April 2016 Auto Dealer Magazine by Massachusetts State Automobile Dealers Association, Inc

MSADA, One McKinley Square, Sixth Floor, Boston, MA 02109

auto M a s s a c h u s e t t s

The official publication of the Massachusetts State Automobile Dealers Association, Inc

FIRST CLASS MAIL US POSTAGE PAID BOSTON, MA PERMIT NO. 216

April 2016 • Vol. 28 No. 4

A Podium Finish

Ma s s a c h u s e t t s

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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 Marta Argueta-Guerra Administrative Assistant/ Membership Coordinator mguerra@msada.org Aut o D e a l e r M A g a z i n e Robert O’Koniewski, Esq. Executive Editor Tom Nash Editorial Coordinator nashtc@gmail.com Subscriptions provided annually to Massachusetts member dealers. All address changes should be submitted to: MSADA by e-mail: mguerra@msada.org Postmaster: Send address change to: One McKinley Square, Sixth Floor Boston, MA 02109 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.

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

4 From the President: See You on May 6 6 THE ROUNDUP: Mass. Tech Team Finds Success in NYC 10 LEGISLATIVE SCORECARD 11 TROUBLESHOOTNG: Uniform Policy 12 ACCOUNTING: Opportunity (Without) Cost 13 LEGAL: Reducing Risk When Terminating Employees 14 AUTO OUTLOOK 16 Cover Story: A Podium Finish

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Ad Directory Blum Shapiro 23 Boston Herald 32 Lynnway Auto Auction 21 Nancy Phillips 23 O’Connor & Drew, P.C. 31 Southern Auto Auction 25 Suntrust 22

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Truck Corner: Report from Las Vegas NEWS From Around the Horn Dealer Services: Compliance and the Automotive Industry nada Market Beat nada update: A Check-In from Vegas

ADVERTISING RATES Inquire for multiple-insertion discounts or full Media Kit. E-mail jfabrizio@msada.org Quarter Page: $450 Half Page: $700 Full Page: $1,400

Back Cover: $1,800 Inside Front: $1,700 Inside Back: $1,600

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from the President

MSADA

See You on May 6

Our 2016 Annual Meeting will be another can’t-miss event

By Scott Dube MSADA President

irst, I want to extend my congratulations to our team from Bristol-Plymouth Tech who competed in New York City this month in the National Automotive Tech Compition. Having placed third, they should be very proud of their accomplishments. And it should be noted that our own Rick Mastria loaned a 2016 Mazda right off his lot to the team for an entire month for them to prepare on. It clearly helped! Check out more about the team’s New York City competition in this month’s cover story on page 16. As we finish out April, your Association is hard at work preparing for the MSADA Annual Meeting on May 6. It promises to be an educational afternoon, with a range of industry experts and government officials who we’ve selected to help get us ahead of the issues “We can’t wait that are coming our way in 2016 and beyond. As until an issue is a member dealer, you know that we are working every day to combat the forces working against in the media to all of us. But as we’ve seen time and again, it’s learn about it important for all of us to stay as plugged in to what’s going on as possible, so that when the time — our industry comes we can leverage our grassroots strength of demands tens of thousands employees across the Commonwealth. We can’t wait until an issue is in the meconstant dia to learn about it -- our industry demands conawareness of stant awareness of what’s coming down the pike. Our Annual Meeting is meant to serve as a part what’s coming of how we keep you informed. Both events serve down the pike.” the dual role of helping us keep our organization transparent and informing you of just what the landscape ahead will look like. Of course, it’s also a chance for us to get together and enjoy being in one place at one time. We also have reserved a block of hotel rooms, so that hopefully you’ll take advantage of a night out in the great city of Boston. Check out Executive Vice President Robert O’Koniewski’s Roundup column for more details about registration and our hotel info. I look forward to seeing you at the meeting for a day of camaraderie and getting ahead of the curve. As always, I am thrilled to see what ideas and questions you all will bring to the table. While all of us can’t be fighting the good fight for our industry every day at the State House, we should celebrate this rare opportunity to all be together in the same room. I encourage you to take advantage of this opportunity to get together and learn. We cram as much information and camaraderie as we can into an afternoon -- but we need you there to make it the best day it can be. In the meantime, happy Spring! t

APRIL 2016

Massachusetts Auto Dealer www.msada.org

Msada Board Barnstable County

Brad Tracy, Tracy Volkswagen

Berkshire County

Brian Bedard, Bedard Brothers Auto Sales

Bristol County

Richard Mastria, Mastria Auto Group

Essex County

William DeLuca III, Woodworth Motors John Hartman, Ira Motor Group

Franklin County

Jay Dillon, Dillon Chevrolet

Hampden County

Jeb Balise, Balise Auto Group

Hampshire County

Bryan Burke, Burke Chevrolet

Middlesex County

Chris Connolly, Jr., Herb Connolly Motors Scott Dube, Bill Dube Hyundai Frank Hanenberger, MetroWest Subaru

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

Associate Members

MSADA A ssociate M ember D irectory ADESA Jack Neshe, (508) 626-7000 Albin, Randall & Bennett Barton D. Haag (207) 772-1981 American Fidelity Assurance Co. Dan Clements (616) 450-1871 American Tire Distributors Pamela LaFleur (774) 307-0707 AutoAlert Don Corinna (505) 304-3040 Auto Auction of New England Steven DeLuca (603) 437-5700 Auto/Mate Dealership Systems Troy Potter (877) 340-2677 Bank of America Merrill Lynch Dan Duda 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, Tom Drislane (617) 929-8373 Burns & Levinson LLP Paul Marshall Harris (617) 345-3854 Capital Automotive Real Estate Services Willie Beck (703) 394-1323 Cars.com Heidi Allen (312) 601-5376 CDK Global Chris Wong (847) 407-3187 Construction Management & Builders, Inc. Sarah Macomber (781) 246-9400 CVR John Alviggi (267) 419-3261 Dealerdocx Brad Bass (978) 766-9000 Dealermine Inc. Carl Bowen (401) 742-1959 DealerTrack Ernest Lattimer (516) 547-2242 Downey & Company Paul McGovern (781) 849-3100 Ethos Group, Inc. Drew Spring (617) 694-9761 F & I Resources Jason Bayko (508) 624-4344 Federated Insurance Matt Johnson (606) 923-6350 First Citizens Federal Credit Union Joe Ender (508) 979-4728

Fisher & Phillips LLP John Donovan (404) 240-4236 Joe Ambash (617) 532-9320 Gulf State Financial Services Bob Lowery (713) 302-5547 GW Marketing Services Gordon Wisbach (857) 404-0226 Harbor First Ron Scolamiero (617) 500-4080 Hireology Kevin Baumgart (773) 220-6035 Huntington National Bank John J. Marchand (781) 326-0823 JMA Group Jose Ruiz (617) 259-0527 John W. Furrh Associates Inc. Kristin Perkins (508) 824-4939 Key Bank Mark Flibotte (617) 385-6232 KPA Rob Stansbury (484) 326-9765 Leader Auto Resources, Inc. Chuck August (518) 364-8723 Lynnway Auto Auction Jim Lamb (781) 596-8500 M & T Bank John Federici (508) 699-3576 Management Developers, Inc. Dale Boch (617) 312-2100 Micorp Dealer Services Frank Salkovitz (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 Northeast Dealer Services Jim Schaffer (781) 255-6399 O’Connor & Drew, P.C. Kevin Carnes (617) 471-1120 Performance Management Group, Inc. Mark Puccio (508) 393-1400 PreOwned Auto Logistics Anthony Parente (877) 542-1955 ProActive Leadership Group Bill Napolitano (774) 254-0383 Quik Video Jack Gardner (617) 221-5502

