Coronavirus Takes Toll on Auto Dealers

AUSTINTOWN, Ohio — Through the middle of March, Greenwood Chevrolet in Austintown was having a pretty good sales month. The dealership was offering incentives in conjunction with the Cleveland Auto Show and looking to pick up the pace after a slow January.

Sales were good in February, ahead of the same month last year, and that trend was expected to continue, says owner Greg Greenwood.

Then, everything stopped. No sales. No oil changes. No one making parts deliveries.

“Early in the month, most of our meetings would have been, ‘How do we sell another car? How do we get this short-term economic downturn?’ … It’s normally tactical,” he says. “One day, it hit me like a tsunami. I came into the daily meeting and asked, ‘Why are we here? Is it to sell another car and make some more profit? Or do we have a responsibility to each other and the community?’ ”

For 10 days, the dealerships worked with a skeleton crew, Greenwood says, with most employees furloughed. But since March 23, the Greenwood dealerships – there are also stores in Hubbard and Cortland – have been closed to protect employees and customers from the spread of COVID-19, the disease spread by the coronavirus. 

Nationwide, as dealerships either close entirely or limit their services, the auto industry is taking a hit. A forecast by J.D. Power estimated that states with stay-at-home orders would see new-car sales decline upward of 80%. Overall, the analytics firm reported, new-car sales dropped 40% in the first quarter.

General Motors, which owns Chevrolet, reported first-quarter sales were down 7% and Fiat Chrysler Automobiles posted a 10% drop. Both said strong sales figures in January and February were offset by the spread of the coronavirus in March.

The Greater Cleveland Automobile Dealers Association reported combined new and used sales were down 14.3% to 4,338 in Mahoning, Trumbull and Columbiana counties. Greenwood Chevy led the combined count locally with 263 sold in March, down 24 from a year ago. 

“It’s going to be a big economic price. We had a very strong sales month going in March. … [Now,] we have half a month’s revenue,” Greenwood says. “Going into April, there’s almost none because we don’t know when it’ll be safe or when some safe level of activity can return.”

Not all dealerships have closed however. Jim Shorkey Chrysler Dodge Jeep Ram, Austintown, has four salesmen working and six people working in service. Both departments have limited hours and no customers are allowed inside the building.

“We canceled a lot of advertising and a lot of expenses. I don’t know the full impact since we’re still toward the beginning of operating in this climate and still seeing what the demand is,” says general manager Justin Bradley. “Part of this is going to be gauging the market to find out what we need to operate and how we do it. Our ultimate goal is to feel that out and bring staff back.”

Initially, the dealership laid off its entire staff of 65, he says. Shorkey Auto Group, the dealership’s parent organization, is based in Pittsburgh. The order from Pennsylvania Gov. Tom Wolf to shutter nonessential businesses extended to dealership showrooms, but allowed for parts and service departments to remain in operation. 

In Austintown – the group’s only Ohio store – the initial closing was done “to err on the side of caution,” Bradley says, and to figure out how to best operate. For cars that need to be serviced, customers leave their keys in the overnight drop-off box and car interiors are wiped down and sprayed with disinfectant, a process that’s repeated when the technician is done. 

For sales, the traditional process has been flipped, he says. Salesmen are putting together the financials first before allowing customers to take test drives, which are done with dealership license plates and no salesman present.

“It’s more straightforward for customers. It’s a faster transaction to make sure it fits their budget,” he says. “There are some customers who are in the early stages of buying a car, looking to get one six or seven months out. We’re asking them to hold off. If it’s not something you have to have right now, wait so we can all limit our exposure.”

Since the coronavirus outbreak hit the country, the major American automakers have been offering financing far longer than is typical. Most are offering 0% financing for seven years and, for those who already have payments, are offering deferrals.

“Anything the manufacturer can do right now to stimulate businesses, they’ll do,” Bradley says. “If someone is in a situation to purchase, now is as good a time as ever, regardless of the situation.”

Shorkey Auto is also looking into the addition of online sales platforms, he adds. It’s a move that’s been made by other automakers, such as GM, to allow customers to get cars without ever setting foot inside a dealership.

“Some of that stuff is going to stick around past this pandemic,” Bradley says. “A lot of dealers are going to find it as an option and it’s one they’ll keep in place.”

Greenwood agrees, adding that his dealership had been looking into adding home delivery before the coronavirus outbreak occurred. 

The adoption of these technologies will likely be the long-lasting impacts of this pandemic, the auto dealers agree.

“As we go through crises like this, you keep your business, keep your people healthy and then have a third responsibility: learn and innovate,” Greenwood says. “I think you’ll see it more institutionalized and see more for online buying. The whole process is accelerated because we’re trying to survive.” 

But also having an impact is the readiness of customers to buy cars. J.D. Power President Thomas King says projections are for sales to be at their lowest levels since the Great Recession, totaling between $12.1 million and $14.8 million this year. 

“This is a very, very difficult environment,” he told CNBC. “Fundamentally, demand will not get restored to pre-virus levels until at least next year.”

The slowdown in sales will ripple throughout the supply chain. Without customers to buy cars, the factories that make them won’t be needed – many have been shut down already, in fact – and the suppliers to those factories won’t be needed. 

In a state saturated with jobs in the automotive manufacturing sector like Ohio, the multiplier is as high as 15, according to the Center for Automotive Research. 

Globally, the supply chain flows through countries that have been hard hit by the virus. In China, shipments were delayed while much of the country was locked down. General Motors, the center reports, has the largest concentration of parts coming from China, making the production stoppage there a larger obstacle than South Korea or Japan, which are also major suppliers to the industry as a whole.

“This is a unique train to work through. But people need and rely on personal transportation. There’s no question that we have to provide that,” Greenwood says. “They can’t get to their doctor, to Giant Eagle, to their place of business. … Somehow and some way, we have to keep people on the road.”