Fallout from the continuing credit crunch is hitting a top Richmond-based car dealer hard following a national trend that may start to become reversed now that the U.S. Senate has passed a $700 billion financial bailout plan.
CarMax Inc. announced yesterday that it is laying off 610 workers or 4 percent of its workforce nationwide. In Richmond, the layoffs involve 15 workers at two stores in the Richmond area where it has 1,150 workers. The firm has a total workforce of about 15,200.
The job cuts followed reports for the second quarter that total sales had slipped 13 percent to $1.84 billion. Net earnings declined to $14 million or six cents per diluted share compared to $65 million or 29 cents per diluted share for the period last year.
CarMax said in a release that adverse credit conditions were part of the problem. CarMax Auto Finance, the firm’s credit arm, reported a pretax loss of $7.1 million.
The auto mass retailer’s woes reflect the tightening credit in the past months. Less money is available for consumer credit and car sales have tumbled. Ford Motor Co. reported a 34 percent decline in sales for the second quarter; Toyota Motor, 32 percent; Hyundai, 25 percent, Honda, 24 percent; and General Motors 16 percent.
Prospects for improving car sales, however, could be brightened since the U.S. Senate last night approved an updated version of a $700 billion financial bailout that the U.S. House of Representatives voted down on Monday.
The proposed bailout is designed to buy up bad loans and clear assets so credit can start flowing freely again.The House may consider the plan again on Friday. Meanwhile, CarMax reports that consumers are favoring cheaper, high-mileage used cars that are easier to afford.