R.L. Tennant Insurance Agency, Inc. Walter F. Tennant (617) 969-1300 Reflex Lighting Daryl Swanson (617) 269-4510 Resources 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 Santander Richard Anderson (401) 432-0749 Schlossberg & Associates, LLC Michael O’Neil, Esq. (781) 848-5028 Sentry Insurance Company Eric Stiles (715) 346-7096 Shepherd & Goldstein CPA Ron Masiello (508) 757-3311 Silverman Advisors, PC Scott Silverman (781) 591-2886 Solect Energy Development Kristen Brandt (781) 733-0223 Southern Auto Auction Tom Munson (860) 292-7500 SPIFFIT Sean Ugrin (303) 862-8655 Sprague Energy Timothy Teevens (800) 828-9427 SunTrust Bank Michael Walsh (617) 345-6567 Taino Consulting Group Herby Duverné (617) 797-9316 Target Dealer Services Andrew Boli (508) 564-5050 TD Auto Finance BethAnn Durepo (603) 490-9615 TD Bank Michael M. Lefebvre (413) 748-8272 TrueCar Pat Watson (803) 360-6094 US Bank Vincent Gaglia (716) 649-0581 Wells Fargo Dealer Services Christopher Peck (508) 314-1283 Wicked Local Media Massachusetts Jay Pelland (508) 626-4334 Zurich American Insurance Company Steven Megee (774) 210-0092

www.msada.org Massachusetts Auto Dealer MARCH 2016

The Roundup

Mass. Tech Team Finds Success in NYC By Robert O’Koniewski, Esq. MSADA Executive Vice President Follow us on Twitter - @MassAutoDealers Congratulations goes out to this year’s Massachusetts team for their third place finish at the National Automotive Technology Competition at the New York International Auto Show. The annual competition is sponsored by the Greater New York Auto Dealers Association and was held March 2931 this year in conjunction with the start of the NY auto show. Represented by Justin Albernaz and Jonathan Arruda, seniors at Bristol-Plymouth Regional Tech High School in Taunton, our Massachusetts team earned its best finish in a number of years. Their instructor is Stephen Ribbe. Justin and Jonathan were tested in NYC on a Mazda3. They competed against over 30 teams sent by state and metro dealer associations from around the country. A big piece of the preparation can be attributed to the efforts of Rick Mastria and his team at his Mazda store in Raynham. In addition to loaning a Mazda3 to the school for the students to practice on, Rick made his top tech consultants available to Justin and Jonathan for additional learning. The Albernaz-Arruda team was selected after winning our statewide competition at Massachusetts Bay Community College on February 6. The selection process began with our written test held on January 16 in Marlborough, on which Jonathan scored the highest. For more information on their successful journey, check out our cover story on page 16.

Put It in the Books - 99th NADA Convention a Success Over 80 Massachusetts dealers and their key employees found their way to NADA’s 2016 national convention in Las Vegas on March 31-April APRIL 2016

Massachusetts Auto Dealer www.msada.org

3. Attendees had access to over 120 workshops, including at least 60 new topics, and over 600 vendors exhibiting their wares on a record amount of sold-out floor space. There was plenty of time for non-industry learning and entertainment, too. Guest speakers included comedian Jeff Foxworthy; Karl “the Architect” Rove, former senior advisor to President George W. Bush; former Vermont governor Howard Dean; Mike Allen, chief White House correspondent for Politico; and Denver Broncos quarterback Peyton Manning, who presented at the inspirational program on Sunday. Manning, in addition to his motivational oratory also demonstrated a breadth of knowledge of the dealership industry, which we can surmise he learned from Broncos general manager John Elway, who is also a Colorado franchised auto dealer. Dealers also heard from outgoing NADA chairman Bill Fox from Auburn, New York, and incoming chairman Jeff Carlson, a Ford and Subaru dealer in Colorado. The convention proved special for three of our member dealers as well. Adam Connolly of the Herb Connolly Motor Group carried the honor of Massachusetts TIME magazine Dealer of the Year into the competition against 50 other representatives from across the country. The state honor is based on a compilation of works on behalf of the state association, efforts for social and charitable organizations, and commitment to the community. Although Adam did not receive the national award, he and his colleagues on the stage that day are all winners for the successes on behalf of their fellow dealers and fellow citizens where they live and

MSADA

work. Also, for the second year in a row the New Hampshire Auto Dealers Association nominated a dealer who is also a MSADA member – Marshall Jespersen of Honda North in Danvers, who was our TIME nominee in 2006. Additionally, Kevin Holmes of Tri State Truck Center in Shrewsbury was sworn in as a member of the American Truck Dealers (ATD) board of directors, representing the Freightliner dealers. Kevin was a nominee for the 2015 Truck Dealer of the Year Award at last year’s ATD convention. Following Saturday’s convention session at which the TIME Dealer of the Year nominees were honored, we held our state cocktail reception at the Encore Hotel, jointly sponsored by our accounting partner O’Connor & Drew, where MSADA President Scott Dube welcomed Massachusetts dealers, their spouses and families, and our associate members in town for the festivities. Be sure to mark your calendars for the 2017 NADA/ATD Convention & Expo, January 26-29 in New Orleans, when NADA will celebrate its 100-year anniversary during the convention. The NADA story began when 30 dealers traveled to the nation’s capital in 1917 to persuade Congress not to impose a luxury tax on cars. They successfully argued that the automobile is a necessity of American life, not a luxury. From that group effort,

NADA was born. Since then, NADA has experienced many major milestones, and so have its dealers. Each dealer’s story is an integral part of the NADA story, especially since so many generations of dealers have been steadfast NADA members. These stories range from store openings and mergers to dealers meeting with their members of Congress on Capitol Hill. To learn more about these important dealer milestones, NADA has launched the “Share Your Story” contest. Participate in NADA’s “Tell Us Your Story” contest for a chance to win one of two all-expense paid trips to the 2017 NADA 100 show in New Orleans. Ten runners up each will win VISA gifts cards worth $100. Dealers can submit photos, videos, newspaper clippings, print and digital ads, their own dealership histories or other memorabilia. Dealers can enter at www.nada.org/NADA100contest/. Finally, prior to the NADA convention, the Automotive Trade Association Executives (ATAE) held its winter meeting. ATAE, housed in NADA’s Virginia headquarters, works with NADA on its national dealer organization programming and matters of federal advocacy on dealer issues, including participation in the annual Washington Conference; the ATAE network consists of the CEOs of over 100 state and metro new car dealer associations in the United States and Canada, including this writer. This year’s meeting included presentations and discussions on a number of issues, especially regarding assaults on the dealer franchise system, primarily from federal regulators (e.g. CFPB’s “regulation through enforcement”) and plaintiff’s attorneys working allegedly under the hooded guise of consumer protection. One interesting presentation covered stair-step programs. As we reported in our February column, we surveyed our dealer members for their views on manufacturers’ stair-step programs. As you may recall, when asked in our survey about their manufacturers’ stair-step program, 46% of respondents were “totally opposed”,

26% were “mostly opposed”, 10% each were “somewhat in favor” or “very much in favor”, and 8% were “neutral”. On the question of “To which degree do you feel stair-step programs damage dealer credibility with customers?”, 59% said “very much”, 18% said “somewhat”, 13% said “not at all”, and 10% were “neutral”. At our ATAE meeting, Michael Regan, NADA’s senior vice president of industry relations, presented data received on a similar NADA-commissioned poll on stair-step programs. NADA received over 1,900 responses from dealers across the country, including over 6,000 verbatims (dealer statements submitted with answers), which revealed that 64% of respondents oppose the programs, 26% are in favor, and 10% are neutral. NADA will be releasing a more detailed report once the verbatims are analyzed.

AIADA Update & Leadership Summit The American International Automobile Dealers Association, which represents the international nameplate dealers, held its 46th annual meeting in Las Vegas on April 3 in conjunction with the NADA Convention. At that time, Greg Kaminsky, a California dealer, was recognized as the group’s 2016 chairman, replacing 2015 chair Bradley Hoffman. Chairman Kaminsky was seated officially in February. Also during the annual meeting AIADA president Cody Lusk presented longtime Virginia dealer Carter Myers III with the 2016 David Mungenast Sr. Lifetime Achievement Award. Mr. Myers is also a past NADA chairman. AIADA members still have time to register for the group’s 10th Annual International Auto Industry Summit in Washington DC on May 10-11. Dealers and other attendees will hear from Washington insiders and industry executives, receive briefings on issues and trends impacting their businesses, and learn how to shape federal legislation and policy. Time, moreover, is set aside for Congressional visits on Capitol Hill. Dealers can register at www.aiada.org.

www.msada.org Massachusetts Auto Dealer APRIL 2016

The Roundup MSADA Annual Meeting – May 6, Boston Don’t Delay – Register Today Have you registered yet for our upcoming annual meeting? Your Association will conduct this year’s meeting – our 76th – at Boston’s premier spot, the Mandarin Oriental Hotel. Our speakers’ lineup will cover a variety of topics impacting your dealerships: • Registrar of Motor Vehicles Erin Deveney; • Dave Guilford of Automotive News on future trends challenging the industry, including the franchise system; • Chip Perry, President and CEO of TrueCar; • Paul Metrey, NADA federal regulatory update on the FTC workshops, advertising enforcement, recalls, CFPB; • Guido Vildozo of IHS with an economic outlook; • D a i s y M e d i c i o f S u n Tr u s t B a n k / GenSpring on generational planning and other transitional issues; and • Jaime Decker – Ethos Group sales trainer. In addition, we will provide a state legislative and regulatory update as well as reports from your MSADA president, Scott Dube, and our NADA director, Don Sudbay. We start the day at Noon with a buffet lunch, and our Speakers Program will run from 1:00 p.m. to 5:00 p.m. There will be a Cocktail Reception immediately after the program. Further, we have blocked off a limited number of rooms for our dealers who wish to stay over at the hotel that evening, for which your MSADA will pick up the room cost for the night. But you must respond as soon as possible to take advantage of this great offer. Contact Jean Fabrizio to register at jfabrizio@msada.org or call at (617) 4511051.

