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May 2016 • Vol. 28
The official publication of the Massachusetts State Automobile Dealers Association, Inc
MSADA
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St a f f D i r 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 A u t o D e a l e r M Ag 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.
Ad Directory Blum Shapiro 28 Boston Herald 36 ConServ 29 Ethos Group 2 Lynnway Auto Auction 29 Nancy Phillips 28 O’Connor & Drew, P.C. 35 Reflex Lighting 26 Southern Auto Auction 25 SunTrust 27
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From the President: An Annual Tradition THE ROUNDUP: Dealers Convene for 76th Annual Meeting and Dealer Day on Beacon Hill LEGISLATIVE SCORECARD TROUBLESHOOTNG: ADA Lawsuits – Coming Soon to Your Dealership? AUTO OUTLOOK ACCOUNTING: Password Cracking 101 LEGAL: How Will the New FLSA Exemption Rules Affect Your Dealership? INSURANCE: Upcoming Law Changes Affecting Reinsurance Companies
18 Cover Story: MSADA Annual Meeting
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NEWS From Around the Horn nada Market Beat Truck Corner: The Trumpet Sounds in Washington, D.C. nada update: Getting to the Grass Roots
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
Join us on Twitter at @MassAutoDealers www.msada.org Massachusetts Auto Dealer MAY 2016
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from the President
MSADA
An Annual Tradition
Gathering together always reveals the strength in our numbers, and our industry.
By Scott Dube MSADA President
W
e end May looking back on two of our most important, and fun, events in the MSADA calendar. I would like to thank those of you who took the time out of your busy schedules to attend this year’s MSADA Annual Meeting and our Dealer Day on Beacon Hill two weeks later. From the feedback I’ve heard about both events, many of you enjoyed a thought-provoking and engaging program with your fellow dealers with the support of our associate members as well. Running dealerships is more than just one full-time job, which is of course why most of us need 50 people to make such an operation work every day. Those moments when we’re “If we team up on all in the same room are too few. It is a crucial reminder that, while we compete with each issues our industry other day in and day out, we need to present a faces as readily and united front. It seems every year, when we get ably as we compete together for our Annual Meeting, there is some sort of industry-changing issue afoot. with each other in As I laid out to you at the Annual Meeting, the marketplace, if it’s not Tesla creeping around the corners of our laws, we have regulatory agencies such as our prospects the Consumer Finance Protection Bureau and remain strong.” incoming electric vehicle regulations lurking around the corner. Protecting our industry is never-ending work, and it rests mostly on visibility and communication. Our Annual Meeting, aside from being a time for camaraderie, is a time to invite regulatory officials into our world to help them understand our issues. They get to see first-hand how many of us there are, how much of the state’s economy we represent, and how we are vital players in any local community. These are the moments legislators remember when we knock on their office doors, and they can make all the difference when our opposition has limitless money to throw against us. The event provided valuable insight from several industry experts as well, ranging from the industry analysis from IHS to Dave Guilford’s fascinating take on the evolution of the automobile. And once again we concluded with a stirring presentation from Ethos Group’s Jaime Decker, whose talk on the Butterfly Effect should have resonance with all of us in our day-to-day work. As always, we are looking to hear your feedback on our guest speakers and hear any ideas you may have for next year. As we move into the Summer season, I ask that you continue to stay up to date on what your Association is up to. We need you to continue to be ready with emails, phone calls, and other grassroots messaging as we continue to push our industry’s future forward. If we team up on issues our industry faces as readily and ably as we compete with each other in the marketplace, our prospects will remain strong. t MAY 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 and 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) 404-404-0226 Harbor First Ron Scolamiero (617) 500-4080 Hireology Kevin Baumgart (773) 220-6035 Huntington National Bank John J. Marchand (781) 326-0823 JM&A 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 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 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
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The Roundup
Dealers Convene for 76th Annual Meeting and Dealer Day on Beacon Hill By Robert O’Koniewski, Esq. MSADA Executive Vice President Follow us on Twitter - @MassAutoDealers On Friday, May 6, your Association convened its 76th Annual Meeting of the Members at the Mandarin Oriental Hotel in Boston. We had a successful turnout of members, and attendees heard from a diverse group of speakers, including MSADA President Scott Dube; Massachusetts NADA Director Don Sudbay; Chip Perry, TrueCar President and CEO; RMV Registrar Erin Deveney; attorney Paul Metrey, NADA vice president of regulatory affairs; Jaime Decker of Ethos Group; Dave Guilford of Automotive News; Bruce Harrison and Guido Vildozo of IHS Automotive; and Daisy Medici, managing director of governance and education for GenSpring Family Offices. We owe a “thank you” to our sponsors for the day, without whose assistance we could not put on such fine events: • Blum Shapiro – Bronze Sponsor • DealerTrack – Gold Sponsor • Downey & Company – Break Station Sponsor • GW Marketing Services – Welcome Gift Sponsor • Hireology – Bronze Sponsor • Murtha Cullina – Bronze Sponsor • Northeast Dealer Services – Parting Gift Sponsor • O’Connor & Drew – Cocktail Reception Sponsor • Quik Video – Bronze Sponsor • SunTrust bank – Bronze Sponsor • TrueCar – Gold Sponsor AND Lunch Sponsor • Zurich – Bronze Sponsor You can read the details of our meeting as part of this month’s cover story. MAY 2016
Massachusetts Auto Dealer www.msada.org
Dealers Visit Beacon Hill Almost every dealer has some sort of relationship with his or her legislators at the local level, whose roots can be found in the interaction of our businessmen and women and politicians in any number of different settings. Until five years ago, however, dealers had never collectively come to-
Left to right: State Sen. Vinny deMacedo (R-Plymouth) and Levon Semerjian, Atlantic Subaru.
gether to communicate directly with legislators at their place of business, the State House. On May 18, your Association held its annual “Dealer Day on Beacon Hill” event designed to bring our member dealers right into the political arena where the legislative decisions are made affecting your businesses. Dealers and their key
MSADA employees convened in the morning at the Parker House Hotel, just down the street from the State House. We provided attendees an issues briefing on several key bills in which we have an interest (and on which I have written previously): licensure of inspection stations for franchised dealers; repeal of the used vehicle record book; increasing the insurance reimbursed labor rates for auto body repairers; promote the adoption and use of electric vehicles; and expand and improve career technical education and training programs. More importantly, we reminded our dealers that it is important to tell your own stories regarding your role in the community, including your economic impact, the employees you manage, and the taxes they, your customers, and you pay. Legislators know dealers and dealerships exist; they just do not know the long and deep reach of your businesses’ tentacles into the state and local economy and throughout the community, especially through your charitable and other servicerelated activities. All our dealers were well received, and the dealers’ presence throughout the building created quite a buzz. In order to build on the successes of our “Dealer Day” events, it is vital that we continue to grow our attendance and participation amongst our members for our events. It is extremely helpful to our lobbying efforts for legislators to see their constituents face to face and receive a perspective they don’t have in the normal course of their activities. No one knows your business better than you. That knowledge needs to be conveyed to your legislators in an environment and manner they understand. As a result of our dealers’ input, this event was a success upon which we can build for the future.
