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FIRST CLASS MAIL US POSTAGE PAID BOSTON, MA PERMIT NO. 216
November 2013 • Vol. 26 No. 11
The official publication of the Massachusetts State Automobile Dealers Association, Inc
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St a f f D ir e ct o ry Robert O’Koniewski, Esq. Executive Vice President rokoniewski@msada.org Jean Fabrizio Director of Administration jfabrizio@msada.org Peter Brennan, Esq. Staff Attorney pbrennan@msada.org Paul Fellows Administrative Assistant/ Membership Coordinator pfellows@msada.org Aut o D e a l e r M A g a z i n e Robert O’Koniewski, Esq. Executive Editor Catherine MacDonald Editorial Coordinator macdonaldcs8@gmail.com Subscriptions provided annually to Massachusetts member dealers. All address changes should be submitted to: MSADA by e-mail: pfellows@msada.org Postmaster: Send address change to: One McKinley Square, Sixth Floor Boston, MA 02109 Quarter Page: $450 Half Page: $700
Full Page: $1,400 Back Cover: $1,800
Auto Dealer is published by the Massachusetts State Automobile Dealers Association, Inc. to provide information about the Bay State auto retail industry and news of MSADA and its membership.
Ad Directory Bank of America, 2 BlumShapiro, 26 Boston Herald, 36 Downey & Company, LLP, 26 Lynnway Auto Auction, 24 Nancy Phillips Associates, Inc., 3 O’Connor & Drew, P.C., 35 Schlossberg, LLC, 28 Southern Auto Auction, 27 ADVERTISING RATES Inquire for multiple-insertion discounts or full Media Kit. E-mail jfabrizio@msada.org
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The official publication of the Massachusetts State Automobile Dealers Association, Inc
Ta b l e o f C o n t e n t s
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From the President: See You at Auto Show Preview Night THE ROUNDUP: Right to Repair Fix Passed – Finally LEGISLATIVE SCORECARD SOUND OFF: In Today’s Market, There is a Buyer for Almost Every Dealership TROUBLESHOOTNG: Frequently Asked Questions ACCOUNTING: Tax Advantages of Installing Solar Energy Systems AUTO OUTLOOK
18 Cover Story: New England International Auto Show 2014 Preview
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LEGAL: DOL Cracking Down on Dealers Using Real Clean ACCOUNTING: Make 2014 a Happy New Year: Consider These Tax Items NEWS From Around the Horn NADA UPDATE: A Season of Thanks NADA MARKET BEAT
Join us on Twitter at @MassAutoDealers www.msada.org
Massachusetts Auto Dealer NOVEMBER 2013
from the President
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by Scott Dube, MSADA President
See You at Auto Show Preview Night Our Auto Show reminds the public that our business is driven by people
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t’s amazing how little can change in a year. I took the reins as MSADA President from Tuck’s Trucks owner Jim Boyle at the last Annual Meeting. As he departed, he could reflect on a four-year tenure that included the most catastrophic changes our economy, and our industry, had ever seen. From the ‘08 crash to the Chrysler and GM bankruptcies, our Association had been tested like it had never been before. What came out of those struggles was a renewed sense of purpose. When we encountered “Right to Repair” at home and the Consumer Finance Protection Bureau down in Washington, we were prepared. And we mobilized to make sure our interests weren’t tossed aside, as so many have attempted to do. We’re now preparing our 2014 New England International Auto Show and Preview Night, which will mark my one year anniversary. All of this capital we’ve built remains in play as we continue the fight against Tesla Motors. If “Right to Repair” was an unsound policy push from aftermarket parts companies, what Tesla is attempting is an attempt to rip up and throw out franchise laws in our state. It’s a daunting battle, and just one of many we are always preparing to face as dealers. And I know I can count on you to continue to remain active in the Association and joining me where our voice is needed to prevent others from taking away our ability to do business. You’ve read and heard from me time and again how that means interacting with your legislators and making sure they know who you are and where you stand. The New England International
Auto Show is a chance to accomplish the same goal, but have a lot more fun. The New England International Auto Show is a chance to also get our names out there behind our products. The ingenuity of automotive technology has been in overdrive since the days of first inventing the internal combustion engine, but every year it seems our product is safer, more efficient and more fun. We all are going to have our own favorites at the Auto Show. Of course, we dedicate our livelihoods to certain manufacturers, and we’d damned well better expect they be the best on the floor. But the bigger message is that with all these new models rolled out for the public, we dealers are here to help get them in the vehicle of their dreams. It’s a critical message: the automotive business is a people-driven business. We are here for our customers. We’re here for their convenience and, more importantly, their safety. That’s why the laws are the way they are, and why we’re always striving to protect and improve them. The Auto Show delivers that message softly, but it can’t be missed. With all that being said, the Auto Show is about us enjoying ourselves, too. So we’ve made this year’s Preview Night more convenient and accessible, We’ve moved it to Friday night so that you might “stay in town” and we have a couple of other surprises about the evenings format that are sure to be fun! I encourage you to contact us with any ticket orders and questions. Jean Fabrizio can be reached at (617) 451-1051 or jfabrizio@msada.org. We’re planning a great night, and I’m excited to see you there.
We are here for our customers. We’re here for their convenience and, more importantly, their safety.
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Msada Board Barnstable County Gary Beard, Dick Beard Chevrolet
Berkshire County Brian Bedard, Bedard Brothers Auto Sales
Bristol County Richard Mastria, Mastria Auto Group
Essex County William DeLuca, Woodworth Motors John Hartman, Ira Motor Group
Franklin County Jay Dillon, Dillon Chevrolet
Hampden County Jack Sarat, Jr., Sarat Ford
Hampshire County Bryan Burke, Burke GMC
Middlesex County Chris Connolly Jr., Herb Connolly Motors Scott Dube, Bill Dube Hyundai
Norfolk County Jack Madden, Jr., Jack Madden Ford Charles Tufankjian, Toyota Scion of Braintree
Plymouth County Christine Alicandro, Marty’s Buick GMC Isuzu
Suffolk County Robert Boch, Expressway Toyota
Worcester County Steven Sewell, Westboro Mitsubishi Steve Salvadore, Salvadore Auto
Medium/Heavy-Duty Truck Dealer Director-at-Large [Open]
Immediate Past President James G. Boyle, Tuck’s Trucks
NADA Director Don Sudbay Jr., Sudbay Motors
Officers President, Scott Dube Vice President, Chris Connolly, Jr. Treasurer, Jack Madden, Jr. Clerk, Charles Tufankjian
A ssociate M ember D irectory Name Contact Telephone ADESA Boston Chris Carli (508) 270-5403 ADP Dealer Services Maria Trezza (973) 404-4466 Albin, Randall & Bennett Barton D. Haag (207) 772-1981 American Fidelity Assurance Co. Tom Trudell (413) 885-5477 AutoRaptor (RAL) Howard L. Leavitt (401) 421-6533 Bank of America Merrill Lynch Lawrence Corrente and Nancy Price (781) 534-8543 Bellavia Blatt Andron & Crossett, PC Leonard A. Bellavia, Esq (516) 873-3000 Blum Shapiro John D. Spatcher (860) 561-4000 Boston Globe Mary Kelly (617) 929-8373 The Boston Business Advisory Group Paul Cuomo (781) 681-1501 Vincent Saccone (781) 681-1519 Burns & Levinson LLP Paul Marshall Harris (617) 345-3854 Cars.com Tawanda Falconer (312) 601-5052 Construction Management & Builders, Inc. Kate Sullivan (781) 246-9400 CVR Scott Herbers (714) 684-2614 DealerDOCX Merchon Brower (585) 451-3322 Dealermine Inc. Steve Rogers (800) 304-3341 DealerTrack Ernest Lattimer (516) 547-2242 Downey & Company James Downey (781) 849-3100 EasyCare New England Inc. Mike Douglas (770) 246-9724 Ethos Group, Inc. Drew Spring (617) 694-9761 F & I Resources Jason Bayko (508) 624-4344 Federated Insurance Chris Welch (724) 766-6666 First Citizens Federal Credit Union Joe Ender (508) 979-4728 Fisher & Phillips LLP John Donovan (404) 240-4236 Joe Ambash (617) 532-9320 Grant Thornton LLP Alan Oslomowski (508) 926-2200 GW Marketing Services Gordon G. Wisbach Jr. (781) 899-8509 Huntington National Bank John J. Marchand (781) 326-0823 Key Bank James Q. Moretti (781) 558-5132 Leader Auto Resources, Inc. Brendan J. Murphy (518) 878-6341 Lynnway Auto Auction Jim Lamb (781) 596-8500 M & T Bank John Federici (508) 699-3576 MetroMedia Energy Timothy Teevens (800) 828-9427 Micorp LLC Ryan Kim (508) 832-9816 Mid-State Insurance Agency James Pietro (508) 791-5566 Mintz Levin Kurt Steinkrauss (617) 542-6000 Murtha Cullina Thomas Vangel (617) 457-4000 Nancy Phillips Associates, Inc. Nancy Phillips (603) 658-0004 O’Connor & Drew, P.C. Kevin Carnes (617) 471-1120 Performance Management Group, Inc. Mark Puccio (508) 393-1400 Ray-Jurgen Richard Thibadeau (860) 585-0111 R.L. Tennant Insurance Agency, Inc. Walter F. Tennant (617) 969-1300 Resource Management Group J. Gregory Hoffman (800) 761-4546 Reynolds & Reynolds Marc Appel (413) 537-1336 Robinson Donovan Madden & Barry, P.C. James F. Martin, Esq. (413) 732-2301 Samet & Company John J. Czyzewski (617) 731-1222 Schlossberg, LLC Michael O’Neil, Esq. (781) 848-5028 Sentry Insurance Company Eric Stiles (715) 346-7096 Shepherd & Goldstein Ron Masiello (508) 757-3311 Silverman Advisors, PC Scott Silverman (781) 591-2886 Southern Auto Auction Tom Munson (860) 292-7500 Sovereign Bank Richard Anderson (401) 432-0749 Target Dealer Services Andrew Boli (508) 564-5050 TD Auto Finance BethAnn Durepo (603) 490-9615 TD Bank Michael M. Lefebvre (413) 748-8272 Wells Fargo Dealer Services Christopher Peck (508-314-1283) Wicked Local Media Massachusetts Jay Pelland (617) 757-5571 Zurich American Insurance Company Steven Megee (800) 443-4513
