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Dealer Surgery Webinar #10Executive Summary(19 May 2020)
Introduction
A recurring theme in this week’s event was a degree of cautious optimism about the future. The gradual reopening of the Chinese market is hopefully a sign of things to come; manufacturing in Europe and the US has recommenced; the crisis has become a driver of e-commerce and a signpost for the future; funding results from the various government backed loan schemes and even landlords got a positive mention!
MHA MacIntyre Hudson’s Motor Team and our partners are providing immediate expert advice to help the sector understand the challenges posed by COVID-19; to benefit from government support where it is available; and to plan as the sector prepares for easing of lockdown.
We held the tenth in our series of live webinars on 19th May. A summary of the information provided at that event is set out below which includes the contact details for all presenters.
We will be delighted to support you with one-to-one advice, so please contact one of the MHA Macintyre Hudson’s team for direct support.
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The importance of risk assessments was emphasised again by a number of the speakers. We can introduce health & safety advisors with great sector experience and software who can help, so please get in touch if you need assistance. We have also distributed an alternative PPE and safety & tech supply list – if further information is required, please get in touch with Jon Pollock and we can send details to you of all or any of the supplier brochures including pricing and availability
Next week’s webinar will be on Wednesday, May 27th and as well as updates on regular topics, we will be hearing from Cazana with their expert view on current stock valuations and we will also be giving details of the government’s newly published duty tariff and how this is likely to impact on the sector, particularly if we leave the EU on December 31st without a deal.
Return to Trading
The assembly has now published plans for exiting for Wales – traffic light system to represent the different phases as it starts to move out of lockdown. Non–essential retail will be permitted to re-open in their Amber phase (currently in red) – no date as yet but could be a week or two behind England.
New sector specific guidance for after-market providers has also been published by relevant trade bodies. MOT test and service repair sectors can welcome back more customers, as long as they meet the comprehensive COVID 19 safety measures across all touch points with the customer. The end of the 6-month MOT extension is likely soon.
The motor sector supports up to 40m vehicles on the road in the UK – significant opportunity with the support right and back to trading from an aftersales perspective.
Government guidance issued last week for vehicles – few points to note for vehicle usage delivery and drivers, e.g. avoiding multiple occupancy, single person or contactless re-fueling, physical screening, using fixed pairing system and including electronic pre-booking and safe exchange of paperwork process, sanitation on all deliveries etc, inbound and outbound goods.
We distributed an alternative PPE and safety & tech supply list – if further information required, please get in touch with Jon Pollock and we can send details to you of all or any of the supplier brochures including pricing and availability
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Showrooms are regarded as non-essential retail and must remain closed until at least June 1st.
• The NFDA & SMMT have confirmed that physical car showrooms should remain closed to the public as per government guidelines but can operate a ‘click & collect’ service if purchases made remotely.
• Strict social distancing and hygiene protocol on site and ensure customers do not enter the showroom to complete the collection,
• Customers may visit dealerships to collect purchased vehicles and to drop off/collect vehicles for repairs, servicing etc: operation and handover paperwork should be completed on the forecourt or parking area, an appointment system should be used.
• The NFDA guidance has also followed engagement with trading standards, therefore should meet all the criteria, from all potential audit bodies.
Used Car Sales
Growing volumes of lockdown used car sales have prompted Cap HPI to recommence valuation changes – and initial sales suggest a 2% to 5% decline.
Cap and Auto Trader both suggest that car retailers’ efforts to cut values to boost the market during the lockdown period would prove ineffective and create instability for the sector.
• Cap HPI said that it had observed around 7,500 car sales records in April and that volume had been exceeded by the middle of May.
• Data suggest a 2% to 5% downward movement for some of those models and ranges older than five-years-old.
• Previous five-years have seen an average drop of 4% during April and May at the five-year-old age point, and last year witnessed a 6.3% drop, so movements are in the middle of this range.
Used car market is showing “signs of recovery”.
No changes to used car values were made by them between the start of lockdown on March 24th and May 10th as they stated that there was “insufficient data” to do so.
