The Empire Club
Moya Greene
President and Chief Executive Officer, Canada Post Corporation
Toronto Ontario
October 24, 2007
Delivered in English
Canada Post has a major presence in Toronto. We have, in fact, two of our largest facilities here, and of the 11 billion pieces of mail that we sort every year - so much for what you might have heard about the demise of the Post, Catherine's absolutely correct - we are far from that, thankfully. Two and a half billion of those 11 billion pieces of mail are sorted right here in Toronto. We have 14,000 of our 74,000 people work in Toronto in the GTA area, and province wide, in the province of Ontario, it's about 27,000. So we're here and we are really proud to be a member of your community here. And I should also tell you that amongst our commercial customers, this province generates about $2.9 billion worth of revenue for Canada Post. So clearly the economic impact of Canada Post in Ontario, and nationally, is still pretty important.
Today I'd like to take you back a little bit to the era in our transformation into a crown corporation. Since then, we've had lots of challenges and I want to tell you as well, lots of success. From a government department, deficit prone - in fact in one year alone we lost over half a billion dollars - in the red far too often, probably the worst labour relations climate in Canada, we have evolved into a commercial entity, a corporation that is now very focused on our customers, and on all aspects of customer service. I am proud to tell you that we have earned a profit every year for the past 12. We are not like many of the entities that have been created by governments that are still reliant on taxpayer revenue. In fact, in the past decade or so, Canada Post has contributed close to a billion dollars back in taxes, dividends and capital returns to our shareholder. So we've made great strides.
I also want to tell you a little bit about a few of the recent distinctions. Nationally, a survey conducted earlier this year by a very respected polling firm, Strategic Counsel, found that Canada Post is in fact the most trusted federal institution in the country; more trusted than the federal parliament, more trusted than the federal public service, more trusted than the Supreme Court of Canada, more trusted than our wonderful military. What a wonderful thing that is, to lead a company that is the most trusted federal institution in the country.
Everybody was totally surprised, but I have to tell you I wasn't surprised. Not a bit because I have been across the country, I have met thousands, and thousands, and thousands of our wonderful people face-to-face, on every shift, in very town, in every city, and so I'm not surprised. Because what I hear from them and from our customers are the great lengths that they go to every day to get the mail out, and they get the mail out in this country in all kinds of weather across the biggest - one of the biggest - geographic expanses in the world.
In fact we had another distinction this year. This year, Léger Marketing conducted a poll on behalf of businesses in Quebec, in the province of Quebec, and they found that the third most admired company in the province of Quebec is, in fact, a federal crown corporation: Canada Post, the third most admired business amongst 150 names that were put forward. We scored higher than great international companies, companies like Toyota, Sony, and Tim Hortons and we take a lot of pride in that trust and in that ranking. I would say that another indicator of how we are doing, and many of your businesses have found themselves in the same ranking, this year for the second year in a row, Canada Post is considered one of the top 100 employers in Canada.
The creation of Canada Post, as Catherine mentioned, was the direct result of the political interventions required to settle a series of very difficult labour disputes, which had involved national service disruptions that had become too frequent a part of the landscape in Canada. I believe we’ve solved a large part of those problems as well. But it took us a full eight years from the time that Canada Post was created as a crown corporation to generate our first profits, and I'm very proud to stand before you today and tell you that we have been profitable every year for the past 12.
In addition to that profitability, we have constantly improved the labour relations climate that had hurt the country, hurt our customers, and certainly hurt the brand of Canada Post. In fact, this year, ladies and gentleman, we managed to negotiate a four-year contract with CUPW - CUPW represents all of our operating employees. This contract was signed without any service disruption. It was entirely out of the media spotlight, hardly any publicity at all.
What we achieved during these most recent negotiations is a strong platform now to modernize the company, and much needs to be done in that domain. Every business day, Canada Post delivers 40 million pieces of mail over one of the biggest areas in the world, with some of the most volatile weather conditions. We manage to do this not free of charge, Catherine, but we do manage to do this at the third lowest rate of all developed countries. If you think about that 52 cents you put on a stamp, look what has to happen, what else can you get in this country for 52 cents? It is a miracle actually what happens to those letters that they get where they get to for just 52 cents. We deliver those 40 million pieces of mail in all kinds of weather on time 96 % of the time. Not by our say-so, but by the say-so of an independent third party. So in many respects, our company is an essential part of the infrastructure, just as essential, I would say to you, as highways, bridges, airports, and shipping lanes; we provide vital communication links for almost every business in the country, and we're still pretty important on other levels as well.
You know, if you think about what we do, Canada Post enables businesses and other organizations of every size to conduct the transactions that are necessary for their economic success, and this is a lot different today than it was early in the 20th century for example. In those days, the post office was the essential personal link, the link that nearly removed isolation for many individuals, and families, and communities across the country. Today much has changed. We are probably less crucial for these personal links. These now... these exchanges are more conducted by telephone and other technology means. However, Canada Post still plays, I would say, an even more important role in the area of economic communication.
