Group 1 furloughs 3,000 U.S. employees, closes stores abroad

Group 1 Automotive Inc. on Wednesday laid out steps it’s taking to respond to the “dramatic decrease” in business due to the coronavirus pandemic, including furloughing 3,000 U.S. employees for at least 30 days, slashing executive salaries and closing stores in the U.K. and Brazil.

The Houston-based retailer is the first of the six publicly traded dealership groups in the U.S. to share details about its response.

Group 1 said that its U.S. vehicle sales volumes are down 50-70 percent from a typical March. Nearly all of its U.S. dealerships are located in markets that are affected by “shelter-in-place” or similar restrictions. The company’s service facilities remain open, and no Group 1 store in the U.S. is completely closed.

While sales departments have closed in some U.S. stores, others continue to operate with a “dramatically reduced staff level,” the company said. Group 1’s Acceleride online sale platform has correspondingly seen increased use.

All of Group 1’s stores in Brazil have closed, and the company is in the process of shuttering its locations in the U.K., per government orders.

At the same time, Group 1 is furloughing 3,000 U.S. employees for a 30-day period, with an option for a second 30-day period. About 2,800 employees in the United Kingdom are being furloughed for an initial period of 21 days.

Group 1 also is reducing its U.S. marketing expenses by more than 75 percent.

“The sudden impact of this medical and human emergency is clearly disrupting most businesses,” CEO Earl Hesterberg said in a statement. “This is requiring us to take many severe and regrettable actions to re-size our business to minimal activity levels in the near term. I believe that the swift and decisive actions that we are taking will enable us to recover quickly when the market recovers as it undoubtedly will.”

Several corporate positions will see reduced salaries. Hesterberg’s salary is being cut by 50 percent, and U.S. and Brazil operations president Daryl Kenningham’s salary is being reduced by 35 percent. According to the company’s 2018 proxy statement, the most recent available, Hesterberg’s and Kenningham’s salaries were $1,150,000 and $624,000 in 2018, respectively, not including additional bonuses, awards and other compensation.

Elsewhere in the group, salaries are being reduced for senior vice presidents by 20 percent, for corporate vice presidents by 15 percent, and for other corporate and field support personnel by 10 percent. Chairman, committee chair and cash retainer fees for all board directors have been eliminated.