Autovista expects losses in residual values observed across markets “to build up over the coming weeks and months” However, countries such as the UK and France, where the lockdown has been more strictly enforced, would see a lesser impact on residual values than countries like Sweden and Finland, where car retailers were allowed to continue trading despite dramatically reduced consumer demand.
Global Outlook
• Optimism is tempered somewhat as In the first 10 days of May, new-vehicle sales fell 14 percent from a year earlier.
Europe• Fiat Chrysler Automobiles confirmed that it is
in talks to obtain an Italian state-backed credit line of as much as 6.3 billion euros ($6.8 billion) to buttress the automaker’s finances after the downturn. The loan would be the second largest financing guaranteed by a European government during the pandemic after Renault’s last month.
USA• FCA, Ford and GM returning to production, but
their suppliers are still grappling with issues due to restart delays at parts plants in Mexico, compounded by liquidity issues for lower-tier manufacturers, which are adversely affecting the supply chain.
Japan
• Toyota will reduce vehicle production in Japan by 122,000 units in June due to lack of demand - a 40% cut from original plans for June.
UK • McLaren is investigating funding options
seeking to raise up to £275 million $335.61 million) by borrowing against its Woking headquarters and collection of historic racing cars.
China• Shanghai auto show was held outdoors with
cars emblazoned with hefty discounts. Shoppers with face masks. Sales, marketing and service apparatus have shifted decidedly to all-digital.
• Automakers have resumed output, and dealerships have reopened across the country. In April, new-vehicle sales rose for the first time in nearly two years, climbing 4.4 percent after plunging 45 percent in the first quarter.
• Most automakers are opting to connect with Chinese customers through online channels with VW Group CEO becoming the first leader of a global automaker to open a blog hosted by Sina Weibo, the country’s most popular microblog site, to pitch products and services.
• Car dealerships are embracing online marketing and sales. At the end of March, nearly a quarter of dealerships surveyed were using live- streaming services for sales and marketing,
• According to VW executives many consumers are first-time car buyers anxious to avoid a return to public transport — this creates a target market of 60 percent of China households.
• Bentley’s CEO says China’s rebound from coronavirus-induced lockdowns has been “astonishing,” resulting in a surge in demand for ultraluxury models from the automaker
• China 2020 volume at 21.4 million units, a drop of 15% from 2019 levels. In 2021, volume could, however, recover to 23.2 million units, based on current forecasts.
• The forecast is for Europe to see sales fall 24.6% to 15.5 million units.
• North America is forecast to see sales drop 26.7% y/y in 2020. The U.S. market sales forecast is currently 12.5 million units.
Global sales forecasts
Strategic Activity
Some optimism about the deals market for next year:
• Pent up demand
• Purchasers focused on quality opportunities only available at sensible prices
• Possible Brexit trade deal or at least the end of uncertainty
After the crash of 2008, lower interest rates, the scrappage scheme and a VAT reduction enabled some dealers to make 2009 a strong year.
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managing ongoing health risks in the work place, educating staff on building infection control and communicate planned response in the event of an employee testing positive to COVID 19.
Conducting risk assessments is vital step to ensure safety – need for comprehensive risk assessments of all areas of the business. Companies with more than 50 employees should share their results of the risk assessments with the public on their website.
D&O policies will not respond if you claim notification is not reported to your insurer from the outset or if you fail to follow any prior written legal advice as laid out in your policy terms. All policies are different so ensure you read to follow the correct procedure.
Insurers appetite for D&O is fast decreasing as they prepare for onslaught of claims. Insurers have started to introduce specific questions for company’s exposure to the virus in order to assess their preparations. In the event the questions are not addressed to the satisfaction of the D&O insurer, they could refuse not to offer renewal.
Short term impact of COVID 19 – increased scrutiny on the financials of the company, including questions around COVID and preparedness from a business continuity perspective and how a company is communicating with their employees.
Exposures that businesses/owners may experience will present a significant risk - claims may arise - management liability policies are intended to protect the company’s board of directors and senior officers against claims, investigations and defense costs. Personal assets are at risk - if you buy Directors/Officers insurance (D&O Policies) you should be covered for the costs and liabilities arising from shareholder lawsuit as a consequence of the spread of COVID 19 virus.
