March 2016 Auto Dealer Magazine

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

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

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

March 2016 • Vol. 28 No. 3

Making the Connection

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

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

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St a f f D i r e ct o r y 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 A u t o D e a l e r M Ag 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: 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.

Ad Directory Blum Shapiro 23 Boston Herald 32 Conserv 21 Ethos Group 2 Lynnway Auto Auction 22 Nancy Phillips 23 O’Connor & Drew, P.C. 31 Southern Auto Auction 24 ADVERTISING RATES Inquire for multiple-insertion discounts or full Media Kit. E-mail jfabrizio@msada.org Back Cover: $1,800 Quarter Page: $450 Inside Front: $1,700 Half Page: $700 Inside Back: $1,600 Full Page: $1,400

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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: Partners in Green THE ROUNDUP: Legislature Hits Another Deadline LEGISLATIVE SCORECARD TROUBLESHOOTNG: Frequently Asked Questions: Wage and Hour Edition

13 LEGAL: Plaintiffs’ Attorneys Continue to Target Dealers 14 AUTO OUTLOOK 16 Cover Story: Making the Connection

20 25 26 28 29

NEWS From Around the Horn ACCOUNTING: Deal Jackets nada Market Beat SOUND OFF: How Great Leaders Ignite Passion and Performance nada update: A Check-In from Vegas

Join us on Twitter at @MassAutoDealers www.msada.org Massachusetts Auto Dealer MARCH 2016

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from the President

MSADA

Partners in Green

More to do in working with the Commonwealth on electric vehicles

By Scott Dube MSADA President

P

eople are coming into our dealerships looking for vehicles that they describe as “green.” That can mean many things, depending on what folks are shopping for -whether it’s sending them toward a hybrid or a truck with an eco conscious engine.

And now more than ever we’ve seen Massachusetts regulators interested as well. By interested, of course, I mean we’re looking at new-electric vehicle sales mandates placed on OEMs that will ratchet up over the next 10 years. Those OEMs (and we, in turn) are expected to have 300,000 zero emission vehicles in Massachusetts by 2025.

That’s an incredible number, and reaching it will present a great deal of challenges.

While our customers have come to expect a wide array of green technology available in whatever vehicle they may choose, the Commonwealth believes it can encourage more customers to go green by offering rebate incentives. For the past two years, we’ve seen the rollout of this Massachusetts policy.

In the midst of all that, Robert Boch and I have served on the Massachusetts Zero Emission Vehicle Commission to make sure our dealership perspective is not overlooked. The hype around this new technology often obscures the reality of the metal we’re trying to move off the lot in the real marketplace. There are people who are excited about zero emission vehicles, but most of our would-be buyers have their eyes on any number of “wow” factors.

We shouldn’t bury our heads in the sand about the need to go green, but we dealers must make sure that we’re not left holding the bag when the market decides it isn’t as keen on electric vehicles as the Commonwealth may expect them to be. Check out this month’s cover story for more about the work Robert and I are doing on the commission and from others involved in the electric vehicle business we increasingly find ourselves in.

As MSADA continues to work to ensure the public learns more about our industry, this is one area we will continue to do more work on. When we get bogged down in regulatory or legislative battles, even the basics of our business are the kinds of details that help our legislators understand how vital we are to the community. Every lawmaker wants to have green businesses in his or district, and, thanks to us, most of them do. We are part of the leading edge of technology that will help our planet, which means our input into how that technology is circulated remains vital to the success of any government-mandated program.

I encourage you to reach out to your Association should you ever have any questions or concerns about the MOR-EV program that aren’t answered on the program website, www.mor-ev.org. And be sure to check back here for updates as we continue to see the program gain ground t

MARCH 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 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 Michelle Pierog (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 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 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 (781) 899-8509 Hireology Kevin Baumgart (773) 220-6035 Huntington National Bank John J. Marchand (781) 326-0823 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, 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 Solect Energy Development Kristen Brandt (781) 733-0223 Southern Auto Auction Tom Munson (860) 292-7500 Sprague 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

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The Roundup

Legislature Hits Another Deadline

By Robert O’Koniewski, Esq. MSADA Executive Vice President Follow us on Twitter - @MassAutoDealers

Legislative Hijinks Not Limited to Washington The skirmishing between the Massachusetts Senate and House of Representatives over committee structure and process, which we have written about previously in great detail, manifested itself yet again this month as committees separately reported out duplicate copies of similar bills into the House and Senate. We saw this firsthand, as bills of interest to dealers have multiple existence in both chambers.

Wednesday, March 16, was the legislative committees’ book report deadline, so to speak. Under the Legislature’s rules, Joint Rule 10 requires committees to make a report of each bill in its possession by the third Wednesday of March in the “even” year of the two-year session. A committee has several options – report the bill favorably or adversely; discharge it to another committee; place it into a study or an extension order. Regardless of the bill’s disposition, a bill is alive until the Legislature does something with the committee report before the July 31 deadline when formal sessions cease. Even a bill with an adverse report can have its report overturned by vote of the legislators. (I should re-remind everyone that the legislators can still pass bills into law after July 31 until the end of the session on January 3, 2017, albeit in informal sessions with the full consent of all legislators present.)

The committees are “joint” committees – meaning that they consist of unequal numbers of House and Senate members. Part of the discourse between the two chambers relates to the fact that the House has double the number of committee members compared to Senate representation. Senators feel MARCH 2016

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that this has prevented various Senate initiatives of being passed due to House intransigence which can have a foundation in a committee’s 2-1 advantage for the House. Why this was not an issue in the previous 100 years of joint committees, when Senate and House initiatives would get passed, is unclear to observers. Nevertheless, the inability to cooperate on procedural matters has caused a flood of duplicate paperwork through which the House and Senate members must sift.

As a result of the Joint Rule 10 actions, here is a brief summary of the disposition of those bills we have an active interest in.

Transportation Committee: • House 3074 (Rogers) would repeal the used vehicle record book (aka the police log) requirement that dealers currently must follow: Favorable Report.

• Senate 1820 (deMacedo) and House 3044 (Markey) would grant vehicle inspection licenses to franchise auto dealers: Each received a Favorable Report in redrafted form and was then sent to the respective chambers.

• Senate 1824 (Eldridge) and House 3085 (Smizik), identical bills that would promote the sale of electric vehicles, were placed into a Committee extension order.

Financial Services Committee: • There are three bills, each identical as filed, which would regulate motor vehicle service contracts including prohibiting certain OEM practices as they relate to forcing OEM exclusivity on dealers: • Senate 493 (Donoghue) received a Favorable

MSADA Report with no changes, so the prodealer language remains; • Senate 536 (Moore) received a Favorable Report on a redraft that deleted the pro-dealer language; • House 258 (Puppolo) was placed into an extension order after having been sent to the committee from the Consumer Protection Committee.

• There are several bills, each identical, that would address the problem of lowest in the country insurance reimbursed labor rates for auto body repairs: • House 883 (Kafka) and House 962 (Wagner) received a Favorable Report together on a redraft that included an amendment for an eight-year sunset clause and was reported into the House; • Senate 561 (Welch) received a Favorable Report on the same redraft as the House bills and was reported into the Senate.

Consumer Protection Committee: • Senate 134 (deMacedo) received a Favorable Report on a redraft, which would prohibit an insurer from requiring a repairer to use a part that would compromise the safety and integrity of the vehicle as well as from mandating the use of a non-OEM part on any vehicle still under manufacturer warranty or lease agreement.

• Senate 140 (Eldridge), which would cap doc prep fees at $100, received a Favorable Report and then was referred to the Senate Committee on Ways and Means.

• Senate 177 (Pacheco), which would amend the Chapter 93B dealer franchise law, was placed into a Committee study.

• Senate 1989 (Brownsberger), which would require vehicle inspection facilities to notify the vehicle owner of all open recalls on the vehicle at the time of the annual inspection, received a Favorable Report and then was referred to the Senate Committee on Ways and Means.

