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'Longer-term impact' of strike threatens Canada Post

CUPW National President and Chief Negotiator Denis Lemelin holds up a picture of mail sitting at a Canada Post facility as he speaks with the media in Ottawa, Monday June 13, 2011.

THE CANADIAN PRESS/Adrian Wyld/THE CANADIAN PRESS/Adrian Wyld

Canadians are seeing a glimpse of the future as Canada Post Corp. takes a heavy hit from rotating walkouts by nearly 50,000 postal workers.

Customers are abandoning the mail system in droves, losses are mounting and home delivery is going to three days a week from five in many cities.

Canada Post worries a lot of that business may never come back.

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"It's not so much about the short-term. It's about the longer-term impact," Canada Post spokesman Jon Hamilton explained. "Once the dust settles, how much of that business will come back?"

The strike is hastening Canada Post's decline. Large companies are using the labour dispute as a catalyst to move customers to online billing and rivals are luring away long-time parcel customers with discounted rates, Mr. Hamilton pointed out.

"One thing is clear: Unless we get a new contract, this [loss of business]is going to continue," he said.

Canada Post said mail volume is down 20 to 50 per cent since the walkouts began June 3. That's meant $65-million in lost revenue for the Crown corporation, including $35-million due to cancelled parcel contracts.

Canada Post, which is marginally profitable on annual revenue of more than $6-billion, is determined to get its costs in line with a shrinking business model.

To get there, it has proposed a two-tier compensation system that would see new employees get paid less than current employees ($19 an hour compared with $24 an hour), enjoy fewer days off and get a stingier pension plan. To take full advantage of new sorting equipment, the post office also wants to make changes to work methods for letter carriers that will allow it to get by with fewer workers in the future.

If Canada Post fails to win key concessions - and the Canadian Union of Postal Workers is so far fiercely resisting them - its only viable option may be to cut service, such as the frequency of delivery.

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The current showdown marks an abrupt change from past negotiations because Canada Post is driving the agenda, remarked Robert Campbell, president of Mount Allison University in Sackville, N.B., and chairman of a 2008 federal advisory committee on the post office. In past negotiations, postal workers would make major new contract demands and Canada Post would work at whittling them down, he said.

"This time, Canada Post is on the offensive because it's got an agenda," Mr. Campbell said.

And he warned that any move away from universal service by Canada Post could accelerate its decline. "That's the one thing it has going for it," Mr. Campbell added.

CUPW has proposed extending the existing contract - an offer rejected by the company. CUPW president Denis Lemelin said Canada Post is trying to bait the government into ordering an end to the strike by arbitrarily cutting service.

Postal workers are planning walkouts Tuesday in 10 smaller cities, including Fredericton, Sherbrooke, Regina and Nanaimo, B.C..

The fundamental long-term challenge for the post office is that its core business - delivering addressed letters to Canadians - is in steady decline. Since 2006, the average number of pieces of mail delivered to Canadians has fallen 17 per cent, replaced by e-mail, online billing and other electronic transactions. At the same time, Canada Post must get the mail to roughly 200,000 new addresses every year.

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"The main driver for change around here is that our core business is in decline," Mary Traversy, Canada Post's senior vice-president of transaction mail, said in a recent interview. "This was always a growth business for us. It's more than half of our revenue. It's our most profitable business."

Canada Post needs to make "sensible decisions" to reduce its cost structure, Ms. Traversy said.

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About the Author
National Business Correspondent

Barrie McKenna is correspondent and columnist in The Globe and Mail's Ottawa bureau. From 1997 until 2010, he covered Washington from The Globe's bureau in the U.S. capital. During his U.S. posting, he traveled widely, filing stories from more than 30 states. Mr. McKenna has also been a frequent visitor to Japan and South Korea on reporting assignments. More

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