If the committee is comfortable with that, I appreciate that advice. Thank you for it. I'll set aside five minutes at the end of the meeting for this.
With that, then, I'll invite our guests to come forward from Purolator.
Pursuant to Standing Order 108(2), we are doing a study of the management and operation of Canada Post Corporation. Joining us today from Purolator Courier Ltd. are Mr. William A. Henderson, president and chief executive officer, and Mr. Stewart Bacon, chairman of the board.
Welcome, and thank you for coming today. I'm hoping you're aware that you're allowed to make an opening statement. Then we would move to question-and-answer rounds from the committee.
If you are ready, I would ask you to proceed. I will give you a heads-up that the meeting is conducted in both official languages, so you may have need or desire for translation at some point. You'll see us all wearing headsets throughout the day.
With that, I would ask you to please proceed.
Thank you very much. Merci beaucoup
My name is Stewart Bacon. I am the chairman of the board of Purolator Holdings, and my colleague Bill Henderson is the president and CEO.
Chairman Tweed, vice-chairmen Volpe and Laframboise, and members of the committee, we are pleased to be here today and welcome the opportunity to speak with the committee about the important work Purolator does for Canadian businesses.
As Canada's largest courier company, Purolator delivers innovative products and superior service on which Canadians have come to depend. Flexibility and responsiveness are the hallmarks of Purolator's approach to customer service. To deliver unparalleled customer service, we have built Canada's most extensive national network and supporting infrastructure.
Purolator employs more than 11,000 Canadians, of which over 9,000 are members of Teamsters Canada and just under 2,000 are Purolator shareholders. We maintain facilities across all regions of Canada with more than 35% of those facilities located in rural areas. We have more facilities in more regional centres than any other courier company in Canada. Nationally, provincially and regionally, Purolator delivers the same exceptional, value-added service and support, regardless of where our customers choose to call home.
We operate approximately 4,000 ground vehicles, of which more than 200 are hybrid-electric vehicles, and, through our partners Kelowna Flightcraft, leverage a domestic air network of 15 aircraft including two DC-10s dedicated to delivering mail product for Canada Post. Purolator's vast network and team of dedicated employees enable Purolator to deliver 275 million packages and envelopes annually.
However, Purolator's story cannot be told solely by the number of packages and envelopes it delivers. Each and every day, milestones are reached that serve to improve the quality of our service for Canadians.
In 2009 alone, Purolator reached several milestones. First of all, Purolator Global Supply Chain Services opened a facility in Toronto, Ontario, supporting GSC facilities in Richmond, British Columbia and Montréal, Quebec.
Secondly, Purolator launched its new advertising campaign promoting “a network unlike any other”, highlighting its role as the Official Courier for the Vancouver 2010 Olympic and Paralympic Winter Games.
Thirdly, Purolator was selected by the Ontario Ministry of Transportation and Ontario Trucking Association as one of 50 companies to test long combination vehicles.
Fourthly, Purolator received its Customs-Trade Partnership Against Terrorism re-certification membership approval, thus doing our part to help secure the Canada-Us border.
It is this continual commitment to renewal that allows Purolator to deliver directly to more points in Canada than any of its competitors; in fact, to every region across our nation.
Mr. Chairman and members of the committee, I'll continue in English.
Each and every business day, Canadians rely on Purolator to deliver life-saving medicines, just-in-time emergency surgical kits, manufacturing supplies, critical business documents, and other items necessary for the well-being of our communities and the businesses that sustain them. In so doing, Purolator brings our large and sparsely populated nation together, enabling economic development in both urban and rural communities. Purolator is very proud of the vital role it plays in connecting Canadians, Canadian communities, and Canadian businesses.
Purolator's ability to connect Canadians comes from its strength as a company, a strength that is built on our corporate culture, enabled by almost 2,000 employee shareholders, which encourages employee involvement, thrives on communication, and empowers employees to find innovative, real-time solutions in everything we do.
In fact, our unique culture has been recognized in the last three years by the National Post and Waterstone Human Capital as one of Canada's top ten corporate cultures. That strength enables Purolator to provide reliable and cost-effective transportation and logistics solutions that deliver exceptional value to Canadian businesses.