AIADA Washington Summit Earlier this month MSADA representatives traveled to Washington DC for the American International Automobile Dealers Association’s (AIADA) Tenth Annual
International Auto Industry Summit. AIADA annually gathers international nameplate franchised dealers in DC to hear from auto industry and political speakers and to meet with members of the dealers’ congressional delegations on Capitol Hill to discuss legislative and business issues facing the international nameplate community, especially pending global trade related legislation. This year’s guest speakers included Gen. Stan McChrystal; Rep. Jeb Hensarling (R-Texas), who is the chair of the House Committee on Financial Services, which has been attempting to rein in the CFPB; Rep. Vern Buchanan (R-Florida), who also is a franchised auto dealer; political columnist Stuart Rothenberg; pollster Dr. Frank Luntz; and Erin Kerrigan, managing director of the buy/sell advisory firm, Kerrigan Advisors. In making our Capitol Hill rounds, we visited the following Members of Congress and/or legislative staff for Rep. William Keating (D-Bourne), Rep. James McGovern (D-Worcester), Rep. Seth Moulton (D-Peabody), Rep. Niki Tsongas (D-Lowell), Rep. Joseph Kennedy (D-Brookline), and Rep. Katherine Clark (D-Melrose). During our meetings we discussed the Massachusetts auto market; the Trans Pacific Partnership (TPP) legislation; the auto dealer exemption in the Dodd-Frank law and the CFPB reform legislation, including thanking Reps. Tsongas and Keating for voting for it; proposed changes to the LIFO accounting method; and auto design patent protection legislation (H.R. 1057). During the conference, AIADA together with the Association of Global Automakers released their 2016 economic impact report showcasing the growing impact of the international automakers on the U.S. economy. The report, entitled The Redefined American Auto Industry, is designed to educate policy makers and the public that the U.S. auto industry is comprised of a global array of companies, each of which is deeply invested in growing and
thriving in America. One can access the report at http://hereforamerica.com.
State Budget Moves Along As we prepare to go to press, the Massachusetts Senate is scheduled to begin debate on its version of the FY2017 state budget, which followed the House’s approval of its own budget version at the end of April. The Senate proposal, with a bottom-line of $39.497 billion, is close to that contained in the Governor’s original plan for the year and the House’s approved total, each of which limited spending growth to 3.5%. We will see if the Senate will be able to exert any fiscal discipline during its deliberations, as Senators have filed amendments that, if all approved, would add over $4 billion to the tally. Senators want desperately to raise taxes to enjoy spending the additional revenue that would come in from their hard-working constituents. However, under our state constitution, tax-raising proposals must originate in the House, and the House, along with Governor Baker, has created a FY17 spending plan that does not include new or increased taxes. Senators will have to await another opportunity, if the House initiates the move, to pry deeper into their constituents’ wallets. Once the Senate completes its budget deliberations, that is not the end of the story. There are scores of differences between the House and Senate documents, which must be resolved in a six-member conference committee, consisting of three Senators and three Representatives. Fortunately, based on your legislative team’s work throughout the budget process, there are no provisions adversely affecting auto dealers. The conference committee will have its work cut out for it, as the FY17 fiscal year begins on July 1. The conference committee would need to get an agreement to both chambers for each’s review and approval so that the budget could be forwarded in time to Governor Baker for his review, issuance of any line-item vetoes,
www.msada.org Massachusetts Auto Dealer MAY 2016
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The Roundup and signature by the July 1 deadline. The race is afoot.
HR Law Seminar – June 2, Peabody How confident are you that your managers and you have kept pace with all the new employment law requirements thrown upon your business? Have you received our updated Wage-Hour Guide for 2016? On Thursday, June 2, at 9:00 a.m., at the Peabody Marriott Hotel, 8A Centennial Drive, Peabody, attend our seminar by Fisher & Phillips attorney Joe Ambash to receive important updates on critical employment law issues specifically affecting auto dealers in Massachusetts. The enforcement of wage/hour laws continues to challenge Massachusetts dealers. In order to assist our member dealers, in June 2014 we unveiled our Legal, OSHA Compliance Assistance Program, which includes employment law compliance in conjunction with the law firm of Fisher & Phillips. Since then, we have conducted numerous seminars across the state to bring our members up to date on the latest state and federal legal and regulatory developments affecting your workplaces. Our employment law compliance program is designed to encourage our members to review their pay plans, employee handbooks, and employment application, and to undertake a management training audit. Be sure to attend on June 2 to catch up on what is going on or just to have a refresher on material that supplements that which you have already learned. Use our registration form sent via our bulletins of contact me directly at rokoniewski@ msada.org to register.
New DOL Persuader Rule Takes Effect on July 1 The following information is provided courtesy of Fisher & Phillips. The federal government has finalized a significant new regulation that seeks to
MAY 2016
interfere with businesses seeking legal counsel to help in opposing or dealing with unions. The U.S. Department of Labor’s (USDOL) new “persuader” rule would force attorneys and their clients to report in public records their confidential attorneyclient and financial relationships, providing an unfair boost to unions in their organizing efforts. The rule, which took effect on April 25, 2016, will apply to all arrangements, agreements, and payments made on or after July 1, 2016. Employment law attorneys expect numerous business organizations will file lawsuits seeking court orders blocking implementation of the new regulation. The Labor Management Reporting and Disclosure Act (LMRDA) requires labor relations consultants to file government reports about any arrangement to persuade workers to reject unionization or collective bargaining. This rule has generally only been applied to situations where businesses retain non-lawyer consultants known as “persuaders” to help them during organizing drives or labor disputes. For over 50 years, the rule had generally not been applied to lawyers or law firms offering advice and counsel to businesses about their rights and obligations under federal labor law. That’s because the LMDRA expressly permits employers to receive “advice” without triggering the reporting requirements, so long as a client has been free to accept or reject the advice, and so long as the lawyer did not communicate directly with employees. In a transparent effort to boost union organizing, the USDOL has waged a five-year battle to radically broaden the reporting requirements. Starting in June 2011 with the issuance of proposed revisions to the persuader rule, and culminating in the publication of the final rule, the USDOL rammed through its changes over the objections of countless business groups, employer organizations, law firms, and the American Bar Association. Under the new rule, pure legal advice would still be protected, provided there is
Massachusetts Auto Dealer www.msada.org
no underlying object to persuade, but no longer would tactical consultations with your lawyer about maintaining unionfree status be immune from persuader reporting requirements. Instead, under the new rule, any time your lawyer so much as helps you educate your workers on the perils of unionization, those activities would need to be disclosed in a public report. Also, any time your lawyer supplies you with information about any particular union or employee activities during a labor dispute, the reporting obligation would be triggered. The following routine services commonly provided to clients are among the countless that could trigger reporting under the new rule: • conducting supervisory do’s and don’ts training sessions; • drafting or revising text for small group talks or other communications; • drafting personnel policies and handbooks touching on the subject of unions; • reviewing and revising orientation materials touching on the subject of unions; and • delivering union-avoidance webinars or seminars. Further, once a law firm is labelled as a “persuader,” coverage is triggered and the firm is required to report all of its receipts from clients relating to all labor relations advice and services, not just persuader services. We believe that the new rule goes too far and will not withstand legal scrutiny, as it inappropriately interprets the LMRDA and impermissibly interferes with a law firm’s relationships with clients. Lawyers have a professional duty to maintain the confidences of their client relationships, and are generally obligated not to disclose them. This duty extends to all client information, not just privileged attorney-client communications. Although there may be limited occasions when lawyers are required to reveal confidential information – such as if a law or court ruling mandates disclosure – we do
MSADA not believe that the LMRDA supports the USDOL’s interpretation requiring wholesale disclosure. Employers are also impacted by the new rule, as you must file a corresponding public report disclosing any persuader arrangement and all payments thereunder. Happily, the rule will only apply to persuader engagements which begin on or after July 1, 2016. Also, no employer reports are due until 90 days after the end of any fiscal year in which you use persuader assistance, and by then we hope to have further clarity from the courts about the validity of this new rule. We await further developments as the court challenges play themselves out. Once we achieve closure, we will keep dealers informed on what they need to do to properly comply with any rules that survive.