Litigation may arise from unreasonable actions by directors or managers, and from inadequate contingency plans - the company’s employees, customers and investors may question whether planning was adequate. From a H & S perspective the robustness of contingency planning will be tested by the nature of your risk assessment and efforts to minimize the impact of an outbreak on your business premises. Ensure you get good support.
Employment practices liability – which is often an extension to a D&O policy, are by far the most common type of directors and officers claim, covering such matters as unfair dismissal, sexual/racial/gender harassment/ discrimination. Employment practice questions may arise as to whether employers have taken efficiently and timely action to manage COVID 19, such as ensuring safe social distancing controls in all areas, supply of PPE, introduction of regular cleaning of multi top surfaces, safe vehicle collections and delivery to customers and unaccompanied test drives and avoiding all non-essential travel.
Employers must evidence they have met their obligations and kept employees informed on the risk assessment results – how are we
Return to Trading Insurance Risks
In summary, your insurance policy should be your last line of defense not your first. Comprehensive risk assessments regularly reviewed at board level must be your absolute priority. If you buy D&O insurance cover your good business practices will mitigate your exposure to claims, protecting the company and its customers.
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Coronavirus Job Retention Scheme (JRS)Last Tuesday, the government announced some of the details of proposed changes to the scheme as well as its extension:
Protect yourself from scams - Don’t give out private information or reply to text messages, and don’t download attachments in emails you weren’t expecting. Forward suspicious emails to be from HMRC to [email protected] and texts to 60599.
The number claiming unemployment benefit soared to 2.1 million in April up by 856,500.
• Separate ONS figures showed UK unemployment rose by 50,000 to 1.35 million in the three months to March.
Moving to Recovery stage:
• What are you doing?
• How will you manage social distancing?
• How much phasing will you do?
• How will you pay for it?
• When will you make the ‘difficult’ decisions?
Extended to the end of October 2020.
In current form until end July 2020
• From August, more flexibility and part time working, but Employers will pay a % of salaries of furloughed staff. ensuring those eased back in to work still get 80%/£2,500
More specific details and information around its implementation will be made available by the end of May.
You cannot furlough your employee and ask to volunteer for you in same or different role!
Keep a copy of all records for 6 years.
Non-discretionary payments - only include where:
• contractual obligation to pay and
• where employee had an enforceable right.
• Variable payments specified in a contract and always made, may become non-discretionary, so should be included when calculating 80% of wages.
• Non-discretionary overtime payments - when contractually obliged to pay at a set and defined rate for overtime worked.
To ensure you receive a payment by the end of May, you need to apply by 20th May.
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• Claim up to weekly rate (£94.25 before 6th April 2020 / £95.85 after).
• Doctor’s fit note not needed but either:
isolation note from NHS 111
NHS or GP letter telling them to stay at home for at least 12 weeks
• Claim both CJRS and Coronavirus Statutory Sick Pay Rebate Scheme for the same employee but not same period of time for that employee.
The online service reclaim Statutory Sick Pay (SSP) available from 26th May 2020 to repay employers the SSP paid to current or former employees.
• Claim if have a PAYE payroll scheme created on or before 28th February 2020
• fewer than 250 employees on 28th February 2020
• Covers up to 2 weeks from first qualifying day of sickness, if an employee:
• has coronavirus (COVID-19) symptoms
• someone they live with has symptoms
• shielding letter from NHS or GP saying stay at home for at least 12 weeks
• Claim for sickness starting on or after:
• 13 March 2020 - if coronavirus symptoms or self-isolating
• 16 April 2020 - if your shielding because of coronavirus
Coronavirus Job Retention Scheme (JRS)continued
• Call 0800 024 1222 at or around the time the payment is due to HMRC seeking a 3-month deferral
• Have the values for non-furlough tax and NIC that you are seeking to defer
• Have the values of NIC from the furlough claim that you will need to still pay ‘on time’
PAYE deferral is still available, but will require you to:
Employment Law IssuesExpect NMW/NLW to be a feature of phasing of CJRS – payment of these minimums is already a requirement for any furloughed employee who is required to carry out training during furlough.