Every business is a part of our community, and Purolator is no exception. Everywhere throughout the company, our people contribute to the betterment of the communities in which we live and do business, truly embodying Purolator's corporate value of social responsibility.
Purolator is committed to Canada. Unlike our foreign multinational competitors, we make Canada our primary market. Purolator people work around the clock to ensure that Canadian businesses in both urban and rural communities remain connected across Canada.
Over the last four years, we have re-invested our profits to improve the efficiency and reliability of our delivery network to ensure that we can continue to deliver exceptional value to all Canadians, no matter what place they choose to call home. Those investments include the construction of state-of-the-art hub facilities at Montreal Trudeau Airport and Vancouver International Airport, as well as Surrey Port Kells.
Servicing the needs of Canadians better than anyone else is essential to Purolator's success; our investments, thankfully, enable us to do so. With such an extensive footprint nationwide, Purolator is committed to supporting Canadian communities in ways that go well beyond the provision of our services.
Since 2003, we've focused our attention and efforts on what we believe is one of the most fundamental and pressing issues facing every community—hunger. Purolator employees have made a meaningful difference in the fight to end hunger. In the province of Quebec alone, we have raised over 60,000 pounds of food in an exciting partnership with the Grey Cup champion Montreal Alouettes. To date, through our sponsorship of the CFL's Tackle Hunger program, we have raised more than three million pounds of food for communities across Canada.
Purolator's commitment to the communities we live and work in extends to the environment we all share. In 2009, the Toronto Star listed Purolator first on its list of Canada's greenest companies. Purolator's Greening the Fleet program has been recognized nationwide and is figuratively and literally employee-driven.
All of our hybrid-electric vehicles are driven by our proud Teamsters employees. In fact, it is our unionized workforce that has been the driving force behind our success in reducing our carbon footprint nationwide by over 1,450 metric tonnes since the inception of the program.
Since 2005, we've acquired over 200 hybrid-electric vehicles and have recently committed to adding an additional 200 hybrid vehicles to our fleet by the end of this year. That provides Purolator with the largest hybrid-electric fleet in the country. Our fleet includes hybrid-gas, hybrid-diesel, and all-electric versions, spread through all Canadian cities.
Once again, we welcome this opportunity to share more details of Purolator's commitment to Canada, Canadians, and Canadian businesses with you today. We would be pleased to answer your questions with respect to our operations nationally and specifically regarding our commitment to ensuring that Canadian business receives on-time deliveries of their time-critical packages, as well as the role we are honoured to play in ensuring Canadians receive their daily mail.
Thank you, Mr. Chairman.
Thank you, gentlemen.
Mr. Bacon, I would like to ask questions about your company's structure. I am interested in transparency. Since Purolator is a subsidiary of Canada Post, which is a crown corporation, it is important that there be transparency. Moreover, that is the objective.
You are quite right. At that time, the president, Ms. Greene, told us that she received a fax announcing that the contract had been cancelled with Air Canada, but she did not go to the trouble of calling the president of Air Canada to find out what had happened. That was her problem, not yours. I understand that, after that, you did business with Canada Post.
As far as the corporate structure is concerned, could you provide me with a detailed breakdown of your shareholders and explain the 7% issue?
Thank you, Mr. Henderson.
I'm a little troubled by a couple of things, and I'm wondering whether we can begin on some of them. I don't have much time right now, but perhaps you could explain to me why you would come to this committee knowing that the soon to be former president of Canada Post said she can't answer any of the questions regarding this contract, that we'll have to ask Purolator, and then you give us exactly the same refrain. You can't answer any of the questions regarding the contract; we'd have to ask Canada Post.
Canada Post has six directors on your board, it owns 92.6% of your company, and your company was the beneficiary of a contract that was previously handled by Air Canada. Not only that, the specifics that are available in the public domain tell us that the contract you got that was initially resident with Air Canada was a cost-plus contract. The reason you got that contract--I think you said 15% margin--is that Air Canada asked Canada Post to make up the difference in the surcharges that everybody was imposing on jet fuel because of the aberrant cost of fuel at that time.
When you got the contract, it was for cost plus, which meant that the fuel cost could have gone through the stratosphere and you would have got every penny that Canada Post didn't want to give Air Canada.