New DOL “White Collar” OT Exemption Rules Unveiled The following information is provided courtesy of Fisher & Phillips. The U.S Labor Department (USDOL) has finally released the anxiously awaited revised regulations affecting certain kinds of employees who may be treated as exempt from the federal Fair Labor Standards Act’s (FLSA) overtime and minimum-wage requirements. These will be published officially on May 23, 2016. If you currently consider any of your employees to be exempt “white collar” employees, you might have to make some sweeping changes. In brief, the following changes will be made in USDOL’s definitions of executive, administrative, professional, computer-employee, and highly compensated exemptions under the FLSA’s Section 13(a)(1): • The minimum salary threshold is increasing to $913 per week, which annualizes to $47,476 (up from $455 per week, or $23,660 per year). USDOL says that this figure is set at the 40th percentile of data representing what it calls “earnings of full-time salaried
workers” in the lowest-wage Census region (currently the South). • This amount will now be “updated” every three years (meaning that it will likely increase with each “update”), beginning on January 1, 2020. USDOL will announce these changes 150 days in advance. • Employers will be able to satisfy up to 10% of this new threshold through nondiscretionary bonuses and other incentive payments, including commissions, provided that the payments are made at least quarterly. This crediting will not be permitted as to the salaries paid to employees treated as exempt “highly compensated” ones. • The total-annual-compensation threshold for the “highly compensated employee” exemption will increase from $100,000 to $134,004 (which will also be “updated” every three years). USDOL says that this figure is set at the 90th percentile of data representing what it calls “earnings of full-time salaried workers” nationally. These rules will become effective on December 1, 2016, which is considerably later than had been thought. Unless this is postponed somehow, by that time you must have done what is necessary to continue to rely upon one or more of these exemptions (or another exemption) as to each affected employee, or you must forgo exempt status as to any employee who no longer satisfies all of the requirements. The bottom line: 1. Essentially, USDOL is doubling the current salary threshold. This is likely intended to both reduce the proportion of exempt workers sharply while increasing the compensation of many who will remain exempt, rather than engaging in the fundamentally definitional process called for under the FLSA. Manipulating exemption requirements to “give employees a raise” has never been an authorized or legitimate pursuit. 2. For the first time in these exemptions’ more-than-75-year history, USDOL
will publish what amounts to an automatic “update” to the minimum salary threshold. This departs from the prior USDOL practice of engaging in what should instead ultimately be a qualitative evaluation that also takes into account a variety of non-numerical considerations. 3. USDOL did not change any of the exemptions’ requirements as they relate to the kinds or amounts of work necessary to sustain exempt status (commonly known as the “duties test”). Of course, USDOL had asked for comments directed to whether there should be a strict more-than-50% requirement for exempt work. The agency apparently decided that this was not necessary in light of the fact that “the number of workers for whom employers must apply the duties test is reduced” by virtue of the salary increase alone. Some in Congress are still considering action aimed at stopping these changes, and it is possible that lawsuits will be filed with the same goal. While one or more of these challenges may be successful, you should assume for the time being that the new requirements will take effect as scheduled. Right now, you should be: • analyzing whether the requirements for the “white collar” exemptions you have been relying upon are met; • evaluating what might be changed about one or more jobs so that the incumbents may be treated as exempt in the future; • considering the possible application of alternative FLSA exemptions; and • developing FLSA-compliant pay plans for employees who have been treated as exempt but who no longer will be. USDOL has provided extensive commentary explaining its rationale for the revised provisions. We are continuing to study the final regulations and accompanying discussion carefully and will offer further considered views in the coming days and weeks. t
www.msada.org Massachusetts Auto Dealer MAY 2016
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MSADA
Troubleshooting
ADA Lawsuits
Coming Soon to Your Dealership? By Peter Brennan, Esq.
MSADA Staff Attorney Many popular trends that have gripped the nation have started in California and spread across the country like one of the Golden State’s legendary wildfires. The results have varied greatly – the state is responsible for the rise of surfer/hippie/new age culture, technophiles, the Kardashians (shudder), usage of the words “hella”, “dude”, “bro”, the 20th century rise of automobile culture, and aggressively progressive legislation that emanates from its state capital. One trend from the west that will hopefully not reach the Atlantic coast is a disturbing increase in frivolous lawsuits filed against dealerships based on violations of the Americans with Disabilities Act (ADA). According to a 2015 report, California had seen more federal disability lawsuits filed in the previous ten years than New York, Texas, Florida, and Pennsylvania combined. Under the ADA, either an individual or an advocacy organization can file a lawsuit against a business for violations of the Act. The plaintiff in such a case is limited to seeking injunctive relief and attorney fees, but the Department of Justice can bring an enforcement action and seek compensatory damages for victims and civil penalties. Title III of the ADA is the section most likely to be cited in the frivolous lawsuits mentioned above. Title III prohibits discrimination on the basis of disability in
the activities of places of public accommodations (businesses that are generally open to the public and that fall into one of 12 categories listed in the ADA) and requires newly constructed or altered places of public accommodation, as well as commercial facilities (privately owned, nonresidential facilities such as factories, warehouses, or office buildings), to comply with the ADA Standards. Finding an ADA violation at any business is generally an easy task. The regulations are so dense that even a business trying to comply with the letter of the law can sometimes find it impossible. Some common examples of non-compliance at dealerships include: improperly labeled access aisles next to handicapped parking spaces, improperly placed signage for the spots, floor mats that are incorrectly anchored to the ground, and transaction stations that are the incorrect maximum height or minimum width (or are being used for storage or another purpose, if there is only one accessible transaction station). Also, don’t forget to check the bathroom to make sure it has proper bathroom door handles, paper towel dispensers within 40 inches of the floor, and wrapped pipes under the sink. Enterprising plaintiffs and plaintiffs’ attorneys have been capitalizing in California by pairing the ADA with the state’s civil rights statute (the Unruh Civil Rights Act) in lawsuits. The Unruh Civil Rights Act contains a statutory damages provision of $4,000 per violation for plaintiffs, and most violations of the ADA are considered to be a violation of the Unruh Civil Rights Act. In California, the dealership will generally receive a demand letter on behalf of a plaintiff that had allegedly suffered damages based on one of the above-listed instances of common noncompliance. In the letter, the attorney will cite the violation, the section of the law that calls for statutory damages (meaning the plaintiff need not prove actual damwww.msada.org
ages), and finish with an offer to settle the claim for several thousand dollars. What the attorney is not concerned with is the dealership’s addressing the violation and getting into compliance, as the lawsuits are generally settled without any regard to the damage that the “violation” could cause to future customers. Under the ADA, the prevailing party is entitled to recover reasonable attorney’s fees. Unfortunately, attorney’s fees are generally only granted to a prevailing defendant in a civil rights action only “upon a finding that the plaintiff’s action was frivolous, unreasonable, or without foundation.” Christiansburg Garment Co. v. EEOC. To clear that high standard, the defendant would likely have to prove that there was no underlying instance of ADA non-compliance, not just that the violation was minor and that the plaintiff did not suffer any damages. California has attempted to address this disheartening trend legislatively, but it remains to be seen whether the state legislature’s fix went far enough to correct the problem. Massachusetts law does not currently provide the same statutory damages that make these lawsuits so appealing to certain attorneys in California, but it remains an area of interest, especially with the Commonwealth’s equally progressive-minded legislature. Just because the Commonwealth is not yet a fertile ground for frivolous lawsuits does not mean that dealerships should ignore ADA compliance, however. Meritorious lawsuits can be much more expensive than frivolous ones. 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 MAY 2016
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AUTO OUTLOOK
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Massachusetts Auto Dealer www.msada.org
MSADA
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Accounting
MSADA MSADA
Password Cracking 101
By Scott Goodwin Joining the firm in October 2015, Scott Goodwin is an experienced member
O’Connor & Drew’s IT Audit & Security Division, OCD Tech. To learn more visit www.ocd-tech. com or contact Scott at sgoodwin@ocd-tech.com. of