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The Roundup
Right to Repair Fix Passed – Finally by Robert O’Koniewski, Esq. MSADA Executive Vice President A little over a year since the problem was created, the Massachusetts Legislature before it broke for its holiday recess approved legislation that would reconcile the conflict that exists between two different “right to repair” laws. By taking action on the last day of its 2013 formal sessions, the Massachusetts Legislature helped franchised car and truck dealers across the state to avoid unnecessary sales disruptions beginning next year. As we go to press, the bill is before the governor for his review and signature. This problem exists because two RTR laws were enacted in 2012 – one through the usual legislative route (Chapter 241 of the Acts of 2012), which we supported, and one through the initiative petition process in last year’s election (Chapter 368 of the Acts of 2012), which we opposed. As you may recall, the efforts of the various parties last year to achieve compromise on a viable RTR law was based in part on the onerous and unworkable provisions contained in the initiative petition. One such penalty provision in the initiative petition law adversely strikes at the very existence of our dealerships and the livelihoods of our employees for no fault of the dealers: Beginning with Model Year 2015 vehicles (to be sold as of January 2, 2014), if a manufacturer cannot or does not want to comply with certain repair and diagnostic requirements demanded in the law, that manufacturer’s franchised dealers are prohibited from selling or leasing those non-compliant vehicles. This is akin to punishing one brother for the sins of the other. There was an element of time sensitivity to this
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drama. In the first year of its two-year sessions, (the odd year), the Legislature breaks for the year on the Wednesday the week before Thanksgiving. After that day, any matter taken up in the remainder of 2013 would need unanimous consent of the members present. Pushing the drama to the limit, on November 12 the Joint Committee on Consumer Protection and Professional Licensure reported a bill out favorable, House 3757, which was essentially the compromise law from last year, except for a small amendment to incorporate all personal vehicles up through Class 3 in weight (14,000 pounds, from the 10,000 currently) into the law’s scope. The House of Representatives unanimously approved that bill the next day and sent it to the Senate. In addition to House Speaker Robert DeLeo (D-Winthrop), we owe a debt of gratitude to the Committee’s House Chairman, Rep. John Scibak (D-South Hadley), for his strong leadership in guiding House 3757 out of his Committee and through that chamber in a day. The Senate is where the fun started. Various parties who received no satisfaction in the House swarmed that chamber with several amendments. AAA wanted to change the law’s treatment of telematic services and be able to grab proprietary messaging between vehicle owners, manufacturers and dealers. Truck, motorcycle and RV repairers and owners all wanted their vehicles included in the repair law, as well. It was the medium- and heavyduty truck issue that presented the most complications. The Senate Ways and Means Committee, led by Chairman Stephen Brewer (D-Barre), reported the bill out as sent by the House. Immediately, interests
MSADA adverse to dealers and the OEMs signaled through other Senators their interests in amending the bill. After 72 hours of wrangling that threatened completion on the bill in time to avoid the Midnight cut off on November 20, legislators and dealer, manufacturer, and repairer representatives came to an agreement to phase in under the statute various aspects of truck coverage in a manner that manufacturers could reasonable comply with over the next five years. A number of Senators battled to make sure compromise was achieved and sent to the governor before the November 20 deadline: Senate President Therese Murray (D-Plymouth), Majority Leader Stan Rosenberg (D-Amherst), Senate Committee Chairman Thomas Kennedy (D-Brockton), Sen. Marc Pacheco (D-Taunton), and Senate Minority Leader Bruce Tarr (RGloucester). The compromise law again being sent to the governor for his signature contains a number of key dealer-related provisions we fought for last year and presently: • Compliance pushed out to MY2018: Manufacturers must comply with a choice of universal non-proprietary interface standards by Model Year 2018; • Vehicle sales prohibition deleted: Removes the onerous prohibition on dealer vehicle sales if a manufacturer cannot, or opts not to, comply with the law; • Construction equipment carved out of the law, and heavy-duty trucks phased in; • Protect dealer franchise rights: Language inserted that re-affirms the basis for dealers’ warranty and recall work under the franchise agreements and the Chapter 93B franchise law, and prohibits any RTR law from piercing the dealer-manufacturer relationship; • No manufacturer-owned repair centers: Language deleted relating to “authorized repair facilities” that would have enabled manufacturers to designate independent repair facilities for warranty, recall, and repair work outside the dealer-manufacturer relationship; • Prohibits tooling price discrimination:
Language inserted that protects dealers from having to buy duplicate tools and information from the manufacturers if the manufacturers are offering the same tools and information to independent repair facilities at terms more favorable than or equal to that at which the dealers can obtain it as required pursuant to their franchise agreements; • Dealer access to key codes affirmed: Removes the requirement that dealers obtain key codes and other immobilizer re-set info from the federal body, NASTF, thereby continuing the dealers access to this info directly with the manufacturers, as is the case now; • Prevent interference by manufacturers in dealer’s non-franchise repair services: Corrects the definition of “independent repair facility” to state that a new car dealer is such a repair facility when working on vehicles outside its franchise line-make and providing dealers the same rights under the law as the non-dealer repairers; • No disclosure of customer information: Prohibits the disclosure to the aftermarket of dealers’ customer information as well as of non-diagnostic and non-repair information flowing between manufacturers and dealers related to franchise operations; and • Telematic services protected: The law cannot be construed to break a telematic services contract between a manufacturer or service provider, a dealer, and/or a motor vehicle owner.
Minimum Wage The Senate was busy with other matters while the RTR negotiations occurred. On a 32-7 vote, the Senate approved a bill to increase the state’s minimum wage by $3 over the next three years to $11 an hour, which would be one of the highest minimum wages in the country. The bill would also tie future increases in the minimum wage to inflation and require that it always be at least 50 cents higher than the federal minimum wage (currently $7.25/hr.) The three-step increase would hike the minimum wage to $9 in 2014, $10 in 2015 and $11 in 2016. The last time the Legislawww.msada.org
ture voted to increase the minimum wage was in 2006 when lawmakers approved an increase to its current level of $8 an hour, phased in over two years. In addition to Republican Sens. Bruce Tarr (R-Gloucester), Robert Hedlund (RWeymouth) and Richard Ross (R-Wrentham), four Democrats also voted against the bill: Sen. Eileen Donoghue (D-Lowell), Sen. Richard Moore (D-Uxbridge), Sen. Kathleen O’Connor Ives (D-Newburyport) and Sen. Michael Rodrigues (D-Westport). The bill now moves to the House, where House Speaker DeLeo has been less than enthusiastic about a wage hike bill unless it includes reforms to the unemployment insurance system.
Auto-Related Legislation Tesla: While the Senate worked on our RTR compromise bill, in another part of the State House the Joint Committee on Consumer Protection and Professional Licensure held a public hearing on various auto-related bills that drew considerable interest because of that five-lettered word “Tesla.” First on the agenda was House 241, filed by Rep. David Linsky (D-Natick), which would allow a vehicle manufacturer to own and operate a new vehicle dealership as long there were no franchised dealers of the same line make. MSADA obviously opposed this bill. We have seen this fight before. In 2002 the Legislature enacted a major overhaul of Chapter 93B to create a level playing field between dealers and their franchisor manufacturers and address a number of abuses those manufacturers had inflicted, or attempted to inflict, upon their dealers, thereby prompting the need for the statutory overhaul. One such situation the Legislature specifically addressed was to tighten the prohibition on manufacturers owning or operating dealerships, directly or indirectly. This was a reaction to attempts by several major manufacturers to do just that not only in Massachusetts but elsewhere across the country.