I just wonder how it is that your company was the beneficiary of a transfer of that contract, limitless in its cost, and then immediately transferred it to the company of one of its board of directors. Who is going to answer the question? Canada Post won't; you won't. I guess maybe Kelowna might.
Kelowna Flightcraft.... I think for the benefit of the committee I should share what Purolator does and what Kelowna does, and that may help.
Purolator establishes the relationship with our customers. We provide the pickup, delivery, the scheduling, and the loading of our pickup and delivery vehicles. We scan all those packages, provide the invoicing, the support, and all the training to our people for the handling of goods, whether it's dangerous goods, safety compliance, security, to make sure we provide a safe, secure environment for our customers' packages. As far as the ground transportation--and I'll cover that--Purolator moves over 1,400 trucks, tractor trailers, every day right across the country. About 600 of those tractor trailers are outsourced every day to other Canadian firms to expand Purolator's capability. But the customers are dealing with Purolator; they're not dealing with the individual 600 trucks that are operating under Purolator's requirements.
Kelowna Flightcraft, as we said, has been providing airlift services for Purolator for a significant period of time. In 2007 we did go out with a public RFP to make sure we were competitive; that was translating to a competitive opportunity for our customers to keep Purolator in business. Obviously, with the companies we compete with, we're the only Canadian carrier. The rest of the competitors we compete with are foreign multinationals, so it's incumbent upon Purolator to keep that number one leadership position that we've worked very hard to maintain for 48 years.
We use Kelowna Flightcraft to provide our airlift services and complete that. So when we are talking about Kelowna...Purolator's capability resides in the trucking firms we employ and in the aircraft aviation companies. Cargojet and Perimeter Aviation are among those aviation companies we use to make sure we provide that service to Canadians.
Well, thank you for establishing that.
Mr. Henderson, DC-10s went out of production in 1988. The two DC-10s that you claim you needed in order to provide a service, you would not have needed if that contract hadn't become available. But you needed them because each DC-10 replaces four of your 727s, I think you said. So you needed two of them, but they were mothballed in Arizona and had been there for quite some time, and Kelowna Flightcraft went out and purchased them and refurbished them.
Because Kelowna Flightcraft is represented on your board, I can only anticipate that you would have some awareness of why Kelowna Flightcraft would go out there—and this amount is in the public domain—and spend $20 million on two aircraft that have been mothballed for some time. These aircraft are the worst polluters in the world, and yet Kelowna Aircraft felt they needed to make an investment.
Was it on spec, or did they know something from inside the Purolator board that the rest of us are going to be asked to pay for through public funds?
There are a number of questions there, and I'll be pleased to answer them all.
First, on the DC-10 and the age, there are only about two or three carriers in the entire world that buy aircraft, production freighters, new. We're not one of them. We operate on the.... It's a standard model. After an aircraft enters passenger service, following a 20-year life cycle operating as a passenger aircraft, it becomes commercially viable to reconfigure that aircraft for cargo services.
The DC-10s, while they're old, are actually newer than our 727s. Some of our 727 aircraft are 40 years old. But they're refurbished. They're taken right down to the skeletal frame, and they're like brand new aircraft when they come out.
The DC-10 for servicing Canada Post, even above a 767 or an Airbus 300-330, has the lowest cost per pound because of the size of the hull, the thrust capability of the engines, and the range. So for Canada Post—its product is so dense, so heavy—it was the ideal aircraft to operate.
The 20-year life cycle does something else. It actually lowers the capital cost to the aircraft. We lease our aircraft, so that provides a much more competitive pricing arrangement to bid with.
In terms of preferential treatment, Purolator's transparency is such that even though we are a private organization, we issue an annual report. That goes out to 2,000 of Purolator's shareholders. It's issued to both Kelowna Flightcraft and Canada Post. That has in it our consolidated financial statements. Our financial statements are consolidated with Canada Post.
In terms of being up front and transparent with Canada Post, we actually have four board meetings annually where we do share with them every single item, whether that's financial, service, health and safety, or productivity.
So we're very transparent and very up front about our business operations.
My question is for Mr. Bacon.
