April 2017 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

April 2017 • Vol. 29 No. 4

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

Taking on the Big Apple

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

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S ta f f D i r e c t 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 Jorge Bernal Administrative Assistant/ Membership Coordinator jbernal@msada.org Auto Dealer MAgazine 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: jbernal@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 21 Boston Herald 32 Ethos Group 2 Lynnway Auto Auction 23 O’Connor & Drew, P.C. 31 Pre Owned Auto Logistics 10 Southern Auto Auction 20

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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: A Moment to Stand Together THE ROUNDUP: Legislature Sparks to Life TROUBLESHOOTNG: Frequently Asked Questions LEGAL: Plaintiffs’ Attorneys Continue to Target Massachusetts Dealers

13 ACCOUNTING: Tax Reform and Tax Policy 14 AUTO OUTLOOK 16 Cover Story: Taking on the Big Apple

20 25 26 28 29

NEWS From Around the Horn Sound Off: Closing the Generation Gap with Millenials nada Market Beat TRUCK CORNER: Tax Reform Debate Has Begun in Nation’s Capital nada update: Springing into Sales

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 APRIL 2017

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From the President

MSADA

A Moment to Stand Together

Join your Association on May 5 in Boston for a day of essential programming and camaraderie

By Chris Connolly, MSADA President Our business is built to expect the unexpected. As if it is not difficult enough to manage the day-to-day of the retail auto industry, being in our great Commonwealth certainly has its own unique challenges. The Chinese curse “May you live in interesting times” is the best fit for the regulatory and legislative onslaught we dealers face constantly.

That is why MSADA was created 77 years ago. As a member dealer, you know that we are working every day to combat the forces working against all of us. But, as we have seen time and again, it is important for all of us to stay as plugged in to what is going on as possible. That way, when the time comes, we can leverage our grassroots strength of 20,000 employees across the state.

Our Annual Meeting on May 5 is meant to serve as a part of how we keep you informed.

Both events serve the dual role of helping us keep our organization transparent and informing you of just what the landscape “While all of us ahead will look like. At our Annual Meetcannot be fighting ing, in addition to an update from Executive Vice President Robert O’Koniewski, RMV the good fight for Registrar Erin Deveney, and Gov. Charlie our industry every Baker, we will hear other industry experts who will lay out what they see coming in day, we should the days and months ahead. celebrate this rare Of course, it is also a chance for us to get together and enjoy being in one place at one opportunity to all time. The Mandarin, where we’ll hold the be together in Annual Meeting, is a very impressive locathe same room.” tion and will make a great setting where we can talk shop and enjoy a drink afterwards.

We have also reserved a block of hotel rooms, so that hopefully you will take advantage of a night out in the great city of Boston.

Please be sure that you have sent in your registration form if you have not already, noting whether or not you would like to spend the night. We are also providing a lunch as well. Please send the forms back to jfabrizio@msada.org.

I look forward to seeing you there for a day of camaraderie and getting ahead of the curve. This being my first opportunity to helm an Annual Meeting, I am thrilled to see what ideas and questions you all will bring to the table. While all of us cannot be fighting the good fight for our industry every day, we should celebrate this rare opportunity to all be together in the same room. We are in this together, and there is no better way to be reminded of it. t

APRIL 2017

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 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 Scott Dube, Bill Dube Hyundai

NADA Director

Don Sudbay, Jr., Sudbay Motors

Officers

President, Chris Connolly, Jr. Vice President, Charles Tufankjian Treasurer, Jack Madden, Jr. Clerk, Steve Sewell

Associate Members

MSADA A ssociate M ember D irectory ACV Auctions Will Morris (860) 670-7867 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 Armatus Dealer Uplift Joe Jankowski (410) 391-5701 AutoAlert Jessica Gates (816) 506-0515 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 BMO Harris Bank Chris Peck (508) 314-1283 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 Catalogs.com David Solar (954) 908-7122 CDK Global Chris Wong (847) 407-3187 Construction Management & Builders, Inc. Nicole Mitsakis (781) 246-9400 Cox Automotive Ernest Lattimer (516) 547-2242 CVR John Alviggi (267) 419-3261 Dealer Creative Glenn Anderson (919) 247-6658 Dealerdocx Brad Bass (978) 766-9000 Dealermine Inc. Jane Webb (800) 304-3341 Downey & Company Paul McGovern (781) 849-3100

EasyCare New England Greg Gomer (617) 967-0303 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 Gatehouse Auto Jay Pelland (508) 626-4334 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

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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 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 Claude Peyrot (603) 430-7254 SunTrust Bank Michael Walsh (617) 345-6567 Target Dealer Services Andrew Boli (508) 564-5050 TD Auto Finance Marc Gerhart (781) 697-1525 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 Stephen Janetz (215) 986-8498 Zurich American Insurance Company Steven Megee (774) 210-0092

Massachusetts Auto Dealer APRIL 2017

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The Roundup

Legislature Sparks to Life

By Robert O’Koniewski, Esq. MSADA Executive Vice President Follow us on Twitter - @MassAutoDealers A Massachusetts legislative session never starts quickly, especially so when the session is a full two years, with the occasional break for holidays, vacation times, and elections.

As we work our way into April in the first year of this two-year journey, most of the bills have been sent to committees, the committees’ chairs and members are set, and the public hearings are starting up, slowly but surely.

One of the first committees to come firing out of the blocks is the Transportation Committee, jointly chaired by Sen. Tom McGee (D-Lynn) and Rep. Bill Straus (D-Mattapoisett). On March 6, the committee conducted a hearing on legislation filed by Governor Charlie Baker, which would provide $200 million for Chapter 90 municipal roads funding as well as $70 million for the Registry of Motor Vehicles to continue with and complete its core information technology replacement, known as the ATLAS system. According to the Baker administration, ATLAS will replace a legacy system that is thirty years old and difficult to maintain and use. It will also enable better service to RMV customers, including dealership supported activities, and improve operational performance and efficiency.

At the hearing, we spoke in favor of the legislation. For years we have been told by numerous registrars that certain functions under which dealerships struggle cannot be modernized because the RMV computer system is so outdated and woefully inadequate. We feel that a computer system properly designed for RMV activities and needs beyond 2017 can strengthen the stream of APRIL 2017

Massachusetts Auto Dealer www.msada.org

commerce for vehicle sales by auto dealers in the Commonwealth and ease certain aspects of the sale process for consumers.

As the RMV’s number one retail partner, our franchised dealers engage in millions of transactions annually on behalf of our customers and in conjunction with the RMV in order to enhance the customer satisfaction experience with a vehicle purchase as well as to reduce visitors to the RMV field offices and service centers. To say that the RMV has been operating with an outdated technological system ill-suited for the challenges and needs of this century is a gross understatement. From our perspective, there are several improvements that could be made to the dealer-customer-RMV relationship if the RMV possessed modernized technological capabilities with the flexibility to adapt to market place needs as they arise in the future.

In several areas, the dealer-customer-RMV relationship could be greatly improved, including, but not limited to, expanding the electronic vehicle titling and registration program (EVR) to all franchised dealers as well as with reciprocity to other DMVs in neighboring states also offering EVR services; improving the electronic lien titling program (ELT) so that upon paying off open liens on trade-in vehicles dealers can receive the vehicle title in a more expeditious and efficient manner, perhaps even print capabilities at the dealerships with RMV approval; providing efficiencies in the statutorily required used vehicle recordkeeping system in order to avoid doubleand triple-recording of used vehicle information that occurs presently. With the correct systems,

MSADA the possibilities are endless.

As we stated before several legislative committees during the process, we look forward to continuing as an active partner with an RMV that can operate with technologies to meet the needs of the automotive retail marketplace of 2017 and as they may be in the years ahead. Planned improvements of the RMV’s technological capabilities will further enhance customer satisfaction at franchised dealerships as well as at the RMV itself, the latter being the long-time stated goal of Registrars.

