Rep. Kelly: Dealers can quickly adjust after crises
U.S. Rep. Mike Kelly was diagnosed with COVID-19 on March 27 — the same day the House voted in favor of the $2.2 trillion coronavirus relief package and then signed into law by President Donald Trump.
The Republican congressman, who supported the bill, continues to self-isolate with his wife, Victoria, at their home in Butler, Pa., but is eager to return to Washington when Congress reconvenes in May.
Kelly owns Mike Kelly Automotive, which retails Cadillac, Chevrolet, Kia, Hyundai and Toyota brands in Pennsylvania — a state where auto sales were banned in response to the pandemic.
"We've been through automobile manufacturer strikes. We've been through depressions. We've been through recessions. We've been through high gas prices and low gas prices. We've been through good times and bad times," he told Automotive News. "We usually get through it just because we know how to react to these situations."
Staff Reporter Audrey LaForest spoke with Kelly, 71, about his experience recovering from the disease and how dealers can navigate through the crisis. Here are edited excerpts.
Q: What has your experience with COVID- 19 been like?
A: I did not have the respiratory problems, which is a huge advantage, and I didn't have high temperatures. I was chilled. I was too cold. I lost 30 pounds. I had a loss of appetite, loss of taste — exhausted most of the time, just totally exhausted. That's the one thing I noticed right away. I was just so tired, and I couldn't figure out why. Now I know why.
Many auto dealers are resting their worries on the Paycheck Protection Program, which ran out of funds last week. What is being done to ensure these businesses have access to those loans?
On the financial end of it, we made a commitment to some of these small businesses, and I think it's critical. They aren't shut down because of anything they did wrong. They're shut down because of a pandemic, which neither they nor any of us had any control over. A lot of the shutdowns were at the behest of the government, so I think we have to be able to help them. I agree with what the president has laid out. I think the administration has done a wonderful job shepherding us through a horrible time period. But let's address the programs that need to be addressed right now.
What guidance can you offer dealers as they wait for funds?
A lot of times, we depend on programs that are put in place by our manufacturers — incentive programs, a lot of things of that nature. The other thing I would suggest is to stay in touch with your local federal representative. Make sure you're registering your concerns. If you can keep those issues on the front burner, that's going to be the best way to get through this. There will be additional funding. The question is: How soon does it get there?
As a congressman and a dealer, what is your perspective on this current economic and public health crisis?
Sales are the biggest driver. Whenever you take that element away from any business model, my concern is OK, you're shutting them down.
When they start back up again, how are you going to help them start back up? Look how quickly the manufacturers have changed and quickly adjusted their offers that they're putting out there to people — 84 months financing in some cases, a delay of payments for six months. Our business will adjust to whatever situation that it's in. What it can't adjust to is being shut down through a government mandate and not being able to respond to the markets.
How will Congress be working to support auto dealers once the virus is contained?
What worked before will work again. Pro-growth policies — ones that put a lower burden, both taxes and regulation, on businesses — are the keys to growth. Every dollar that we allow the American people to keep is a dollar they can choose to spend any way they want to spend it. The best thing the government can do is have as little negative effect on the private sector as possible.
Will Congress consider a repeat of Cash for Clunkers or a similar program to help the auto industry?
When the government handled Cash for Clunkers, that was a disaster. Nothing was worse administered than that. It took so long to get the money out to dealers. We had people out of trust for months because they couldn't get their money from the government.
That was one of the most disastrous programs I think I've ever seen. We crushed more really good cars and trucks than we ever should have. I'd rather see programs right now that help people get through a very tough period of time, and then let the markets go to work. Let the private sector do what the private sector does best and that is drive for success.
Anything else you'd like to say to auto dealers who are looking to the government for guidance?
Nobody adjusts quicker to the market changes than retail merchants. I'm including auto dealers in that. We adjust very quickly with what we stock on our lots, with the hours that we're open, with our advertising, with our merchandising, with our pay plans.
We adjust very quickly because we have to. The automobile people always lead. Coming out of any depression — any type of a recession — who leads? Automobiles and construction. They are adapters. They will adapt to whatever the situation is. We're going to get through this thing.
Chris Lenckosz will sit in his office inside his locked Nissan showroom in Colorado and watch people drive up to the store.
Customers pull on the door, then return to their cars. And then Lenckosz hears the dealership phone ring. They're seeking extensions on their temporary license plate tags, something Colorado dealers are authorized to issue.
Except showrooms are closed right now, under state orders aimed at slowing transmission of the novel coronavirus. Retailers can sell remotely in Colorado, but the arrangement raises questions about what happens once the customer has taken the keys to a new car — namely, the processing of permanent titles and vehicle registrations.
In addition to closing physical showrooms in many states across the country, stay-home orders in some places also have closed the government offices that process vehicle-purchase paperwork. The impact of these closures varies by state, and in some case by county. More than 40 states have implemented restrictions on public access to departments of motor vehicles and equivalent offices, according to Cox Automotive's Dealertrack unit, which is tracking the changes.
In some states, particularly those with electronic systems, title and registration work generally has proceeded. In others, turnaround time could be longer.
Some dealers and state dealer association leaders who spoke to Automotive News said the back-end work hasn't yet become a major problem, though it has the potential to slow dealership cash flow if it takes longer than usual for dealers to get a clear title to a lender. A number of states have extended the duration of temporary vehicle registrations, allowing buyers to drive their new cars without running afoul of the law.
