COVID-19 Relief Programs:
Paycheck Protection Program (PPP) and COVID-19 Relief:
Treasury Secretary Steve Mnuchin told CNBC last week that “shutting down the economy for a second time to combat the spread of COVID-19 isn’t a viable option.” However, as states and localities begin to reopen, some governments are hitting the pause button on reopening due to spikes in COVID-19 cases. For example, Governors in Oregon, Utah, and Tennessee are pausing reopening plans due to there being sharp spikes in COVID-19 cases. Businesses will have to remain cognizant of any local or state changes to their reopening schedules.
COVID-19 Relief Programs:
Last week, the Federal Reserve released its semi-annual report to Congress, which painted an alarming picture of small business health. The report found that a majority of small businesses are not expecting to return to normal operations within the next six months and that three-fourths of small businesses with employees had applied for the Paycheck Protection Program (PPP). The Federal Reserve also explained that while the PPP program proved to be extremely valuable, some industries will continue to need federal aid even after the PPP program expires. This likely increases the chances that there will be more small business aid in the next round of COVID-19 legislation from Congress.
The Small Business Administration (SBA) has reopened the Economic Injury Disaster Loan (EIDL) grant and loan program. Businesses who have not already applied can apply for an EIDL grant and receive $1,000 per-employee (up to $10,000). Click here for the application page on the SBA website.
There are still funds available in the Paycheck Protection Program (PPP). If you have not already applied for a PPP loan, you can still apply for a loan until June 30, 2020. To find an eligible lender click here. Remember, if you are applying for a PPP loan, you will be more likely to receive funds if you apply with a regional or local bank.
Last week, the D.C. Circuit Court of Appeals ruled against the AFL-CIO, which filed a lawsuit against the Trump administration and claimed that the Department of Labor’s Occupational Safety and Health Administration (OSHA) must issue mandatory COVID-19 workplace safety rules. As of now, OSHA has not issued mandatory COVID-19 specific workplace protections and that the guidance OSHA has published thus far has merely been voluntary and unenforceable. This ruling by the D.C. Circuit Court of Appeals is consistent with past holdings that grant federal executive agencies broad discretion and deference when considering enacting or not enacting regulations.
U.S. automobile shredders are struggling due to lack of feedstock availability and low prices for shredded scrap metal. Due to COVID-19 shelter-in-place orders, the number of vehicles on the roads in April decreased by almost 40% from April of last year. The substantial reduction in vehicle traffic due to COVID-19 has caused some shredders to operate on a limited basis because there is an inadequate supply of vehicles. According to a survey conducted by Argus Media, “inbound scrap volumes now are barely enough to cover April orders.” While April was the worst month for automobile shredders, prices for scrap metal increased slightly in May due to increased demand in part from the reopening of manufacturing by automakers.
FOR MORE IMPORTANT INFORMATION, VISIT ARA's COVID-19 DASHBOARD
Yesterday, the Federal Reserve projected that the U.S. economy will shrink by 6.5 percent this year and that unemployment will only drop to 9.3 percent. This is despite a positive May jobs report from the Bureau of Labor Statistics that found the U.S. economy added 2.5 million jobs last month.
The Federal Reserve made sweeping changes to its Main Street Lending Program. Due to fears of there being little demand for the $600 billion loan program meant to provide support to small and medium-sized businesses negatively affected by the COVID-19 pandemic. As part of the changes, the new minimum amount companies can borrow is $250,000 down from $500,000. The Fed also extended the repayment period from four to five years and will increase the repayment period to two years. These changes are designed to broaden the appeal of the program, which has received little in the way of excitement or interest from businesses.
Recent data from the Department of Transportation shows that car traffic dropped by nearly 40 percent this past April from April 2019 as a result of stay-at-home orders due to COVID-19.
The Insurance Institute for Highway Safety found that only about 34 percent of collisions could be avoided through the use of self-driving cars.
￼COVID-19 Relief Programs:
Last Friday, President Trump signed a bipartisan bill to reform the Paycheck Protection Program (PPP). On Monday, the heads of both the Small Business Administration and the U.S. Department of Treasury issued a joint statement explaining that they would provide new rules and guidance relating to PPP loans. In addition to new rules and guidance, there will be a new modified borrower application form and a modified loan forgiveness application. While these rules and documents have not yet been published, the joint statement outlines some of the important changes to be made:
1) The covered period for loan forgiveness will be extended from eight weeks after the date of loan disbursement to 24 weeks after the date of disbursement. Borrowers who have already received PPP loans will retain the option to use an eight-week covered period.
2) The requirements that 75 percent of a borrower’s loan proceeds must be used for payroll has been reduced to 60 percent. Additionally, if a borrower uses less than 60 percent on payroll, they will still be eligible for partial forgiveness.
3) There will be a safe harbor from reductions in loan forgiveness based on reductions in full-time equivalent employees for borrowers that are unable to return to the same level of business activity the business was operating at before February 15, 2020.
4) There will be a safe harbor from reductions in loan forgiveness based on reductions in full-time equivalent employees, to provide protections for borrowers that are both unable to rehire individuals who were employees and unable to hire similarly qualified employees.
5) Extend the deferral period for borrower payments and increase the date PPP loans mature to five years.
