Here's What Group 1 Is Doing To Combat Coronavirus Crisis

Group 1 Automotive, Inc. (NYSE:GPI) recently announced that it is implementing a number of actions to boost the firm’s cash position and preserve financial flexibility in the face of rising global market uncertainty due to the coronavirus-induced crisis.

The coronavirus pandemic has affected businesses across all markets of Group 1 –– the United States, the U.K. and Brazil, with several dealership operations being suspended or significantly reduced.

Group 1’s dealership service facilities in the United States continue to operate in order to provide essential services to customers. All of its U.S. dealerships are located in markets operating in some type of shelter in place or restricted travel environments in accordance with the guidelines issued by President Trump to contain the spread of the pandemic. However, the company’s Noble Group Limited U.S. dealership remains completely closed.

Overall, Group 1’s service activity levels in the United States have declined due to reduced number of vehicles on the road caused by government regulations, or customers’ fears about the virus. Notably, the number of confirmed coronavirus cases in the United States has crossed 82,000.

Moreover, while the dealership sales divisions of the company have closed in some jurisdictions in amid the crisis, they are allowed to continue to work in most cases, although with a drastically-reduced number of staff. However, Acceleride, Group 1’s online sales platform, continues to display increased usage levels which are likely to surge.

Meanwhile, Group 1 is in the process of closing all its dealerships in the U.K. in compliance with the government's orders. It will maintain a minimal support workforce to provide emergency services only. Further, the firm will be unable to supply many vehicles previously contracted to customers due to the closing of its facilities and various travel restrictions in March. The required closure period will be re-evaluated on Apr 13, 2020.

In addition, in Brazil, all Group 1 dealerships are closed since Mar 20 to prevent the spread of coronavirus. The company is in the process of seeking approval from the government to open all of its dealership service departments.

Due to the rapid downturn in market activity and the unpredictable period of this decline, Group 1 is taking a number of steps to maintain the financial strength and stability of the company. The company has granted leave to 3,000 U.S. operating and staff employees for a period of 30 days, with an option for a second 30-day period. In the U.K., Group 1 Automotive has furloughed 2,800 workers for an initial 21-day period, which is around 90% of the company's U.K. workforce.

Moreover, Group 1 Automotive has reduced corporate compensation until further notice to combat the crisis. While the firm’s CEO’s salary has been reduced by 50%, the president of the U.S. and Brazilian Operations will receive a pay cut of 35%. Salary of the senior vice president and the corporate vice president will be slashed by 20% and 15%, respectively. Other corporate and field support personnel will receive a pay cut of around 10%. The company is also putting efforts to trim U.S. marketing costs by more than 75%.

Group 1 currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

The rapidly-spreading coronavirus pandemic has become a concern for other global auto biggies as well, including Tesla (NASDAQ:TSLA) TSLA, Honda Motor (NYSE:HMC) , Toyota Motor (NYSE:TM) , Volkswagen (DE:VOWG_p) AG, Goodyear Tire, Nissan, Harley-Davidson and Hyundai Motor. Several automakers have closed their factories and suspended production, while the others plan to change manufacturing processes and cut production levels in their plants, in line with the nation-wide campaign addressing the crisis. The pandemic has not only dampened consumer sentiment and thwarted vehicle demand but also distorted the supply-chain balance globally.

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