Dealer Day on Beacon Hill – May 18 Be sure to register for our annual “Dealer Day on Beacon Hill” event in Boston. It will be held on Wednesday, May 18, APRIL 2016

beginning at the Parker House Hotel at 10 a.m. with a legislative briefing before traveling up the Hill to the State House to meet with legislators. It is a great opportunity for dealers and their key managers to get involved in the legislative process and to help get our message out on those bills that she help and hurt dealership operations. Use the registration materials that have been sent to you, or contact me at rokoniewski@msada.org.

New Wage-Hour Guide Issued The MSADA 2016 Wage-Hour Guide is now available. Since 2004 your Association has published a guide to assist franchised dealers in answering questions regarding overtime requirements, hiring practices, compliance procedures, and other wage-hour issues. We have revised the 2014 Guide to address recent law changes and clarify certain laws and regulations, including the voter-approved mandatory sick leave law. The NEW 2016 Guide contains the necessary revisions and is now available for your dealership. Discard any previous versions of the Guide. We have sent each member dealer principal a complimentary hard copy. Members can download a PDF copy of the Guide for free on the MSADA web site (www.msada.org) or purchase additional hard copies for a member price of $25 each ($50 for non-members). Contact Jean Fabrizio at jfabrizio@msada.org to order the Guide.

Dealers Eligible for Damage Settlements in Wire Harness Litigation – May 15 Deadline As previously reported, the U.S. District Court for the Eastern Division of Michigan has approved the first wave of settlements in a Federal multi-district antitrust case involving a number of automotive suppliers dealing with bid-rigging and price-fixing of component parts of automobiles. The litigation alleged that the companies had conspired to fix prices, effectively raising costs for their customers, who are auto manufacturers, dealers, and consum-

Massachusetts Auto Dealer www.msada.org

ers. Several class action suits followed at the state level, involving not only the direct purchasers in the case (the auto manufacturers) but also their customers (auto dealers) and their customers’ customers (consumers), the indirect purchasers. A settlement was reached in the state class action suit brought on behalf of dealers, and now it’s time to distribute the settlement pool, which is approximately $35 million. Others cases are ongoing. Below are some key facts about the settlement, including how dealers can apply for damages: • Dealers in Massachusetts are eligible to apply for damages from the settlement fund if they purchased certain vehicles during the period of January 1, 1998, to September 12, 2105. • A Claims Administrator – Gilardi & Co. LLC – has been appointed to oversee the application for, and distribution of, the settlement money. Deadline extended Dealers who are eligible must apply no later than May 15, 2016. Dealers should go to www.autodealersettlement.com for detailed instructions about how to apply and to submit an application. • Attorney Dewitt “Sparky” Lovelace, Class Counsel, has been designated as a contact for affected dealers. His phone number is (850) 837-6020 and his email is dml@lovelacelaw.com. His office will answer any questions from dealers and help dealers fill out a claims form at no cost to the dealer. • Payments will be awarded directly to dealers. A separate class action suit has been brought on behalf of consumers.

NADA Data 2015 Released NADA has released the latest edition of NADA Data. For the fifth straight year, net pretax profit at dealerships as a percent of total sales was 2.2%, according to the annual financial profile of new-car dealerships. NADA Data 2015 includes the many major milestones achieved by the retail auto industry in 2015: • Franchised new-car dealerships sold a record 17.3 million-plus new cars and light trucks.

MSADA • Total dealership revenue, including new- and used-car sales, as well as parts and service sales, eclipsed sales from 2014 reaching a new high of $862 billion in 2015, an increase of 6.9% from 2014. • Dealerships wrote more than 200 million repair orders, with more than $97 billion in service and parts sales. • New-car dealership employment reached 1,110,700, up 4.3% from 1,064,000 employees in 2014. • Average number of employees per dealership was 67, up 3.1% from 65 employees in 2014. • Annual payroll at new-car dealerships was $62.8 billion in 2015, up nearly 8% from 2014. • Average dealership payroll was $3.8 million, up nearly 8%. Dealers spent billions last year on contracting, services, and wages – almost all of which flows right back to the local community. In each of the past three years, dealership employees have seen their incomes rise by more than two percent, and total compensation increased by almost six percent. This has outpaced total compensation in other retail sectors, and dealers boast one of the highest average salaries of all industries. Other highlights from NADA Data 2015: • Average selling price of a new vehicle was $33,419, up 2.5% from 2014. • Average selling price of used vehicles sold was $19,397, up 2.9% from 2014. • Average new vehicles sold per dealership was 1,050. • Total number of new-car dealerships was 16,545, up 149 dealerships from 2014. • Number of customers purchasing a newor used-vehicle service contract was 43%, up 1.3% from 2014. • New-car dealerships sold 18.76 million used vehicles (10.86 million were retailed and 7.90 million were wholesaled). If you have questions about the report or would like additional information, please contact NADA’s chief economist, Steven Szakaly, at sszakaly@nada.org.

New DOL “Persuader Rule” A new U.S. Department of Labor (DOL) “persuader rule” will require employers, third-party lawyers, and labor consultants to report the efforts or arrangements they make to persuade employees, directly or indirectly, regarding their right to organize or bargain collectively. The rule will cover persuader engagements that occur on or after July 1, 2016. There are currently three lawsuits seeking injunctions against the rule, however. “Persuader” report forms must be filed electronically with the DOL, where they will become publicly available. Reports must include information concerning relevant employer expenditures and the funds received by law firms and consultants. Reportable “persuader” activities include the conduct of union-avoidance seminars, the distribution of “persuader” materials to workers, the drafting of personnel policies on union issues, etc. The DOL has an FAQ document about the new rule at: www.dol.gov/olms/regs/compliance/ecr/Persuader_QA_508.pdf.

OSHA Exempts Dealership Auto Body Shops from Revised Silica Rule OSHA has exempted dealership auto body shops from its newly released rule governing respirable crystalline silica, a hazardous mineral often found in construction materials but sometimes also in auto body filler. The exemption shields dealerships from costly new mandates for workplace exposure control measures, exposure recordkeeping, and employee medical examinations. Working with data collected by KPA and others, NADA successfully demonstrated to OSHA that the likelihood of exposure to respirable crystalline silica in dealership auto body operations is de minimis. (Note: Dealership auto body shops were the only industry group specifically exempted from the new silica rule.) Auto body shops performing tasks consistent with normal workplace health and safety controls may rely on the exemp-

tion, which is based on a recognition by OSHA that exposures will not exceed the new regulatory levels under foreseeable conditions. If you need more information on this, please contact NADA’s Lauren Bailey at lbailey@nada.org.

OSHA Revises Eye/Face Protection Rule The Occupational Health and Safety Administration (OSHA) has revised its workplace eye and face protection equipment rule to align with consensus standards adopted in 2010 (ANSI/ ISEA Z87.1-2010). The new rule does not require dealerships to update or replace their current eye and face protection equipment if they are in compliance. However, any eye and face protection equipment replaced or purchased after the April 25, 2016, effective date must comply with ANSI/ISEA Z87.1-2010. Rejecting an NADA request that it do so, OSHA is refusing to make ANSI/ISEA Z87.1-2010 available to industry at no cost. If you need more information on this, please contact NADA’s Lauren Bailey at lbailey@nada.org.

Two New NADA Guides Available NADA has released an updated edition of “A Dealer Guide to Federal Tax Issues”. This edition provides a primer on 23 federal income tax topics like dealer accounting methods, advertising expenses, bonus depreciation and section 179 expensing, cash reporting, employee v. independent contractor classifications, estate and gift tax, factory franchise agreements, insurance and reinsurance, a suggested records retention schedule, and UNICAP. NADA has also published an updated “Guide to the EPA Underground Storage Tank Regulations”. The revised Guide covers the major aspects of the updated regulations that are relevant to dealers. Both guides are available at the NADA University site on the NADA website (www.nada.org). t

www.msada.org Massachusetts Auto Dealer APRIL 2016

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Massachusetts Auto Dealer www.msada.org

Troubleshooting

MSADA

Uniform Policy By Peter Brennan, Esq.

