Rainy day fund buoys dealerships' employees

A rainy day fund has helped ease the financial worries of employees at Bill Penney Toyota and Bill Penney Mitsubishi during the coronavirus outbreak.
For the past seven years that Ryan Hensley has been CFO of the Huntsville, Ala., dealerships, he has transferred 50 to 60 percent of the previous month’s net profit into the fund each month.
That foresight means that, despite a 30 percent drop in sales last month, the dealerships’ 200 employees will receive all or most of their pay while many competitors are laying off staff. The fund will cover employees’ compensation through April, Hensley said.

Bill Penney Toyota even advertised a service technician opening on its Facebook page March 25: “With all the layoffs, furloughs, unemployment or just no business, Bill Penney Toyota is always looking for top talent,” the post said. “We’re still open and doing business!!”
On March 23, the stores started scheduling employees for three days of work alternating with three days off, but hourly employees were still paid for at least 32 hours and salaried employees received their full compensation.
“We wanted to take away some of the anxiety. That’s why we rolled that out when we did,” Hensley said. “We think it’s better than what the government would pay if you had to furlough.”
As of Thursday, April 2, Alabama had not ordered residents to shelter in place, but public schools are closed for the rest of the academic year. Management restructured the schedule to give employees more time with their families without worrying about missing a paycheck. Plus, operating with half of the staff “gives everybody a chance to sell a car and to fix a car,” even when business is slow, Hensley said.
When the dealerships restructured the schedule, the coronavirus had not hit Alabama as hard as it had many other states. There were 167 cases statewide then, according to the Alabama Department of Health. As of Wednesday, April 1, more than 1,300 residents had contracted the virus.
In the past year, Hensley had been especially diligent about contributing to the savings fund as the dealership prepared to build a 65,000-square-foot body shop.

But now, “we just feel like our 200 employees are more important than starting construction. We’ve got the building. We’ve got our architecture plans,” he said.
“We’d rather take the money from savings and pay our employees than get to work on that. The backbone of the store is the employees. That’s what makes it go.”
The two dealerships, which sold about 5,000 new and used vehicles in 2019, previously have directed cash from the fund toward tax payments, but they’ve never had to rely on it to cope with a crisis such as the coronavirus pandemic.
When the fund starts to run dry, management will consider other options. But for now, Hensley said, “we’ve got the money and we’re going to … hang onto our employees.”

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For battery challenger, it's build, build, build

Jun Kim is spending $1.6 billion to build a battery factory in Georgia — and it’s not enough. Not even close.
His company, SK Innovation of South Korea, needs to spend twice that. And frankly, that won’t be enough either. By mid-decade, Kim aims to have five times the Georgia project’s capacity scattered around the world.
“When I became CEO in 2017,” he said, “I had to ask the question: Is this the right time for us to invest in batteries, and do we have the financial resources and technology to do what it will take?

“We felt that the market was very ripe and we did have a competitive advantage. This could be one of the biggest opportunities for us if we invest now. So I made the decision to enter the market aggressively.”
“Aggressively” is almost an understatement.
Since that decision in 2017, SK has launched construction of the plant in Commerce, Ga., which by 2022 will yield 10 gigawatt-hours of battery-cell production (the industry’s peculiar way of measuring production capacity). Kim said it will be necessary to double the plant’s size to 20 GWh by 2023, which would supply about 250,000 vehicles. And still more is likely to come after that.
SK Innovation has also invested in the South Korean home market to expand capacity there, from 1.7 GWh of startup volume to 5 GWh.
In China, the world’s biggest market for electric vehicles, SK is investing to increase from 7.5 GWh of capacity to 27.5. SK also expects to acquire the capacity of another company there to obtain an additional 8.5 GWh. And it has begun building still another production base in Hungary that will yield 23.5 GWh of battery capacity by 2022.
All of SK’s current plants together add up to nearly 85 GWh of capacity, according to Kim’s calculations, enough to supply about 1 million vehicles a year.
But that’s not enough, either, he points out.

“If we continue to expand,” the CEO said, “by 2025, our goal of reaching capacity for 100 GWh should not be a challenging goal at all.”
That would allow SK to supply batteries for about 1.2 million vehicles a year, depending on the size of the batteries.
The big question for SK, as it racks up worldwide plant investment that might end up costing more than $10 billion in a short time, is whether even 100 GWh will be enough for a world inching toward vehicle electrification.
SK is part of the global race of auto parts suppliers and others to support a coming wave of electrified cars, trucks, vans and buses.