Once the Transportation Committee issued a favorable report, the bill went through the House Committee on Bonding and the House Ways and Means Committee; received a favorable vote by the full House; went through the Senate Committee on Bonding and the Senate Ways and Means Committee, which supported the bill at a different amount than the House; received a favorable vote by the full Senate; and then went to a HouseSenate conference committee to battle over the changes approved by the two chambers (i.e., reducing the RMV amount to $60 million, expanding the road funding from a one-year program to a twoyear program and doubling the money).

For a bill that essentially had initial agreement between Governor Baker, the House, and the Senate when it was filed, it ultimately got bogged down in the conference committee, until the chambers came to their senses and reported a version out that looked an awful lot like what is did on March 6 at the first public hearing. I point this out just to show one that there is never anything easy in the legislative process, even when everyone agrees – House and Senate, Republican and Democrat, executive and legislative.

As we go to press, the bill still has not been sent to the governor for his review and signature because of certain procedural steps that have dragged out its final legislative passage. Keep in mind that, although we care about the component relating to the RMV computer improvement project, there are 351 cities and towns whose road

and bridge repair and construction schedule is shrinking by the day in anticipation of getting the $200 million in road improvements into the ground before the end of the summer construction season.

Autonomous Vehicles The Transportation Committee kept up the pace by holding a public hearing on April 12 regarding autonomous vehicles.

The essential message emanating from the established, franchisor vehicle manufacturers and the Silicon Valley pioneers such as Google was to ask the legislators not to pass any legislation, leaving the development process unregulated for now, a message which certainly did not go over well with legislators. Further, there is not a unified message coming from the parties, as GM would like to limit AV testing to just franchisor manufacturers, other franchisors thinking the GM position is all wet, and the internet titans also taking exception to GM’s push.

How this AV issue is dealt with at the national and state levels certainly will impact franchised dealerships. How so specifically? We do not have that crystal ball.

But as I speak to legislators about this developing concept, there are a number of issues they need to keep in mind while contemplating permission for AVs to use our roads: • Will these vehicles be sold through a franchisor’s dealership network, or will they go directly from the factory to fleet managers and consumers, thereby chopping another leg out from the existing franchise system?

• Depending on the distribution and retail sales processes, where will the lemon law, warranty, and recall responsibilities fall and who will be there to address them for consumers? As we have seen within the current system, the manufacturers certainly cannot be trusted even with all the federal and state scrutiny focused on them.

• To what extent will manufacturers attempt to shift product liability issues away from themselves as we have seen www.msada.org

through the current tidal wave of recalls over the last several years?

• How will AVs be treated in the secondary marketplace as these vehicles enter the used vehicle arena?

• Will AVs be powered exclusively by electricity or some other non-carbon based fuel, or will the regulatory framework allow for carbon-based fueling as well? This will have gas tax revenue implications.

Disruptions to the marketplace are never easy and will always have winners and losers. Your association will remain on top of these issues in order to maintain the franchise system as the pre-eminent structure for retailing to and servicing the automotive customer. Unfortunately, early indications lead me to think I cannot say the same for our franchisor manufacturers and new entrants to the industry.

Jump Starting Auto Tech Training Programs As one may recall from last year, a priority of Governor Baker was legislation addressing numerous economic development issues for the Commonwealth. As the bill worked its way through the legislative process, your association actively lobbied for inclusion in the bill of language addressing the need for a more comprehensive approach for auto tech training and job placement in Massachusetts.

The final economic development compromise, approved at the end of the session on July 31, included language creating a statewide auto tech training and recruitment program tied into high schools, community colleges, and potential employers.

We have advocated in favor of bolstering specific efforts at our voc-tech high schools and community colleges in recruiting and training auto tech students for ultimate hiring at your dealerships. The number one employee need at dealerships is techs, and there are almost 70 high schools and six state community colleges with auto tech education in their curriculum. More can be done from identifying students, training them, and recruiting them for full-time emMassachusetts Auto Dealer APRIL 2017

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The Roundup ployment at excellent pay at your stores.

The bill signed into law by the governor (Chapter 219 of the 2016 Acts) ultimately contained the new program (in Section 94) within the Executive Office of Higher Education.

We also wrote earlier this year about a program the Baker administration is operating out of the Department of Correction to identify certain qualifying inmates for training and placement as auto techs at repair facilities, including franchised dealerships, upon the trainee’s release from the state’s hospitality.

This month, as we were going to press, the House began deliberations on the state’s $40 billion FY2018 budget, which commences July 1. The House budget, issued earlier this month by the House Ways and Means Committee, did not include funding for the Section 94 Higher Ed program or the DOC prisoners program. Hence, we approached legislators with amendments to provide monies for the programs.

The amendments, #1128 filed by Rep. Paul Brodeur (D-Melrose) and #1192 filed by Rep. Diana DiZoglio (DMethuen), would provide funding for automotive tech training and hiring programs within the Department of Correction ($250,000) and Higher Education ($150,000), respectively.

Amendment #1128 would seek an appropriation of $250,000 within the Department of Correction line-item to fund the auto repair technician training and job placement program administered by DOC. DOC has established and operates the program to identify incarcerated individuals who are interested in and capable of being trained as auto repair techs, for ultimate placement at the numerous job openings presently available in the repair field, especially at new vehicle dealerships. In fact, DOC has been working directly with several dealerships to help place their charges in full-time work upon their release. The program is designed to help reduce the criminal recidivism rate in the Commonwealth, which is one of the highest in the country.

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Amendment #1192 would seek an appropriation of $150,000 in the Higher Ed line item to provide initial seed money to the Section 94 program that the Legislature created within the economic development law last year. Section 94 established a grant program for recruiting, training, and hiring qualified auto tech trained students by repair employers, through high school and post-secondary education institutions that have auto tech training programs. The House and Senate, by including the program in each’s version of the economic development bills last session, endorsed the concept of a comprehensive, cooperative effort between schools and employers to help address youth employment issues while getting these jobs filled with qualified applicants. This amendment would provide funds to help jump start the effort.

Dealerships need one important resource: a ready supply of young technicians. The job openings exist; however, there is a lack of tech students moving through our educational institutions in any great number. Young qualified technicians are scarce. Demand is growing.

The US Bureau of Labor Statistics expects 17 percent growth between 2010 and 2020, which means 848,200 mechanics and 125,000 new jobs nationally.

Someone who is qualified and knows how to troubleshoot and repair is basically guaranteed a job. The key word is “qualified” – the highest demand (and the highest pay) is for master technicians.

The existing market demands a more focused approach to informing students of the need for techs, and for employers to get into the schools to help grow the pool, train the students, and hire them for what would hopefully be long-term, meaningful, well-paying employment. A comprehensive, cooperative effort between schools and employers can help address youth employment issues while getting these jobs filled with qualified applicants.

Massachusetts has 62 High School auto tech programs, including 26 tech/voc HS; 24 comprehensive HS; 7 agriculture HS; and 2 independent HS. Of these, over 45

Massachusetts Auto Dealer www.msada.org

high schools are ASE/NATEF certified tech training programs. Massachusetts institutions that have post-secondary tech training programs include the following: • MassBay Community College • Middlesex Community College • Massasoit Community College • Springfield Tech Community College • Mt Wachusett Community College • Quinsigamond Community College • Benjamin Franklin Institute of Technology • Universal Technical Institute • Northern Essex Community College is in the process of creating a program.

The educational programs these schools offer need to be tied in together, essentially, from middle school on up to meaningful employment. The current marketplace demands it.

Further, these jobs are not the sole domain for men. Increasingly women are entering the field as high school and postsecondary educational institutions have made concerted efforts to recruit tech savvy individuals with an auto interest.

Once the House completes its action on the budget, the focus shifts to the Senate.

Differences between their appropriation documents will then be resolved by conference committee, with time to send it to the governor to beat the July 1 deadline.

Mass. Tech Team Competes at NYC Show Congratulations goes out to this year’s Massachusetts team from Blackstone Valley Regional Technical High School for representing us at the National Automotive Technology Competition at the New York International Auto Show. The annual competition, sponsored by the Greater New York Auto Dealers Association, was held April 18-19 in conjunction with the start of the NY auto show.

