Automotive News Canada - March 2018 - v2 - 17

* MARCH 2018

CANADACONGRESS

From left, Magna International CEO Don Walker, Woodbridge Group
CEO Charles Daly and Martinrea International CEO Pat D'Eramo discuss
a changing supplier business with Dave Versical, Automotive News
Group director of editorial operations. ( P H O T O : J O R D A N L E N S S E N )

SUPPLIER PANEL

Canadian companies drive,
and are driven by, technology
Suppliers see mobility,
connectivity challenges,
but relish innovation
By PERRY LEFKO

TORONTO CORRESPONDENT

TORONTO - IS THIS AN EXCITING
time in the automotive industry or is
it a scary time?
CEOs of three Canadian suppliers
assessed the future in a panel at the
Automotive News Canada Congress,
weighing the uncertainty about
autonomous, electric and connected
vehicles, combined with a concern
that the bullish sales of the last several years could be headed for a slowdown.
Charles Daly, CEO of The
Woodbridge Group, based in
Mississauga, Ont., said the future
of the automotive industry will be
defined by unprecedented transforma-

tion, specifically mobility and digitalization.
"Mobility will transform our
industry and digitization will transform both our business and operating
costs ... Significant change does present significant opportunity.
"Connected/autonomy's ability's to prevent the loss of 1.2 million
lives or 20-50 million injuries per year
in auto accidents should be reason
enough, but consider this: The cost
of full battery electric vehicles continues to improve. In fact, reducing
an unprecedented 65 per cent over
the last seven years, while in parallel
massive investments are being made
by [automakers] to further prove this
value proposition."

SMART REGULATIONS NEEDED
Pat D'Eramo, CEO of Martinrea
International, based in Vaughn, Ont.,
which makes powertrain components
but primarily focuses on lightweighting of vehicle components, said "regu-

lations are not the enemy."
"Regulations inspire innovation
if they are smart," D'Eramo said. "In
a supplier case, regulation gives an
opportunity to improve marketing -
and if often does. The guy that spends
24 years at General Motors or Toyota
looks at regulations a little differently. Yes, it can inspire innovation and it
can be great for customers, but it can
also be very costly.
"So there's a balance between the
supplier and their innovation and
something new, and the [automakers]
who have to pay for that part and still
make the car affordable masses."
But, he said, regulations need to be
targeted.
"The government needs to regulate targets, not solutions. Sometimes,
when you regulate solutions you rob
the ability of the industry, which
knows how to do this better than anybody, of innovations that may otherwise not come to pass."
The head of Canada's largest sup-

Should dealers buy, sell or stay?
Buy-sell expert advises to weigh
likelihood of successorship with
current high values and potential
returns of staying in the game
By ROBERT BOSTELAAR
O T TAWA C O R R E S P O N D E N T

TORONTO - FOR CANADIAN CAR DEALERS,
there might never be a better time to sell. Franchise
values are high and buyers with fat wallets are plentiful.
But the high yearly earnings that make so many
dealerships ripe targets for purchase could be a compelling reason for an owner to stay on, says dealership buy-sell expert Erin Kerrigan, even if it means
accepting a lower sales price down the road.
Most dealers appear to understand this, despite
fears of a sales downturn, the disruptive effects of
autonomous transportation and a blossing ride-hailing lifestyle that's offsetting traditional ownership,
said the head of U.S.-based Kerrigan Advisors.
"One thing for sure, there are fewer sellers in

Canada than there are buyers," Kerrigan told the
Automotive News Canada Congress.
In a changing industry, the long view should pay
off.
"Smart sellers are looking to the future to determine if today is the right time for their family to
exit, while astute buyers are studying changes
expected in the market to identify the best place to
invest. In both cases it is all about the future, rather
than the present."
Canadian sellers should expect more interest
from American buyers taking advantage of the
stronger U.S. dollar, she said. But at the same time,
lower prices for U.S. dealerships have Canadian
groups looking south. Kerrigan said she was working on two U.S. sales to Canadian buyers.
Other trends she noted:
* More dealers are willing to take on equity investors, as minority or majority partners, to help with
the high costs of growth.
* As online merchants replace the brick-and-mortar
retailers who might buy a former dealer site, dealers
are less likely to want to hold on to a property when
selling a franchise.
* Large, publicly owned groups will become bigger
players in the Canadian market - which now has

plier says the influx of talent into the
industry is a key strength.
"The automotive industry is global,
and it's going to become more global,"
said Don Walker, CEO of Aurora, Ont.based Magna International Inc.
"The industry is the most complicated, highest-tech in the world by far.
You look at the amenable electronics
in the vehicle and the volume and the
safety product ... that attracts a lot of
really good talent."

'PENT-UP DEMAND'
"As for a global recession," Walker
added. "nobody can predict that. It
looks like there's still pent-up demand
globally, especially in emerging areas
... I don't look at it as being scary.
There's always an opportunity and a
threat when things are changing fast.
"At Magna, we've got a lot of really
good things going on. If we can't outgrow the competition, then shame on
us because we've always done it, and I
think we will continue to do it." - ANC

Erin Kerrigan says
that cross-border
deals will increase,
in both directions.
( P H O TO :
JORDAN LENSSEN)

just one public group - Alberta-based AutoCanada
- because they have more resources.
"For a long time in auto retailing, there weren't
often buyers with deep enough pockets to do these
kind of deals," Kerrigan said.
* Buyers are less focused on new-vehicle sales,
where profits are thin, than they are on projected
earnings growth and returns from fixed operations
and used-vehicle sales. And as consumer reviews
become ever more important, buyers are seeking
stores with high customer-satisfaction scores.
- ANC

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