Automotive News Canada - September 2020 - 7

* S E P T E M B E R 2020

AutoCanada
positioned for
M&A revival

TRENDING
STORIES
automotivenews.ca

ONGOING WEB COVERAGE

DETROIT THREE CONTRACTS

Unifor picked Ford as its target for pattern bargaining.
Contracts with Ford, General Motors and Fiat Chrysler
expire at end of the day on Monday, Sept. 21.

GOVERNMENT ASSISTANCE?

AutoCanada lost $20.1 million in the second quarter, but there are signs of resiliency. Its Canadian sales
outperformed the market for a sixth consecutive quarter and it reduced net indebtedness. F I L E P H O T O

Pandemic reveals
a resiliency in
the dealership
group's operations,
strengthening investor
confidence and
clearing a path
for growth
By JOHN IRWIN

AUTOMOTIVE NEWS CANADA

A TWO-YEAR-OLD
turnaround plan has put
Edmonton-based AutoCanada Inc.
in a position to both weather a
potential second wave of COVID19 and resume acquiring dealerships, executives say.
"I consider what happened
in March, April, May as a bit of
a dress rehearsal for us, where
we've prepared ourselves for a bad
few months," Executive Chairman
Paul Antony told Automotive News
Canada.
"We feel like we have the capabilities to ... come out the other
side with a new kind of structured organization that's
more built for a
downturn."
Like the rest
of the industry,
AutoCanada
was hammered
in the second
quarter as
Antony:
new-vehicle
AutoCanada
sales plummetaims "to
ed nationwide
amid shuttered organize the
business and
showrooms.
put it in good
Canada's only
shape so that
publicly tradwe can actually
ed dealership
group lost $20.1 go and start
to fire up the
million in the
M&A machine
quarter, which
again."
ended June
FILE PHOTO
30, as revenue
dipped 23 per cent from a year earlier. AutoCanada currently operates 63 franchised dealerships
comprising 26 brands in Canada
and the United States.
But executives and analysts saw signs of resilience in

AutoCanada even during a bleak
quarter for the industry. Its
Canadian sales outperformed the
market as a whole for a sixth consecutive quarter and the company reduced its net indebtedness.
AutoCanada also saw same-store
gross profit on finance and insurance grow 18 per cent compared
with a year earlier.
Perhaps most crucially for
the group, its used-to-new vehicle sales ratio rose significantly.
Antony, who founded the vehicle history provider CarProof and
joined AutoCanada in 2018, has
made building up the company's
used-vehicle business a priority,
saying those customers are likely to come back for service and
future purchases.

NEW STRATEGY? USED CARS
On an investors call in August,
Antony said AutoCanada plans to
launch a "fully realized Canadian
digital retail strategy" aimed at
selling used vehicles. Few details
were provided, although Antony
said AutoCanada has been studying what new-vehicle groups and
large used-car retailers in the
United States have been doing in
the digital space.
Regarding used vehicles, "I
have a fair bit of experience in
this world. That's kind of where
I come from," Antony said.
AutoCanada has been "trying to
organize the business and put it in
good shape so that we can actually go and start to fire up the [mergers-and-acquisitions] machine
again."
Previously a major player in
the Canadian buy-sell market,
AutoCanada paused recently as
the company chose instead to find
efficiencies throughout its operations. The process, which accelerated during the height of the pandemic, identified about $10 million
in annual cost savings.
"For us, that's pretty significant," Antony said. The pandemic
helped AutoCanada "understand
how our expenses were really allocated throughout the business."
Chris Murray, an analyst for
AltaCorp Capital Inc. who follows
AutoCanada, said the company
could look to expand by adding
new brands and new markets to
its dealership lineup. The bulk of

the group's stores are located in
western Canada, and it has more
Fiat Chrysler stores than any
other brand.
"Adding more Ford would certainly be a really logical position
for them, What they're trying to
avoid is adding concentration of
Chrysler in Alberta."