The team comprised seniors Tyler Dencer and Bailey Martin. Their instructor at the school, located in Upton, is Paul Perrault. Tyler and Bailey were tested in NYC on a Mazda3. They competed against 29 other teams sent by state and metro dealer associations from around

MSADA the country. We owe thanks to Century Mazda in Shrewsbury for assisting the team in its preparation.

The Dencer-Martin team was selected after winning our statewide competition at Massachusetts Bay Community College on February 4. The selection process began with our written test held on January 14 in Marlborough.

For their participation in the competition, the students and their instructor received the following: For the Students: • Snap-on Tool Bag compliments of Snapon Tools • Lincoln Technical Institute $3,000 Scholarship • Official Competition Racing Shirt & Hat from GNYADA • New York International Auto Show Bag from GNYADA • Gifts from Lincoln Technical Institute • Gifts from Permatex • Gifts from Slime Tire Sealant • Gifts from Subaru • Gifts from Universal Technical Institute • Gifts from Bobby Martin Racing • Gifts from Consulab Training Aids • Gifts from Electude • Gifts from Toyota T-Ten • Gifts from Hunter Engineering Company For the Instructor: • Snap-on 7 Piece Electronics Series Screwdriver Set compliments of Snapon Tools • Official Competition Racing Shirt & Hat from GNYADA For more information on their NY experience, check out our cover story on page 16.

MSADA Annual Meeting – May 5, Boston Gov. Baker to Speak Don’t Delay – Register Today Have you registered yet for our upcoming annual meeting? Your Association will conduct this year’s meeting – our 77th – at Boston’s premier spot, the Mandarin Oriental Hotel.

Our speakers’ lineup so far includes Massachusetts Governor Charles Baker;

Jason Stein, Automotive News publisher; Registrar of Motor Vehicles Erin Deveney; and more. In addition, we will provide a state legislative and regulatory update as well as reports from your MSADA president, Chris Connolly, and our NADA director, Don Sudbay.

We start the day at Noon with a buffet lunch, and our Speakers Program will run from 1:00 p.m. to 5:00 p.m. There will be a Cocktail Reception immediately after the program.

Contact Jean Fabrizio to register at jfabrizio@msada.org or call at (617) 4511051.

Dealer Day on Beacon Hill – May 24 Be sure to register for our annual “Dealer Day on Beacon Hill” event in Boston.

It will be held on Wednesday, May 24, beginning at the Parker House Hotel at 10 a.m. with a legislative briefing before traveling up the Hill to the State House to meet with legislators. It is a great opportunity for dealers and their key managers to get involved in the legislative process and to help get our message out on those bills that she help and hurt dealership operations. Use the registration materials that have been sent to you.

MSADCF Auto Tech Scholarships Available Applications for the Massachusetts State Auto Dealers Charitable Foundation’s 2017-2018 Auto Tech Scholarships are now available on our website at www. msada.org. The Foundation’s auto tech scholarship program awards scholarships to eligible applicants for use at post-secondary educational institutions that offer auto tech training programs. Since its inception in 2003, the Foundation has awarded over $1 million to more than 200 students. A scholarship award is worth $6,000-$13,000 each over two years.

Seven years ago the Foundation’s scholarship program expanded to include not just manufacturer-backed programs but also general automotive technology programs at a greater number of colleges in www.msada.org

the Massachusetts area. This gives dealers an even greater chance to capitalize on a highly skilled base of potential employees.

To obtain additional information on the scholarship program, contact Jean Fabrizio at MSADA at (617) 451-1051 or by e-mail at jfabrizio@msada.org. The application deadline is Friday, May 26, 2017.

Prostate Cancer Foundation Car Show – June 24 On June 24 long-time associate member attorney Len Bellavia will produce a car show for the national Prostate Cancer Foundation in California. It will be called “Cruisin’ for the Cure”, and the show will be held at Windham Mountain Resort in Windham, New York. They expect over 1,000 cars to be on display, and 100% of the proceeds will go to the Foundation.

Over a year ago Len was diagnosed with stage 4 prostate cancer, with no hope of recovery. He was told to get his life in order, with months to live. As it so happens, while preparing for a particular chemotherapy treatment, Len’s misdiagnosis was discovered; his prostate cancer was contained and had not metastasized as he had initially been told. Instead of facing grueling chemotherapy treatments and imminent death, Len had his prostate removed.

Embracing the silver lining in this story, Len has turned this experience into his mission to find a cure to prostate cancer. He has applied to be an official fundraiser for the Foundation. Automotive News will soon be running a story about his initiative to mobilize dealers and dealer associations to help encourage men to get screened and to ultimately develop a cure.

With respect to the classic car show, his “ask” of MSADA is to forward his request to our member dealers to donate $20 to PCF for every car they sell or deliver on June 24, the day of the show. Checks can be made payable to the Prostate Cancer Foundation.

Check out the ad for the Show on page 24.

For those interested, classic car owners can register their cars at: http://www. windhamclassiccarshow.com/. t Massachusetts Auto Dealer APRIL 2017

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Troubleshooting

MSADA

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Frequently Asked Questions

By Peter Brennan, Esq.

MSADA Staff Attorney Question: I would like to give customers that buy or lease a car from me a $200 Amazon gift card. Is this legal?

Answer: Yes, presuming that a few legalities are observed. First, if advertised as a “gift”, then it must be treated as a gift and the cost of the gift card must not be included in the advertised price or final purchase price of the vehicle. Additionally, the value of the gift card must not be used to reduce the purchase price of the vehicle for sales tax purposes.

If the promotion is advertised then the dealership must honor the terms of the advertisement. For instance, if the advertisement states that a gift card is given for the purchase or lease of any vehicle, then the dealership must not attempt to limit the promotion to certain vehicles once the customer is in the store.

The dealership must also consider how the Internal Revenue Service treats business gifts when designing a promotion around gift cards or other gifts. The IRS allows businesses to deduct all or part of the cost of gifts given in the course of trade or business; however, the deduction is limited to $25 per gift. As always, you should seek the advice of counsel when designing any promotion as advertising, and promotion rules vary from state to state.

Question: My dealership is located in an area with a significant immigrant population. As such, we frequently get

customers that speak Spanish as their first language. Is our dealership required to provide deal documents in Spanish?

Answer: The first impact that dealers should be aware of is the need, under the Federal Trade Commission’s Used Car Rule (discussed previously in this column), to post a Spanish-language Buyer’s Guide on an automobile that is the subject of a Spanish-language negotiation.

Importantly, if a transaction is conducted in Spanish, the Spanish language Buyers Guide must be displayed on the vehicle before the vehicle is offered for sale. A dealership in an area with a high concentration of primarily Spanish speaking residents should display both the English language Buyer’s Guide and the Spanish translation on every automobile that is offered for sale.

Advertisement requirements, which are already onerous, can become even trickier when advertising in multiple languages. The FTC has ruled that advertisements that include multiple languages can be deceptive if the statements expressed therein are inconsistent.

For example, if a Spanish language advertisement offers a low lease rate on a new car with no money down, an English language disclaimer at the end of the advertisement could be viewed as deceptive if the disclaimer is inconsistent with the language in the body of the advertisement. It is better to avoid this potential pitfall altogether by limiting all advertisements to one language.

Additionally, the FTC has long held that if a company advertises, makes sales pitches and negotiates transactions in Spanish, the company should provide contracts and necessary disclosures in the same language. Failure to do so can be seen as an unfair and deceptive practice and leave a dealer exposed to regulatory action as well as liability under M.G.L. Chapter 93A, the Massachusetts Con-

www.msada.org

sumer Protection Act. The predominant deciding factor in cases where liability has been found on the part of the business has been the conduct of the business and not the English proficiency of the customer, so dealers should monitor their actions and the actions of their salespeople closely when negotiating a deal with a non-English speaking customer.

Of course, many potential customers may speak neither English nor Spanish, so how should dealers plan to transact business with customers that speak other languages? A dealership should not be expected to employ an interpreter for every language, and, in fact, it is better if the interpreter is provided by the customer to avoid any accusation of unfair dealing.

