Understanding everything from dealership agreements to employee assessment programs will help dealers manage their current and post-crisis situation.
There has been a surge of information about what Canadian consumers and businesses can do during the novel coronavirus pandemic to help them manage their current situation.
For dealerships in particular, there is an abundance of topics worth reviewing, with a wealth of information that covers topics such as the federal government programs, dealership agreements, buy-sell advice, employee assessment, online car-buying, digital tools, and more. So where to start?
Dealership agreements
In early April, Canadian auto dealer connected with John Yiokaris, Partner, Commercial Group at Toronto-based law firm SOTOS, to review dealership agreements, OEMs communications and force majeure provisions.
“Dealers need to remember that almost all dealership agreements require them to continually operate their dealership,” said Yiokaris. “If a dealer closes its doors or even reduces the number of services that it is offering without any notice or approval by its OEM, it runs the very serious risk of being in default of its dealership agreement.”
In Canada, Yiokaris said the dealership has an obligation to remain open, but the current situation has placed them in a position where their offerings need to be reduced and physical sales offices shut down.
“The best way to go about doing that without being in breach of your dealer agreement is to basically pick up the phone and speak with the manufacturer,” said Yiokaris. “Get the manufacturer’s consent, because you don’t want to be stuck in a situation where you end up closing your dealership and the OEM issues a notice of default to you because you haven’t lived up to your obligation to continually operate your business.”
However, Yiokaris also said that there are “special protections” in Canada that will help both parties, where the OEM and the dealer have to act in good faith, and that includes acting in a “commercial, reasonable manner.”
Yiokaris said many contracts also contain force majeure provisions that would allow one party to suspend the fulfillment of its duties — essentially putting things on hold — due to certain situations. But in the current COVID-19 context, dealers may not be able to take advantage of the provision.
“Not every dealer agreement contains a force majeure provision, and for those dealer agreements that do have a force majeure provision one has to look at the scope of the wording,” said Yiokaris. “Does it allow dealers to temporarily close their dealership? The answer may very well be that it doesn’t allow them.”
At the time, dealerships in some provinces were still permitted by their respective government to remain open — if not fully, at least in part, which could have hindered a dealer’s ability to take advantage of the provision.
“Dealers have said to me ‘I’m going to operate at a huge loss, isn’t that part of force majeure?’ And unfortunately it’s not. That would not relieve a dealer from being responsible from operating its dealership,” said Yiokaris.
He advises dealers to ensure there is ongoing communication with the OEM, as this will be important in managing the situation during and post-crisis.
Employee assessment
Another area that dealers may need to consider is employee assessment.
Jessi Kessel, Director of Operations at Auto Careers Group, said they are helping dealers in assessing their people through a process that involves going back to the drawing board and reviewing who their current employees are, what their skill sets are, and when the crisis is over and the dealership fully opens, understanding what their situation will look like.
“Who are we going to bring back first? Are we going to bring them back in phases? And then (dealers) are talking about possibly consolidating some roles as well,” said Kessel.
On consolidating roles, Kessel said they are helping dealerships through what they call a “stay interview”, where they review questions with the employee that are different from a standard interview. This is meant to help the dealership understand and assess some of the hidden talents or interests that their employees have so these individuals can “step up and offer more of their skill sets to the dealership.”
As for employees that have been laid off but may not be recalled to work at the dealership post-crisis, they will be looking for another job. To ease the transition, Kessel said dealers can partner with Auto Careers Group to better support those employees.
“We came up with a couple different things for the people that have been affected by layoffs,” said Kessel, adding that one of those things is a resume review program.
The program is meant to highlight the employee’s accomplishments and provide them with tips and tricks to boost their chance of finding another employment opportunity.
Resources for dealers
There are a number of resources available to dealers in a range of areas. Wilson and Vukelich LLP posted vital information for employers about how to navigate employment insurance (EI) programs. The guide covers slowdowns, leaves, layoffs and dismissals, along with the record of employment, applying for EI, and more,
automotiveMastermind launched a 36-point checklist for closed dealerships, and tips to function virtually during the crisis. That last one includes information for management (to adapt and be resourceful), BDC (to focus on what they can control), sales (to think outside the box), and for service to go “above and beyond” for customers.
Dealer Security posted a warning letter about what dealers can do to manage the increased level of criminal activity at dealerships, including moving valuable inventory inside the store, blocking lot entrances with the least expensive vehicles, and turning off key management systems so that it can only be accessed physically, with a key.
On the digital front, Roadster created a landing page for best practices, free digital marketing tools and templates, regional demos, and webinars.