From the corner window of your office, the front of the vehicle was just barely visible. You didn’t recognize the van, but it certainly seemed innocuous enough at the time. Then, in a fleeting moment of clarity, you realize you just can’t remember it arriving, and you don’t remember anyone ever getting out. But you don’t get paid to worry about security. The strangeness of the situation fades as you log into your network and begin another hard day’s work. How could you be expected to know that, after hours of network sniffing, the attackers had finally captured the elusive string of information they were hunting for – your encrypted password? Hold on tight, because the rest happens very quickly. The attacker needs only to run a single command, launching any one of several powerful password cracking tools against your credentials. Their specialized equipment is optimized for this type of analysis. Multiple computers scream along as thousands of passwords are guessed with every passing second. Then, after a surprisingly short period of time, the plaintext password is recovered, and the attacker is in control. You are no longer the unique owner of your own identity, and the network can’t tell the difference. Game over. Weak passwords are one of the leading causes of information security related incidents. In fact, dumping and cracking employee credentials is part of every hacker’s toolkit. It’s obvious that password strength is crucial to any information security policy. But if the criticality of password strength is widely known, why are they still so widely compromised? Well, for starters, rememMAY 2016
bering complex passwords is difficult, and people are disinclined to use passwords which they cannot easily recall. Secondly, there is no real standard against which to measure password strength. The computing power available to today’s average consumer is staggering. Modern laptops and desktop PCs have more than enough computing power to handle a simple password recovery. But consider also that there are cloud-based services which will rent access to dozens, even hundreds, of computers. These can then be used for such illicit purposes as attempting to crack the passwords of every employee at your organization, all at once. And these services cost considerably less than investing in a new computer, some as little as fifty cents per password. As in war, one can only defeat an enemy by fully understanding their motives and tactics. Therefore, in order to create truly strong passwords, one must have an understanding of the techniques used to compromise them. After all, when we discuss “strength”, we are really talking about “resistance to cracking”. The strongest passwords are uncrackable in a reasonable amount of time, and that is the only metric by which password strength can be reliably measured. The attacker is likely to employ two standard types of password attacks. The first is a brute force attack, which simply attempts every single combination of alphanumeric and special characters possible. In reality, the only defense against this sort of attack lies in the length of the password. The attacker should run out of time or computing power, or simply lose interest, before succeeding. In this case, the attacker seeks to exploit our tendency to choose passwords that are short and simple enough to remember. The second type of password attack is known as a dictionary attack, which uses vast wordlists to try and match a password. These wordlists are often composed of actual dictionaries, previously leaked passwords, and even popular books. Here, the
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attacker seeks to exploit our language, since recognizable words are easier to remember than meaningless strings of characters. In order to defend against this type of attack, it’s necessary to keep your password out of the dictionary. This can be adequately achieved by squishing multiple words together, as in a passphrase. A similar option involves converting a complex phrase into an acronym. Both of these types of passwords are nearly transparent to dictionary style attacks, because neither is likely to be found on a wordlist. The success rate of either type of attack can be increased by employing a technique known as “mangling”. By mangling their guesses, an attacker seeks to exploit our tendencies to place special characters at the end of a password and capital letters at the front. The attacker can then attempt to recreate these conditions by trying each guess multiple times, appending different special characters to the end, and changing the capitalization. By specifying targeted mangling rules, the attacker is more likely to recover a password to which strength had been “added” by the average user. Examples of passwords vulnerable to dictionary-mangling attacks: Password1! Summer2016! Strength in passphrases and acronyms: The ants go marching 2 by 2 hurrah! Hurrah! Tagm2x2h!H! Through an understanding of the various ways a hacker can compromise credentials, the real meaning of password strength has emerged. It is not as simple as merely adding characters or length to an existing password. Rather, we should be employing techniques that increase the time and computing cost to crack a given password. Password strength must be measured in the context of an attack. After all, the people who are testing the strength of your password are usually the ones trying to hack into your business and steal your data. t
MSADA
Legal
By Joseph W. Ambash and Jeffrey A. Fritz
How Will the New FLSA Exemption Rules Affect Your Dealership? On May 19, the U.S. Department of Labor (DOL) issued revised regulations, which take effect December 1, 2016, concerning the “white collar” exemptions to minimum wage and overtime under the Fair Labor Standards (FLSA). The new rules, among other things, significantly increase the minimum salary requirement for those employees who qualify for the “executive,” “administrative,” or “professional” exemptions, from $455 per week (which annualizes to $23,660), to $913 per week (which annualizes to $47,476 per year). Dealerships, with a little planning, should be able to adjust to the change in stride. No Effect on Salesman, Partsman, Mechanic, or Commission-Paid Exemptions. The FLSA contains a number of exemptions in addition to the “white collar” exemptions that may apply to dealership employees, including “salesmen,” “partsmen,” mechanics, and those who earn a majority of their compensation over a representative period in form of commissions. Fortunately, the DOL’s new rules have no impact whatsoever on these exemptions, and dealers can continue to rely on them as they have in the past. The “White Collar” Exemptions. To qualify for a “white collar” exemption, an employee must, in the first instance, satisfy its “duties” test. For example, to qualify for the “executive” exemption, the employee, in fact, must: (1) be primarily engaged in managing your dealership or a customarily-recognized department or subdivision thereof; (2) customarily and regularly direct the work of at least two full-time employees (or their equivalent); and (3) have the authority to hire or fire employees (or make recommendations on such issues afforded significant weight). Similarly, to qualify for the “administrative” exemption, the employee’s primary duty must, in fact: (1) be the performance
of office or non-manual work directly related to the management or general business operations of your dealership, and (2) include the exercise of discretion and independent judgment with respect to “matters of significance.” Fortunately, the DOL’s new regulations do not impact the “white collar” exemptions’ “duties” tests. If an employee meets the “duties” test for a “white collar” exemption, to be exempt he or she also must satisfy the “salary or guarantee basis” test; that is, he or she must be paid a guaranteed amount per week regardless of the number of hours they work (subject to very narrow exceptions beyond the scope of this article). Since 2004, the salary threshold has been $455 per week. As noted above, the new rules almost double that amount. The Changes and Their Impact. In addition to increasing the “white collar” salary threshold to $913, the new rules also (1) provide that employers may attribute nondiscretionary bonuses, commissions, or other incentive payments to satisfy 10% of the salary threshold amount, provided such payments are made at least quarterly, (2) increase the total annual compensation required to qualify for the “highlycompensated employee” exemption from $100,000 to $134,004, and (3) provide that, beginning January 1, 2020, and every three years thereafter, these thresholds will be “updated,” which almost certainly means increased. What does all this mean? Come December 1, 2016, employees currently exempt as “executives,” “administrators,” or “professionals,” such as, generally speaking, your managers and higher-level office employees earning less than the $913 per week salary/guarantee threshold, no longer will be exempt and will be entitled to overtime pay, at one-and-a-half times their “regular rate of pay,” for all hours worked over forty each week. www.msada.org
What Should You Do Now?
In light of these impending changes, you should review your “white collar” employees’ pay plans now to determine what, if any, changes you will need to make to ensure compliance with the new rules. Think about what changes make the most sense for your dealership. While not a one-sizefits-all proposition, such changes may include any, or a hybrid, of the following: (1) increasing the salary to the new threshold to maintain the exemption; (2) prohibiting employees from working overtime (keeping in mind that, while you can discipline employees for ignoring that prohibition, you still need to pay them appropriately for the time they work); (3) hiring additional employees to reduce the need for overtime; and/or (4) “reducing” the salary to an amount that, taking into account the employee’s average overtime hours, amounts essentially to what you are paying them now. Other changes may be appropriate, as well. Consult with an attorney on any changes you intend to make. One option is ill-advised: doing nothing. Failure to comply with the FLSA can result in significant time spent defending against class action lawsuits, hefty judgments, triple damages under Massachusetts law, and sizeable attorneys’ fees and costs. 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.