MSADA Staff Attorney Many dealerships require their employees to wear uniforms when working. For some employees, such as technicians, the uniforms are utilitarian and are designed to protect the employee from bodily harm while working. For others, such as sales and service department employees, the uniform might consist of a polo embroidered with the dealership’s logo. In order to sell and service a sophisticated product, it is important to project a professional image to customers. Requiring employees to wear uniforms helps a dealership project this professional image, and in many ways it makes things easier on employees by simplifying their decision making process when getting dressed in the morning. Additionally, a simple uniform policy should reduce or eliminate “wardrobe malfunctions” around the dealership. However, if you currently maintain a uniform policy at your dealership or plan to implement one in the future, you should be aware of the complex state and federal regulations relating to employee uniforms. Under the Massachusetts Department of Labor Standards Minimum Wage Regulations, a uniform is defined as: “All special wearing apparel which is worn by the employee as a condition of employment. It shall be presumed that a uniform worn by any employee of any establishment is worn as a condition of employment if such uniform is of similar

design, color, or material, or it forms part of the decorative pattern of the establishment to distinguish a person as an employee of the place of work. Where an employer requires a general type of basic street clothing, permits variation in the details of dress, and the employee chooses the specific type and style of clothing, this clothing shall not be considered a uniform.” [454 C.M.R. § 27.02.] Importantly, a dealership may not charge employees for their uniforms without a special waiver (as detailed below). The dealership must reimburse an employee that is required to purchase or rent a uniform for the actual purchase or rental cost of the uniform. [454 C.M.R. § 27.05(4)(c).] This policy represents a somewhat recent change in the law and should be recognized by all employers. If your current uniform policy requires employees to pay for some or all of the cost of their uniforms, we advise that you change the policy to comply with the regulations. Additionally, it may be necessary to reimburse any employees that have purchased or rented required uniforms since the regulations went into effect in January 2015, although legal counsel should be consulted before doing so. Violations of the relevant regulations can result in treble damage civil awards, so an effective waiver should be executed by the employee and dealership before compensating any employee for past uniform charges. Enterprising members of the plaintiff’s bar with class action lawsuits in mind are already using this regulation change to find clients, so be wary. The regulations also provide that if a uniform requires dry-cleaning, commercial laundering or other special treatment, the employer must reimburse the employee for the actual cost of such service, even if it does not result in an employee receiving less than the minimum wage. If the uniforms are made of “wash and wear” materials that do not require spewww.msada.org

cial treatment and are routinely washed and dried with other personal garments, the employer need not reimburse the employee for uniform maintenance costs. [454 C.M.R. § 27.05(4).] An employer may not require a deposit from any employee for a uniform or for any other purpose, except by permission of the Director of the Department of Labor Standards. The Director has established a “Uniform Deposit Waiver Policy.” An employer may file an “Application for Uniform Deposit Waiver”, requesting permission to charge the employee for uniforms. If you require employees to wear a uniform, then you may have to pay them for the time it takes to change into the uniform. Under the Federal Fair Labor Standards Act, an employer is required to count as “hours worked” any time spent performing activities outside an employee’s normal work hours if the activities are “integral and indispensable to the employee’s principal activities.” In some industries such as meat packing, employees must be compensated for the time spent dressing in special sanitary clothing and putting on protective gear required by the employer or the law or by the nature of the work. However, some dealership uniforms, such as the ones worn by sales and service staff, can easily be put on at home. Therefore, if a dealership does not require employees to change at work, the federal law does not require the employer to count time spent dressing or undressing as “hours worked” even if an employee chooses to change clothes at work. t If you require any additional information on these wage and hour issues please contact Robert O’Koniewski, MSADA Executive Vice President, rokoniewski@ msada.org or Peter Brennan, MSADA Staff Attorney, pbrennan@msada.org or by phone at (617) 451-1051. Massachusetts Auto Dealer APRIL 2016

Accounting

MSADA MSADA

Opportunity (Without) Cost By Mark V. Dow Mark Dow, CPA, MST is a principal at the firm.To contact Mark, call (617) 471-1120 or email him at mdow@ocd.com.

The entire sales cycle and its journey to the “bottom line” is an arduous process with pitfalls and detours along the way. A return of a mere 2-3 percent on sales more than underscores this fact. There is no substitution for a sound sales strategy in all departments of the dealership. The proper sales and marketing approach, the right people in the right spots, the setting of goals and attention to detail usually leads to good results. This is hard work. Fortunately, there may be areas where the bottom line can be improved without an increase in sales. The return on the “investments” noted below far exceeds 2-3 percent. These are numbers worth investigating!

Parts Warranty Rate

This is a layup. The rate paid by your manufacturer on parts warranty sales can be increased. You are required to perform and submit a representative sample of customer repair orders, often followed by a little back and forth. The end result is your sales price for parts on warranty repairs goes up and the cost of the warranty parts is unchanged. Many have already done this – if you haven’t then you are missing out.

Customer Labor Rate

You may be surprised at the last time you reviewed and increased your labor rate. We often hear from dealers that they recently increased the rate without any decrease in business. Some amount of the increased rate will likely be shared with the service department employees, but it still puts you ahead of the game. APRIL 2016

Treatment of Service Discounts/ Policy

Good customer service is a vital cog in almost any business. When a repair doesn’t work quite right or there is a misdiagnosis, providing an allowance to your service customers makes good business sense. There are times, however, when this can be used as a crutch, and service department margin can slide if the use of “policy” adjustments is not monitored. Sometimes, just “writing it off” is the easy way to avoid a difficult conversation with a customer. Margin often slips away, particularly when there is likely a middle ground that should result in a fair charge for the work performed.

Internal Labor Rate

This one is straight-forward. Be sure that the rate charged for prep and reconditioning of your used cars is close to your retail rate. The cost of the vehicle will then reflect “market” and will ensure that the proper gross profit is achieved upon vehicle sale.

Extended Service Contracts

There are options available to enhance the profits on the sale of extended service contracts (ESC). The additional profits can be significant. There are a myriad of programs available, and each has its complications. This is one to study carefully with respect to fees, assistance with selling the product, etc. It is all about sharing in the profit being made from the “cost of the contracts” that you currently send out to your existing ESC vendors.

Software- Leasing and F&I Products

How many software “products” and “tools” do you currently pay for and how do they maintain or improve your gross margins? Many of these products are charged to the dealership through the manufacturers’ parts statement and are on autopilot, requiring no monthly approval. There are other charges on the parts statement that may not add value to your operation. A careful review of all these products may uncover significant savings.

Massachusetts Auto Dealer www.msada.org

Service Loaners

It is well known that for many brands, the providing of service loaners has become standard. The expense associated with a loaner fleet has grown substantially over the last several years, and to some degree it is a cost of doing business. It is, therefore, critical to manage the fleet and maintain just the right number of units. The purchasing of off-lease cars needs to be coordinated with units coming out of loaner status to avoid a bottle-neck in inventory. Additionally, the use of rental car companies should be questioned, based on the significant number of loaners many dealers have available. Someone needs to be clearly in charge of this area, as it often neglected.

Special Order Parts & Sublet

When service work requires special order parts or subletting of a portion of the work, it is critical to have strong processes in place. Special order parts should require a deposit to ensure that the customer intends to follow through with the work and to offset the loss that can occur if the part goes unused. Sublet charges need to be promptly applied to repair orders to avoid failing to recoup the cost from the customer.

Aged Rebates and Warranty Claims The factory rebate and incentive programs can be complicated and, on occasion, a misunderstanding can occur. We often see rebates and warranty claims being written off that could have been received if administered properly. It is best practice to review the status of these accounts at a minimum of twice per month. Those claims that “should have been paid by now” almost always have an “issue.” These need to be reviewed immediately for resubmission. A review of the above items will likely yield results and will also give you a sense of the internal controls throughout many of your departments. There can be an increase in profits without increasing sales! .t O’Connor & Drew has served auto dealers for over fifty years.