Employer’s duty of care particularly important as many employees will have concerns on return from lockdown
What about employees with childcare issues?
• ‘Dependent Leave’ allows short period of unpaid leave to make emergency arrangements (typically up to one day’s leave)
• May be extended due to schools remaining closed to some pupils, but will be unpaid unless employer’s policies/contracts specify otherwise
What about employees who have safety concerns?
• Communication in advance of opening should provide reassurance on steps employer has taken
• Ultimately however, failure to return to work could become a disciplinary matter
What about vulnerable employees such as over-70s, pregnancy etc
• Open dialogue early to make maximum safeguards available including employment in more socially isolated roles
• Not entitled to SSP
• Can remain on furlough whilst that scheme is available, but otherwise will be required to return to work
What about the extremely vulnerable?
• They can remain off work on SSP
The increasing role of e-commerce
Post lockdown extension digital engagement has continued to grow.
Since the lowest point of the lockdown (April 8th), calls are up 44%, service bookings 79% and valuations 66%.
Ecommerce continues to grow, up 84% with daily transactions peaking at 118 in one day.
Shop streaming - live streaming product demonstrations could be a future tool to display stock.
Kiosk based interfaces to handle customers dropping off and picking up cars for servicing.
APPs to manage customer engagement could be rolled out.
Fundingupdate
• BBLS (Bounce-back loan scheme):268k approvals from 363k applications and total approved facilities of £8.3bn
• CBILS: 36k approved out of 71k applications, Total approved facilities of £6bn
• CLBILS: 59 approved out of 358 applications. Total approved facilities of £359m
• Some discussion that larger companies receiving this support could face being banned from paying dividends or buying back shares. No such plans are intended for those companies that take out funding through the SME-focussed CBIL and BBL loan schemes
The latest statistics on the government loan schemes are:
CBILS Applications for non-essential working capital now possible
State Aid Rules “in difficulty” being reviewed
Q3 will be a critical period with furlough being phased out, deferred taxes becoming due,, payment holidays ending etc so it’s essential to keep your cashflow forecasting up to date and your funding needs under review.
KEEP TALKING TO YOUR FUNDERS“ “
Property Update
Raised level of engagement between landlords and tenants as we approach the next rent quarter day
As trading recommences landlords are likely to be more sympathetic to proposals as they can see the prospect of income to support repayments
The hospitality sector is seen as much bigger risk than motor
Tenants should highlight exciting future prospects for the sector such as the rise of EVs – by presenting a positive outlook, rent deferrals allied with lease restructuring may be possible.
GDPR andCyber Issues
CJRS is seen as an opportunity by scammers
Interserve suffered a data breach affecting 100,000 records
Hacks have been made into ‘super computers’ in academic settings
Please use [email protected] to report concerns
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Steve FreemanHead of Motor, Partner
M: +44 (0)7795 476 651E: [email protected]
Jon PollockElectric Vehicle Consultancy Lead
M: +44 (0)7738 756 177E: [email protected]
Jon BeveridgeOEM Consultancy Lead
M: +44 (0)7970 740 625E: [email protected]
Nigel MorrisMotor Tax Head, Director
M: +44(0)7718 340 634E: [email protected]
Lee Cohen Managing Director,Hamilton Leigh
M: +44 (0)7980 606 886 E: [email protected]
Glyn Edwards Motor VAT Head, Director
M: +44(0)7889 537 549E: [email protected]
Greg Taylor Head of MHA Financial Solutions, Partner
M: +44(0)7736 297 072E: [email protected]
Bill BexsonManaging Partner, Automotive Property
M: +44(0)7831 827 442E: [email protected];
Emma Tice Geldards Law Firm
T: +44(0)1332 278 311E: [email protected]
The Team
Andy FlinnCEO at RDS Global
M: +44(0)7795 848 727E: [email protected]
Martin Wilson MTBN
M: +44(0)7802 296363E: [email protected]
Ben Green Techyo
M: +44(0)7946 040336E: [email protected]
MHA MacIntyre Hudson trading as MacIntyre Hudson LLP is a member of MHA, an independent member of Baker Tilly International Ltd., the members of which are separate and independent legal entities.
Now, for tomorrow
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