MSADA, One McKinley Square, Sixth Floor, Boston, MA 02109
auto M a s s a c h u s e t t s
D
E
A
L
E
R
FIRST CLASS MAIL US POSTAGE PAID BOSTON, MA PERMIT NO. 216
April 2018 • Vol. 30 No. 4
The official publication of the Massachusetts State Automobile Dealers Association, Inc
Race to the Finish
Ma s s a c h u s e t t s
auto D
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 Jean Harris Administrative Assistant/ Membership Coordinator jharris@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: jharris@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 Bellavia Blatt & Crossett, PC, 22 The Boston Herald, 32 BlumShapiro, 23 F&I Resources, 11 Lynnway Auto Auction, 21 O’Connor & Drew, P.C., 31 Southern Auto Auction, 20 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
E
A
L
E
R
The official publication of the Massachusetts State Automobile Dealers Association, Inc
Table of Contents
4 5 6 9 10 12
From the President: A United Voice ASSOCIATE MEMBERS DIRECTORY THE ROUNDUP: MSADA Tech Team Has Strong Showing in NYC legislative scorecard TROUBLESHOOTNG: Regulators Cool to AVs as Body Count Mounts AUTO OUTLOOK
16 Cover Story: Race to the Finish
19 20 25 26 28
Sound Off: Growing Concerns for Dealers Still in Reinsurance NEWS From Around the Horn TRUCK CORNER: Carrying the Torch Forward nada Market Beat Sound Off: New England Energy Market Developments – A Market in Flux
29
nada update: Looking Ahead at Ownership
Join us on Twitter at @MassAutoDealers www.msada.org
Massachusetts Auto Dealer
APRIL 2018
4
From the President
MSADA
A United Voice Gather with your fellow dealers on May 4
By Chris Connolly, MSADA President
Msada Board
As we finally roll into Spring, your Association is busy on several important fronts ensuring the future of our franchise dealer auto industry. Your Association is taking the lead on issues that affect all of us -- everywhere from government offices to your service bay. First, we are of course active on Beacon Hill and working with the RMV as they confronted their latest headline grabbing issues (which became ours). We are also busy preparing for the MSADA Annual Meeting on May 4 -- please complete a registration form if you have not already done so. More details about what to expect from the day can be found in Executive Vice President Robert O’Koniewski’s column. Your Association also sponsored a team from Bristol-Plymouth Regional Technical High School at the National Automotive Technical Competition in New York City, where the students placed a very respectable sixth out of 28 teams. I congratulate them on this impressive accomplishment! You can read more about their hard work in this month’s cover story. Developing the future workforce that we will utilize in our dealerships is one of the great challenges and opportunities we face as Massachusetts dealers. We are making great strides with Gov. Charlie Baker in encouraging the allocation of more resources to focus on technical education across the Commonwealth. And we continue to look for more opportunities to work with partners to put more young people in the classrooms that will someday be working in our stores. The need for this activity is obvious. Ten years ago we talked about how cars were becoming more like computers. As we see now in 2018, cars simply are computers on wheels. As we saw tragically in Arizona in March, we have a long way to go before every vehicle on the road lacks a steering wheel. Dealers are the group best positioned to make sure that the aspirations of tech giants are tempered by the real world, on the ground experience we can provide about drivers and customers. Clearly, the issue of technology and policy circles back to who will be working on these vehicles. I see no reason that Massachusetts techs will not be among the most qualified in our country to help lead this revolution. But it is up to us to work toward that goal. While these are issues we are looking to get in front of in the long term, there are, of course, the more immediate items we will gather to discuss on May 4. I look forward to seeing you there for a day of camaraderie and learning from one another. As always, I hope you will reach out to me if you have any questions, concerns, or ideas about any of the initiatives we are undertaking as an Association. We are here to serve you. t
APRIL 2018
Massachusetts Auto Dealer www.msada.org
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 [Open]
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 [Open]
NADA Director
Scott Dube, Bill Dube Hyundai