MSADA

Legal

By Joseph W. Ambash and Jeffrey A. Fritz

Reducing Risk When Terminating Employees As you know if you read this column with any regularity, many state and federal laws exist which govern the employer-employee relationship. Every time you fire an employee, a risk exists he or she will sue your dealership based on one, or several, of those laws. And while you cannot outright eliminate that risk, you can conduct your employment terminations in such a way as to minimize the risk they will form the basis of, or contribute in the employee’s favor to, any such lawsuit. Have a good reason. To be sure, the default rule in Massachusetts is that employees are at-will, meaning either the employee or the employer can terminate the employment relationship, at any time, for any reason not prohibited by law, with or without notice. That means the law technically does not prohibit an employer from firing an employee because the employer simply felt like it, or did not like the color of the employee’s shirt, or was having a bad day completely unrelated to the employee. That said, many laws, such as anti-discrimination laws, require an employer faced with such a claim, in essence, to justify its decision to terminate. For example, Chapter 151B and Title VII, the state and federal anti-discrimination laws, require an employer to state its legitimate, non-discriminatory reason for the decision to fire, which an employee then will try to pick apart and discredit to suggest it was not the real reason but merely a pretext for discrimination. The less justifiable the employer’s proffered legitimate, non-discriminatory reason seems, the more likely a jury will conclude it was not the real reason and, depending on the evidence, may agree it was a pretext for discrimination. While the law does not require termination decisions to be just or fair, if a jury believes an employer’s decision was unjust or unfair, it may be more likely to find in the employ-

ee’s favor, in any event. Make sure your good reason is on firm footing. If the termination involves employee misconduct, make sure you have conducted an appropriate investigation, including giving the employee charged with the misconduct an opportunity to explain him or herself. If the termination involves employee performance, make sure you have given appropriate coaching and an opportunity to improve before terminating. Of course, the nature of the misconduct or performance deficiencies should dictate what level of discipline is appropriate. And to avoid a disparate treatment claim, make sure you are treating apples like apples and oranges like oranges. Finally, make sure you document the basis for your decision. Prepare for the termination meeting. Employers should not hold termination meetings off-the-cuff. They should plan them, prepare for them, script them as best they can, and then follow their plan and script as best as possible. Keep it brief, focused, and respectful. An employer once told us of a termination meeting he held that lasted about two hours, during which the employer and employee argued back and forth ad nauseam about the merits of the decision. The meeting became very contentious, and the employer said things that would not be helpful in the event the employee sued. Indeed, the longer the meeting, the more likely an employer is to go “off script” and say something it later regrets. To be sure, an employer should tell the employee it has decided to terminate his or her employment and, in a focused manner, explain generally the rationale for the decision. Above all, an employer should be honest and forthright about the reason for the decision; giving inaccurate, incomplete, or false (even if not illegal) reasons can make lawsuits about the basis for the www.msada.org

decision much more difficult and costly to defend. The employer should not engage in debate with the employee during the termination meeting about the wisdom of that rationale. By the time of the termination meeting, the employer already should have a firm basis for the decision. Employers should meet employee attempts at debate with a brief acknowledgement of the statement and an indication that the decision is final and not open for debate. You should have a witness in every termination meeting; the best practice is to have someone from Human Resources attend and explain benefits and other administrative issues attendant to the transition. And make sure, as soon as possible after the meeting, you document what occurred as best you can. Consider using separation agreements. Some employers offer separation agreements to employees they have decided to terminate whereby, in exchange for some amount of severance, the employee agrees to release the employer from any and all legal claims. While separation agreements may not apply technically to every potential claim, they can, sometimes for a relatively nominal amount, eliminate the risk of many. t

Joe Ambash is the Managing Partner and Jeff Fritz is counsel at Fisher & Phillips, LLP, a national labor and employment firm representing hundreds of dealerships in Massachusetts and nationally. They may be reached at (617) 722-0044.

Massachusetts Auto Dealer APRIL 2016

AUTO OUTLOOK

APRIL 2016

Massachusetts Auto Dealer www.msada.org

MSADA

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Massachusetts Auto Dealer APRIL 2016

Cover Story

A Podium Finish

Bristol-Plymouth Tech holds its own against the National Auto Tech Competition By Tom Nash

Peering from under safety glasses as the clock wound down, BristolPlymouth Regional Tech seniors Justin Albernaz and Jonathan Arruda exuded a quiet confidence as they worked their way through their own checklist of how to debug their Mazda3. They had done this for weeks at their own shop, and the National Auto Tech Competition in New York City proved no different. The pair first proved their mettle when they finished on top at the MSADA auto tech competition in February. The victory earned them an MSADA-sponsored trip to New York City to compete in the National Automotive Technology Competition, held during the New York International Auto Show at the Jacob Javits Center in late March. After passing that hurdle, instructor Steve Ribbe arranged for them to practice for the national competition on a current-year model Mazda3 through a generous loan from MSADA dealer member and past president Rick Mastria. That gained expertise on the vehicle the students had been assigned for the New York competition brought them a significant advantage when it came to unfolding the troubles bugged into the vehicle in New York. “Rick’s been a long-time supporter of our school,” Ribbe said. “We told them what we needed, and they gave it to us.” Before the team got to debugging, however, came a first day of even tougher competition. APRIL 2016

Massachusetts Auto Dealer www.msada.org

MSADA A Grueling First Day After a train ride into midtown Manhattan, the team arrived at the Javits Center ready to tackle the first day of the competition – which consisted of a set of workstations where the 30 teams’ knowledge on everything from wheel alignment to job interviews would be evaluated. The competition took place alongside the New York International Auto Show, which featured hundreds of vehicles from every major manufacturer and several new model unveilings. The impressive surroundings didn’t faze the team, however. Working on the cars was the fun part. This was the day when knowing how to handle a tire balancer and the ins and outs of electrical systems would dominate the competition – it also counts for 60 percent of the final scores. Ribbe, who had worked with the students for months on preparing for the competition, could only stand by and watch as his students competed. Like most of the students here, he said, they found the first day of competition is the most stressful.

“They feel like they did pretty good, and they were definitely challenged,” Ribbe said. “I think that gives them a lot more satisfaction to say it was hard than ‘that was easy.’ It was a rewarding day for them.”

The Final Round With scan tools placed and judges assigned, the teams worked for three hours to get their vehicles running in the second phase of the competition. While every manufacturer and most major brands were represented, the same bugs appear in each. The competition comes down to knowing the nuances of the car. Ribbe was confident, the parents even more so. The parents beam about both students, who already have extensive experience at independent repair shops. Albernaz also became a Pro2 Modified champion at Stafford Motor Speedway last year, in just his first year of competition. His mother, Christine Albernaz, sees more racing in his future. “It’s in his blood,” she says, noting his grandfather ran a Craftsman Series truck team in North Carolina after also putting in time racing in New England. For Arruda, the hands-on side and business side of the repair business beckon. Arruda’s brother already runs his own business. “[Jonawww.msada.org

Massachusetts Auto Dealer APRIL 2016

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A Podium Finish than] wants hands on, but he loves running the business side as well,” his father, Joe, explains. “Someday he’ll want his own shop.” As Joe watched, he predicted success. “They’re definitely going to get a top-5 finish,” Joe says. “Easily.” When the final buzzer went off, the team was already packing its tools, having completed all of its tasks. Within half an hour, they were on stage being honored for a third-place finish out of 30 teams. “As a mom, watching Justin at the competition in NYC made me proud of his achievement and making it to such a recognizable and memorable point in his education, career, and life expe-

MSADA rience,” Christine Albernaz said after the ceremony. “As a parent, it made me thankful for the his mentors: his grandfather, the two master technicians he works for at an independent shop, Mr. Ribbe, B-P and exposure to the collaborative programs B-P is fortunate to have.” Meanwhile, MSADA Executive Vice President Robert O’Koniewski said the team’s overall academic success is just one way the Association supports its next generation of auto techs. “We are very proud of these students,” O’Koniewski said. “They represent the best of what our young Massachusetts technicians have to offer. We need to continue to grow our involvement with the next generation through sponsoring this competition, our Foundation scholarship program, and working with MassBay, Ben Franklin and other schools to help show students the opportunities at our dealerships.” “We also need to give a big shout out to Rick Mastria, who went the extra mile to assist the students with a car to work on and technical advice from his staff,” added O’Koniewski.

MSADA Scholarships Help Meet Demand for Technicians In 2003, the Massachusetts State Auto Dealers Charitable Foundation began its Automotive Technician Scholarship Program. The Foundation is the charitable arm of the Massachusetts State Automobile Dealers Association. More than 200 students have benefited from over $1,00,000 in scholarships. Massachusetts Bay Community College has been a long-time partner and has the most extensive partnership (scholarships) with the Foundation in the state. Students from colleges, including Benjamin Franklin Institute of Technology, Springfield Technical Community College, and Massasoit Community College, have also received scholarships from the Foundation. The Scholarship Program is competitive. A two-year scholarship ranges from $6,000 to $13,000 per year. Less than 10 percent of the students who apply are accepted. Students must maintain a 3.0 average in their tech courses, and they must have secured a co-op appointment in a Massachusetts new car dealer repair shop (dealership). A co-op is technically an internship and students are paid, offsetting the cost of tuition of the program at MassBay. The tuition for the automotive technician program is $16,000. Each year the MSADA sponsors a team to compete in a technician competition at the Auto Show in New York. The competition is fierce and some 100-200 competitors statewide apply to be part of it. The field of auto mechanics is changing dramatically. Today’s mechanic needs to know how to operate a keyboard as well as a stick shift. As cars with sophisticated onboard computers become the rule rather than the exception, the profession is becoming more white collar, and technicians now need to be computer- as well as mechanically-savvy. Auto mechanics are now called technicians, and for good reason. While they may still sometimes get their hands dirty, more often than not, they turn to computers to help them diagnose a problem and perhaps even give them the repair instructions. MassBay, part of the state’s community college system, is training this new breed of automotive technicians at its state-of-the-art automotive center in Ashland. MassBay’s Automotive Center is known for having one of the best programs in the Northeast. Its strong partnerships with area dealers ensures that its students get to work and train on the latest models.