In a situation where an interpreter is required (and provided) by the customer, and the deal documents are not available in the customer’s primary language, the dealer must ensure that the transaction is properly documented. In this situation, the dealership should have the interpreter complete an affidavit of translation in which: (i) the interpreter states that they are fluent in English and the language that the deal was negotiated in and (ii) the interpreter lists the deal documents that were interpreted and certifies that they have translated and verified the deal documents to the customer (the deal documents should then be attached to the affidavit). The interpreter must then sign and date the affidavit, and the document should be notarized. t If you require any additional information on these wage and hour issues please contact Robert O’Koniewski, MSADA Executive Vice President, rokoniewski@ msada.org or Peter Brennan, MSADA Staff Attorney, pbrennan@msada.org or by phone at (617) 451-1051.

Massachusetts Auto Dealer APRIL 2017

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Legal

MSADA

By Joseph W. Ambash and Jeffrey A. Fritz

Plaintiffs’ Attorneys Continue to Target Massachusetts Dealers We frequently offer in this column suggestions on ways Massachusetts dealers can minimize, or at least reduce, risk of a lawsuit by a former employee or an adverse finding from a governmental agency, for example. And while these suggestions will reduce risk, the unfortunate reality is that they cannot eliminate it. Strict adherence to the law is not a panacea and will not guarantee that you won’t have to deal with unwarranted lawsuits from time to time. The question if and when you do, however, is how best to deal with them.

Case in point: We have seen a rash of lawsuits lately by plaintiffs’ attorneys claiming dealers’ salespeople or service advisors paid on a 100% commission basis are entitled to overtime pay under Massachusetts law for time worked over 40 hours in any workweek. Such employees are exempt from federal overtime under either the salesman or commission-paid exemptions. However, two opinion letters from the Massachusetts Office of Workforce Development make clear that, among other things, so long as such employees earn at least Massachusetts minimum wage (currently $11 per hour) for all hours up to 40 and time-and-a-half minimum wage (currently $16.50 per hour) for all time worked over 40 hours in any workweek, the employer will be deemed in compliance.

Nonetheless, plaintiffs’ attorneys have been attempting to take advantage of a fairly recent, but ambiguous, revision of the Massachusetts wage and hour regulations to suggest this is no longer the case.

Instead, they claim that, in addition to their commissions, whatever they may be, these employees also are entitled to time-and-ahalf minimum wage for all time worked over 40 hours in any workweek. These lawsuits seek such overtime pay going back three years and are sometimes brought on a class action basis. We believe they are groundless, but it will take a definitive deciAPRIL 2017

sion from a Massachusetts court to resolve this spate of lawsuits.

We also handle discrimination, harassment, and retaliation cases all the time in which the employer did everything right but still had to defend against the employee’s claims at the Massachusetts Commission Against Discrimination, the U.S. Equal Employment Opportunities Commission, or in state or federal court. In some instances, we have come to learn that no good deed goes unpunished. And there are a number of plaintiffs’ attorneys who take any and all comers, regardless of the merits of their claims, and file administrative charges and lawsuits against their employers, usually with a small retainer and on contingency.

Because lawsuits are not inexpensive for employers, and in light of the fee shift provisions in most employment-related statutes (that is, if the employee prevails, the employer must pay his or her attorneys’ fees), these plaintiffs’ attorneys try to leverage these costs, and the risks inherent in any litigation, to settle cases.

Many employers ask whether they can countersue a former employee for what in their view is a frivolous lawsuit. In short, while there is a mechanism for pursuing such a claim, the chance of success is minimal (as the law unfortunately takes a very narrow view of what is “frivolous”), and it typically would result in chasing good money after bad. Even if successful, collecting the money is a whole separate issue.

So what is an employer to do? The answer is “It depends”, and it is entirely up to you. Sometimes it makes sense simply to hold your nose and settle the case early for as little as possible, especially where it would cost your dealership more money (sometimes significantly more) to litigate the case through summary judgment, trial, and possibly an appeal. Sometimes, however, employers prefer not to settle early (or at all), even if it would cost more to take

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their chances in litigation, because they feel strongly about the issue, or because they are concerned that if they settle, other employees may be waiting in the wings, hear about it, and follow suit. (Of course, most settlement agreements contain confidentiality provisions that should preclude the employee from talking to others about it.) And sometimes it simply is not possible to settle cases early (or at all) because the demand from the plaintiff’s attorney is not reasonable or realistic.

Lawsuits by employees and former employees are an unfortunate cost of doing business for many employers. While such lawsuits are almost inevitable, at one point or another, that should not dissuade you from taking any and all measures you can to reduce the risk of a lawsuit and/or an adverse judgment, including strictly complying with the law, consulting counsel as appropriate when employment-related issues arise, and periodically training your managers to identify potential problems and act appropriately in handling such issues. As we have counseled repeatedly in this column, appropriately training your managers is key, as your dealership, in most instances, will be held responsible for their actions or inactions. t

Joe Ambash is the Managing Partner and Jeff Fritz is counsel at Fisher Phillips, LLP, a n a t i o n a l l a b o r a n d e mp l o y m e n t f i r m r e p r e s e n t i n g h u n d r e ds o f d e a l e r s h i ps in

Massachusetts

be reached at (617)

and nationally.

722-0044.

They

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Accounting

MSADA

Tax Reform and Tax Policy By Mark Dow CPA, MST

Donald Trump’s victory triggered an unprecedented widespread outpouring of emotion. There have been protests, debates, and accusations (98% of which include reference to “the Russians”). And although the country continues to be quite divided, there is one unifying item on the agenda: Lower taxes! Yet nearly 100 days into the new term (as of this writing), the topic of tax reform has been largely in the background. What is the holdup?

Health Care, Business Regulations & “Walls” These topics have taken priority and have prevented any productive talk on tax reform. Healthcare reform continues to be elusive. Whatever changes that eventually materialize will likely have little impact on employers or employees because, as always, someone has to pay. Many business regulations have been renounced, and changes are in process that should improve the ability to conduct business.

Discussion of building the “wall” has subsided, and immigration reform is stalled once again.

Perhaps the administration, in seeking a victory on any front, will turn to tax legislation, as it appears that a deal could be made.

Corporate Taxes This is a two-pronged issue.

Multinational corporations have lots of profits parked overseas, fearful of returning to the U.S. and giving 35% of their money to Washington. The administration is considering some form of incentive

“Oftentimes it is best to ignore the outside ‘noise’ and take care of your business from within.” to encourage a good portion of the estimated 2.6 trillion to “come home” with the enticement of more jobs and training, improved infrastructure, and finally fixing the structurally unsafe roads and bridges (doesn’t this last one have to be done at some point?). Repatriation seems to be at the top of the list and will be discussed as part of tax reform.

U.S. corporate tax rates at 35% are essentially the highest in the world. The average corporate rate is 22-23%, and President Trump would like to get closer to the average to assist businesses in remaining competitive and to avoid profits from continuing to be stashed overseas. If rates for “C” Corporations were lowered, an analysis of operating under this structure would be in order.

Individual Taxes The headliners here are fewer tax brackets, lower rates, possibly fewer deductions, and simplification.

As noted above, the impact on businesses that have flow-through taxation to their owners could be significant if C Corporation rates are lowered.

The most compelling reason for flowthrough taxation from S Corps, LLCs and Partnerships is “one level of taxation.” Business profits are subject to tax at individual rates, which currently peak at 39.6%. Once the flow through income has been taxed, there are no restrictions or additional taxes on distributions of profits to the owners. With a C Corporation, after tax distributions to owners are taxed as dividends. The flow-through treatment is also critically important at the time of a potential sale of the business when “goodwww.msada.org

will” is typically taxed once and at favorable capital gain rates.

Estate Taxes While the current administration talked about repealing the estate tax, this does not appear to be high on anyone’s list. For starters, the tax does not impact a lot of the population and the amount of tax generated is not significant to overall tax collections. The estate and gift tax exclusion has increased over the last decade and currently stands at nearly $5.5 million per person.

(The Massachusetts estate tax exemption is just $1 million.) With a crowded agenda that is getting much attention, I would be surprised if much happens on this front.

What’s a business to do?

