Mix of relief, concern as dealerships open doors

Cast aside the masks, plastic partitions and copious amounts of hand sanitizer that now rate as basic costs of selling cars.

What lies ahead for U.S. dealerships as they slowly come back up to speed will be anything but business as usual.

Conversations across the country last week found dealers grateful for the sight of shoppers as well as relieved by sales declines that would have once been viewed as disastrous. Adjustments were being made to allow customers to take test drives alone. A once-unimaginable concern — the legal liability tied to a deadly virus being transmitted inside a showroom — became a headline.

But with government doctors warning senators of the dangers of getting back to normal too fast, even staying open isn't guaranteed.

"I don't think anybody really knows what's going to happen, but we have communicated to our members that this isn't a permanent condition," said Brian Maas, president of the California New Car Dealers Association, whose members got a welcome green light to open showrooms on May 8.

"Things could hopefully get better, but it's possible we could retreat, and there may be further restrictions down the road."

For now at least, more areas of the U.S. are relaxing coronavirus-related restrictions, a pattern reaching states that initially imposed more stringent requirements on physical auto sales. Kentucky, New York and Pennsylvania, in addition to California, are lifting bans on in-person sales, albeit with restrictions, stoking dealer hopes that the bleakest days of the COVID-19 era may be in the past.

Jack Kain Ford locked its showroom doors March 24, a requirement in Kentucky as the coronavirus spread across the country.

New- and used-vehicle sales at the Versailles, Ky., dealership fell 20 percent in April, something General Manager Bob Kain said "wasn't terrible" as his sales employees adapted to working remotely and delivering vehicles curbside or at customers' homes.

But when Kentucky allowed showrooms to reopen May 11, Jack Kain Ford was ready to welcome back customers. Even if only 10 people are allowed at a time. Even if employees must wear masks and gloves and have their temperatures taken each morning.

"It's not like ... customers just came from all over and are lined up," Kain said. "That's not the case. It's about the same amount of traffic. It's just that now we're able to have them in the showroom."

Last week, Carlos Echevarria was preparing to open his showroom in Pittsburgh for the first time in about two months.

"Which means we're still safe-distancing, [wearing] masks, sanitizing everything — basically making sure that everything is almost as clean as an operating room," said Echevarria, general manager of North Star Chevrolet – West Liberty.

Stores such as Echevarria's are opening their doors to appointment-only customers, but in other parts of the state, such as the densely populated Philadelphia area, where COVID-19 cases are more prevalent, dealership showrooms remain closed under a stay-at-home order through June 4.

It's part of Pennsylvania Gov. Tom Wolf's plan to reopen businesses through a color-coded system. On May 8, 24 counties moved to what Wolf is calling a "yellow phase," which lifts some restrictions on businesses while requiring specific health and safety practices. An additional 13 counties followed Friday, May 15.

Auto dealerships in those counties can reopen, though online sales and appointments remain encouraged, and in-person capacity is limited to half, said John Devlin, CEO of the Pennsylvania Automotive Association.

Wolf's administration permitted online sales in April.

In New York state, dealers were allowed to begin face-to-face sales by appointment May 6, per updated guidance from Gov. Andrew Cuomo. Test drives are also allowed, so long as vehicles are properly sanitized, and salespeople are asked not to accompany customers.

The order includes the New York City area, which is widely seen as the epicenter of the contagion's outbreak in the U.S. The Greater New York Automobile Dealers Association surveyed its members near the end of April, and respondents on average reported sales off by 81 percent since lockdown measures began, association President Mark Schienberg said.

In New Jersey, Doug Wells, general manager of Mercedes-Benz of Edison, said he expected his state to follow New York's lead to allow dealerships to reopen showrooms by appointment only.

"We figured that New Jersey was going to open it up within a day or two, [May 11] at the latest," Wells said. "That didn't happen."

Instead, New Jersey dealerships continued to sell vehicles online only at press time, with remote delivery and curbside pickup. The New Jersey Coalition of Automotive Retailers, the state's franchised dealership trade association, has lobbied Gov. Phil Murphy's administration to allow appointment-based, in-person sales.

"It doesn't make a whole lot of sense to leave 10,000-square-foot retail operations vacant when you could easily put a few people in those locations safely," association President Jim Appleton told Automotive News.

Appleton said dealerships in states where rules are more relaxed — such as Connecticut, Delaware, New York and parts of Pennsylvania — could have a competitive advantage by attracting New Jersey customers who don't want to conduct transactions online.

As of Thursday, May 14, Planet Honda in Golden, Colo., a suburb of Denver, had sold 34 new vehicles this month — surpassing the 29 new vehicles sold in all of April, said John Osborne, the store's general manager.

Colorado closed dealerships in March but later allowed digital sales. All dealerships had the OK under state and local orders to unlock showrooms by May 9.

The in-person experience looks different, Osborne said. Planet Honda installed acrylic sneeze guards at desks in sales, service and parts departments, he said. The dealership bought 38 of them, at a cost of $100 to $125 per shield.

As California stores reopened, dealerships in the San Francisco Bay Area were governed by a stricter set of rules, permitting sales only in outdoor settings.

Wilson Automotive Group, which has stores in Orange County, Calif., as well as Nevada and Arizona, saw business drop in the middle of March, but it rebounded equally strongly in April, CEO David Wilson said. He said his stores sold about 4,000 new and used vehicles in April.

"We have 15 rooftops, [and] 13 of them made money in April," he said, adding that one Lexus store and one Mazda location lost money — "and not that much."

The path to reopening has included legal worries.

Last week, General Motors asked its dealerships to join a "clean" program aimed at reassuring consumers that showrooms and vehicles have been properly sanitized. Participating dealers would agree to follow government guidelines and use EPA-approved cleansers in their stores and on new, used and serviced vehicles.

The California dealers association argued in a letter to the automaker that the initiative could put dealers in legal jeopardy if a case of the coronavirus was identified at their stores.

A GM spokeswoman said the initiative was designed to simply encourage dealers to implement U.S. Centers for Disease Control and Prevention guidelines. Most GM dealers have enrolled in the program and signed a rolling agreement, which means they can withdraw from the program after 30 days, she said.

In Washington state, where sales had been strictly limited in April, the Department of Licensing reportedly sent letters to some 25 new and used dealerships investigating whether they had violated the governor's stay-at-home order. The Washington State Auto Dealers Association said in an emailed statement that affected dealers have been complying with the state's request, which could be expanded to more dealers. The department did not respond to a message seeking comment.

Washington Gov. Jay Inslee announced new guidelines for vehicle sales May 6, which allow customers to come into stores on an appointment-only basis after most of the transaction has been done remotely. Dealerships had otherwise been limited to selling mainly to essential workers, lease returnees and service customers who ultimately needed a new vehicle.

Jason Courter, who owns Honda Auto Center of Bellevue and Honda of Kirkland in the Seattle area, said that after seeing his sales plummet in March and April, he hopes consumers realize dealerships are open for business. He said he did not receive a letter from the state Licensing Department.

And now Courter's showrooms will be open for the Memorial Day holiday weekend, traditionally a strong sales weekend.

"Maybe we can get to only be off 40 percent, or maybe 30 percent," he said. "That's our goal. That'd be a huge, huge success for sure."

Hannah Lutz contributed to this report.