Canada Post faces shortfall, admits pension fund is insolvent

Canada Post is forecasting a loss for the first time since
1994, when it began running up a string of profits following years
of red ink and labour unrest.

In a document tabled in the House of Commons, the post office has
also disclosed its $1.1-billion pension fund became insolvent as of
last December and the Crown corporation was forced this year to
contribute $267 million to the fund to keep it viable under federal
pension rules.

The post office said it will return to deficit within five years
unless it can adjust to the changing marketplace and growing
competition.

Canada Post last year transferred an initial instalment of $129
million to the pension fund, a spokesman said.

The post office cites exploding use of the Internet for bill
payments and e-mail as a leading cause of its problems.

But hot-button issues for traditional letter writers and small
towns are at stake if the corporation wants to stay in the black.

The post office cites a legislated ceiling on stamp prices, which
can be increased by no more than two-thirds of the consumer price
index each year, and a 1994 moratorium on the closing of rural
outlets among its constraints.

The report forecasts the cost of postal operations, roughly $2.8
billion annually, will continue to grow at a yearly rate of 3.4 per
cent through the next five years while revenue is expected to
increase by only 2.4 per cent.

Manitoba Conservative MP Brian Pallister said private sector
companies face similar problems with pension fund solvency, because
of losses in the value of stock investments and growth funds, as
well as similar demands to adapt to the changing marketplace.

But he said he believes the problem stems from the reign of former
Canada Post chairman and president Andre Ouellet, a longtime former
Liberal cabinet minister who was forced to resign from Canada Post
last year in a controversy over expense accounts.

NDP MP Peter Stoffer blamed the problems on the government’s
decision to run the post office as though it were a private-sector
company after the former post office department became a Crown
corporation in 1981.

“They should keep post offices, keep the workers and downsize their
corporate headquarters here in Ottawa,” said Mr. Stoffer.

Copyright Ottawa Citizen 2005