AutoNation to return federal aid funds

Company to give back $77 million in money aimed at small businesses

AutoNation, the car retailing giant based in Fort Lauderdale, has agreed to return $77 million in federal aid intended to help small businesses survive the economic crisis.

The $349 billion program ran out of funds last week, partly because national chains such as Shake Shack and Ruth’s Chris Steak House grabbed the money before mom-and-pop businesses could apply. Amid a national outcry over what many saw as the abuse of a program to help small businesses, those chains have also returned the funds.

AutoNation, a $3 billion company with revenues of more than $21 billion last year, applied for money in the federal Paycheck Protection Program in hopes of bringing back 7,000 furloughed employees, said Marc Cannon, AutoNation’s executive vice president. But he said the federal government changed the guidelines, and the company’s board, aware that the change was going to take place, voted Thursday to return the money.

“AutoNation was clearly eligible and applied on behalf of the 7,000 employees furloughed caused by the COVID-19 crisis,” he said in an email. “AutoNation intended to rehire all 7,000 associates under the PPP program as encouraged by the government and designed to get individuals back to work.”

With the return of the money, he said, the employees will remain on unpaid leave.

The Washington Post reported that it obtained documents that show AutoNation’s aid may have been even higher, totaling $95 million, spread across dozens of locations, an amount that would be more than triple what any company is known to have received through the fund. AutoNation

disputes the $95 million figure, according to the Post.

More than 81 locations received loan money, according to the documents reviewed by the Washington Post. That included $4.6 million for an Audi dealership in Bellevue, Wash., and $2.7 million for a Toyota Mall location in Georgia.

The Small Business Ad

ministration’s Paycheck Protection Program is a major component of the $2.2 trillion coronavirus relief program enacted on March 27. It was designed to provide immediate aid to small businesses that were forced to close under COVID-19 shutdown orders.

The program was intended to lend money to businesses for eight weeks to cover payrolls and other expenses until the public health crisis passed.

The federal program ran out of money last week, before many businesses could even apply for help. Some of the funds had been scooped up by businesses that wouldn’t qualify as “small” to most people, including national chains.

The loans are administered by the Small Business Administration. But local banks handle the borrower applications and provide the initial funding. The loans are based on payroll size and come at an interest rate of 1% for a two-year term.

In general, a business must employ under 500 people to qualify. There are other size guidelines pegged to a company’s industry that can allow the work force to be higher.

Large publicly traded companies such as AutoNation appear to have gained access to the program because they operate subsidiaries and franchises that are separate entities in their respective cities and states. When applying for the loans, those dealerships used their local tax identification numbers on the applications they presented to their banks. The number of employees working for each dealership apparently was low enough for each business to qualify under the rules.

That’s probably why an AutoNation executive was able to tell his employees that “the majority of our dealerships are able to apply for this.”