Canada Post has initiated a phasing out of home delivery for some residents over the next five years, among other money-saving strategies, the postal service announced last week.
According to Canada Post, transitioning one third of home delivery recipients to a “community mailbox delivery” is expected to bring savings of $400 million to $500 million annually once fully implemented. The program will begin rolling out in the latter half of 2014, but will take five years until it is complete on a national scale.
The company is also planning to thin its workforce by up to 8,000 employees in the next five years, but these work reductions will occur mainly through retirements.
On March 31, Canada Post will start charging $1 for each stamp when bought individually; customers who buy booklets of stamps will end up paying $0.85 each. This new pricing strategy is expected to save the organization between $160 million and $200 million.
Finally, Canada Post will begin to open more retail outlets inside local businesses, bringing an estimated savings of between $40 million and $50 million, and will also institute internal changes by installing faster sorting equipment, initiating more efficient processing procedures and adding to its fuel-efficient fleet. The company expects these internal maneuvers to save Canada Post between $100 million and $150 million each year.
Changes to Canada Post’s pension plan and the implementation of its new strategy will turn the tide on the loss of $1 billion by 2020, according to officials. If fully implemented, the strategy should put Canada Post back to financial stability by 2019.
“Canada Post has a mandate to fund its operations with revenues from the sale of its products and services, rather than become a burden on taxpayers,” the company said. “With the increasing use of digital communication and the historic decline of Lettermail volumes, Canada Post has begun to post significant financial losses. If left unchecked, continued losses would soon jeopardize its financial self-sufficiency and become a significant burden on taxpayers and customers.”
Canada Post is facing many of the same issues that have plagued the U.S. Postal Service, which ended its 2013 Fiscal Year with a net loss of $5 billion. In 2013, the USPS saw an increase in operating revenue and a decrease in operating costs compared to the 2012 Fiscal Year, but total mail volume fell from 159.8 billion pieces to 158.4 billion pieces during the same time period.
The post office’s cost-cutting plans have helped it shed $15 billion in costs over the last seven years, but it is still facing challenges. To add revenue in the changing mail landscape, the USPS recently entered into a pact with Amazon to deliver small packages on Sunday, and it has experimented with same-day services and other new programs; any significant changes in service, however, have to be approved by Congress reluctant to change the current USPS system. In the release announcing its year-end results, the USPS’s Joseph Corbett explained that the post office is up against its debt ceiling and desperately needs Congressional assistance.
“Our liquidity continues to be dangerously low, and our liabilities exceed our assets by approximately $40 billion,” he said in a statement. “This underscores the need for Congress to pass legislation that improves our financial position and that gives the Postal Service a more flexible business model to improve its cash flow.”
The USPS’s five-year business plan calls for employee health care restructuring; lowering of the postal service’s retirement obligations; and a service adjustment to five-day mail delivery, among other key changes.