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Canada @150

We always mention that time goes by very fast. A few days ago starting the New Year, watching the fireworks in Ottawa, while being aware that Canada is turning 150.

Canada Pavillion

It hit The Colonel that he was around when Canada turned 100 and Expo 67. Agreed you have to be of a certain age to have attended Expo 67 in Montreal.

First blush it was 50 years ago, 2 generations, where did the time go?

By 2017 standards its ancient human standards it was 50 years ago when Canada turned 100.

By car perspectives it was the middle of the muscle and pony car era, a 427 Corvette coupe with sidepipes, and 67 Camaro were new cars back then...reflect on this for just a moment.

While Boomers were coming of age.

The Vietnam war was going full swing.

The Cold War was enduring.

Woodstock was still a couple of years in the future.

As we progress this year we will make additional references to "Canada @150".





Canadian Consumer Debt

How often do we hear that CMS (Citizen Main Street) is swimming in debt. By now its a Canadian thing that every month CMS is swimming in a bigger pool of debt.

We will spare you the figures, and graphs. Its usually one sound bite accompanying another sound bite until you start connecting your own dots.

Here is the deal....

Consumer debt is through the roof again, excluding mortgages (consumer credit) it increased again.

Mortgages and the housing market lets not even go there...huge clouds all over the place.

Delinquency is almost at an all time low, seems like CMS still has money to make payments.

Yes...we know Alberta has been hit hard and delinquency is a little higher.

Its the eastern provinces that are increasing the level of consumer credit.

We could keep on going, but hopefully these sound bites are familiar to you too.

If mortgages are excluded, and credit card debt is under control with balances increasingly paid off on a monthly basis. You have to wonder "What's left?"

The second biggest purchase by CMS after a house is a car. Its a record year in Canada...never before have so many vehicles (trucks) been sold, especially in the eastern provinces (Ontario/Quebec).

What is driving up consumer credit (debt) in Canada? Simple automotive financing and leasing.

Will this trend continue in 2017?

Will CMS continue with "mobility for a monthly payment" in 2017?

Will manufacturers continue to enable "rolling over deficiencies" in 2017?

Will software continue the shift to a longer term to uphold a constant monthly payment in 2017?

What will happen if "somebody" steps in and disrupts the "roll over" and "pull ahead" guidelines?





The First Snowfall

We are in Canada, at some point it gets colder, and we will get snow. Been like that for centuries.

Although if you listen to the media in 2016 its an exception, a few degress centigrade on the minus side is suddenly cold. Go figure when minus 1C is cold for Canada.

The first snowfall of the season, same thing its as if it never snowed before, a shock to the system. 

Oh...we have to plow roads, we have to clean airport ramps, in short we have to deal with the snow, its Canada, its winter its normal to have snow.

Agreed...windy conditions can ice up stretches of roads, we know that too.

But it still comes as a surprise to many folks that its Canada, its winter, we get snow, wind, wind chill, icy patches on roads.

Should you have winter tires? What do you think?

The first snowfall reinforces the reality that slush, blowing snow, probably not the best thing for AV's (autonomous vehicles)...reflect on this.




Gutless...and More

The other day we read an interesting article in the Globe and Mail; that resonated with us Corporate Canada has a courage defecit-and its costing us.

“Far too many Canadian companies lack the courage necessary to make bold decisions in the face of uncertainty and risk,” concludes the report being released Monday. “They shy away from making key investments and executing dynamic strategies, unwilling to accept short-term challenge for the long-term opportunity. As a result, they – and Canada’s economy – remain in low gear.”

Another snippet...from Canadian Business.

In August 2012, former Bank of Canada governor Mark Carneyderided Corporate Canada for sitting on a large pile of “dead money.” In effect, Carney called out the country’s business leaders as a bunch of wimps.

As you know we have been saying for years that its CMS (Citizen Main Street) that is powering the Canadian economy. Agreed...CMS is enabled by Canadian financial institutions.

We have also been saying that many Canadian companies are sitting on mountains of cash.

While CMS has the GUTS to invest in the Canadian economy, many Canadian companies are GUTLESS when it comes to investing.

In the meantime auto sales in Canada powered by CMS are through the roof.

While Unifor has to strong arm GM, and possibly the other manufacturers to invest money in Canada, and more important remain in Canada.

Reflect on this for a moment...

Do you get the feeling that CMS and Corporate Canada are moving in different directions? If you do, we agree with you.




The Montreal Olympic Games

With all the noise of the upcoming Rio Olympics.

Suddenly 40 years ago there were summer Games in Montreal, in Canada.