Whatever one party “proposes” the other diametrically “opposes” regardless of the merits. It is almost guaranteed to be slow-going, particularly when everything requires a “special prosecutor.”

Investment, i.e. equipment and other capital expenditures, will likely be supported and encouraged, as has been the case with favorable tax depreciation rules for small businesses.

As a business owner, when it comes to Washington and taxes, perhaps ignorance is bliss. If anything, the overall tax burden will be the same or decrease slightly.

Oftentimes it is best to ignore the outside “noise” and take care of your business from within.

Hence, be sure these are covered -Operating plan: Draw one up, monitor the budget and make course corrections.

Communicate: Let everyone know the plan and what will trigger needed changes.

Details: Be sure it is clear who is responsible for the critical details in each department. t Mark V. Dow, CPA, MST is a Principal at O’Connor & Drew. He can be reached at mdow@ocd.com.

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AUTO OUTLOOK

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COVER STORY

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Taking on the Big Apple “I would like to thank the Mass. Auto Dealers Association for sponsoring us.

It’s awesome, and the kids really appreciate it. It helps my program and everything we’re trying to do.”

Paul Perreault Blackstone Valley Tech instructor

Blackstone Valley Tech students head to NYC to represent Massachusetts in the National Automotive Technology Competition

By Tom Nash Blackstone Valley Tech made its second appearance in just three years at the National Automotive Technology Competition in April, held during the New York International Auto Show at the Jacob Javits Center in New York City.

The team, comprising seniors Bailey Martin and Tyler Dencer, was coached by instructor Paul Perreault and received technical assistance from Century Mazda in Shrewsbury for the Mazda3 they were assigned in the competition. The dealership offered a test vehicle and scan tools that helped the team feel confident.

Perreault expressed his appreciation to both Century Mazda and MSADA as he watched the pair finish the final moments of the competition. www.msada.org

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TAKING ON THE BIG APPLE

“I would like to thank the Massachusetts State Auto Dealers Association for sponsoring us,” Perreault said. “It’s awesome, and the kids really appreciate it. It helps my program and everything we’re trying to do.”

From Country to City After a train ride into midtown Manhattan and navigating the city’s subway system, the team arrived at the Javits Center ready to tackle the first day of the competition. The day’s challenges consisted of workstations where the 30 teams’ knowledge on everything from wheel alignment to job interviews would be evaluated.

The competition took place alongside the New York International Auto Show, which featured hundreds of vehicles from every major manufacturer and several new model unveilings. The impressive surroundings didn’t faze the team, however. Working on the cars was the fun part. This was the day when knowing how to handle a tire balancer and the ins and outs of electrical systems would dominate the competition – it also counts for 60 percent of the final scores.

Perreault, who had worked with the students for months on preparing for the competition, could only stand by and watch as his students competed. He spent most of the time wandering around the Auto Show, not wanting to spook them by standing there. Like most of the students here, he said, the first day of competition is the most stressful.

“But they did well,” he said. “There wasn’t a bunch of stuff they hadn’t seen before. They’re sharp kids.”

On Day Two, with scan tools set up and judges assigned, the teams worked for three hours to get their vehicles running in the second phase of the competition. While every manufacturer and most major brands were represented, the same bugs appear in each. The competition comes down to knowing the nuances of the car.

For Dencer and Martin, the competition came as a chance to APRIL 2017

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show they could proceed calmly and follow procedure. The students said they felt good about how they performed. “We did what we could,” Dencer said.

Tracy Dencer, Tyler’s mother, made the trip along with his sister.

“It is so cool to see him doing what he loves,” she said. “I’m proud of him – he’s loved cars since he’s been three years old.”

The students now have their post-graduation plans to look toward. They plan to attend the University of Northwestern Ohio’s diesel trucks program on sizable scholarships.

Perreault is optimistic about both his students’ futures and the growth of the industry in general. As a tech at Prime Toyota for 25 years, he has seen drastic changes in technology and says the need for skilled techs has never been greater.

“From ’92 to now it’s unbelievable the difference in cars,” he said. “There’s actually less wires in a car nowadays, but the computers communicate more. Understanding the communication systems is critical.”

Meanwhile, MSADA Executive Vice President Robert O’Koniewski said the team’s overall academic success is just one way the Association supports younger auto techs.

“Every year, it is one of our Association’s great pleasures to help shine a light on the next generations of great techs,” O’Koniewski said. “They represent the best of what our young Massachusetts technicians have to offer. We need to continue to grow our involvement with the next generation through sponsoring this competition, our Foundation scholarship program, and working with MassBay, Ben Franklin and other schools to help show students the opportunities at our dealerships.” t

MSADA

MSADA Scholarships Help Meet The Demand for Technicians In 2003, the Massachusetts State Auto Dealers Charitable Foundation began its Automotive Technician Scholarship Program. The Foundation is the charitable arm of the Massachusetts State Automobile Dealers Association. More than 200

students have benefited from over $1 million in scholarships.

Massachusetts Bay Community College has been a long-time partner and has the most extensive partnership (scholarships) with the Foundation in the state. Students from colleges, including Benjamin Franklin Institute of Technology, Springfield Technical Community College, and Massasoit Community College, have also received scholarships from the Foundation.

The Scholarship Program is competitive. A two-year scholarship ranges from $6,000 to $13,000 per year. Less than 10 percent of the students who apply are accepted. Students must maintain a 3.0 average in their tech courses, and they must have secured a co-op appointment in a Massachusetts new car dealer repair shop (dealership). A co-op is technically an internship and students are paid, offsetting the cost of tuition of the program at MassBay. The tuition for the automotive technician program is $16,000.

Each year the MSADA sponsors a team to compete in a technician competition at the Auto Show in New York in April. The competition is fierce and some 400-500 competitors statewide

apply to be part of it.

The field of auto mechanics is changing dramatically. Today’s mechanic needs to know how to operate a keyboard as well as a stick shift. As cars with sophisticated onboard computers become the rule rather than the exception, the profession is becoming more white collar, and technicians now need to be computer- as well as mechanically-savvy.

Auto mechanics are now called technicians, and for good reason.

While they may still sometimes get their hands dirty, more often than not, they turn to computers to help them diagnose a problem and perhaps even give them the repair instructions.

MassBay, part of the state’s community college system, is training this new breed of automotive technicians at its state-of-the-art automotive center in Ashland. MassBay’s Automotive Center is known for having one of the best programs in the Northeast. Its strong partnerships with area dealers ensures that its students get to work and train on the latest models.

To learn more about the scholarship program, email rokoniewski@msada.org. t

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NEWS from the NEWS from Around Around the Horn Horn from Around BOSTON

Bernardi Auto Group Announces New Sunday-less Hours Contrary to the current climate where many dealerships are extending hours and opening to meet the needs of as many different customers as possible, some dealerships are changing course. The Bernardi Auto Group has now closed their doors on Sundays, while extending hours during other days of the week.

The group includes Bernardi Honda in Natick, Acura of Boston, Audi Natick, Bernardi Toyota in Framingham, and Volvo of Wellesley. The change took effect on April 2, but still allows for customers to browse the stores inventories online. The Bernardi Auto Group had been the first auto retailer to open Sundays when Massachusetts eased their blue laws, and now they find themselves again on the forefront of change.

“Lifestyles and ways of doing business have changed, so the Sunday closing makes sense,” owner Jim Carney said. “Industry surveys show that with internet access, our customers can and do shop in the comfort of their home or office, any time day or night - they don’t really need to spend as much time shopping in the stores. So, we can make this change for the benefit of our team without inconveniencing our clients.”

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While some salesmen were worried about reduced sales opportunities, the reaction has been positive both within families of workers and with new prospective employees who appreciate the focus on quality of life for themselves.

“This represents only a small shift in the way we do business,” CEO Keith Monnin explained. “The two most important areas of focus for our organization have always been our customers and our employees. We believe that providing our team with Sundays off greatly improves their quality of life; this in turn will enhance the quality of service they provide to our customers. In today’s hectic world of deadlines, demands, and commitments, our staff deserves this day off to spend time with their families or simply just enjoy much-needed downtime that will allow them to return to work on Monday, rested and rejuvenated.”

