AutoNation, an auto retailer worth billions, received nearly $95 million in SBA funds

AutoNation, a Fortune 500 company that runs a network of auto sellers, received nearly $95 million in federal small business funds, according to internal company documents and two company employees.

In response to questions from The Washington Post, AutoNation executive vice president Marc Cannon said that the company's board voted Thursday to return the funds even though the company had acquired them under the rules created by Congress and intended to use the money only to pay employees.

The $95 million, spread across dozens of locations, is more than triple the amount any company is known to have received through the fund, called the Paycheck Protection Program. The $349 billion small business loan program ran out of money last week, leaving thousands of small businesses empty handed.

The Post reviewed documents detailing the AutoNation loans and interviewed two employees of the business, who requested anonymity because they were not authorized by the company to discuss the matter.

The $3 billion publicly held company has 26,000 employees in 18 states. AutoNation used separate tax identification numbers assigned to dozens of its more than 300 locations to apply for at least $266 million in funds for separate dealerships, including Jaguar and Land Rover of Bethesda, Porsche Orlando and Lexus of Cerritos, outside Los Angeles, according to the documents.

"The majority of our dealerships are able to apply for this," said executive James J. Murphy on a call with employees last week, according to one of the employees on the call.

Executives compiled detailed spreadsheets of which dealerships had already applied, been approved and received the money. Last week executives internally reported having received $79 million for locations in its western division and $15 million for its eastern division.

More than 81 locations received loan money, according to the documents reviewed by The Post. That included $4.6 million for an Audi dealership in Bellevue, Washington, and $2.7 million for a Toyota Mall location in Georgia.

Cannon said in a statement that the company "was clearly eligible and applied on behalf of the 7,000 employees furloughed caused by the COVID-19 crisis."

"AutoNation intended to rehire all 7,000 associates under the PPP program as encouraged by the government and designed to get individuals back to work," Cannon said. "From the beginning, AutoNation decided that all PPP funds would be used only for our employees and nothing else."

He said that the board voted "to cancel all PPP applications and return all PPP funds by the safe harbor date of May 7th."

The loans were allowed because under the $2 trillion Cares Act economic stimulus package, separate affiliates of a single corporation could apply independently for small business funds. After hotel and restaurant chains received millions of dollars through the program, the Small Business Administration asked Thursday that larger, well-funded companies consider returning those loans by May 7.

For the loans to be forgiven, 75 percent of the money must be used to pay employees. But two company employees said they took issue with AutoNation getting the money.

"Small businesses don't have investors or millions in cash and credit to weather this storm," said one of the company's employees. "AutoNation could have made it through without taking these loans out."

The employee said the loans are "an obscene amount for any company to take out of this fund that was intended to help keep our communities intact." The funds were intended to go to companies with fewer than 500 employees that are unable to obtain credit elsewhere.

The company has gone through leadership changes recently, with Chief Executive Cheryl Miller taking a leave of absence for reported health reasons earlier this month and being replaced by Chairman Mike Jackson until she returns. On Wednesday, AutoNation also named a new president, Jim Bender.

Spokespersons for the Treasury Department and Small Business Administration did not return requests for comment. The administration has refused to release a list of companies that received loans under the PPP, but has said it provided funding to more than 1.6 million small businesses in all 50 states, with 74 percent of the loans for amounts under $150,000.

Yesterday the House passed a new $484 billion small business aid package, which the president is expected to sign.

After the small business program ran dry last week, the resulting outrage prompted chains including Shake Shack, Kura Sushi USA, Ruth's Chris Steak House and Sweetgreen to return their loans. Executives said they had followed the program's rules but returned the funds because their companies had access to other capital in ways that smaller businesses did not.

While AutoNation has not disclosed its PPP loan in public filings, more than 80 publicly traded companies in an array of industries - including owners of large hotel chains, restaurant chains, energy firms and manufacturers - have reported receiving PPP money, Securities and Exchange Commission records show.

Some of the companies are worth hundreds of millions of dollars based on their share values, and many of them pay executives seven-figure compensation packages. Others have boosted their share prices in recent years through share buybacks and dividend payments.

Among those disclosures so far, one of the largest loans appears to be more than $30 million to Ashford Hospitality Trust Inc. The company owns more than 40 hotels including the Ritz Carlton Atlanta and numerous Marriott and Hilton properties, which each received loans ranging from $86,000 to $3.7 million.

The SBA's original $349 billion program contained a vague requirement that businesses certify that "current economic uncertainty makes this loan request necessary." The new guidance is more explicit and said companies that had other sources of cash probably would not qualify.