Car dealers looking to hire are rethinking what they have to offer

As dealerships across the country grapple with decimated inventory levels as part of the lingering microchip shortage, an ever-present challenge in showrooms and service bays is worsening: finding and hiring candidates for open positions and retaining those already employed.

It's a stark change from the early days of the coronavirus pandemic, when dealerships laid off employees en masse as stay-at-home mandates were issued by governors and local leaders to curb the spread of illness. And it has cemented a shift in power from employer to employee, dealership hiring experts say.

"The biggest problem dealers have is they can't find people," said Ted Kraybill, president of ESI Trends, a Clearwater, Fla., consulting firm that conducts the annual National Automobile Dealers Association Dealership Workforce Study. "That's been an increasing problem for a number of years even before COVID. And then you have the problem that the culture in car dealerships is ... not always the most pleasant place to work."

That dynamic has many dealers putting a renewed focus on changing the culture and improving the employee experience even as they increase pay and expand outreach to potential job applicants. While some are making progress, the labor shortage is still complicating recruiting and retention efforts. Some dealers are even making drastic choices to adequately staff their stores.

Last week, Mohawk Auto Group in upstate New York ended sales at its Mohawk Auto Center used-vehicle store in Schenectady, and it plans to cease offering vehicle service there by April 1. The shutdown allows the group to move much-needed employees to its nearby Honda and Chevrolet dealerships.

While the move in part was prompted by the need for repairs at the 100-year-old Mohawk Auto Center building, where a finance unit continues to operate, it also helped the group solve the problem of open positions at its other stores, said Steve Haraden, Mohawk's executive vice president.

Discussion about such a move "really picked up steam as it got harder and harder to find good, qualified people to work in our new-car stores," Haraden told Automotive News.

Mohawk's ad for a lot coordinator late last year was met with silence, and no one had replied to the post after a month. "I used to run that ad five, 10 years ago, and I'd get five replies in a day," Haraden said.

Mohawk will move about 25 employees from the used-car store to the two franchised dealerships, and Haraden said he figures the group can produce the same or better collective results with improved staffing at the franchised stores. And Mohawk will stock more higher-mileage, lower-priced used vehicles at the two dealerships.

The U.S. unemployment rate stood at 4 percent in January, its lowest level since before the pandemic, according to the Bureau of Labor Statistics.

Recent surveys by Automotive News and dealership recruitment technology company Hireology confirm dealerships' struggles.

In a September survey of dealership clients, Hireology found around one-fifth had a dozen or more openings. Just more than half had four to 11 openings. In preliminary findings from Automotive News' 2022 Dealer Outlook Survey, more than half of dealers and dealership managers responding said they've been paying higher base wages or salaries since the start of the pandemic. And 1 in 5, while they added jobs in 2021, said they couldn't find the people to increase employment by as much as they wanted.

Hireology CEO Adam Robinson doesn't see hiring getting easier for dealers anytime soon.

"For dealers holding their breath hoping this gets better, they need to not do that anymore," Robinson said. "They're going to be waiting a long time. I think this is a three-year cycle before this gets better."

While acknowledging car dealers have reputational hurdles to overcome when hiring, Robinson called the current challenge broader than that, with some workers leaving automotive "because every other industry out there is raising pay and offering flexibility."

To help solve the hiring challenge, in addition to ensuring pay and benefits are competitive, dealers should take a deeper look at what they can offer workers — and capture that in an employee branding effort, Kraybill and other hiring experts said.

Dealers also should examine how they manage existing employees.

Fleming Ford, chief strategy officer at Quantum5, which provides skills training to dealerships, said that in the past, employee performance was managed with a paycheck, but that's no longer the case.

"Now people want more emotional salary," Ford told Automotive News. "Are you going to value me? Are you going to care about me? Are you going to engage me? Are you going to grow me? What's my career path?"

And dealership leaders are going to have to meet their employees with answers to those questions because "this has been a real seismic shift of power from employer to employee," Ford said. "Those that get it will be able to keep and attract the talent."

Jonathan Fowler, president of Fowler Holding Co., of Norman, Okla., with 10 Fowler Automotive Group dealerships in Oklahoma and Colorado, said employers must give employees reasons to want to work for a company and stay.

"People want to feel valued," Fowler said. "The most important thing is, how are you, as a leader in your company, going about trying to make sure that your team genuinely and authentically knows that you care about them and that you value what they do for you?"