The notion that automakers will shift from gasoline engines to electric powertrains over the next decade or two signals a seismic disruption of industry technologies. But the sudden arrival of barely heard of companies such as SK Innovation turns upside down the age-old industry order, in which automakers’ names represented their powertrains, not just their vehicles. Ford Motor Co. has always built the engines for Fords and Lincolns. Toyota Motor Corp. makes engines for Toyota and Lexus vehicles.
But in the next chapter of the industry, companies such as SK Innovation, LG Chem, Samsung and Panasonic will essentially serve as the world’s engine plants.
It is a daring plunge for SK. In 2017, when the CEO surveyed the financial resources at his disposal, he was contemplating the deep pockets of its parent organization, SK Group, one of South Korea’s largest business groups. With major operations in oil refining, petrochemicals, shipping, cellphone and Internet services, semiconductors and construction, SK posted 2018 sales of about $143 billion and operating profit of $24.5 billion.
“We are able to have a sufficient cash flow to support our efforts,” Kim said.
But it wasn’t merely a question of whether an oil and telecommunications conglomerate could afford the tab — it also represented an existential question for SK.
“As an oil refining company, the shift from combustion engines to electric power could be a risk for us,” said Kim, 58, who earned an MBA while working at SK Group in positions in oil, chemicals, strategy and communications. “It might be a threat. So we felt the need to respond quickly.”
Why quickly? Some world markets — especially the U.S. — talk about EVs and other electrification, but sales continue to fall short of enthusiastic forecasts.

The reason for urgency is the competition: SK’s rivals are already far ahead of Kim’s aggressive plans.
China’s CATL, the largest producer of EV batteries, has twice SK’s backlog of customer orders, according to Kim’s best estimate. SK’s fellow Korean competitor LG Chem dwarfs SK’s backlog.

Japan’s Panasonic is also a rival to SK’s ambitions, and so is another major Korean supplier, SDI.
“SK is a very big company with deep pockets,” observed Ariel Cohen, principal of International Market Analysis Ltd., a risk advisory firm in Washington, D.C. “But competing in this new global environment will require more than money. It will require leadership and quality management, which many Korean companies are fortunate to have. But it will also require a technological edge.
“You have to be the company that delivers the best battery technology.”

The battery manufacturing rivalry is not limited to who can plan and spend the biggest.
Shortly after SK announced its plan to build its plant in Georgia, which is initially intended to supply Volkswagen’s plant in Chattanooga, it was hit with a complaint by LG Chem in U.S. District Court in Delaware and to the U.S. International Trade Commission. LG Chem accused SK of hiring away employees to plumb them for trade secrets on how to mass-produce batteries and how to develop their technologies.

The case has been moving through the commission, and construction crews continue building the factory.
In February, the commission issued a preliminary ruling in favor of LG Chem’s argument. LG Chem had accused SK of destroying evidence in the case.
The commission is expected to issue a final ruling on the matter in October. The complaint could put a wrinkle into Kim’s plans for SK in the U.S., but it is not likely to derail the plan, according to a company source who asked not to be identified.
Late last year, meanwhile, LG Chem and General Motors said they would jointly invest $2.3 billion to build an EV battery plant in Lordstown, Ohio.
GM intends to use the batteries in a new family of EVs in the 2021-22 time frame.
The Lordstown plant would represent about 30 GWh of battery production capacity, compared with SK’s 20 GWh planned for Georgia.
In a statement emailed to Automotive News last week, SK Innovation called the commission’s preliminary ruling “unfortunate” and said SK intends to appeal it.
But the statement also signaled that SK hoped to resolve the matter.
“As long-time industry peers, SK Innovation and LG Chem have a shared history of promoting innovation and developing advanced technologies,” the statement said. “We believe that it is in our collective interest to together continue creating maximum economic and social value for our customers, partners, and the communities we serve.”

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Former racing star helps put troubled Nissan back in order

TOKYO — Keiko Ihara was a part-time fashion model in college when a chance assignment at a Formula 1 event inspired her to switch gears and race cars.
But there were two strikes against her. First, she was a woman in ultra-patriarchal Japan. And second, she didn’t even have a driver’s license.
Ihara not only overcame those challenges to become one of the world’s top female racers, she is now an influential director on the board of Nissan Motor Co.

