Canada Post's controversial reforms could hang on election

The outcome of Monday's election may determine whether Canada Post will ever finish its five-year overhaul. But experts are still divided on whether the troubled postal service is on the right track by phasing out door-to-door delivery.

Experts still divided on whether cutting jobs, home delivery is right course for postal service

Canada Post is phasing out door-to-door delivery of regular mail to urban residents and increased the cost of postage in a major move to try to reduce significant, regular losses. But experts are divided on whether the postal service in on the right course. (Canadian Press)

It's been almost two years since Canada Post announced its controversial plan to overhaul its operations, and the outcome of Monday's election may determine whether it will ever finish the job.

The NDP has said it will, if elected, tell Canada Post to reverse course on its plan to replace some home delivery with community mailboxes — the most contentious part of its five-point, five-year strategy — while the Tories say they stand by the changes which were announced, during their watch, in late 2013. 

The Bloc Québécois and Greens also oppose the end of door-to-door and, like the NDP, have also come out against the postal service's plan to eliminate as many as 8,000 jobs. 

The Liberals have been less clear on their position — more on them later. 

Protests, at least one arrest, and even a jackhammer-wielding mayor have greeted Canada Post's efforts at reform. But a change in course now would be a mistake according to Walid Hejazi, a professor of international business at the University of Toronto. 

Hejazi says Canada Post is "doing exactly the right thing," by putting more emphasis on parcel delivery while trimming delivery routes. 

"The business case for delivering to the door is not there anymore," he told CBC News. "If [Canada Post] was a purely private company this is exactly what that company would do." 

Royal Mail privatized

But politics tends to get in the way of postal reform.

U.S. Postmaster General Patrick Donahoe said as much in a recent speech in Washington; blaming politicians and unions for holding up efforts to turn around his troubled organization, which has been doing a slow-motion but spot-on impression of the Hindenburg as it struggles to adapt to a 21st century marketplace driven by parcels and e-commerce. 

Protests and at least one arrest have greeted Canada Post's plan to phase out door-to-door delivery. (Jonah O'Neil - CNW Group/Canadian Union of Postal Workers)
The U.S. Postal Service lost $26 billion over the past three years, Donahoe said, according to reports.

"What's holding us up? Myopia, shortsightedness," he said. "We never get past the narrow set of interests that are determined to preserve the status quo."

The U.S. has propped up its postal service while the U.K. has gone in the other direction and recently finalized the privatization of its similarly challenged Royal Mail, which has been carrying letters around the British Isles since 1516. It is led by former Canada Post CEO Moya Greene. 

The sale, finalized earlier this month, brought in 3.3 billion pounds (just over $6.5 billion Cdn), though there were complaints the British government undervalued some of the shares that were first put on sale in 2013. 

'Death spiral'

But one analyst says the route Canada Post has charted leads not to a bright future, but into a "death spiral" of higher prices and poorer service. 

Benjamin Dachis, an analyst with the C.D. Howe Institute, says the five-point plan will send customers into the arms of Canada Post's competitors in the parcel sector while failing to address its cumbersome expenses. 

Liberal Leader Justin Trudeau has vowed to put a moratorium on Canada Post's plans, pending review, but stopped short of saying he'd call for an about-face. (Jonathan Hayward/Canadian Press)
"Reduced mail routes are going to help, but they still don't address the chronic issues … embedded in the labour costs," which were 71 per cent of Canada Post's total costs in 2011, he said, adding the Crown corporation is "just fiddling with the margins" by cutting routes and switching to community mailboxes. 

Dachis penned a series of recommendations for reforming Canada Post in mid 2013. He wanted it to privatize pickup and delivery services — competition would keep a lid on labour costs — while keeping the core, organizational components public. 

He also said Ottawa should subsidize rural postal services, which are more expensive to operate and are currently paid for by customers in urban markets. 

The inevitable storm over privatization would surely dwarf the current argle-bargle over home delivery and job losses, but Dachis noted those involved are "going to have a public relations battle, one way or another." 

Under the current plan, Canada Post is fighting with its customers, employees and cities. His plan would have likely only been an issue with the employees, he says. 

Given a pass?

What does all this mean for Canada Post's future? With some polls suggesting the Liberals are set to form a minority government, the picture is murky. 

The Liberals have said they would put a moratorium on Canada Post's plan to cut home delivery, pending review, but have stopped short of saying they would call for an about-face. 

But as Hejazi points out, a minority government means working with partners, which in this case would mostly likely be the NDP. 

"I believe if the Liberals or Conservatives win and form the government [Canada Post] will be given a pass for the next number of years, which should be enough to complete their transformation," he said; which, in his view, is the right thing to do. 

But if the Liberals ever need a favour from the NDP, it will presumably come at a price.

It's not hard to imagine NDP Leader Tom Mulcair sending his bill to Justin Trudeau through the mail.  


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