Cox Automotive to furlough 12,500 workers because of pandemic

Cox Automotive has charged an Illinois-based technology and marketing company with anti-trust violations, filing a suit in federal district court.

Atlanta-based Cox Automotive, a division of Cox Enterprises, told employees Thursday that it is furloughing more than 12,500 full- and part-time workers as the result of the business downturn caused by the coronavirus pandemic.

“A furlough is different than a layoff and our hope is that we will be able to have as many of these people back as soon as conditions allow,” Cox Automotive President and Chief Executive Sandy Schwartz wrote to employees. “We know, though, it is impossible to predict the course or duration of this pandemic and whether any of the furloughs will become permanent.”

The coronavirus pandemic has hammered worldwide auto sales and production, with consumer spending down sharply and many automakers shuttering production lines. Some states included car dealers among businesses to be closed to slow the spread of the virus, and only permitted online or remote sales.

“We think the business is going to come back slowly, but we do believe it is going to come back,” Schwartz said in an interview. “My own personal view is — I think we are going to get back about 80% of our business. The question is, how does that happen and when does that happen?”

The furloughs are to begin May 17 and will last up to 16 weeks. Furloughs will allow the employees to maintain health benefits that will continue to be paid for by the company, the company said.

“By then, I think we will know something about what our needs will be for the next six months,” Schwartz said.

He discounted optimists who see new car sales quickly returning to their previous levels of 17 million vehicles a year, but he also rejected the notion that they will not crest past 12 million vehicles. “I think it’s probably somewhere in the middle,” he said.

Much of the business was moving from physical to digital, a trend that has been accelerated by the crisis, Schwartz said. “Buying a car is not like buying a pair of shoes on Zappos, but you know? It’s getting closer.”

Schwartz, as well as Cox Enterprises CEO Alex Taylor and other top executives will "voluntarily forgo their full base salaries for the duration of the COVID-19 pandemic," the company said.

Senior executives at Cox Automotive will also see reductions in pay: 15% cuts for titles of vice president and above and up to 25% for the executive leadership team.

J.D. Power reported this week that all key measures of auto industry health have declined. Sales have begun to tick upwards in recent weeks, but are climbing out of a deep hole, the company reported.

Since the start of the pandemic, consumers have purchased nearly 1.6 million fewer new and used cars compared to previously estimated demand, the company reported, representing $41.3 billion not spent on autos.

In Atlanta, year over year sales for the month of April were down 35%, J.D. Power reported.

At Cox Automotive, approximately 10,000 of the furloughed employees are based in the United States and about 8,700 of those are from Manheim, a division of Cox Automotive that is the world’s largest auto auction for dealers. More than half of the Manheim furloughs are people working as part-time drivers or providing assistance with auctions that the company runs, the company said.

Of those people affected, 4,600 are being furloughed because they cannot do their work from home or because they currently do not have enough work to do. Among the company's remaining hourly workers, a number are having their hours reduced, the company said.

“I could say a lot of things about this being the best-case scenario, but nothing will change that furloughs and pay cuts are painful and represent real sacrifices for many families,” Schwartz said in his note to employees. “We don’t take lightly the broad impact these actions will have on everyone; the toll from COVID-19 is already so high and this adds more uncertainty. If there were another way, I promise we would have done it.”

Cox Automotive's brands include Autotrader, Dealer.com, Kelley Blue Book and Manheim, working with consumers and auto dealers in the United States and overseas.

The company has about 34,000 employees, about 29,000 of them in the United States.

The Atlanta Journal-Constitution is a division of Cox Enterprises.

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