After shuttering showrooms, dealers lay off employees — and it may be just the start

With vehicle sales plummeting and thousands of dealership showrooms coast to coast ordered to shutter in the wake of the coronavirus outbreak, dealers are desperately slashing costs — including laying off employees en masse.

Stay-at-home mandates by governors and local leaders to curb the outbreak accelerated last week. The resulting restrictions on vehicle sales in those locations added to the rapid falloff in sales and showroom traffic across the U.S. and left one dealership hiring expert predicting that retailers will have to cut a third of their work forces by May.

That would equate to 360,000 or more dealership employees out of work in a matter of weeks. U.S. dealerships last year employed more than 1.1 million people, with an estimated 225,000 people working directly in vehicle sales, according to the National Automobile Dealers Association.

While it's unclear just how many employees have been affected thus far, many dealerships have started cutting staff. In some cases, dealers have opted to pay employees while showrooms are temporarily closed. But others just can't afford to.

Last week, Greg Rairdon, owner of the 10-store Rairdon Automotive Group in Kirkland, Wash., the first epicenter of the virus in the U.S., shut all showrooms and stopped selling vehicles following Gov. Jay Inslee's stay-at-home order, which doesn't list auto sales as essential. Rairdon put a "significant" number of employees on what he called standby unemployment.

"It was probably the most tragic day of my career in 30 years. In my opinion, this is much worse than 2008," Rairdon said, referring to the Great Recession. "I never had to lay off masses in 2008."

As of Friday, March 27, at least 33 states had issued executive orders that limited nonessential business activity and affected dealerships. About two dozen governors had issued stay-at-home orders.

The orders have triggered confusion in many places on whether and under what circumstances dealerships could still sell vehicles. In some states, initial rules were clarified or even reversed later in the week as dealer associations lobbied for vehicle sales to be declared essential business.

Adam Robinson, CEO of Hireology, a technology recruitment firm that works with 4,000 franchised dealerships nationwide, said the reduction of dealership jobs began in early March in states such as California, Washington and New York. Then on March 23, "the dam burst," Robinson said. "It's as if everyone came into work on Monday looking at the reality of the situation and started making the decisions, all at once, to cut costs."
From March 10 through March 25, Hireology saw 15,300 available job postings at franchised dealerships vanish — though Robinson noted the overall impact on dealership jobs is much bigger. He expects one-third of U.S. franchised dealership positions to be eliminated or reduced in some way by May 1.

Auto repair and auto parts generally have been deemed essential, meaning dealerships can continue to run service and parts departments. But whether physical showrooms can operate varies. Showrooms in states such as California, Illinois and Pennsylvania had to temporarily close.

The California New Car Dealers Association advised franchised dealers in the state to shut their 1,400 showrooms to comply with Gov. Gavin Newsom's indefinite order. NADA estimates more than 23,000 people were employed in sales jobs in the state last year.Some orders cover only a few weeks, while others are until further notice. Delaware's order is in effect until May 15.

In some cases, dealers have successfully lobbied states — such as Nevada — to overturn orders that had banned sales.

Dealer Billy Fuccillo Jr. had to close sales departments and lay off staff at 20 dealerships in New York state for about a week under an order that had prohibited vehicle sales of any kind. After learning Thursday, March 26, that he could sell vehicles remotely and conduct deliveries and lease returns by appointment, Fuccillo began to rotate 211 sales employees back into the dealerships.

"I want to keep my people working and producing," said Fuccillo, president of Fuccillo Automotive Group.
Fuccillo also has three dealerships in Florida, where sales and service continued to operate in the absence of a statewide order. Even so, he said, his Florida stores have seen a 30 to 40 percent decline in sales.

Dealers in many states where showrooms were ordered closed were still trying to determine late last week whether they could conduct online or phone sales with deliveries.

The Michigan Automobile Dealers Association told its dealers that it had reached out to Michigan Gov. Gretchen Whitmer's office about opening sales in limited scenarios, such as customers with expiring leases or those needing to replace crash-damaged vehicles. The association also was seeking clarity about "sales in process prior to the shutdown, wholesale transactions, the possibility of appointment only sales, Internet sales, online sales and delivery of vehicles to a customer's home." By Thursday, the association advised dealers that Whitmer's office had not granted any exemptions, and "as such, automotive sales remain closed."

The Massachusetts State Automobile Dealers Association late last week told Massachusetts' 425 franchised dealerships they could conduct virtual sales and remote deliveries. Robert O'Koniewski, executive vice president of the association, said he was still seeking guidance from Gov. Charlie Baker's administration on whether exemptions would be made for physical auto sales. Baker's order lists automotive repair and maintenance facilities as essential, but not showrooms.

Publicly owned retailers have reported varying degrees of impact.

Group 1 Automotive Inc. last week said it was furloughing 3,000 U.S. employees for at least 30 days and slashing executive salaries, as its U.S. sales were down 50 to 70 percent from a typical March. Group 1 has had to close sales departments in some U.S. stores.

Lithia Motors Inc. last week said its 188 stores were open, but 30 percent were located in states that had prohibited vehicle sales. Lithia has cut staff but didn't provide numbers.

Asbury Automotive Group on March 20 closed McDavid Honda Frisco in Texas after learning an employee tested positive for COVID-19. Asbury followed Centers for Disease Control and Prevention guidelines and advised store employees to self-quarantine and monitor themselves for symptoms, a spokeswoman said. Asbury plans to reopen the store Saturday, April 4.

AutoNation Inc. said Thursday its stores remained open coast to coast and no employees had been laid off. The company cut store hours beginning last week.

Penske Automotive Group has shut down four dealerships in Puerto Rico and closed showrooms at six CarSense used-vehicle stores in Pennsylvania and New Jersey. Penske spokesman Anthony Pordon said the retailer is "evaluating next steps" as they relate to possible layoffs or furloughs.

Sonic Automotive Inc. CEO David Smith told Bloomberg last week that the company had laid off "a whole bunch of people" in Northern California and that it would have to reduce staff "without a doubt nationwide, if only temporarily."

Used-vehicle retail giant CarMax Inc. had closed 91 stores in 21 states, more than 40 percent of its store count, as of Friday. CarMax said it had not laid off or furloughed any employees.

"Associates at locations that are temporarily closed will be paid for up to 14 days," CarMax said in a statement. "We are currently working on plans for if stores remain closed longer than 14 days."

In Maryland, where dealers were able to keep sales operating, Brandon Younger, president of the four-store Younger Automotive Group in Hagerstown, said he's had to lay off employees "in every department," though he declined to provide numbers. He has also shuffled some staff into other roles.
Hireology has seen a hiring freeze at nearly half the dealerships it works with, with some dealerships instituting mass furloughs or layoffs. Robinson expects another wave of cuts in mid-April after dealers receive March financial statements, with more possible in the future.
"We went from near-record vehicle sales at the end of February to what will be the worst month on record in over a decade," Robinson said. "The pace of the decline is breathtaking."

Lindsay VanHulle and David Muller contributed to this report.