And the race at Nissan at this moment is white-knuckled.
As one of Nissan’s independent outsider directors, the motorhead turned corporate bigwig has been a key mover in many of the changes during a turbulent post-Carlos Ghosn era.
Ihara chairs the newly created compensation committee, a flashpoint of reform for the automaker, and was widely reported to be a driving force in pushing out former CEO Hiroto Saikawa.
Ihara also sits on the nomination committee that picks Nissan’s future leaders. And she is an adviser at meetings of the Alliance Operating Board that governs business projects with partners Renault and Mitsubishi.
Ihara acknowledged to Automotive News that Nissan and the alliance have been through tough times since Ghosn’s November 2018 arrest for alleged financial misconduct. But she said the partners are making progress on new midterm business
plans to be released around May and that Nissan is poised for a “revolutionary” change for the better.
“I think we have hit the bottom and now we are moving in the right direction,” Ihara said.
Details of the company’s “new way forward” aren’t ready for release, she said. But one element will be restoring trust through better governance, and another will be a wave of new products, she added.
“Nissan is expected to deliver many attractive automobiles,” Ihara said. “These are all exciting; I tested some of them already.”
Ihara should know. As a pro driver, she has an eye for what’s hot and what’s not.
Over a career spanning two decades, she entered 97 races in 70 countries, competing in everything from the 24 Hours at Le Mans and the World Endurance Championship to Formula Three. She has piloted an open-wheeled Dallara F305, a Lola B12/80 and a Ligier JS P2, to name a few, according to DriverDatabase. And in 2013, Ihara, now 46, was the top-ranked woman in the World Endurance Championship.
Over time, she also became an international advocate for women in motorsports and was a brand ambassador for Nissan and Mazda. Among her duties was wowing journalists with stomach-churning laps up the banked curve of Nissan’s Oppama proving ground in a GT-R.

Ihara seemed like a natural choice when she was appointed to the Nissan board in June 2018 as part of a wider effort across the Japanese industry to improve diversity and corporate governance by adding outside directors.
But then the Ghosn scandal erupted, with accusations that the ex-chairman freely wheeled and dealed tens of millions of dollars, and corporate governance exploded to the forefront.
In response, Nissan undertook a massive overhaul of its corporate structure to improve transparency and accountability by elevating the role of independent directors.

Management oversight was decentralized away from the CEO and split into three statutory committees that deal with compensation, nomination and auditing.
Ihara is symbolic of the new, more accountable Nissan where independents get more clout.
When Ihara joined the board, Nissan had only three independent directors. The other members came from Nissan or Renault, the Japanese carmaker’s top shareholder with a 43.4 percent stake.
With the restructuring approved at the 2019 shareholders meeting, Nissan now has seven independent directors, three of whom are not Japanese. And under the new rules, independent directors must chair the three committees and comprise a majority of the committee seats.

Those changes were dramatic in a country where few big companies have implemented any extra measures of transparency and accountability. Fewer than half of Japan’s top 100 companies have the three-committee structure, notes Zuhair Khan, a corporate governance expert and managing director at Union Bancaire Privee in Tokyo.
“It is something that all companies in Japan, especially the larger ones, should adopt. It is the only structure that ensures proper compliance,” Khan said. “It gives a lot of power to independent directors. But there are relatively few companies that have adopted it.”
Ihara said these changes are essential to reestablishing Nissan’s credibility after the Ghosn scandal.
Nissan previously had no committee oversight of executive compensation. A review done after Ghosn’s arrest found he had sole authority over everyone’s pay, including his own.
“We should avoid the case where only one single top manager can make a decision,” Ihara said. “The next step is to regain the trust of stakeholders based on this solid foundation of governance.
“By the end of the revised midterm plan you will see the improvements.”

Some initially criticized Ihara’s nomination as an attempt to install a pliable poster child of diversity. But Ihara has emerged as a strong, outside voice.
She reportedly played an important role in forcing the resignation of Saikawa last September, following revelations that he received improper payouts under an executive incentive program. At the time, some Saikawa critics saw him as a Ghosn-era holdover and wanted him to step aside.
Ihara declined to comment on that, but she said it is her job to hold management accountable.
“For several years, Nissan has been delivering poor results, and we also faced executive misconduct,” she said bluntly. “So the responsibility of the top management should be pursued.
“That’s another role to be played by the independent directors, and that was part of my role.”

Ihara declined to offer a sneak peek of the midterm plan, but she said CEO Makoto Uchida will offer bold remedies for the problems ailing Nissan.
They are many — from a slow new-product cadence and bloated global production capacity to slumping global sales and frayed relations with Renault.
“We need to build a revolutionary plan, otherwise we cannot survive. That’s what Mr. Uchida told me,” Ihara said. “As independent directors, we cannot accept it if it takes too much time.”
Along with the midterm business plan, Ihara said she would like to see a separate road map, looking out to 2030, that charts a course for restoring corporate trust and brand value.
Ihara cautioned that the COVID-19 pandemic may throw a kink into the planning, or possibly force a rethink later. Nonetheless, the plan is expected to account for the pandemic’s impact, she said. Longer term, she assured, Nissan is plotting a sustainable rebound.
“We have improved the governance structure and finally we are ready to move forward positively, including with the alliance,” Ihara said. “Since I assumed a directorship, this is the first time I’ve seen that we are moving toward the right direction.”

