[Best_Wordpress_Gallery id=”56″ gal_title=”CADEX 2018″]
Canadian auto dealer was in Halifax for the NSADA’s CADEX event. Read our event recap.
Mark Buzzell Keynote
Mark Buzzell, President and CEO of Ford Motor Company of Canada, kicked off the sixth annual CADEX conference in Halifax, N.S., by tackling everything from autonomous vehicles to safety features, ride sharing, car ownership and vehicle financing.
The advancement of driverless car technology and the development of ride sharing companies like Uber and Lyft, along with questions surrounding the future of vehicle ownership have been increasingly discussed in the auto industry. But while many changes are on the horizon, Buzzell said some things have not changed.
In an interview with Canadian auto dealer, Buzzell said “even though there might be changes in ownership models, at the end of the day a lot of people are going to want to buy (vehicles) — especially SUVs, trucks and commercial vehicles.” He expects driverless cars to make up a small part of the company’s future business in Canada.
Looking ahead, he said Ford will be offering a greater level of safety features in all of its vehicles (including sedans, crossovers and trucks) as of 2019. It’s an area that Buzzell said will likely drive more customers to dealerships to purchase new cars.
As for the role of the dealer in all of these changes — including industry disruptors like ride sharing services, Buzzell advises working as a team. “At the end of the day, let’s work together to find solutions so we don’t have to invite external players into our business. I think if we commit to working together with our dealer partners, we are going to find ways to meet the new customer needs.”
Economic outlook
Michael Hatch, Chief Economist for the Canadian Automobile Dealers Association (CADA), discussed a wide range of topics ranging from Nova Scotia’s record year in 2017 to the current situation around automotive debt and the North American Free Trade Agreement (NAFTA).
Hatch said 2018’s growth would probably not be as spectacular as in previous years, but that growth was expected nonetheless. It may also be the year that Nova Scotia finally reaches the 60,000 new car sales milestone for the first time ever in the province. For the province to reach that threshold, new cars sales would only have to grow by about 2 per cent, said Hatch.
On the issue of automotive debt, Hatch said the topic is constantly in the media and on the government’s mind. “People are worried that consumers are over indebted. On the automotive side, auto debt is the single biggest piece of the consumer debt picture, but it actually went down last year and (in) inflation adjusted terms, average consumer automotive debt went down in 2017. So it’s stabilized.”
He added that the delinquency rate (the percentage of people not paying back their loans) is less than 1 per cent on auto debt, which is considered to be very strong. The levels seen today also suggest that the situation is sustainable, based on where things are now. “Consumers are paying their loans back in full and on time.”
As for NAFTA, Hatch said that although dealers may sell almost exclusively to a domestic customer base, they are still an important player and an important voice speaking up in favour of continued liberalized trade on the continent. He added that it is not just for the sake of the manufacturing partners, but also for the health of the economy “and the fact that we are a trading company.”
“The United States is our biggest customer, and anytime that you interrupt or disrupt that process, it’s really an act of self-harm,” said Hatch. “I’m confident that NAFTA is going to survive this process. They are going to change it, they’re going to tweak it, they’re going to update it, they’re going to modernize it, but it’s going to survive and it’s going to be a good news story. It’s just a bit of a painful process to get there.”
F&I trends
Engaging customers earlier on in the F&I process was one of the key points explored during an F&I panel discussion.
The conversation was moderated by Canadian auto dealer publisher Niel Hiscox, and included Lindsay Duffield, Executive Vice President of Sym-Tech Dealer Services; Luc Samson, Vice President, Sales and Administration, iA-SAL Dealer Services; Gino Cozza, Vice President Sales & Distribution at TD Auto Finance, and Jeremy Belanger, Sales Manager, Ontario, iA-SAL Dealer Services.
In a post-panel interview with Canadian auto dealer, Belanger emphasized the importance of starting the conversation about F&I — not at the end of the process, but earlier in the consumer purchasing journey. He described this as one of the major pieces of the discussion, while also expressing the need to be strategic about what they want to accomplish in the F&I office.
“It’s not all about driving profit on one product,” said Belanger. “If we spread that profit across multiple products — ones that engage the customer to come back into our dealerships to engage with us in the service departments, that is sort of a holistic view of what we want to accomplish at F&I.”
He added that, instead of measuring F&I profit by one measure (the gross profit made on a particular deal), we should be thinking about multiple products on a deal that would also have backend profitability when a customer returns to service a vehicle. “Whether it’s a tire and rim program or a chemical protection program, the claim that those customers would engage in would also be filling us on the backend with some profit,” said Belanger. “So sort of double dipping on those F&I products,” he added.
Integration challenges
One of the biggest issues to surface from a dealer panel discussion at CADEX about the challenge of acquiring a new store, found that dealing with employees was the toughest aspect of the integration process.
Duane Rath of Motor Hub Group in Nova Scotia, one of the panelists attending the annual dealer conference at the Halifax Marriott Harbourfront Hotel, said that fear of the unknown has a lot to do with the issue.
One of the biggest issues to surface from a dealer panel discussion at CADEX about the challenge of acquiring a new store, found that dealing with employees was the toughest aspect of the integration process.
“It seems to me the biggest challenge is dealing with the employees, because they have worked for one person or one group for a long time,” said Rath, adding that “what I think makes it even harder sometimes is that you’re doing so much behind the scenes, and you really can’t tell anyone as you’re going.”