• House 222 (Linsky), which would allow an OEM to open a factory-owned store, without a dealer, if there is no same line make dealer in the state (the so-called “Tesla exemption”), was placed into a

Committee study.

• House 3383 (Cronin), which would establish a new law regarding digital rightto-repair, was placed into a Committee study.

• House 3810 (Scibak), which would require dealers to provide customers a notice regarding the use of non-OEM parts in repairs not voiding warranties, was placed into a Committee study.

As the legislative process continues to the July 31 date of conclusion of formal sessions, your team on Beacon Hill will be active pushing for bills we support like the repeal of the used vehicle record book, inspection facility licensure for new dealerships, franchise law amendments, and labor rates, as well as fighting bills that would be harmful to dealership operations, such as, especially, the doc fee cap bill.

Making this task even more interesting will be the fact that there are identical bills now reported into the two chambers, as well as bills dealing with the same subject matter but with different language. In the past, when the sides actually get along, the joint committee members would coalesce around a single proposal on a subject matter and then work the process. Now we will be chasing multiple vehicles in both chambers simultaneously.

What will also be another curveball is the fact that the Legislature will refrain from formal sessions in July the two weeks that the Republicans, first, and then the Democrats travel to Cleveland and Philadelphia, respectively, for their national presidential nominating conventions.

Finally, be sure to register for our annual “Dealer Day on Beacon Hill” event in Boston. It will be held on Wednesday, May 18, beginning at the Parker House Hotel and traveling 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 help and hurt dealership operations. Use the registration materials that have been sent to you.

Dealers Respond to FTC Workshop On January 19 the Federal Trade Commission held a public workshop on the Automobile Distribution System at its conference center in Washington DC. The workshop focused on four areas, the first three being statutory topics regulated by state franchise laws: relevant market area and termination; warranty reimbursement; direct sales; and future trends in the industry. There were four distinct panels that presented on each of these areas.

The FTC kept the record open until March 4, by which time interested parties could submit comments on what occurred at the all-day workshop. As a result, the FTC has on file submissions from 530 parties, including individual franchised dealers and automotive groups, such as Group 1 Automotive; dealer associations (over 20), such as your MSADA, the National Automobile Dealers Association, the American International Automobile Dealers Association, and the National Association of Minority Automobile Dealers; attorneys and accountants who work for dealers, such as MSADA associate members John Spatcher of Blum Shapiro and Bart Haag of Albin, Randall, & Bennett; manufacturer representatives, such as the Global Automakers; supporters of non-traditional auto distribution schemes, such as Tesla owners; and numerous individuals who have an opinion to express.

The comments can be accessed at https://www.ftc.gov/policy/public-comments/initiative-632. MSADA’s comments can be found at #31 and NADA’s at #23.

Where this all ends up is anyone’s guess, especially with the changes in the executive branch coming in January 2017. Regardless of the one-sided nature of the FTC’s scheduled presenters that day, skewed especially against the current dealer franchise system, the detailed comments submitted by dealer advocates clearly rebut many of the lies, half-truths, and myths the anti-dealer elements, including some OEM representatives, like to perpetuate.

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The Roundup DeLucas Host Cong. Tsongas in Haverhill On March 10, Essex County Director William DeLuca III, along with his son Bill, hosted Congresswoman Niki Tsongas (D-Lowell) at the DeLuca Family of Dealerships in Haverhill. MSADA President Scott Dube of Bill Dube Hyundai in Wilmington and Tom Barenboim of Clark Chrysler Jeep Dodge Ram in Methuen also attended the meeting. After touring the Chevrolet, Buick GMC, and Chrysler

the “Reforming CFPB Indirect Auto Financing Guidance Act”, would require the Consumer Financial Protection Bureau to withdraw its flawed guidance that attempts to eliminate a dealer’s ability to discount auto financing for consumers. The legislation would also require the minimal safeguards the CFPB failed to follow, such as public participation and transparency.

Your MSADA will provide updates on this legislative effort as they occur.

MSADA Annual Meeting May 6, Boston Your Association will conduct this year’s Annual Meeting on Friday, May 6, at the Mandarin Oriental Hotel, in Boston.

We are lining up a number of exciting industry speakers for the day. Use the registration materials we have sent you to sign up today.

Jeep Dodge Ram stores, Cong. Tsongas and the attendees discussed the local and national economy, federal issues such as the CFPB, electric vehicles, and LIFO, and dealer-manufacturer relations. Most importantly, we had the opportunity to thank the Congresswoman in person for her “yes” vote on the CFPB reform legislation, HR 1737, which passed the House 332-96 last November. She was one of 88 House Democrats to support the bill.

(Cong. Bill Keating from Cape Cod was the only other Massachusetts Democrat to support the bill.)

Your Association values the relationships that dealers have with the elected officials in the communities they are located. We try to take advantage of legislators’ down time away from Beacon Hill or Capitol Hill to schedule visits at our members’ dealerships in order to build upon those relationships. If you are interested in hosting a legislative visit, please contact me and we can get that meeting scheduled.

Senate CFPB Bill Introduced On March 10, U.S. Senator Jerry Moran (R-Kansas) introduced CFPB reform legislation, S.2663, which is identical to the House-passed bill, H.R. 1737. S.2663, MARCH 2016

Dealers Eligible for Damage Settlements in Wire Harness Litigation 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 consumers. 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

Massachusetts Auto Dealer www.msada.org

fund if they purchased certain vehicles during the period of January 1, 1998, to September 12, 2015.

• A Claims Administrator – Gilardi & Co. LLC – has been appointed to oversee the application for, and distribution of, the settlement money. Dealers who are eligible must apply no later than March 31, 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 Files Comments on FTC Actions on Dealers’ Ads and Open Recalls A couple of months back the Federal Trade Commission entered into consent agreements with two auto dealership chains that the FTC accused of deceptive advertising violations in connection with the sale of certified used vehicles which were under an open recall. The proposed consent agreements resolve the FTC’s allegations that the dealerships engaged in deceptive advertising by representing that certified used vehicles they offered for sale had passed quality inspections but not disclosing that some of the vehicles were subject to an open safety recall.

To resolve the FTC’s actions, the dealerships agreed, in part, to either (i) ensure that the advertised used vehicles are not subject to an open safety recall or (ii) include a disclosure in used-vehicle ads making a safety inspection claim stating that the dealership’s used vehicles may be subject to an open safety recall and how consumers can determine a used vehicle’s recall status (which refers to NHTSA’s VIN lookup feature). Additionally, if the

MSADA dealership receives a written notification from a manufacturer that a used vehicle is subject to an open safety recall, it must clearly and conspicuously provide that notice or a document with the same information using a substantially similar format to the consumer prior to consummation of the sale.

Earlier this month NADA filed comments with the FTC that respond to the proposed consent orders. NADA’s comments do not address the merits of the FTC’s actions or the actions the dealerships must take to comply with the proposed consent orders. Rather, they criticize the uninformed process the FTC employed in this matter and its unwillingness to engage NADA in either the development or dissemination of information to dealers on their compliance responsibilities. NADA will issue such guidance to dealers after these actions are finalized and the FTC’s compliance expectations are more certain.

NADA Comments on FTC Consumer Survey Also this month NADA filed detailed comments with the FTC that respond to the agency’s plans to conduct a qualitative survey of 40 to 80 consumers who recently purchased an automobile and financed that purchase through a dealer. The stated purpose of the survey is to inform the FTC about “current consumer protection issues that may exist and that could be addressed through FTC action, including enforcement initiatives, rulemaking, or education.” NADA’s comments strongly criticize the planned survey on several basis, including the following.

• The FTC conducted a thorough examination of the same question during the 2011-12 motor vehicle roundtable process. That examination failed to produce credible evidence of systemic problems in the retailing automotive industry, and the FTC therefore has no reason, from either a substantive or budgetary perspective, to reexamine this matter.