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Insurance
MSADA MSADA
Upcoming Law Changes Affecting Reinsurance Companies By Mike Scolamiero Mike is Vice President at Harbor First Solutions. He can be contacted at (617) 500-4080 or mike@ harborfirst.com.
A dealership’s F&I department has developed over the years into one of the most important profit centers in a store. There are several opportunities for a dealer to profit from the sale of F&I products, including the ability to participate in the revenue generated as the premiums earn out. One of the more popular structures is a CFC (Controlled Foreign Corporation), often referred to as a reinsurance company. CFCs have been around for decades, and there are many dealers who have had terrific success with them. Congress passed the 2015 Appropriations Bill last December, which included updates to the Internal Revenue Code that will affect CFCs. For any dealer with an existing reinsurance company, it is strongly recommended that he or she consult with a CPA regarding these changes to review his or her participation position. Section 831(b) of the Internal Revenue Code offers small non-life insurance companies, with annual underwriting income less than $1.2 million, the ability to elect to exclude underwriting income from taxable income and be subject to tax only on investment income. After nearly 30 years since the $1.2 million threshold was written into law, new legislation finally has been passed. The $1.2 million ceiling is being raised to $2.2 million and will now be indexed annually to inflation. This is a tremendous advantage to dealers who currently own reinsurance companies, especially those that must formulate strategies to avoid going over the $1.2 MAY 2016
million threshold. Doing so would mean losing their 831(b) status and having to pay substantially more in taxes. Unfortunately, included in the law change are two tests designed to offset abuses of 831(b), specifically in wealth transfer and estate planning. The major theme behind the tests is to ensure 831(b) isn’t being used to steer a dealer’s wealth to other individuals while circumventing the dealer’s estate. In an effort to curb such possible tax abuse, a diversification requirement and an ownership test were added. The good news is that a dealer needs only to pass one of the two tests. The diversification requirement states that no one policyholder can represent more than 20% of the company’s net written premiums. At first glance it would seem this shouldn’t present any problem, since thousands of customers contribute to the company’s portfolio. However, F&I products originate as a contract between customers and the administrator, and their reserves are later reinsured into the dealer’s reinsurance company. At the moment, the general consensus is that it seems to be unclear whether the “policyholder” is the ceding company or the underlying insured. If the IRS determines it to be the former, then just about every dealer would fail the diversification requirement. The ambiguity of this language is the result of the law being poorly written. If the law is rewritten, which is likely, then they’ll change the language to better reflect the law’s intention. If the word “policyholder” becomes “source”, then the majority of dealers would have to move on in hopes of passing the ownership test, which will still allow them to qualify to make the 831(b) election. The ownership test requires the ownership of the 831(b) company to mirror, within 2% margins, the ownership of the company being insured.
Massachusetts Auto Dealer www.msada.org
In other words, if a dealer owns 100% of their dealership, then no other individual may own more than 2% of the reinsurance company. For a dealer who has CFC’s in their spouse’s name, children’s name, etc., it is easy to see the concern. No company will be grandfathered in with the new laws. Dealers have until 2017 to properly prepare and, if need be, restructure themselves. There are several strategies for a dealer who wants to continue participating in the earned premiums of their F&I products but has decided that it is time to move away from their CFC position. Here are three other participation structures and their advantages and disadvantages when being compared with a traditional reinsurance company (CFC): • NCFC (non-Controlled Foreign Corporation): Will often produce better investment income for a dealer, but the dealer loses some control, shares risk with other dealers, and pays a 1% excise tax. • Dealer Obligor: A good structure for dealers who are looking for the quickest access to capital.The biggest downside is the assets of the dealership are put at risk. • DOWC (Dealer-Owned Warranty Company): For most dealers, a DOWC is the ideal structure. It produces the strongest financial returns, creates a prolonged tax deferred period where zero taxes are paid at the corporate level, is a separate, fully insured entity acting as the obligor, and offers the ability to borrow against the reserves. Depending on each dealer’s business, capital needs, tax concerns, and estate planning strategies, one of the aforementioned structures may fit their prerequisites better than the rest. It is important for a dealer to be knowledgeable of the upcoming law changes, to be aware of the different available structures, and to put themselves in the best possible position.
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Cover Story
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Massachusetts Auto Dealer www.msada.org
MSADA “The fact is we can start to worry about this stuff in 2024, or be ready.” –Scott Dube
Confronting the Future The 2016 MSADA Annual Meeting gave dealers a forum for new ideas and better solutions.
More than 200 gathered for the Massachusetts State Automobile Dealers Association 2016 Annual Meeting, held at the Mandarin Oriental in Boston this month. The event saw industry experts, regulators, and others present their ideas on how the Massachusetts franchised automotive retail economy is changing. The event highlighted a need to embrace new technology while also maintaining a healthy skepticism of emerging trends that discourage competition. The following are some of the highlights from the day’s program.
Scott Dube, MSADA President MSADA President Scott Dube opened the meeting with a call for dealers to pay more attention to the changing landscape of the Commonwealth’s green energy initiatives. Massachusetts has mandated that hundreds of thousands of electric vehicles be sold by 2025 – there are only 5,000 on the road today. “You might say, ‘That’s not my problem, I’m going to sell the cars I have.’ But just like ‘Right to Repair’, there’s the potential for our manufacturers getting fined or not being allowed to sell cars in the Commonwealth if they don’t meet certain numbers. And manufacturers meet their obligation once they drop cars at the www.msada.org
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Confronting the Future Erin Deveney
Registrar, Massachusetts Registry of Motor Vehicles
lot – so you can probably use your imagination to see how that goes.” Dube encouraged members to stay engaged with their representatives in Congress and on Beacon Hill, as well as maintaining a dialogue with regulators about their needs. “The fact is, we can start to worry about this stuff in 2024, or be ready,” Dube said.
Don Sudbay, NADA Director NADA Director Don Sudbay checked in with a report on how dealers are faring on Capitol Hill. He noted the constant attacks from the Consumer Finance Protection Bureau have received pushback from legislators of both parties, including measures that scaled back some of the CFPB’s control. “There’s a huge amount of pressure on CFPB right now, on their director,” Sudbay said. “They were raking this guy over the coals. It’s out of control, and Congress is trying to pull them in a little bit.” Sudbay credited Reps. Niki Tsongas and Bill Keating with their help on the issue, noting it’s imperative for dealers to maintain relationships with their representatives. “We need Democrats to get things through,” he added. Sudbay concluded by inviting dealer members to join him in September for the annual NADA Washington Conference at Capitol Hill, where dealers from across the country gather to meet with their representatives and advocate for themselves. MAY 2016
Massachusetts Auto Dealer www.msada.org
Now well-established in her position as Registrar at the Registry of Motor Vehicles, Erin Deveney made a pitch for further integrating dealerships within the RMV’s “We need operations. “We’re trying to think of you a little bit guys as customers,” Deveney more time, opened. She noted the RMV’s B2B concept had found and a little success in Milford and recently opened in Springfield. bit more of “Our goal is to get it across the state,” she added. “We your faith, need to increase government’s as we work ability to act like a business and recognize businesses as our customers, as well.” together.” Deveney also took questions on inspection decal practices, including the lack of inspection licenses among franchised dealers who need them, noting that frustration with the program would be something she would look into. “We need a little bit more time, and a little bit more of your faith, as we work together.”
