BRAMPTON, Ontario - From a one-man show staging public retail dealer auctions in hockey rinks in the early 1960s, the Canadian Auction Group has become the fourth-largest player in the $70-billion-a-year North American auto auction business.
Expatriate American Bert Dagnon, the company's COO, says three factors have fueled its last three years of growth:
1. The increase in fleets and leasing has fed more vehicles in at the top end of the business. Average transaction prices have risen from $8,700 Canadian (about $5,940) three years ago to more than $12,000 Canadian ($8,200) in the first quarter of 1998.
2. Northern U.S. buyers have helped drive prices higher, creating a shortage of vehicles in some segments for Canadian dealers. U.S. buyers now account for 5 to 8 percent of volume at the Canadian group's sales. Says Dagnon: 'With a 68-cent dollar right now, we're seeing U.S. buyers coming north in herds.' They are after vehicles in short supply in their own markets: sport-utilities, vans and 1- to 3-year-old cars.
'On some cars, it makes it nearly impossible for the Canadian dealer to be a player, because his retail market just won't support those prices,' Dagnon says.
3. More dealers are realizing auctions are an efficient way to keep inventories fresh. 'Ten years ago, less than 25 percent of dealers visited an auction (in a given year). Now, more than 70 percent do so,' Dagnon says.
Canadian Auction Group's first-quarter revenues for the 1998 fiscal year ended Jan. 30 shot up 220 percent. At the Toronto auction alone, the group's auctioneers thumped their trademark red rubber radiator hoses to punctuate the sale of 55,199 vehicles, up 33 percent from a year ago. That one auction accounted for more than half the group's 104,361 units sold for the year. The group is on track to meet predicted 1998-99 volumes of 140,000 vehicles and more than $1.8 billion Canadian (about $1.2 billion) in sales.
Mike Lawrence, Canadian Auction Group founder and current chairman, began staging auctions for franchised dealers in 1960 in Alberta. Between 1971 and 1993, he joined forces with established auto auctions in nine Canadian locations to present a united front in the face of U.S. competition. U.S. giants Manheim Auctions, ADESA Corp. and ADT Automotive Inc. also operate in Canada.
Canadian Auction Group, in its current form, was created in 1995 from 37 companies. It is privately held by six Canadian shareholders. Its only U.S. location, Rochester/ Syracuse, N.Y., was purchased in 1992, and accounts for about 5 percent of total revenue.
Dagnon says the company has no plans for U.S. expansion at this time. Immediate plans include expansion of its operations in Vancouver, British Columbia; Calgary, Alberta; and Montreal.
Canadian Auction Group is also active in real estate and surplus government equipment auctions and offers storage, reconditioning and transportation services. It publishes Market Reporter, a pricing guide using auction sales statistics. In late 1996, Canadian Auction Group expanded its Winnipeg, Manitoba, operation and opened its $15 million Canadian ($10.25 million) five-lane flagship operation in Brampton, Ontario. Last year, it expanded operations in Halifax, Nova Scotia, and in Edmonton, Alberta.
'Mike Lawrence is likely the man responsible for establishing the auction business in Canada,' says Peter Lukasiak, executive director of the National Auto Auction Association in Frederick, Md. 'Today, Canadian Auction Group is probably one of the most sophisticated auction groups in the world. You don't see facilities a whole lot bigger than their new Toronto operation.'
Lukasiak says Canadian Auction Group is unique because various elements of the business are operated by the individual partners taking a hands-on approach. Canadian Auction Group also stages some public retail sales; U.S. auctions steer clear of those. Conducting auctions in two languages - English and French (in Quebec) - is also uniquely Canadian.
KICKING THE TIRES
The company recognizes the growing importance of the Internet and computer technologies.
Dagnon says it will be at least five years before electronic transactions account for a sizable portion of used-car sales.
'We're working on a number of possible solutions. We've invested in the technology, and we're ready to go as soon as the guys who are doing it are ready for us,' he says.
Canadian Auction Group is interested in joining Auto Auction Services Corp., the new industry consortium dedicated to developing a common computer system.
But selling used cars remains a kick-the-tires business, Dagnon says. There are also logistical realities - such as parking and transporting thousands of vehicles - that have to be managed.
He says: 'I think it's going to be a long time before the Nintendo generation meets the car business.'