So dealers must tend to their existing employees, Fowler said, something his group is working on by taking such actions as adding time off for bereavement and eight weeks of paid parental leave.

"That improves the quality of life for our team to take the pressure off of people in really intense emotional situations that could be difficult to navigate," Fowler said.

Scott Smith, CEO of Smith Automotive Group in metro Atlanta, aims for a similar message.

"We've improved pay plans to let employees know they're a valuable asset to our company and our profitability," Smith said. "Payout in the sales department has increased about 5 percent. We're offering better employee benefits, such as lower insurance premiums. Health insurance costs have increased 15 to 20 percent from last year, and we've absorbed a majority of that."

Higher minimum wages are common across various industries, including automotive retail.

In early 2021, Fowler Automotive raised its corporate minimum wage to $12 an hour.

"We're almost to a corporate minimum wage of $15 per hour," Fowler said. "We're trying to get that as quickly as we can."

Megaretailer Sonic Automotive Inc. implemented a $15 minimum wage for all hourly employees as of last September, raising annual pay for affected employees by an average of an estimated $3,250.

Christine Collinet, director of recruiting for Lithia Motors Inc., the country's second-largest dealership group, said the hiring environment is especially competitive for hourly positions such as lot porters, receptionists and cashiers.

"When a fast-food restaurant is paying $15, $16, $17 an hour right down the road, we definitely have to be aware of what those market conditions are driving when it comes to compensation," Collinet said.

The labor market has also pushed dealership groups to become more creative in recruiting.

Suburban Collection, for instance, held a tailgate hiring event tied to the Super Bowl last month at its Chevrolet-Cadillac dealership in Ann Arbor, Mich. The event, which ran for four hours, offered food and drinks, on-the-spot interviews, a dealership tour, a chance to win a TV and hiring bonuses of up to $10,000.

Ron MacEachern, group general manager for Suburban, a platform of 34 Michigan dealerships owned by Lithia, said the idea came from DCH Auto Group, another Lithia-owned collection of dealerships. DCH reported in a Lithia leadership meeting that it had hired 30 technicians after hosting three tailgate events in metro New York, according to MacEachern.

Intrigued, MacEachern initiated Suburban's own recruiting tailgate party and began advertising the event on TV and social media about three weeks ahead of time. The early promotion paid dividends, as Suburban hired four technicians who heard about the party and reached out before it even took place, he said.

The event resulted in Suburban hiring more employees overall than group leaders expected, though MacEachern, who described the initiative as "a huge success," declined to specify how many.

"The takeaway from this whole exercise was it's not business as usual," he said. "Normally we would place ads and wait for people to contact us. We're in a battle right now. I think the challenge that we face is that, how do we get a chance to talk to people we normally wouldn't get a chance to talk to?"

After February's event aimed at hiring technicians for Suburban's Ann Arbor stores, the group is planning two tailgate parties this month at separate dealerships in metro Detroit.

In addition to using TV to promote the parties, Suburban has employed broadcast and streaming TV and social media for a recruitment campaign that started last October. Those ads tout the reasons workers should consider the dealership group. Suburban plans to launch a new iteration of the employment campaign in mid-March, MacEachern said.

Jason Willis, CEO of Willis Auto Campus in Des Moines, Iowa, calls recruiting an "all-hands-on-deck" endeavor.

"Everyone's a recruiter at a dealership. You certainly can't sit and wait for an online portal to send you candidates," Willis said. "You've got to be in your community and finding people who meet your culture and your values who are eligible, whether this is a service adviser or a service technician."

Penske Automotive Group Inc. CEO Roger Penske told Automotive News that the retailer is seeing wage pressure throughout the company.

"What we've done is really put a relentless focus on recruiting across the country," Penske said. "And I think getting people to the company and to the business, we've tried to streamline that so it's efficient. Because people are available, then they're not."

For dealers who haven't yet reinvented their hiring strategies, it's not too late to start. Hireology's Robinson said he forecasts the labor imbalance will be around until at least 2024.

"Even then, in roles like technicians and other fixed ops roles, it's just never going to be enough," Robinson said. "If there was ever a reason to get serious about changing your approach, now's the time."

Melissa Burden, Urvaksh Karkaria and Jim Henry contributed to this report.