Hartford Business Journal

8 Hartford Business Journal • April 20, 2020 • www.HartfordBusiness.com By Matt Pilon mpilon@hartfordbusiness.com I n late March, as his sales continued to plummet due to COVID-19 pandemic precau- tions, Jeffrey Merriam laid off about half of the 175 people who work across his four auto deal- erships, including in Manchester and Middletown. Merriam, president and owner of Key Chevrolet and Key Hyundai dealerships, said the cuts to most of his sales staff and about one-quarter of his service team are temporary, at least for now. He's hoping to bring back workers in the next month or so, assuming his federal emergency stimulus loan is approved, and Gov. Ned Lamont allows non-essential busi- nesses to reopen during that period. "We laid people off so they could collect unemployment and we agreed to pay their medical insurance," Mer- riam said. "There's not enough activ- ity right now. People aren't feeling safe to leave the house." Key's troubles are far from unique. Forced to shutter their showrooms to avoid further spread of the coronavirus, many of Connecticut's 270 auto dealer- ships have furloughed large numbers of employees and are bracing for a major drop in vehicle sales this year. One recent estimate from Cox Automotive said U.S. auto sales could fall to about 12 million this year, down from more than 17 million last year, and that's assuming conditions return to normal in May, which is uncertain. In Connecticut, car-sales fees transferred to the Department of Motor Vehicles were down more than 62% between the week of New Year's Day and the week of March 29, according to the Connecticut Automotive Retailers Association (CARA), signaling a steep decline. Dealers can sell online, scheduling vehicle deliveries or pickups by ap- pointment, but their hands are other- wise tied. Their maintenance opera- tions have been deemed essential, and many are open for business, though demand for those services is down overall as drivers avoid going out. The situation, said Jeff Aiosa, a New London-based Mercedes dealer who represents his Connecticut peers as a board member of the National Auto- mobile Dealers Association (NADA), is not one for which the industry could prepare. While dealers could project sales trends in prior recessions and adjust their inventory levels accordingly, the coronavirus pandemic hit almost immediately. "This was like just going off a cliff," Aiosa said. "Just a complete shutdown." Aiosa's sales of new and used cars fell somewhere around 70% during the first month of the crisis, which be- gan in early to mid-March. Customers with expiring auto leases are holding off on renewing as well, he said. Automakers are advertising heav- ily on television and have rolled out attractive deals, such as 0% financing for 84 months, to help their franchi- sees move inventory. That reminds Merriam of the incentives manufac- turers introduced last recession. "I think manufacturers right now are pretty concerned," he said. While the situation is dire, federal stimulus loans will make a big dif- ference, said CARA President James Fleming, who estimated that virtu- ally every Connecticut dealership has applied for the money. He praised Congress for acting so quickly in pass- ing the stimulus funds, particularly the $350-billion Paycheck Protection Program, which provides small em- ployers potentially forgivable loans if they keep workers employed. "It's going to keep dealerships open and what we will not experience is what we saw in '08 and '09 in Con- necticut, when we saw 30% of dealer- ships go out of business," Fleming said. "That's what we want to avoid." Still, he predicts it's inevitable that some dealerships will go under as a result of the ongoing pandemic, but he suspects the businesses will hold some of their value and get acquired, rather than just close. Reinventing how cars are sold COVID-19 is undoubtedly a negative for car dealerships, but they are still try- ing to make the best of a bad situation. The pandemic has dealers doubling down on online sales channels, and introducing or beefing up offerings like curbside pickup and drop off for maintenance work and sales. Those aren't new ideas, but Bradley Hoffman, Co-chair, Hoffman Auto Group From 60 to Zero With skeleton staffs and showrooms shuttered, CT car dealers hope for quick bounce back Hoffman Toyota service manager Mike Fitzgerald (left) prepares to greet a customer with a COVID-19 questionnaire. (Right) Kevin King, a master technician at Hoffman Ford and Lincoln, works on a vehicle while wearing a protective mask.

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