AutoNation repays $77 million in US coronavirus relief loans

WASHINGTON (Reuters) – AutoNation Inc. AN.Nthe largest U.S. car dealership chain said on Friday it would repay $77 million it received in forgivable loans from the U.S. Paycheck Protection Program (PPP) intended to help small businesses and employees struggling during the coronavirus outbreak.

Marc Cannon, a spokesman for the company, told Reuters that AutoNation was “clearly eligible and applied on behalf of the 7,000 employees laid off due to the COVID-19 crisis.”

He said the company “intends to rehire all 7,000 associates under the PPP program, as encouraged by the government and designed to put individuals back to work.”

AutoNation has implemented cost-cutting measures, including temporary pay cuts for staff, reduced advertising spending, and the deferral of more than $50 million in capital spending until the second quarter of 2020.

On Thursday, the Small Business Administration issued new guidelines for the program and shortly after AutoNation called a meeting of the board of directors “and decided to cancel all PPP applications and return all PPP funds.” by May 7.

Loans are repayable if businesses utilize at least 75% of payroll expenses. AutoNation said it planned to use all payroll funds.

Cannon confirmed a Washington Post report that AutoNation used separate tax IDs to request at least $266 million in funds for separate dealerships. Cannon pointed out that the company followed the rules of the program.

Auto dealerships have been hit hard by the coronavirus pandemic, with some states temporarily banning sales of new vehicles. Sales fell amid stay-at-home orders aimed at curbing the spread of the highly contagious virus.

CarMax Inc KMX.N, the country’s largest used-car dealership, had said that starting April 18 it would lay off 15,500 employees, but some were called back when stores reopened. About 60% of its locations are now fully open. CarMax said Friday that it did not apply for a payroll protection loan.

On Thursday, US companies began turning down government loans they had just given, after the Treasury Department said publicly traded companies would struggle to prove they really needed the relief funds against coronaviruses.

Some large, well-funded companies have received millions of dollars from the $350 billion funding pool, while many small, family-owned shops have been unable to access any funding, sparking public outrage.

Initial PPP funding was secured in less than two weeks. Congress has now approved another $310 billion and new loans will be issued again starting next week.

Reporting by David Shepardson; Editing by Bill Berkrot

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