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Staying open puts dealers at risk for police action

Over five days in late March, police in Norman, Okla., twice cited Oklahoma Motorcars for being open and selling cars despite a city stay-at-home order blocking most vehicle sales.
Norman Police spokeswoman Sarah Jensen said the tickets for violating the city’s emergency coronavirus proclamation — each with a penalty of up to a $750 fine and/or 60 days in jail — were issued after the city received several complaints that the used-vehicle store was still operating. The citations followed two visits by officers who shared the health-and-safety reasoning behind the order and issued a warning, Jensen said.

The dealer has a different view.
“This is absolutely without a question targeting,” General Manager Chris Mayes, whose family owns Oklahoma Motorcars, a used-car and service center, told Automotive News last week.
Mayes’ family also owns a marijuana dispensary that operates in the same building; he claims the dispensary has irked some in the city. As of Friday, April 3, no other dealerships in Norman had been cited, according to police. Mayes, however, said he’s driven by other stores in the city that appear to be operating.
Mayes is not alone in receiving increased scrutiny from authorities. From California to the East Coast, dealership lawyers and a state dealer association leader say they have heard reports that police and public health officers have ramped up visits to dealerships to ensure they are complying with various state and local orders that in some cases require showrooms to be closed.
The risks of running afoul of those orders are potentially severe. Dealer lawyers are advising clients to follow the most restrictive rules — or else.
That or else prompted Mayes to close Oklahoma Motorcars on Wednesday, the day after he received his second ticket. The store remained closed as of April 3.
“I was worried they would come in and arrest me,” said Mayes, who also owns a Kia dealership in Norman. As of Friday, his Kia store remained open for online sales and service and had not been cited.

Keeping a store open in defiance of orders that ban sales could lead to financial trouble and jail time, or even put dealer licenses in jeopardy, dealer lawyers say.
Stephen Dietrich, a dealer lawyer and partner with Holland and Knight in Denver, said dealerships and dealers first would see an escalation of actions. But a dealer license could be lost in extreme circumstances and over time.”If you got to that level that the state or local government was that angry with you and you just kept flaunting this law, would they shut you down under a public health issue, where they literally come and lock the doors?” Dietrich said. “And then you have a question, perhaps a longer-term question, of is that violation then going to affect your dealer license.”In Oklahoma, Gov. Kevin Stitt’s order to close nonessential businesses names motor vehicle and parts dealers as essential, and the Oklahoma Automobile Dealers Association has advised dealerships they can remain open for sales and service.
The city of Norman is under a separate stay-at-home order that took effect March 25 and lasts at least through April 14. It cites auto supply and repair as essential but requires showrooms be shut.
Norman police issued tickets to Oklahoma Motorcars on March 27 and March 31.
“Our goal is not to put someone in jail at this point,” police spokeswoman Jensen said. “We just are trying to work through the seriousness of the proclamation and make people understand that this is serious and it’s in the best interest of public safety and public health.”
The citations to Oklahoma Motorcars were the first the city had issued, though it had investigated 66 complaints about businesses as of Friday. The majority were in compliance or agreed to comply once visited by the police, including other car dealerships it received complaints for, Jensen said.
Norman’s order forbids test drives but does allow online sales to essential businesses and essential employees. On Thursday, police and fire marshals hand-delivered guidance pertaining to car dealerships to the stores, Jensen said.
Norman City Attorney Kathryn Walker, in a statement, said if a business repeatedly refuses to comply, the city could seek a court order requiring it to close.
Mayes said he is considering suing the city and the police department for business interference.
“I believe I should be able to sell cars under the governor’s order,” Mayes said. “However, if the city’s order is going to take precedence over the governor’s, I am just fine with complying. But everyone should have to comply. There shouldn’t be one store targeted to shut down.”

California New Car Dealers Association President Brian Maas said he’s heard reports that jurisdictions across the state are increasing enforcement to ensure showrooms aren’t open to the public. The San Diego County Sheriff’s Department confirmed that it had visited a Honda dealership in the San Diego suburb of Lemon Grove on March 21 after a complaint about a large gathering of people. Deputies spoke to the dealership manager, who said store leaders were developing a plan, “and everyone complied,” a department spokesman wrote in an email.
Warnings have been issued to some dealerships, Maas said.
“While we continue to believe limited sales are permissible in California, dealers must heed the requests of local law enforcement or code enforcement officers who ask them to further restrict or cease sales operations,” Maas said in an email.
California Gov. Gavin Newsom’s indefinite stay-at-home order went into effect March 19. Auto repair has been deemed essential, but auto sales were not included. With some additional clarity and federal guidance on auto leases issued in late March, the dealer association’s law firm Scali Rasmussen is advising dealerships to limit in-store sales and leases to customers who work in essential sectors or need transportation for essential travel.
Violators of California’s order could face up to six months in jail or a $1,000 fine.
Last week, the association sent a memo to dealers notifying them that six Bay Area counties and the cities of San Francisco and Berkeley had revised shelter-in-place orders to allow online vehicle sales with deliveries to homes or essential businesses. The memo also noted the association had received reports that Palm Springs law enforcement was “taking the position that only online sales are allowed.”