• The FTC has taken other actions that suggest a predisposition and unbalanced approach toward this matter.

• If the FTC still is intent on conducting this exercise, it should consult several existing quantitative surveys (which are more reliable than qualitative surveys) that have found a very high level of consumer satisfaction with the vehicle purchasing process.

• If the FTC nevertheless conducts qualitative surveys, it should first address a litany of issues (which the comments specify and explain) to ensure the qualitative surveys produce useful data.

The FTC notice to which the NADA comments respond is the first of two notices that the FTC is required to publish in the Federal Register concerning its consumer survey initiative. The FTC has neither announced a schedule for when it will issue its second notice nor indicated what the next phase of this process will involve.

NADA Regulatory Affairs will continue to closely monitor and respond to further developments on this issue. If you have any questions, please contact NADA’s Paul Metrey at pmetrey@nada.org.

Reminder - NADA Work Force Study Open The fifth annual NADA/ATD 2016 Dealership Workforce Study (DWS) is now open. Your chance as a NADA/ATD member to participate ends on April 29.

With the Dealership Workforce Study, NADA and ATD members have the opportunity to find out if they have the best tools to attract and retain the best employees in their markets. Whether it’s compensation, benefits, work schedules, or even the company culture, dealers need to finetune these to get it right.

The DWS collects data on compensation, employee benefits, retention and turnover, as well as work schedules, and hours of operation, and reports these as well as demographic issues such as the gender and generational gaps in the dealership workforce.

Only NADA and ATD members can participate in the DWS. It is free to participate, and participation involves enrolling, completing a survey, and uploading

payroll data.

Just for participating, members receive two valuable complimentary reports: (1) the Basic Report, which is anything but basic, as it is customized to the individual participating dealership, comparing that store’s numbers to the aggregate numbers of peers in the individual dealer’s own region and the entire country; and (2) the Industry Report, which provides overall analysis and trends, and statistics for every region of the U.S. Participants are also eligible to purchase the Enhanced Report, which compares the individual dealership’s numbers to peers who sell the same brand in the same state. By “numbers,” we are talking compensation for 60 job positions; retention, turnover, and tenure; benefits; work schedules; and hours of operation.

The NADA/ATD Dealership Workforce Study is the most comprehensive study available of the retail workforce. With the data dealer-participants receive, you can adjust your pay plans, work policies, employment practices, etc., so that you are in position to attract and retain the finest workforce in your marketplace.

To enroll in the free survey, go to www.nadaworkforcestudy.com. Participants will need their member (company) ID. Call (800) 447-6232 or email WorkforceStudy@nada.org with any questions.

2016 Dues Invoices We have sent out 2016 dues invoices to all our dealership and associate members.

Our members’ dues help fund the Association’s activities on their behalf, including our lobbying on Beacon Hill and in Washington, our member counsel services, our education and training activities, and other services.

If you have not yet done so, please submit payment so that you can continue to enjoy access to our programs and services.

With your continued support and membership renewal, we can build on our current foundation and begin to enhance your Association’s core purposes of communication, advocacy, and education. t

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Troubleshooting

MSADA

Frequently Asked Questions Wage and Hour Edition

By Peter Brennan, Esq.

MSADA Staff Attorney Here at your Association, we field legal inquiries from dealers and key managers on a daily basis. Many of these questions resurface from time to time, and this column will periodically review some of the most frequently asked questions that we answer for our members. In conjunction with the release of the new MSADA Wage and Hour Guide, here are some frequently asked Wage and Hour queries: Q: Can I require an employee to work on Veterans’ Day? If so, do I have to pay the employee extra for the hours they work?

Under Massachusetts law, Veterans’ Day is designated as a partially restricted holiday, meaning that employees may not be required to work and those that do must be paid time and one-half of their regular rate. The following holidays are also designated as partially or fully restricted in Massachusetts: Christmas Day, Thanksgiving Day, New Year’s Day, Memorial Day, Independence Day, Labor Day, and Columbus Day. Note that a dealership must obtain a special permit to open on Thanksgiving, Christmas, before Noon on Columbus Day, or before 1 p.m. on Veterans’ Day. The following holidays are unrestricted, and employees may be required to work and are not eligible to receive premium holiday pay: Martin Luther King

Q: Our dealership’s employee handbook states that employees must take a thirty-minute lunch break and punch out during this time. Unfortunately, many employees “forget” to punch out during their lunch breaks. Can we automatically deduct a half-hour for each day that an employee forgets to punch out?

Massachusetts law provides that employees must be given a 30-minute break after working six hours. Generally, this break period is unpaid. However, if the

employer requires that the employees remain on the premises or otherwise restricts the employees’ movement while on break, the employer must treat the time as “hours worked.” The penalty for a violation is a fine of $300-$600.

[M.G.L. c.149, §100.] An employee who is scheduled to work long hours may be entitled to two breaks. For example, if the employee begins work at 8 a.m. and takes a normal lunch from 12 to 12:30 p.m., he would also be entitled to another break if he works after 6:30 p.m.

An employee may voluntarily elect to work through his or her meal break or to take less than thirty minutes. In that case, the employee must be paid for the time worked. On the other hand, an employer may require all employees to take the full thirty-minute or longer break. If the employer completely relieves the employees of all duties and permits employees to leave the premises if they wish, the break time is unpaid.

More and more, dealerships are facing liability because they assume (without really knowing) that nonexempt employees are taking their full meal periods every day without interruption. Based upon what it is assuming to be true, and without having any record of whether an employee took a meal period at all or how much time he or she actually took, the dealership automatically subtracts the full amount of a meal period from the employee’s daily hours and computes the employee’s pay based upon the total of that “net” time for the workweek. In many cases, this causes the employee to have received less pay than the law requires. Therefore, we strongly recommend that dealerships require all employees to punch out and in for meals each day.

If a dealership chooses to make automatic meal period deductions, it must be certain that any employee who misses

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Massachusetts Auto Dealer MARCH 2016

Day, Presidents’ Day, Evacuation Day, Patriots’ Day, and Bunker Hill Day. Occasionally, enterprising employees will attempt to collect “double-premium” pay for overtime hours worked on a holiday. A non-exempt employee that works holiday hours that put the employee over 40 hours worked for the week does not need to be paid a double-premium on the hours works over forty. For example: an employee works 44 hours in a week, 8 of which are worked on Veterans’ Day. The dealer should pay the employee 8 hours of holiday pay (time and one-half) and 36 hours at the employee’s regular rate.

Keep this in mind if an employee seeks to be paid both time and one-half for the holiday hours worked and for the hours worked over 40 concurrently.

While Massachusetts recognizes and has special rules for certain holidays, the Commonwealth does not require an employee to be paid for any holiday that they do not actually work. Therefore, employees do not automatically benefit from any state-sanctioned “paid holiday”, in which the employee gets a day off and gets paid for that day. However, many dealerships’ employee handbooks do have such a provision. Dealerships need to be cognizant of what is specified on the subject, as the dealership is legally bound to its own stated policies.

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Troubleshooting lunch or takes less than a full half-hour or a full hour notifies his supervisor of the fact and makes an appropriate notation on the time card. This is because the law requires the employer to maintain an accurate record of all hours worked. Therefore, employers who auto-deduct must ensure that employees understand this policy by periodically notifying them in writing with a memo or insert in their pay envelope. You should also check to see that the appropriate notations are being

still others assign them a less attractive work schedule. However, you need to be sure that the fines do not cut into the minimum wage or overtime and that they do not run afoul of state wage payment laws. In addition, delaying payment of earned wages beyond the regular payday can also be a violation of the FLSA or state wage payment law. We have found that once employees – and their managers – understand that the dealership is serious about having accurate time records,

While Massachusetts recognizes and has special rules for certain holidays, the Commonwealth does not require an employee to be paid for any holiday that they do not actually work.

made on the time card and that employees are being properly compensated for short lunches. A dealership must also be able to show through its payroll records that when an employee does take a short lunch and marks it on the time card, the employee is properly paid. Even then, the dealership remains at substantial risk.