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Paul Metrey
NADA Vice President, Regulatory Affairs Giving another glimpse at NADA’s operations, NADA Vice President Paul Metrey provided an overview of the annual convention, recent changes to the NADA Guides, and other aspects of the national organization. Metrey also gave an overview of recent federal regulatory developments affecting automobile dealerships, including the current status of the CFPB’s fair credit initiative, an array of FTC enforcement actions, the FTC Used Car Rule, recalls, fuel economy, and labor issues. Metrey noted there are several compliance resources available to dealers at NADA.org.
Chip Perry
TrueCar, President and CEO
Government Affairs Report
Robert O’Koniewski, MSADA Executive Vice President Peter Brennan, MSADA Staff Attorney Robert O’Koniewski, MSADA Executive Vice President, and Peter Brennan, Staff Attorney, gave an overview of the legislative and regulatory outlook from Beacon Hill. O’Koniewski noted that the signature issue facing the entire Commonwealth is the dysfunction between the legislature’s two houses. Competing bills are confusing the process, and, as a result, the situation remains difficult to pin down one day to the next. For his part, Brennan outlined the work being done with the Commonwealth on clean energy vehicles, noting cautious optimism with the newly created task force that MSADA President Scott Dube and MSADA Suffolk County Director Robert Boch now take part in. Both stressed the need for dealers to continue to be involved in making sure their legislators know where dealers stand, including participating at the annual Dealer Day on Beacon Hill.
www.msada.org
Chip Perry, the head of the controversial auto retail service TrueCar, appeared before dealer members to make the case for why the program is helpful for dealers as much as it is customers. In fact, he said, he’s working toward making TrueCar reflect the needs of dealers as customers themselves. “We’re changing our business practices to treat you much better as customers,” Perry said. That includes no longer holding onto customer data. “I believe you own that customer information,” he said. “To resolve any concerns you have about us doing something nefarious with that data, we’re going to erase it.” Perry also tried to assuage concerns that TrueCar’s price hunting model isn’t giving dealers the short end of the stick. “Our goal is to enable consumers to receive market competitive pricing on the car and then introduce a dealer who provides an above average customer experience,” he said. “But whatever we do, this is not going to be launched from an ivory tower. As a third party, we need to respect the individuality of your business and your needs as local entrepreneurs.” Massachusetts Auto Dealer MAY 2016
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Confronting the Future
Bruce Harrison & Guido Vildozo IHS Automotive
Guido Vildozo and Bruce Harrison presented their take on the economic forecast for the next year and the on-the-ground realities presented in the market. Taking on the forecast, Vildozo said growth will continue even as the policies of whoever is elected president in November remain a question mark. “As the rest of the world stabilizes, we will probably push toward 2.7 percent (growth) next year,” Vildozo said. “Is there going to be a change depending on the next president? We don’t see any drastic change. But in due course we have to pay the debt that’s been issued over the past eight years, and that’s going to affect disposable income.” Meanwhile, Harrison gave an overview of technology changes coming to bear, including new oils that only require servicing every 7,500 miles and vehicles that are simply lasting longer than ever. “What’s happening to you? You’re not seeing customers.”
Dan Guilford, News Editor, Automotive News
Dan Guilford presented dealers with his vision of the changing soul of the automobile, beginning with recollections of the earliest car ad that left an impact on him: a TV spot from the late ‘60s selling Chevys as the way to see the country. The appeal of the car back then: “The freedom to go out where you wanna go and how you wanna go there.” Today, he says, we’re moving toward new technology that’s changing the meaning of that idea. Self-driving vehicles are making it possible for those who can’t drive, including older people and those with disabilities that preclude driving, the same freedom automobiles provide normally. “It’s a transformation that will affect the basic bonds people have with cars,” Guilford says. But the transformation is not without its challenges. Data privacy, safety, and other factors make the concept of self-driving vehicles a tough sell for some. While the prospect of zero accidents in a world of self-driving cars is within reach, he says, it’s a goal that requires a leap for consumers. “But if you work with an agency that has safety in its name, you’re pretty much obligated to pay attention to this,” he added. MAY 2016
Massachusetts Auto Dealer www.msada.org
MSADA
Jaime Decker Ethos Group
Delivering the end note of the day, Jaime Decker offered observations on perseverance and motivation from both his family history – he’s a great-grandson of Robert E. Lee – and his own work in the dealership world. Holding on for too long to negativity, he said, is poisonous. When a Confederate widow, talking to Gen. Lee pointed out a tree at her home that had been planted by a husband and three sons lost to the war, Lee told her to cut it down rather than let it remind her of her loss. Conversely, he recounted the story of the 20th Maine Regiment, led by Joshua Chamberlain, that chose to charge when it ran out of ammunition rather than retreat
Daisy Medici
GenSpring Family Offices, Managing Director of Governance and Education Speaking as a representative of a fourth-generation family business, GenSpring Family Offices Managing Director Daisy Medici outlined some of the challenges faced by businesses as they enter the complexities of turnover to the next generation. Medici said the key to avoiding conflict and ensuring a smooth transition is communication. “Many families wait a long, long time before they communicate to their next generation what their future might look like for them as owners,” she said. “Gone are the days when you find out what that looks like at the reading of the will.” Among the issues faced by modern businesses are the blending of families, changing marketplace conditions, and the difficulty of getting involved family members together to discuss the future. Her parting message: Don’t wait to talk about the future of your dealership.
and allow the Union army to be flanked at a crucial point in the Battle of Gettysburg. That story served as an example of the Butterly Effect – the idea that the flap of a butterfly wing creates ripples throughout the world. Recalling having to resuscitate a child injured at baseball practice, he circled back to the person who forced him to learn the CPR technique, then to the child who went on to be a brain surgeon. “How many lives change because of one thing we did in our lives, when you think it didn’t matter? When you look down at a young salesman and say, ‘Man, am I glad you are here,’ that matters. Everything falls on our leadership. You don’t have to have big meetings, you just have to respect people. If you do that, I guaranatee your life changes when you walk out the door, starting now.”
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Thank You to Our Annual Meeting Sponsors
MAY 2016
Blum Shapiro
Northeast Dealer Services
Bronze Sponsor
Parting Gift
DealerTrack
O’Connor & Drew
Gold Sponsor
Cocktail Reception Sponsor
Downey & Company
Quik Video
Break Station Sponsor
Bronze Sponsor
GW Marketing Services
SunTrust Bank
Welcome Gift
Bronze Sponsor
Hireology
TrueCar
Bronze Sponsor
Gold Sponsor & Lunch Sponsor
Murtha Cullina
Zurich
Bronze Sponsor
Bronze Sponsor
Massachusetts Auto Dealer www.msada.org
NEWS from the NEWS from Around Around the Horn Horn from Around
NEWS the Horn
MSADA MSADA MSADA
STONEHAM
Watertown and Stoneham Ford Dealerships Team Up to Fight ALS Watertown Ford and Stoneham Ford raffled off a 2016 Harley Davidson Road Glide in May to benefit ALS One, an organization dedicated to erradicating the disease. The raffle was dedicated to the memory of Stoneham Ford owner Alan Melkonian and in honor of local entrepeneur and ALS advocate Kevin Gosnell. The raffle saw proceeds of more than $18,000 raised for ALS One, with Service Manager at Watertown Ford Shane Carey named as the lucky winner. The final raffle event was held at Montvale Plaza. “Thank you to all that purchased a raf- Left to Right: Peter King, General Manager of Watertown Ford, and raffle winner Shane fle and attended the benefit at the Mont- Carey, Watertown Ford Service Manager. vale Plaza,” the dealership said in a statefor your devoted support in memory of Alan Melkonian and in ment. “It was a big success, and the money raised will be put honor of Kevin Gosnell.” toward research to fight this horrible disease. Thank you to all
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NEWS from Around the Horn DANVERS MARLBORO
Tech Student Earns Place in National SkillsUSA Competition Bristol Plymouth Regional Technical High School’s Jonathan Arruda, one half of the MSADA-sponsored student team that took third place at the National Auto Tech Competition in New York City in March, recently earned a spot in the national SkillsUSA competion. Arruda competed at the Massachusetts qualifying round of the competion in late April, held in Marlboro, where he earned a gold medal and a spot at the nationals in Louisville, Kentucky, to be held in June. The national competition will have contestants demonstrate their ability to perform jobs and skills based on the task list outlined by the National Institute for Automotive Service Excellence (ASE) and the National Automotive Technicians Education Foundation.
