Autobots during the epidemic

Compiled by?|?Yang Yuke

Edited by?|?Jane

Produced by?|?Bangning Studio (gbngzs)

New Crown The epidemic has completely disrupted dealers' daily operations, forcing them to make bold changes. These moves would have been unimaginable just a few weeks ago.

Some dealer groups are considering displaying and selling used car inventories, while some dealers are shortening working hours and even considering layoffs due to their inability to cope with the deteriorating sales prospects.

Sales plummeted in many regions. Due to orders issued by some local governments, some dealers were forced to close their stores. The situation has worsened dramatically, forcing dealers to make difficult decisions on how to cut costs and preserve cash to stay afloat in the coming weeks and months.

Ken Rosenfield is a well-known accountant whose consulting firm Rosenfield & Co. has offices in Florida, New Jersey and New York and works with more than 400 distributors suppliers to maintain cooperation.

Rosenfeld said he has been fielding calls from dealer customers non-stop. As of March 17, none of the dealers he had spoken to had resorted to laying off employees.

"They go into cash conservation mode, they tighten up their internal controls and they step up their guard against theft. We've also experienced that in tough economic times, people panic," he added.

Jodi Kippe is managing partner of dealer services at Crowe Accounting & Consulting. He told Automotive News that dealer customers have multiple meetings every day to keep up with the rapid changes in federal and local governments.

He reminded: “If you look back at the Great Recession, you will find that those dealers who responded fastest will be in a more advantageous position, and those dealers who have not responded quickly should speed up their pace. ”

Currently, the COVID-19 epidemic has swept across all 50 states in the United States, and the impact has been very serious in some areas.

Earl Stewart's dealership is located in Lake Park, Florida, and mainly deals in Toyota vehicles. He said that the sales target for March is 237 new cars, and he is working towards achieving this target.

The service department of this dealership is still busy, but not as busy as usual. There were 65 reservations for service on March 17, down from the usual 90. Typically services are busier on Wednesdays and Thursdays.

Stewart said he lost more money in the stock market than at the dealership. He cut his sales time by two hours a day. He and management are discussing plans to downsize staff, reduce hours and ultimately lay off employees.

“I never thought about laying off employees.” Stewart said, “We have 170 employees. Once the situation worsens and employees are quarantined at home, I can’t keep all 170 employees. And pay wages as usual."

Stuart McCallum, a partner at Henderson Hutcherson & McCullough Accounting Firm, suggested that dealers should retain star employees during special times. Because if the economy recovers, they will definitely not want to see their star employees go to work for their competitors within 45 days.

"I'm worried that dealers may panic and start laying off employees right away." McCallum added that dealers may need employees in the short term. Also, “try not to dismiss anyone in the service department lightly.”

Crowe partner Greg Dougherty suggested that as dealers increase remote delivery and pickup services, they could temporarily transform salespeople into movers or janitors.

Some sales employees may feel aggrieved by being asked to carry things or work as janitors, but Doherty further said that the current situation is very special. If you think about it, being able to keep this job and get a salary, people will be willing to do so.

01.

Save cash

Accountants say dealers should seek flexibility from their lenders, given it's unclear how long this situation will last.

McCallum advises dealers to carefully read their loan agreements, including showroom loans. They must be very familiar with the terms and covenants, paying particular attention to provisions that allow the lender to make any equity remedies under the loan default agreement if the borrower is unable to maintain working capital.

He said that whether these problems can be stably solved in the next 30 days will become the key to determining whether dealers can continue to operate. Dealers should also consider drawing down their revolving line of credit, "taking it out so it's at your disposal."

Buddy Dearman, managing partner of DHG accounting firm Dixon Hughes Goodman's dealer business, expects some dealers to seek deferrals on mortgage principal payments. In this way, they can use all the cash flow on hand to maintain business operations and pay employee wages and benefits.

Tactics such as deferring estimated taxes can also help dealers preserve cash, Dillman said.

Experts believe dealers could also consider leveraging existing showroom inventory or taking out loans on used showcars, if they haven't done so already.

Liza Borches, CEO of Carter Myers Automotive in Virginia, is thinking about this.

We try to simulate every possibility without overreacting, Borchers said. “We want to make sure we fully understand the consequences of every decision we might make so that Only in this way can all employees be taken care of as much as possible.”

According to accountants, as one of the top five expenses for most dealers, advertising expenses are another expense that can be cut quickly, but not all dealers are. Cut advertising costs.

Myers Automotive Group did not adjust its advertising expenditures. "Due to the epidemic, many consumers are staying at home. Therefore, now is a good time to reach customers." Borchers explained.

Borches's group, which has 13 stores in Virginia and operates 16 car brands, is carefully reviewing its short- and long-term expenses. Currently, the identified cuts include unnecessary construction projects and the hiring of new employees.

The vast majority of Rosenfeld's customers are fully funded, and its distribution group has operating expenses in the bank for three months or more. "These funds can weather the storm for a few weeks. It's a last resort, but they can at least do that," he said.

John Malishenko, chief operating officer of Germain Automotive Group, said that the situation is getting worse day by day. At this rate, sales this month may drop by 40% to 50%. %. German Auto Group has stores in Michigan, Florida and Ohio.

“We all feel a little anxious, but we are all working hard to survive.” Malishenko said, “The epidemic has caused us great losses, but we are also doing our best, every day and every day. Every hour is a new challenge. ”

02.

