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Entries in Canada (92)

Monday
Oct062014

Warren Buffet Is A Dealer

Late last week we were pleasantly surprised that Warren Buffet is now a dealer, and in the auto business. This deal to purchase Van Tuyl was surely in the "works" for some time, and will close in the first quarter of 2015. 

Interesting that we publish our latest ebook Behind Closed Doors, and literally a day later its made public that Berkshire Hathaway is acquiring Van Tuyl. 

This morning we have The Colonel, lets get his thoughts.

Q: Colonel Good Morning, lookin' good as usual, what do you think of this deal?

A: Its GREAT, cool to have Warren Buffet in the auto business. Most probably only Warren Buffet was in a position to acquire Van Tuyl with terms that suited numerous variables.

Q: You always mention that you need a ton of money to operate a dealership. 

A: Absolutely, and even more today with dealers groups in a position to access public funds. Manufacturers love the idea of well funded dealers that cater to their imaging wishes.

Q: Berkshire Hathaway in the future can acquire additional groups.

A: Its a starting point...yes its easy to acquire additional groups in a building block fashion.

Q: Warren Buffet has interests in Canada with Heinz, Tim Horton/Burger King, perhaps....

A: Hold that thought...you never know what the future holds.

Q: Manufacturers have a stable of dealers, and dealers have a stable of franchises (manufacturers).

A: Interesting dynamics that will continue to evolve through the years.

Q: Will some manufacturers set their own clauses towards the Bershire Hathaway/Van Tuyl deal.

A: Obvious they will, its a unique opportunity, you can imagine that if anything hits a roadblock the optics are in favor of Berkshire Hathaway. Do you guys remember when Wayne Huizenga was assembling Auto Nation, it was interesting.

Q: Manufacturers are very good at developing programs to move iron, why nor to develop dealers.

A: Decades ago the Detroit 3 had programs to enable individuals to open dealerships, where they partners with the individual.

Q: Are you serious they had such programs? That would work wonders in Canada today to assist young people that have an entrepreneurial desire.

A: You guys are quick...although its easier for manufacturers to chase after big money, imaged real estate, and so on.

Q: In Canada manufacturers could make a compelling contribution towards young people.

A: Sure they could, go back to their roots where a dealer principle is part of the community, and so on...I could keep on going here...better to be brief.

Q: Perhaps Warren Buffet might do something like that in Canada?

A: That would certainly rattle a few cages...

 

Friday
Oct032014

Vroom Room

Good Morning,

Its Friday, its the Vroom Room, enjoy the cappuccino and biscotti, join the conversation, leave a comment.

Its a new month, we are back to fully engaged reality, with the expected increased turmoil in the world, and a ton of opinions on the Canadian economy, and the dollar.

Yes...we knew it was coming during the summer.

In case you missed our latest ebook "Behind Closed Doors"...Click. We are certain that you will find it interesting, captivating, and revealing.

As we move closer to "connected cars" and self driving cars. Old school mechanical cars are starting to look totally archaic, although easily restorable. You have to wonder about the challenges that these new cars will pose decades from now in the restoration process. By then the software to operate many of the features will be long gone.

Think about this for a moment.

Have you noticed how the mainstream media is increasingly in the eyeball business. Literally rehashing the same stories, photos, content, over and over in their quest to capture more eyeballs. 

In an atmosphere of diminished attention span, humans just "shut down" to ingesting the same s#&t over and over. 

Canadian Sales:

A record September, and a record 3rd quarter. Fascinating results when everyone fires on all cylinders, gets the game plan, and the money flows freely. Let's not forget new models too. It literally took years to arrive at this juncture in Canada. 

As expected trucks are increasing their popularity and market share.

Finally GM throttled up in September with a strong month...

Canada:

We are increasingly reading opinions by pundits that Canada is falling behind. A couple of years ago we mentioned that Canadian companies were sitting on mountains of cash, while the conomy was relying on the Canadian consumer, and cheap money. 

We are seeing the results of a lack of "corporate leadership and innovation" in Canada. Cheap money from the banks has camouflaged a myriad of weaknesses, while increasing a wave of consumption. 

Canadian auto sales are one effect of cheap money.

The Corvette Z06 has a 0 to 60 of 2.95 seconds with an 8 speed automatic...impressive.

Old and new cars at The Maserati Centennial 2014.

 

 

 

Wednesday
Sep102014

The Pontiac Saga

Some issues seem to have a life of their own. The Pontiac saga in Canada continues to endure.

We have always been of the opinion that losing Pontiac deeply affected GM sales in Canada. In addition to greatly assisting Korean manufacturers in quickly establishing additional sales points.

Not only did GM close Pontiac sales points, created internal turmoil; it quickly assisted its Korean competitors. 

Some Pontiac dealers in desirable "open points" for the Koreans did well, and very quickly. Other dealers did not do so well. In addition to the various buy and sell side agreements to ideally consolidate the GM dealers into the ideal "full line" representation.

It begs the question "How much sales momentum did GM lose in Canada?"

A few years ago we were reading about various legal positions regarding the closings, and the various players and stakeholders that were involved. Back then it seemd a little complicated, and convoluted.

