In early March, fear and panic began gripping America. As the coronavirus quickly spread across our country, the stock market plunged, and businesses scrambled to figure out how to respond. As schools and businesses closed, the U.S. economy went into a tailspin. In the last week of March, new-vehicle sales dropped 59%, and America’s new-car and -truck dealers faced severe liquidity concerns not seen since the Great Recession of 2008-09. As a result, many of our members confronted the dreaded prospect of having to lay off valued employees.
Panics are not uncommon in U.S. history, but the speed at which the coronavirus pandemic impacted life in America, and across the globe, was stunning.
Amid these unparalleled events, Congress and the Administration acted decisively by enacting a series of broad-based economic stimulus packages. The centerpiece was the CARES Act, which contained a lifeline for dealership employees: the Paycheck Protection Program (PPP).
Different from previous, more diffuse stimulus tools, the PPP delivered needed relief to working men and women through forgivable loans to businesses, contingent on those businesses retaining or rehiring furloughed employees. Most new-car and -truck dealers are local, family owned small businesses that prior to the pandemic employed more than 1.1 million people nationwide in good-paying jobs with opportunities for advancement. The PPP was not only a lifesaver, but it also was an extraordinarily successful measure to keep our employees at work in the face of plummeting vehicle sales.
Under the PPP, at least 60% of the loan proceeds must be used for payroll expenses—with the rest going to a set of approved expenses, including mortgage or rent payments, utility bills, etc. For the typical dealership, this 60% threshold will be easy to hit because payroll is historically one of our members’ largest expense items. In fact, we expect that many, if not most, dealerships will use 100% of their PPP loans for payroll. The data is already bearing this out. We saw dealership employment bounce back dramatically in May, once PPP loans kicked in.
For dealership employees, the PPP kept food on the table and helped pay household bills. It also provided peace of mind.
The economic benefits of dealership payrolls also reverberated broadly through our economy, supporting myriad other local businesses and the people they serve. The loss of dealership payrolls during this time would have dramatically increased the severity of the downturn in communities across the country.
PPP loans have delivered for countless employees across the nation who were the intended beneficiaries. This bipartisan measure may go down in history as one of the most cost-effective stimulus measures ever deployed. In our industry, the PPP helped stabilize local businesses that are essential to a national economic recovery. Auto retailing provides more than 1 million good-paying jobs, accounts for 18.8% of all U.S retail sales, and annually generates over $90 billion in much-needed state sales tax.
The pandemic is not over and there are still steep hills to climb. But the footing for dealership employees, who provide critical infrastructure services that keep America’s cars and trucks on the road, has been made more secure by the PPP.
On behalf of tens of thousands of dealership employees in thousands of communities across America: THANK YOU!