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The Roundup Chapter 93B, at Section 4(c)(10), prohibits a manufacturer from owning and operating, either directly or indirectly, a vehicle dealership except in two well-defined instances – (1) in a successor situation for a limited period of time where an existing dealer needs to be replaced and (2) through a dealer development program in which a manufacturer stakes a dealer recruit in a dealership and the dealer becomes fully vested over a defined period of time. All that has changed currently is the name of the manufacturer. Today it is Tesla. Tesla is attempting to do business in Massachusetts by circumventing the very law every dealer, and every manufacturer, must follow. There is nothing in the current law that prevents Tesla from doing business in Massachusetts, as long as they follow the rules that apply equally to all other auto-related parties. In October 2012, MSADA initiated a lawsuit against Tesla Motors Inc. for attempting to own and operate a car dealership in the Town of Natick, which, we argue, violates the (unambiguous) prohibition against such ownership as contained in Chapter 93B. Our litigation is now before the Commonwealth’s Supreme Judicial Court, having been moved up from the Appeals Court directly by the SJC. MSADA, our sister state associations across the country, and the National Automobile Dealers Association take these efforts by Tesla very seriously. We see this as a blatant attempt by Tesla to undermine the dealer franchise system – a system which has served the Commonwealth’s consumers and economy rather well. The benefits of the current dealer franchise system are substantial. The franchise network promotes consumer competition and public safety, and instills confidence in the consumer that there will be someone there when help is needed. Our 412 franchised new car dealers, who represent almost 20% of the Commonwealth’s retail economy, provide incalculable competitive opportunities for consumers. Not only do our dealers comNOVEMBER 2013
MSADA pete for the consumers’ dollars inter-brand (Ford dealer vs. Chrysler dealer vs. Toyota dealer, etc.), but they also compete against each other intra-brand (Ford dealer vs. Ford dealer, Nissan dealer vs. Nissan dealer, etc.), all to provide the best value for the astute consumer. What’s better for the consumer – competition amongst 412 stores or a system of 25 manufacturer entities offering factory-dictated terms at set prices? All state governments require the dealer to invest in brick-and-mortar facilities to ensure there is an independent franchised dealer available to car owners for the life of the vehicle, not just at the point of sale. Buying a car is not like buying any other product. When you have a problem with your iPad, for example, it affects only you. When you have a problem with your car, it affects you and the driving public. It’s a matter of public safety. Finally, the Massachusetts Legislature has affirmed a dealership system, anchored by store ownership by independent small businessmen and women and not the franchisor factories. For more than 100 years, automakers have contracted with franchised dealers to sell and service their vehicles because it’s the most efficient and cost effective option. Ford and General Motors tried owning their own dealerships and failed. Factory stores do not deliver better customer service, and they do not reduce customer cost. Auto dealers’ total investment in land, equipment and facilities exceeds $150 billion nationally. Without the franchise system, auto manufacturers would shoulder these expenses themselves. 93B: As you may recall, the Legislature last year passed and the governor signed into law Chapter 152 of the Acts of 2012, which addressed certain dealer-OEM issues through our franchise law, Chapter 93B, including establishing a formula for the parties to rely on to ensure dealers receive actual retail-level reimbursement for warranty work and parts. For this year’s session, Senator Marc Pacheco, a long-time ally of franchise
Massachusetts Auto Dealer www.msada.org
dealers, filed Senate 129 to address additional on-going concerns in the dealermanufacturer relationship. At the public hearing MSADA President Scott Dube and I testified in favor of the bill, which was opposed by the manufacturers and Subaru New England, the lone distributor in the state. Issues addressed in Senate 129 include the following: • Amends the price discrimination prohibition protection for dealers to identify the type of facility upgrade programs that violate price discrimination protections; • Prohibits vehicle surcharges by manufacturer to pay for warranty reimbursement at the statutorily required retail rate; • Protects dealers from investing in costly facility upgrades when the dealer does not have a reasonable expectation to recoup the investment and limits how often the manufacturer can request a facility upgrade; • Eliminates backdoor facility upgrade demands through untenable incentive programs; • Prohibits a manufacturer from requiring a dealer to purchase goods or services from a vendor selected, identified, or designated by a manufacturer or distributor by agreement, program, incentive provision, or otherwise without making available to the dealer the option to obtain the goods or services of substantially similar quality from a vendor chosen by the dealer; and • Protects dealers from manufacturers’ using export chargebacks to penalize dealers for cars that get exported without dealer’s knowledge. We will continue to work with the manufacturers on this bill to develop a product that will provide dealers the additional protections being sought. Doc Fee Cap: The Committee had on its agenda Senate 95, filed by Sen. James Eldridge (D-Acton), which would cap the doc prep fee at $75. No one testified in favor of this proposal. MSADA is opposed. .
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Massachusetts Auto Dealer NOVEMBER 2013
Insurance
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MSADA
SOUND OFF
MSADA
In Today’s Market, There is a Buyer for Almost Every Dealership By Nancy Phillips Many of the most desirable dealerships are aggressively targeted by other dealers and dealership groups. But if you want to grow and aren’t the biggest fish in the sea, there are still good opportunities out there that are different from what you thought your dream store may be. Meet Steve Pelletier - young, ambitious, successful in the Maine lumber industry - now turned auto dealer in Fort Kent, Maine. When Norm Martin, the Ford dealer in town wanted to sell, he engaged Nancy Phillips Associates to assist him and introduced us to Pelletier in the process. Steve was very entrepreneurial, highly ambitious and strong financially. We liked him immediately and thought he was just what the community of Fort Kent needed. While we would never dare to present a franchise application to Ford proposing a lumberman as their new dealer, we did come up with a creative way to sell to Pelletier, keeping the original owner in place for a period of time. Pelletier upgraded the facility immediately endearing himself to Ford in the process and the business grew faster than anyone anticipated. When the Fort Kent General Motors dealership burned to the ground in a massive fire just one year ago, it’s owner Carl Theriault, also called on Nancy Phillips Associates for help. Thus began the most unusual transaction in our 25-year his-
tory of selling dealerships. We represented both buyer and seller and worked through a multitude of obstacles to consummate the sale and rebuilding of the dealership that General Motors classified as non-existent. We have just returned from celebrating the grand opening of Steve Nancy celebrating with previous “Valley Motors” owner Carl TheriPelletier’s new Chev- ault and Steve Pelletier, who got his rolet, Buick and GMC start in the industry through Nancy dealership and wanted Phillips Associates. to share this story of the new dealer who saw opportunity where others did not and our role in making it all happen. If you own Steve Pelletier, with his family and employees, a dealership gets ready to cut the ribbon at his new dealership. Most of the town of Fort Kent, and in an outlyeven the Governor’s wife, came to celebrate ing area or the Grand Opening just one year after the one that has original dealership burnt to the ground. other challenges, remember there may be an option you never considered that could add significant value to your exit plan. Thinking outside the proverbial box as a buyer may just land you a dealership with low expense, less competition and a big upside potential. The difference between terminating a franchise and looking at an empty building and finding someone to replace you is enormous.
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Valley Motors, owned by Carl Theriault for 15 years, burnt to the ground in October of 2012, leaving him in uncharted waters. With the help of Nancy Phillips Associates the dealership was sold and reopened just one year after the fire.
Nancy Phillips Associates specializes in sales, acquisitions and evaluations of franchised automobile dealerships. Contact Nancy Phillips at 603-658-0004 or email auto@nancyphillips.com.
Do you have an opinion you want to share? Send submissions to tnash@msada.org.
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Massachusetts Auto Dealer NOVEMBER 2013
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Troubleshooting
MSADA
Frequently Asked Questions By Peter Brennan, Esq.
Staff Attorney, MSADA Here at your Association, we field legal inquiries from dealers and their employees on a daily basis. Many of these questions reappear from time to time, and this column will periodically review some of the most frequently asked questions that we field on behalf of members.
Q: What type of information am I allowed to request on a job application? Numerous state and federal laws dictate the kinds of information that must be either included or excluded from employment applications. Dealers need to ask the right questions to avoid liability on a charge of negligent hiring, but also avoid requesting prohibited information so as to prevent a hiring discrimination lawsuit. Solicit relevant job related information to help you determine whether an applicant is qualified for the listed position such as education level, work experience, and skills. Make sure to include an authorization to be signed by the applicant allowing the employer to check all references and conduct a credit and background check, as well as a verification statement that the applicant must sign to verify the information provided in the application. Refrain from requesting any information that pertains to the following NOVEMBER 2013
subjects: Age, National Origin, Gender, Sexual Orientation and Religion. Information regarding an applicant’s criminal record must not be requested on the initial employment application, but an employer may ask the applicant about his or her criminal history during the interview process. Additionally, employers may not request health or disability-related information, but may ask whether the applicant can perform the functions of the job with or without reasonable accommodation, whether they can meet the attendance requirements of the position, and if the applicant holds any required licenses. Contact your Association for a legally compliant template for a job application.
Q: If I terminate an employee for stealing dealership funds, do I have to give the employee her last paycheck? Can I instead apply these funds towards the loss? While withholding an employee’s final paycheck after dismissing the employee for theft might seem like a reasonable and fair action in light of the circumstances, such practice was prohibited by the Massachusetts Supreme Judicial Court in a 2011 decision. Under Camara v. Attorney General, an employer cannot deduct from an employee’s wages without a “valid set off,” which requires a clear and established debt, determined by an impartial third party, such as a court. Even if an employer has a specific policy requiring the employee to reimburse the company for lost money, the policy would be ruled invalid in court, and the deduction would not be permitted. If an employer wishes to seek reimbursement under similar circumstances, he must get a judgment against the employee in court.