Because salespeople rarely get an uninterrupted lunch or dinner period, we recommend that you not make deductions for such meal periods unless the employee affirmatively acknowledges that he or she actually took a meal break of at least 30 minutes. The same is true of parts drivers and runners who often eat lunch while they are driving. In that case, deductions should only be made if the employee affirmatively acknowledges that he took a meal break of at least 30 minutes.

This is an ongoing struggle for most dealerships, particularly with respect to salespeople. Some dealerships have used small fines, others delay handing out paychecks until the end of the business day to those employees who have chronic time card problems and MARCH 2016

and once the managers begin checking time records on a daily basis, employees quickly learn that keeping accurate time records is not difficult and is just another part of their job.

The dealership must also ensure that it retains employee time records for an appropriate amount of time. Federal law requires employers to keep time records for three full years. [29 C.F.R. § 516.2;] The Massachusetts Minimum Wage Regulations now require that these records also be retained for three full years. [454 C.M.R. § 27.07(2).] However, because an employee can sue for unpaid wages going back three years and because the Massachusetts unemployment regulations require time records be retained for four years [430 C.M.R. § 5.01], we recommend that you retain them for four years.

Q: We terminated a salesperson last week that had sold three cars since the last pay period. On the date of the salesperson’s termination, the cars had not been delivered to customer.

Must we pay the employee a commis-

Massachusetts Auto Dealer www.msada.org

MSADA MSADA sion on the sales even though the cars had not been delivered on the date of termination?

Under Massachusetts law, employers must pay employees all wages earned and all commissions that are “definitely determined and due” on the day of termination. This includes all holiday pay and vacation pay due under the employer’s policy. Commissions must be paid as soon as they can be determined.

When a salesperson leaves a dealership, the question often arises as to what commissions are “definitely determined and due.” For example, if a salesperson has sold a vehicle but leaves the dealership before it is delivered, is he or she entitled to the commission? In some cases, a vehicle may be ordered weeks or even months before it is actually delivered.

Most dealers believe that the delivery of the vehicle is a critical and integral part of the sale and prefer not to pay commissions to former employees. However, absent some written agreement or wellestablished practice to the contrary, the general rule is that a salesperson earns the commission when the customer signs the buyer’s order, because that is when the sale is actually made.

Therefore, if a dealership does not want to pay commissions on vehicles not yet delivered, it must carefully define when the “sale” is made and when the commission is earned or due. A dealership has the right to state that a commission will not be earned or payable until the vehicle is delivered, the deal is fully funded, and the office has processed all necessary paperwork, including the title to the trade-in and the payoff. The best way to establish such a practice is to include explicit language in the written sales pay plan. 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.

MSADA

Legal

By Joseph W. Ambash and Jeffrey A. Fritz

Plaintiffs’ Attorneys Continue to Target Dealers With regard to compliance with federal and Massachusetts wage and hour laws, letting sleeping dogs lie is never a good strategy. To date, you may have avoided (1) an audit by the United States Department of Labor or the Massachusetts’ Attorneys General’s office, or (2) a lawsuit by an aggressive attorney representing an employee or class of employees, intent on maximizing a settlement or judgment (to maximize his or her own payday). Such audits and lawsuits, however, can materialize really at any moment, regardless of whether they are warranted or have any merit. And the dealer, and the dealership’s managing agents, may be sued personally.

It is extremely important, therefore, to make sure you have your ducks in a row on wage and hour compliance.

This is not theoretical. We have represented a number of dealerships in connection with audits by government agencies, most recently by the United States Department of Labor, which have come about by an increased focus of detailing businesses and trying to pin their wage and hour violations on the dealerships who contract with them. We also have represented a number of dealerships (and dealers themselves) in lawsuits concerning alleged wage and hour violations, many of which are baseless. Plaintiffs’ attorneys frequently bring such lawsuits on a class basis, purporting to represent not just one employee but a group of employees subject to the same wage and hour practices. Unfortunately, plaintiffs’ attorneys generally are not interested in whether your dealership has, in fact, violated wage and hour laws; their focus is on having you pay to the employees they represent (and, ultimately, to them) as much money as possible, regardless of whether any violation actually occurred.

For example, we represent a dealer who, in November 2014, was sued for wage and hour violations by a flat-rate mechanic,

on behalf of himself and all mechanics the dealer employed over a three-year period. Notwithstanding the fact that the mechanic earned $26 per flat-rate-hour (and a guarantee of 40 flat-rate-hours per week) and very clearly was paid over $8 per clock hour he worked, he and his attorney claimed the dealer violated the Massachusetts minimum wage law in effect at the time. Moreover, notwithstanding the fact that the Executive Office of Labor and Workforce Development in April 2002 made clear that the Massachusetts “garagemen” exemption applies to mechanics who work in dealerships, the mechanic and his attorney claimed the dealership violated the Massachusetts overtime law by not paying him and other mechanics overtime pay.

Furthermore, the mechanic and his attorney misrepresented how he was paid in their lawsuit. Rather than acknowledge the flat-rate-hour basis upon which he was paid, they (falsely) claimed he was paid $26 per clock hour for time spent working on vehicles and $0 per hour for time spent on other ancillary tasks, such as maintaining tools, cleaning the facility, interacting with customers and other employees, doing paperwork, and other similar responsibilities. On that basis, they claimed the dealership violated the Massachusetts wage payment law insofar as it failed to pay its mechanics “for all hours worked”, a requirement that does not exist in the Massachusetts wage payment law (which requires only that employees be paid what they “earn”).

Ultimately, the Massachusetts Superior Court (correctly) dismissed these claims.

And, on a good note, Massachusetts dealers now have judicial corroboration that (1) the Massachusetts “garagemen” exemption applies to mechanics who work in dealerships, and (2) no requirement exists in Massachusetts that all employees be www.msada.org

paid “for all hours worked”. The requirement is that they be paid what they “earn,” as dictated by the agreement between employer and employee. (Important Note: As a practical matter, this does not apply to straight hourly employees, who, in order to be paid what they “earn,” must be paid for all time they work.) This case highlights the fact that employees and their attorneys may file lawsuits against you and your dealership regardless of how they are paid, and regardless of whether how they are paid violates the law.

Unfortunately, ensuring your dealership is in compliance with wage and hour laws (and ensuring you have appropriate documentation to prove it) will not inoculate you or your dealership from such litigation. But not ensuring such compliance leaves you and your dealership vulnerable to serious risk when and if you receive a letter from a plaintiff’s attorney threatening such litigation, or are served with a complaint. You should review your pay plans now to reduce the risk of significant liability down the line, including triple damages and attorneys’ fees (both your own and the plaintiff’s). Letting sleeping dogs lie is not a good strategy. 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 MARCH 2016

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AUTO OUTLOOK

MARCH 2016

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Cover Story

Making the Connection

By Tom Nash By just about any measurement offered by the Commonwealth of Massachusetts, 2015 was an excellent year for electric vehicle sales. Rebates offered for zero emission vehicles doubled from 66 in January to 122 in December. And the Commonwealth saw 2,975 tons in greenhouse gas reduction in December alone.

But those numbers borne out of the nearly twoyear-old Massachusetts electric vehicle rebate program come with strings attached that bring wide-ranging implications for dealers. The incentive program is the carrot end of environmental regulations adopted by the Commonwealth that will require manufacturers to deliver around 15,000 electric vehicles on dealership lots in

MARCH 2016

Massachusetts Auto Dealer www.msada.org

The Massachusetts electric vehicle rebate program shows no signs of slowing down, but where is the market?

2018. The stick is the fine of $5,000 per unit that manufacturers will be assessed for each zero emission vehicle not produced and delivered based on the manufacturer’s requirement.

Coupled with the fact that only 1,848 rebates have been issued in the history of the program, the next few years will require dealers, state regulators, and consumers to travel a long road ahead if that 15,000-target has any hope of matching reality.