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 Automotive Search Group Howard Weisberg (508) 620-6300 Bank of America Merrill Lynch Dan Duda and Nancy Price (781) 534-8543 Bellavia Blatt & 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 (617) 929-8373 Broadway Equipment Company Fred Bauer (860) 798-5869 Burns & Levinson LLP Paul Marshall Harris (617) 345-3854 C-4 Analytics LLC Rob Stoesser (617) 250-8888 Capital Automotive Real Estate Services Willie Beck (703) 394-1323 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 Mike Otis (315) 382-3675 Dealerdocx Brad Bass (978) 766-9000 Dealermine Inc. Jane Webb (800) 304-3341 DealerSocket Shelly Del Rosario (949) 900-0300
Downey & Company Paul McGovern (781) 849-3100 Eastern Bank David Sawyer (617) 897-1125 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 Tom Foster (832) 628-1916 GW Marketing Services Gordon Wisbach (857) 404-0226 Harbor First Ron Scolamiero, Michael Scolamiero (617) 500-4080 Hireology Kevin Baumgart (773) 220-6035 Huntington National Bank John J. Marchand (781) 326-0823 Independent Power Systems Mariana Seabra/Ryan Ferrero (978) 998-4079 Todd Stratford, (617) 777-0365 JM&A Group Jose Ruiz (617) 259-0527 John W. Furrh Associates Inc. Kristin Perkins (508) 824-4939 JP Morgan Chase Bank Alex Khademi (404) 375-4504 Key Bank Mark Flibotte (617) 385-6232 KPA Tim Whelan (303) 802-3019 Leader Auto Resources, Inc. Curt Murray (978) 201-4797 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 Robert Calhoun 617-285-4833 Mid-State Insurance Agency James Pietro (508) 791-5566
www.msada.org
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 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 Mike O’Connor (860) 462-7958 Robinson Donovan Madden & Barry, P.C. James F. Martin, Esq. (413) 732-2301 Samet & Company John J. Czyzewski (617) 731-1222 Santander Bank 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 Southern Auto Auction Joe Derohanian (860) 292-7500 SPIFFIT Sean Ugrin (303) 862-8655 Sprague Energy Claude Peyrot (603) 430-7254 SunPower Christie McCarthy, (408) 457-2357 SunTrust Bank Michael Walsh (617) 345-6567 Target Dealer Services Andrew Boli (508) 564-5050 TD Auto Finance Marc Gerhart (781) 697-1525 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 2018
5
6
The Roundup
MSADA Tech Team Has Strong Showing in NYC By Robert O’Koniewski, Esq. MSADA Executive Vice President rokoniewski@msada.org Follow us on Twitter • @MassAutoDealers
Congratulations goes out to this year’s Massachusetts team for their sixth place finish at the National Automotive Technology Competition at the New York International Auto Show. The annual competition is sponsored by the Greater New York Auto Dealers Association and was held April 2-4 this year in conjunction with the start of the NY auto show. Represented by Shane Clark and Jacob Horsman, seniors at Bristol-Plymouth Regional Tech High School in Taunton, our Massachusetts team earned its first top ten finish since MSADA’s team finished third in 2016. Their instructor is Stephen Ribbe, who led our 2016 team from Bristol-Plymouth in that third place finish. Shane and Jacob were tested in NYC on a 2018 Subaru Legacy. They competed against 27 teams sent by state and metro dealer associations from around the country. (This year a team from China qualified but was unable to show up and compete due to visa issues.) A big piece of the preparation can be attributed to the efforts of Rick Mastria and his team at his Subaru store in Raynham. In addition to loaning a Legacy to the school for the students to practice on, Rick made his top tech consultants available to Shane and Jacob for additional learning. The Clark-Horsman team was selected after winning our statewide competition at Universal Technical Institute on February 10. The selection process began with our written test held on January 19 in Marlborough, on which Shane Clark scored the highest. For their sixth place finish, the students and their instructor received the following: APRIL 2018
Massachusetts Auto Dealer www.msada.org
For the Students: • Snap-on Tool Bag compliments of Snap-on Tools • Snap-on 8-piece Screwdriver Set compliments of Snap-on Tools • Lincoln Technical Institute Half Tuition Scholarship • Ohio Technical College $10,000 Scholarship • University of Northwestern Ohio $8,000 Scholarship • Universal Technical Institute $2,000 Scholarship • Official Competition 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 For the Instructor: • Snap-on 7-piece Electronics Series Torx Set compliments of Snap-on Tools • Official Competition Racing Shirt & Hat from GNYADA For more information on their successful journey, check out our cover story on page 16.
