By Myron Love
WINNIPEG, MAN. – When Dennis DesRosiers, Canada’s pre-eminent auto industry analyst, last spoke at the Manitoba Motor Dealers Association convention three years ago, he created a bit of controversy when he predicted major financial problems for General Motors and Chrysler.
DesRosiers made a return appearance for the MMDA in mid-June and, while his focus was on the bright prospects for Manitoba auto dealers over the next decade, he revisited the GM and Chrysler troubles with an eye to lessons that can be learned from the disasters.
The domestic dealers (including Ford) had two fundamental problems, he said. One is the issue of supply and demand.
“The industry has always been cyclical,” he said. “Rather than letting the market sort itself out after 9/11, GM introduced stimulus programs to keep sales growing. With the deregulation of the banking industry, the market overbought and eventually the market collapsed. The size of the pie got a lot smaller.”
While he noted that new-vehicle sales are growing again, he doesn’t foresee sales getting back to their past highs in the immediate future.
DesRosiers noted that the three domestic manufacturers continue to enjoy a higher percentage of the marketing pie in the Prairies provinces (including Manitoba) than the import manufacturers because trucks are still in high demand in this region.
He pointed out that over the past 10 years, sales of entry-level vehicles have substantially increased – in both Manitoba and Canada – at the expense of mid-sized family vehicles.
In Manitoba, 73.5 per cent of consumers buy used vehicles. Because vehicles are better built than they used to be, he says, they last much longer.
There is an unlimited supply. And there is a wider price variance between individual models than among new car models.
“With Manitoba’s growing population, I expect vehicle sales in the province to remain strong,” he said.
It was not all rosy, though, as the analyst addressed present concerns with General Motors and Chrysler as well as discussing the practices that led to their respective bailouts last year.
“The fundamental problem,” he said, “has been poor management. Detroit took its eye off the ball (and the end customer) for two decades. The Big Three put too much emphasis on trucks and fell so far behind in car sales that they couldn’t catch up. The lesson here is that you need to be diversified.”
He also cited other failings such as lack of care in choosing dealer locations, cutting dealer margins, putting out some shoddy products, ignoring brand name values, stretching itself too thin (in the case of GM) and gutting its research and development budget in the case of Chrysler.
He predicted that GM will survive –although it will be a smaller company – but wasn’t sure about Chrysler. “It’s 50-50,” he said of Chrysler’s survival chances.