Massachusetts Auto Dealer www.msada.org
Without the valid set off, the employer would be liable for treble damages under the law: three times the amount of any invalid deduction. In addition to obtaining a judgment, the dealer should also notify their insurance carrier because employee dishonesty may be covered under the dealership policy.
Q: What is full-time versus parttime employment? Neither Massachusetts nor Federal law defines what constitutes a “fulltime” or “part-time” employee. Most employers handle the designation of “full-time” versus “part-time” internally for purposes of establishing employee benefits such as paid vacations, sick days, and, most importantly, participation in the employer’s group health insurance plan. Massachusetts health care reform set the standard for FTEs at 35 or more hours per week, while Obamacare (the Affordable Care Act) considers the full-time threshold to be 30 or more hours per week. For health plan eligibility purposes, employers should refer to the current federal standard. For the purposes of establishing employee benefits such as paid vacations, sick days, paid holidays, etc., employers are free to set their own standard for FTEs, but should make sure that the policy is consistently applied and written down, preferably in an employee handbook. The employee handbook should be designed with the assistance of counsel and distributed to every employee at the time of hire, with the employee signing a statement acknowledging receipt of the handbook. If you have a question that you would like to see answered in this column, please contact Peter Brennan, MSADA Staff Attorney, at pbrennan@msada.org or by phone at (617) 451-1051.
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Tax Advantages of Installing Solar Energy Systems Solar energy is a natural, clean renewable energy source that offers both cost savings and security for businesses. It can reduce electric bills substantially while providing a stable and afMaureen Burns fordable source of energy Fradera is a for the business. Many senior manager businesses are moving at Downey & Company and towards environmenspecializes in tally friendly solutions to auto dealership meet their building and accounting. energy needs. For these businesses, solar energy may not only be an attractive “green” alternative to reduce their environmental footprint, but a tax savings opportunity as well. The installation of an efficient, clean, energy producing renewable energy system now could mean both lower electric bills and tax savings in the future.
By Maureen Burns Fradera
Federal Tax Incentives In order to encourage the use of renewable energy, including solar energy, the United States federal government has instituted the federal energy investment tax credit program. Under this program, an investment tax credit for installing solar energy systems is available in the amount of 30% of the cost of those systems. There is no cap on the amount of qualifying costs or the amount of the credit available to individual property owners. It includes not only the solar equipment, but the cost of installation as well. The credit is available to qualified commercial property owners through 2016. If the credit cannot be fully utilized in the year the system is installed, it may be carried forward for five years or until 2016. Systems eligible for the federal energy investment tax credit include those solar systems that generate electricity to heat, cool or provide lighting to illuminate the inside of a structure. The original use of the equipment must begin with the taxpayer. All applicable design, performance, and quality standards in effect at the time the equipment is acquired must be met in order to qualify for the credit. Federal incentives don’t end there, though. In addition to the federal energy investment tax credit, there is a deduction available for the first year the equipment is put into service in the amount of 50% of the cost of the equipment. This deduction is available under the existing Bonus Depreciation Rules. The remaining cost may be depreciated over the next four years.
Massachusetts Tax Incentives
Massachusetts has an aggressive renewable energy program which requires electricity providers to obtain increasing amounts
of the electricity consumed in the state each year from solar sources. This gives rise to the need for providers to purchase renewable energy credits from outside sources. That means businesses that generate solar power have the very real opportunity to generate an incremental revenue stream by selling energy credits for excess power generated by their solar systems. This technique further reduces the cost of energy for Massachusetts businesses. Massachusetts allows businesses to deduct the cost paid or incurred from the installation of qualified solar systems from net income for state excise tax purposes when certain criteria have been met. Furthermore, solar systems that qualify for the deduction from net income will not be taxed under the tangible property measure of the state’s corporate excise tax for the length of the equipment’s depreciation period. This means, a qualifying property owner may not pay any Massachusetts excise tax on the new solar system for up to five years. The value added to taxable property as a result of installing a qualifying solar system will be exempt from local property taxes for a period of 20 years. Solar system equipment and materials are exempt from sales tax in Massachusetts. The following is an example to illustrate the potential tax savings for a Massachusetts S-Corporation: Cost of System
$300,000
Federal Energy Tax Credit 30%
(90,000)
Cost of System After Tax Credit
$210,000
Other Potential Tax Savings: Federal Tax Savings on Bonus Depreciation for Owners in the 39.6% Tax Bracket ($300,000 cost less 50% of investment tax credit of $90,000 = 255,000 depreciable base * 50% bonus depreciation = $127,500 X 39.6%)
(50,490)
Massachusetts S-Corp. Income Tax Savings ($300,000 X 2.75%)
(8,250)
Massachusetts Corporate Excise Tax Savings ($300,000 X .026%)
(7,800)
Massachusetts Tax Savings for Owners ($300,000 X 5.25%)
(15,750)
Total Potential Tax Savings
$91,290
Cost of System in Year 1 Less All Potential Savings
$118,710
Assuming a savings on utility costs plus revenue generated from the sale of renewable energy credits of $10,000 to $15,000 per year, the remaining cost could be fully recovered in approximately 7 - 10 years. If you would like more information on this topic, please contact Maureen Burns Fradera at 800-849-6022 or mburns@downeycocpa.com
www.msada.org
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Massachusetts Auto Dealer NOVEMBER 2013
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AUTO OUTLOOK
NOVEMBER 2013
Massachusetts Auto Dealer www.msada.org
MSADA
www.msada.org
Massachusetts Auto Dealer NOVEMBER 2013
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New England International Auto Show
2014 PREVIEW
Buick Lacrosse The LaCrosse’s new advanced technologies include camera- and radar-based safety features that work with General Motors-patented Safety Alert Seat
GMC Sierra HD New and enhanced features for the 2015 Sierra HD lineup include CornerStep rear bumper, EZ Lift and Lower tailgate, standard upper tiedowns and other features that make cargo handling easier.
Cadillac CTS Sedan The new Vsport model offers a new Cadillac Twin-Turbo V-6 and the brand’s first eightspeed automatic transmission.
Scion iQ
The iQ is powered by an efficient 94-hp 1.3-liter four-cylinder engine, paired with a Continuously Variable Transmission. NOVEMBER 2013
Massachusetts Auto Dealer www.msada.org
MSADA Lincoln MKC The base MKC shares a 2.0-liter, 240 horsepower EcoBoost four-cylinder engine with the MKZ.
MINI Hardtop Every new MINI has 3 driving modes you can switch on the fly: Sport Mode, Green Mode and mid-mode.
Chevrolet Spark Continuously variable transmission on gasoline Spark with 3.75 final drive ratio increases highway fuel economy to 39 mpg, improves acceleration, and reduces engine noise at highway speeds
Toyota Highlander Hybrid Limited This is one of the first auto show appearances for this vehicle. www.msada.org
Massachusetts Auto Dealer NOVEMBER 2013
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2014 New England International Auto Show
Nissan GT-R The GT-R gets new lighting technology for 2015, including multi-LED headlights that lend the car a new light signature at night.
Equus Ultimate Equus employs a unique thermoelectric technology that controls the heating, cooling and humidity of
Rolling into Showrooms
Chrysler 300 The 2014 Chrysler 300S features body-colored door handles and fascia inserts, a glossy black finish for the belt molding and light surrounds, and a new black chrome grille. NOVEMBER 2013
Massachusetts Auto Dealer www.msada.org
i Beetle The i Beetle is the first model series of the Volkswagen Group in which the iPhone will become an integrative component.
PREVIEW
Mercedes E350 Cab
Ford Transit Connect Wagon
The E350 Cab’s fuel-saving ECO Start/Stop system automatically shuts off the engine at stoplights and other idle situations. As soon as the driver lifts off the brake, the engine instantly restarts for immediate acceleration response.
Powered by either a 2.5-liter four-cylinder or an EcoBoost 1.6-liter four pot, the front-drive Transit Connect Wagon may be had in one of two wheelbase configurations.
in 2014
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Kia K900 The 2015 Kia K900, Kia’s newest luxury sedan, is the brand’s featured vehicle for the auto show. The allnew K900 is scheduled to go on sale next year and be available with either a V6 or V8 engine.
