Dealers try to ward off new limits as virus surges

Most dealerships so far are unaffected by new government-mandated shutdowns as U.S. coronavirus cases rise sharply this fall.

But not Plaza Motors in Brooklyn.

The five-franchise dealership group was forced to shift to remote and appointment-only sales last month after New York Gov. Andrew Cuomo designated its neighborhood a red zone because of soaring COVID-19 cases. Plaza could no longer accept walk-in customers.

It also meant competitors within walking distance for customers were operating under a different set of rules, said Adam Rosatti, Plaza's general manager.

"We feel it's just a complete unfair advantage, and it doesn't deter people in the area from shopping for a vehicle that's not in a red zone," Rosatti told Automotive News.

So Plaza on Oct. 8 sued Cuomo, New York City Mayor Bill de Blasio and a state economic development agency for relief from the new limits. It's one example of pushback by dealers and dealer associations against the kind of government restrictions that shut down a large swath of auto retailing in the spring as coronavirus cases spread.

Now dealer association leaders are lobbying state and local governments to try to keep a fresh batch of restrictions at bay. Though some say they don't anticipate limitations as strict as those seen in the spring, the fear of another round of virus-related shutdowns is high for many dealers across the country as COVID-19 cases in the U.S. rise to the highest level seen during the pandemic.

Jason Bernica, owner of Sunrise Chevrolet in Omak, Wash., expressed just that worry.

"We need to be able to open for business, and we need to be able to sell cars," said Bernica. If given the opportunity, dealers can "show that we can be safe and that we can do business day to day like we always have."

Bernica joined local politicians and business owners in a federal lawsuit against Washington Gov. Jay Inslee in May over the state's stay-at-home order, arguing that it was unconstitutional. The case was dismissed in August.

Plaza's lawsuit in federal court in New York sought a temporary restraining order and injunctive relief from red-zone restrictions. The restraining order was denied, and Plaza was still waiting for a decision on an injunction at press time.

The retailer also is seeking unspecified damages for sales lost while the stricter measures are in place. Rosatti said business is off by about 25 percent since the limits began Oct. 9.

The latest mandate is part of a more targeted approach by the state to fight the spread of COVID-19. The governor's office said the color-coded zones are based on hard data showing COVID-19 case locations. While nonessential businesses in red zones must be closed for in-person operations, car dealerships still can conduct in-person vehicle showings, returns and deliveries by appointment.

"We get sued virtually every day for virtually every action taken during this pandemic, and frankly I've lost track of all the frivolous suits filed against us," Cuomo spokesman Rich Azzopardi wrote in an email. "We are moving heaven and earth to contain this virus and we know some people are unhappy, but New York continues to have one of the lowest infection rates in the nation, and better to be unhappy than sick or worse."

Meanwhile, New York announced Monday, Nov. 9, that it had reduced the size of the Red Zone in Brooklyn, which meant that Plaza could reopen for business. Rosatti said he was made aware of the change Friday, and reopened for walk-in traffic on Saturday. His lawsuit continues, however, as he is seeking damages for the time he was affected by the mandate.

Greater New York Automobile Dealers Association President Mark Schienberg said he is sympathetic to Plaza's situation and has been in regular contact with the governor.

On Thursday, Nov. 5, the U.S. reported more than 121,000 new COVID-19 infections, a daily record, according to The New York Times. The rate of new daily cases last week was more than double what it was Sept. 4, CNN reported, citing figures from Johns Hopkins University.

The explosion of cases had more state leaders putting targeted limits in place last week. But dealerships in the U.S. so far appear to be avoiding strict closures such as those implemented in some areas this spring.

Across the Atlantic, dealerships in the United Kingdom must shut their showrooms until Dec. 2 in a new mandate aimed to slow the spread of the virus.

Rick Baker, president of the South Florida Automobile Dealers Association and 2020 chairman of the Automotive Trade Association Executives, said many state dealer associations have lobbied to prevent shutdowns.

"Most ATAE members have contacted their governors to express concerns about not being shut down in order to be able to assist health care workers and other essential individuals during this pandemic," Baker wrote in an email, saying those employees need transportation to get to work. "Auto dealerships and service departments are essential in this case."

Baker's message echoes the National Automobile Dealers Association. Business closure decisions will be made at state and local levels, and federal guidance lists vehicle sales and service as essential, NADA spokesman Jared Allen said.

John Devlin, CEO of the Pennsylvania Automotive Association, said dealers in his state are concerned about possible new shutdowns as cases surge.

But he said he was reassured during a call with state officials the week of Oct. 26 in which it was communicated that the level of previous shutdowns wasn't being considered. Pennsylvania's closures this spring were among the most stringent for auto retailers across the U.S. and had dealership sales departments shuttered for months.

"We feel a lot more comfortable now than we did six months ago that there isn't going to be anything quite like what happened," Devlin said.

State officials seem more aware of dealerships' importance in providing transportation options, he said.

"In light of the fact public transportation — subways, trains or ride- sharing — is not very popular right now, I think having independent modes of transportation is critical," Devlin said. "They know it; the state governor knows it."

Still, he added, there's always a risk a local municipality could issue an order affecting dealerships.

Generally, dealers and dealer association leaders remain optimistic that, even with rising cases, the safety protocols they've put in place — mask requirements, plastic partitions and social distancing, for example — will keep them free from new government orders.

Group 1 Automotive Inc. has not had to reclose or return to remote-only sales at its dealerships in 15 states, but the company is keeping tabs on case spread.

"We worry about that every day," said Daryl Kenningham, Group 1 president of U.S. and Brazil operations. "We want to make sure that we're prepared and proactive about that in terms of the processes in our stores, the staffing, [personal protective equipment] we provide for customers and employees."

Sonic Automotive Inc. President Jeff Dyke said last month that the retailer is more prepared in the event of new restrictions.

A reduced cost structure after pandemic-induced cuts and a rebounding economy help.

"The shutdowns, if they happen again, we're a lot more educated on how to deal with them," Dyke said.