Sun Sentinel Palm Beach Edition
Optimistic AutoNation brings back 1,000 furloughed workers
A month after announcing the furlough of 7,000 employees and other steep cuts due to customer concerns about COVID-19, AutoNation brought back about 1,000 employees in the last three weeks, including 100 in South Florida.
In a filing with the Securities Exchange Commission, AutoNation reported that business had picked up, a positive sign that the auto industry could be in recovery.
The Fort Lauderdale-based Fortune 500 company had applied for and received $77 million from the federal Paycheck Protection Program but returned the money after the rules changed, said Mike Jackson, AutoNation’s executive chairman and acting CEO.
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People are beginning to return to AutoNation to buy cars and get their vehicles serviced, an optimistic sign that a recovery in the auto market could be underway, the Fort Lauderdale-based auto dealer giant reported Monday.
A month after announcing the furlough of 7,000 employees and other steep cuts due to customer concerns about COVID-19, business has picked up, AutoNation reported in a filing with the Security and Exchange Commission. About 1,000 employees have been brought back in the past three weeks, including 100 in South Florida.
The Fortune 500 company had applied for and received $77 million from the federal Paycheck Protection Program but returned the money after the rules changed, said Mike Jackson, AutoNation’s executive chairman and acting CEO.
“While there is unpredictability on the pace of the recovery, we believe the automotive recovery is underway,” Jackson told investors Monday.
Concerns about using ride-sharing services during the pandemic is helping car sales, he said.
“Customers are motivated. They have told us they want personal space rather than shared space when it comes to transportation,” Jackson said.
He said company stores are now cleaned and sanitized multiple times a day. The company has implemented social distancing practices within the workplace and has offered a“store-to-door” delivery program, allowing customers to complete transactions at home. The company has also offered attractive financing deals to customers and offered 25% discounts on service.
The efforts may be working. While store sales during the last 10 days in April were down 20%, compared with the same time a year ago, they were down 50% during the first 10 days of last month.
But 6,000 workers, about a quarter of its workforce, still aren’t getting paid.
Jackson said the company had planned to use the $77 million from the federal government to help bring back all of its furloughed employees. Jackson said the federal government changed the guidelines retroactively to focus more on small businesses. The company could still receive a loan, but it may be expected to repay it. As a result, the company paid the money back in late
April, he said.
Jackson said federal assistance was initially touted as a way for companies to “mitigate the damage from an avalanche of unprecedented unemployment. You were looking to companies to, despite the circumstances, sustain the same payroll as the prior year.”
But it “was a non-starter once there was no clear path to forgiveness,” Jackson said, explaining why the money was returned. “We have to run the business for ourselves rationally where we knew we would be protected on the other side.”
He wouldn’t say when remaining furloughed employees would be brought back or whether some jobs will be eliminated due to improvements in efficiency.
“I can say rehiring will trail the growth of the business,” Jackson said.
The company announced first-quarter results Monday, which were strong until mid-March, when counties and states starting issuing stay-athome orders. The net result was a 4% earnings dip from the same quarter a year ago. AutoNation’s stock closed at $39.39 Monday, up $1.07 from the previous day of trading.
“While there is unpredictability on the pace of the recovery, we believe the automotive recovery is underway.”
Mike Jackson, AutoNation’s executive chairman and acting CEO