Car sales are nosediving, which is bad news for automakers but also dealers, most of which don’t or aren’t allowed to have showrooms open. While most of them do have their service shops open as they are considered essential businesses, business there is down too.
This is, above all, terrible news for employees of dealerships, a huge chunk of whom will be getting laid off, if they haven’t been already. Automotive News crunched some of the numbers:
The resulting restrictions on vehicle sales in those locations added to the rapid falloff in sales and showroom traffic across the U.S. and left one dealership hiring expert predicting that retailers will have to cut a third of their work forces by May.
That would equate to 360,000 or more dealership employees out of work in a matter of weeks. U.S. dealerships last year employed more than 1.1 million people, with an estimated 225,000 people working directly in vehicle sales, according to the National Automobile Dealers Association.
Adam Robinson, CEO of Hireology, a technology recruitment firm that works with 4,000 franchised dealerships nationwide, said the reduction of dealership jobs began in early March in states such as California, Washington and New York. Then on March 23, “the dam burst,” Robinson said. “It’s as if everyone came into work on Monday looking at the reality of the situation and started making the decisions, all at once, to cut costs.”
From March 10 through March 25, Hireology saw 15,300 available job postings at franchised dealerships vanish — though Robinson noted the overall impact on dealership jobs is much bigger.
And here’s a snapshot from a dealer in Michigan from last week, which should be sobering for anyone who thinks that dealers can repair their way through this:
Even though the service department is still open as an essential business, they have experienced a major decline in activity, but haven’t experienced lay-offs.
“Unfortunately, we usually see about 120 cars here. Right now we’re seeing about 30,” [Metro Toyota Parts and Service Director Keith DeBoer] said. “So, we’ve had a dramatic reduction, but we are still open, and we still want to encourage all the essential workers, hey we’re here to help them. We want to keep them on the road. Parts and services is not shutting down.”
Winnipeg’s largest dealership group, Birchwood Auto Group, has announced changes that will affect 17 dealerships, including temporary staff reductions.
“As a result of the recent provincial state of emergency and the surge in confirmed cases here in Manitoba, we’ve made the difficult decision to move to a central service model effective Monday, March 30,” Birchwood president Steve Chipman said in a video posted Thursday on the Birchwood website.
“We have temporarily reduced our staff to a core team in each location. This was a very hard decision, but one that needed to be made. We remain open providing the essential level service for your automotive needs,” Chipman said.
And at the Houston-based Group 1 Automotive, the fourth-biggest dealership group in the country:
The company said it would furlough 2,800 employees, or about 90% of its workforce, in the UK and 3,000 employees in the United States due to the massive decrease in business activities.
Group 1 said its UK order intake nearly halved in recent weeks and it would close all of its dealerships there as per a government order.
“This (the outbreak) is requiring us to take many severe and regrettable actions to re-size our business to minimal activity levels in the near term,” Chief Executive Officer Earl J. Hesterberg said in a statement.
And this is a parking lot chain and not an auto dealership but:
Keith Jones watched nervously this month as one group after another canceled their San Diego conventions, businesses began ordering employees to work remotely, and all restaurants were closed to dine-in service. That couldn’t be good for his business, Ace Parking, which operates 1,000 lots and garages across the country, about 40 percent of them in San Diego County.
He was right.
By the time he made what he said was the gut-wrenching decision more than a week ago to lay off 80 percent of his 5,000 employees nationwide, his revenue had fallen off 95 percent. He had to move quickly, he said, to stem the financial bleeding of a more than $8 million a month payroll or face the demise of a company started 70 years ago by his grandparents.
This all conforms to the brutal logic of our new reality. No one is doing much of anything aside from going online and staying in. The slightly better news is that once this is all over, a lot of this business and these jobs should be coming back.
Or at least that’s what’s happening right now in China, per Reuters, which has been loosening restrictions as its coronavirus curve has flattened:
SAIC-GM-Wuling (SGMW) - a venture between SAIC Motor Corp Ltd (600104.SS), U.S. maker GM and a local partner - on Feb. 25 started offering up to 11,000 yuan off purchases of its Wuling and Baojun brand vehicles, until the total discounts given reach 1 billion yuan ($141.69 million). Buyers also get medical masks.
Family sauna equipment supplier Mo Xiufeng, 40, was at the same dealership viewing the same vehicle to make a purchase he had been chewing over since before the lockdown.
“I haven’t been able to come in the meantime because, fearing the virus, I didn’t want to leave my home,” he said.
The dealership sold just 20 vehicles in February. It targets March sales of 100, versus an average of 500 before the virus.
Due to the campaign, SGMW’s nationwide is a picture of even quicker recovery. A spokeswoman said March registered at least five days of sales surpassing 5,000 vehicles, with one day reaching 6,000, exceeding last year’s daily average. At the beginning of February, sales were around 200.
There will be plenty of pent-up demand here, too, eventually. I do wonder though, who will be left once this is out of the way. There will be a lot of lost earnings between now and then and presumably still high unemployment. You can probably also expect some inventory issues further on down the line, as almost every car factory in the country is idled right now, and will be for some time. We’ll be watching in real time, in other words, what happens when you grind the economy almost completely to a halt and then flip the switch back on.