Auto dealerships and servicing are deemed an essential service during the COVID-19 crisis but the massive disruption of normal commercial activity has forced the largest dealership group in the city to significantly limit its operations.
Birchwood Auto Group told employees on Thursday that at least half of the group's 1,200 total work force will be temporarily laid off — for at least three weeks — as the company deals with a significant drop in sales and the challenging requirements to sustain the proper level of public health hygiene as well.
Steve Chipman, Birchwood’s CEO, said sales volumes and health concerns make it impossible to continue to operate at full capacity, although all dealerships will remain open.
With 17 dealerships — and three more under construction — and a total of about 25 distinct locations, Chipman said it is becoming untenable to operate as if it was business as usual.
Chipman stressed that the action would be temporary.
"I have been in the car business for 25 years. This is the hardest decision I have ever had to make in my life," he said. "But it’s not safe and there is just not enough business."
All laid-off staff will be paid until the end of March.
Chipman said sales are currently off by 50 per cent and he expects them to fall even more.
"There is just not enough business right now to support all the staff," Chipman said. "We have to be in a position, not only health wise, but financially, to have a job for them" when normal life returns.
Geoff Sine, executive director of the Manitoba Motor Dealers Association, said other dealerships have also laid off staff, but he is not aware of any dealership closures.
In its February report on provincial sales that was released this week, DesRosiers Automotive Consultants said sales in Manitoba were up by 5.6 per cent compared to February 2019 and about 2.1 per cent across the country, but that trend was likely to head south very quickly.
"Clearly, February sales showed no impact from COVID-19, but we expect March numbers to exhibit a markedly different pattern with sales declines across the country," DesRosiers said.
But in an interview, Dennis DesRosiers said the annualized decline in vehicles this year because of the public health actions taken to control the COVID-19 outbreak may not be as severe as many might think.
Using a comprehensive forecasting model that DesRosiers has developed — keeping in mind, he warned, that there are a lot of uncertainties as to how long it will take to control the outbreak — he is forecasting that annualized new vehicle sales across the country this year may only be down by about 20 per cent in the most likely scenario.
"You have to be careful with the math because for the last half of March and April, sales could be down (60 to 70 to 80 per cent,)" he said. "But after that there will be some catching up."
DesRosiers points out that in many scenarios, buyers may not have a choice but to get back in the market. For instance, fleet operators under contract, leased vehicles (that have to be returned at the end of the lease), scrapped vehicles and consumers who have a change in family will all have a need to replace vehicles.
(DesRosiers said the largest group of first time buyers are divorced or separated women and there is plenty of suspicion that self-quarantining may increase divorce rates.)
"When you look at everything with an analytical eye… you end up believing this may not be as serious as it first appears," DesRosiers said. "For the first month, yes. The government is forcing all non-essential services to shut down. People are terrified. But once you get into one or two months I suspect the market will respond a little better than what some of the naysayers are saying."
“There is just not enough business right now to support all the staff. We have to be in a position, not only health wise, but financially, to have a job for them” when normal life returns." – Steve Chipman
Chipman said starting Monday Birchwood Group dealerships will start dramatically controlling the flow of people at the dealerships. Sales inquiries will be by appointment only.
A rigorous sanitizing protocol will be in place at all service departments and will involve a thorough cleaning when vehicles are dropped off and when they are picked up.
Auto dealerships and service departments fall under essential services. Manitoba’s Essential Services Act states that services "necessary to enable the employer to prevent… the destruction or serious deterioration of machinery, equipment or premises.’
Sine said, "Manitobans rely heavily on their vehicles to get essential goods such as food and medicines. Equally, emergency services, and businesses rely on their motor vehicle fleets to continue delivering essential services and goods to Manitobans during these difficult times."
Martin Cash has been writing a column and business news at the Free Press since 1989. Over those years he’s written through a number of business cycles and the rise and fall (and rise) in fortunes of many local businesses.
Updated on Thursday, March 26, 2020 at 10:39 PM CDT: Fixes several typos.