“It will be interesting to see where the project ends up as we are now beyond being an experiment,” said MSADA Executive Vice President Robert O’Koniewski. “This is a classic example of the government mandating the manufacture of a product with little existing demand and then throwing money into the mix to create a market for the mandated product. But these are the cards we have been dealt.”

How We Got Here

Following new federal environmental standards, the Commonwealth faced a choice of either signing on to the California Air Resources Board (CARB) standards or ones proposed by the federal government in 2014. Massachusetts, alongside several northeastern states, adopted the new California-originated carbon emissions standards. Alongside a stated goal of putting 300,000 zero emissions vehicles on the road in Massachusetts by 2025, the Commonwealth’s Department of Energy Resources put forward the following mission behind the numbers: • protect public health and air quality by reducing transportation-related air pollution that contributes to the formation of smog and related health effects such as asthma and heart attacks; • reduce greenhouse gas (GHGs) emissions that contribute to climate change; • enhance energy diversity and security; • save drivers money; and • promote economic growth.

The Massachusetts Offers Rebates for Electric Vehicles program, or MOR-EV, was established in 2014 to offer cash incentives to anyone purchasing a plug-in hybrid, battery, or fuel cell zero emission vehicle. While the program has seen sustained growth, totaling more than $4 million in redeemed rebates so far, dealers and regulators have been working to close the gap in understanding between how cars are sold in Massachusetts.

The Executive Office of Energy and Environmental Affairs’ Linda Benevides wants to make clear that the rebate program is as much for dealers as it is consumers.

“We’re trying to help create and accelerate the market for those cars,” Benevides said in a recent interview. “It’s at that early stage of market development where those measures are needed.”

Benevides also helped usher in the Zero Emission Vehicle Commission in 2015, with two slots filled by dealer representatives. MSADA President Scott Dube and Suffolk County Director Robert Boch represent franchised dealers on the commis-

By the Numbers

MSADA

$4,325,500 Total value of rebates issued in Mass. since June 2014 Using 2015 totals, starting in model year 2018 manufacturers must deliver roughly 15,000 PHEVs and ZEVs for sale in Mass.

Nationwide in 2015, ZEVs and PHEVs accounted for 0.6% of market share for new vehicles, with only 0.4% being full battery electric (non-hybrid).

sion, advocating for the dealer perspective among a board that includes state regulators, manufacturer representatives, energy interests, and parking garage owners.

“We’re able to help guide policy by bringing in the concept of how to retail cars,” Dube said of their involvement. “People are interested in that, and realize that there’s issues there. Because 300,000 is a lot of cars to sell, and we have only a short time to get there.” www.msada.org

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Making the Connection The Missing Market

MSADA

EV program and its website, has offered several ways for dealers to get up to speed on the initiative and its changing requirements.

Webinars and other training materials are available to anyone in need, and she says more opportunities will be available in the coming months.

What Benevides calls the early stage of market development, Boch and Dube call a market that’s missing almost entirely. A large chunk of the rebates have gone to Tesla buyers (see chart), vehicles at a price point that falls well outside the Commonwealth’s goal of making zero emission cars accessible to everyday consumers. And low gas prices aren’t helping.

June 2014 - March 2016 “Right now we’re just getting the people who are dedicated to BMW 115 Tesla 482 electric or hybrid, period,” Boch Volkswagen 94 Chevrolet 372 says. “When gas gets up to $3 or Mercedes-Benz 32 Nissan 333 $4 a gallon, we’ll see the Average Joe interested.”

Cadillac 16 Ford 244 For Dube, the high numbers Toyota 13 Smart 119 of zero emission vehicles mandated to be on the road over the next 10 years boils down to the government inserting itself into the marketplace.

“The government is telling us what to buy and when to buy it,” Dube said. “It’s tough to make that happen. The government has put some money against it, but it’s not enough yet to change the market.”

Ultimately, Dube says, two “We need to things are going to happen: engage our “Dealers are going to get these cars dumped on them by their legislators manufacturers, and dealers have to help them to get excited about moving them.”

Top 10 Rebates Issued by Brand

understand that we don’t have people knocking our doors down looking for plug-in vehicles.”

Moving Forward

If anyone is ready for the challenge of bringing consumer excitement to zero emission vehicles, it’s Nicole Appenzeller.

Having moved out from California after helping the Center for Sustainable Energy enact an electric vehicle rebate program there, she says the geography alone is making implementation a much easier proposition in Massachusetts.

– Scott Dube MSADA President “Being in the northeast allows us to work more closely with dealer associations like MSADA,” Appenzeller says, “Whereas in California it’s more spread out and sometimes not as conducive to collaboration with multiple entities.”

The Center for Sustainable Energy, which manages the MOR-

MARCH 2016

Massachusetts Auto Dealer www.msada.org

As increased quotas loom, however, Dube stresses the importance of dealers remaining plugged in with their legislators. Between the commission and dealer ingenuity, Dube remains optimistic that at some point a readjustment in expectations could take place alongside increased sales.

“We need to engage our state senators and representatives to help them understand that we don’t have people knocking our doors down looking for plug-in vehicles. But one way or another, we have to create that market.”

“Dealers know their customers and the marketplace better than anyone,” O’Koniewski added. “Once the market conditions are satisfactory -- expensive gasoline, affordably priced vehicles, extensive plug-in infrastructure -- there is no better person to get the EV metal off the lot than our franchised dealers. Not the government, not the manufactures. Nobody.” t

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Massachusetts Auto Dealer FEBRUARY 2016

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NEWS from Around the Horn from Around

NEWS the Horn

SWANSEA

Bristol Toyota Opens New Location in Massachusetts A longrunning Rhode Island dealership finalized its move across the border from Bristol to Swansea earlier this year.

Bristol Toyota recently held a grand opening for its new 44,000 square-foot facility in Swansea. The new store features 24 service bays and a kids play room among other amenities on 10 acres. The dealership traces its origins to an auto body shop and used vehicle lot in Seekonk.

“Since opening in 1985, Bristol Toyota has occupied the same space on Metacom Avenue - so while we’re thrilled to finally be

expanding into a new space customized to fit our growing needs, it’s also bittersweet for us,” the dealership said in a statement.

“The Bristol community played a large part in making us who we are, and has always been kind to us.”

Look for more about the dealership’s history and future in an upcomming issue of Auto Dealer.

CHICOPEE

New Mercedes Dealership Earns Five-Year Tax Break The Chicopee City Council has approved an agreement that will give the developer of a new Mercedes-Benz dealership a break on his real estate taxes for five years.

MARCH 2016

Massachusetts Auto Dealer www.msada.org

MSADA The proposal was reviewed by the city’s Economic Development Incentive Program Review Committee and negotiated by Mayor Richard J. Kos before being approved unanimously by the 13-member Council this month. It still must be approved by the Massachusetts Economic Assistance Coordinating Council.

“Everyone is on board with creating jobs and redeveloping an old business and hazardous waste will be removed,” City Council President John L. Vieau said. The vote was unanimous.

Peter Wirth and his wife Michelle Wirth, owners of Springfield Automotive Partners LLC, are planning to spend about $11.8 million to tear down the former Plantation Inn on Burnett Road and build a Mercedes-Benz dealership in its place.

The Economic Development Committee first proposed that Springfield Automotive Partners LLC would continue to pay, at a minimum, the about $75,000 in taxes the owners of the Plantation Inn currently pay.

The incentive that was approved will reduce the property taxes by 50 percent on the increased value of the business in fiscal years 2018, 2019, and 2020. The owners will then receive a 25 percent cut in property taxes for 2021 and 2022 fiscal years.

“Through this agreement we are able to maintain the current level of tax revenue being generated, in addition to improving a major gateway to our city,” Kos said.

Meanwhile the tax break will help Wirth to construct business and build a customer base, said City Councilor Frank N. Laflamme, who is also a member of the Economic Development Committee.