Kelly Unveils Rare Maserati Brian Kelly joined a crowd of 75 to introduce the 2017 Maserati Levante at an unveiling party in May. Kelly called the new SUV “a beautiful vehicle” and told The Boston Herald it will be “a real game changer for the brand.” Only 2,500 Levante models have been created for sale in the United States, with Kelly telling the paper the dealership booked at least four orders at the unveiling party.
Kelly Maserati owner Brian Kelly, with his wife Sherry, and the 2017 Maserati Levante.
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Massachusetts Auto Dealer www.msada.org
MSADA BOSTON
Audi Names Mass. Dealerships to Magna Honor Society Audi honored seven Massachusetts dealerships with the Magna Society Awards, a distinction for dealers who achieved excellent performance in 2015. To earn Magna Society recognition, dealers must demonstrate an exceptional level of customer service as well as strong business performance. The Massachusetts dealerships receiving the recognition include: Audi Brookline, Audi Burlington, Audi Natick, Audi Norwell, Audi Shrewsbury, Audi Westwood, and Ira Audi. Among the recipients, Audi Burlington was distinguished as 2015 Audi Magna Society Elite, a special honor for superior achievements. Only 12 dealerships nationally received this recognition. The Magna Society was created by Audi to identify and recognize dealerships that go above and beyond business objec-
tives and sales targets, and cultivate staff that properly represents the Audi brand and culture. “Each year the number of Magna Society Award recipients increases, a testament to the elite caliber of the Audi dealer network in the United States” said Mark Del Rosso, EVP and
Chief Operating Officer, Audi of America. “As Audi continues its rise as one of the top luxury brands in the country, the commitment of our dealer partners is one of the key drivers of this success.”
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NEWS from Around the Horn BROCKTON
City Gets New Car Charging Stations Brockton received two electric car charging stations this month to suit two new battery-powered vehicles leased by the city. The Brockton City Council voted this month to approve the acceptance of the donations, which are worth $1,000 each, according to Department of Public Works Commissioner Larry Rowley. The two new charging stations were donated by Nissan 24. The dealership recently leased the city three of its electric Leaf model cars, including two new ones received last month and another that was obtained last year. The final six months on the lease agreements for the cars will have to be paid by the city, but otherwise they were covered by state grants, including a $15,000 state grant received this year and a $22,500 state grant in 2015. Rowley said the plan is to install the two new charging stations soon at the municipal garage in downtown Brockton. The two new Nissan Leafs will likely be used by employees from the city’s assessors department and by the engineering unit that is part of the DPW. MARION
Town’s First Electric Car Hits the Road Making good on its promise to move toward a goal of being designated a “Green Community,” Marion’s first electric car arrived recently and is being utilized by the town recreation department. The Marion Energy Management Committee (EMC) approached the board of selectmen in the fall of 2015 with a proposal to take advantage of federal, state, and dealership incentives to acquire electric vehicles (EVs) for town use. The new Nissan Leaf has two charging stations, one at Marion Town House and one at the recreation department’s Atlantis Drive facility. With the help of Evan Melillo, who assisted in obtaining six EVs for Dartmouth through this program, Marion was awarded two grants of $7,500 each that completely cover the car’s 36-month lease and installation of two, dual-plug, 240-volt charging stations. “The public can use the stations during business hours free of charge while the Leaf is zipping around doing town business,” Marion Energy Management Committee member MAY 2016
Massachusetts Auto Dealer www.msada.org
MSADA Jennifer Francis said. The EMC plans to apply for at least two more EVs in the near future, Francis said. She said the Leaf was selected from bids submitted by local dealerships; Mastria Nissan’s quote was the lowest. In addition to the two grants for $7,500 from the Massachusetts Electric Vehicle Incentive Program (MassEVIP), the federal government also provides a $7,500 tax credit for a leased EV, which favored the lease option over purchase. Northampton
Local Celebrity Customer Photo Goes Viral While Pioneer Valley guitar god J Mascis is notorious for his unsmiling demeanor, thousands of adoring fans recognized him as a satifised Northampton Volkswagen customer last month. A photo of the Dinosaur Jr. leader purchasing a new car from the dealership received thousands of ‘likes’ and shares within a few hours. “We were very starstruck!” the dealership wrote. “Congratulations to J Mascis from Dinosaur Jr. on your 2016 Volkswagen Golf.”
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The Trumpet Sounds in Washington, D.C. Preparing for battle on Capitol Hill
By Steve Parker ATD Chairman
Two years ago, ATD created its first-ever Strategic Plan which outlines the association’s membercentric visions and overarching goals, including positive manufacturer and industry outreach, progressive truck dealer education, and active government advocacy. This year’s Summer board meeting allows us to closely re-assess our Strategic Plan for past markers of success as well as best practices for the future. My fellow board members and I will closely examine ATD’s current resources and the ways in which we can strengthen our position in the industry. We also will discuss opportunities throughout the rest of the year and measure ATD’s success thus far. During the board meeting, we also will hear from a special Congressional speaker. And we will continue to look forward to our next 2017 ATD Convention in New Orleans and select the convention workshops. The nation’s capital is a battleground. So in conjunction with the board meeting, we are preparing for our highly anticipated, second annual truck dealer fly-in to Capitol Hill. Last year, ATD hosted the first fly-in of its kind, and the event was highly successful. Thanks to the hard work and engagement of our members and state executives, we held over 40 Capitol Hill visits with Congressional members and their staff. We spoke on important issues, including government overreach into our business and federal regulations that will have a serious impact on the truck industry. Most importantly, we were able to build face-to-face relationships with those who represent us in the nation’s capital. I am especially grateful for the state associations that participated in the 2015 pilot program, includ-
ing Iowa, Colorado, Massachusetts, Texas, West Virginia, and Wisconsin. This year, ATD has been diligently coordinating with state dealer associations and their members in anticipation of the upcoming visits with their state representatives. Once again, this is an opportune time in which our members can talk to Congress and advocate on behalf of all truck dealers. We will be focusing on supporting House Concurrent Resolution 33 and opposing any increase of the harmful FET tax on most heavy-duty truck sales. The final Phase 2 rule for GHG will also be a focus. This is the time for our voices to be heard and to utilize a platform that addresses the commercial truck dealers’ needs—particularly DC’s rulemaking and policies which are affecting our business. I look forward to seeing an active dealer body on the steps of Capitol Hill once again. Finally, as we approach this important time, remember that ATD holds the best interest of all our members at heart. That is why we would like to hear from you in our annual ATD Dealer Attitude Survey that has been officially released. The survey is only available online at: https://daisurvey. com/atd. The survey results matter and are closely evaluated by the OEMs’ senior management. This is another opportunity to have your voices counted in future corporate decisions that will affect our dealerships. I urge everyone to complete and submit the survey by June 3. The trumpet has been sounded to our fellow dealers. I look forward to working together in June. t
“This is the time for our voices to be heard and to utilize a platform that addresses the commercial truck dealers’ needs.”
MAY 2016
Massachusetts Auto Dealer www.msada.org
NADA Update
By Don Sudbay
Getting to the Grass Roots There’s no better way to advocate against bad policy than showing up to make our case.
