While Canadian automotive suppliers and dealers say they welcome the federal government’s offer of a 75-per-cent wage subsidy to help small and medium-size business survive the coronavirus crisis, the association representing dealers is urging Ottawa to make a few changes.
Prime Minister Justin Trudeau announced Friday the government would boost its previously announced 10-per-cent wage subsidy to 75 per cent to help small business survive the deepening economic downturn.
The Canadian Automobile Dealers Association (CADA) had been calling for higher wage subsidies during the massive economic shutdown aimed at combating the new and deadly virus.
A wage subsidy would “absolutely” help, said Shahin Alizadeh, president and CEO of Downtown Automotive Group, whose 10 dealerships across the Greater Toronto Area have 300 people on layoff.
“Otherwise they’re going to be getting EI (employment insurance). It’s much better if they come back to work. They could be engaged in online sales, or home pickup and delivery of service vehicles. Things that don’t compromise their safety and health,” he said.
The Canadian Automobile Dealers Association (CADA) is urging Ottawa to make changes to its emergency financial support package for business to ensure dealers can withstand the COVID-19 pandemic.
“Sales have come to a standstill across the country and dealers need these programs to survive,” CADA President Tim Reuss said in a letter sent Friday to Finance Minister Bill Morneau after Ottawa announced plans to boost its 10-per-cent wage subsidy to 75 per cent to help small business survive the deepening economic downturn.
While CADA praised the measures as “excellent tools to help businesses cope with the current crisis and keep their employees on the payroll,” they don’t reflect the needs of auto retailers, Reuss said.
CADA was “highly concerned that dealers are unfairly disadvantaged and will not be eligible for the program because, unlike other retail businesses dealers pay for their inventory when ordered, and our inventories have a disproportionate value versus the true size or our operations.”
With details of the plan yet to be disclosed, it’s unclear which companies will qualify and on what terms.
The government’s previous 10-per-cent wage subsidy plan was limited to companies with less than $15 million in assets, a threshold some car dealers would exceed especially those in groups with five or more dealerships. Roughly half of Canadian car dealers are part of ownership groups.
Reuss said the $15-million eligibility threshold in taxable capital for those employed in Canada under the small business tax deduction “make it nearly impossible for vehicle dealerships in Canada to access the wage subsidy programs or other support announced.”
CADA is recommending two key measures:
- Remove new and used vehicle inventory from the definition of taxable capital for any calculations involving announced COVID-19 business support and programs or;
- Ensure the definition of medium-sized business is robust and broad to include the majority of dealerships.
Reuss said these changes would help dealerships, which employ 160,000 workers, retain their employees and their businesses.
CADA also is urging its more than 3,000 members to lobby their local MPs.
Dealers across the country, facing various provincial states of emergency as well as plunging sales, are either drastically altering their businesses or temporarily closing shop altogether.
Tammy Roach, principal dealer at Charlottetown Mitsubishi, on Prince Edward Island, said she’s unlikely to tap the wage subsidy plan in the short term. Her dealership is closed and 10 employees are on employment insurance.
“If I understand correctly it’s for those still working,” she said of the wage subsidy. “I may consider opening part time in a few weeks .... but don’t feel it’s necessary at this point. I think it’s more important that we close and keep this virus under control.”
The subsidy would be in effect for up to three months, retroactive to March 15, the government said.
Eligibility criteria would start with the impact of COVID-19 on sales, the government said.
Further details would be announced before the end of March, the government said.
Meanwhile, the supply chain is also watching closely.
“The government has shown a commitment to mitigating this crisis that is unprecedented,” Flavio Volpe, president of the Automotive Parts Manufacturers’ Association said. “Whether it is ultimately successful will be for historians to sort out long after the storm passes."