A U.S. REVIVAL, TOO
AutoCanada executives are
also optimistic about the future of
their dealerships in Illinois. The
company bought those stores for
$135 million in 2018, but executives
subsequently found unexpected
and "highly abnormal costs" at
the stores.
Executives now say they're
in the middle of a turnaround. Tamara
Darvish, head of
AutoCanada's
U.S. operations,
said the dealerships there
are concentrating more on the
Darvish: U.S.
quality of sales
operations
over quantity
focused on
and are emphaquality of sales sizing improvover quantity,
ing internal
and customer
processes and
retention.
retaining cusFILE PHOTO
tomers.
"There are some dealers who
prefer to sell a lot of cars and move
a lot of volumes but lose a lot of
money," Darvish said. "That's just
not a formula that's a part of our
business plan."
AutoCanada has been rewarded by investors in recent weeks.
After falling below $5 per share
in March as the industry began to
shut down, the stock consistently traded above $10 beginning in
June. It was above $17 a share in
early September, compared with
about $8 a year earlier, according
to Yahoo Finance.
"As we look out over the next
couple quarters, we feel pretty
comfortable with their operational
performance," Murray said.
"The intangible on this is, do
they start getting back into acquisitions? If they do, it sounds like
they have a fairly healthy pipeline
and a balance sheet that's available to support that." - ANC

As the federal government returns to a more regular
schedule in September, it remains to be seen whether it
will give in to auto-industry demands for stimulus and
whether it will move forward with a tax of 10 per cent on
luxury vehicles.

REDISTRIBUTING A DISTRIBUTION HUB

Ford Canada plans to close its Bramalea National Parts Depot in
Ontario and split the work done there between two new locations
in the province. "In order to improve
customer satisfaction and expedite
parts delivery time to dealers, Ford
will be opening a new parts depot in
Eastern Ontario and a new location
west of Toronto to continue servicing Canada's most heavily populat- PHOTO: FORD
ed region," company spokeswoman Rose Pao said. "As a result
of the two new locations in Ontario, Ford will no longer operate
out of the current Bramalea Parts Distribution Centre once the
new locations open."

SUV GETS ONE HELLCAT OF A PRICE

The 2021 Dodge Durango SRT Hellcat will have 710 horsepower and a six-digit price tag. FCA Canada says the full-size utility
vehicle will start at $116,240, including shipping. The three-row
muscle machine is equipped with a supercharged 6.2-litre V-8
engine paired with an eight-speed automatic transmission. It has
a top speed of 290 km/h and hits 60 mph (96 km/h) from rest in
a claimed 3.5 seconds. Canadian dealers will begin accepting
orders this fall. Deliveries are scheduled to begin next year.

MAGNA WINS FOR EQUINOX, Z4 AND X6

In the seven categories of the J.D. Power 2020 U.S. Seat Quality
and Satisfaction Study, Canada-based
Magna International took three firstplace awards and one second. The
global supplier earned the top spot in
the mass-market compact-SUV segment for the Chevrolet Equinox, and in
the luxury-car division for seats in the
BMW Z4. It also topped the luxury-SUV PHOTO: MAGNA
category for the BMW X6. The awards are based on responses from 87,282 purchasers and lessees of new 2020 model-year
vehicles who were surveyed after 90 days of ownership.

SOLO EVs BEGIN ROLLING OFF THE LINE

Canada-based ElectraMeccanica Vehicles Corp. officially
launched production of its three-wheel electric car Aug. 26 by
the company's manufacturing partner in China. The single-seat
Solo, aimed at the U.S. market - particularly California - starts
at $18,500 plus $750 destination charge. The car has been in
development for about five years. The automaker had considered building the Solo in Canada but was unable to secure federal-funding support for a factory. The company is now scouting
locations for a U.S. assembly facility and research centre.

BRONCO SPORT STARTS AT $34,099

In Canada, Ford's new compact-utility vehicle will receive standard equipment in the base model that costs extra in the United
States. The Bronco Sport - not to
be confused with the Bronco, which
arrives next year - automatically comes with rain-sensing wipers, a
wiper de-icing bay, an engine block
heater, LED daytime running lights,
and an auto-dimming rearview mirror. P H O TO : FO R D
Heated front seats, heated side mirrors
and keyless entry with push-button start are extra. The Bronco
Sport will start at $34,099, including a $1,900 destination fee.

- ANC

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Automotive News Canada - September 2020

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