This secrecy can in turn create a situation that finds the employees unaware that the dealership they are working for has been sold. Shock or surprise can cause them to react in several ways, which is why Rath said it is a key issue for dealers. After all, one of the main things that dealers are buying, when purchasing a new store, is the employees that are already there. The need to manage that situation and ease their fears is a top-of-mind challenge.
That fear also extends past the store itself to concerns about changes that could affect their community, said Jonathan Hickman of Hickman Automotive Group in Newfoundland. Employees worry about the “big bad company” coming in, believing the new owner will not only change the way they do business, but also what is important to them in their communities. “They may be supporting a hockey team, and they think we might come in and say ‘cut that.’ And so they don’t know what to expect of us,” said Hickman.
Two of the biggest mistakes that dealers can make when acquiring a store or a business is to change nothing at all or change everything, said Peter MacDonald, President and CEO of four auto dealerships on Prince Edward Island, and Chairman of the Canadian Automobile Dealers Association (CADA).
In an interview with Canadian auto dealer, MacDonald said, “I think if you change nothing at all, you show lack of leadership and apathy, and I think that’s not good for the staff that you are acquiring. And if you change everything, you can spook your staff, and maybe spook your customer base as well, because if they see too much change going on, they may move and go elsewhere.” He said he thinks there is a happy medium that can be found.
As for personnel changes and the issues that come with the culture of the store when taking over, MacDonald emphasized the importance of ensuring that the dealership remains an inviting place for customers and for the staff. He said a happy staff creates a good atmosphere that will help attract customers, who “will want to come to a place that they can see that employees are happy.”
Millennial perspectives
For the third consecutive year, dealers at the CADEX conference in Halifax, N.S., had the opportunity to listen to what millennial students of the Automotive Business School of Canada (ABSC) had to say about social media. Seated on stage in a room filled with dealers were three panelists aged 22-23 years old, all prepared to answer questions from moderator Niel Hiscox, publisher of Canadian auto dealer.
He opened the discussion by asking them what the automotive industry’s biggest miss was in terms of how it is speaking to millennials.
According to Maddy Winter, a fourth year ABSC student from around Toronto, Ont., dealers should not underestimate the power of social media. “It’s very relevant in our day-to-day lives. It is basically what we spend most of our time doing, and it really should be something that is focused on and utilized to its full capacity,” said Winter during an interview with Canadian auto dealer.
She added that Instagram, with its very attractive photos and video, and its ability to show content like dealership products, offers and discounts, is the best platform to get that message across. However, she also warned dealers in the room that posting too much content can hurt them. “I know that is kind of a backward statement, but having enough and then not having too much is really important,” said Winter. “Finding that balance between posting everyday but not overwhelming people’s timelines, that’s really important for dealers (to know).”
Sergio De Cubellis of Laval, Que., followed up with a conversation about Twitter and how he feels that it is not the most effective social platform for dealers to connect with millennials, due to its nature. Instead of putting advertising dollars and time towards Twitter, he said that other platforms, such as Instagram, would be more effective for dealerships.
When asked about Facebook and where it stands in the grand scheme of social media platforms for his generation, De Cubellis acknowledged that it is still important but that it is not one of the emerging social medias. “I would say that Instagram is a little bit more on the newer side. It’s a little bit more relevant.”
Millennial Alex Tucker of Gander, N.L., steered the conversation in a slightly different direction, away from specific platforms and more towards how dealers should be using social media to connect with their followers and customers. He said that, “as you give back to the community in a traditional way, I think that it is equally important to give back to the community on your social media platforms by acknowledging them in their posting and responding to their engagement on the platform.”
Tucker said he thinks this will help dealers build a relationship with their social media followers or “guests” who are active on their site, and who are taking the time to interest themselves in their products and dealership.
He also said it is important to promote a positive atmosphere by expressing through social channels how great the dealership environment is, and how happy their employees and customers are.
Millennials will not only be the next generation of people staffing dealerships, but also the ones coming into the stores as customers. The way they consume information, their habits, tools, and in many cases their attitudes, are different from other generations. How dealers connect and respond to them will be important for their businesses, and for millennials as consumers and employees.
CADA’s observations
John White, President and CEO of the Canadian Automobile Dealers Association (CADA), concluded the event with a discussion about the state of OEMs and dealers, and what he sees coming up.
“As you know, there are traditional things around which a dealer can put their franchise at risk, but now what we are starting to see is that some OEMs are taking a non-traditional role and trying to initiate that language.”
— John White, President and CEO of the CADA
White said CADA has been helping to negotiate dealer sales and service agreements with the various Dealer Councils, and as such they have observed some OEMs trying to introduce direct selling language. Whether this is due to a decision by the OEM to buy into ride sharing companies and “at the end of the day they want to sell it themselves,” or because some of them plan to start selling to the retail customer, it is nonetheless a trend that White sees approaching.
He said he is also starting to see some language around termination for performance in some of the dealer agreements. “As you know, there are traditional things around which a dealer can put their franchise at risk, but now what we are starting to see is that some OEMs are taking a non-traditional role and trying to initiate that language,” said White.
To better manage the situation, CADA met with the Dealer Councils and the Industry Relations Committee to put together a Dealer Council Guide. White said he believes it is important for all of the Dealer Councils to have some sort of process, and that dealers should be engaging with their OEMs in a “positive, constructive two-way manner.”
“There are certain principles that most dealer councils need to follow if they are going to have engaging and meaningful discussions,” said White, adding that “it’s things like this that we are working on to try and help guide the dialogue in a positive way.”