Numerous states have restricted vehicle sales under stay-at-home and nonessential-business orders.
Alaska as of last week was allowing only remote sales and those by special appointment, according to the Alaska Automobile Dealers Association. Businesses failing to comply with Alaska’s mandate may be ordered to cease operations and/or receive a fine of up to $1,000 per violation.
Alaska’s order says that, under certain circumstances, an individual or organization failing to comply could be criminally prosecuted for reckless endangerment, a misdemeanor. If convicted, a person could be sentenced to up to a year in jail and fined up to $25,000, while a business could receive a $2.5 million fine for a misdemeanor charge resulting in death or $500,000 for an offense not resulting in death.
Michigan is among states with stay-at-home orders that allow dealerships to operate service but deem sales as nonessential.
Failing to comply with Gov. Gretchen Whitmer’s order could mean a $1,000 fine and/or 90 days in jail per incident, plus potential licensing actions, according to state officials. The Michigan Attorney General’s office, as of Friday, April 3, had received no complaints of showrooms staying open under the order, a spokeswoman said.
Christian Scali, managing partner at Scali Rasmussen, said he’s heard of police visiting dealerships in San Diego and San Jose demanding they close, while the Los Angeles County Department of Public Health also has told dealerships to close showrooms.
Given changes and confusion with various orders, Scali said his firm has been working on educating local officials about the types of sales dealerships can conduct for the public benefit — such as selling vehicles to keep medical personnel on the road and able to go to work.
“The tension, I believe, is that local authorities may be receiving complaints that dealerships are open (because their service departments are open, even if they are not open for sales or are open for sales by appointment only),” Scali said in an email.
If authorities don’t understand how some appointment-based sales are necessary to keep essential workers mobile, “wrong decisions can be made at the local level.”

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Latest target in quest for service technicians: seventh-graders

Most everyone agrees that a shortage of technicians ranks among the biggest challenges facing dealership service departments.
Over the decades, recruiting strategies have largely been aimed at high school and college-age students. Now, the latest in a long line of industry efforts is trying to lure them at an even younger age.
“We decided we would target as young as middle school,” said Harry Hollenberg, a managing director at Carlisle & Co., a Concord, Mass., consulting firm that has been working for the better part of a year with nine automakers on the Auto Technician Collaborative.

The signature recruiting part of the program is called Project Shift. Its website attempts to hit all the right pre-teen and teenage angst buttons — or at least the buttons of parents.
Worried about the future? There will always be demand for service technicians.
Dread the prospect of a meaningless desk job? The best techs help people by finding answers to fresh challenges every day.
Not cut out for grease and grime? The auto shop is now a place for computers and high-tech tools.
Can’t wait to get out from under your parents’ roof? Auto techs can find jobs most anywhere.
There’s an attractive cost equation, too.
Consider the promise of good money following two years of post-high school training and a typical $20,000 investment in tuition.
Or add $100,000 and two more years to the education tab for a bachelor’s degree that likely doesn’t offer anything close to the job guarantee that technicians have.

“The No. 1 thing that every dealer says is, ‘I could use an extra technician or two,’ ” said Michelle Johnson, senior manager of technician development and recruitment at Nissan North America, one of the collaborative’s partners.
It’s not as if Nissan hasn’t been trying. Its Nissan Technician Training Academy, for example, partners with 22 community colleges that encourage students to seek apprentices at Nissan dealerships.
But there’s a need to go younger, Johnson admits. And perhaps a bigger need to target beyond the students themselves. Parents and school counselors also must be convinced that being an auto technician “is a viable, rewarding career,” she said.
In line with that thinking, the initial videos will be aimed at adults who are typing things such as “best job without a college degree” into their search engines, said Carlisle’s Hollenberg.
Subsequent videos, mainly 30-second spots, likely will target students.
The project also will address retention. That effort will zero in on that critical second year of the job.
“That’s where all the falloff is,” Hollenberg said.
Carlisle worked with some big dealership groups — Hendrick Automotive, Sonic Automotive and Sewell Automotive — to interview technicians and come up with some best practices for retention. The findings are packaged into a 72-page playbook.