Don Sudbay, President of Sudbay Automotive Group, represents MSADA members on the NADA Board of Directors. He welcomes your
questions
and
concerns
(donsudbayjr@sudbay.com). As we close out May, we’re seeing a lot of action both here in our Commonwealth and on Capitol Hill. I saw many of you at another fantastic Annual Meeting earlier this month, and our Dealer Day on Beacon Hill followed two weeks later. Both are critical to educating ourselves and others on the issues we face and where we stand. As you’ll see below in Jeff Carlson’s column, Washington continues to talk, and attempt to legislate, more about recalls. NADA continues to monitor the situation, and it looks like we’re going to have a lot of work cut out for us by the time NADA’s dealer convergence on Capitol Hill arrives in September. As always, it’s important to keep up with these issues and do what what you can to make your legislators know where you stand.
To Drive or Not to Drive: On Recalls, That is the Only Question — and Only Because of Parts By Jeff Carlson, NADA Chairman
Parts, parts, parts. Much has been said and written recently about our nation’s vehicle recall policy. And while it’s regrettable that a great deal of the conversation has been overly negative, needlessly controversial and – at times – unfairly accusatory, the silver lining is that the discussion has prompted an increase in consumer awareness of the issue, which we all know from experience is desperately needed to increase the recall completion rate. But at the same time, many have lost sight of the core issue at hand, which is what to do with recalled vehicles while consumers and dealers are awaiting replacement parts from the manufacturers. Because when we’re talking about recalls, parts are everything. Let’s take a step back and consider what the world would look like if all needed repair parts were immediately and readily available for every vehicle recall. If parts were available, then everyone – dealers, manufac-
turers, regulatory agencies like the National Highway Traffic Safety Administration (NHTSA) and the United States Department of Transportation (DOT), and safety advocates – would be in lockstep in stressing the urgency of having consumers bring their vehicles into local dealerships for repairs as soon as possible. Everyone would be working together to improve consumer outreach and awareness, because consumer apathy would be the only obstacle in the way of achieving our shared goal of a 100-percent recall completion rate. Unfortunately, that’s not the world in which we live. Parts are not always available. And manufacturer delays in providing repair parts have become the core problem in recall policy. These delays prevent timely repairs of the vehicles. And delays between the time a manufacturer announces a recall and when parts are available are responsible for driving consumer apathy toward recalls. Consumers simply become numb to all the notices they receive. But the biggest consequence is that manufacturer delays force us all – dealers, regulators, safety advocates, and consumers alike – to consider what to do with recalled vehicles from the time the recall is announced to when the repair can be completed. Which leads to the question every consumer wants answered: Should I continue to drive my recalled vehicle in the interim? This is a vitally important question. Fortunately, there are federal agencies responsible for providing those answers: DOT and NHTSA. Congress has entrusted NHTSA, a division of DOT, with reviewing all manufacturer-identified defects in order to determine how severe each is in terms of risk to the driving public. And for every vehicle recall that is issued, NHTSA – working with the vehicle manufacturer – makes such an assessment. • Does NHTSA have full authority to determine which defects pose such an immediate and severe risk to drivers and passengers that affected vehicles should be parked and not operated until repairs can be made? Yes. Transportation Secretary Anthony Foxx has acknowledged in writing that NHTSA “may require a manufacturer to advise owners not to drive their vehicles until a safety-related defect or noncompliance is remedied.” • Has NHTSA exercised this authority? Yes. In fact, a recent study revealed that such “do not drive” recommendations were issued in 6 percent of all vehicle recalled issued from 2000 to 2013. • Were NHTSA and DOT ever asked specifically whether consumers with recalled Takata airbag inflators or faulty
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NADA Update GM ignition switches should stop driving these vehicles until repairs could be made? Yes. • Did NHTSA or DOT issue “do not drive” recommendations for these affected vehicles? No. In fact, NHTSA explicitly told Congress that it did not believe such action was necessary for vehicles with recalled Takata airbags. The DOT said the same thing regarding GM ignitionswitch recalls – that it was “not necessary” for consumers to stop driving affected vehicles if drivers took certain precautions. While everyone may not agree with the answers to these questions, DOT and NHTSA thoroughly considered these questions and made these calls. Their decisions shouldn’t lead us to play politics with this issue, and we shouldn’t react by accusing one another of being anti-consumer or anti-safety. Because the truth of the matter is that we ALL want to get 100 percent of recalls fixed 100 percent of the time, period. How do we get there? More parts, and more consumer awareness. And we all have to work together to get there. Our customers deserve nothing less.
Industry Speaks Out on Blumenthal Recall Effort What options exist for vehicle owners with an open safety recall? Trade it in at a loss? Continue to drive it? If parts were unavailable, most would want to trade it in. This would be done at a loss of $1,210 per vehicle, according to a recent J.D. Power study for NADA. The Transportation Department has consistently concluded that it’s acceptable to drive vehicles under safety recalls while waiting for parts, including vehicles with GM ignition switch or Takata air bag concerns. This is where the federal government says one thing and does another. A new law will not solve this complex issue, especially one that raises more questions than it answers. A previously-rejected proposal to prohibit dealers from selling or even wholesaling any used vehicle under open recall has resurfaced, despite the fact that parts availability is the central impediment to a 100% recall completion rate. Senator Blumenthal (D-Connecticut) plans to introduce an amendment to a spending bill which would create a “trade-in tax” of $1,210 on average for recalled vehicles where parts are not available, making it harder for consumers to afford a newer, safer vehicle. As a direct result, consumers would have an economic incentive to sell their cars in the private market, where the recall completion rate is much lower. Congress should focus on parts availability and consumer education efforts that will actually increase recall completion rates, and reject the Blumenthal trade-in tax that would diminish the value of millions of customer trade-ins and likely reduce the number of completed recalls. NADA opposes the
MAY 2016
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MSADA Blumenthal Amendment to the Senate transportation appropriations bill. For more information, visit www.nada.org/recalls/. For more information, contact legislative@nada.org.
Dealer Wins Court Battle Against GM New York’s highest court ruled in May that General Motors violated state law by trying to cancel a Chevrolet franchise for subpar sales, a ruling legal experts say could force automakers to alter how they measure retailers’ sales performance. The legal victory by the owners of Beck Chevrolet in Yonkers, New York, centered on GM’s use of a benchmark called the retail sales index, or RSI, its version of a commonly used metric that has become a flashpoint between dealers and automakers. Dealers believe the system is unfair because it measures them against a state average but fails to account for market nuances. NADA supported this effort through the NADA Legal Defense Fund, and salutes Beck Chevrolet of Yonkers, New York, for its persistence in standing up against a flawed sales formula. The court’s decision reinforces what NADA has been saying about the importance of state franchise laws, like the one in New York State upon which this decision is based, in helping to ensure that a level playing field exists in the business relationship between all manufacturers and their dealers.
ALERT: Be Aware of ‘Deceptive’ Email Marketing Offers Some dealers may have received an email with the subject line “Local Expiring Leases.” The email also reads “From NADA Digital Dealer Marketing.” The sender of these emails has no relationship with NADA. NADA has asked the sender to stop these deceptive emails and all other advertising that suggests any connection with NADA. If you have any questions about advertising or other communications from NADA, please contact the appropriate NADA department.
Study: Auto Industry’s Sales Boom will Last to 2018 The auto industry’s good times have about two more years to roll and annual sales are expected to top 20 million by 2018, according to Bank of America Merrill Lynch’s annual industry outlook. General Motors, Ford, and Honda are all well positioned to take advantage of the record sales, with robust product plans that should lead to market-share gains over the next four years. The rosy forecast and future product plans of each major automaker were outlined in May by John Murphy, an analyst for Bank of America Merrill Lynch, who presented the company’s annual “Car Wars” study.
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Massachusetts Auto Dealer JUNE 2015