Business plummeted

Warren Waugh owns eight high-end car brand dealerships in the Boston area. Since the outbreak of the new crown epidemic, he has seen a decline in showrooms. Customer traffic continues to decrease, and the phone lines at the business development center are silent. He also told Automotive News that last week, in Boston, a city known for its traffic congestion, there were almost no cars even during rush hour.

“People are really starting to take the warnings to heart now and are staying at home,” he said.

About a year ago, Wolf's car dealership group stopped using customer traffic as a metric and began monitoring overall activity at its business centers. Wolf said business activity was "really shockingly low," with overall business down by an average of about 40%.

Aaron Koehn owns Ed Koehn Automotive Group in Michigan. For him, the problem now is not selling the car, but how to get the customer to finally sign the purchase agreement. Some of these customers had verbally agreed to buy the car, but were ready to walk away due to the potential loss of wages and pensions caused by the epidemic.

Since March 13, the new crown epidemic has caused Cohen’s distribution group to lose 4 orders. For example, Cohen said that after learning that his pension was affected, a male customer said that he could no longer fulfill his promise to buy a new Chevrolet Equinox. "He didn't sign anything before, but he still felt apologetic because he had made a promise to us before."

There was another customer who had almost completed the transaction, but suddenly backed down. Affected by the new crown epidemic, his job in the hotel changed from full-time to part-time. In this case, buying a new car is beyond the budget.

Cohen concluded that clients are anxious about their current financial situation and are unsure of how to get out of it. "We feel for them. So, we feel for them," he said.

In East Texas, Fernando Varela owns three Ford stores and one Chevrolet-Buick-Cadillac dealership. Business here was booming until March 18, the day of traffic restrictions.

On March 18, Texas has not yet mandated dealership closures like other states. People were still walking outside, Varela recalled.

As the owner of a dealership, Varela is struggling with what to do next. He hasn't laid off anyone, and he plans to continue operating as long as possible.

Varela, who is also president of the National Association of Minority Auto Dealers (NAMAD), is very concerned about the organization's 1,200 members. Many of these members are first-generation entrepreneurs, and he hopes they can weather this increasingly severe financial storm.

NAMAD wrote a letter to U.S. President Donald Trump asking for his help in launching a relief package for mortgage payments and mortgage loans.

03.

Profits fell sharply

The Mercedes-Benz Lynwood store (Lynwood) is located just outside Seattle. This dealership closed in December 2019, January 2020, and February 2020. Sales records were set in March and March.

The New Year should be full of hope, but at this time the new crown epidemic broke out. Terry Haigh, the dealership's general sales manager, expects revenue to be down 20% this year.

There are many car dealers in the same situation as Haig. Their good prospects for 2020 have come to an abrupt end.

Six weeks ago, some dealers who participated in the Automotive News survey were optimistic about this year's prospects. But last week, Automotive News followed up with a second tracking survey and found that many dealers have become much more pessimistic about the prospects.

Preliminary results of the second round of the Automotive News Data Center (Automotive News Data Center) show that more than 90% of respondents expect business conditions in 2020 to be worse than in 2019. In contrast, in the first round of the survey conducted in February, nearly 50% of respondents expected business this year to be better than 2019.

One dealer said in the latest investigation: "The situation is becoming more urgent every day, and we are adapting and trying to continue operating with compassion. From last week to this week, in just one week, the situation happened A 180-degree change. But we will try to survive.”

Six weeks ago, only 10% of dealers believed that the profit outlook in 2020 would be worse. The preliminary results of the latest survey show that about two-thirds of the respondents expect their income to drop by at least 20%.

The survey started counting phased results as of the morning of March 20. There were 177 respondents. The survey is still ongoing.

73-year-old Drew Fitchett is one of the respondents to this survey.

Last week, he was forced to close his dealerships outside Philadelphia, which include North Penn Volkswagen and North Penn Mazda. Fitchett had already been preparing to do so before the state of Pennsylvania issued an order to close all dealer showrooms on March 19.

Fitchett recalled the tumultuous events he witnessed—high interest rates in the 1980s; the first Gulf War in the early 1990s; the 9/11 terrorist attacks in 2001; and the 2008-2009 years of the Great Depression.

“We have experienced a lot of turmoil, and this new crown epidemic is one of the most challenging events so far.” Fitchett told Automotive News.

Both Haig and Fitchett have set their sights on the second half of the year, hoping that the situation can be reversed to a certain extent by then. Hague said, "I think by the end of this summer, the cold winter will be over. By then, we will definitely come back strong. That is my hope."

Seattle is the city hardest hit by the epidemic in the United States. one of the regions. But as of press time, the Mercedes-Benz Lynnwood store was still open, albeit with reduced staff and hours.

Nearly half of the dealers surveyed believe that business will return to normal in 2 to 6 months. But the other half of respondents believe recovery will take longer. Among them, nearly 20% of dealers believe that recovery will take a year or more.

Dealers believe that the areas with the greatest profit growth potential have shifted from dominating used car sales to dominating services. Last week, several states issued store closing orders. Dealers in these areas are only allowed to carry out service-related business.

Many dealers said they have begun to shift to promoting online shopping and home delivery. "This will have a profound impact on reshaping consumer behavior." One respondent said in the Automotive News survey, "To meet the needs of new customers, many new digital tools will emerge."

This article comes from the author of Autohome Chejiahao and does not represent the views and positions of Autohome.