Eric Kenar, a technical training manager at General Motors, said the collaborative came together at a good time for his company.
GM’s dealership techs, on average, are older than most, he said. That means its recruiting needs are going to be even more urgent.

Kenar also pointed to Carlisle’s retention book as a guide for hanging on to technicians far away from retirement.
“We are all getting together to do the right thing,” he said of his competitors. “We all have the same issue.”
In the realm of dealership culture, for example, the playbook lists public recognition for collaborating as a good practice. A best practice: giving employees financial rewards for stoking collaboration.
Carlisle also has developed a tool to calculate the cost of losing a technician. It will be shared with automakers in hopes it will filter down to the dealer level.
Factors in the formula include revenue lost when service bays go empty when a technician quits.
Also included is the cost of recruiting a replacement and the decline in productivity when a less-experienced tech replaces a veteran. Hollenberg said the tool is customizable to reflect unique circumstances inside a dealership.
When the costs are bundled together, the average dealership stands to lose $173,000 over 13 months when a newly minted technician replaces a veteran.
If that and other lessons from the Auto Technician Collaborative make a mark, dealers may have time to make their dealerships more attractive places for today’s seventh-graders to someday call their home away from home.

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Technician recruiters target seventh-graders

Most everyone agrees that a shortage of technicians ranks among the biggest challenges facing dealership service departments.
Over the decades, recruiting strategies have largely been aimed at high school and college-age students. Now, the latest in a long line of industry efforts is trying to lure them at an even younger age.
“We decided we would target as young as middle school,” said Harry Hollenberg, a managing director at Carlisle & Co., a Concord, Mass., consulting firm that has been working for the better part of a year with nine automakers on the Auto Technician Collaborative.

The signature recruiting part of the program is called Project Shift. Its website attempts to hit all the right pre-teen and teenage angst buttons — or at least the buttons of parents.
Worried about the future? There will always be demand for service technicians.
Dread the prospect of a meaningless desk job? The best techs help people by finding answers to fresh challenges every day.
Not cut out for grease and grime? The auto shop is now a place for computers and high-tech tools.
Can’t wait to get out from under your parents’ roof? Auto techs can find jobs most anywhere.
There’s an attractive cost equation, too.
Consider the promise of good money following two years of post-high school training and a typical $20,000 investment in tuition.
Or add $100,000 and two more years to the education tab for a bachelor’s degree that likely doesn’t offer anything close to the job guarantee that technicians have.

“The No. 1 thing that every dealer says is, ‘I could use an extra technician or two,’ ” said Michelle Johnson, senior manager of technician development and recruitment at Nissan North America, one of the collaborative’s partners.
It’s not as if Nissan hasn’t been trying. Its Nissan Technician Training Academy, for example, partners with 22 community colleges that encourage students to seek apprentices at Nissan dealerships.
But there’s a need to go younger, Johnson admits. And perhaps a bigger need to target beyond the students themselves. Parents and school counselors also must be convinced that being an auto technician “is a viable, rewarding career,” she said.
In line with that thinking, the initial videos will be aimed at adults who are typing things such as “best job without a college degree” into their search engines, said Carlisle’s Hollenberg.
Subsequent videos, mainly 30-second spots, likely will target students.
The project also will address retention. That effort will zero in on that critical second year of the job.
“That’s where all the falloff is,” Hollenberg said.
Carlisle worked with some big dealership groups — Hendrick Automotive, Sonic Automotive and Sewell Automotive — to interview technicians and come up with some best practices for retention. The findings are packaged into a 72-page playbook.

Eric Kenar, a technical training manager at General Motors, said the collaborative came together at a good time for his company.
GM’s dealership techs, on average, are older than most, he said. That means its recruiting needs are going to be even more urgent.

Kenar also pointed to Carlisle’s retention book as a guide for hanging on to technicians far away from retirement.
“We are all getting together to do the right thing,” he said of his competitors. “We all have the same issue.”
In the realm of dealership culture, for example, the playbook lists public recognition for collaborating as a good practice. A best practice: giving employees financial rewards for stoking collaboration.
Carlisle also has developed a tool to calculate the cost of losing a technician. It will be shared with automakers in hopes it will filter down to the dealer level.
Factors in the formula include revenue lost when service bays go empty when a technician quits.
Also included is the cost of recruiting a replacement and the decline in productivity when a less-experienced tech replaces a veteran. Hollenberg said the tool is customizable to reflect unique circumstances inside a dealership.
When the costs are bundled together, the average dealership stands to lose $173,000 over 13 months when a newly minted technician replaces a veteran.
If that and other lessons from the Auto Technician Collaborative make a mark, dealers may have time to make their dealerships more attractive places for today’s seventh-graders to someday call their home away from home.