In my view, the problem is still a matter of transparency. You explained earlier that when you do business with Mr. Lapointe, he is excluded from board discussions, which is quite appropriate. That is the way to conduct business. Moreover, the contract was analyzed by the Auditor General, who conducts audits of Canada Post. The contract was deemed to be in order. I am convinced that is the case.
The problem is going forward. I am wondering whether the best solution would not be to subject you as well to audits by the Auditor General, given the fact that you are basically a wholly-owned subsidiary of Canada Post. Have you given thought to issues of transparency, to your business relationship with Air Canada, when competitors might intervene in your areas of business?
Thank you very much, Mr. Chairman.
I'm going to go back, Mr. Henderson, to what you said earlier about always acting in the best interests of Purolator. Canada Post always acts in the best interests of Canada Post. Kelowna Flightcraft always acts in the best interests of Kelowna Flightcraft.
The reason I put all three of them together is that they all converge on your board. So you can appreciate that from our perspective the question of transparency is important.
You also said that in 2007 you had already started to reconfigure your capacity to deliver service. In 2008, Kelowna went out and acquired two wide-bodied airplanes. They must have anticipated, if they were looking out for their best interests, a growth in business that would justify the acquisition costs. In 2009, a contract became available. It was initially resident with Air Canada, but some of the overflow would go to you, Cargojet, FedEx, UPS, and Morningstar. So it wasn't a big deal, but that was part of the contract.
You responded to an RFI, and just a moment ago you said that people south of the border were surprised that you could actually provide appropriate service within 120 days. Acting in the best interests of Purolator, you must have given assurances. You must have given assurances knowing already that Kelowna Flightcraft had the wide-bodied capacity you thought you would need. Canada Post, thinking about the best interests of Canada Post, said, “We're not going to renegotiate with Air Canada. Instead of asking for an extension...so the rest of the world, which thinks we can't provide services within 120 days, can go to pot.”
What percentage of those wide-bodied DC-10s are utilized by Canada Post?
Yes, thank you, Mr. Chair.
Thank you, witnesses, for answering all our questions in relation to transparency and accountability and for letting us know that you actually have the interests of Canadian taxpayers at heart. That's good to see.
I'll go back to the Office of the Auditor General of Canada. With 44 pages of a special examination report done in 2009, I take it that was an extensive study and that the Office of the Auditor General was around for a period of time on Canada Post.
What interests me in relation to this is in the nineties my family owned a printing shop, which had printing and signs and mailboxes, and we actually had a relationship with Purolator—and I didn't even know Canada Post owned it at the time. In fact, we were a delivery centre for them. They had a Xerox franchise and some other things. So we had a pretty good relationship. I had about 120 mailboxes.
Actually, at that stage, I never thought Canada Post was a very good manager and steward, just simply from what I'd seen. But in looking at some of these examinations, especially.... I understand that in 2006 Canada Post had been working towards what it called the “modern post”. I was interested in this, and I thought some Canadians might be as well.
The corporation reorganized along its three major lines of business: transaction mail, parcels, and direct marketing. Does Purolator do that kind of thing as well? Does it identify three main elements to become a more efficient and modern post service? For instance, Canada Post is engaged in employees, investing in infrastructure, and growing the business. It seems they reoriented a quite old business model into a new business model to reflect the changes, such as e-mail and things like that. Does Purolator do that on a consistent basis?
I think quite clearly there are two questions. One is that Natural Resources Canada is dealing with drilling regulations that deal with the potential for creating a spill by the way the drilling operations are conducted. They're doing that work.
Transport Canada is the lead regulatory agency for the national oil spill preparedness and response regime. They're not in charge of developing the drilling regulations, but they are definitely in charge of the response to any spills that occur.
This is from Transport Canada's website. Quite clearly, it states that they do regime management and oversight. They develop regulations and standards. They enforce and implement regulations relating to response organizations. They oversee an appropriate level of national preparedness. These are things that Transport Canada, on its website, indicates it has the responsibility for.
When we look at oil spills--and these oil spills can be from any source--the responsibility for the oil spill comes under Transport Canada. The responsibility for developing drilling regulations and the way people conduct their business is with Natural Resources Canada. That's the difference.
I think if we don't recognize that we have this larger role of regime management, then we're not fulfilling a function that quite clearly is required. We have to have a coordinated effort between a variety of departments within the government to respond to spills. That includes the coast guard and a number of other organizations.
