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May 29, 2020 03:45 PM

ACA survey: Mixed outlook in aftermarket for coming year

Tire Business Staff
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    BETHESDA, Md. — More than half the automotive aftermarket has a somewhat negative business outlook for the next 12 months, according to a recent Auto Care Association (ACA) member survey.

    However, another 26% of survey respondents have a positive outlook while 19% were neutral, according to the results of 208 survey responses through May 18.

    "Over the past few weeks, it appears that the lowest level of vehicle activity is behind us and that vehicle travel has steadily crept back up," the ACA said in it latest online edition of Market Insights with Mike.

    Overall, two-thirds of automotive aftermarket companies are seeing demand reductions in excess of 10%, according to Michael Chung, ACA director, market intelligence.

    About 32% of survey respondents said demand fell by a range of 26% to 50%.

    As such, one-third of companies are highly concerned about their cash position. Acknowledging that the sample size is small, Mr. Chung noted that the concern is particularly pronounced among service and repair shops.

    "This is not terribly surprising given consumers' hesitancy to take their vehicles in for service, in combination with reduction in driving activity," he said.

    According to the survey, larger companies were more likely to have reduced staff and/or closed a facility under state stay-at-home orders.

    "Upon reflection, several factors may be at play: smaller companies are more likely to be family-owned, and the decision to lay off staff may be more difficult because of close or family relations," Mr. Chung said.

    "Further, smaller companies may be required to maintain pre-pandemic employment levels to secure government assistance and larger companies are more likely to be publicly traded, with swifter calls to action to demonstrate fiscal stewardship."

    Larger companies are more likely to have multiple facilities and may have needed to close a facility for disinfection or deep cleaning in the event of an employee's having tested positive for COVID-19 and/or to adjust production schedules based on product demand, he said.

    According to the survey, about half the industry is experiencing disruptions in its supply chain: 44% said supply has been somewhat to very disruptive, while 40% said it was slightly disruptive.

    Due to the impacts on business performance and investments — nearly two-thirds of respondents said they are experiencing a high level of impact — it may be surprising that about 51% of respondents said they had a "somewhat negative" outlook for the next 12 months.

    On average, larger companies (with 501 or more employees) were slightly more pessimistic, and manufacturing companies even more so, with 64% "somewhat negative."

    As the auto care industry continues to serve customers, many shop and factory owners have contacted their legal counsel on appropriate practices and potential liability, the association said.

    "While there is no foolproof way to insulate a business from liability, taking reasonable steps and implementing governmental recommendations on social distancing and other preventative measures (PPE, etc.) will enable a business owner to demonstrate reasonableness and social responsibility," the ACA said.

    Shop owners and facility managers should be mindful of adhering to the most stringent applicable laws in considering their duty to provide a healthful and safe workplace for their employees, the ACA said.

    Business owners are concerned with the potential for being held liable in the event a customer claims he or she was infected with COVID-19 as a result of entering the premises of a business establishment, the ACA noted.

    "It is worth noting that in some jurisdictions an individual is deemed to 'assume the risk' when voluntarily subjecting himself or herself to a known peril — but even in these circumstances the facility owner must take objectively reasonable steps to protect the public. As such, an individual may reasonably be viewed as bearing responsibility with news/media coverage of COVID-19 and related recommendations and orders to avoid unnecessary travel and to practice social distancing."

    Another issue is where, when and how COVID-19 was contracted, the ACA said.

    "It will be difficult for customers to prove causation given the nature of the virus and the ongoing inability to pinpoint where and when people have contracted the virus. As stated above, taking reasonable steps and implementing governmental recommendations on social distancing will enable a business owner to demonstrate reasonableness and social responsibility. You are urged to consult with your own legal counsel to obtain advice applicable to your specific circumstances."

     

     

     

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