APRIL 2016

Massachusetts Auto Dealer www.msada.org

MSADA

TRUCK CORNER

Report from Las Vegas Over 1,000 truck dealers gather in the entertainment capital of the world

By Steve Parker ATD Chairman

reach into our business, the harmful FET excise tax, I’d like to welcome our readership to the first inand continuous advocacy for good relationships stallment of the ATD Chairman’s Column! This colwith our manufacturers. umn is my opportunity to share and introspectively With our members at the forefront of everything comment on some of the most important highlights we do, remember that ATD needs to hear from you. in our industry each month. And there is no bigger I urge you to fill out our Dealer Attitude Survey highlight from the past month than our annual ATD which will be available online in May. This survey Convention & Expo in Las Vegas. is an integral part of ATD’s industry relations proJust a few weeks ago, over 25,000 attendees— gram. It is your chance to communicate with your and 2,800 international guests — converged in the manufacturer and our opportunity to present your Entertainment Capital of the World for our annual feedback on key issues to each of the respective convention. truck OEMs. The greater the response rate, the more It proved to be our best industry affair yet with weight the survey results will carry. Your response nearly 1,000 truck dealers, OEMs, suppliers, and will always remain confidential. vendors in attendance. I am especially grateful to Please stay tuned our amazing sponfor the launch of this sors, including year’s survey and be Shepherd Insurance sure to complete it. for sponsoring the It will be my duty to help The information you Welcome Reception; support your businesses give ATD will help Cummins for sponsoring the opening and employees through the us advocate for you when we meet with ATD luncheon genregulatory burden. the manufacturers you eral session; Eaton represent. for sponsoring the There will be many Saturday ATD lunnew ‘beginnings’ this cheon general sesyear. We are in the throes of an election year in sion and the ATD Happy Hours; Heavy Duty Truckwhich we will select a new President and Vice Presing and Procede Software for the momentous Truck ident for our great country. Those whom we elect Dealer of the Year program; and Karmak for the into office—at the federal and local levels—will NextGen reception. make decisions that can impact our industry tremenOur ATD exhibitors are world class, and they dously. So let us make this a good beginning. make everything on the expo floor possible year afFrom a personal standpoint, I am very proud to be ter year. We are proud to receive 100 percent OEM a first-time grandparent. My newly born grandson support for the final evening gala at the convention. seemed to have waited until my wife and I got home On behalf of ATD, I’d like to extend a heartfelt thank from the convention until he decided to come out you to everyone who took the time to celebrate a into this world. I couldn’t be more grateful. year of remarkable achievements and dedication to As we continue into 2016, there will be many our great truck industry. more beginnings and challenges ahead. It will be my Speaking of dedication, I am eager to serve as ongoing mission to educate others about our comyour ATD Chairman for the next two years, and I mercial truck industry. It will be my duty to help am confident in the ATD staff and Board that will be support your businesses and employees through the spearheading so many efforts on your behalf. We’ve regulatory burden. And it is my honor to lead ATD come this far thanks to our Immediate Past Chairthrough the next two years. From the beginning to man Eric Jorgensen who has led this association the end, rest assured that ATD will remain commitwith strength and clear direction despite many chalted to you—our great truck dealers—through it all. lenges. I am prepared to carry the torch and tackle many of our pressing issues such as regulatory overt

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Massachusetts Auto Dealer APRIL 2016

NEWS from Around the Horn from Around

NEWS the Horn

LAS VEGAS

Adam Connolly Recognized at NADA Convention Herb Connolly Chevrolet President Adam Connolly appeared in Las Vegas this month to be recognized as the Massachusetts nominee for the the 2016 [ITAL] TIME Dealer of the Year award. Connolly was among a select group of 50 dealer nominees from across the country who were honored at the 99th annual National Automobile Dealers Association Convention & Exposition. Connolly was profiled in our February issue of Auto Dealer. TIME Dealer of the Year award nominees are business leaders and pillars of their communities, who have each given generously to support important charitable causes,” said Tim Russi, president of Auto Finance for Ally Financial, which co-sponsors the award.

MSADA WEST SPRINGFIELD

Bertera Subaru Donates Over $55,000 to Make a Wish Foundation Bertera Subaru donated $55,146 during an April ceremony dedicated to the the Make a Wish Foundation of Massachusetts & Rhode Island.

From left to right: Shawn Sullivan of Bertera; Mark Noel of Bertera; Ella Negron, age 8, of Chicopee; Michael Bertera of Bertera; Peg Wheble of Make a Wish; and Michael Hutchings of Subaru of New England.

HYANNIS

Adam Connolly with MSADA Executive Vice President Robert O’Koniewski, TIME Sales Manager Kelly Wood, and Tim Russi of Ally Financial.

The TIME Dealer of the Year award is one of the automobile industry’s most prestigious and highly coveted honors. Recipients are among the nation’s most successful auto dealers who also demonstrate a long-standing commitment to community service. “MSADA honored Adam as our Dealer of the Year based on his commitment to our industry and the charitable community in which he operates,” said MSADA Executive Vice President Robert O’Koniewski. “Adam brings a positive energy and great leadership skills to all that he does, and we are proud to have him as our standard bearer for the next year.”

APRIL 2016

Massachusetts Auto Dealer www.msada.org

Beard Subaru Makes Donation to Land Trust Capping off a winter sales event aimed at raising money for the Barnstable Land Trust, Beard Subaru owner Gary Beard made a donation to the group this month. The Barnstable Land Trust was chosen as the local nonprofit recipient of Subaru of America’s “Share the Love” program held annually. Beard presented the group with $17,771 at a recent event. “I chose Barnstable Land Trust because I believe in what the organization does,” Beard said in a statement. “It’s a good idea to protect the beauty of Cape Cod.” Beard is also a longtime donor to Barnstable Land Trust’s Gifts from the Sea fundraiser. The trust is currently the steward of 1,075 acres in the town of Barnstable.

MSADA WEST SPRINGFIELD

Balise Opens New Kia Dealership Balise Motor Sales opened its new Kia dealership this month next to its sister Mazda dealership on Riverdale Street. The 15,000-squarefoot dealership replaces the Balise-owned Mighty Auto Parts warehouse, which has been relocated to a nearby facility. The new Kia building features a customerfriendly showroom and waiting area with free WiFi. The dealership also offers a covered service drive-up for customer convenience. Bill Peffer, presi-

dent and COO of Balise Motor Sales, said he’s excited to welcome a rapidly growing brand to the Balise family. “The addition of Kia, one of the fastest-growing brands in the United States, aligns perfectly with the Balise philosophy of putting the customer first,” he said. “With numerous accolades in the areas of quality, safety, and sustainability, we’re thrilled to continue serving Kia customers throughout Western Massachusetts with a highquality product.” Construction and renovation of the facility was completed by Associated Builders of South Hadley. This is the first Kia dealership for the Balise group and is the only Kia Motors America franchise in the Springfield Metro area.

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Massachusetts Auto Dealer APRIL 2016

NEWS from Around the Horn NORWOOD

Ernie Boch Jr. Surprises Governor Baker with Throwback Photo Ernie Boch Jr. surprised Gov. Charlie Baker with a vintage photo at a recent Subaru of New England ribbon cutting. As Baker entered, he found himself pictured at age 19 at an Aerosmith concert at the Providence Civic Center in Rhode Island. The photo was prominently featured in Rolling Stone, but had been lost to Baker for decades. “It’s a legendary photo, and sure enough, the guy in the middle is the governor of Massachusetts,” Boch told The Boston Herald. Baker called Boch’s effort “a very kind gesture,” and could still recall the evening at the Civic Center. “I got there early, got to the pit with some friends,” Baker told The Herald. “It was the hottest I have ever been in my life - had to be middle of August. Rick Derringer was the opener.” Baker, upon seeing the photo, signed it: “Dream on, Ernie. All the best, Charlie Baker.” Boch gave Baker a copy of the photo to take home.