This is a seven and a half billion-dollar company, ladies and gentleman. Approximately 90% of our revenues come from the commercial sector. We are the company that helps your business grow. When we deliver direct marketing mail, for example, we are a part of your marketing arm. When we deliver your parcels, we are a part of the backbone of your business. And most importantly, when we deliver your bills, your statements, your invoices, we are a crucial part of the system that makes sure you get paid.
As with all other infrastructure, success is dependent on revitalization and modernization, and I'd like to tell you that this is the time for Canada Post; there is now a pressing need to begin updating Canada Post's physical and electronic network. Truth be told, this upgrade should have been done many years ago. In recent years, most postal administrations in the industrialized world have invested in their systems to improve customer service and to provide safer, healthier, more efficient, and also more environmentally friendly work situations. In the developed countries, where this renewal was carried out in the normal course of their business operations, what you see is that profits have grown, relations with employees have improved, and the success of the entity in a more competitive environment has been, to a great extent, more assured. Three such countries come to mind: Austria, Sweden and Germany. In countries, though, that have failed to update their postal systems, just the opposite is the truth. In the United Kingdom today, for example, the post office is operating at a huge loss, it is plagued almost daily by labour disruptions, but worst of all, it now lacks the capacity to modernize.
We at Canada Post now have an outstanding opportunity at this precise moment. Most of our sorting plants are obsolete; a few have been in service now for 40 years, some for 70 years. These plants are located in downtown cores near railway stations. That was more important to us historically than it is today. We need to be close to airports and highways. This is how we move the mail today. Several of our facilities are very poorly adapted to handling the volumes of mail that we have. They resemble more multi-story office buildings than they do processing and logistics operations. They are poorly adapted for logistical streams that we manage.
In 2007, you're going to be surprised to learn that we still sort a lot of mail by hand. Our equipment, our sorting equipment, dates back five generations. The technology was designed to facilitate our activities not in the integrated way that you need in a modern, technology driven and logistics corporation. If you look at our systems, some aspects of our technology are downright prehistoric in my view.
We have a wonderful CIO in John Smith, and he said to me, Moya, it's just ridiculous. We have computers here in our system that are being used by our employees every day; they are so old that the manufacturers no longer even service the software. What we need for a modern communications company is not state-of-the-ark technology, which is I think what we have. And you certainly know that you're behind the times when your people tell you that they're going on eBay to find parts for your telephone system.
So the equipment and the technology available today, that you'll see in other modern postal administrations around the world, can actually sort every piece of mail right down to the point of call, right down to your individual address. Our letter carriers, however, spend two hours every morning in the letter carrier depots across this land sorting by hand their routes, so we are losing the ability even to maintain this technology and sorting equipment it's so old. The plants were also designed before the era of ergonomics and environmentally friendly buildings came onto the scene. We thankfully know a lot more today than we did 70 years ago. We are far removed now from the ideal situation of what can be built into your system from the point of view of health, safety and environmental protection.
I spend a lot of time out in the field talking to our people. And I have to tell you, what I've come away with over the past two and a half years is this: in some ways, it is almost a small miracle every day that we’re able to get the 40 million pieces of mail into the 14 million mailboxes, given the state of our sorting equipment and our facilities. It requires enormous effort on the part of the 74,000 people, the sixth largest workforce in Canada, and they sometimes perform super human feats to get you your mail on time.
And it comes at a cost. It comes at a cost to them; more than 8,000 injuries a year, and we have one of the highest rates of modified duties and absenteeism in the country. When I joined the Canada Post team in 2005, I really only had a couple of goals until I could get my arms around the wonderful company that is Canada Post. One was to create a model postal business, a flexible business able to meet the needs of our customers, focused on the needs of our customers, but also to become the most efficient postal operator that we could possibly be, to be a leader again in postal efficiency.
We re-organized our business to focus on our customers, we created, in fact, three lines of business that reflect the kind of work that we do for you: transaction mail, which includes statements, bills and invoices; parcels; and direct marketing. The new structure placed our customers at the centre of everything that we do. One thing that has changed since our conversion into a crown corporation is the fact that most of our operations now face competition. We must be successful in the marketplace against some of the largest, deepest-pocketed courier companies in the world: FedEx, UPS, and others. In direct marketing, our competitors are also enormous; companies like Bell, Rogers and in Quebec, Quebecor.
The technology revolution that brought us the Internet continues to be both a major threat to our business, but also a crucial aid to doing our business and to interacting with our customers better than we do today. So Canada Post is now poised to begin a modernization effort that will change our physical and electronic network - all aspects of it. The investment will entail $1.9 billion in capital expenditures over a five-year period, and it will place Canada Post, once again, at the forefront of the business that it does.
The change will also support renewal of Canada's largest corporate fleet. We operate almost 7,000 vans and trucks, and during this modernization we will have the opportunity to capitalize on other modes and technologies that are far more fuel efficient than what we operate today - fuel efficient, environmentally friendly and, in fact, more ergonomic for mail delivery by our carriers. Canada Post will be a better supplier of preferred, logistical and messaging solutions for our customers than we are today, so these improvements will ensure that we can continue to offer not just competitive rates, but better products and services.