"It's kind of uncharted waters," said Lenckosz, dealer principal of Empire Lakewood Nissan and Empire Littleton Nissan in suburban Denver.
New Jersey Motor Vehicle Commission offices are closed, though its headquarters and online services have continued operations, according to Dealertrack. Courier services in the state that picked up and dropped off paperwork at dealerships temporarily pulled drivers off the road as a health precaution, leading to delays, said Jim Appleton, president of the New Jersey Coalition of Automotive Retailers.
The dealer association processes more than 1 million title and registration deals annually, he said, and verifies documents prior to deals being registered with the state. In normal times, it can turn around a single deal in three to six days, he added.
The association stopped accepting new transactions while the courier service was offline but resumed last week as couriers ramped up limited operations.
Tim Jackson, president of the Colorado Automobile Dealers Association, said one concern is the ability to perfect liens — the process of establishing a security interest — within 30 days as required under federal bankruptcy law. That provision gives dealerships protection from liability if a customer files for bankruptcy and the lender does not have a secured interest in the vehicle, he said.
In Colorado, county offices process titles and registrations, but some are closed while others are operating on limited schedules, he said. Jackson said his association advised dealers to ship title applications to the proper county office and retain mailing receipts.
"It doesn't happen often," Jackson said of the bankruptcy issue, "but under these circumstances that we're operating under now, this could be a really big deal."
Dealership cash-flow issues could be more immediate on the used-vehicle side if processing delays become a problem, Jackson and Appleton said. And while lenders normally pay on new-vehicle deals before titles are perfected, Appleton said via text message, "as this drags out, will they continue to do so?"
Electronic systems continue
At Roy O'Brien Ford in St. Clair Shores, Mich., close to 100 vehicle transactions are waiting to be finalized now that Michigan has eased earlier restrictions to allow digital and remote auto sales, said Mark O'Brien, the dealership's chairman.
The Michigan Automobile Dealers Association issued guidance on title and registration processing April 9, noting that regardless of whether that work happens electronically or at a branch office, "there will be a delay in the title being mailed to the end user."
Jake Rollow, a spokesman for the Michigan Department of State, said via email that dealers are encouraged to enroll in an electronic filing system. Those who don't can make in-person appointments on an emergency basis for sales "that support critical infrastructure work that sustains life or supports the sustainment of life."
Even when public-facing offices are closed, files often still can be processed through automated or electronic systems, said Melanie Erff, associate director of IHS Markit Automotive Advisory Services in Southfield, Mich.
"What can't be sent over the phone right now or electronically is just going to take a little longer," she said.
Jackie Charniga contributed to this report.
The halt in North American automaking due to the COVID-19 emergency is spilling over into some major construction projects that represent the industry's aspirations for the coming decade.
The $1.6 billion Mazda-Toyota joint-venture project in Huntsville, Ala., will be delayed about six months to account for pandemic disruption and social distancing concerns of contractors, the company told Automotive News last week.
Separately, a Toyota Motor North America spokesman said some smaller Toyota investment projects also have been delayed.
Fiat Chrysler Automobiles stopped construction on multiple projects in and around Detroit in late March and last week extended that interruption. FCA has been working on $4.5 billion worth of manufacturing projects in the area.
Ford Motor Co. has paused work on a $740 million project to renovate a dilapidated Detroit train station into a showcase urban office and R&D center. It is intended as a demonstration of Ford's commitment to Detroit and also as a way to attract young engineers.
General Motors currently has only "a limited number of projects underway at a few plants to support timing of critical programs," spokeswoman Kim Carpenter said. But she said small crews are operating under strict safety protocols that "include temperature screening before entering the facility, wearing medical-grade masks and practicing physical distancing."
Startup Rivian Automotive previously said it has delayed the launch of its electric pickup by a year, as it pauses the construction work necessary to tool up its plant in Normal, Ill.
The pandemic has interrupted a wave of bullishness in the North American industry that includes expansion projects and large-scale investments going into auto plants around the country.
The Detroit 3 were beginning to boost their factory capacity to produce additional pickups and SUVs, and expanding and upgrading powertrain plants and stamping operations to support the coming new volumes.
The start of production at the Mazda-Toyota Manufacturing venture, which had been planned for 2021, will be delayed until later that year, said Toni Eberhart, a spokeswoman for the project.
The plant was to begin production of 150,000 units each of a Toyota and a Mazda crossover yet to be named. Any job that could not meet social distancing recommendations had to be halted, which caused the project to pause briefly this month. It then resumed, but it has now been halted because of lack of construction materials.
"We informed state and local government officials in Alabama, along with our key suppliers, how the COVID-19 pandemic is impacting our ability to maintain critical equipment delivery schedules, creating labor shortages and slowing construction," Eberhart said in an emailed statement.
But the construction stoppages are not universal. A North American spokesman for Daimler said Mercedes-Benz is pressing ahead on its $1 billion project to introduce electric vehicle manufacturing into its Vance, Ala., operations. That project includes the construction of a battery plant nearby, which remains underway.
At the same time, amid last week's dire industry news reports, GM moved forward to start a $2 billion project in Lordstown, Ohio, to construct an EV battery plant in partnership with battery technology supplier LG Chem. But that project is currently only at the site preparation stage.
Omari Gardner, Hannah Lutz, Michael Martinez, Vince Bond Jr. and Urvaksh Karkaria contributed to this report.