APRIL 2016

Massachusetts Auto Dealer www.msada.org

MSADA BOSTON

Electric Vehicle Incentives Bill Moves Forward Massachusetts lawmakers put forward a bill this month that could add to the benefits of owning an electric vehicle. If passed, the bill would allow electric car owners and operators access to high occupancy vehicle lanes, increase access to charging stations throughout the state, and ensure that certain charging station information, including compatibility BOSTON.COM PHOTO and charging level, is posted online. The bill, which is also known as “An Act Promoting Electric Vehicle Adoption,” would also require the Department of Energy Resources to develop and promote a common standard as part of the state building code for electric vehicle charging stations. Rep. Frank Smizik, a Brookline Democrat who chairs the House Committee on Global Warming and Climate Change, says the measure is necessary to curtail carbon emissions in the state. “Electric Vehicles have made enormous technological advancements over the past decade, and can now compete economically and functionally with traditional motor vehicles,” Smizik said in a statement. “Many in the legislature, including myself, recognize this and believe we can consider EVs in our emissions reductions strategy.” BOSTON

Business Journal Shares Herb Chambers Interview The Boston Business Journal sat down with Herb Chambers on Marathon Monday to discuss his work with the Dana Farber Cancer Institute, the marathon, and where he was during the 2013 bombings in a recently published interview. Chambers describes being pulled into a restaurant along the finish line by a customer just before the first bombing occurred, saying, “If I wasn’t talking to that customer in the restaurant, my brother and I would’ve been out of the street and possibly in harm’s way.” The full interview is available at www.bostonbusinessjournal.com. www.msada.org

Massachusetts Auto Dealer APRIL 2016

Dealer Ser vices Compliance and the Automotive Industry By Rob Sneed and Steve Lloyd Ethos Group

to learn and embrace new processes and new levels of accountability in order to manage these changes. Some dealerships have embraced these changes, yet others in our industry remain confused, reluctant to take the steps needed to embrace the changes that are required. Dealerships that have embraced such changes seek to concurrently enjoy both sales volume and deal profits while raising the standard and quality of the business services offered to their customers.

Make Change Happen

Rob Sneed

is a development representative

Ethos Group Consulting Services. Steve Lloyd has spent over 32 years in the automotive industry in sales, finance, and lending, where he developed Ethos Group Compliance Solutions. For more information on how Ethos Group Compliance Solutions can help your business, contact Steve at (214) 952-9947 or slloyd@ethosgroup.com. and motivator for

Compliance is not new to our industry. Our industry has always operated its businesses within certain legal compliance requirements. However, the scope, breadth, and complexity of legal compliance requirements that our industry has been con-

Legal compliance requirements are forcing dealerships to change historical industry-standard business practices and adopt new practices. While that certainly may intimidate some, others understand these requirements can make change a positive experience – for your dealership and your customers! Though a cyclical business, many dealerships are experiencing the most profitable years in recent history. Yet regulators continue to constrain attempts to provide customers with a great driving experience (regulations once measured in ounces, are now measured in pounds of paper), forcing dealerships to change the very practices that many feel are leading to these record

“Many of today’s compliance programs require a new level of accountability within your organization.”

levels of customer satisfaction. Does this seem difficult? Of course it does! Before you can begin to learn and embrace each of the compliance programs and their specific and unique requirements, you need to understand what is expected of you and how these changes will impact your business. Many of today’s compliance programs require a new level of accountability within your organization. Let us look at the following key requirements that have been identified in several recent compliance programs.

Assign a Program Coordinator The first step in many cases is to appoint a person within your organization to assess the dealership’s current compliance risk and then implement a compliance program. This person is often referred to as a “program coordinator”. The dealer is responsible for appointing a program coordinator to make the critical decisions regarding compliance and that person typically reports directly to the dealer or a special committee of board of directors.

Assess Your Risk Your program coordinator has the responsibility of analyzing your current business practices and comparing them to the regulations and your dealership’s own policies. Once risks have been identified, the dealer and/or the board of directors must agree on the policies, processes, and procedures needed to comply with applicable regulations. A plan-of-action should be documented and implemented.

Implement Training fronted with since the turn of the last millennium has been remarkable, if not near overwhelming! Many in our industry have adapted and moved forward under the full realization that the impact of compliance does change “old school” operating standards. Owners, managers, and employees alike have had APRIL 2016

success and customer satisfaction. Change is required; it is not optional. As business owners, dealers must accept and should welcome these new compliance requirements; while thoughtfully solving how to retain similar profitability being generated using “old-school” methods while at the same time ensuring the same

Massachusetts Auto Dealer www.msada.org

Once your plan-of-action has been documented, approved, and established, the dealership should train all of the employees that are impacted. The training must be focused and conducted as efficiently as possible so that your employees are engaged in learning the concepts taught and not just completing the training.

MSADA All new employees should receive the training as soon as they are hired to learn how to follow the company’s compliance program. All existing employees should be required to retake the training periodically to be reminded of their responsibilities in the compliance program. It is the dealer’s responsibility to document the training and ensure that employees understood the content. Be careful not to practice one-and-done training! Always document your training efforts! This is an essential element in assuring accountability in your compliance program.

Conduct Audits The only way to truly reduce risk is to inspect what you expect! If your new processes are not consistently enforced and reinforced, your employees will have a tendency to fall back to their old ways – ways that are more comfortable and much

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more familiar. Your program coordinator must design and complete periodic audits to ensure compliance. Violations must be noted and discussed with the dealer and/ or board of directors to identify the steps needed to ensure that the team remains in compliance. Unfortunately, these steps sometimes require taking disciplinary action against employees who simply will not embrace the needed changes. This is an area where many dealerships fall short. But you cannot allow employee non-compliance to be tolerated at the expense of your business’ reputation and longevity.

Many dealerships hold their employees accountable based on their job assignments. For instance, a salesperson may be held accountable for their sales volume while a body shop painter will be

held accountable for the quality of their work. Just as important, dealerships must make compliance a priority and create an environment that values adherence to the company standards of doing business. Your best employees will always respond positively to it. Our industry is changing and changing rapidly. The legal compliance requirements that regulators are implementing seem destined to increase over time, and the dealers who will experience the greatest long-term success will be the ones that that can effectively embrace these legal compliance requirements while maintaining their profit margins and levels of customer satisfaction. We know that these changes require great discipline and even greater leadership! Can it be done? Absolutely! We see it every day…but you must start now. t

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Massachusetts Auto Dealer APRIL 2016

Employee Accountability

NADA Market Beat MARCH 2016

Nationally, March came in far below expectations, with only 16.46 million SAAR light-vehicle sales, a steep fall-off from the previous month. The question everyone is asking: Have sales finally peaked? Our view has always been that sales were set to grow only based on incentives spending in 2016. It is clear that pent-up demand for cars and light trucks has been satisfied, and the longer buying cycle from 66-month average loans is pushing sales out. But we also know that, long-run, sales at 16.5 million is likely unsustainable with the amount of existing capacity. If continued low rates and strong employment growth do not improve sales, sale incentives likely will. We hold our forecast at 17.7 million with some positive news on wages, strong employment growth, and expectations that incentives will grow sales.

APRIL 2016

Massachusetts Auto Dealer www.msada.org

MSADA

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Massachusetts Auto Dealer APRIL 2016

Sound Off

MSADA

How Do Millennials View Your Dealership as an Employer? By Kevin Baumgart Hireology

Whether you want to accept it or not, the next wave of talent in today’s workforce is the millennials. According to a recent article published by Automotive News, “The percentage of millennials working in dealerships rose to 31 percent from 27 percent a year earlier. Close to half of all new dealership hires in 2014 were millennials.” While Gen Y continues to have a growing presence within the retail automotive workforce, dealerships are having a hard time retaining them. “In 2014, the annualized turnover rate in the average car dealership’s sales department was 72 percent, an increase of six percentage points from a year earlier,” says Automotive News. So this group of young employees is the growing workforce at dealerships, yet rooftops are having trouble keeping them. Therefore, it’s critical to think about how millennials view your dealership as an employer and how you might be able to make that perception better. Sometimes the best way to combat turnover is with better hiring. If you hire the right people (those who truly want to work at your business and have the right skillset), then you’re more likely to retain them for a much longer time.

Getting to Know Your Gen Y Workers Citing a 2016 survey conducted by Deloitte (a study which covers responses from nearly 8,000 millennials across the globe), here are the recent findings on how millennials think and behave in today’s workforce: They want more responsibility: • “Supporting leadership ambitions builds loyalty (yes, really!)” • “Being held accountable doesn’t reduce loyalty or satisfaction.” • “Strong sense of purpose, inclusiveness, and open communications are higher where employees intend to stay longer.” • “Three-quarters of millennials are confident and feel in control of their career paths.” • “Those who feel in control appear to be a little more loyal.” They care about their work:

• “The values that support long-term business success are people treatment, ethics, and customer focus.” • “Personal values have the greatest influence on Millennials’ decision making.” • “Millennials would prioritize the sense of purpose around people rather than growth or profit maximization.” • “Millennials with a mentor are receiving good advice and feel somebody is interested in their professional development.” They care about the work/life balance: • “Pay and financial benefits drive Millennials’ choice of organization more than anything else.” • “In most markets, work/life balance comes before career progression when evaluating job opportunities.” • “Millennials would like more opportunities to work remotely and think it will boost productivity.”