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Dealers seek guidance on business loans as showrooms shutter

As showrooms are ordered to close and new-vehicle sales come to a crawl, a number of dealers need help navigating the massive $2.2 trillion coronavirus stimulus package signed into law March 27 by President Donald Trump.
With demand for forgivable loans expected to be high, the key question is how long will it take for their cash-flow dependent businesses to secure aid?
The CARES Act — or Coronavirus Aid, Relief and Economic Security Act — expands existing loan programs and creates programs intended to help companies maintain employment and, ultimately, save their businesses. The nearly 900-page bill offers several potential benefits, including new payroll and tax provisions to provide a short-term lifeline to companies such as dealerships as they navigate the best way forward financially.

A lack of clarity on the scope, requirements and timeline of the lending process — particularly within a new program from the Small Business Administration — has caused some dealers to scratch their heads as they consult with bankers and tax advisers while struggling to keep their employees paid and businesses afloat during an economic and public health crisis.
“My head is spinning trying to understand all of this,” said Michelle Primm, managing partner of Cascade Auto Group in Cuyahoga Falls, Ohio. “I’ve read probably four or five interpretations, and it’s all just really confusing, so I’m depending on my bank and my accounting firm to hold my hand through this.”
Dealerships in Ohio can still operate, according to a stay-at-home order from Gov. Mike DeWine. However, Cascade Auto Group has announced layoffs in all departments and is operating with about half of its staff on-site, Primm said.
“From a survival point, one of my mantras has always been, ‘Volume is vanity, profit is sanity, and cash is king,’ ” she said.

Within the CARES Act, the Paycheck Protection Program from the Small Business Administration, which authorizes up to $349 billion in forgivable loans to small businesses, is a top priority for dealers such as Primm who are seeking emergency financing.

“The biggest and quickest or best benefit for the dealers is going to fall under the Paycheck Protection Program,” said Marc Spizzirri, senior managing director of GlassRatner Advisory & Capital Group in Irvine, Calif.
The program provides small businesses — usually those with fewer than 500 employees, though there are exceptions — with forgivable loans to cover payroll costs including benefits as well as mortgage interest, rent and utilities for up to eight weeks. The eight-week period can be applied to any time frame between Feb. 15 and June 30.
The program contains a waiver provision that can work well for dealers with multiple stores, according to the National Automobile Dealers Association. Those organizations wouldn’t usually be considered small businesses.

Automotive franchisors need to register with the administration and receive a franchise identifier code to ensure their multidealership franchisees qualify for the loan programs, said Russell McRory, a partner at major dealer law firm Arent Fox.
“For businesses like car dealerships, applying for these loans is only the first step. They will also have to properly document expenditures for which they will seek loan forgiveness,” McRory said. “And when the dust settles, we can expect audits of loan and forgiveness applications.”
Automaker brands that already have franchise identifier codes include Ford, Kia, Chrysler, Subaru, Volkswagen, Nissan and Mazda. NADA has reached out to those without franchise codes, including General Motors, BMW and Toyota — most of which have advised they are applying for the codes. Further implementation guidance is needed from the administration, NADA said.
Small businesses and sole proprietorships, including dealers, can apply for the loans through any regulated lender or other federally insured institutions approved to participate.

The administration’s program is a financial leg up for dealers who want to keep their staff gainfully employed and safe, but GlassRatner’s Mike Issa, a principal at the firm, warns that the route to these forgivable loans could be a tedious process because demand is expected to be high.
“You’ve got a substantial number of businesses that are desperate to get this done, but the [Small Business Administration] has the same number of people — the same throughput capacity — that they had 30 days ago before all this happened,” Issa said. “I hope we get this in time, in dealers’ hands, to do some good as opposed to just in time to have a nice wake at a funeral.”

Janet Martin-Clark, dealer principal at Martin Chevrolet-Buick-GMC in Cleveland, Texas, said she’ll be taking advantage of the Paycheck Protection Program because of the loan forgiveness.
“But, frankly, I’m a little concerned by the sheer amount of people that’s going to be applying for these loans,” she said. “This isn’t normal. Where am I going to be in the queue? How long is this going to take?”
Chris Reeves, general manager at University Mazda in Seattle, is waiting for legal and tax advice from accountants with dealership clients, but he said the loan program will provide relief to employees and businesses that are incurring massive fixed operational expenses.
“We’ve gone to a nearly zero revenue funnel,” he said. “My service is down 75 percent. My sales business is shut down, but I still have the same fixed expenses that don’t fluctuate every month.”
Certain requirements of the process still need to be refined, with numerous instances within the crisis-oriented legislation stating the Department of Treasury “shall issue further guidance,” said Buddy Dearman, managing partner for DHG Dealerships at accounting firm Dixon Hughes Goodman.
“They pulled this bill together in a really quick amount of time, so there will be further guidance on some of the more delicate nuances in the details and some of these calculations as we go forward,” he said.
His advice for dealers in the meantime?
“Determine how much you can borrow, and borrow as much as you can borrow in accordance with the terms of the program,” he said.

