Cox Automotive will furlough more than 12,500 employees — about 10,000 in the U.S. — and executives will forgo some or all of their salaries as a result of the financial hit the company has taken from the coronavirus pandemic.
Close to 87 percent of the furloughed employees work for Cox's Manheim wholesale auction unit, which stopped running physical sales in mid-March and shifted to all-digital sales as states began to shut nonessential business locations, Cox said Thursday.
More than half of the furloughed employees are part-time drivers for Manheim or perform other roles on auction days. About 4,600 others will be furloughed because their jobs can't easily be done at home or have reduced workloads.
Furloughs will begin May 17 and last up to 16 weeks, the company said in a statement. Employees will not be paid and can file for state unemployment benefits, though Cox said they will continue to receive health care benefits, with the company paying the full cost.
In addition, Cox Enterprises CEO Alex Taylor and Cox Automotive President Sandy Schwartz are among senior executives who will work without pay until the pandemic ends, the company said. Members of the company's executive leadership team will take temporary 25 percent pay cuts, while leaders starting at the vice president level will take 15 percent reductions.
"A furlough is different than a layoff and our hope is that we will be able to have as many of these people back as soon as conditions allow," Schwartz wrote in a letter to employees Thursday morning. "We know, though, it is impossible to predict the course or duration of this pandemic and whether any of the furloughs will become permanent."
The used-vehicle market has slowed during the pandemic, as consumers heed state orders to stay home and limit the spread of the virus. Auction business has felt the impact, as well — wholesale volume nearly stopped in the early days of the pandemic. As an example, Manheim has said wholesale transactions sank by more than 75 percent during the week that ended April 11 compared with the prior year, though the company said business has begun to return.
Cox Automotive's dealership customers also have sold fewer vehicles, and many had to close their physical showrooms and shift to online sales and home deliveries to comply with state restrictions. The company offered half off its retail subscription fees for its dealership clients in April and May and said it will extend a 25 percent discount on subscription listings fees through its Autotrader brand for June. It also has provided additional products to dealerships during the pandemic, including some that help with virtual transactions.
Cox said in the statement that it also has reduced expenses by cutting marketing spending, limiting hiring and postponing or canceling events and sponsorships.
"We don't take lightly the broad impact these actions will have on everyone; the toll from COVID-19 is already so high and this adds more uncertainty," Schwartz wrote to employees. "If there were another way, I promise we would have done it."