Audi AG S3 Sedan The S3 has a range-topping S3 with 300 hp and Quattro. www.msada.org
Massachusetts Auto Dealerr NOVEMBER 2013
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Legal
MSADA
By Joseph W. Ambash
Alert: DOL Cracking Down on Dealers Using Real Clean We have learned that the Department of Labor has approached several dealers in the past couple of weeks and demanded payment of overtime for detailers working for Real Clean (Kilnapp Enterprises). The amounts range from a few thousand to tens of thousands of dollars. In some cases the DOL has asked the dealer to pay “liquidated damages,” meaning a penalty equal to the total back pay owed. This is a serious situation for dealers who have relationships with Real Clean, and it will only get worse. As we have previously reported, the DOL has been visiting dealerships for months, demanding to interview dealership employees and Real Clean employees. Their primary objective has been to tie the dealerships to Real Clean, in order to claim that the dealership is a “joint employer” of the Real Clean personnel. After the DOL completes its investigation, which typically also covers FLSA compliance for the dealership employees, the DOL schedules a “closing conference” and demands backpay and overtime it claims is owed both to any dealership employees who were improperly paid, as well as to employees of Real Clean. The dealers, of course, do not employ any of the Real Clean employees directly, nor do they supervise or control their work. Under the brokerage arrangement with Real Clean, the dealer pays a fee directly to Real Clean for detailing or reconditioning each car, and Real Clean is exclusively responsible for paying its employees and contractors. The DOL claims that the Real Clean contractors are not independent, but are “jointly” employed by the dealer and either Real Clean or the contractor. Therefore, the DOL says the dealers are responsible for monitoring their hours and pay, and making sure they are paid minimum wage NOVEMBER 2013
and overtime. When the dealers explain to the DOL that they have no knowledge of or control over the Real Clean personnel, the DOL often threatens them with liquidated damages or legal action if they don’t pay the money, which covers alleged back pay for two years. Even if a dealer decides to pay the DOL, that does not relieve the dealer of liability, because each day Real Clean employees are not paid overtime or minimum wage constitutes a new violation. The DOL, therefore, can come back again and demand more back pay unless something has changed.
What Should Dealers Do? If they feel that the DOL has no legitimate reason demanding money from them for work done by Real Clean employees, dealers have a variety of options to consider, including: • Real Clean has indemnification agreements with some dealers. It has indicated that it will consider offering indemnification agreements to all of its dealers. Real Clean is asking the dealers not to agree to pay the DOL, but instead to let Real Clean’s lawyers defend them. Real Clean has indicated through its lawyer that it will not reimburse any dealers who choose to pay the DOL directly. • Therefore, dealers have the option of not paying the DOL and permitting Real Clean to defend any lawsuits against them. However, any such offer by Real Clean will not stop the DOL from coming back, or other government agencies like the Attorney General from getting involved. It may also lead to time-consuming litigation. Furthermore, being defended by Real Clean’s attorneys might give the impression that there is, in fact, a close relationship between the dealer and Real Clean. And the
Massachusetts Auto Dealer www.msada.org
dealer may have a real dispute with Real Clean, so its lawyer would have a conflict representing the dealer in any event. • Dealers can pay the DOL and end their relationship with Real Clean if they feel the risks are too great. In connection with that, they can demand reimbursement by Real Clean or consider offsetting any amounts paid against monies due to Real Clean. • If a dealer ends its relationship with Real Clean, the dealer can hire detailers directly, and pay them properly as employees of the dealership. Alternatively, a dealer can engage the services of another outside company to provide detailing services. Of course, the dealer should take steps to ensure that the new detailing company is complying with all employment laws, including wage-hour. • Dealers can demand that Real Clean guarantee full compliance with all laws by Real Clean and its contractors, and build in appropriate offsets and penalties against Real Clean if there are violations. Each of these options requires careful consideration and involves weighing risks and benefits. The situation is very complicated. Each dealer should consult with counsel to help determine the best course of action for your dealership. Fisher & Phillips will continue to monitor the situation and provide advice and guidance to dealers as requested. Please contact Joe Ambash at (617) 532-9320.
t
Joe Ambash
is managing
Boston Fisher & Phil-
partner of the office of
lips, a national law firm representing
manage-
ment in labor and employment
law.
He
can
be reached at jambash@ laborlawyers.com.
Accounting
MSADA
Make 2014 a Happy New Year: Consider These Tax Items By Kathryn Loranger
Kathryn Loranger, CPA, Tax M anager , has been with the accounting , tax , and business consulting
firm
O’Connor & Drew, P.C. since 2011. She has 18+ years of public accounting experience prior to joining the firm.
If you are considering selling your interest in a passive activity, sell it before year-end in order to deduct any prior years’ suspended losses in the 2013 tax year. Once you have disposed of your entire interest in the activity, all suspended losses can be used not only to offset any of your current year passive income but also used to offset ordinary income earned from other sources.
Realize capital losses on depreciated stock holdings
As the holidays approach us and the 2013 tax year is coming to a close, it is not too late for you to make some financial decisions to help make your tax bill a little less painful. You still have time to obtain some additional deductions that will reduce your overall tax burden. In a year where the level of your adjusted gross income will determine if you owe additional taxes on your net investment income and possibly cause a reduction in the amount of your deductible itemized deductions and personal exemptions, it will really be worth your time to plan accordingly. In addition to federal tax considerations, there are also some state tax items to keep in mind for the 2013 tax year.
Individual taxpayers can deduct up to $3,000 from their ordinary income if they have net capital losses in excess of net capital gains. Capital losses will also reduce investment income that could be subject to the 3.8% net investment income tax, which takes effect for the 2013 tax year. You can preserve an investment position while realizing a tax loss, if you sell the original holding and then buy the same securities at least 31 days later. Although you will lock in your tax loss by year-end, be aware that you do run the risk of an upward price movement by having to wait the 31 days.
Increase your basis in a Partnership/S Corporation
Overall, the tax year 2013 has been a good year for the auto industry. If you are a corporation and predict having taxable income for 2013, make sure you pay your Federal and state estimated tax payments before year-end. You will owe penalties and interest if you don’t pay in either 100% of your 2013 or 2012 tax liability, whichever is lower, by year-end. You can’t base your 2013 tax estimates on your 2012 tax return unless you incurred a 2012 tax liability. Your 2012 tax return must also have been for a full 12 month period. If your 2012 tax return did not reflect a tax liability or you had a short tax year, you
If your dealership operates as a partnership or is an S Corporation, you may need to increase your basis in the entity in order to deduct a loss from it this year. If you have an S corporation, keep in mind you must actually have a financial outlay to the entity in order to obtain additional basis in the entity. A personal guarantee on a loan to an S Corporation will not by itself create additional basis for you to offset losses against. Dispose of a passive activity with suspended losses
Review your 2013 estimated tax payments
www.msada.org
must base your estimated tax payments on your 2013 estimated tax liability.
State tax updates to keep in mind New England states continue to make changes effecting businesses operating in their states. For tax years beginning January 1, 2013, Massachusetts implemented a Wellness Credit for businesses that set up a wellness program for their employees. The credit is equal to 25% of the cost associated with implementing a certified wellness program, with a maximum amount of $10,000 per business in any one fiscal year. Effective July 1, 2013, Rhode Island amended its regulations requiring single-member limited liability companies (LLCs) that are disregarded entities to obtain their own Federal taxpayer identification number. Even though a singlemember LLC isn’t required to file its own Federal income tax return, it is still required to file the Form RI-1065 with payment of the annual charge. Effective for tax periods on or after December 31, 2013, New Hampshire has raised the gross receipts requirement and the enterprise value tax base for determining whether a business must file a N.H. Business Enterprise Tax return (BET). Every business enterprise with gross receipts in excess of $200,000 (previously $150,000) during the taxable period or an enterprise value tax base that is greater than $100,000 (previously $75,000) must file a BET return on or before March 15 (if filing a Federal corporate tax return), and April 15 for all other business enterprises. If you have any questions about any of these items, please contact Kathryn M. Loranger, CPA, O’Connor & Drew, P.C., at kloranger@ocd.com, or by phone at (617) 471-1120.
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Massachusetts Auto Dealer NOVEMBER 2013
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NEWS
from Around the Horn
DANVERS
Kelly Profiled in Automotive News Dealer Brian Kelly discussed his managerial priority of treating his employees well in a recent issue of Automotive News. “We try to take good care of our employees, and they take care of the customers,” Kelly told the publication. “I just feel it’s the right thing to do.” Five of Kelly’s eight rooftops -- Nissan stores in Lynnfield and Woburn, his Honda store in Lynn, an Infiniti and a brandnew Volkswagen store, both in Danvers -- are among Automotive News’ 100 Best Dealerships To Work For. They made the short list, Kelly said, because of the lessons his late father taught him on how to run a dealership. “My father was a very generous, outgoing kind of a guy. He died five years ago, but I still quote him three or four times a day,” said Kelly. “To me, you do nice things, and if it pays off, it pays off. If it doesn’t, it doesn’t. You can’t expect anything in return.” Kelly listed a number of extras and perks his employees enjoy, including dinners out, catered lunch, clothing allowances, health
NOVEMBER 2013
insurance that kicks in on employees’ first day, birthday recognition and flowers on February 14. The methodology flows through employees to customers, who Kelly said regularly tell him about his employees going an extra mile to take care of their issues and needs. “It keeps customers coming back,” Kelly told Automotive News. SOMERVILLE
Herb Chambers Companies Ranked Among Top Places to Work Herb Chambers Companies were ranked a “Top Place to Work” by The Boston Globe for the fifth consecutive year. This year, they were ranked fifth among largest companies. Companies in this category must employ at least 1,000 people. “We are most honored to be included in The Boston Globe’s ‘Top Places to Work’ this year,” said Herb Chambers in a written statement. “Whether in sales, service, customer relations or finance, our employees are the pulse of our business and we are incredibly appreciative for all of their dedication and stellar work.”
