Canadian new-vehicle sales in April will be “far worse” than March, annual sales are set to plunge more than 20 per cent and recovery could take months if not years, Toronto Dominion Bank warns in a new report. The bank’s Canadian Auto Outlook Update says April’s total could be as low as 40,000, down 80 per cent from the same month a year ago and on par with a recent forecast by Scotiabank Economics. “While most dealerships have shifted to having a stronger online presence, it seems unlikely that online purchases will provide a meaningful offset over the coming months,” TD says. “Given both the magnitude of the shock and current level of uncertainty, consumers are likely to forgo near-term purchases and wait until better economic conditions prevail.” Through the first few weeks of March, volumes were tracking a relatively “normal” pace of sales for the month, TD said. But “April promises to be far worse.”
Canada’s annual sales are now expected to be around 1.5 million for 2020, down nearly 23 per cent from 2019.
Most provinces have strict physical-distancing measures in place. In Ontario and Quebec, showrooms have been deemed non-essential and are closed to the public. On April 15, Quebec eased some of the restrictions, allowing dealers to open service departments to the public as long as they met health and safety guidelines. Ontario, meanwhile, has banned test drives. The two provinces combine for 80 per cent of the Canadian marketplace. “It is expected that conditions will continue to deteriorate over the coming months, as attempts to flatten the curve lead to unprecedented declines in both real GDP and employment,” TD says.
TD expects the extreme disruptions in economic activity to persist into mid-May, before there is a gradual return to economic activity. “Gradual is the key word,” the report reads. “Despite the duration of the shock expected to be just several months, it is assumed that it will take two-years to recover all the lost economy-wide output. “Similar disruptions are assumed for vehicle sales as well,” the report reads. “And while we expect some demand to come back in the latter half of May, it’s highly unlikely that we’ll see a complete return to normal activity [plus any lost purchases] in just one month. “Sentiment has been damaged and it will likely take at least several months before we see a return to a ‘normal’ level of sales.” It’s difficult to predict consumer behaviour and TD has outlined a trio of recovery scenarios. “We are still early days and forecasting potential impacts in this rapidly changing environment is by no means an exact science,” the report says. “Economic relationships that are typically observed in normal times are currently broken, and hence we need to rely more on our priors and other countries’ experiences to help inform the forecast. This embeds more uncertainty, particularly in our near-term estimates. “Should social distancing guidelines extend beyond what we have assumed, the economic disruptions will be both more prolonged and deeper than what is currently forecasted. Buckle up, we are in for a crazy ride over the coming months.”
Source: Automotive News Canada
Automakers are cautiously coalescing around plans to reopen North American assembly plants early next month following what will be a roughly six-week shutdown for virtually the entire industry. Toyota Motor Corp., Tesla Inc., Hyundai Motor Co. and Volkswagen AG are among the major automakers that have said they intend to resume production in the first week of May. Even if they stick to that schedule, many won’t restart all their factories at once, and the facilities that do restore output will run assembly lines at slower rates than they did pre-shutdown.
The head of the United Auto Workers union on Thursday said it was “too soon and too risky” to reopen auto plants and Michigan’s economy in early May, citing insufficient scientific data and coronavirus testing to assure workplaces are safe. The warning from UAW President Rory Gamble on Thursday afternoon came as General Motors Co, Ford Motor Co and Toyota Motor Corp took new steps toward reopening North American vehicle manufacturing operations in an environment where consumer demand is uncertain and worker safety paramount.
The U.S. auto industry will deploy millions more wireless systems to help prevent traffic collisions if the Federal Communications Commission abandons a proposal that would take away most of the radio frequencies reserved to carry those signals, according to an industry trade association. If the commission agrees to preserve those airwaves for vehicle safety, auto companies will install at least five million so-called vehicle-to-everything radios on vehicles and roadside infrastructure over the next five years, far more than have been deployed so far, Alliance for Automotive Innovation President John Bozzella said in a Thursday letter to FCC Chairman Ajit Pai and Transportation Secretary Elaine Chao.