“A happier, more relaxed team is also more productive,” Monnin added. “This sense of well-being will resonate throughout the entire company and especially with our customers. Sometimes to make a bold move forward, you have to be different from the crowd.”

MSADA BOSTON

Honda Gives President’s Award to Local Dealerships The American Honda Motor Company annually awards its top dealerships across the country with their President’s Award. The objectives of the Honda President’s Award Program are reviewed and altered to match the market environment in order to motivate Honda dealerships to achieve a greater sense of customer satisfaction. The award is considered Honda’s highest dealership honor and is based on a candidate’s achievement of excellence in all areas of the dealership’s operation. Customer service and satisfaction, sales, training, and facilities are all evaluated as criteria for the recognition.

Honda North, a member of the International Cars, Ltd. family of dealerships, has been named a recipient for the seventh consecutive year and the tenth time overall. “We’re humbled and honored to once again be recognized by American Honda for this prestigious award,” said Joseph Hajjar, General Manager of Honda North. “We’re especially grateful for our incredible customers without whom there’s no way we could have achieved such an honor. Thank you from all of us at Honda North.”

Herb Chambers Honda of Burlington received the President’s Award for the dealership’s sixth time, and the third consecutive year. “To have our Burlington location recognized as one of the top-performing Honda dealerships in the country is a great honor,” said Herb Chambers, president of The Herb Chambers Companies. “Honda’s President Award is a distinction our dedicated team strives to achieve every day and we’re very proud to be considered among their best dealerships nationwide for the third consecutive year.”

Commonwealth Honda also received the prestigious Honda President’s Award for 2016. Only the top-performing Honda dealerships, from among more than 1,000 nationwide, receive this award for excellence in sales performance, sales experience, service performance, and business operations. Owner Charlie Daher said, “This is a great honor that American Honda has bestowed on us. This great achievement was made possible by the hard work and dedication of each and every one of our team members: sales, service, parts, office staff, janitorial, and cashiers. Every one of them has made us the proud recipients of American Honda’s coveted President’s Award.”

NORWELL

Audi Norwell GM Graduates from NADA Academy Mike Gaughran, General Manager of Audi Norwell, recently graduated from NADA Academy. The Academy is an 11-month educational program that consists of six classroom sessions, each one week in length, combined with 40 weeks of in dealership analysis provided by his sponsoring dealer, Ray Ciccolo, president of Village Automotive Group.

The classroom instruction is structured in a manner that allows for analysis and strategic business planning for operational success of various profit centers within an auto dealership.

Mike resides in Franklin, with his wife Michelle and daughter Madison, Irish Dancer Extraordinaire.

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Mass. Attorney General Announces Auto Loan Violation Settlement with Santander One of the nation’s largest providers of automobile financing, Santander Bank, has agreed to pay $26 million to end a two-state investigation into the financial institution’s alleged violation of state consumer protection laws related to its auto loan underwriting practices.

The Attorneys General from Massachusetts and Delaware announced the settlements earlier this month, resolving accusations that from 2009 to 2014 Santander backed “unfair, high-rate auto loans” for thousands of car buyers in the states who could never repay the debts.

The settlements, which the states claim are the first in the U.S. involving subprime auto loans, are the culmination of a joint investigation by the offices of Massachusetts Attorney General Maura Healey and Delaware Attorney General Matt Denn into the financing and securitization of subprime auto loans.

These loans, known as subprime auto loans, are often made to consumers with poor credit through contracts at a car dealership.

However, the loans are actually funded by a non-dealer financial institution, like Santander.

According to the AG offices, Santander allegedly funded auto loans without having a reasonable basis to believe that the borrowers could afford them.

In fact, the investigation found that Santander predicted that a large portion of the loans would default. Additionally, the bank allegedly knew that the reported incomes listed to support the loan applications submitted to the company by car dealers were incorrect and often inflated, the AG’s investigation claimed.

Santander, according to the AG’s settlement, even identified a group of dealers that had high default rates due in part, to the regular submission of inaccurate data on loan applications – most often involving inflated income.

Despite this, the bank continued to purchase loans from those dealers anyway and, in some cases, sold them to third parties.

Once the loans were approved, Santander would package the auto loans into large asset pools and then sell the bonds or notes backed by the pools. The money that was generated by the sold bonds or note was then used to fund more subprime loans. This was a process used, most recently, in the lead-up to the housing crisis.

Under this month’s settlement, Santander will provide $22 million to the Commonwealth of Massachusetts, with about $16 million going toward refunding harmed consumers. The bank will also pay $4 million to Delaware, of which $2.89 million will be used to refund consumers and the remainder will be paid to the Delaware Consumer Protection Fund.

Additionally, the settlement requires Santander to revise its business practices, including updating procedures to screen loans originated by car dealers and not selling any loans purchased from high risk dealers to third-parties.

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MANSFIELD

Jeep Chrysler Dealership Ownership Change Nancy Phillips Associates announced this month that Mansfield Jeep Chrysler, previously owned by Paul Connor, has been sold to Laddie and Jonathan Stern and Edward Kardon.

Mansfield Jeep Chrysler began selling Chryslers in 1928 and has continued to do so through three generations of Connors. Laddie and Jonathan Stern and Edward Kardon, whose company controls multiple dealerships in New York, Massachusetts, and Rhode Island, are now the new owners.

From left to right: Edward Kardon, Laddie Stern, Paul Connor, Nancy Phillips, and Jonathan Stern.

BOSTON

Acura Goes the Extra Miles for the Boston Marathon The New England Acura Dealers Association (NEADA), official automotive sponsor of the Boston Marathon for the second consecutive year, hosted events throughout Marathon Weekend. NEADA helped celebrate Ben Beach’s 50th consecutive run of the Boston Marathon and the 50th anniversary of Katherine Switzer’s 1967 run.

“No other event brings people together like this,” Chris Connolly, NEADA president and general manager of Herb Connolly Acura, said.

“The weekend featured NEADA everywhere, bringing fun, unique activities to the marathon course, and showing off our stellar lineup.”

NEADA provided the 2017 “We Are Boston” Acura MDX, custom-painted by local group Artists for Humanity at the 2017 New England Auto Show as the official B.A.A. 5K pace car, with the 2017 NSX and 2017 TLX on display at Boston Common and Copley Square, and attended the sold-out world premiere of Boston, the first feature-length documentary about the Boston Marathon, at the Boch Center Wang Theatre. The 2017 Acura RDX and TLX

MSADA were displayed at the Pre-Race Pasta Dinner at City Hall Plaza.

The painted MDX pace car carried co-Grand Marshals Dave McKenzie and Bobbi Gibb, and the entire Acura lineup served as pace cars during the race, including the 2017 NSX. NEADA’s sponsored 2017 marathon team comprised 15 runners, including five charity runners raising over $50,000 for their respective charities. An exclusive NSX Virtual Reality test-drive experience was at NEADA booths in Wellesley and Brookline, as well as cheer sign-making stations. NEADA also provided an Acura Family Meeting Area by the finish line and were at the official Mile 27 Post-Race Party at Fenway Park with the 2017 NSX and 2018 MDX. BRAINTREE

Polar builds a new home for Copeland Polar Design Build, a general contractor that provides construction management services to clients in the New England region, completed a 31,422 square-foot automobile dealership for Copeland Chevrolet in Braintree.

The work on the site began in June 2016 with a ground-breaking ceremony in a vacant lot for the dealership, and completed

construction in January 2017. It features an 10,850 square-foot state-of-the-art showroom for 10 vehicles with an abundance of natural light, and glass-enclosed offices. There is also a 15,228 square-foot service department that includes 21 work bays and 15 lifts for vehicle maintenance and repair, with an additional 5,344 square-foot mezzanine for storage and parts.

“The new Copeland Chevrolet will be a great addition to the growing list of Route 24 auto dealership relocations,” said Donald F. O’Neill, president of Polar Design Build, Inc. “The older industrial or vacant land sites in the area have recently been developed for better uses, a considerable amount into auto dealerships. The new facility has easy access to Route 24, and major roadways between Brockton, Easton, and West Bridgewater making it a convenient location for car buyers. We are very pleased to be a part of this project and the continued growth of Copeland brands.”