Massachusetts Auto Dealer www.msada.org
NEWS from Around the Horn
MSADA
NATICK
Natick Town Meeting Approves Car Sales Bylaw, Paves Way for Tesla Natick’s Town Meeting has approved a shortterm change to town zoning bylaws to allow for limited car sales at the Natick Mall and in the Golden Triangle area, a decision that paves the way for Tesla to sell its automobiles directly to consumers. As passed on October 17, the bylaw allows for a “Limited Salesroom for Motor Vehicles,” which is defined as “a retail establishment for the sale of Motor Vehicles with … having no more than four vehicles on site for sale, test driving or display, with no repair services” — provided a company gets a special permit from the town Planning Board. Because it involves a change to zoning bylaws, the new bylaw will have to be approved by the state Attorney General before it can take effect. The new bylaw will offer relief to the electric car manufacturer Tesla Motors, who had previously been granted temporary waiver to sell its cars out of a showroom in the Natick Mall in July. The company’s attempt to sell cars directly to consumers had rankled many dealers in the state, culminating in a lawsuit by the Massachusetts State Auto Dealers Association last fall that was ultimately thrown out of Norfolk Superior Court.
Feds Officially Investigating Tesla Fires Following several crashes, federal safety regulators have opened a probe into a series of fires in Tesla Motors Inc. electric cars. The National Highway Traffic Safety Administration said recently that it would investigate why two of the expensive Tesla Model S sporty hatchbacks have caught fire this year following accidents in which the battery casing that serves as the undercarriage of the car cracked open.
A third fire, which took place in Mexico, won’t be part of the investigation because it is outside the agency’s jurisdiction. NHTSA noted that in the two U.S. fires, one in Seattle and the other in Nashville, the battery monitoring system in the cars warned the drivers, allowing them to pull over and safely exit the vehicles before the battery emitted smoke and fire. The fires have contributed to a 37 percent drop in the value of Tesla’s stock, after it reached a high of $193.37 on September 30.
BOSTON
Mass. Vows 3.3M Zero-Emission Vehicles by 2025 Massachusetts Gov. Deval Patrick recently joined governors from seven other states to pledge to get 3.3 million zero-emission vehicles on roadways by 2025 in an effort to curb greenhouse gas pollution from transportation sources. Representatives from all eight states signed a memorandum of understanding that would increase infrastructure and make other changes to help increase market share for electric cars, hydrogen fuel-cell electric vehicles, and plug-in hybrids. Gov. Patrick said more electric vehicles are key to the state’s efforts to grow the region’s economy.
“Diversifying transportation fuels and providing drivers with options will help reduce vulnerability to price swings in imported oil that hurt consumers and our economy,” Patrick said in a statement. The other states involved are Rhode Island, Vermont, Connecticut, New York, Maryland, Oregon, and California. The eight states together represent about 23 percent of the U.S. auto market. The agreement signed last month requires no specific financial commitment from each state. But each has already launched incentive programs and other policies meant to increase sales of zero-emission vehicles. Massachusetts pays incentives of up to $7,500 per vehicle to cities that buy electric models, and up to $15,000 for each charging station built. www.msada.org
Massachusetts Auto Dealer NOVEMBER 2013
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NEWS from Around the Horn RAYNHAM
2014 Nissan Pathfinder Hybrid Rolls Out for Efficient Winter Commuting Nissan Pathfinder Hybrid If the Farmers’ Almanac can be trusted, New England is in for a brutal upcoming winter, meaning Massachusetts commuters will want a vehicle that can handle the relentless snow and ice without costing them more at the gas pump. Arriving in time to battle whatever weather might be in store, the new 2014 Nissan Pathfinder Hybrid is on its way to dealerships with an impressive combination of fuel economy and allconditions capability. Returning up to 26 mpg in combined city and highway driving, the new Pathfinder Hybrid is 24 percent more efficient than regular Pathfinder models, pairing a 2.5-liter four-cylinder gas engine with an electric motor and a compact lithium-ion battery pack.
Despite its extra gas mileage, the hybrid system offers similar performance to the Pathfinder’s standard 3.5-liter V6 engine, generating a total output of 250 horsepower and 243 pound-feet of torque compared to the gas-only model’s 260 horsepower and 240 pound-feet of torque. When it gets messy on the road, an available All-Mode 4×4i Dial allows the driver to select between two-wheel drive, four-wheel drive or an Auto Mode that starts out in two-wheel drive but senses when power should be sent to all four wheels for greater traction. “In past winters, drivers would need to choose between cost savings or capability when selecting their ride, but the latest Pathfinder, especially the new hybrid model, is designed to offer both,” said Bruce Garcia, general sales manager of Mastria Nissan in Raynham. “That means a lot to parents who need more space and extra grocery money for their growing families but also want to keep their kids safe when driving in the snow.” NOVEMBER 2013
Massachusetts Auto Dealer www.msada.org
MSADA NEEDHAM
PEABODY
Mass. Ford Dealers Excited For Arrival of 45 MPG Fiesta SFE The EPA has officially certified the 2014 Ford Fiesta as getting 45 miles per gallon highway, adding to Ford’s growing fuel efficient lineup which includes 3 new hybrids and 2 plug-in hybrids. The Fiesta SFE, scheduled to arrive in Massachusetts Ford dealerships in December, will be the most cost-effective gas subcompact car in highway mileage in the Commonwealth. With Ford’s new Ecoboost engine and a manual transmission, the Fiesta SFE is very aggressively priced at $16,740 at local MA Ford Dealers. The gas Fiesta SFE at 45 MPG Hwy exceeds the miles per gallon of many hybrids on the market. The efficient turbocharged engine generates 123 horsepower and 125 pound-feet of torque and is available as a sedan and a five-door hatchback with a choice of automatic or manual transmission.
2014 Range Rover Sport to Attempt Fastest Trek Across Empty Quarter As the largest sand desert in the world, the Empty Quarter is characterized by dunes that swell as high as 850 feet and temperatures that can surpass 120 degrees. Those conditions won’t stop Land Rover from attempting to drive the redesigned 2014 Range Rover Sport across the treacherous Middle East desert in record time this week, as the brand has total confidence in the off-road capability of its newest SUV. With experienced Spanish off-road driver Moi Torrallardona behind the wheel, a production-spec 2014 Range Rover Sport will take off at dawn from Wadi Adda Wasir, Saudi Arabia, and travel 622 miles across the Empty Quarter before its expected arrival at the United Arab Emirates border around dusk. With an all-new aluminum body structure that is about 800 pounds lighter than its predecessor, the new Range Rover Sport is the fastest, most agile and most responsive Land Rover ever, and those claims will be put to the test on extreme terrain that is usually reserved for specialist sand vehicles. “The Range Rover Sport’s lighter unibody frame allows the
www.msada.org
Massachusetts Auto Dealer NOVEMBER 2013
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NEWS from Around the Horn
MSADA
SUV to be not only faster and more fuel efficient but also just as capable as past models due to the strict use of high-strength aluminum,” said Dave Edwards, general manager of Land Rover Peabody. “The new chassis also connects to a next-gen four-corner air suspension, giving the Range Rover Sport extra maneuverability for traversing the huge sand dunes in the Empty Quarter.” PEABODY
With Its RLX, Acura Emphasizes Style and Sophistication at SEMA Show While the annual SEMA Show in Las Vegas likely evokes scenes of outrageously tricked-out vehicles for most driving enthusiasts, Acura elected to take a more sophisticated route this year to highlight its all-new Acura RLX flagship luxury sedan. The auto brand teamed with Evasive Motorsports and MAD Industries to showcase two customized RLX models at the aftermarket event last week, and both rides emphasized refinement and responsiveness over juiced-up performance. Donning a carbon-fiber front-bumper lip and vents, a revamped rear bumper and a customized exhaust with titanium tips, the 2014 Acura RLX VIP Sedan by Evasive Motorsports is equally at
NOVEMBER 2013
home traveling to the office or to the concert hall. Completing that upscale look are Chargespeed carbon-fiber side skirts and 21-inch Advan F15 wheels, while prototype Tein Street Flex coilovers allow the RLX VIP Sedan to assume a lower stance. Inside the cabin, passengers are coddled with custom neck pillows featuring a Jordan Brand-inspired elephant print. “With its upswept design lines and sleek Jewel-Eye LED headlights, the new Acura RLX doesn’t require many modifications to stand out on the road, so Evasive Motorsports and MAD Industries focused more on complementing its style rather than changing the design direction,” said Joel Avery, general manager of Acura of Peabody. “The RLX is also the most powerful Acura sedan ever, so it didn’t need much in the way of performance upgrades to satisfy the SEMA audience.”
Massachusetts Auto Dealer www.msada.org
NADA Update by Don Sudbay
A Season of Thanks
The franchise system is alive and well Don Sudbay, President of Sudbay Automotive Group, represents MSADA members on the NADA Board of Directors. He welcomes your
questions
and
concerns
(donsudbayjr@sudbay.com). As we end 2013 I think we can all be thankful for the progress our industry and our dealerships have made in the past five years. We all remember the dark days that beset us in the fall of 2008. Dealers are truly a group of resilient entrepreneurs, and we have helped lead the way for our country out of the worst economic conditions since the Great Depression. Your state and national dealer associations have played a major part in helping us all through these difficult times. The franchise system is alive and well, and please be assured that MSADA and NADA will continue to advocate for all of us. A safe and happy holiday season to all.
