KAR Global will temporarily furlough a "significant portion" of its work force and company executives will cut their salaries as the wholesale vehicle-auction company works to counter the financial impact of the COVID-19 virus outbreak, it said Friday.
KAR also will prohibit all business travel through April 17, terminated nonessential third-party services and delayed or canceled all capital projects at physical auction locations, CEO Jim Hallett said Friday on a conference call. Those actions should lower the company's cash outflows by $10 million per week, he said.
"It goes without saying that we're facing an unprecedented situation throughout the world," Hallett said.
Hallett said he, President Peter Kelly and Eric Loughmiller, executive vice president and CFO, will work without pay through at least the second quarter. In addition, the rest of KAR Global's executive leadership team will receive half of their current salaries through the second quarter, while board members will forgo cash compensation for the second quarter.
Hallett did not provide the number of employees who will be furloughed, but said "we do intend to bring these employees back as we see our business recovering."
The company also is withdrawing its 2020 financial guidance, citing the economic uncertainty caused by the epidemic.
Loughmiller said the company has $350 million in available cash and does not intend to draw on its revolving credit at this point.
"We believe that our balance sheet, including our cash position, is strong," Hallett said Friday. "We also believe that we have the resources to get through the temporary disruption and return to business as quickly as possible."
KAR Global's additional actions follow a decision last week to halt sales at all North American ADESA locations for at least two weeks. That includes simulcast-only sales.
The company's performance had surpassed expectations through February and was on track through mid-March before the coronavirus impact escalated, Hallett said, though he declined to provide specific financial details for the first quarter.
By the week of March 16, he said, business had taken "a sudden turn" and activity declined each day compared with the day before. KAR Global would stop all North American ADESA sales by the end of that week.