Automotive News Canada - February 2024 - 16

16
* FEBRUARY 2024
Retooling for EVs in Oakville is about to begin
The $1.8-billion project
will start in the second
quarter, after production
of the Ford Edge ends,
but what electric vehicles
will be built there?
By DAVID KENNEDY
TORONTO BUREAU CHIEF
PRODUCTION OF THE EDGE AT
Oakville Assembly Complex is scheduled
to end April 26, Ford has told its unionized
workforce, clearing the way for a retooling
project that will bring battery-electric
vehicle production to the plant southwest
of Toronto.
Unifor Plant Chair Marc Brennan
shared the timeline with members in a
Jan. 20 update, adding that no downtime
is scheduled for the plant before the end
of April. This means workers can plan on
" consistent work through to the start of the
retool. "
As with other assembly plants in
Canada and the United States, production
suspensions in Oakville have been
relatively frequent since the start of the
COVID-19 pandemic. Union members at
the plant started the year on layoff, with
Edge output paused for the first two weeks
of January.
Ford Canada did not respond to
requests for comment about its retooling
timeline for Oakville. Previously, it has
said the $1.8-billion project would start in
the second quarter of 2024 without specifying
a date.
The automaker first shared details of the
long-anticipated plant overhaul, which is
backed by $590 million in joint federal and
provincial funding, in April 2023. Among
the changes, the company plans to add a
new battery-pack assembly facility to the
487-acre (197-hectare) site, and consolidate
the plant's three body shops into one.
Ford has not confirmed what vehicles
it plans to build at the retooled plant, but
analysts and a major supplier say the
company is prepping for electric versions
of the Ford Explorer and Lincoln Aviator
utility vehicles.
The Oakville plant employs about 3,000
workers and Ford previously said it anticipates
few changes to staffing levels following
the retool.
The shift to EV production will end an
18-year production run for the Ford
Edge at the Oakville plant. PHOTO: FORD
STAFFING FOR EVs A 'HUGE UNDERTAKING'
Brennan told union members in
January that the employee " churn "
brought on by the launch of the new EVs
would be a " huge undertaking, " but speBattery
pack
assembly
Paint
Final
assembly
Body
Pre-production of EVs will begin in late 2024 at Ford's Oakville Electric Vehicle
Complex, followed by full production in early 2025. FORD RENDERING
cific timelines for job postings haven't
been finalized.
The shift to EVs will end a roughly
18-year run for the Edge and the related
Lincoln MKX (later the Nautilus) in
Oakville. The plant also built the larger
Ford Flex and Lincoln MKT utility vehicles
from 2007 to 2019.
North American production of the
Nautilus has already wrapped up; the
Oakville plant built its final Nautilus on
Dec. 6, Brennan told Automotive News
Canada. The next-generation Nautilus
will be imported from China, a first for
the century-old brand.
Ford has a new version of the Edge
slated to be built and sold in China but
has not announced plans to bring it to
North America.
The Oakville retooling project is
scheduled to run roughly through the
end of the year. Pre-production of EVs
will begin in late 2024, followed by full
production in early 2025, according to the
timeline shared by Ford in April 2023.
- ANC
Is it time to buy a dealership? Not everyone's sold
Whether economic
uncertainty or
interest rates become
factors remains to
be seen, but prime
brands continue to
be solid bets
By DAVID KENNEDY
TORONTO BUREAU CHIEF
CANADIAN DEALERSHIP
valuations have fallen slightly
from their lofty post-pandemic
highs over the past year, but
dealers and industry buy-sell
experts are divided over whether
the pricing reversal will continue
into 2024 or if valuations are
poised to stabilize.
Buyers are paying higher
interest rates and facing greater
due diligence from banks, but
that hasn't altered the acquisitive
mindset at dealership groups,
said Samir Akhavan, managing
partner at the Toronto-based
buy-sell consultancy Templeton
Marsh.
The industry has already seen
a market correction over the past
year or so, he said, and the current
environment simply represents
the " new normal. "
" People will deal with the
shock and say the world is going
to come to an end, " he said. " And
three months later, it's business
as usual. "
Goodwill multiples for dealerships
have declined about 20
per cent for second-tier brands
from their highs in 2021 and 2022,
Akhavan said, but prices for the
longtime valuation leaders, such
as Toyota franchises, are little
changed.
" The market has always
taught us historically - not just
in retail auto but everywhere
- in times of difficulty, people
gravitate toward good assets, "
Akhavan said.
Barring any major economic
or geopolitical surprises,
Akhavan expects dealership valuations
to remain steady, driven
by the trend toward consolidation
and the outlook among bankers
that interest rates have peaked.
TURBULENCE, BUT FOR HOW LONG?
Others are more bearish in
their short-term outlook.
Farid Ahmad, CEO of buysell
firm DSMA, expects dealership
valuations to decline over
the next 12 months - and for
possibly as long as 24 months -
before rebounding. He cited economic
turbulence that is forecast
for the first half of 2024, as well as
greater hesitancy among banks
to lend, as the key reasons.
" Canada is an extremely conservative
country, especially
when it comes to banking, "
Ahmad said.
As interest rates have risen,
he said, banks have kept an
increasingly " tight hold " on lending
for acquisitions, which has
put negative pressure on goodwill
values.
While dealership sales volume
remained steady in 2023, the
amount paid in goodwill declined
11 per cent, Ahmad said. That figure
includes more than 100 deals
that DSMA completed in Canada
and the United States last year.
As with Akhavan, Ahmad said
valuations have held up better
for brands such as Toyota and
Porsche that typically top dealership
group wish lists.
How much dealership valuations
will slide and how long
the decline will last depends on
when banks regain their appetite
for lending and on the strength
of the wider economy in what's
expected to be a bumpy 2024,
Ahmad said.
" All of this is making most people's
crystal balls very cloudy, "
he said.
BIDING TIME BEFORE BUYING
AutoCanada Inc., the country's
only publicly traded dealership
group, is also anticipating a dip
in prices. The Edmonton-based
company, which owns 65 stores
in Canada and 18 in the United
States, is timing further acquisitions
accordingly.
During AutoCanada's most
recent earnings call Nov. 9,
Executive Chairman Paul Antony
said the group anticipates valuations
sliding through 2024.
" We believe that an attractive
buying opportunity will present
itself as valuation expectations
for private dealerships start to
compress over the next 18 to 24
months, and we plan to be ready. "
Against this backdrop, Antony
said, AutoCanada is " not in
acquisition mode right now, " but
as the market corrects, it will aim
to purchase between 10 and 15
stores annually over the next five
years.
Erin Kerrigan, managing
director of the U.S.-based buy-sell
consultancy Kerrigan Advisors,
also forecasts Canada's auto retail
market heading for a course correction.
" Valuations
have always been
sort of a head-scratcher to me in
Canada simply because you don't
have the strength in the franchise
law that we have in the U.S., " she
told Automotive News Canada.
" Yet your valuations were very
high over the last five years.
They've been high or higher in
many cases than in the U.S. "
Kerrigan, who operates mainly
in the United States but also
does business in Canada, pointed
to the encroachment of the directsales
and agency models as two
key long-term concerns for the
Canadian market.
Akhavan: Despite
higher interest
rates and greater
scrutiny from banks,
dealership groups
are still looking for
acquisitions.
FILE PHOTO
Ahmad: Economic
instability will
depress dealership
valuations for at
least the next year
- maybe two -
before reviving.
FILE PHOTO
Kerrigan:
Dealership values
are expected to
fall as Canada
transitions to the
EV era. FILE PHOTO
" I do think that you're going
to see valuations come down in
Canada because you're going to
see more changes to the business
model with the introduction
of EVs than you can have in the
U.S. " - ANC
- Digital and Mobile Editor Greg
Layson contributed to this report

