In early 2007, Canada Post was debt free and had a maximum availability of $300 million in external borrowing. In 2010, Canada Post had a $3.2 billion pension shortfall along with a potential debt load of $3.9 billion dollars in external borrowing – a startling change.
Canada Post has went from debt-free four years ago, to a potential $7.1 billion in debt, or if the funds not fully utilized, around $5 billion. Canada Post may not have borrowed all this money or perhaps used some of this capital to pay-off the pension which may make it less than $7.1 billion.
What happened? The details of this enormous financial shift are documented in a previous article, A Brief History of Canada’s Postal Transformation.
This is a very serious financial position Canada Post is in. How can any Canadian corporation go $5-$7 billion in debt in a three year period and no official representative admit that it is significantly affecting their operations? In the private sector the minimum would be the potential resignation of the chairman, re-arrangement of the board and angry shareholders who want confidence in a new business plan. In Canada Post’s case, nothing has been spoken on the subject nor a new strategy proposed that would give the key stakeholders, the Federal Government, employees of Canada Post and the general public, confidence that they are moving in the right direction.
Michael Warren, ex-CEO of Canada Post warned that the modernization of Canada Post lacked a clear business plan, as found in, A Former CEO on Canada Post’s Modernization. The first article published on this website on January 2011, Important Questions on Postal Transformation, asked open questions regarding the financial viability of the business plan.
It has been four years now since the postal transformation has been announced. Today there exists a massive debt load and members of the public, such as Mr. Warren and myself, are asking for transparency – yet a business plan has still not been publicly unveiled.
This lack of public accountability leads to many further unanswered questions:
Will a crisis come to a head where the Government is forced to financially bail-out Canada Post? Will this implosion be the impetus to sell the Crown corporation? Or can Canada Post crawl out of this financial dilemma themselves with no outside intervention?
What if the financial markets do fall again and put the pension plan in a further deficit? What if the revenues from mail and parcels continue their quick and downward slide? What will Canada Post do?
These answers are not known, but there are two things that are: Canada Post is in a bad financial position, and neither them, nor their principal stake-holder, the Federal Government, are saying anything. What will it take before something is finally made public?