The coast guard is responsible for conducting spill management but not for setting up the regime and overseeing the management. The coast guard is the contractor, you might say, that does the spill work. Transport Canada is ultimately responsible for ensuring that spill management is conducted in a fashion that is correct for the country.
The talk of coalitions is reviving interest in the activities of Parliament Hill, and I know both the government and the Bloc share a common colour: it's blue, and they're busy in the process of trying to educate the Canadian public about just how it is that the Government of Canada is dominated by the Bloc and the Conservative coalition.
That said as an introduction, Mr. Chair, I can appreciate that all of these other committees are taking an interest in the obvious—the obvious being, of course, the world attention that's being placed on the untold billions of dollars of damage, environmental and economic, associated with the rupture of that pipe by BP—but it has called into question something the government uses for virtually everything as justification for its inaction, or “mal-action”, and that is security. Economic security, environmental security, fiscal security, whatever adjective one wants to use in front of security, that's the issue all the time. The lead spokesman in all of this is always the Minister of Transport.
That said, we obviously cannot do it in this next week, but I think it would be important for this committee to turn its attention to what the notice of motion asks. So I'm going to suggest that you call the question.
On clarification, I think committee members have to understand that if we do enter into a major spill problem in Canada, the responsibility for overseeing and ensuring that we have a spill response that's appropriate lies with this department, and this committee should take an active interest in that. The results of not doing that are pretty onerous. If we have a spill in Canada and we don't have a well-developed spill control regime in place, that responsibility is with Transport Canada and with this committee.
We can't simply fob it off on Natural Resources Canada. They are dealing with oil drilling regulations, which are completely different from what we're talking about here. To suggest that somehow they're going to come to accomplish something that is actually in the purview of Transport Canada I think just doesn't work. We need to take this seriously.
Just the fact that the parliamentary secretary didn't understand the role of Transport Canada in dealing with spill regulation says to me that something is missing here.
I would like to ensure that he's enlightened as well as to what the responsibilities of Transport Canada are. Simply in a very non-partisan fashion, I want to make sure that the government completely understands what its role is. I think this is something the government should take heed of. If we're debating over who has the responsibility to control oil spills in this country, that suggests to me that we should review the action so that we clearly understand whose roles and responsibilities are on the line here. Without that taking place, we've abrogated our responsibility for the preparedness that we need in case of these oil spills.
To me, the discussion that is taking place here today suggests that this should be done.
I'm going to put the question.
An hon. member: A recorded vote, please.
The Chair: We're going to record the vote.
The motion is on the floor by Mr. Bevington that this committee engage in a study of the federal government's oil spill response planning and capacity, with particular interest in the response to a spill caused by offshore drilling along all three coasts, report the results of the study, and make recommendations to the House of Commons.
A recorded vote has been called, so I'll turn it over to our clerk.
(Motion negatived [See Minutes of Proceedings])
The Chair: The motion is defeated.
I raise a point of order concerning the upcoming hearings, to do with the deadlines impacting the efficacy and the workability of infrastructure programs, particularly with respect to municipalities.
The point of order I am raising is about the implementation of the hearings: whether or not it is following the committee's wishes, but also fairness with respect to a variety of municipalities who have asked to be heard urgently because of the situation affecting them. They have not heard from the committee as to whether they'll be able to depute here so that their concerns can be heard.
I know it would not be the committee's intention to be disrespectful of municipalities, such as the Town of Ajax, which has three projects at $3.3 million that have a need for some flexibility, or else those projects will run into extreme costs.
Small communities, such as the Town of Lakeshore, for example, have asked to be here and have not heard back from the committee. They only need about three months of flexibility, but otherwise their entire project, which is about $3 million, will not be able to go forward. So they need to hear urgently. They've applied to the committee and have not heard anything back.
The City of Owen Sound, which has a $30 million project, has also asked to be heard. The mayor is willing to attend. They don't need a tremendous amount of flexibility, but they need to put themselves in front of the committee, because they hope they can inform the committee's deliberations.