According to the National Bureau of Economic Research, the United States economy is officially in a recession – ending a historic 128 months of economic growth. While this news does not come as a surprise due to the sharp economic downturn that came as a result of state responses to the COVID-19 pandemic, many were shocked by the Bureau of Labor Statistics May jobs report. According to the report, which pushed the S&P 500 into positive numbers for the year and the Dow Jones Industrial Average to trim its 2020 losses to 3.3 percent, payroll employment rose by 2.5 million jobs and the unemployment rate declined by 1.4 percent to 13.3 percent. These numbers come as a shock since many economists had expected the unemployment rate to jump to about 20 percent. As states continue to ease stay-at-home restrictions, the next few weeks will be crucial in determining the trajectory of the economy moving forward and whether we can continue this positive momentum.
The Senate passed legislation on June 3 that would give Paycheck Protection Program (PPP) loan recipients greater flexibility in how to spend their funds while still remaining eligible for forgiveness. The Senate passed H.R. 7010 unanimously and President Trump is expected to sign the bill into law. Some of the main provisions of the new bill gives PPP loan recipients 24 weeks to spend PPP funds – a dramatic increase from the current requirement that businesses spend PPP funds within 8 weeks. The bill also changes the threshold for the amount of PPP funds required to be spent on payroll from 75 to 60 percent of the loan amount. However, to be eligible for forgiveness borrowers must spend at least 60% of the loan on payroll or none of the loan will be forgiven. There are several more changes in the new bill that may have consequences for your business. For more information on how the new law changes the existing rules for PPP forgiveness click here.
On Wednesday, House Democrats rolled out their proposal for a surface transportation bill that would spend $494 billion over next five years. As soon as the House Transportation and Infrastructure Committee released their proposal, Republicans criticized the committee for not taking Republican concerns into account. Republicans also criticized the proposal for giving funding priority to urban areas at the expense of rural communities.
Senate Republicans seem to be changing their position as it relates to federal augmentation of unemployment benefits. Last month, Senate Majority Leader McConnell vowed not to renew the $600 weekly boost to state unemployment benefits from the federal government. However, with the continued rise in unemployment due to COVID-19 and projections that there may be double digit unemployment into 2021, Republicans appear to be more open to continuing the federal supplements to state unemployment benefits. The second highest ranking Republican in the Senate, Senator John Thune (R-SD), stated with regards to federal augmentation of unemployment benefits that the federal increase of weekly unemployment benefits could last until the end of the year depending on how long the current economic downturn lasts.
Former United Auto Workers (UAW) President Gary Jones pled guilty to racketeering and embezzlement on Wednesday. Jones’s guilty plea came after a multi-year investigation by the federal government into the lavish spending and misappropriation union dues by Jones and other UAW board members.
Effective June 1, 2020, Ford Motor Company ended its lighting and bumper core return program. Today, ARA issued a press release responding to Ford’s cancellation of the recovery program. ARA President Scott Robertson said about the issue that “It’s clear that over the past several years, Ford and other auto manufacturers have taken aggressive steps to push the automotive recycling as well as remanufacturing and aftermarket industries out of the market… I find it highly suspect how in 2012, Ford can publicly acknowledge that their original equipment manufacturer (OEM) parts still have a lot of life left, yet they’ve taken every position to the contrary when it comes to the recycled, genuine OEM parts sold by our members. The professional automotive recycling industry is the true champion of recycling here, and I think Ford’s termination of this program shows that.”
FOR MORE IMPORTANT INFORMATION, VISIT ARA's COVID-19 DASHBOARD
Last Thursday, the House of Representatives voted on H.R. 7010, a bill that gives businesses 24 weeks in which to spend Paycheck Protection Program (PPP) funds -- a dramatic increase from the current requirement that businesses spend PPP funds within 8 weeks. The House passed the bill by a vote of 417-1. In prior weeks, Senate Majority Leader Mitch McConnell has expressed disinterest in working with Democrats on COVID-19 relief efforts. However, McConnell has said that the "Senate would soon vote on the House bill that would add flexibility to the PPP loan program. On Monday, McConnell stated that he hopes and anticipates the “Senate will soon take up and pass legislation that just passed the House… to further strengthen the Paycheck Protection Program so it continues working for small businesses that need our help.”
This week, the House of Representatives is set to release a surface transportation bill.
COVID-19 Relief Programs:
According to Federal Reserve Chairman Jerome Powell, the Main Street Lending Program is only days away from beginning to offer $600 billion in non-forgivable loans. The program is designed to offer further relief to small and medium businesses in the wake of COVID-19. Businesses with up to 15,000 employees can apply for loans from $500,000 to $100 million. While the Federal Reserve Chairman believes the program will help businesses struggling to stay afloat, some believe the program is too risky for small businesses due to onerous rules and requirements. In addition, some commentators believe the program appears to be designed to help large companies. For more information on the Main Street Lending Program click here.
Be careful of scams and fraud schemes associated with COVID-19 relief programs. For more information please visit the Small Business Administration’s website. Click here for more information on scams and fraud schemes related to COVID-19 relief programs.
On Monday, the Collision Industry Electronic Commerce Association (CIECA) announced that Paul Barry would be taking over as executive director. Barry previously served as PEMCO claims Vice President.
In April, U.K. automakers produced the fewest number of vehicles in any month since WWII. Automakers in the U.K. only produced 197 vehicles in April, which was a production decrease of 99.7 percent.