Polar Design included modern finishes throughout consistent with the Chevrolet Design Intent Directive (D.I.D.) and the Copeland brand. It also features a luxurious lounge area for customer amenities and a children’s room for convenience. The dealership has an expansive parking lot that can house over 400 vehicles.

Last, there was a groundwater recharge system installed meeting the stringent code of new development in Massachusetts. t

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MSADA Sound Off

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Closing the Generation Gap with Millennials It has been over a decade since members of the millennial generation entered the workforce. From the beginning, it was apparent that the wants and needs of this group were distinctly different from those of previous generations. Fortune magazine has described the millennial generation as “tolerant but also narcissistic, pragmatic but with a sense of entitlement, civic-minded but harboring a keen interest in accumulating wealth.” The characteristics describing this generation sound like an entire generation of workers that want to have their cake and eat it too!

But the truth is that the youngest generation in the workforce does not have it all wrong. Although their message is certainly counterintuitive to that of past generations, what is good for millennials may actually be good for the industry.

What is Their Deal?

Millennials think differently than members of previous generations. A dealer that understands this and is willing to adapt to it can harness millennials’ energy and innovation in ways that slow-to-change dealers cannot.

Younger workers want to be part of something greater than themselves. They want to be seen as valued contributors and do work that they enjoy, not just work that gets them paid.

Millennials are team players who require individual recognition. They want to make a great living, but they do not want to make a living at the expense of their other goals. Ultimately, millennials do not mind working hard, but they insist on maintaining some sort of work/life balance. I cannot think of another industry that can deliver as much to the millennial worker as the auto industry.

Finding Top Talent Ethos Group has been recruiting for our dealer-clients on college campuses long before the demographic known as the “Millennial” generation emerged. After all, many college grads have exactly what is needed to be successful in the retail automotive environment. They are fresh thinkers with a desire to show the world their capabilities, to begin their careers, and to repay student loans, if needed.

Our company has invested countless hours developing programs at over 200 colleges and universities over the course of two decades. These programs have produced thousands upon thousands of successful hires. We have networked with everyone from fraternities and sororities to alumni associations, and we have not limited our efforts to business schools either; some of the most creative, out-of-the-box thinkers do not graduate with traditional business degrees.

For our company it has always made sense to find young, energetic individuals who show the professionalism, ability, and desire to be successful. Then we invest our time, energy, and resources to bring out their potential. For many of our dealer-clients who have wholeheartedly committed to the program they will likely feel that this approach has enabled them to leverage more than just dollars to grow their business – it has enabled them to leverage people.

Motivating the Millennial The millennial model is different than the one the industry has traditionally used. However, Ethos Group has found that motivating the millennial is no different than motivating any other generation of employees.

Many dealers are finding that the cost to develop a millennial is considerably less than an equally successful counterpart. Why? Millennials are not solely motivated by money.

For those of us that learned the “old school” approach this does not make a lot of sense, but remember that the youngest generation is working for more than just a paycheck.

By connecting this generation of employees to your company vision, you will harness their will and energy by tapping into their need for significance. Millennials want to do good work, but they also need to hear it. Communicate their successes and show appreciation for their contributions and you will find that millennials continue to perform--just so they can hear how great they are doing.

Providing millennials with an opportunity for work/life balance is not as difficult as many in the business have made it. The easiest way to free people up is to staff up with more people. Each employee carries less responsibility for the workload and receives a smaller piece of the pie – simple.

Having a bench loaded with talent is good for your dealership too. It allows your business to be more responsive to the market and better positioned for growth. While it may be a different approach than has been used in the past, you will find that the upside far outweighs the downside. t Rob Sneed is a recognized industry leader and representative of Ethos Group Consulting Services, a company that provides franchised automotive dealerships across the nation with an integrated program of resultsdriven income-development services, comprehensive training, robust recruiting and innovative products. To explore how Ethos Group can help maximize the potential of your business contact us at (972) 331-1000.

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

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Tax Reform Debate Has Begun in Nation’s Capital

By Steve Parker

Baltimore Potomac Truck Centers ATD Chairman

APRIL 2017

The debate on tax reform is currently underway in Washington, D.C. The House Republican leadership released their “tax blueprint.” It is an outline for tax reform legislation that is projected for later this spring.

The new administration presents one of the best opportunities for tax reform in decades. However, it is important to note that it is still very early in the tax writing process, and legislation has not been released.

The goal of tax reform is to lower tax rates by closing tax loopholes and eliminating deductions. When it comes to our industry, the American Truck Dealers (ATD) has always been vigilant of changes in LIFO and the Estate Tax. The good news is that the blueprint is set to uphold LIFO and the dealers’ inventory accounting method. ATD has made it a mission to let Washington know that repealing LIFO would take away working capital from the nation’s truck dealerships-capital that is used to create jobs. This is one of the blueprint’s favorable provisions.

An unknown factor is LKEs, which allow companies to defer taxes on the sale of existing business assets when replacing them with new products. The blueprint does not address how LKEs would be treated, but restricting or eliminating them would likely decrease the purchase of new trucks. It could also result in increased taxes on lessors with subsequent higher lease payments for customers. Therefore, ATD is advocating that Congress oppose any efforts to limit LKE provisions since they encourage dealers’ capital investment.

And speaking of the dealer’s capital investment, I am happy to report that the blueprint seeks to eliminate the estate tax. This would hugely benefit truck dealers nationwide. Since its inception, the estate tax has been harmful to our dealerships, because assets such as our land cannot easily be liquidated to pay the tax without destroying the viability of our stores.

ATD looks forward to seeing the elimination of the dealer estate tax.

And when it comes to a harmful tax, there is none greater than the Federal Excise Tax (FET) that is imposed on our industry. Congress already imposes a 12 percent FET on most new heavy-duty trucks, which is the highest excise tax on a percentage basis of any industry. The FET routinely adds $12,000 to $22,000 on the price of a new heavy-duty truck. Unfortunate-

Massachusetts Auto Dealer www.msada.org

ly, Capitol Hill has made proposals to further increase the FET so that revenue will be raised for the depleted Highway Trust Fund.

As we all know, a further increase in the FET would severely depress new heavy-duty truck sales and delay the deployment of cleaner, safer, and more fuelefficient trucks. In the last Congress, ATD supported H. Con. Res. 33/S. Con. Res. 40, bills that would have put Congress on record opposing an increase in the 12 percent FET. In January, the ATD board voted to support a new bill to eliminate this onerous tax. The tackling of comprehensive tax reform presents ATD with the opportunity to inform our elected officials on the FET’s detrimental impact and how it negatively impacts safety, the environment, and our trucking industry overall.

Finally, all dealers should be aware that the blueprint eliminates the deduction for net interest expense, and it creates a brand new provision for product importers. It is called the “Border Adjustment Tax” (BAT). The BAT is not a tariff, but it could significantly increase the cost of goods, specifically a 20% tax on imported products and exempts exports. This cost could very well get passed down to the American consumer. We could see price increases from the items on grocery store shelves to the cost of gasoline.

ATD will continue to monitor any progression in the BAT and the possible consequences it holds for the truck industry.

ATD is committed to helping Washington understand that any threat to truck affordability is a threat to selling the nation’s fleets and a threat to economic growth. On behalf of ATD, let us all make sure that our return is a strong one.

Visit www.nada.org/ATD to learn more about tax reform and how you can get involved with ATD. t Steve Parker is chairman of ATD, a division of NADA in Tysons Corner, Virginia, which represents 1,800 heavy- and medium-duty truck dealerships.

He is president of Baltimore Potomac Truck Centers in Linthicum, Maryland, which operates five full-service commercial truck dealership locations with Mack, Volvo and Hino Trucks franchises in Maryland and Virginia.

NADA Update

By Don Sudbay

Springing into Sales

As we prepare for our MSADA Annual Meeting, NADA recaps a big year 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).

With Spring finally upon us, this is the time when we are able at NADA to put final metrics on 2016 and have a better sense of what lies ahead. You will find both below, and I think all of us are pleased to see the industry in the shape it is in right now.