MSADA Annual Meeting – May 4, Boston Lt. Gov. Polito 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 78th – at Boston’s premier spot, the Mandarin Oriental Hotel. Our speakers’ lineup so far includes Massachu-
MSADA setts Lieutenant Governor Karyn Polito; Brian Finkelmeyer, Director of Business Development at Cox Automotive’s vAuto; Guido Vildozo of IHS Automotive Group; 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, Scott Dube. We start the day at 11:30 a.m. with registration and a buffet lunch, and our Speakers Program will run from 12:30 p.m. to 5:00 p.m. There will be a Cocktail Reception immediately after the program. We have sent out via emails and snail mail our invitation and registration materials. We will again this year provide a hotel room at the Mandarin for any member dealer who desires one for Friday evening. Be sure to register before hotel space runs out. Contact Jean Fabrizio to register at jfabrizio@msada.org or call at (617) 451-1051.
Dealer Day on Beacon Hill – May 23 Be sure to register for our annual “Dealer Day on Beacon Hill” event in Boston. It will be held on Wednesday, May 23, 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.
Chairman Sanchez Visits Herb Connolly Acura On April 13, MSADA President Chris Connolly hosted State Rep. Jeffrey Sanchez (D-Jamaica Plain/Boston), the House Ways and Means Committee chairman, for a dealership visit and discussion of various issues impacting the dealer industry in Massachusetts. There are three bills of importance before the committee presently: reform of the used vehicle book, creation
of a temp tag program, and allocation of vehicle inspection licenses to franchised new-car dealers.
Pregnant Workers Protections Law Took Effect on April 1 [This information was provided by employment law firm Fisher Phillips.] In July 2017 Governor Charlie Baker signed the Pregnant Workers Fairness Act (PWFA), thereby enabling Massachusetts to join 21 other states and the District of Columbia with a comprehensive pregnancy workplace law. At that time, the Massachusetts law was passed with unanimous support from the legislature, employee advocates, and the Massachusetts business community. The law was passed with an April 1, 2018, effective date to give businesses nine months to prepare for its impact. At its heart, the PWFA adds “pregnancy or a condition related to said pregnancy including, but not limited to, lactation or the need to express breast milk for a nursing child” to the list of protected classes under the Commonwealth’s anti-discrimination act, but the law goes further than that - it also requires employers to provide reasonable accommodations when appropriate. Massachusetts employers will need to prepare for some changes to their policies and practices in order to comply with this new law. The PWFA will make it illegal for an employer to deny a reasonable accommodation for an employee’s pregnancy, or any condition related to her pregnancy, including lactation or the need to express breast milk. It also bars retaliation against an employee who requests or uses www.msada.org
such accommodation. Likewise, employers cannot deny any employment opportunity, such as promotions, transfers, etc. or refuse to hire a pregnant applicant on account of the pregnancy. Several examples of potential reasonable accommodations are provided in the PWFA: • more frequent or longer paid or unpaid breaks; • time off to recover from childbirth with or without pay; • acquisition or modification of equipment or seating; • temporary transfer to a less strenuous or hazardous position; • job restructuring; • light duty work; • private non-bathroom space for expressing breast milk; • assistance with manual labor; and • a modified work schedule. Upon notice from an employee that she is pregnant and seeking an accommodation, you must engage in an interactive process to determine an effective and reasonable accommodation for the employee. Only where an accommodation would cause you an undue hardship may you deny the accommodation request. It is your burden to prove that an undue hardship exists, and the PWFA includes five factors that will be considered when making such a determination: the nature and cost of the accommodation; the financial resources of the employer; the number of employees; the number, type, and location of the employer’s facilities; and the effect on expenses and resources on the employer’s business. Although both state and federal law prohibit the discrimination “because of or on the basis of pregnancy,” those laws only require that pregnant women be treated “the same for all employment related purposes.” They do not provide for any accommodations if such workplace modifications are not provided for similarly situated male employees. Likewise, while the federal Americans with Disabilities Act (ADA) already covers pregnancy-reMassachusetts Auto Dealer
APRIL 2018
7
8
The Roundup lated disabilities such as gestational diabetes, pregnancy alone is not considered a disability under the federal law unless it causes a physical or mental impairment that substantially limits one or more major life activities. The new Massachusetts law will take it a step further. How Should Businesses Respond? You should take the following steps to make sure you stay on the right side of the law: • Avoid questioning employees and job applicants about their marital status, family planning, or pregnancy. This is not new - these types of questions could already lead to discrimination claims under Title VII and existing state anti-discrimination laws, but this advice is worth repeating given the new focus that will soon be on pregnancy discrimination issues. • Be prepared to participate in the interactive process in good faith. You should train your managers and your HR staff on compliance with the PWFA. • Update your handbook and policies to comply with the law’s new requirements; for example, the PWFA requires that you provide notice to your employees of their right to be free from pregnancy discrimination by January 1, 2018. You should likewise consider implementing a policy to comply with the law’s notice and medical documentation requirements. • Distribute revised handbooks and policies to all new employees at the beginning of their employment or before they begin, and again to an employee within 10 days’ notification to you that she is pregnant or has a condition related to pregnancy. The Massachusetts Commission Against Discrimination has published a guidance document further explaining various pieces of the law. It is available at www.mass. gov/mcad/.