Hertz Global Holdings Inc. brought in restructuring advisers to rework the rental-car company’s debt amid a bleak outlook for business trips and vacations. Management is seeking advice from restructuring bankers at Moelis & Co. on ways to boost liquidity and avoid filing for Chapter 11 bankruptcy, according to people familiar with the situation. One of the options that has been under discussion with bankers is raising cash by issuing new debt, Bloomberg previously reported. The maneuver would need an amendment to a secured debt facility, the people said, asking not to be identified while discussing a private matter. The situation remains fluid and plans could change, depending on market conditions and federal support.
A representative for Hertz, based in Estero, Fla., declined to comment. Andrea Hurst, a spokeswoman for Moelis, declined to comment. Hertz has $1 billion in liquidity and no significant corporate debt maturities until June 2021, according a March 26 filing. Revenue at Hertz has been squeezed as governments around the world instruct their residents to stay at home for all but essential travel. The company’s brands include Dollar, Thrifty and Firefly. With cancellations soaring and new bookings scarce, CEO Kathy Marinello has been consolidating locations, cutting staff and reducing capital spending to preserve liquidity.
The squeeze calls into question Hertz’s ability to manage its nearly $500 million of annual corporate interest expenses, Joel Levington of Bloomberg Intelligence said in a note.
More pressure will come from weak used car prices, according to S&P Global Ratings. That’s a problem because Hertz regularly retires and sells off thousands of older cars from its fleet, and the proceeds are needed to reinvest in new vehicles.
Hertz’s loans and notes are trading at deeply distressed levels, with bonds maturing in 2024 falling to less than 30 cents on the dollar from around par as recently as last month. In credit markets, derivatives linked to the company are pricing in more than 95 percent odds of a default in the next three years. “But we think it may be sooner than later -- particularly since federal car-rental aid doesn’t appear to be forthcoming -- to preserve liquidity and to help reorganize the company with a less-stressed balance sheet,” Levington wrote.
Elements of the potential financing deal were reported earlier by Reuters.
Fiat Chrysler Automobiles is reconsidering its plans to restart some of its U.S. factory production given Michigan's extended stay in place order. FCA had said it was targeting May 4 to begin restarting some of its U.S. production. Last week, Gov. Gretchen Whitmer extended an executive order that keeps the state’s nonessential businesses closed through May 15 to mitigate the spread of coronavirus.
Source: Detroit Free Press
Ford Motor Co. and Rivian are canceling their plan to jointly develop an electric vehicle for the Lincoln brand due to the ongoing coronavirus crisis.
Lincoln informed its dealers of the decision on Tuesday. Officials said the brand still planned to have its own EV eventually and could potentially co-develop a product with Rivian in the future but shelved the project because of the "current environment."
Although the pandemic has delayed numerous vehicles currently in development, including the upcoming Ford Bronco Sport crossover, this appears to be the first announcement of a vehicle cancellation in the United States attributed to the crisis. "Our strategic commitment to Lincoln, Rivian and electrification remains unchanged and Lincoln's future plans will include an all-electric vehicle consistent with its Quiet Flight DNA," Lincoln said in a statement provided to Automotive News. Lincoln said it was still committed to its partnership with Rivian and would continue to work with the EV startup "on an alternative vehicle based on Rivian's skateboard platform."
Ford Motor invested US$500 million in Rivian last year.
The EV developed with Rivian, announced in January, was to be the Lincoln's first battery-electric model. It would have been built on Rivian's flexible skateboard platform, but neither company had provided details on what type of vehicle it would be, where it would be assembled or when it would go on sale.
Rivian CEO RJ Scaringe was quoted as saying the vehicle would have been "in the SUV space" and "very different" from Rivian's own R1S utility. Lincoln has invested heavily in electrification but until now has mostly focused on plug-in hybrid models of its existing crossovers, including the Aviator and Corsair.
Other ford vehicles delayed
The Bronco Sport, an Escape-sized off-roader, will start rolling off assembly lines at Ford's Hermosillo, Mexico, plant on Sept. 7, nearly 60 days after the original July 13 target, according to supplier information obtained by Automotive News. It's unclear how the virus has impacted other vehicles, including the upcoming Bronco SUV, F-150 pickup and Mustang Mach-E crossover.