Laflamme said the city cannot lose in the deal. The 187-room inn, which has been closed since 2013, is full of asbestos. Wirth is spending an estimated $800,000 to remove the hazardous materials and tear down the building.

If he walked away from the proposal, it would be a minimum of two years before another developer could be found and go through the process to create a plan, Laflamme said.

“It was a no-brainer in my opinion,” he said. “It is bringing in jobs and an eyesore is going away.”

SPRINGFIELD

Balise Auto Group Donates $10,000 to Youth Fitness Program Squeaky, the Balise Motor Sales car wash mascot, joined preschoolers from Square One’s child care center this month on a trip to the Holyoke YMCA to celebrate Balise’s $10,000 sponsorship of “LAUNCH,” a healthy living partnership between the three organizations.

The goal of LAUNCH is to improve healthy life habits for chil-

MSADA dren from higher-risk communities. The program works to help children see exercise, good nutrition, and healthy life choices as enjoyable ways to feel good, reduce stress, and increase wellness and sense of self. It focuses on character building and self-esteem issues, which are critical for disadvantaged children and help to build a foundation that leads to a lifetime of healthier living.

“We at Balise are proud to be able to support this terrific collaboration between Square One and the YMCA,” said Jeb Balise, Chief Executive Officer of Balise Motor Sales. “We are a longtime supporter of both organizations and of youth athletic programs throughout Western Massachusetts and Rhode Island. We are delighted to have the opportunity to sponsor LAUNCH as part of our continued efforts to promote the benefits of healthy living and the value of teamwork among children and families.”

“Proper nutrition and fitness opportunities are a vital

GLOUCESTER

Sudbay Celebrates 50 Years with Buick and Cadillac The Sudbay family was featured in Automotive News in March as Sudbay Chevrolet-Buick-Cadillac-GMC received a 50-year award for Buick and Cadillac. Seated is Don Sudbay Sr., founder. Standing, from left, are Dave Sudbay, Don Sudbay Jr., and Regis Buckley, Chevrolet’s New England zone manager

part of every child’s overall health and wellbeing – particularly when their families are faced with significant challenges, such as poverty and homelessness, that can cause tremendous amounts of stress,” said Kristine Allard, Vice President of Development at Square One. “We are so grateful to Balise for recognizing this and providing us with the funding we need to ensure the health and success of our Square One children. Thanks to the YMCA, our children will have the opportunity to properly exercise several times each week, making use of their wonderful space and equipment.” www.msada.org

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NEWS from Around the Horn BOSTON

SUDBURY

BMW Awards ‘Center of Excellence’ to Three Mass. Dealerships BMW of North America announced its annual Center of Excellence honors this month, including BMW of Cape Cod, BMW of Sudbury, and South Shore BMW among its 2016 winners.

The dealers are measured against their peers on 11 Key Performance Indicators, which include Customer Orientation, Aftersales, and Sales data. The data is then calculated to award the top 9 percent of the 340 BMW dealers based on their 2015 performance.

The Massachusetts dealerships earned this distinction for 2016 by demonstrating consistently superior performance, with a combination of sales leadership and customer satisfaction that placed them at the very top among BMW dealers.

“It is both a great achievement and honor to be chosen as a Center of Excellence and I heartily congratulate this year’s winners on their accomplishment,” said Ludwig Willisch, President and CEO, BMW of North America. “In our business, nothing is more important than customer loyalty, and these centers have proven they know how to delight their customers and keep them coming back. I hope they will proudly display their COE recognition and then enjoy the rewards.”

MARCH 2016

Massachusetts Auto Dealer www.msada.org

Boston Consulting Group Says CarSharing Won’t Impact Sales As automakers make forays into the car-share business with their own startups, a new study says the car-share industry will have a limited impact on vehicle sales in any case.

The study by the Boston Consulting Group (BCG) predicts that car-sharing will cost the industry just 550,000 vehicle sales worldwide in 2021, a year in which global auto sales are expected to approach 100 million vehicles. Those lost sales could total $8.2 billion, according to the study.

BCG’s Brian Collie believes automakers such as GM and Ford are doing the

MSADA right thing by starting car-share pilot programs, because shared mobility is a growing trend, particularly in urban areas. BCG says more than 1.5 million people currently share vehicles in North America. But despite the growth in car-sharing, Collie believes car ownership will remain popular in the United States.

“In North America, the economics for owning a vehicle still works for most people,” Collie says. “We have an affinity for having our own car or truck. Younger people may not care quite as much, but it still matters to them, too.”

The study predicts the largest growth in car-sharing will be in Asia, where large urban areas and congestion will drive greater demand for shared mobility.

BOSTON

Ernie Boch Jr. Makes Headlines as Trump Supporter Ernie Boch Jr. appeared on the Fox Business Network in March to explain why Republican presidential frontrunner Donald Trump should be in charge of the country.

“What I think is almost comical at this point is it seems like everybody is telling you not to vote for this gentleman,” he said. “I’ve never seen it before in any election, local, national — it’s the fortitude that Mr. Trump has to keep going and try to change this country. It’s amazing.

I’ve been a fan of Mr. Trump since the ’80s.”

Boch was asked what specific policies he thought

Trump would fight for that would benefit the country.

“I think he can save the U.S. a lot of money [by eliminating] government waste,” Boch replied. “I think it’s time for a guy like this in the White House. It’s only four years. Let’s give him a shot.” www.msada.org

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NEWS from Around the Horn DANVERS

Honda North Earns 2015 President’s Award Honda North, a member of the International Cars, Ltd. family of dealerships, has been named a recipient of the President’s Award for 2015 by American Honda Motor Co., Inc. Recognizing top-ranking Honda dealerships across the country, the award is considered Honda’s highest dealership honor and is based on a candidate’s achievement of excellence in all areas of operation. Customer service and satisfaction, sales, training and facilities are all evaluated as criteria for the recognition.

This is the sixth consecutive year that Honda North has been awarded with the President’s Award and the ninth time overall.

“At Honda North, our mission is to always serve our community and customers with enthusiasm and pride, each and every day. We’re extremely honored to again be recognized for this achievement for the sixth year in a row,” said Joseph Hajjar, general manager of Honda North. “I speak on behalf of my entire team - from sales to service to operations - we are extremely grateful to our loyal customers who make us the dealership we are today.”

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Massachusetts Auto Dealer www.msada.org

“We are so proud of Honda North and we want to thank all of our customers, friends, and neighbors for all of their support,” said Richard Collins, CEO of International Cars, LTD. “Every year, we expect such great things from Honda North, and to see them continue to achieve year in and year out, it’s been amazing to watch.”

BOSTON

Top Dealer Groups Announced Automotive News released its annual list of the top 150 dealer groups based on total 2015 new-vehicle retail sales units, including five Massachusetts-based dealer groups.

They include: Herb Chambers Companies, based in Somerville (#16); Prime Motor Group, based in Westwood (#41); Balise Motor Sales, based in West Springfield (#57); Colonial Automotive Group, based in Acton (#86); and Kelly Automotive Group, based in Danvers (#100). Each of these moved up from its 2014 sales units rankings.

Additionally, three groups based outside Massachusetts with dealerships located here achieved recognition: Group 1 Automotive (#3), Lia Auto Group (#60), and AutoFair Automotive Group (#117). Congratulations to all!

MSADA

Accounting

Deal Jackets

The Industry’s Ticking Time Bomb

By Frank O’Brien O’Connor & Drew

With retail car sales soaring to an alltime high in 2015, many car dealers experienced record years in sales. NADA projects 2016 new vehicle sales to surpass last year. Even though unit sales increase, front-end gross profits continue to remain low or diminish. This heightens the importance of the income produced by the finance department. Many of our dealers’ finance managers generate over $1,000 per unit in back-end gross profit, with some exceeding $1,500. In fact, a strong finance department can be the difference between a profitable and a nonprofitable store. However, the challenge to maintain such numbers may become more difficult due to the scrutiny on dealer participation and aftermarket gross profit by the Consumer Financial Protection Board (“CFPB”).

