TORONTO - Canadian dealers have two consecutive years of solid sales under their belts, but they are not about to let themselves get fat and happy.
Concerns over what road the industry will take in the new century, plus a number of issues particular to Canada, will keep them thinking lean and operating with their belts well tightened.
Part of that tight-belt policy is responsible for the Canadian Automobile Dealers Association's decision to cancel its annual convention, which for the past three years has been held in the United States in conjunction with the National Automobile Dealers Association Convention and Ex-position. The Canadian association says turmoil in world markets, which has resulted in pressure on the Canadian dollar, makes it costly for dealers to attend the U.S. event and for the industry to support it. By skipping this year's gathering, the Canadian association also can focus its resources on a major convention planned for Ottawa in summer 2000.
The industry is searching for a way to do business in the future, and 2000 has been imposed as an unofficial deadline, said Canadian Automobile Dealers Association President Rick Gauthier.
'Dealers, factories and other stakeholders in the industry are all searching to discover what their place is and how it will be defined,' he said. 'Dealers have more to contend with all at once than they've ever had before.'
LOSS OF CONTROL
One big question facing dealers in the next couple of years, Gauthier said, is who will be selling or leasing vehicles across the country. 'Will it be the dealer, will it be the local bank or will it be the factory?' he asked.
He said the factories clearly are on the move, with the aim of getting both feet firmly into the retail business in North America.
Canadian dealers fear the automakers have decided that the factories can do as well in the retail arena as the dealers, Gauthier said.
'The dealers feel strongly that factories should stick to what they're good at and leave the selling, leasing and servicing of vehicles to the dealers,' he said.
Gauthier said the potential is scary and could mean factories will get more involved in such things as how vehicles are serviced, what hours dealerships must be open for service and how much customers should be charged, as well as gaining access to customer information from dealers' databases.
The door is opening to factories retailing vehicles through partnerships with certain dealer groups, Gauthier said. 'Are we going to end up in Canada five or six years from now with a large percentage of our dealers partially owned by the factories?' he wondered.
The Canadian Automobile Dealers Association's chairman, Honda dealer Jean-Louis Duplessis of Lallier Automobile (Quebec) Inc. in Ste.-Foy, near Quebec City, said such moves could spell the end of the traditional, entrepreneurial, family-operated dealership in Canada. He said dealers are watching closely to see where Ford Motor Co., which is buying dealerships, and Toyota Motors Sales U.S.A. Inc., which is getting more actively involved in the dealership-level selling experience, are heading with their programs.
Stephen O'Regan of O'Regan Motors Ltd., a Toyota-Lexus dealership in Halifax, Nova Scotia, said: 'Toyota is certainly very much getting into areas that have traditionally been very much in the dealer's bailiwick. The overall concept looks good, he added, but some things are of concern, particularly from a cost standpoint.
'All these things mean that dealers will not have quite the same control over the selling process as they have had in the past,' he said.
TOO MANY DEALERS
Gauthier said the factories' new interest in retailing also stems from the realization that Canada has too many dealers, something dealers have claimed for years. 'The move to become involved in the retail end of the business also could be an approach to reducing the number of dealers,' he said.
With 3,400 outlets, Canada has far too many dealers compared with the United States, said Ron Jones of West Coast Motors, a Ford-Lincoln-Mercury dealership in Maple Ridge, British Columbia. He said this problem is compounded by Canadians' lower purchasing power, which has kept sales lower than in the United States. 'The fewer vehicles being sold are being divided among a larger number of dealerships, so profitability is subpar,' Jones said.
He said dealers in British Columbia in particular also are concerned about the continued use of gasoline octane-enhancing additive MMT. Canada banned the additive and then reversed itself last year after losing a battle with Exxon. The auto industry says MMT harms emission-control devices, and this could leave dealers open to liability if they sell vehicles that don't meet emission standards because of MMT.
Canadian dealers also are battling the country's major banks, which seek the right to lease vehicles through their branches, something not allowed under Canadian law. The Canadian Bank Act is reviewed every four years, and lobbying from both sides has been intense. Dealers feel that letting the banks get involved in direct retail leasing is not only a conflict of interest but a direct threat to their ability to operate successfully, as leasing now accounts for half of their business.
Canadian dealers in general are eyeing industry moves to concentrate globally into fewer but larger units through mergers and acquisitions, Duplessis said, and are concerned that more nameplates and even vehicle lines will disappear.
Dealers also are uncertain about the impact of the Internet on the retail auto business. Most dealers do not think it will change significantly the way a consumer buys a car because the consumer eventually will have to go into the showroom to test-drive the vehicle and to get a trade-in valued, Gauthier said.
'What it could change is the way people shop for vehicles,' he said. 'It's a fuzzy area. Dealers feel they've got to get in on the act. But how do they make it work? It's a great big question mark.'
Dealers are concerned when they read about some small-town dealer in the United States selling 5,000 cars. If that happened here, we'd be pretty upset, said Toronto-area dealer Doug Leggat.
'But I haven't heard of anybody yet who's bought a car over the Internet,' added Leggat, of Leggat Pontiac-Buick-Cadillac Ltd. in Burlington, Ontario, and Leggat Chevrolet-Oldsmobile in Toronto. 'And I hope that manufacturers up here would have some common sense. They keep talking about customer service, but how can you serve customers properly if they're buying at a place that has no intention of ever servicing the vehicle?'
Leggat said it is potentially of more concern to him and other metropolitan dealers with high overheads. 'It might not be a concern to a guy in some rural area looking to sell some more cars.'
GOOD AND BAD
The response of Canadian dealers to the changes in their industry is mixed, said O'Regan. 'Dealers in general recognize that we have to make changes. Unless we're prepared to be on the leading edge ourselves, we're not going to survive long. The concern is that dealers are going to lose a lot of the control they have had. But maybe that's not all bad.'
John Carmichael of City Buick-Pontiac-Cadillac Ltd. in Toronto, said, 'Canadian dealers don't have their heads buried in the sand. They are very aware of what confronts them today.
'They are being forced to measure up very quickly, due to consumer expectations. Those who do have their heads buried won't be there to play anyway,' he said.
Carmichael, also chairman of the Ontario Motor Vehicle Council, which was established by the province to allow self-management of the industry, said the group is leading the way in cleaning up the industry's image by setting standards and guidelines for marketing and advertising.
'We want to make sure we're fully disclosing what we're advertising, and that descriptions are fully warranted and justified,' he said.
While Ontario is taking the lead, Carmichael said there also is interest across the country and in the United States.
The strong U.S. dollar is causing more than travel problems for Canadian dealers. Leggat said U.S. used-car buyers are causing problems at Canadian used-car auctions by paying over-the-top prices.
'To them it's bargain city, but it is driving used-car prices up, particularly in late models,' he said.
Another concern related to the U.S. dollar is the exporting of new cars purchased from Canadian dealers to the United States. This primarily hurts the manufacturers, but Canadian dealers risk chargebacks if they're not sure to whom they are selling.
Gauthier said the Canadian dealers association itself sees 2000 as a turning point. He said the Canadian Automobile Dealers Association is redefining its role in the industry after almost 60 years of existence. Gauthier has been president for two years, and during that time the association has made many staff changes and has dramatically revamped a number of the services it offers its members.
It also has created a stronger presence in Ottawa, where its permanent office deals with Canada's political leaders on issues related to the industry. And, Gauthier said, it has improved its communication with its dealer members and works more closely and effectively with provincial associations across the country.