Automotive News Canada - February 2024

Table of Contents for the Digital Edition of Automotive News Canada - February 2024

Automotive News Canada - February 2024 - Intro
Automotive News Canada - February 2024 - CT1
Automotive News Canada - February 2024 - CT2
Automotive News Canada - February 2024 - 1
Automotive News Canada - February 2024 - 2
Automotive News Canada - February 2024 - 3
Automotive News Canada - February 2024 - 4
Automotive News Canada - February 2024 - 5
Automotive News Canada - February 2024 - 6
Automotive News Canada - February 2024 - 7
Automotive News Canada - February 2024 - 8
Automotive News Canada - February 2024 - 9
Automotive News Canada - February 2024 - 10
Automotive News Canada - February 2024 - 11
Automotive News Canada - February 2024 - 12
Automotive News Canada - February 2024 - 13
Automotive News Canada - February 2024 - 14
Automotive News Canada - February 2024 - 15
Automotive News Canada - February 2024 - 16
Automotive News Canada - February 2024 - 17
Automotive News Canada - February 2024 - 18
Automotive News Canada - February 2024 - 19
Automotive News Canada - February 2024 - 20
Automotive News Canada - February 2024 - 21
Automotive News Canada - February 2024 - 22
Automotive News Canada - February 2024 - 23
Automotive News Canada - February 2024 - 24
Automotive News Canada - February 2024 - 25
Automotive News Canada - February 2024 - 26
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