Sustainable development at McCarthy (Bidvest Automotive)

In the economic downturn, McCarthy has aligned its business with changing market conditions and focused on improving efficiencies and cost containment. Despite these business challenges, McCarthy continues its long-term strategy of leading with value, earning the trust of all stakeholders and building excellence in its workforce.

Material sustainable development issues

• retaining customer loyalty through responsible business practices
• effect of the economic downturn and legislation on turnover and business practices
• difficulty in attracting and retaining HDIs at senior level
• talent availability, attraction and retention
• the impact of increasing fuel prices, stricter emission standards and the green tax (CO₂ emissions tax) on sales in certain vehicle categories
• imperative to grow the value segment of the vehicle market
• management of HIV/Aids in the workplace
• impact of crime on dealerships and car rental

Introduction

The automotive industry in South Africa is undergoing a period of adjustment as new economic, social and environmental factors threaten the traditional models of car ownership and use. More vehicles are being scrapped than sold and mid to upper income citizens are taking to public transport. A dramatic increase in perks tax on company cars comes into effect in March 2011, while the new CO₂ emissions tax, effective from  September, is expected to add up to 2.5% to the average price of a new vehicle. These factors all contribute to a declining vehicle population and the buying down trend. This, combined with longer service intervals for modern vehicles, has resulted in reduced after-sales business for the dealerships.

Given these realities, we have restructured the group to narrow its focus and improve our sustainability by becoming smaller and more nimble. All corporate services were redeployed at divisional level, Fleet Solutions were incorporated into Bidvest Bank and renamed Bidvest Capital. Yamaha joined a newly formed division of Bidvest and McCarthy Heavy Equipment was closed. Bidvest Automotive now consists of the McCarthy Motor Group, Bidvest Financial Services and Budget Car and Van Rental. In the face of limited growth, the business is now better able to focus on its strengths, and will be a simpler entity to hand over when the current chief executive, Brand Pretorius, retires in 2011.

Despite current business challenges, the company’s deeply entrenched values – mutual trust and respect; ethical dealings; openness and sincerity; teamwork and excellence in putting the customer first – have consistently been aligned to the sustainability agenda, thus keeping the company on track.

Labour practices and decent work

The aftermath of the recession continues to affect our staff. After losing nearly 1000 employees in the previous year, our headcount stabilised this year at 6 699, from 6 719 last year. Unsurprisingly, job security and concern over personal finances have been the most pressing issues. With the closure of a further four branches in the dealership network this year (from 120 to 116), staff morale has needed constant support. In response, we were successful in securing additional brands for some of our dealerships. We introduced the Renault franchise to two Nissan dealerships, added Citroen to five Peugeot dealerships and Mahindra to two McCarthy Value Centres. These additions proved successful with an immediate improvement in both sales and employee morale.

All staff engagements are approved by the relevant management level and every opportunity is taken to improve our staff demographic mix. The results of this approach are discussed at business unit, regional and national level consultative forums. All forum chairmen and representatives have been trained on EE and Training compliance and good practice. The chief executive and his executive team conducted open and frank discussions on the realities of the economic situation at branches across the country.

Every year, we measure the alignment between our values and our behaviour. Despite restructuring and retrenchments, our survey again recorded a high level of employee satisfaction of over 70%; a consequence, we believe, of open engagement and our determination to live company values.

376 employees were affected by retrenchments following business closures. Of these, 87 were cross-skilled for deployment in other dealerships. South Africa’s Labour Relations Act guides the treatment of employees in these situations and McCarthy has a strong team to assist with relocations and retrenchments. During restructuring, the company strives to minimise social impacts. There was no industrial action during the process, indicating that our approach was appreciated by our workers.  A dedicated Careers @ McCarthy team has been retained to focus on employment equity at management level appointments and to assist with sales learnership programme recruitment.

Health and Safety

The division’s LTIFR is still low for the industry at 2,6.

Product responsibility

In challenging trading conditions, retaining the loyalty of our customers is top priority. McCarthy actively manages its business using the information derived from the various manufacturer New and Service customer satisfaction index surveys. In addition, it has for many years used its own Used customer satisfaction index. These indices are integrated into the company’s performance management system and affect employee remuneration. Index scores have risen over the years and consistently top 85% in the case of used vehicle customers.

We support the long- and the short-term insurance industry ombudsman, the FAIS ombudsman and the ombudsman for the automotive industry. We established a customer complaints resolution centre and also subscribe to Hellopeter.com (a webportal for customer complaints). These channels help us identify areas for improvement and provide marketplace feedback.  A Customer Complaints Resolution Centre was established to record, refer and follow up on all customer complaints to improve external stakeholder engagement in McCarthy.

The Consumer Protection Act will come into full effect in October 2010. As a consequence of this new legislation, there will be more complexity in the day to day running of the business. In response, we are conducting staff training across our dealerships and car rental outlets to ensure that the provisions of the Act are met, especially with regard to front line customer interaction, such as the sale and servicing of motor vehicles, car rental customer interaction and interaction with customers in Club McCarthy and McCarthy Call a Car.

Environment and affordable transport

The hydrocarbon emission based tax which is due to come into effect in September 2010, will lead to an average increase in the retail selling prices of cars of up to  2,5%.  In principle McCarthy is fully supportive of government’s policy to regulate vehicle emissions and to create greater consumer awareness of environmental considerations as part of the new car buying decision.  However, it is regrettable that this new green tax will impact negatively on vehicle affordability.  The key to sustainable growth for the local motor industry is enhanced affordability of both new and used vehicles, so that more South Africans could enjoy a greater degree of personal mobility.  To this end our group has achieved considerable success with the launch of South Africa’s lowest priced new car, the Chery QQ.  This vehicle range, imported from China, also boasts both low emission levels and low cost of ownership.  It has found encouraging acceptance in the entry level segment of the market.