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Cadillac CT5 aims to undercut rivals

By setting a lower price point than competitors and making a more affordable V-Series line, Cadillac says it has positioned the 2020 CT5 to stand up against German luxury sedans.
Cadillac says a two-tiered approach to the V-Series and a handful of segment-first or exclusive features — such as a rear camera mirror, safety alert seat and ZF passive dampers — will help the car, which effectively replaced the CTS, gain traction.
The high-performance CT5-V starts at $48,690 including shipping. That’s about $2,000 less than the Audi S4, $6,000 less than the BMW M340i and $8,000 less than the Mercedes-Benz AMG C 43. The standard CT5 starts at $37,890, in line with the Audi A4 and a few thousand less than the BMW 3 Series and the Mercedes-Benz C-Class.
For about the same price some rivals charge, Cadillac customers can upgrade to a premium luxury or sport trim.
Last year was the 15th anniversary of the V-Series, and it marked a shift in Cadillac’s performance-line strategy. “We realized that we were leaving opportunity at the table,” said Ken Kornas, CT5 product manager.
For many, the models were too pricey, had more track capability than customers needed and lacked everyday benefits such as all-wheel drive and all-season tires, he said.
So Cadillac created two offerings starting with the 2020 CT4 and CT5. Track-ready vehicles will still be available. But an entry-level option will target buyers who want less-extreme performance. “We think that’s going to better target a wider array of customers that are out there,” Kornas said.

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Asbury furloughs 2,300 employees, cuts salaries

Asbury Automotive Group is furloughing 2,300 employees and slashing executive pay as a result of the coronavirus pandemic, according to a regulatory filing.
The retailer cited a “sudden and significant decline” in U.S. vehicle sales and service operations for the cutbacks, the company said Friday.
Asbury, the nation’s seventh-largest dealership group, said it also implemented temporary pay cuts for all employees. CEO David Hult will see his salary reduced by 50 percent, while base salaries for senior vice presidents, regional and field vice presidents and national directors will be reduced 20 percent. All other vice presidents will receive a 10 percent salary cut.
The company said it was acting “decisively in an effort to right-size its business, reduce expenses and mitigate the financial impact” of the virus.
In addition to the furloughs, hours are being reduced across the retailer’s 88 stores and the company will suspend a 401(k) match for employees.
Asbury has “significantly reduced” marketing expenses, deferred capital expenses and negotiated discounts with vendors through the end of the second quarter, the filing also said. Last week, Asbury terminated its $1 billion purchase of most of the luxury Park Place Dealerships in Texas days before the deal was scheduled to close.
The company, hampered by shelter-at-home orders and other restrictions in most of the states where it operates, notably Florida, Georgia, Texas, Virginia, North Carolina, Missouri and Indiana, is the latest dealership group to cut executive compensation and furlough workers to preserve cash and counter the crisis.
Earlier Friday, AutoNation, the biggest new-vehicle retailer, said it would lay off 7,000 workers, reduce executive salaries and postpone capital spending. AutoNation said its vehicle sales fell by half in late March as a result of the outbreak.
Group 1 Automotive Inc. last week slashed executive salaries, furloughed 3,000 U.S. employees for at least 30 days and closed stores in the U.K. and Brazil.
And on Monday, Penske Automotive Group said it will cut executive pay and postpone $150 million in capital expenditures while furloughing an undisclosed number of employees. CEO Roger Penske and President Robert Kurnick agreed to accept no salary for the duration of the outbreak.
Lithia Motors Inc., noting 30 percent of its 188 stores are located in states that have prohibited vehicle sales, has cut staff but hasn’t provided details.

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FCA postpones shareholders' meeting to late June

MILAN —  Fiat Chrysler Automobiles said on Friday it decided to postpone to late June its shareholders’ meeting scheduled for April 16, as a consequence of the continuing coronavirus emergency.
The automaker said in a statement that the decision on its shareholders’ meeting would result in the postponement of a resolution on the automaker’s planned 1.1 billion euro ($1.2 billion) ordinary dividend on last year’s results.
“The new date for the AGM will be announced as soon as practicable,” FCA said.
On Thursday Peugeot owner PSA, which has signed a binding merger deal with FCA to create the world’s fourth-largest automaker, also said it postponed its annual shareholders’ meeting from May 14 to June 25.

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