Prepping the Plan

The first annual TalkAUTO conference, presented by J.D. Power Canada and Canadian Black Book, took place November 14 at the Toronto Congress Centre. Some 200 attendees representing dealers, manufacturers, the trade media and ancillary sectors serving the automotive industry listened to a series of presentations from industry thought leaders on the state of Canada’s automotive sector and prospects for 2013.

The key theme was risk management, says Ryan Robinson, director, automotive practice for J.D. Power Canada, who co-introduced the conference with Larry Shred of Canadian Black Book. “It’s a topical focus given the economic uncertainty and the conditions the Canadian automotive sector operates under,” he says. “I think it was a good opportunity to start discussions around planning for next year. People found the content informative and topical and we hope it will help them hit the ground running in January.”

Topics in the morning sessions included a North American automotive sector outlook, dealer/manufacturer disputes, dealer issues (a panel session), new vehicle technologies, and a keynote from Jaguar Land Rover Canada. Afternoon breakouts covered auto lending, residual value, leveraging data to make better business decisions, and the importance of the customer experience.

Dave Cutting, senior manager, North American forecasting for LMC Automotive, delivered the North American automotive sector outlook. The long-term prospects are good, Cutting said, as new household numbers grow and replacement demand drives volume. Overall economic growth, while slowing, is still positive, and light vehicle sales are outperforming expectations, up 13 per cent in the US and seven per cent in Canada.

While his presentation was targeted at an audience whose main interest is in new vehicle sales, Cutting highlighted some trends that may have an impact on the business prospects for readers of SSGM. The average age of automobiles, at least in the US, is reaching a tipping point for replacement at seven years, a factor which will drive new vehicle sales but will also affect the number of older vehicles on the roads. “Owners can’t hold on to vehicles as long as they used to,” Cutting told the audience. “They increasingly see the need to replace their cars.”

Cutting said that “product cadence” — the pace at which OEMs introduce new models — is a key market variable that directly drives consumer interest in new vehicles, and while the number of new products introduced this year — 293 — is high, it represents a decline for the fourth year in a row. Also, the perceived difference between brands has evened out, making for a more competitive marketplace. Ford and GM are still the top two brands, but over the past five years their lead has narrowed, while trailing brands have gained.

Dave Sargent, J.D. Power’s vice-president, global automotive, delivered a presentation titled “The Changing Nature of Quality.” Sargent began by noting that at a time when there are supposedly “no bad vehicles anymore,” the meaning of the term “quality” is changing. Drawing on a comprehensive range of metrics that J.D. Power uses to assess customer satisfaction, Sargent said that the complexity of vehicles now is an important element of what is considered product quality.

Initial quality of vehicles has improved dramatically since 1997 according to Sargent’s figures, with reported initial problems falling from the 1997 baseline of 100 to a mere 25 for this year. Moving beyond initial quality problems, overall reported problems since 1987 have fallen from the 1987 baseline of 100 to 36 today.

What is considered to be a “problem” is also changing. As customers get used to higher quality they adjust their expectations upwards. So while the average number of problems is way down, at the same time consumers report that they’ve still had more than they expected. And as you might expect with today’s “wired” cars, the audio, entertainment and navigation systems are increasingly a focus for complaint.

Sargent also pointed out that as onboard systems become increasingly complex, customers increasingly complain about “design problems” as opposed to defects. In other words, they can find themselves unsatisfied with vehicle features that have in fact been produced correctly to the manufacturer’s specifications, while they’re also finding fewer outright defects — cases where a system or component just doesn’t work as it’s supposed to. “Customers consider design problems to be just as bad as defects these days,” Sargent said. “Actually, if anything, they’re considered to be slightly worse than outright defects.”

Design problems include poor ergonomics, the aesthetics of how a feature is positioned, problems with perceived quality, and excessive complexity. Design problems pose a clear difficulty for those who service automobiles, as they can’t be “fixed” the way an outright defect can.

Also of interest was the “Dealer Issues” panel discussion, moderated by Chuck Seguin of SAS. Right off the bat, the discussion focused on the growing importance of the service component as part of dealer operations. The consensus seemed to be that dealers in general have been slow to take the service side seriously, but that this is now about to change. “We got lazy about service because of all of the buzz in the showroom,” added Murray Clark of Oakville Volkswagen. “We thank the independents for waking us up to what a huge customer retention tool the service side can be.” Clark noted that with consumers keeping cars for a longer time, upping a dealer’s service game represents a great opportunity to increase and retain business.

Being able to offer an improved service option will “really marry the customer to the dealership,” said Ron Loveys of WhiteOak Ford Lincoln. “If we can sell products like rustproofing, sell and store winter tires for the owners, and offer things like prepaid maintenance, this represents a real area of opportunity for dealerships.”

Mike Collins of DealerTrack noted the importance of service, and in response to a question about whether dealers might break out service operations into their own standalone locations, he responded that service hits close to home with customers. “There’s still a very local delivery requirement,” he said. “People want to be able to have their cars serviced where they acquire them.”

J.D. Power is already thinking about next year’s event. “We’re meeting with our partners to go over how it went, see what we learned,” Robinson says. “There’s a lot of value in term of the topics and themes we’re covering. It’ll evolve and find its own path, but I think we got off on the right foot this year.”