Automotive News Canada - March 2020 - v2 - 24

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Car sales continue dive: Could the bottom be zero?
By JOHN IRWIN
TORONTO BUREAU

TORONTO - THE NEW-PASSENGERcar market will collapse over the next
two years as consumers continue to
gravitate toward utility vehicles, say
industry experts.
Robert Karwel, senior manager of
J.D. Power's Canadian automotive
practice, said he expected cars to make

Low payments push
Canadians into utility
vehicles, but a real death
shot could come from
U.S. President Trump

up 25 per cent of the new-vehicle market by the middle of 2019, and 20 per
cent in 2020.
"It's not a coincidence at all that

EV REPORT CARD

FILE PHOTO

It's a slowing
market,
and dealers
are taking
long-term risks
in the struggle
to earn automaker
incentives

ONLY TWO PROVINCES EARN PASSING GRADES/P16-17

For job gains,
look beyond
auto plants
Hiring is on the
rise as dealerships,
suppliers, the
aftermarket
sector and even
manufacturing
show growth

Karwel: Longer
loans make
more expensive
utility vehicles
affordable.

from the 2008-09 economic collapse.
The rise in employment
comes amid uncertainty over
the future of Canadian auto
production, which has fallen 25 per cent, according to
Ontario government data.
Jobs at dealerships, for
instance, rose 20 per cent
since 2010 to 159,045, while
aftermarket jobs jumped 17
By JOHN IRWIN
TORONTO BUREAU
per cent to 407,253.
"The politics in any country tend to - from an autoTOTAL AUTOMOTIVEmotive perspective, anyrelated employment
way - only look
has grown by 17 per
at manufacturcent since the start
ing," said Dennis
of the decade, drivDesRosiers, presien in large part by
Automotive jobs
dent of DesRosiers
have been increassurging sales, lonAutomotive
ing since the
ger-lasting vehicles
Consultants. "And
Great Recession,
and Canadian vehithe theory behind
a result of higher
cle ownership reach- vehicle sales and
that is that manufacownership rates.
ing record levels.
turing is mobile and
Total employment:
According to
when you lose it, it's
* 2010: 703,451
data supplied
gone. Whereas the
by DesRosiers
* 2011: 715,513
nonmanufacturing
Automotive
* 2012: 733,136
side, if a dealer on
Consultants Inc.,
one side of Toronto
* 2013: 745,660
823,052 Canadians
closes, another one
* 2014: 766,516
were employed in
opens up across the
* 2015: 782,592
auto-related jobs in
street. It's technical* 2016: 790,243
2018, ranging from
ly net-neutral in the
* 2017: 803,584
dealerships and
country.
* 2018: 823,052
aftermarket com"So I understand
Source: DesRosiers
Automotive Consultants
panies, to assembly
the politics of it. It's
plants and suppliers.
bad to lose manufacThat compares with 703,451 in turing because it has a
2010, when the industry and
the economy as a whole were
just beginning to emerge
SEE MANUFACTURING PAGE 24

the rise in popularity of utilities
has also meant that
the average loan
term in Canada has
increased and that
our dominant loan
term is 84 months,"
Karwel said. "That's
the only way customers are spending
on average $13,000 or

$14,000 more to get a utility body style
vehicle and still make it affordable."
Cars accounted for 29.7 per cent of
all 2018 new-vehicle sales in Canada,
according to the Automotive News
Data Center in Detroit. Despite sales of
more than two million vehicles for the
second time in history, total car sales
finished below 600,000 units. Compare
that with 2009, when automakers sold

SEE U.S. TARIFFS PAGE 26

STAIR-STEP
PROGRAMS

THE DANGER
OF

falling

down

APRIL 20
RETAIL 2020
AD CLOSE: MAR 26
MORE JOBS

By JOHN IRWIN
TORONTO BUREAU

AS NEW-VEHICLE SALES DECLINE,
a growing number of Canadian auto dealers
are balking at stair-step incentive programs, blaming them
for damaging long-term profitability.
"You may get the money
that month or that quarter,
but it costs you in the long
run. It costs you at year-end.
It's not a fun game to play,"
Michael
said Michael Wyant, COO of
Wyant of
the western Canada-based
the Wyant
Wyant Group, which has Fiat
Group says
Chrysler, Ford, Hyundai,
stair-step
Mercedes-Benz and Audi
programs
stores.
eventually
The programs automakers
catch up with
employ to incentivize dealers
dealers.
to be aggressive on new-vehiFILE PHOTO
cle sales vary from brand to
brand. Those structured as stair-step plans
generally offer lucrative bonuses to dealers for
hitting increasingly higher sales targets.

While the Canadian new-vehicle market
soared to new heights earlier this decade, targets were attainable for many retailers. Some
became dependent on those bonuses for much
of their revenue, said dealers interviewed by
Automotive News Canada.
But as sales begin to decline, many dealers
are finding it harder to hit those targets, causing some stores to either miss out on crucial
revenue or consider undertaking questionable
tactics to reach them. And dealers often order
extra vehicles and boost marketing spending
to hit them, making it costly to fall short of targets.