How to Keep Your Millennial Workers It’s simple: If you want to retain your millennial talent before they head out the door for the next best offer, you have to learn how to work with them, not against them. Looking at this generation of employees as disposable talent will slowly hurt your business (in many different areas) with one being the cost of turnover. Here are some ways for business leaders can help keep millennials from leaving their company: • Provide a unique work culture that reflects millennial preferences; • Let them know their work means something — show them purpose; • Provide a flexible work-schedule that allows time for work/ life balance; • Offer stability via salary and benefits; • Encourage individuality within a team environment; • Give recognition when it’s due; and • Offer encouragement and mentorship, as opposed to giving orders and managing directly upfront. Looking to attract the right millennial talent to your dealership? See how you can refresh your career site to begin building a better team.

Kevin Baumgart is Vice President of Sales at Hireology. Contact Kevin at (773) 220-6035.

Have an opinion you want to share? Email rokoniewski@msada.org. APRIL 2016

Massachusetts Auto Dealer www.msada.org

NADA Update

By Don Sudbay

Power in Numbers

From Las Vegas to Boston, it’s great to see dealers gather 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). This is an exciting time of year for anyone lucky enough to be able to travel to the NADA Convention and the MSADA Annual Meeting – which both occur within one month of each other. I’m one of those folks, and it’s invigorating to say the least. As businessmen and women, we are out to grow and prosper for the sake of our families and employees. And while that means we’re all competing against each other day in and day out, the forces at work against us

Knowledge is power, and getting together to share knowledge is one of the most effective ways of learning from each other. are much larger than stiff competition. Getting together is a good reminder of that. Dealers can’t live in a bubble. They need to know more than just what’s coming onto the lot and how much metal we’re going to move in the next hour, day or month. Knowledge is power, and getting together to share knowledge is one of the most effective ways of learning from each other. I hope to see you on May 6 at our Annual Meeting.

Dealer Finance and Franchise System Under Attack, Says NADA Chairman Franchised dealers in the U.S. are facing a threat to their finance sales, the new chairman of the NADA told delegates at the NADA conference in Las Vegas this month. Jeff Carlson pledged that NADA would continue to build in its successful advocacy efforts on key issues, such as preserving the ability of dealers to discount credit and make credit affordable and accessible, and being advocates for dealers and consumers alike when it comes to ill-advised government

policy and manufacturer issues. “The CFPB (Consumer Finance Protection Bureau) is overreaching into our business model, which will reduce consumer access to the most competitive credit market on the planet,” said Carlson, who heads Ford and Subaru dealerships in Colorado. “It’s no secret that the dealer franchise system has been attacked unfairly and relentlessly. But, the best defense is a good offense. We’ve made sure to identify those in Washington who understand and respect our business.”

New Light Vehicle Sales on Track for Record Year in 2016 New-vehicle sales for cars and light trucks are on pace to reach NADA’s forecast of 17.7 million vehicles in 2016. “We are closing out a strong first quarter,” said NADA Chief Economist Steven Szakaly at a press briefing during the NADA Convention and Expo in Las Vegas. “With low interest rates, low gasoline prices, and a rich selection of new vehicles with improved fuel and safety technology, it remains a great time for consumers to buy a car.” Szakaly noted that the average transaction price on a new vehicle was nearly $34,000 at the end of the first quarter, thanks to an increase in light-truck sales and the purchase of more options on vehicles. Low fuel prices are also helping to accelerate a long-term trend in U.S. motor vehicle sales that continues to favor light trucks over cars. “We expect light trucks to reach 57 percent of the newcar market this year,” Szakaly said. “Consumers appreciate the utility, convenience and cargo room that light trucks provide, and buyers continue to favor them over cars.” Car segments are expected to remain weak this year, with incentives on small, midsize and even luxury cars expected to rise as the year progresses. But Szakaly said this will be offset by falling incentives on in-demand light trucks.

New Report: Employment at New-Car Dealerships Up 4.3% in 2015 As auto sales continue to rise, new-car dealerships across the country continue to hire, according a new report released by NADA. Employment at new-car dealerships in the U.S. reached 1,110,700 in 2015, up 4.3 percent from 1,064,000 employees in 2014, according to NADA Data 2015, the annual financial profile of new-car dealerships. On average, a new-car dealership employed 67 people in 2015, up 3.1 percent from 65 employees per dealership in 2014. “For 2016, expect new-car dealership employment to www.msada.org

Massachusetts Auto Dealer APRIL 2016

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NADA Update reach an all-time high. The past six years have been the longest period of new-vehicle sales growth since the 1920s, and the outlook for 2016 is just as bright,” said NADA Chief Economist Steven Szakaly. “But what matters even more is that dealers continue to be drivers of economic development in their local communities. Last year, new-car dealers employed more than 1.1 million workers directly; in addition, hundreds of thousands of other local jobs across the country were dependent on dealerships.”

NADA Issues Call for 2017 Convention Workshop Proposals The workshops are one of the main attractions at the annual NADA Convention and Expo. Nearly 16,200 participants, which included new-car dealers, dealership managers, and industry professionals, attended the workshop sessions at the past convention in Las Vegas. Workshop proposals for the 2017 NADA convention, which will be held in New Orleans, can be submitted online until 5 p.m. on May 16, 2016.

Overtime Case Goes from the Service Desk to High Court A shorthanded U.S. Supreme Court took up this month the case of five dealership service advisers who sought overtime pay for their 55-hour workweeks, a dispute that could have big implications for dealerships and their compensation structures. The question before the court is whether service advisers fall into the same category as dealership salespeople, mechanics, and parts department workers, who are explicitly exempted from overtime pay requirements under the Fair Labor Standards Act. Dealers and many courts have long understood the answer to be “yes”, and dealerships have structured their bookkeeping and compensation practices accordingly, with many paying service advisers on commission, according to NADA. But the Obama administration and a ruling by the 9th U.S. Circuit Court of Appeals have challenged that assumption. If the Supreme Court agrees, many service advisers presumably would qualify for overtime pay under the Fair Labor Standards Act, which established the standard 40-hour workweek in 1938. According to NADA, service advisers work an average of 47 hours a week. Such a decision would “upend” dealers’ understanding of the law and create “widespread unanticipated liability and disruption” at dealerships nationwide, NADA said in a brief filed in the Supreme Court case. It also could result in “hundreds of millions of dollars” in claims by service advisers seeking to recover back pay, said Steven Szakaly, NADA’s chief economist. Switching to an hourly wage system with overtime could encourage dealers to hire more service ad-

APRIL 2016

Massachusetts Auto Dealer www.msada.org

MSADA visers with shorter work hours, leading to lower per-employee pay and higher turnover, Szakaly says. “There’s no positives in applying the overtime law to service advisers,” Szakaly said. “You’re just creating a lot of uncertainty in the industry and eliminating what was an excellent alignment of the economic interests of the consumers, the employers and the employees.” Note on Massachusetts law governing service advisers: They are not exempt from the state overtime law and regulations.

Senators Lobby Consumer Bureau in Letter That Appears to Be Written by Agency’s Own Adviser The Daily Signal has obtained a draft letter from two Democrat senators urging the Consumer Financial Protection Bureau to continue addressing what they call “discriminatory and unfair lending practices” in the auto industry. But, according to metadata found in the document’s properties, it appears the letter may not have been written by the two senators or any of their staffers but instead by a top adviser to the agency. “We write to urge the Consumer Financial Protection Bureau (CFPB), in the face of opposition, to continue its work to combat discriminatory and unfair lending practices, particularly in auto finance.” The letter was provided to The Daily Signal by a Republican staffer. According to the document’s metadata, the author is Chris Kukla from Self-Help Credit Union. Kukla is a member of the CFPB’s Consumer Advisory Board and also serves as a senior vice president at the Center for Responsible Lending. The Republican staffer, who spoke on the condition of anonymity, said the situation raises alarming concerns. “CRL must really stand for the Center for Rented Letterwriters.”

New at NADA University Online: 2016 Update to the Dealer Guide to the EPA Underground Storage Tank Regulations This management guide is a revision of the December 1988 NADA guide to the EPA Underground Storage Tank Regulations. The revised guide covers the major aspects of the updated regulations that are relevant to dealers. The guide addresses Subtitle I of the Resource Conservation and Recovery Act, which authorized EPA to create, administer, and enforce a comprehensive UST program. The updated regulation lists key definitions and exclusions, establishes a tank notification mandate, outlines new and existing UST technical standards, provides for state UST programs, and calls for leak reporting and clean-up criteria.

MSADA

www.msada.org

Massachusetts Auto Dealer JUNE 2015