Fascinating to see the perspective of folks 40 years later, and yes Montrealers paid for a long time.

From way back in the day with Montreal coming out of Expo 67, it was only normal to host Olympics games a few years later in 1976.

Agreed...the Olympic Stadium that subsequently took years to complete, made a statement back then for a multitude of reasons. While building the stadium was an ongoing saga for a few years prior, and several years later to complete the tower.

The retractable roof...don't go there.

The games were the event of the year in Montreal, securing tickets for any venue at face value was an accomplishment.

GM was the official vehicle supplier to COJO, and there was nothing more Canadian than a Pontiac Parisienne at the time, and probably assembled in Ste.Therese. Obvious that Parisiennes were the car of choice used by COJO.

Imagine for a moment if the Internet and social media existed back then.

The Olympic Village is still there.

Following the Munich Olympics of 1972, the games in Montreal were perhaps a prescient glimpse into the security for any major event on the world stage that attracts millions of eyeballs. The Olympic Village was fenced in during the games guarded by the Canadian Military. The food for the athletes was at a central location under guard.

Yes...time passes for was 40 years ago.





Canada Day

Have an awesome Canada Day, start of the Dog Days of Summer and week end with your family and friends.



Fort Mac

At Strada our thoughts and prayers are with all the folks that have been displaced in one fashion or another by the devastating fires that have engulfed Fort McMurray.

We hope that as a Canadian you have by now made a donation to the Red Cross to assist all these folks at a time when they surely need a helping hand from everybody.

Obvious that if you are in other parts of Canada Fort Mac is far removed from the horizon. If you have ever had an opportunity to travel in the northern areas of western Canada, its stunning scenery while reinforcing that Canada is a great country.

If you have travelled in Canada for the past few years, although Fort Mac is far removed, you surely noticed how many folks from across Canada have gone to Fort Mac to work. In its own way its still an economic engine that ensures a livelihood to a bunch of folks across Canada.

If you are in an urban area, you should know that a pick up is the vehicle of choice in northern Canada, its that simple.

Having to leave your home on a moments notice is an excruciating experience, displacing your family especially with small children must be emotionally draining.

Staying in a temporary shelter, not knowing if there is a home to return to, or when you can return, plays out on a wide spectrum of human emotions.

Its moving to see the local folks all pitch in to help each other in any way they can, the rest of us as Canadians also need to pitch in and give these folks a hand.

Simple...its the right thing to do.



Is The Auto Business Myopic In Canada?

In the early days of the Internet the entire auto industry was myopic towards the Internet, and later towards social media. There are countless cases where the business comes up short.

If you have been around, involved with, or participated in the auto business for a while, you have the luxury of looking back, and looking ahead.

We were doing that the other day, and it hit us that in the 21st century some folks that are truly enlightened, prescient, and always very discreet. While others are myopic, with a glancing pedestrian knowledge, usually if not always making a ton of noise.

Everyone has a better mouse trap than the other guy. Everybody is trying to monetize something or other, or grab some piece of the action.

There is the "guild" for this, the association for that, the convention for something else, the event for another thing...and it goes on. Let's not forget the 20 of this, the 10 best of that, the top 5 of the other thing, and the nominated winner of something else.

Being part of a "guild", while attending these various events of like minded folks is great for networking, disseminating pedestrian knowledge, and inflating egos.

While the really smart "dude" observes from the back of the room acknowledges the myopic behavior, while crafting his strategy.

Agreed...public relations, photo ops, guilds, associations, events, networking, are an intrinsic part of any business, and create the right optics from a social, community perspective. In the auto business the PR budgets are well consumed for a myriad of activities that capture a nano second of attention.

In 2016 if you need to go to an industry event to discover a new product, new software, new concept, bolster your ego...where are you the rest of the time?

There is so much of this low level stuff going on, its has a tendency of sucking in individuals. While propagating "street knowledge" in an auto business environment where you have to be brilliant to make a difference, and stand out.

"Did you really do that (a brilliant move/strategy)?"....reply "Yes"...."How did you do that?"....reply "A bit of this, and that it worked out". Obvious no one will provide a step by step answer....certainly not to a room full of like minded folks (competitors).

Consider this simple graph from JD Power...for March 2016 in Canada.

The myopic / pedestrian comment would be "The spring market is around the corner and you can't sell new vehicles from an empty shelf."

The smart dude in the back of the room, discreetly starts to connect a few dots, seeking an advantage.

If you are an astute observer and conclude that manufacturers have applied the "sledge hammer" approach to move iron, you might be correct.