We have a unique opportunity to do this now because we are facing some of the same workforce challenges that you and your business are facing. More than one third of our employees will retire in the near future; we will, therefore, be able to synchronize our plan for modernization of our facilities with the pace of these retirements. We know that our challenge mostly comes from the marketplace today.
Just think for a moment at the evolution that has taken place, rapid evolution in technology, the impact of the internet on all aspects of the communications market. To deal with globalization and evolving technology, virtually all industries have had to adapt their business models; postal and delivery services are no exception.
Over the past 20 years, technological change and globalization have drastically affected our market, the postal market. The value chain has become more and more fragmented. If you think about all of the things that have to happen from the time that we get a piece of mail until the time that we deliver it, there are many, many segments in that process that have to work well. What we're finding is that the private sector, many new private sector companies have moved in to take over aspects of that value chain. They prepare the mail for many of you in this room.
So postal markets are not only facing competition from companies outside the country, they're also competing inside the country as the value chain has become more fragmented. Sometimes their business model involves exploiting postal rates that are offered in developing countries. And this is now in contravention of the law but as you know, it's very hard for the law to create a protected market these days.
In 1981 when Canada Post Corporation was created, it was given a small and shrinking monopoly, something we call "the exclusive privilege"; the privilege to collect and deliver letters that weigh less than 500 grams. So what exactly does that mean? An exclusive privilege is a regulated market, a market reserved by law for Canada Post, but it was done for one purpose and one purpose alone. Because we are the only company in our space that has the range of policy obligations that we have, we are proud to have the obligation to deliver the mail to all Canadians, regardless of where they are, at a reasonable price. We are proud to have that obligation and to have discharged it as we have for so long.
But other companies in our space do not have that obligation and you'll probably be hearing more and more about that. In the future you'll hear language like "remailers". Well, remailers are really companies that have moved in to pick up mail destined for foreign destinations. This used to be part of the market reserved for Canada Post, reserved for the reason that I mentioned - in order to allow the company to profitably, in a self-sustaining way, without resorting to taxpayer funds, deliver the mail to all Canadians at a reasonable cost.
So as we go forward now, in the future, what we're going to have to do is to change how we do the business, and I think that means that we have to be open to these new participants in the market and still rely on the pride and the trust that Canadians have in us that we will always deliver the mail to all Canadians, regardless of where they are. Some of the restrictions that have been on Canada Post in the past I think in the future will be relaxed. That is what has happened in other areas of the world where markets have become deregulated.
We have seen that the current entrant, the postal administration, has sometimes been very successful responding to a new environment as it has gotten a more relaxed set of rules in which it can play a role. Our universal service is an agreement that requires us to carry the mail to all Canadians, the 14 million boxes every day, which is a growing obligation. Every year we add 240,000 new addresses to that obligation.
At the same time, the average number of revenue-generating items that we are able to deliver to each address is diminishing. Most customers still prefer, thankfully, to receive their messages through a piece of paper, particularly things that are important to them like statements, bills and invoices, but there's no question that over time the comfort level with electronic-only channels will continue to grow. Therefore, there is a need at Canada Post that we develop a multi-channel presence, that we provide multi-channel solutions to the businesses who are our customers. If we want to remain relevant in the future, we will have to have solid links with senders and receivers; solid electronic links as well as physical links.
Deregulated markets generally ensure that consumers have more choice, they drive innovation, they ensure that incumbents in markets become as productive and efficient as they possibly can. So the benefits of deregulated markets in any other sector are pretty clear, but you see the benefits where you also see fair competition; fair competition that allows new entrants, yes, to build innovative new businesses, but it allows existing players to up their game, to become the kind of efficient operator that they wish to be, and that they will need to be to meet these new entrants in the market head-on. Within the postal world, deregulation has produced some enormous successes and a few disasters. The role of the incumbent post - to provide customer service to all people in an area within a country - is a very heavy and a financially difficult role. People expect to get their mail on time, and that's a reasonable expectation. That is our responsibility; it is also our responsibility to stay profitable.
We do not want to have to rely on taxpayers' dollars again. So what is the difference between successful deregulation, and the sort of failures that I know about in other parts of the world? Well, first, successful deregulation happened gradually. It allowed the necessary time for the incumbent postal administration to adjust to the new environment; and also, successful deregulation gave the postal administration new freedom to innovate, to compete, to become more productive, to retain the trust that the incumbent had built up over the many years.
Canada Post now competes effectively in parcels and direct marketing. I mean, these are open markets. And we can compete effectively in letter mail as well - even in the area that has traditionally been called the exclusive privilege - if we modernize and we receive the same freedoms to adjust to the new environment that other entrants and participants will have when they enter our markets. It has been our pleasure at Canada Post, it has been my pleasure as the CEO of Canada Post, to serve you as our customers, and it has been my great pleasure to speak to you today and to tell you about the modernization program that we are about to begin at Canada Post. So thank you very much for your attention.