A Special Note from NADA Chairman David Westcott: “November is a special month. As the leaves change to bright, fall foliage outside NADA’s headquarters, it is a good time to take stock of what we’re thankful for. For one, I’m thankful to be a franchised dealer, and I bet you are too. I’m proud to be part of a group of resilient entrepreneurs that do what nobody else can: keep America moving. “Meeting the transportation needs of our customers is essential to a strong economy, a strong community and a strong country. But there’s more. –NADA Chairman “As I travel and meet dealers around the country, I can’t help but be impressed with what dealers do outside of their showrooms. Dealers are philanthropists, civic leaders and the cornerstones of their communities. They fund hospitals, support schools and back local police
and fire departments. That is why NADA is proud to co-produce the TIME Dealer of the Year Award, a national initiative that recognizes the industry’s most successful new-car dealers who also demonstrate a longstanding commitment to community service. “The award, sponsored by Ally Financial, is now in its 45th year. It is considered the industry’s most prestigious award for new-car dealers. “TIME recently announced 57 nominees from a field of more than 8,700 dealers nationwide. This select group from across the country will be honored at our 97th annual Convention & Expo in New Orleans. And the national winner will be announced on Saturday, at the opening session of the convention, on January 25. “NADA’s ties with the awardees extend beyond the award show. In fact, of all the previous TIME Dealer of the Year national winners, 11 are Ambassadors of the National Automobile Dealers Charitable Foundation. These winners also include past NADA chairmen and presidents and current board members. “NADA is extremely proud to be part of this legacy. The NADA Foundation, which serves as the philanthropic arm of our association, was established in 1975. The foundation has expanded beyond the Ambassador program to include emergency relief for dealership employees, educational and road safety grants, and support for Canine Companions, including its Wounded Warrior initiative, as well as CPR training manikins to organizations in all 50 states. This is all made possible by the contributions from our members to the foundation. “If you are not already an Ambassador, you should become one. “A dealer, company, association or individual makes a contribution of $10,000 in his or her own name or in the name of someone they would like David Westcott to recognize and honor. The foundation then guarantees that a grant of at least $1,000 will be presented to an entity the Ambassador selects every three years in perpetuity. It’s like having your own foundation without having to bother with administration and overhead.
“I can’t help but be impressed with what dealers do outside of their showrooms. Dealers are philanthropists, civic leaders and the cornerstones of their communities.”
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Massachusetts Auto Dealer NOVEMBER 2013
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MSADA
NADA Update “Today, there are 650 Ambassadors who collectively donate about $250,000 each year to charities of their choice, usually in their local communities. “Dealers are giving more than ever. The 2013 Dealer Charitable Survey, sponsored by Ally and NADA, showed a 65 percent increase in donations and volunteerism among dealers in their local communities. “NADA salutes the Dealer of the Year award nominees and we congratulate every individual on the list. We salute all of our NADA Ambassadors who have generously donated their time and resources to others. And we salute all dealers across the country who make a difference in their communities and have given others something to be thankful for during the holiday season. “For more information on the TIME award nominees, visit: www.allydealerheroes.com. For more information about the TIME program, visit: www.timedealeroftheyear. com. “For more information on the NADA Charitable Foundation or to become an Ambassador, email us at: foundation@nada.org. “From our NADA family to yours, have a safe and happy Thanksgiving!”
NADA and CFPB Take Center Stage in Washington in November Richard Cordray, director of the Consumer Financial Protection Bureau, provided the agency’s semi-annual report to Congress in testimony to U.S. Senate Banking Committee on November 12. During questioning from the Senators, Cordray admitted that the CFPB needs to provide more transparency on its methodology, but expressed concern about dealers setting auto loan rates. “Like Congress, NADA is still waiting for the CFBP to share the methodology it uses to determine that statistical discrimination exists in the auto lending,” said NADA President Peter Welch. Welch stressed that many factors outside of race can impact an interest rate such as the amount financed, vehicle class, whether the car is new or used, the size of the down payment, term of the loan, time of the month and automaker sales incentives, etc, “Without understanding the bureau’s computer modeling there is no way to determine if the CFPB’s conclusions are reliable or come to a resolution that protects the affordability and accessibility that dealers can offer their customers today,” Welch added. Six of the 22-members on the Senate Banking Committee signed a letter to Cordray on Oct. 30 expressing concern about the CFPB’s guidance issued last March “that could curtail a pro-competitive feature of the indirect vehicle financing market and to request greater transparency for the bureau’s activity related to this matter.” They are Ranking NOVEMBER 2013
Member Mike Crapo (R-Idaho), Kay Hagan (D-N.C.), Heidi Heitkamp (D-N.D.), Joe Manchin, III, (D-W.V.), Jerry Moran (R-Kan.) and David Vitter (R-La.). In March, the CFPB—without public comment or formal rulemaking—issued guidance that pressures lenders into compensating dealers arranging financing with flat fees and eliminating any discretion dealers have to “meet or beat” a competitor. Since then, the CFPB has refused to release any of its research that supports the need to force these changes in auto lending. After multiple bipartisan requests from both the House and Senate, the CFPB admitted recently that there was no analysis performed as to how moving to flat fees will help or harm consumers. “NADA shares the CFPB’s goal of eradicating discrimination. There is no room for discrimination in the car business or any other business,” Welch added. “In the name of fair lending, the CFPB’s actions will eliminate a customer’s right to negotiate a better interest rate. That is akin to eliminating the ability to negotiate a lower sticker price on a car or truck.” Welch added that consumers benefit from the current system of dealer-assisted financing because consumers can shop at more than 17,000 franchised new-car dealerships that have the ability to “meet or beat” interest rates offered by their competitors. “The current system yields credit that is widely available and competitively priced,” he said. For the latest NADA updates on the CFPB and dealer-assisted financing, visit http://www.nada.org/legislativeaffairs/ economy-financial/cfpb/default.htm
NADA Unveils Second Annual Industry Report on Dealership Workforce NADA has unveiled its second annual industry report on car and truck dealership employee compensation, benefits, retention and turnover, and hours of operation and work schedules. The 2013 Dealership Workforce Study Industry Report was produced in partnership with DeltaTrends, and was designed to help dealers meet their No. 1 challenge: recruiting, hiring and retaining top talent. The report helps dealers meet that challenge, with hard data culled from 290,000 car and truck payroll records, and cogent analysis by DeltaTrends, the automotive retailing industry’s leading provider of workforce metrics, guides and trends, and HR best practices. “This is by far the most comprehensive and timely study on the dealership workforce ever produced, and serves as a tremendous resource to help dealers ‘step up their game’ to gain an edge on the competition,” said NADA Chairman David Westcott. To purchase the 2013 Dealership Workforce Industry Report, contact NADA University Online at (800) 557-6232 or complete the form at www.nadauniversity.com/workforcestudy. The opportu-
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MSADA MSADA nity to participate in the 2014 study will open to NADA and ATD member dealers at the 2014 NADA Convention & Expo in New Orleans from January 24-27.
NADA Convention: 33 Hotels Sold Out; Limited Number of Rooms Available in New Orleans Dealers and their managers planning to attend the 2014 NADA Convention & Expo in New Orleans should register as soon as possible and book one of the few remaining hotel rooms. Thirty-three out of 36 hotels in the NADA convention block are sold out. Only three hotels have rooms available, which are Embassy Suites, Hyatt Regency and Omni Royal Crescent. “With numerous conferences and events scheduled in New Orleans over the same dates as the NADA convention, hotel rooms are filling up quickly and there’s limited space,” said NADA Convention Chairman Desmond Roberts. “NADA’s hotel rates are guaranteed to be the lowest in town.” The NADA convention runs January 24-27. Dealers and their managers who register by January 16 will receive at $75 discount from the on-site rate. For more information or to register, visit www.nadaconvention.org.
New Consent Requirements for Telephone Calls and Text Messages Effective October 16 New FCC consent requirements for phone calls and text messages went into effect on October 16, 2013. Dealers should review the rules and work with their counsel and any third party vendors to ensure that all phone calls and text messages they make or send (or that are made or sent on their behalf) meet these new requirements.
Nissan’s Jose Munoz to Keynote NADA/J.D. Power Conference in Los Angeles Jose Munoz, Nissan’s new senior vice president of sales and marketing for the Americas, will deliver keynote remarks at the 2013 Western Automotive Conference in Los Angeles on Tuesday, November 19. The half-day conference, presented by NADA and J.D. Power, also includes Stewart Reed, chairman of the Transportation Design Department at Art Center College of Design in Pasadena, Calif., who will deliver a special keynote presentation, “Identifying and Cultivating Emerging Talent in Transportation Design.” The second annual conference, which precedes press days at the Los Angeles Auto Show (http://laautoshow. com), includes a panel discussion on “Diversity Marketing,” with an emphasis on the Hispanic market. An OEM panel, “Positioning Your Brand for 2015 and Beyond,” will be moderated by CNBC’s Phil LeBeau and includes James O’Sullivan, president and CEO of Mazda North America
Operations; William Fay, group vice president and general manager, Toyota Division; and Thomas Loveless, executive vice president of sales for Kia Motors America. Other speakers include David Westcott, NADA chairman; Finbarr O’Neill, president of J.D. Power; Beth Ann Bovino, chief U.S. economist at Standard & Poor’s; and John Humphrey, senior vice president of global automotive operations for J.D. Power. The conference, held in conjunction with the Greater Los Angeles New Car Dealers Association and the California New Car Dealers Association, will be held at the Biltmore Hotel. For more information or to register, click here: http://www.jdpower.com/ events/2013-western-automotive-conference.