Yesterday the trial started, this article in the Globe and Mail provides a glimpse of the proceedings, stakeholders, conflicts.

It will be interesting to see how these legal proceedings develop, and who will come out ahead.

 

 

Friday
Jul252014

Vroom Room

Good Morning!

 

Its Friday, its the Vroom Room, come in make yourself comfortable, enjoy the cappuccino and biscotti, join the conversation, leave a comment if you wish.

 

The other day we were reading that Boomers are presumably rich, and snapping up luxury cars like its going out of style, one of the reasons MerBimAu sells/leases a ton of cars in Canada. You have to wonder how presumably knowledgeable folks arrive at such conclusions?

The succesful Boomers were driving luxury cars decades ago. Successful Boomers from back in the day, as they become "seniors" have other priorities in their lives, have moved on from the luxury car segment, and yes they might still be driving a luxury car. 

Boomers that had luxury cars from back in the day, are surely not the one's snapping up "entry level" luxury MerBimAu's...today.

Agreed, Boomers are still hanging on to their toys, be it a car, a motorcycle, or anything else with an engine.

The dude that could not afford a luxury car back in the day. Be assured this same dude was "envious" of the Boomers with the luxury cars. Perhaps this dude today is driving an entry level MerBimAu.

Fascinating to see GM, Mary Barra, Michael Millikin get raked over the coals again, at a Congressional hearing in the US. While "doing the right thing" takes on new perspectives, and nuances. At the same time the benefit of the doubt dissapates.

Our habitual old race cars from "Sommet des Legendes" at Circuit Mont-Tremblant. As an aside its the 50th anniversary of Le Circuit.


 

Thursday
Jul172014

Dealers Suing GM Canada

You have no doubt heard that several influential GM dealers in the GTA are suing GM Canada for an an appreciable amount of money (400 M). A few weeks ago we mentioned that its was primarily due to a breakdown in communications. 

This morning we have The Colonel with us, he is sharing his thoughts.

Lets get going.

Q: Colonel, good morning, you are looking well, even after a few hyper hectic months.

A: Good morning guys, yes gaining momentum again, hopefully by the end of the month I will be ahead of the 8 Ball as the saying goes.

Q: Why would several dealer band together to sue a manufacturer.

A: A communication breakdown, overflowing frustration, rising costs, diminishing sales, diminishing profitability, seeking concessions to name a few.

Q: It seems to be a myriad of reasons, can you simplify the landscape, since you have an extensive knowledge base in this area.

A: Guys at its simplest, a dealership is a money machine, and it has to generate a ton of money to pay all the expenses, remain in business, turn a profit. These dealers are perhaps saying that the GM money machine is broken.

Q: We know that the auto business in general, and at the dealer level requires immense sums of money to function successfully.

A: Precisely...it requires a ton of money, and must make a ton of money to remain viable.

Q: From the little that is known, what do you think are some of the issues that motivated thse dealers?

A: It seems that the "imaged" brick and mortar is one issue. Obvious that when a dealer renovates, or builds new premises, there is immense pressure applied to the money machine.

Q: These guys are smart they knew that from the outset.

A: Sure they did, now factor in diminishing sales for GM in Canada, and perhaps some promises that did not develop, and suddenly its a different landscape.

Q: In Canada during a brutal winter sales increased this year, what does that say about brick and mortar?

A: Great question, impactful, imaged brick and mortar was initiated by the "Germans" a few decades back. Lets be candid, GM dealers went along with acceptable premises (compared to the Germans) for many years. Now factor in the closure of Pontiac dealers, while seeking an improved image for Cadillac.

Q: Pontiac dealers they are long gone by now.

A: Entertain this scenario for a moment: A dealer had both a Chevrolet and Pontiac franchise, the Pontiac franchise closes, GM offers compensation, while demanding renovations and re imaging for the Chevrolet premises.

Q; At a time of "iDealers" the brick and mortar is less of a factor.

A: Precisely, this is reinforced by the brutal winter which did not impact sales, other manufacturers with less imaged dealers are increasing their sales...it gets complex.

Q: Some manufacturers demand exceptional facilities just to open a new point.

A: Yes...some manufacturers demand an up front investment in the millions to grant a point. Although most of these points go to dealer groups, or folks with deep pockets that need to feed their egos. Usually its dealer groups. 

Q: Why are dealer groups prepared to spend millions up front, and these dealers are suing GM?

A: A dealer group has a stable of "money machines" from various manufacturers, where one money machine can support an emerging money machine that is just starting out.

Q: Perhaps these dealers suing GM only have a money machine from GM?

A: In 2014 in a major metro market, or better yet the metro market in Canada, having only a GM money machine is a flawed business model.

Q: There is certainly more to this...

A: Sure there is...but in 2014 having all your eggs in the same basket is a precarious position.

Q: What is one aspect of dealer group clout.

A: Brick and mortar...multi franchise dealer groups have no qualms to invest millions in brick and mortar. The dealers suing GM are doing the opposite, they are having second thoughts about their brick and mortar investments.

Q: We could keep on going.

A: Absolutely...at another time.