By Ben Foldy and Mike Colias 

The worsening virus outbreak is denting sales and store traffic at U.S. dealerships and leading some car companies to suspend work at North America factories, early indications of the pandemic's impact on the U.S. auto industry.

With Americans staying at home, dealers say new-car sales are tanking and showrooms are quiet, and likely will remain so for a while.

Several analysts have cut their sales forecasts for 2020, upending predictions for another solid year in the U.S. car business. Car companies are rolling out promotions to soothe rattled customers, including interest-free loans and delayed monthly payments.

The U.S. car market, for years the world's most lucrative, has been a safe haven for global auto makers since the coronavirus outbreak began to spread. Sales in China have cratered as factories shut down and dealerships close. In Europe, auto makers have been forced to cut production as Italy went on lockdown and the virus spread to other major markets.

The industry's concerns have now shifted from fretting about factory disruptions to bigger worries about whether people will buy cars as much of society shuts down.

"It feels like there is a dark cloud over the dealership," said Andre Woods, a 40-year-old sales associate at Village Ford in Dearborn, Mich. "It's got me unnerved, and I don't shake easily."

For many U.S. dealers, the recent drop off-in buyer traffic was sharp and sudden, just as the industry was gearing up for the busy spring-selling season.

Stores in most areas had seen little virus-related slowdown before last week, when schools began closing and states and the federal government declared emergencies, said Rhett Ricart, an Ohio dealer and chairman of the National Automobile Dealers Association.

"That changed everything," Mr. Ricart said. On a conference call with the heads of dozens of state dealership groups Monday, those in states with tighter restrictions on gatherings reported sales or showroom traffic down 25% to 50% in the past few days, he said.

George Waikem II, general manager at Waikem Ford in Ohio, said the dealership had a solid sales weekend, but store traffic evaporated on Monday, a day after the state's governor ordered bars and restaurants closed to limit the virus' spread. Of the 12 sales appointments scheduled for the day, all but one canceled, he said.

The store already has scaled back some, moving its carwash operation to a skeleton crew and considering other measures if sales continue to slow, he said. His outlook for the week: "Probably a ghost town."

Analysts are warning of the first significant drop in U.S. vehicle sales since 2009, potentially spelling an end to an unprecedented streak of good times for an industry accustomed to boom-and-bust cycles. While U.S. car factories for the most part continue to run, auto makers could be forced to cut production if sales continue to fall or the virus spreads to workers in the plants, they say.

The United Auto Workers and the Detroit car companies reached agreements late Tuesday on coronavirus-mitigation efforts, including partial shutdowns of U.S. factories to help limit worker contact and create more time for cleaning.

José Muñoz, chief executive of Hyundai's North American division, said he expects the auto maker's U.S. sales to drop in March by 15% to 20% over the same month last year and then further slide in April by as much as 50%.

"I see the situation getting worse for the next few weeks," Mr. Muñoz said, adding that he did not expect a slow recovery until summer at the earliest.

RBC Capital Markets this week said auto sales could fall to 13.5 million vehicles this year, which would mark a 20% decline from last year and the lowest level since 2010. The bank also doesn't see a quick snapback in car sales.

Matthew Welch, who owns Auburn Volkswagen in the Seattle area, the site of the country's worst outbreak so far, said sales are down around 30%. He worries what would happen if his store were forced to temporarily close.

"If we have to pay people to not come in, financially we can't do that for long," he said. For now, Volkswagen AG is trying to soften the blow by offering salespeople another $100 for each vehicle they sell on commission, he said.

Some dealerships, including Auburn Volkswagen, are trying to lure in wary buyers by putting a bigger emphasis on their online-sales services, including those that allow shoppers to skip the showroom and take delivery of their new vehicle at home.

While such services have been slow to catch on -- the overwhelming majority of car buyers still prefer to make the purchase in person -- the virus outbreak has sparked more interest lately, said Rick Case, who heads a chain of 16 auto dealerships in Ohio, Florida and Georgia. "People are afraid to go out," Mr. Case said.

Car companies also are scrambling to offer ways to quell the financial uncertainty for customers. General Motors Co. is offering buyers with good credit no-interest loans stretched over seven years, and allowing them to delay payments for four months. Ford Motor Co. on Monday said its in-house lender would allow customers experiencing virus-related disruptions to delay payments in some situations.

Hyundai Motor Co. has dusted off a version of a deal it first rolled out in the throes of the recession in the late 2000s: The company will cover six months of payments for any new-car buyer who loses their job after their purchase.

Before the virus hit, analysts were predicting U.S. vehicle sales would start to cool this year, after topping out at 17 million in 2019 for a record fifth straight year.

Any coronavirus-related hit to the U.S. car market would come at a bad time for Detroit. GM had hopes for a strong start to 2020 after a 40-day strike at its U.S. factories last fall drained $3.6 billion in profit. At Ford, Chief Executive Jim Hackett has assured uneasy investors that his turnaround plan would bear fruit this year following several disappointing quarters.

Write to Ben Foldy at Ben.Foldy@wsj.com and Mike Colias at Mike.Colias@wsj.com

 

(END) Dow Jones Newswires

March 18, 2020 11:11 ET (15:11 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.
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