Some Canadian dealerships began to rehire employees as far back as May as provincial shutdown orders eased, but with fewer sales and administrative staff than they needed prior to the pandemic.
“At a point, you go, ‘I don’t think it’s going to get back to 100 per cent,’” said Steve Chipman, CEO of the Birchwood Automotive Group in Winnipeg. “How many people do we really, really need?”
Dealers were assessing what their businesses would look like in the coming months as economies gradually reopened amid a global pandemic, which led to mass layoffs in automotive retail beginning in mid-March.
Most dealers were beginning to rehire by early May according to surveys by the Canadian Automobile Dealers Association (CADA). Its June 29 survey of 425 dealerships showed that 86.3 per cent of dealers have put employees back on payroll.
But for many dealers interviewed by Automotive News Canada the number of workers they ultimately rehire will depend in large part on how sales rebound in the second half of the year.
Some said there would be less need for as many salespeople if new-vehicle demand remains below pre-pandemic levels.
John Hairabedian, CEO of the Quebec-based HGregoire group, said the Canadian economy is likely to begin recovering as the auto industry enters what is traditionally a less busy period for new-vehicle sales. The pandemic hit Canada beginning in March, just as it was about to enter the traditionally hot spring new-vehicle market.
“If there’s pent-up demand, I’m sure we’re going to have to increase staffing. But what does the ramp-up look like? And one thing to note in Canada is that as sales ramp back up, they’ll be ramping back up counter-cyclically with seasonality. We’re sort of off-season now.”
Chipman, who said his group permanently laid off about 10 per cent of its workforce, said stores operating “on a bare-bones basis” during the first several weeks of the pandemic allowed his group to examine which positions were necessary. As an example, he cited delivery managers responsible for delivering vehicle to customers.
“The argument was the salesperson would be selling another car instead of delivering the car,” Chipman said. “Now you [think], it’s a salary, and why can’t a salesman now, when business is slower, deliver the vehicle?
“In fact, the salesman [has] built a relationship with a customer and maybe if the salesman wants to build on the relationship, he should be delivering the car,” he said.
New-vehicles sales fell 45 per cent in the second quarter compared with the same period last year. Still, dealers said demand was beginning to rise from the depths of April, when new-vehicle sales plunged 74 per cent from a year earlier due to stay-at-home orders and, in some provinces, mandatory shutdowns of new-vehicle showrooms.
According to the June CADA survey, most dealerships had begun to rehire workers and most stores were offering on-premises vehicle sales. CEO Tim Reuss credited the Canada Emergency Wage Subsidy for putting most dealerships in a position to rehire workers. The subsidy covers 75 per cent of wages for employers who lost at least 30 per cent of their revenue compared with a year earlier, up to $847 per worker per week.
But he warned that the wage subsidy, which has been extended until December, could prove to be less effective as dealership activity increases.
“We’ve started the conversation with the government on whether there is a way the [wage subsidy] can be scaled according to revenue. For instance, implementing lower subsidy levels at revenue declines of 20 per cent and 10 per cent,” Reuss said in a statement.
Many dealers said reduced demand and an eventual end to government support could put a hard cap on how many employees they bring back.
“I’m more worried about the fall,” said Trent Hargrave, general manager of Riverside Chrysler-Dodge-Jeep-Ram in Prince Albert, Sask. “As government starts to retreat some of its support, we may see some businesses increase their layoffs. That’s the part that worries me.”
“I don’t see this changing this calendar year. I don’t see some bouncy rebound. I don’t see the V[shaped recovery] that we were kind of hoping for, not in our industry.”
Hargrave expected new-vehicle demand to continue to be soft as the long-term economic situation remains foggy.
“New-vehicle sales are tied to jobs and how people feel about their ability to earn income in the future, that impacts their willingness to buy a vehicle today,” he said. “Until we get a clearer line of sight on what’s going to happen to the job market, we’ll have to adjust.”