M & A Trends
Impact of Technology
AutoTeam America Buy-Sell Summit and CEO-CFO Forum
Alan Haig, Haig Partners
John Murphy, Bank of America Merrill Lynch Global
Auto dealers want to lure young buyers back to new-car lots. Auto makers have in recent years turned away from cheaper models, such as hatchbacks and small sedans, to focus their lineups on the higher-priced SUVs and trucks that have surged in popularity with the drop in fuel prices. The shift has helped lift new-vehicle prices to record levels and boost profitability for the auto sector. But dealers, gathering at a conference in Las Vegas this past weekend, warned that the trend is also pricing many buyers out of the new-car market. The main casualty, they said, are younger adults. “We really do need the younger buyers in these new vehicles,” said Charlie Gilchrist, the 2019 chairman of the National Automobile Dealers Association, in an interview.
Source: The Wall Street Journal
Canada’s automotive industry can learn a lot from software giants such as Microsoft Corp. about using internships and other post-secondary school partnerships to fill a looming skills gap, the 2020 Automotive News Canada Congress heard last week. Too few post-secondary students are being prepared for the jobs of the future and, in particular, the impact of robotics, said John Stackhouse, senior vice-president, Office of the COE, Royal Bank of Canada.
“At RBC, we consider this a quiet crisis,” he said in a speech at the Metro Toronto Convention Centre Feb. 13.
Contrary to popular belief, technological change will create more jobs in the future, not fewer, he said. Many will require the so-called soft skills, such as complex problem solving, critical thinking and communication, that are common to many professions, he said. But workers will require retraining in specific skills to take on news tasks. Traditional auto industry jobs, such as service mechanic, are changing, he noted, opening them up to new groups of workers. A field traditionally dominated by men, the job now requires more computer and communication skills than physical strength. “It’s no longer the grease-monkey skills from decades past. I see this as a tremendous opportunity.”
One solution to the looming skills shortage is for the auto industry to partner with more post-secondary institutions to tap into new labour pools, including underrepresented groups like women and indigenous Canadians, he said. Investing in training and development costs money, he acknowledged. “But we can’t afford not to do this. The labour shortage is so great.”
In exchange, business can benefit from the fresh perspective young trainees bring, he added.
“There are 7 millennials in Canada who have grown up completely digital, who understand your problems differently,” Stackhouse said.
Source: Automotive News Canada
Auto dealership chain Sonic Automotive is looking to greatly expand its EchoPark brand of standalone used-car dealerships to a major metro area near you, especially if you live in the Sunbelt. Sonic spent five years and millions of dollars getting the EchoPark customer-experience formula right, including no-haggle pricing, and having a single salesperson stay with the customer through the whole process, including financing, CEO David Smith said.
Nissan Motor Co. shares fell to a decade low after the company cut its full-year profit outlook and scrapped its year-end dividend payout, slipping to fifth place by market value among Japan’s automakers. Nissan shares fell 9.6% to their lowest since 2009 in Tokyo on Friday, leaving the company with a market capitalization of 2.17 trillion yen ($19.8 billion), behind Subaru Corp., Suzuki Motor Corp., Honda Motor Co. and Toyota Motor Corp. Nissan’s stock is down 19% since the start of the year, after declining 28% in 2019 and 22% in 2018.
Since its development of the Model T in 1908, Ford Motor Co. has been synonymous with building affordable, entry-level vehicles for the working class. By 1924 the price of a Model T Runabout had fallen to just $260 — the equivalent of about $3,900 in today's dollars. Fast-forward to 2020, and Ford does not offer a single vehicle for less than $20,000 when delivery fees are included. And Ford is not alone. As Detroit automakers increasingly abandon affordable sedans for higher-priced SUVs, Asian carmakers are only too happy to pick up those entry-level sales and possibly gain loyal customers for life.
Source: The Detroit News
Ford Motor Co., in partnership with automotive supplier Robert Bosch, will use virtual reality to teach service technicians at dealerships how to work on the upcoming Mustang Mach-E electric crossover. Through the use of a VR headset, techs can learn how to service the crossover's battery pack and how to remove and install the main battery. Bosch said it's working on updates that would allow techs to virtually enter the vehicle. Ford is the first automaker to pilot the application in its service technician powertrain repair course, the company said.
