Sean Silcoff wrote in April 22, 2008 edition of the Financial Post that Canada Post’s transformation program could jeopardize the overall health of the company pension plan:
“But volatile markets mean Ms. Greene may need to conserve cash in case there is a shortfall in the post office’s pension plan. Ms. Greene inherited a $1.4-billion plan deficit when she joined in 2005. That was gradually whittled down by rising markets and $719-million in special contributions.”(1)
As was noted in a previous article on the subject, A Brief History of Canada’s Postal Transformation, the conserving of cash was not done, and the amount now owing to the current pension deficit is 3.2 billion dollars, (see What are Solvency and Going Concern Deficits? for more info on the current pension deficit).
Canada Post’s blueprint for the future did not calculate a market crash and did not conserve any cash for a just-in-case scenario. Now they do not have the money, as Mr. Silcoff predicted, for the pension.
Canada Post is now looking to recover this miscalculation through the bargaining of a new collective agreement with their largest union, the Canadian Union of Postal Workers.
If the cost savings in the new collective agreement are not met, especially in relation to the unforeseen requirement to pay for the pension deficit, Canada Post will not be able to meet its target of turning a $250 million dollar profit in 2017.(2)
Canada Post is also not financially in the position to sustain the pension plan if another market crash occurs again. There are no cash reserves for this.
The corporate decisions of the last four years have put Canada Post into a financial crisis and it will be interesting to see how it will overcome the financial obstacles it has created. That is if it can, or it may have to be overhauled.