We know that we cannot get too comfortable, however. I hope you will join me at the MSADA Annual Meeting on May 5 to learn more about what is going on in our slice of the world, and what we can do as dealers to help out on Beacon Hill.

NADA Expects 2017 Sales to Remain at 17.1 Million Despite some economic headwinds on the horizon, NADA is holding steady at its original U.S. sales forecast for new cars and light trucks this year.

“Overall, we still expect sales and leases to reach 17.1 million new vehicles in 2017, with the expectation that rising consumer incentives will overcome any increases in interest rates later in the year,” said NADA Chief Economist Steven Szakaly, during NADA’s quarterly economic briefing in April. “While these headwinds will not have much of an impact on new-vehicle sales, they are a sign of a flat market as we look at the rest of 2017 and next year.”

Szakaly, along with NADA Chairman Mark Scarpelli, added that consumer demand for new vehicles remains strong, which continues to run at a pace above 17 million SAAR through the first three months of 2017, but both see a mixed bag of consumer positives and negatives shaping the new-vehicle market ahead.

“One area that does not get nearly enough attention in the consumer demand equation [for new vehicles] is technology and safety, particularly the combination of the two in the form of advanced driver assistance systems,” said Scarpelli, a Chevrolet, Chrysler-Jeep-Dodge-Ram and Kia dealer near Chicago.

“Across the fleet, there is strong demand for vehicles equipped with the latest safety features, such as automatic

emergency braking, lane-departure warning systems and collision avoidance technology,” Scarpelli added. “This is a big piece of the overall new-vehicle demand puzzle. And in my view, it’s tremendously positive. Not just because it’s helping sales, but because it’s leading to a safer fleet of vehicles on the road every year.”

Factors that could adversely impact new-vehicle sales include longer terms for auto loans and higher interest rates that stretch out the buying cycle, and a large supply of off-lease used vehicles entering the market that will likely pull some new-car buyers into the used-vehicle market, Szakaly added.

New Report: New-Car Dealership Employment Sets Record in 2016 Employment, wages, and payroll at U.S. new-car dealerships all continued to rise in 2016, according to a new report released by NADA. In 2016, new-car dealerships directly employed a record 1,131,900 workers, a 2.4% increase from the previous year, according to NADA Data 2016, the annual financial profile of new-car dealerships.

“Total dealership employment has consistently risen every year since the Great Recession,” said NADA Chief Economist Steven Szakaly. “In addition, hundreds of thousands of other local jobs are dependent on dealerships.”

On average, a dealership employed 69 workers in 2016, up from 66 in 2015. Average weekly earnings of dealership employees also increased, growing by 2.6% from 2015. Total annual compensation now averages $69,000 per employee, giving dealership employees one of the highest average salaries of any industry. Average annual payroll was $65 billion, up 4.9%, or $3.9 million per dealership.

Total dealership sales revenue, including new- and usedcar sales (including F&I), parts, service, and body shop was $995.6 billion in 2016, an increase of 6.1% from 2015. The average per dealership was $59.6 million.

The top-10 states in dealership sales in 2016 were California, Texas, Florida, New York, Oklahoma, Pennsylvania, Illinois, Michigan, Ohio, and New Jersey. Despite rising auto sales and back-to-back record sales in 2015 and 2016, net pretax profit at new-car dealerships as a percent of total sales has remained flat, hovering at 2.5 percent for several years.

“The past seven years have been the longest period of new-vehicle sales growth since the 1920s,” Szakaly added.

“For 2017 we expect new light-vehicle sales to continue on a strong trend, ending another year above 17 million.”

In addition to the Average Dealership Profile section, NADA Data 2016 now includes a new expanded financial www.msada.org

Massachusetts Auto Dealer APRIL 2017

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NADA Update profile section covering Domestic, Import, Luxury, and Mass Market dealerships.

New-car dealerships wrote 259 million customer repair orders in 2016, up 6.5% from the previous year. These orders included service, warranty, and recalls.

“More and more consumers are choosing new-car dealerships for their service needs,” said Patrick Manzi, NADA senior economist. “Express service, such oil changes, and non-warranty repair orders at dealerships, on average, increased by 10.9% and 4.2%, respectively, in 2016. This increase demonstrates that consumers value the expertise of the highly-trained and factory-certified technicians employed at new-vehicle dealerships.”

NADA Data 2016 was updated with completely re-benchmarked data and methodologies. Revisions and expansions within the Average Dealership Profile series influenced how dealership sales were calculated. As a result, data and figures from previously released reports will not be comparable to the 2016 report.

There are two versions of NADA Data 2016. One is a general overview of the retail-auto industry, with infographics that can be shared by print and broadcast news outlets as well as on social media. The other, more detailed version looks at each dealership department, employment, and payroll, trends in dealership advertising, as well as the entire retail-auto industry.

To download either version of NADA Data 2016, visit www.nada.org/nadadata.

NADA Introduces Tiered Life Insurance Program NADA knows that employee retention is paramount for running a successful dealership. To that end, a group insurance plan has been developed to meet the life insurance needs of dealer members.

The NADA Insurance group program has been revamped to offer tiers of life insurance coverage based on three specific groups: dealer owners, dealer managers, and all other employees. In addition, there are three different plan coverage levels to choose from, providing flexible options to meet the dealerships’ group benefit goals.

Visit www.nada.org/insurance/group or contact Deborah Stevens at dstevens@nada.org to learn more about the NADA Tiered Group Life Insurance Program, as well as other exclusive life insurance solutions.

AutoNation’s Mike Jackson Shares Views on Auto Retailing at NADA/J.D. Power Forum Mike Jackson, chairman and CEO of AutoNation, said dealers will have to find creative ways to grow their business in an ever-challenging retail environment during an interview with Wall Street Journal reporter Mike Spector at APRIL 2017

Massachusetts Auto Dealer www.msada.org

MSADA the 2017 NADA/J.D. Power Automotive Forum on April 11.

Jackson, who shared his views on several topics, said stair-step incentives were deceptive and corrosive.

“Multi-tiered pricing or targeted incentive systems in the extreme are unfair to consumers, introduce a level of mistrust at retail between consumers and dealers … and are extremely disruptive,” he said. “It’s not in [the automakers’] interest to destroy their brand and their resale value, and that’s what they’re doing with these programs.”

On the topic of fuel-economy standards, restoring the midterm review and CAFE debate with new federal regulators, Jackson highlighted the importance of consumer choice in determining new rules since light trucks now account for nearly 65 percent of the sales mix in the U.S. “This shift to sport utility vehicles and crossovers and pickup trucks is permanent. It’s structural. It’s long term because the customer passionately loves these vehicles,” he said. “With affordable gas, there is no reason to go back.”

Jackson called single-point dealers in rural towns “pillars of their community.”

“I cannot understand why manufacturers make life so difficult for rural American automobile dealers,” he added. “They care for their markets that is a labor of love and passion.”

Dealers Urged to Promote Teen Driving Safety during Prom Season The National Foundation for Teen Safe Driving is calling on new-car dealerships to help raise awareness of Senior Promise 2017.

“The campaign’s messages are targeted to the high school graduating class of 2017, with a similar call-to-action to other members of the community, reminding us that safety is a shared responsibility,” said Roy Bavaro, NFTSD executive director. “The goal of the campaign is to guard against poor choices that can have tragic consequences during a time that is among the deadliest times of the year for teens.”

NFTSD will provide participating dealerships – at no cost – with all campaign materials, ready for co-branding, instruction, tips and guidance. The campaign slogan is “Dance with your date, not with your fate.” Dealerships can choose the level of participation and duration that works best. Schools, local organizations, and others interested in joining the campaign are invited to partner with a participating dealership in their community.

“The call-to-action begins with a knowledge and understanding of the facts, followed by a pledge from each of us to behave responsibly, drive safely, abide by and enforce the rules, and lead by example,” Bavaro added.

For information on how to participate, send an email to RBavaro@nftsd.org or call (732) 952-0218. Visit www. nftsd.org or www.SeniorPromise2017.com for more details. t

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