A roundtable discussion with industry experts
The participants were in a feisty mood when we gathered in the boardroom of the CADA office for the first in a series of roundtable discussions on the state of the auto industry in Canada. Clearly, they were anxious to have at each other in the free-wheeling discussion that ensued, just a portion of which is addressed here.
There was no question that their opinions would carry considerable weight. Collectively, they represented over 250 years of direct automotive experience.
The participants were:
Dennis DesRosiers – President
DesRosiers Automotive Consultants
Yves Gionet – former executive
Toyota Canada
Gerry Malloy – Editor
Canadian auto dealer
Jim Miller – former executive
Honda Canada
Stew Low – former executive
General Motors of Canada
Chuck Seguin – President
Seguin Advisory Services
Niel Hiscox, publisher of Canadian auto dealer, monitored the discussion, tossing out topics for the panel to attack, and stepping in to maintain order when things became too boisterous. The general theme of the discussion was, the year ahead.
What have we learned from 2010?
What we’ve learned, Dennis bluntly stated, is that, “The vehicle companies have a short memory.” With gross incentives and discounted leases they’re replaying the scenario that got them into the problems they’d just begun to get out of and at the same time they’re destroying the residual values of their customers’ cars.
According to Jim, however, “Incentives are required to move the cars.” There is still an industry-wide over-capacity issue. And as Stew pointed out, it often costs less to keep a factory running than to shut it down.
“When you incentivize a product you are marginalizing your product – but there are other factors. If you have a factory sitting idle it’s costing you huge money,” he explained.
“Who will be first to cut back?” Chuck asked. “Who will have the guts to say ‘here’s the business model we have to follow?’ That’s a tough step.”
Some have done it in the past, the group agreed… BMW and Mercedes, and just recently, Honda. But they have all abandoned it now.
Dennis had the final word on that topic. “My Dad once said if you don’t want to be a prostitute don’t live in a whorehouse,” he said. “There’s not enough structure in the industry to deal with these issues.”
What effects will government intervention have?
New products are being pushed in the direction of hybrids, plug-in hybrids or pure electric vehicles by future fuel-consumption regulations, Gerry noted.
The companies boast about new levels of fuel efficiency,” said Dennis, “but they are still way short of the fuel economy that will soon be required by governments.” Only a handful of vehicles currently on the market can meet the fleet average that will be required by 2016.
Besides, he said, dealers don’t seem to want to sell these vehicles. “How much money does a dealer make selling and repairing gas guzzlers? A lot!” Dealers will deal with the issue easily: they won’t sell them.
To get what they want, consumers will buy used vehicles instead, he suggested. And once customers switch to used vehicles, and stop buying new, Jim added, more government intervention will be required to help the car companies.
What about fixed ops?
Jim suggested that the introduction of new technologies could have a positive effect on the service side of the business. But, Chuck noted, “The dealer in the future won’t do 100 percent of everything.” The example of Ford’s Sync system and the deal in place with Best Buy was raised.
Yves disagreed. “The infrastructure dealers have will mandate that cars go there for repairs,” he said. “Dealers will have to train their people. I come from Toyota. We had the technology issues when we introduced the Prius. Everyone had to be trained, and they adapted. It’s a transition.”
Maybe the dealers should set up a kiosk in dealership with a Best Buy or electronics stores to deal with consumer electronics, Gerry offered, and Chuck concurred.
Perhaps dealers should hire the “geek” from the high school and pay him to work for a few hours after school to show customers how the electronic gadgetry in cars works, Stew suggested.
