Inventory, staffing issues linger after rough spring

Dealers know as well as any businesspeople that the going is not always good, and they prepare accordingly. But few could have imagined that 2020 would include a near-complete shutdown of operations during what was expected to be an otherwise strong year.

That's the situation dealers Brian Benstock and Corina Diehl said they faced in the spring, as they joined Hireology CEO Adam Robinson for the last installment of Automotive News' Retail Forum: Dealer Discussions video series last week.

"You can prepare for certain things; you can't prepare for a 100 percent reduction in revenue," said Benstock, general manager of Paragon Honda and Paragon Acura in Queens, N.Y. "When that happens, it's like someone shot a hole in your boat."

"Our governor shut us down for two months, which was insane because the surrounding states were able to sell cars," said Diehl, CEO of Diehl Automotive Group, which has dealerships in western Pennsylvania, plus one in Ohio.

Like many dealers, Benstock and Diehl have seen business rebound to an extent. But they are still facing inventory shortages, an erratic used-vehicle market and lingering questions about proper staffing levels.

"The inventory shortages are out there, and that's caused us to have some good margins not normally associated with this time of year," said Benstock, who added that he was fortunate to have ordered a couple hundred extra vehicles from Honda in March.

Looking ahead, he said he remains wary about automakers oversupplying new-vehicle inventory once they get production back up to regular levels, as demand — currently high — may not last.

Diehl agreed. "I think that the supply and demand right now is glorious," she said. "We are getting list on almost every vehicle." But she has also had a hard time getting new cars and trucks, especially at her Toyota store. "I'm truly enjoying the margins right now," Diehl added. "But we are absolutely going to be inundated with product in the next few months."

For used vehicles, grosses have been "fabulous," but the inventory has also been hard to come by, Diehl said. Her group has been scouring classified ads for vehicles and has been buying damaged vehicles to be fixed up at its four collision centers, while also doing its best to bring in quality trade-ins.

The group is eying auctions across the country, Diehl said, but is also hesitant to stock up on product that it could be stuck with when used-vehicle values fall back to normal levels.

Benstock said his stores have set up a vehicle exchange program in his service department and therein deployed a team of 10 salespeople, one finance manager and two service managers. That's generated both new sales and trade-ins, he said.

"I can say that we are getting north of 150 cars out of the service department every month," he said. "I'm not overpaying for any one of them. I'm not bidding against anybody there. And we're able to provide a great value for the customer because the interest rates and the incentives from the manufacturer being what they are, customers are able to get out of their old car into a new car and lower their monthly payment."

Meanwhile, staffing levels at dealerships appear to have been permanently altered by the coronavirus pandemic.

Robinson said Hireology works with about 1 in 4 franchised dealers in the U.S. On March 13, when President Donald Trump declared a national emergency, almost immediately some 20 percent of auto retail employees were furloughed or laid off. By the middle of April, about half of all jobs in the industry had been impacted.

"We are working our way back," Robinson said, adding that about 30 percent of jobs have returned, but he expects auto retail employment to remain 5 to 10 percent lower permanently.

Dealers have known for years that they're carrying too many staffers in a store, he said, as costs per employee have continued to rise. "We were predicting there's got to be some great sorting mechanism out there that's going to catalyze the decision to operate a leaner work force," Robinson said. "And boy, COVID sure was the perfect catalyst for that."