Ford CEO Jim Hackett, speaking last month on a Detroit radio station, said the virus was not likely to have a significant impact on the launch of some of Ford's biggest models.
"It's had an effect, but it's not going to dampen our spirits about how all these great new things have to come to market," Hackett said. "If they're a month or six weeks late, I don't think anyone would think we fumbled there because of the virus."
Masks Not Enough to Shield Workers From Coronavirus
As Detroit’s automakers seek to restart their U.S. plants during the coronavirus pandemic, two health experts advising Michigan’s governor and the United Auto Workers union warned against an over-reliance on masks and face shields to keep workers safe. Neitzel and Marisa Eisenberg, a University of Michigan associate professor of epidemiology, are part of Michigan Governor Gretchen Whitmer’s task force on economic recovery. They are also among the experts the United Auto Workers has sought advice from as it negotiates with General Motors Co, Ford Motor Co and Fiat Chrysler Automobiles NV on restarting assembly plants.
The “new normal” between the time many dealerships re-open and a coronavirus vaccine is discovered might involve dealers frequently sanitizing all common areas of their stores, strictly enforcing social distancing and even doing laundry for mechanics.
That’s according to interviews with dealers who are anticipating strict safety protocols remaining in place for months even after governments begin to ease stay-at-home orders, as well as new guidelines for service departments in a document distributed by the Quebec dealers’ association. “We’re going to enter a new way of doing business, and a lot of it is going to be digital and Internet-based,” said Robert Stein, president of the Plaza Auto Group in the Toronto area.
Some of the conversation surrounding government stay-at-home orders and emergency declarations has shifted in recent days to how soon governments will be able to relax them and what that easing will look like. Ontario Premier Doug Ford has laid out a three-phase plan to restart the economy. But details were scarce and the first step is anywhere from two to four weeks away.
Given that some physical distancing measures are likely to remain in place for months even as the economy slowly reopens, dealers have been preparing for how to operate in a post-shutdown, pre-vaccine world. Newel DeSouza, general manager of Maranello BMW in Vaughan, Ont., said new practices need to be implemented in order to meet consumers’ demands for a clean, safe place to shop. “We’re thinking about how we’re going to align new protocols and process with what the consumer’s expectations will be,” he said in a recent interview with Automotive News Canada.
The Quebec dealers’ association’s guidelines outline how dealerships can keep their service departments safe while performing necessary repairs. Some of the guidelines appear designed to boost consumers’ confidence in the safety of dealerships, including making sure that keys are disinfected in front of the customer before they are returned. Changes include requiring that mechanics change into and out of their work clothes at the dealership and that the dealer cleans the clothes. Other recommendations include discouraging customers from using wait rooms and assigning them a seat to stay if they stay, as well as limiting shuttle vehicles to one customer at a time.
Stein said his dealerships would be ready to re-open once it’s deemed safe to do so. He said his store has tape on the floor designating where people can stand while respecting social distancing, chairs are pulled back from desks, plexiglass dividers have been installed and customers will be offered masks and gloves upon entering the building. “We have Lysol wipes everywhere. We wipe every key and every car,” he said. “We’ve had this in place almost since Day 1.”
Mercedes-Benz reopened its U.S. plant this week in Alabama, becoming one of the first manufacturers to resume operations since the coronavirus pandemic halted auto production across the country last month. Depending how the reopening goes, it could assist other automakers in efforts to reopen their domestic plants in the coming weeks and months. If successful, it could be a benchmark for the industry. If not, it may cause others to rethink their processes and timing.
Toyota’s luxury brand Lexus scored No.1 in the reputation report’s ranking, followed by Nissan. Businesses should respond to both good and bad reviews, especially the latter, to keep negativity from escalating or lingering, Fawaz says. “Customers learn from other customers.” In the event of a bad review, a dealership should “acknowledge the situation, apologize if necessary, show concern and try to rectify it by taking the conversation offline,” he advises. “Avoid getting into the weeds.”
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