BUSINESS

Memos to Canada Post

Rivals say the Crown corporation has no business operating in the private sector

TOM FENNELL April 1 1996
BUSINESS

Memos to Canada Post

Rivals say the Crown corporation has no business operating in the private sector

TOM FENNELL April 1 1996

Memos to Canada Post

BUSINESS

Rivals say the Crown corporation has no business operating in the private sector

For years, the owner of the local drugstore in Moosomin,

Sask., a town of 2,450, 222 km east of Regina—delivered his advertising flyers between the pages of the World-Spectator, the town’s weekly newspaper. That arrangement changed in 1993, when the drugstore joined a national chain; it printed its flyers in Winnipeg and hired Canada Post to distribute them. But according to Spectator publisher Bruce Penton, the account was lost because the Crown corporation unfairly undercut his prices. That is the accusation Penton levelled in a brief to the Canada Post Mandate Review Committee in February—and he was not alone: dozens of other companies have also complained that the corporation uses revenues generated from mail de-

livery to undercut its competitors in other areas. “I can’t compete against the post office,” Penton told Maclean’s. “I do not have a monopoly.”

The review committee, charged with ex-

amining exactly what businesses the post office should be in, was appointed last July by David Dingwall—then the minister in charge of Canada Post Chaired by George Radwanski of Toronto, a former editor-in-chief of The Toronto Star, it faces the daunting task of determining how the corporation will move into the 21st century as communications technology threatens to erode revenues the post office generates by delivering mail.

Last week, the committee held hearings in Vancouver; 275 groups have made formal submissions and 600 individuals have written letters advising Radwanski—expected to present his findings to the federal cabinet in July— how they would change Canada Post. Those with a direct interest in its operation, such as its suppliers and the Canadian Union of Postal Workers, say it should be allowed to expand into new areas. But others, including Federal Express Canada Ltd. and the Canadian Daily Newspaper Association, argue that the $500 million that the corporation generates annual-

ly delivering the mail gives it an unfair advantage when it competes against the private sector.

The post office began its foray into the private sector in 1981, when it became a Crown corporation. It has branched out into several new enterprises that link the post office to businesses and individuals by computer. Lettermail Plus and Admail Plus, for example, allow businesses to electronically transmit messages and advertisements to Canada Post, which then prints and delivers them door to door.

Georges Clermont, Canada Post’s president and chief executive officer, believes the only way to adequately finance the post office in the future is to let it continue to grow—even if that means competing headto-head against private corporations like Federal Express. To increase revenues, Clermont wants to dramatically expand operations by plugging the corporation into the wired world. In a recent interview, he said many of the corporation’s 18,500 retail postal outlets across the country could soon have their own automated teller machines, at which customers might pay bills or pick up cash. He also wants to use the Internet to offer a variety of postal services to inhome businesses, and as a conduit to send information, such as electronic mail, across the country. If the post office does not generate new revenues, Clermont warns, “the

cost of a stamp would have to go up. Or the government would have to throw in millions of dollars like they use to.”

But many of Canada Post’s competitors say they find Clermont’s expansion plans “frightening.” According to Doug Moffatt, executive director of the Toronto-based Canadian Courier Association, the Crown

corporation has lost hundreds of millions of dollars over the past four years trying to compete in businesses outside of mail delivery. The post office does not break down losses in specific areas of its operation, but it did report an overall loss of $67 million in 1995 on revenues of $4.7 billion.

It was Canada Post’s purchase of Toronto-based Purolator Courier Ltd. in 1993 for $55 million that galvanized opposition to

Clermont’s expansion plans. Purolator, the largest courier firm in Canada, controls 32 per cent of the market. Its major competitors have told Radwanski that they believe the post office is unfairly subsidizing Purolator’s operations. In fact, Moffatt claims that Purolator was saddled with $144 million in debt when it was purchased, but the post office is paying for it out of general revenues. “If they weren’t involved in Purolator and these other things, what would the price of a stamp be?” asks Moffatt. Purolator senior vice-president Maurice Levy, however, insists that the courier company has its own board of directors and a separate accounting firm; as a result, transferring money to Purolator is almost impossible. “It’s just irrational to think that something could go on and no one would know about it,” Levy says.

Although Canada Post is not required to disclose all aspects of internal financing, the Courier Association hired BDO Dunwoody, a Toronto accounting firm, to analyze the corporation’s results. It determined that Canada Post’s cash on hand has declined sharply—from $333 million in 1991 to just $5 million in 1995. Says Moffatt: “Letting them expand further will only give them a chance to lose more money.” But that is just one of dozens of thorny issues facing Radwanski as he attempts to deliver Canada Post successfully into the next century.

TOM FENNELL

Without new revenues, says Canada Post's CEO, the government would have to raise the cost of stamps