If you are a dealer and look outside, you visually see the increase in day supply, the increase in longer term loans, the additional challenge to close deals, while intimately feeling the pressure to move iron.

If you are a customer you see serious deals being offered in the immediate horizon.

Do you think that the smart / prescient individual in the back of the room will give you a step by step guide as to what he will do to move iron during the second quarter?



What's Up with Leasing

We always mention that you should be your own editor and edit out stuff that is...lets just say misinformed.

Last week we published our "white paper" Creeping Auto Loans, and mentioned that manufacturers that did not abandon leasing in Canada were in a dramatically better competitive position.

Reading in industry publications various comments and remarks from folks that should know better, you have to wonder if these folks are in the auto business in Canada...lets leave it at that.


A decade ago leasing had  50% penetration in Canada, CMS (Citizen Main Street) was leasing mobility, eschewing ownership. 

CMS was directed by manufacturers from mobility to ownership with increasingly longer finance terms.

While some manufacturers got out of leasing, others kept on leasing. They are in a better position today, aided by strong CPO programs.

What is the deal?

Leasing will not save the day of long loan terms and negative equity in 2016. Thinking otherwise is being naive, and totally detached from the current reality. 

Rolling over negative equity in a lease is perhaps possible, but the monthly payments would skyrocket, at a time when most deals are closed on a similar or lower monthly payment. Reflect on this for a moment.

Which begs the question "Why do industry experts mix long term loans, negative equity, and leasing in the same conversation.

Reality Check 1

Manufacturers that never abandoned leasing can easily function within the 36 month cycle, while attracting and conquering customers that are in a lesser negative equity position to their product. These manufacturers that never abondoned leasing in Canada have also introduced numerous new models in the "Premium Economy" segment.

Suffice it to say that they are eating a few lunches.

Reality Check 2

Manufacturers that abandoned leasing for finance, and are now fully embroiled in longer term finance, and negative equity have no choice but to continue doing the same, rolling over deficiencies, and pulling ahead finance deals. 

There is a choice...perhaps they will introduce a 72+ month lease to roll over deficiencies? Same as stretching the finance terms a few years ago.

Reality Check 3

When manufacturers abandoned leasing in Canada, they opened the door for Canadian financial institutions to become more active in the auto segment. Auto sales have exploded with the increased participation of financial institutions, which also influence the captives in recalibrating the risk of auto loans.

You have to wonder why "industry experts" persist in connecting the wrong dots, or remain oblivious to the emergence of new dots.

In the meantime CMS is enjoying mobility at $500 per month, and will keep on demanding and enjoying mobility. Its similar to a lease...especially when "everyone has skin in the game" pitching in to roll the negative equity risk down the road.



What's Going On?

Every so often we stop and ask "What's Going On?" this is the ideal time, mid month on the last month of the 1st quarter of 2016.

In no particular oder

Utility Vehicles

It still seems to befuddle a ton of folks, CMS (Citizen Main Street) prefers utility vehicles over sedans. That simple...this migration has been enabled by manufacturers.

4 Cylinder with a Turbo

Its the new 6 cylinder...usually tweaked to provide good low end torque

6 Cylinder with a Turbo

Its the new V8...again tweaked for torque and some top end power. Many manufacturers are putting these V6's in all sorts of models with an appealing word track to entice consumers.


By now its truly a luxury engine, especially one big enough to not require a turbo or a blower. Agreed the Detroit 3 have some interesting offerings when it comes to V8's.

Multispped Automatic Transmissions

Remember the Powerglide? Today we are up to 8 and 9 speed automatics, which makes sense that by going to smaller engines, more gears are useful to "lift the load". Think of this...for decades a 13 speed Fuller Road Ranger was the mainstay of the trucking industry. A 9 speed automatic with a torque converter is similar to a 13 speed in a heavy duty truck.

Loan Terms

Getting longer not a good thing for the auto business. The loan terms are signaling the the business has crossed the shark and truly pushing the envelope.

Pulling Forward

Dealers to be competitive are pulling deals forward which makes sense, when folks are in longer than shorter loan terms. How much forward can you pull...its the question.

Negative Equity

From a consumer perspective they are getting about 50% of what is owed on a vehicle on a trade value. Think about this for a moment.


CMS in Canada increasingly wants mobility, not ownership. With profound implications for the auto business. The loan terms are merely a financial instrument to package mobility.

Opinion of Others

Have you noticed all the references to the younger generation relying on the opinion of others, reviews, forums to formulate their decisions especially when it comes to vehicles. When it comes to vehicles is it the the money of others, or your money?