Source: Automotive News
Ford has cut production of the Fiesta small hatchback at its plant in Cologne, Germany, in reaction to factors including a drop in U.K. sales. The model is the best-selling car in the U.K., Europe's second largest market.
Ford will reduce Fiesta production to four days a week, down from five, at the plant in a move that will affect 2,200 workers. The reduced output is expected to last until year-end, with a review in May, a Ford spokesman told Automotive News Europe.
"Southern Europe and the United Kingdom are seeing weaker demand [for the Fiesta], leading to the need to adjust production," the spokesman said.
Overall sales of new cars in the U.K. fell 7.3 percent in January as consumers held back from big purchases due to factors including ongoing economic uncertainty following Brexit.
The Cologne plant produces 1,150 Fiestas a day, with a third of that output going to the U.K.
Source: Automotive News Europe
It’s been three years since BMW dealers in the U.S. complained loudly to brand executives at the National Automobile Dealers Assn.’s convention and expo in New Orleans about inconsistent marketing messages, overly conservative vehicle styling and lackluster showroom upgrades. Many of those issues have been addressed to the point that this year’s franchise meeting at the NADA convention here wrapped up early, needing only about half the allotted time for presentations by company management and questions from dealers.
Fiat Chrysler Automobiles NV on Tuesday secured a small victory in General Motors Co.'s civil racketeering suit against the Italian American automaker. U.S. District Judge Paul Borman is allowing Fiat Chrysler to delay turning over the documents requested by the Detroit automaker until he determines whether the case should be dismissed. GM is seeking to prove its allegations that a years-long bribery conspiracy by Fiat Chrysler executives corrupted labor negotiations and hurt GM, which FCA has called "groundless."
On Tuesday, S&P Dow Jones Indices and Experian released data through January, and analysts found the auto-finance default rate dropped 3 basis points on a sequential comparison to settle at 0.99%. The decline left the auto default rate below 1% for the first time since August when it was 0.98%. And how did 2019 start for the auto space? The auto-default rate last January was exactly the same at 0.99%. The readings to begin 2018, 2017 and 2016 all came in above 1% as analysts pegged them at 1.07%, 1.06% and 1.04%, respectively.
Source: Auto Remarketing
French prosecutors have stepped up their investigation into alleged misappropriation of funds at Renault by former boss Carlos Ghosn, saying a judge had now been assigned to the case to launch a formal investigation.
The prosecutor's office in Nanterre, on the outskirts of Paris, had since last year been looking into a party Ghosn had thrown for his wife at the sumptuous Versailles palace among other financial dealings. It said in a statement on Wednesday a judge would now examine several charges linked to Renault and levelled at an unnamed person or people. A judicial source confirmed that Ghosn was among them.
A lawyer for Ghosn said he welcomed the opportunity to give his version of the events.
"We will provide our explanations to the designated magistrate after we can finally have access to the case file," lawyer Jean-Yves Le Borgne told Reuters.
Ghosn -- now in Lebanon after he fled prosecution in Japan on financial misconduct charges -- has repeatedly denied any wrongdoing. Reuters reported in January that judges, who have wider powers than investigators to pursue a criminal case, were set to get involved, potentially bringing prosecution a step closer. The prosecutor's office said the case involved suspect financial flows between Renault and a car dealership in Oman, as well as spending on trips and events. Prosecutors had been looking into whether Ghosn knowingly used company resources to throw a party that was for private purposes - his wife's birthday - in 2016.
Ghosn's lawyers have said he did nothing wrong, but there may have been a misunderstanding between Versailles and party planners over who was to foot the bill for renting the venue. Another event at Versailles in 2014, when Ghosn held a corporate party to celebrate the 15-year anniversary of Renault's alliance with Japan's Nissan, will now also fall under the scope of the investigation, the judicial source said.
At a news conference in January, Ghosn rejected allegations that most of the guests at the party -- paid for by RNBV, a Dutch-based holding company for Renault and Nissan -- were his own friends and family, saying the companies had invited business contacts from dealerships and other partners.
Renault conducted its own internal inquiry into Ghosn's time at the carmaker and handed over information to prosecutors last year. This included its probe into millions of euros described as dealer incentives to an Omani distributor.
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