Additionally, compliance in the finance department has become increasingly complex. The number of documents required in a deal jacket is staggering, which has led to several of our dealer clients requesting that we audit their deal jackets. Based on our experience, the majority of finance managers have neither a strong understanding of the laws that pertain to their department nor the documents required in a deal jacket. This lack of compliance exposes dealers to potential fines and/or lawsuits. As a result, it is crucial for dealers to implement a system that audits deal jackets on a periodic basis, either internally or externally,

through an outside vendor.

The following are examples of the common errors, omissions, and violations that we typically observe when performing deal jackets audits: • Omission of a Rate Certification Form.

This form is necessary to protect the dealer against potential allegations of discriminatory practices and very few dealers have implemented it. A template of this form is available from NADA. • Omission of other documents required by federal law, including, but not limited to, Credit Disclosure Form, OFAC, and Red Flags Checklist.

Based on our experience, the average dealership has most of these violations as well as some others. Additionally, it is concerning that very few finance managers truly understand the compliance requirements. It should be noted that compliance is a process and the dealers that consistently audit their deal jackets have shown tremendous improvement.

Dealerships are also required to prepare written documents related to its policies and procedures for the Safeguards Rule and the Red Flags Rule. The Safeguards Rule Program has to be tested periodically and updated accordingly. Many dealers

It is crucial for dealers to implement a system that audits deal jackets on a periodic basis.

• Lack of any evidence of compliance with the Red Flags Rule, such as proof of residency or proof of income to remedy possible red flags.

• Truth in Lending Act violations, such as failure to agree on the sales price to the purchase contract and properly itemize all additional costs.

• It is also a violation of the Truth in Lending Act when the numeric values of the terms of the contract do not line up properly on the appropriate lines.

• Inconsistent utilization of an electronic F&I selling menu that is time/date stamped and pre-prints the pricing for the available aftermarket products.

• Lack of a Product Disclosure Form that itemizes the products purchased and declined with the applicable pricing.

• Lack of a deal jacket checklist that encompasses all documents required by sales, finance, accounting, and compliance. www.msada.org

have not updated their Safeguards Rule Program since it was first written, despite changes to the systems, infrastructure, processes, and key personnel. The Red Flags Rule requires the compliance officer to report annually the results of its compliance efforts. The dealer principal must sign off on this report.

The finance department is under attack, and the deal jacket is the primary source of evidence that dealers are complying with these complex laws. However, without the proper training, processes, and monitoring, the deal jacket could become a liability instead.

t

Since joining O’Connor & Drew in 1998, Frank has worked with both closely held businesses and non-profits, specializing in the automotive industry. For the past seven years, Frank has managed the internal audit and fraud division at the Massachusetts Auto Dealer MARCH 2016

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NADA Market Beat FEBRUARY 2016

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February sales of 17.4 million SAAR are up 1.1 million over last year, helped by Presidents’ Day sales and an economy that seems to be outpacing equity markets. As has been the case for the past several years, cars continued to lose ground to light trucks—though large cars posted a surprise uptick of 0.1%, due to heavy incentives and fleet sales. Overall, we are firm in our forecast of a robust 17.7 million in new-vehicle sales for 2016. China remains the major economic wildcard, where the slowdown is contributing to a collapse in commodities prices and deep recessions in commodity exporting countries, such as Brazil. But the U.S. economy continues to grow, and the equity markets have probably oversold concerns about China. Wage growth also has been tracking higher, and low interest rates will continue this year. These factors will not only continue to support sales, but also will help underpin rising transaction prices—already up to $33,789 in February.

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Sound Off

MSADA

How Great Leaders Ignite Passion and Performance

By Bill Napolitano

Partner, ProActive Leadership Group (744) 254-0383 Bill@ResultsImproved.com

Look at today’s top-performing companies, and you’ll inevitably find a high degree of employee engagement.

Most workers are motivated to give their best and often go beyond what’s required. But for countless other organizations, only 20 percent of employees say they’re excited about work.

They show up to earn a paycheck.

In the first workplace, people are passionate. In the latter, they’re looking out for themselves, with management struggling to realize performance goals. The difference lies in leaders’ failure to ignite passion.

While most leaders are highly experienced in financial planning, capital budgeting, and organizational structure and strategies, most receive no formal training in building, leveraging, or measuring employee passion. Engagement surveys are a reasonable way to gauge passion levels, but they cannot capture what it looks like or how to increase it.

We usually see successful startups filled with hordes of passionate people, yet we view them as anomalies—unique because of their youthful culture or trendy products. We seldom imagine older, more traditional companies as hotbeds of passion and energy. Stagnant leadership thinking plagues executives who fail to identify a purpose beyond making profits.

Passion Starts with Purpose

If you haven’t clearly articulated the “why” of your business, people will struggle to be engaged in the “what” that their job requires. Employees who don’t know how their job contributes to the organization’s purpose are unable to give their wholehearted participation.

Igniting passion starts with defining your personal and company purpose: your beliefs, values, passions, principles, and connection to the company’s mission.

Purpose isn’t what a group does, but why it performs. Leaders must activate people’s emotions and desires. Smart leaders infuse passion into their workplaces by hiring for it right from the start. How do you find people who believe in the same values you and your company represent?

You probably won’t unearth them using boring, conventional interview questions. You need to do more than determine someone’s skills, education, and experience. You must ascertain whether candidates are a cultural fit.

It’s hard to tell if a candidate is excited because she desperately wants a job vs. a job at your company. The best people to

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Massachusetts Auto Dealer www.msada.org

gauge true passion, interest, and fit already work for you, so let them participate in candidate interviews. Future peers are likely to learn valuable information about potential new hires.

Evaluate how candidates interact with prospective team members. Assess for curiosity in others, big-picture vs. littlepicture vision, and outside interests and values.

Recognize and Reinforce Passion

In the context of work, passion refers to strong emotions that drive energy and engagement. To foster passion, leaders must set the stage by openly sharing their own desires and emotional interests. When leaders are unafraid to show their own excitement, others will follow suit. Great leaders recognize and reward people whose passion drives them beyond basic job requirements.

When employees openly express passion for their work, you must recognize and honor it; otherwise, you risk losing it. In a truly engaged workplace, everyone relies on peers for praise and acknowledgment. A leader must encourage this.

When an employee goes above and beyond expectations, make sure others find out about it. A company intranet or bulletin board is a great way to spread and share kudos.

You can reinforce your company’s culture and brand in many ways, but the most important may be trumpeting grassroots ideas. When people offer their ideas, make sure they’re heard and responded to within a reasonable time frame. Emails should never be ignored or delayed. If you want people to be creative and innovative, you must listen to their contributions and give them freedom to take action.

Reinforce company values and purpose, and let staff organize themselves to explore projects. Provide a platform to celebrate events and achievements. Let staff plan celebrations to acknowledge hard work, success, and initiative.

Connecting personal interests to company purpose can be tricky. It won’t happen without frequent discussions among staff and leaders. Some experts say a message must be heard five times before people actually hear it and incorporate it into memory.

Linking Passion to Performance

When leaders encourage a culture in which employees take psychological ownership, even average employees can perform at high levels. Purpose and passion create meaning and excitement at work.

Passion abounds when people believe their daily tasks have meaning. You energize your workplace when people see their accomplishments have a direct impact on team members, customers, the community, and the business.

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NADA Update

By Don Sudbay

A Check-in from Vegas 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).

Hello from Las Vegas! Soon thousands of dealers from across the nation will be arriving for what promises to be an exciting NADA Convention. Hopefully I’ll be running into you over the Convention weekend, but if not I’ll have more to report on what went down here next month. If you are in Vegas for the convention, remember to attend our cocktail reception we jointly host with O’Connor & Drew on Saturday, April 2, at the Encore Hotel’s Chopin Room. In the meantime, it looks we’re on track for a fantastic start to Spring.