U.S. Senate Passes Resolution to Rescind Flawed CFPB Guidance As we were going to press, we received great news on April 18 that the Senate approved Senate Joint Resolution 57, on a 51-47 vote, which would rescind the Consumer Financial Protection Bureau’s APRIL 2018
(CFPB’s) flawed auto finance guidance. The Senate relied on the Congressional Review Act (CRA) to take this very significant step to renounce the multi-year, unjustified attack on indirect auto lending. One Democrat, Sen. Joe Manchin of West Virginia, stood with all the Republicans present to vote to pass this resolution on what was being called a “bipartisan” vote. (It is amazing to see what passes for “bipartisan” spin these days.) After the vote NADA applauded Sen. Jerry Moran (R-Kansas) for his leadership on this issue. Some Senators who voted “No” will try to hide behind CRA procedural reasons. However, in the five years since the guidance was issued, none of the Senators opposing S.J.Res. 57 made a serious attempt to remedy this flawed guidance. The House is expected to vote as early as the week of April 23, which would clear the measure for the president’s signature. With this quick turnaround, NADA will contact dealers soon regarding bipartisan grassroots efforts in anticipation of this important House vote. The White House issued a statement of administration policy recommending that President Trump sign S.J.Res. 57 into law if it passes the House. According to this policy statement, the guidance “limits the ability of auto dealers to offer auto loans to their customers and was not issued pursuant to notice-and-comment rulemaking. Further, the Dodd-Frank Act explicitly excludes the regulation of auto dealers from the CFPB’s jurisdiction. Disapproving this bulletin, therefore, would provide consumers with more options for auto financing while ensuring that the CFPB abides by congressional limits on its jurisdiction.” Readers may recall that when the House voted 332-96 in a truly bipartisan manner to approve CFPB reform legislation in November of 2015, two of Massachusetts’ nine members of Congress voted “yes”U.S. Reps. Niki Tsongas (D-Lowell) and Bill Keating (D-Bourne). They joined 86 other Democrats to support the bill. This year, once the House takes up the Senate Resolution, we will be asking our House members again to support a “yes” vote.
Massachusetts Auto Dealer www.msada.org
Save the Date: Dealer Hall of Fame Ceremony – October 3-5, Chatham; Send in Your Nomination Forms In order to honor those who have been titans within our industry in Massachusetts, your Association will conduct its inaugural Dealer Hall of Fame ceremony October 3-5 at the Chatham Bars Inn on Cape Cod. We have sent out the nomination materials by email and snail mail. If you know a dealer or dealers who should be recognized in our inaugural inductee class, submit the nomination form today. Criteria upon which dealers should base their nominations should include, but not be limited to, the following: commitment to the industry and the Association; time in the business; community involvement; and overall positive impact on the industry. We are looking for our members’ input to help with the selection process.
MSADCF Auto Tech Scholarships Available Applications for the Massachusetts State Auto Dealers Charitable Foundation’s 2018-2019 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. Nine 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 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 25, 2018. t
MSADA
www.msada.org
Massachusetts Auto Dealer
APRIL 2018
9
10
Troubleshooting
MSADA
Regulators Cool to AVs as Body Count Mounts By Peter Brennan, Esq.
