Staying Ahead of the Coronavirus Curve
Preparing for the Impact the Coronavirus Will Have on Your Dealership
By Phil Villegas
Throughout our automotive careers, most of us have had to face what has been considered unprecedented. We have had to face challenges we had not fully anticipated or could have imagined. Whether it was the terrorist attacks on 9/11/2001, the great recession of 2008, and now the global coronavirus pandemic.
While each of the above events are unique in both their substance and nature, they are similar in their anxiety impact. The anxiety of not knowing how deep and how long lasting an impact this is going to have on our daily lives. With all the uncertainties come essential questions; are we doing enough? Are we adequately prepared? How do we prepare for the unknown, and for how long? The real answer is that no one really knows; the entire situation is very fluid and changing every day. However, one thing is for certain; this too will pass. The only real question is when.
In a way, the U.S. is fortunate that it is at the tail-end of the virus making its way around the globe. We have the benefit of learning from those unfortunately impacted before us. As an example, the first known death related to Coronavirus in Wuhan, China was on January 11, 2020. On March 18, 2020, Wuhan, for the first time, had not had a reported new case of Coronavirus. China and South Korea, which were both heavily impacted early on, seem to be slowly returning to normal. Under what I believe is a worst-case scenario based on how things have transpired in China and South Korea, we are looking at a 60 – 90-day disruption to our lives and businesses.
I believe the impact of the Coronavirus pandemic will not be uniform for everyone, and it will manifest itself differently to dealers across the country. Major metro areas may more likely feel this impact greater than rural areas; assuming a rural area doesn’t become a virus hotspot. However, regardless of where a dealer may be located, the reality is that dealers should be preparing for possible business disruption and temporary shutdown. If we once again look at China, new vehicle sales dropped by 80% in February and I believe many U.S. dealers could have a similar impact over the next 30 to 60 days.
I have spoken to several dealers who have similar questions and concerns about the preparation for the unknown, and our discussions have weighed heavily on strategy and contingency planning. Some of the steps that can be taken now ahead of a potential shutdown are:
Determining your daily payroll and calculating how long and to what extent you can pay your employees under the circumstances if you must shut down completely.
Establish a contingency layoff plan, identifying which essential employees will be retained, vacation leave, pay cuts, and/or pay-outs.
Review your parts inventory and stockpile high demand parts to have available supply once normal business resumes, to offset delays due to many manufacturers temporarily shutting down.
Establish practical communication networks for employees in the event there is a shutdown. Many groups have embraced messaging services like WhatsApp to maintain an active link to other team members.
Cutting expenses on non-essential areas of your operation. Outside of compensation, advertising may be one of the greatest savings opportunities.
Determine your current liquidity, prioritize and protect your cash flow.
My recommendation is to have an executable action plan in place by March 31 or sooner. While there are some positive signs of federal, state, and manufacturer/lender assistance programs coming down the pipeline to help dealers, from assistance with payroll expense, to zero-interest loans, and deferred loan payments, individual stores should prepare on their own in the event these do not come to fruition.
A few weeks ago, I viewed the disruption this pandemic might cause as being V-shaped dip and recovery. However, it is looking more and more like this might be more of a slower L shape recovery and not an immediate bounce back. Besides what we have already seen in the food & beverage and hospitality industries, we are anticipating a significant number of layoffs in the coming weeks. So even if we’re fortunate to weather the pandemic well, our business impact will undoubtedly linger and have a prolonged recession.
Yesterday I was trying to calm the overanxious nerves of a millennial friend who believes the world is ending and is in a complete panic. As they say, once a Marine - always a Marine, I told him to suck it up, stop whining and reminded him of the challenges our country faced in World War II, that a two-week in-home quarantine is a pimple on your ass compared to a two-year tour with the Marines in the South Pacific campaign against the Japanese. Time and time again, we are reminded why people who lived during WWII are the Greatest Generation and how we should draw inspiration in carrying out our daily lives in times of crisis. We are comparatively fortunate from the standpoint we each have a role as individuals, and though our businesses, to better our changes of staying ahead of the curve.