What Happens in Vegas Chairman’s Commentary by Jeff Carlson What do Cirque du Soleil, Chris Angel, Celine Dion, and NADA all have in common? We’ll all be in Vegas at the end of this month. From March 31 through April 3, what happens in Vegas won’t just stay in Vegas. Because with an estimated 10,000 dealers and managers converging on the entertainment capital of the world, you will not want to miss the NADA/ATD Convention and Expo in Las Vegas.

We invite you to try the all-new Exchange pavilion located in Hall N3 of the Las Vegas Convention Center. Based on feedback that we received from attendees during the registration process, Exchange will feature round-table discussions and short presentations on the most trending industry topics today. If you’ve been waiting to have an interactive discussion on “employee generational gaps,” “pre-paid maintenance,” “grassroots engagement,” “online sales strategies,” and more, put the Exchange on your agenda.

We also have an amazing array of speakers: GOP strategist Karl Rove and former Vermont governor and Democratic presidential candidate Howard Dean will analyze this year’s historic campaign; 2016 Super Bowl-winning quarterback Peyton Manning will motivate with his theories of leadership, something he’s clearly an expert on; and comedian Jeff Foxworthy is sure to make you laugh.

Finally, don’t miss 2015 NADA Chairman Bill Fox who will recap his year and hand the torch over to the 2016 NADA Chairman, yours truly.

If that’s not enough, your association will be celebrating its

99th year of serving dealers ... here for you since 1917. We invite all our members, international dealers, OEMs, industry allies, and the media to celebrate with us in Las Vegas before we turn the big “1-0-0” next year.

Las Vegas has more hotel rooms than any other city on the planet, and we hoped you booked one!

See you at the auto industry event of the year!

Looking Ahead: What the Auto Lending Industry Can Expect from the CFPB in 2016 The CFPB’s critics are getting louder, arbitration clauses are spending some time on the chopping block, and credit reporting continues to garner more and more attention. These are all things we can expect to focus on this year as the auto lending industry continues its power struggle with the CFPB. This month Sen. Jerry Moran (R-Kansas), a member of the Senate Banking, Housing and Urban Affairs Committee, has introduced S. 2663, the “Reforming CFPB Indirect Auto Financing Guidance Act,” which is identical to the Housepassed H.R. 1737.

All signs point to the Senate passing the Reforming CFPB Indirect Auto Financing Guidance Act this year. The Act aims to curtail the CFPB’s attempts to regulate purportedly discriminatory auto lending practices. The legislation also requires the minimal safeguards the agency failed to follow, such as public participation and transparency. Nothing in the bill would restrict the CFPB’s ability to enforce fair credit laws in auto financing.

According to the CFPB, auto lenders are charging minorities a higher markup on products than similarly situated white borrowers. Auto dealers and lenders, however, have questioned the methodology used by the CFPB to reach this conclusion, and the Act is the auto industry’s attempt to obtain more transparency from the CFPB. Although President Obama will likely veto the Act if it passes in the Senate, there is a high probability that the Act will get passed by a Congressional override. If nothing else, the strong bipartisan support for the Act is a powerful indictment on the CFPB’s forays into the auto lending space so far.

We are likely to see a stronger, louder outcry from the auto lending industry regarding the CFPB’s attempts to issue guidance in 2016.

In January 2016, the Republican staff of the House’s Committee on Financial Services issued a report finding that the CFPB improperly issued settlement checks to white consumers in connection with the 2014 Ally Financial settlement. (In the 2014 CFPB/DOJ joint enforcement action against Ally, Ally was ordered to pay $80 million in damages to a large class of claimants for its “discriminatory pricing system.”

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MSADA

NADA Update There, the CFPB found that Ally charged minorities higher markups on auto loans than white customers.)

The House Committee is the latest in a long line of critics of the CFPB’s data mining processes, particularly in connection with its research regarding disparate impact on minorities.

Auto Industry to Evade Manufacturing Slowdown, on Pace for Another Record Year Automotive sales are projected to soar in 2016 and usher in another banner year for automakers, who are expected to remain unscathed by an industrywide slowdown in manufacturing. The auto industry expects to sell or lease 17.7 million light-duty vehicles this year, a 2 percent increase from 2015.

That news is a relief to auto manufacturers, which haven’t seen business trail off as it has in other manufacturing sectors.

The projected growth follows an upward trend in the automotive sector. Last year, 17.4 million new light vehicles were retailed, a 5.8 percent increase from 2014, according to the NADA.

Driverless Car Rollout Seen Stalling Without Nationwide Rules A patchwork of state laws governing the operation of selfdriving cars threatens to stall their development, supporters told lawmakers as U.S. senators began consideration of a national standard for robotic vehicles.

“It’s absolutely critical that we have uniform rules across the country,” Senator Gary Peters, a Michigan Democrat, said. “These are vehicles that will be on interstate highways and going across state lines. If you have a patchwork of state regulations, it will slow down the process, add confusion and ultimately, I don’t think will add to safety or the advancement of these technologies.”

By taking the wheel from error-prone humans, driverless cars are expected to dramatically reduce road deaths, which rose to 38,300 in the U.S. last year from 32,675 in 2014, Peters said. In a hearing before the Senate Commerce Committee, officials from Google, General Motors, and other companies developing driverless cars said they need national standards to deploy robot cars quickly and safely.

And they found a receptive audience among the senators on the committee.

Dealership Workforce Study Participants Will Receive Two Complimentary Reports NADA and ATD members who participate in the 2016 Dealership Workforce Study – which entails completing a questionnaire and submitting payroll records – will receive the trends report, “Automotive Retail: National & Regional Trends in Compensation, Benefits & Retention,” and customized report, “Compensation, Benefits, Retention: How Your

MARCH 2016

Dealership Compares”, at no cost. The trends report, which retails for $399, is packed with useful information on competitive pay, benefits, and work schedules so that dealerships can attract new hires and retain talented employees.

The customized report, which is only available to participants, provides dealers with comparison data to see how they stack up against their peers nationally, regionally, and by state as well as by brand. Last year, more than 290,000 payroll records were submitted.

The participation period for the Dealership Workforce Study closes on April 29, 2016. To participate, visit www. nadaworkforcestudy.com. For questions, send an email to WorkforceStudy@nada.org or call (800) 557-6232.

NADA Statement on Departure of VW of America CEO Michael Horn This months’s departure of Volkswagen of America’s President and CEO Michael Horn is a significant blow to the VW dealer network, which has been operating in crisis mode for more than six months. What’s most regrettable about Mr. Horn’s departure is that it leaves more questions than answers for the 652 Volkswagen dealers across the U.S. The impact of the diesel defeat-device scandal has not only negatively impacted dealership profitability due to a limitation of product available to sell, but, more significantly, has

“NADA calls on Volkswagen AG CEO Matthias Mueller and brand chief Herbert Diess to meet personally with their dealers at the upcoming Volkswagen franchise meeting during the NADA Convention in Las Vegas.” severely damaged the reputation of the brand in the eyes of consumers - damage we all know could take many years to overcome.

A critical step in this recovery will be for VW to honor the future product plan that Mr. Horn and VW dealers fought vigorously for in Wolfsburg. Volkswagen’s U.S. dealers have made significant investments in buildings, technology, and people over the past several years based these product commitments that we hope are not in jeopardy.

NADA calls on Volkswagen AG CEO Matthias Mueller and brand chief Herbert Diess to meet personally with their dealers at the upcoming Volkswagen franchise meeting during the NADA Convention in Las Vegas. VW dealers deserve to hear first-hand from the company about its vision for the future of Volkswagen in the United States.

Massachusetts Auto Dealer www.msada.org

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MSADA

TRUCK CORNER American Truck Dealers Move the Industry Forward

By Eric K. Jorgensen

www.msada.org

Massachusetts Auto Dealer JUNE 2015

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