SQUEEZING PROFITS

"They just fundamentally don't work
in a difficult marketplace," said Dennis
DesRosiers, president of DesRosiers
Automotive Consultants Inc. "When the market is growing, they work, and they work very
well. They really do get dealers to become very
aggressive. The amount of money at stake can
be huge, and so it really motivates dealers to
go after it. Unfortunately, they only were able

SEE THE STAIR-STEP PAGE 24

UAW's gains
handcuff
UniforDetroit 3
bargaining
What does it mean
for the union, the
autoworkers and
new product for the
Canadian plants?
By JOHN IRWIN
TORONTO BUREAU

NEW UNITED AUTO WORKERS
(UAW) contracts with the Detroit
Three appear to make things more
difficult for Unifor in its attempts
to secure longNEWS ANALYSIS term investments and production at Canadian plants in 2020.
The UAW deal with General
Motors, which was ratified following a 40-day strike in the United
States, includes several provisions
Unifor is likely to model in
2020 talks with
GM, including a
shortening of the
10-year pay grid
and bonuses for
workers.
Kristin Dziczek:
"But it didn't
Securing
move the neenew product
dle at all on job
mandates
security," said
for Detroit
Kristin Dziczek,
Three plants
vice-president of
in Canada
remains a lofty industry, labour
and economics
goal.
at the Center
FILE PHOTO
for Automotive
Research. "That's a huge deal for
GM and what remains at Oshawa."
Contracts between the UAW
and the Detroit Three in large part

FINAL MONTH
DEALERS: TO REGISTER

SEE

E3
PAG

Dealers weigh the
pros and cons as
stability becomes
the new currency
that attracts talent

commission?

CIAS fights
to prevent
automaker
defections

But Volvo and
Mercedes-Benz
are undeterred by new
survey findings that
tout auto show benefits
By PERRY LEFKO

TORONTO CORRESPONDENT

Gubasta, dealer principal at
Mississauga Toyota in the
Greater Toronto Area, who
about four years ago switched
the dealership from straight commissions to a salary-plus-bonus
plan. Compensation includes incentives on all aspects of the sales process,
By KELLY TAYLOR
from customer satisfaction to referrals
WINNIPEG CORRESPONDENT
on financial products and a percentage
of gross on every vehicle sold.
"If you're worried about the money,
SHRINKING PROFIT MARyou're not doing the job at
GINS AS well as the need to
hand," Gubasta said. "The sales
attract "risk-averse" young
staff loved it. It just provides
employees are prompting some
them with stability for the slowdealerships to shift - at least
er times without it being a draw
in part - away from commison pay."
sion-based compensation for
The change has made it eassales staff, industry experts
ier to recruit staff and dramatisay.
cally cut turnover, Gubasta said.
Fleming
Fleming Ford, head of
"It's much easier to recruit. ...
Ford
people and performance at
[There's] peace of mind so they
ESiTrends, a Florida consulcan focus on selling as it is like a
tancy that has worked with the
safety net," she said. "Since we
Trillium Automobile Dealers
moved to their pay plan, 80 per
Association (TADA) in Ontario,
cent of our sales staff has stayed
said the shift to a salary compowith us."
nent allows dealerships to comThat's much lower than the
pete for talent with other forms
annualized turnover rate of
of retail.
about 50 per cent among sales
Sue
"People don't like risk anystaff, cited in a 2018 dealership
Gubasta
more," Ford said, referring to
work force study commissioned
millennials and their younger cohorts,
by TADA.
Generation Z. "When you don't feel
Still, not all staff made the switch,
safe, you can be coming across as desGubasta said. "One of our top advisperate and not providing that great
ers, when we asked if she wanted to go
customer experience dealers are trying
to salary plus commission, said, 'Can
to provide."
Such was the motivation for Sue
SEE FLEXIBLE PAGE 22

MANAGERS OF THE CANADIAN
International AutoShow (CIAS), hoping that a new study would prove the
worth of Canada's largest trade show,
have had no immediate impact on at
least two automakers that planned to
pull out of the 2020 event.
The findings, which show that the
event influences car-shopping purchases and draws affluent, highly educated consumers, are part of a broader
look at 56 North American auto shows
in 2019. The study was conducted by
Foresight Research, a Michigan-based
company that specializes in providing
data for car companies based on auto
shows' attendance.
"We found it very encouraging
that the data ... not only corroborates
ours, but even goes further than what
our studies have shown," said Jason
Campbell, general manager of CIAS.
"It's a positive story and one we

AUG 17
F&I SECTION
AD CLOSE: JULY 23
SEE 2020 PAGE 20

SEE BREAKAWAY PAGE 21

Mercedes-Benz and Volvo plan to skip
the 2020 Toronto and Montreal shows
in favour of more targeted approaches
to marketing vehicles. P H O T O : C I A S

Toyota dealers bear the brunt of customer anger over parts shortage
By DANA FLAVELLE

TORONTO CORRESPONDENT

EXCLUSIVE
LEAD SPONSOR

The
sins of

DONNA LAPORTE WAS SO
troubled by Toyota's five-month-long
parts shortage at dealerships across
Canada that she decided against buying a RAV4.
"Absolutely, that's the reason," she
said of her decision to purchase a com-

Service departments are
the Canada-wide collateral
damage of a 'systems
transformation'
petitor's vehicle during her car-buying
search in Windsor, Ont., in October.
The blame falls to a "planned systems transformation" at Toyota

Canada, which slowed the flow of
replacement parts needed for repairs.
The company declined to provide
details of the nature of overhaul, but
said the process, which began in June,
is nearly complete.
In the meantime, dealership staff
has been thrust into various forms of
damage control as irate customers play
the waiting game to get their vehicles
serviced.

Tina Smith, a Prince George,
B.C., resident who drives a 2017 Toyota
Tacoma, said she wasn't impressed
with the way Toyota handled the situation, providing customers with little
information.
"Finally got truck brakes fixed on
Oct. 17. Nothing to help me with the
delay. Charged me about $1,300. Parts

SEE TOYOTA PAGE 20

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Automotive News Canada - March 2020 - v2

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