Used Vehicle Prices Fall by Largest Amount in Two Years Wholesale used vehicle prices for units up to eight years in age fell by 3.5% in October, nearly a point higher than the decline recorded in September. This marked the largest fall since October 2011’s similar drop of 3.5%. “Without the drama created by federal lawmakers that resulted in the shutdown, it’s likely that October’s rate of decline would have been directly in line with recent seasonal norms,” said Jonathan Banks, executive automotive analyst for the NADA Used Car Guide, in the November edition of Guidelines, a monthly report on new and used vehicle sales trends and price movement. Click here for Guidelines: http://www. nada.com/b2b/LinkClick.aspx?fileticket=yRHiTU8_9M%3d&tabid=85
Lt. Gen. Honoré to Address ATD Convention in New Orleans Lt. Gen. Russel L. Honoré (U.S. Army Ret.), commander of the Joint Task Force Katrina and Global Preparedness Authority, will deliver keynote remarks at the 2014 American Truck Dealers (ATD) Convention & Expo, which runs January 24-27 in New Orleans. As commander of the task force, Honoré led the Defense Department’s response to hurricanes Katrina and Rita in Alabama, Mississippi and Louisiana. Honoré will speak during the ATD general session at 12:15 p.m., on Monday, January 27. Other speakers are Philip Byrd, chairman of the American Trucking Associations, and ATD Chairman Dick Witcher, CEO of Minuteman Trucks in Walpole, Mass. The 51st annual ATD convention runs concurrently with the NADA Convention & Expo. ATD dealers and their managers can attend the NADA speaker sessions and workshops. All attendees who register in advance by Jan. 16 will receive a $100 discount from the onsite rate. For more information or to register, visit www.atdconvention.org.
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NADA Market Beat
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Produced by NADA’s Industry Analysis Group • Angela Lisulo, Economist
Review of New Light Vehicle Sales Overall
FIGURE 1
There were 1.2 million light-vehicle sales, in the U.S., in October 2013 – this marked an increase of 6.0 percent from September 2013 and an increase of 10.5 percent over last October. October 2013 YTD figures bring total light-vehicle sales to 12.9 million up 8.3 percent from a year ago. The October 2013 Seasonally Adjusted Annual Rate (SAAR) for light-vehicle sales is 15.2 million. In October 2013 YTD figures, car sales held a market share of 49.4 percent and these sales were up 5.4 percent from a year ago
Companies/Brands
FIGURE 2
Companies with a geographic base in North America (Detroit 3 and Tesla Motors) held the largest market share of light-vehicle sales for October 2013: 46.1 percent of the market. This was followed by companies based in Asia/Pacific at 43.9 percent and then companies based in Europe at 10.0 percent. In October 2013 YTD figures, North America-based companies also held the largest share of light-vehicle sales in the U.S. at 45.5 percent. The corresponding share held by Asia/Pacific-based companies was 45.4 percent and that for the Europe-based companies was 9.1 percent. All company categories by geographic bases – North America, Asia/Pacific and Europe – experienced growth in light-vehicle sales in October 2013 YTD figures from last year. For the North America-based companies, the Detroit 3 companies have collectively held the overwhelmingly dominant portion of October 2013 YTD sales with a share of 99.7 percent. Amongst the Detroit 3 companies, General Motors has taken the lead in October 2013 YTD sales with a share of 39.9 percent (2.3 million sales) followed by Ford with 34.7 percent and then Chrysler with 25.3 percent. Of the 3 geographic bases, Asia/Pacific holds the largest number of companies (10) for October 2013 YTD light-vehicle sales, 8 of these companies have bases in Japan while the remaining 2 companies have bases in South Korea. For the Asia/Pacific-based NOVEMBER 2013
while corresponding figures for light trucks put the light-truck share at 50.6 percent with sales up 11.2 percent from a year ago. See Figure 1.
companies, companies based in Japan held the largest share of total light-vehicle sales at 82.0 percent with Toyota taking the lead in sales volume with 1.9 million sales. Of the 3 geographic bases, Europe holds the second largest number of companies (7) for October 2013 YTD light-vehicle
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33 sales, 5 of which have bases in Germany while 1 is based in Sweden (Volvo) and the other is based in the United Kingdom (Jaguar Land Rover). For the Europe-based companies, companies based in Germany held the largest share of total lightvehicle sales at 91.0 percent with Volkswagen taking the lead in sales volume with 342,962 sales. See Figures 2, 3 and 4.
FIGURE 3
Segments
There are 4 segments under the light-truck category. For total light-truck sales, in October 2013 YTD terms, the cross utility vehicle (CUV) segment has held the largest share of sales at 49.8 percent while the van segment has held the least share at 10.5 percent. There are 4 segments under the car category. For total car sales, in October 2013 YTD terms, the middle car segment has held the largest share of sales at 41.6 percent while the large car segment has held the least share of 3.9 percent. Out of total light-vehicle sales, FIGURE 4 in October 2013 YTD terms, it is the CUV segment which has held the largest share of sales at 25.2 percent while the large car segment has held the least share at 1.9 percent. Despite having the least share of total light-vehicle sales, in October 2013 YTD terms, the large car segment has experienced the largest growth in sales, of all the segments, since last year: 26.7 percent. This was followed by the CUV segment which has had sales growth of 16.3 percent when compared to figures for October 2012 YTD. Focus: The small car segment. For 1982-2012, the annual share of small cars out of light-vehicle sales was at its peak in 1982 (24.6 percent) after which it trended downwards to the lowest point in the period in 1998 (12.6 percent) and then generally trended upwards. For October 2013 YTD, the small car segment has held 19.4 percent of total light-vehicle sales with 2.5 million units up 6.3 percent from last year. For the car category, this segment has held 39.3 percent of sales, October 2013 YTD. Of the 3 sub-segments within the small car segment, the upper small sub-segment has held
FIGURE 5
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NADA Market Beat the largest portion at 72.4 percent in October 2013 YTD terms while the small specialty sub-segment has held the least share at 6.6 percent in October 2013 YTD terms. In Q3 2013, the leading small car in the upper small sub-segment was the Honda Civic holding 16.5 percent of the sales in the sub-segment with 94,722 units sold up 35.5 percent from Q2 2012. See Figures 5 and 6.
FIGURE 6
Power source
As a power source, gasoline held a market share of 93.3 percent of October 2013 YTD light-vehicle sales which was down from its corresponding share of 93.9 percent a year ago. The market share held by the diesel category rose slightly to 2.9 percent, in YTD terms, from its value of 2.8 percent last year. The market shares held by electrics, light vehicles powered by fuel cells, hybrids, light vehicles powered by natural gas and plug-in hybrids have each continued to grow incrementally from last year, in YTD terms. In October 2013, these were the light-vehicle sales for the alternative power category: 4,012 electrics, 0 light vehicles powered by fuel cells, 33,810 hybrids, 229 light vehicles powered by natural gas and 6,367 plug-in hybrids amounting to 44,418 light-vehicle sales. Focus: Plug-in hybrid light vehicles. Plug-in hybrids have ranked third, in descending order of sales volume, out of the 5 alternative power sources in October 2013 YTD sales figures, although the sales have nearly been level with those of electric light vehicles which have held the second position. There are 5 brands in the plug-in hybrid category: Chevrolet, Ford, Honda, Toyota and Porsche. Each of these brands has 1 model except for Ford which has 2 models (Ford Fusion and Ford C-Max). For October 2013 YTD, the leading model by sales has been the FIGURE 7
NOVEMBER 2013
Chevrolet Volt holding 48.1 percent of total sales of plug-in hybrid light vehicles with 18,782 units sold. However, sales for this vehicle are down 2.7 percent from last October while sales for the Ford Fusion, Ford C-Max, Honda Accord and Toyota Prius are all up from last year. See Figure 7.
Models
In October 2013 YTD terms, the list of 15 best-selling light vehicles has been dominated slightly by models from the Detroit 3 companies over those from the Asia/Pacific region: 8 models are from the Detroit 3 while 7 models are from Asia/Pacific-based companies. From the Detroit 3, Ford has held the lead with 4 models. From the Asia/Pacific-based companies, Honda has held the lead with 3 models. There have been 3 pickup trucks occupying the top 5 ranks of the best-selling light vehicles for October 2013 YTD: Ford F series, Chevrolet Silverado and Ram pickup occupying the first, second and fifth rank, respectively. There have been 2 cars occupying the top 5 ranks of the best-selling light vehicles for October 2013 YTD: Toyota Camry and Honda Accord occupying the third and fourth rank, respectively. See Figure 8. FIGURE 8
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