The City of Côte Saint-Luc, in Quebec, is having problems with its aquacentre. This is a project of approximately $18 million. To address the intentions of the municipality, the government has to show some flexibility. Côte Saint-Luc officials have already informed the committee of their willingness to testify, but they have not received a response. People from the Town of Shelburne, in Nova Scotia, are also in a similar situation.
People in Shelburne, Nova Scotia, also want to participate, and from the Town of Canmore, Alberta.
I would say, Mr. Chair, that we have dozens and dozens of examples across the country, but a number of them have asked specifically to be in front of the committee, have responded to the intention of the committee to hear about this problem. Either the committee is going to bury the problem by only hearing from secondary sources or they're not afraid to hear from these communities.
I would also respectfully suggest, Mr. Chair, under this point of order, that the committee, on the days it has set aside, do as other committees have done and have video links available for municipalities. This is about keeping costs down. They would find, I believe, that they could get a good diversity of people addressing them about the unfairness of the March 31 deadline. It is vital, I think, for the integrity of the committee and its study that it hear from everybody.
Mr. Chair, we've tried to speak with the clerk, and we understand that this is at the direction of the chair, following the will of the committee. But I think it's really quite important that this not be a point of disrespect between the federal government and communities. They entered into partnership; they have their own money at risk; these are real things affecting real communities in terms of their ability to do these projects.
Again, Mr. Chair, I hope the committee will hear from these witnesses, will find a way to accommodate them in the deliberations, so that what this committee is actually able to understand is the reality of how these things are being worked out in different parts of the country.
I would hopefully, under this point of order, appeal to the chair to cause such arrangements that people could be heard, pursuant to the motions of the committee, and more importantly, I think, because I believe everybody here spoke to this at different times, the intent of the committee to understand this problem. We shouldn't be waiting until the end of the year when we have failure after failure.
The committee must hold an appropriate discussion as soon as possible. That is the only place where such a discussion can be held within the federal government. We cannot limit ourselves to information from federations or associations.
So, Mr. Chair, again, my point is to get a final sort of determination to permit individual municipalities to participate here directly, those that have applied and given their indication to the committee, some of them weeks and weeks ago, that they'd like to be here to address the members of the committee; and secondly, the consideration of the committee to do what is normal for committees, to hear by video conference some of those other communities that wouldn't be able to bring themselves here on the short notice available but would like this committee to consider directly and to hear and to go back and forth with them in ways that written submissions simply do not permit.
I would submit, Mr. Chair, that it is impossible for this committee to do its work if it denies individual municipalities the chance to speak here. I hope that is adequately clear to Mr. Jean. My appeal really, Mr. Chair, is to you as the individual in charge of carrying out the committee's will in this respect. I hope this may be possible so that the hearings have the credibility needed for the municipalities across the country.
Thank you, Mr. Chair.
Mr. Chair, Mr. Kennedy 's comments are of some concern to me.
I have asked the Quebec Union of Municipalities to survey its members and inform us of concrete cases. In theory, when officials from the Quebec Union of Municipalities appear before our committee, I will ask them whether the Town of Côte Saint-Luc has raised the issue with the union.
If not, I hope this is not political partisanship. In fact, I could easily write to the representatives of Quebec's 1,100 municipalities in order to ask them whether they would object to appearing before the committee. That would be very simple to do, but I do not want to get into any political games. I am doing so because I want to show the government that there is a certain problem, but this has to be done without any partisanship, or else our attempt will not succeed.
I therefore hope that Mr. Kennedy's request is not partisan, in the sense that he would like to see appear before the committee the municipal representatives he contacted and who spoke to him. Before I agree to that, I would ask that we hold a meeting on June 10 with the Quebec Union of Municipalities, which will explain the steps it has taken in Quebec to gather specific cases from its member municipalities. We had an agreement on the issue: there had to be specific cases.
I would prefer to proceed with the municipal unions rather than the municipalities directly. It is a matter of lightening the committee's workload. We should never lose sight of the fact that some deadlines are set for December, and others for next March. Therefore, if we are to start playing political games as Mr. Kennedy wants to do, then we will have to hold meetings every day until next March, and at the end of the day, we will not have made a decision.
In short, I would like to draw the government's attention so that a decision is made as quickly as possible. I would like to wait a bit before agreeing to Mr. Kennedy's request.