Dealerships Dealing with CoVid-19: A Week in the Industry

By Jeffrey Bellant March 22, 2020

As America and the world face the deadly effect of the global pandemic caused by coronavirus (COVID-19), the auto industry is trying to figure out how to survive this nearly total shutdown of business.

Used Car News spoke with a few members of the industry during the week of March 16 to get their initial reactions to this new way of life for the near future. This is snapshot of a week, though things are changing quickly.

 

THE DEALER

“This is craziness,” said Keith Hagler, president of Taylor Auto Credit in Taylor, Texas.  “It’s unprecedented.”

In Williamson County, where Hagler’s lot is located, they haven’t had anyone test positive for the virus as of March 17, so there weren’t as many restrictions at press time, though Hagler expects that to change.

“It’s still business as usual, for now,” Hagler said. “Yesterday (March 16), my collector said she had our first call from somebody whose business they worked at was shut down.”

As a buy-here, pay-here dealer, Hagler’s business is built on cash flow through collections.

“So, we’ll see how it affects our sales,” he said. “I don’t know how much it will affect our sales, but I guarantee it will affect our collections.”

Hagler has other concerns. He and his wife also have several rental properties and a cattle ranch.

“Everything I’ve had scheduled has been canceled,” he said. “I had all kinds of fundraisers canceled. Even my longhorn cattle sales have been canceled.”

He pointed out how auctions are all going online.

“They all wanted to go online anyway,” he said. “Big H Auto Auction in Houston is now going 100 percent online.”

ADESA, Manheim, McConkey Auction Group and other auctions have all moved to simulcast and online sales.

Hagler’s family has also been affected. His daughters are home from college as classes go online.

“My mom is in a rest home and my dad, I can’t even go and see them,” he said. “It’s just strange not being able to see my parents.”

 

THE VENDOR

 

“This is big,” said Mike Frazer, president of Frazer Computing, a dealer software provider. “I’m concerned about our dealers.

“I’m worried that if these governments keep shutting people down, nobody’s going to buy a car.”

Frazer Computing has been in business since 1985 and has more than 20,000 customers. He and his employees are ubiquitous an industry events in their signature black polos.

On March 19, the effect of the pandemic was already being felt.

“We saw a pretty quick drop off,” Frazer said. “We normally do 900 calls a day and that dropped to 700 within a couple of days.”

Frazer said if this continues for a long time – and it looks like it will – “I don’t know if our customers can come back. They’ll close their doors and that will be it.”

Frazer said as business, half of the company’s employees are set up from home.

He said the Great Recession doesn’t compare with what’s happening now.

“We didn’t notice it. It didn’t affect us at all,” he said.

That recession hurt new-car dealers, more, he said, where sales went from 17 million to 8 million.

“Back then, we were 50 percent buy-here, pay-here, and those guys did great then,” Frazer said.

An economic downturn is much different than the government telling people they can’t leave their homes, he said.

“I’m worried about the government overreacting,” Frazer said. “These poor people that work in restaurants and bars who probably live week-to-week as it is and now they’re unemployed? For how long?”

Frazer, who’s been an entrepreneur for decades, is focusing on one thing.

“Right now, it’s about keeping everybody employed and fully engaged with our customers,” he said. “That’s key right now. But what happens two months from now? We might not have any customers, and then I might have to start looking at layoffs.”

 

THE ASSOCIATION EXECUTIVE

Larry Laskowski, executive director of the Independent Automobile Dealers Association of California, was interviewed shortly after Gov. Gavin Newsome placed a shelter-in-place order of the state’s 40 million people.

Newsome’s order does not apply to “essential services,” and auto dealers are not included in that category

The order only lists “auto supply and repair” are listed, but dealerships are not.

Counties have offered conflicting lists.

“So far, we’ve seen two counties (Los Angeles County and Sacramento County) that specifically state that auto sales are considered an essential business and will still open during this crisis,” Laskowski said,

However, the language is vague in other counties.

“We’re just trying to provide the facts for dealers and let them make their own determination,” Laskowski said, “Out of all the counties (58), every one of them is responding differently to the order.

“Certainly, we can’t weigh in on a legal matter,” But we’re just trying to provide them information where we can.”

The National Automobile Dealers Association and the Alliance for Automotive Innovation have issued a joint letter to President Trump asking to include auto sales as an essential service.

The National Independent Automobile Dealers Association is also in contact with the federal government to discuss relief packages for small dealers, according to a statement from Steve Jordan, the group’s CEO.

Laskowski is trying to keep dealers informed of these rapidly changing developments.

“My phone hasn’t stopped ringing all day long,” he said.

The shelter-in-place order didn’t surprise Laskowski. It was just the next step in what had been ever-tightening restrictions.

Despite the county guidance, Laskowski said dealers are scared. He said the media hasn’t helped with their coverage and Newsome has the used the words “martial law” more than once.

Laskowski is not panicking, though.

“I’m the cup half-full guy,” he said. “I don’t deal in what-ifs. I can’t clutter my head with those things.”

 

THE AUCTION OWNER

 

In Oklahoma, where there were no major statewide restrictions at press time, the Oklahoma Auto Exchange held a live auction on March 18.

“When they mandate us to do something, we will follow it,” said Mike Clopton, co-owner of the auction with his son, Kyle.

Since there were no restrictions, the auction held its regular sale, though volumes were down at 560.

“We were down a couple of hundred cars,” Clopton said. “Our percentage was off about 10 percent, but we still had a good sale.”

Oklahoma faces an additional hit as its economy relies on the oil and gas industry, which was in a downswing even before the pandemic. If the state ramps up restrictions, the auction may be in the same place as other businesses.

But like Laskowski, Clopton is optimistic, even in the face of a deadly pandemic,

“Honestly, I’ve never been more encouraged about our business,” he said, “I met with our employees (on March 13), because employees around the country are concerned about getting fired.

“I told them that I don’t know what’s going to happen and neither do they. But one thing I do know, you will have a paycheck every Friday. If they shut us down and we’re not working, you can count on getting paid.”

Clopton said if the business isn’t about the people, then it’s not fun.

The auction has 65 employees, with 30 temp workers and 50 additional workers on sale days.

“Everyone is going to get paid,” Clopton said. “If we work this whole year as a company and all we do is pay back what we borrow  – if we have to borrow – and our employees kept their cars and paid their rent, then it’s been a good year.”

His has a core group of employees that’s been with him since the start and he wants to return that loyalty.

Clopton said he doesn’t understand why other businesses don’t have that same attitude.

“You don’t let the team down at the expense of the coach,” he said. “I’ll take not getting paid before (allowing) anyone around here not getting paid.”

Clopton always talks about the resilience of Oklahoma and the toughness of its people.

“We’re going to be fine. Are we going to be profitable this year? Probably not. Will I feel good about our employees? Yes,” he said,

Clopton added, with a laugh, “But I don’t want to do this every year.”

 

 

 

 

 

 

 

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Last modified on Monday, 23 March 2020 16:32

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