MSADA
Staff Attorney At some point in the future, near or far, humans will no longer need or want to drive their own vehicles and will be chauffeured exclusively by autonomous vehicles (AVs). Countless bright and motivated advocates in academia and government are working to create this future. Motor vehicle manufacturers, wary of missing out on a transportation revolution, are positioning themselves as “mobility companies”. Legislators have taken a generally cautious approach to regulating autonomous vehicles. The autonomous vehicle industry has encouraged this approach by promoting the idea that the widespread adoption of AVs will one day greatly reduce the roughly 40,000 vehicle fatalities that occurred in the United States in 2017. AV proponents have also been unshy about voicing their opinion that the technology behind AVs is so newfangled that regulators at the National Highway Traffic Safety Administration (NHTSA) or the Massachusetts Department of Transportation couldn’t possibly understand it well enough to craft practicable regulations. Regulators at the state and federal level have generally agreed and have taken a laissez-faire approach to regulating the burgeoning technology. Cities have been doing their part to usher in this brave new world by allowing companies to test their products in urban areas, competing for the patronage of companies such as Waymo, Uber, and NuTonomy with a lax approach to oversight. APRIL 2018
However, the era of light AV regulation may be nearing an end, as a pedestrian death in Tempe, Arizona, caused by a self-driving vehicle being tested by Uber seems to have unearthed a sense of regulatory urgency throughout the country. Two days after the Tempe crash, a Tesla Model X being driven on Autopilot, a form of autonomy exclusive to the automaker, crashed head-on into a highway barrier, killing the driver. (Tesla has responded to the incident by blaming the driver and feuding with investigators.) Local authorities reacted swiftly to the Tempe crash. The city of Boston immediately suspended the testing of autonomous vehicles in the Seaport district of the city (testing has since resumed). A planned public signing of a Memorandum of Understanding to Facilitate the Testing of AVs, to be signed by Governor Charlie Baker and several metropolitan mayors, was postponed indefinitely. In the Massachusetts legislature, several pieces of AV legislation that had been designated for study (generally a death sentence for a bill), were immediately returned to the Transportation Committee for further deliberation. While the companies with an interest in AV-related technologies have thus far opposed all regulation, what they fear most is that each state will pass its own distinct law. A patchwork of AV regulations across the county could mean that the vehicles would not be able to travel across state lines, and automakers might be limited in the states where they could sell AVs. Consequently, many AV proponents have warmed to federal legislation currently being considered in the United States Senate that would give automakers broad exemptions to federal vehicle safety standards requiring human controls and pre-empting states from imposing restrictions on AV design, construction, and performance. The bill, titled the “American Vision for Safer Transportation through Advancement of Revolutionary Technologies” (AV START) Act, is very similar to
Massachusetts Auto Dealer www.msada.org
legislation that passed the House of Representatives several months ago. When the legislation was being considered in the House, under the title “Safely Ensuring Lives Future Deployment and Research In Vehicle Evolution Act” (SELF DRIVE Act), it contained language that could have preempted a variety of statebased motor vehicle franchise and licensing laws. NADA was successful in getting the bill amended at the committee level to ensure that state franchise laws were not pre-empted, and the legislation was passed by committee, as well as the full House, with broad bipartisan support. The AV START Act is identical to the SELF DRIVE Act regarding matters of federal pre-emption and cleared the Senate Commerce Committee with unanimous support. However, the legislation has been slowed significantly by “holds” placed on the bill for varying reasons by Sens. Dianne Feinstein (D-California), Richard Blumenthal (D-Connecticut), and our own Ed Markey (D-Massachusetts). Senator Markey has stated that he is concerned with the implications to data privacy and cybersecurity that an autonomous vehicle future could usher in. Curiously, the issue of data privacy was dealt with significantly in the House bill, but it is not mentioned at all in the Senate bill. While the AV START Act stalls in the Senate, opponents of autonomous vehicles are getting organized. Alex Roy, rally car driver and record holder, has founded the Human Driving Association to “lobby to defend human driving”. The cover image of Mr. Roy’s “Self Driving Manifesto” features a picture of a steering wheel with the text “From my cold, dead hands.” t If you have questions regarding this or any other issue, please contact Robert O’Koniewski, MSADA Executive Vice President, at rokoniewski@msada.org, or Peter Brennan, MSADA Staff Attorney, at pbrennan@msada.org, or by phone at (617) 451-1051.
ACCOUNTING
MSADA
The New Pass-Through 20% Deduction Taxpayers Can Deduct Up to 20% of Qualified Business Income
By Ryan McDonell O’Connor & Drew
Ryan is a tax supervisor at O’Connor & Drew, P.C. He can be reached at rmcdonell@ocd.com
Fresh from the tax reform legislation, a new 20% deduction is available on qualified business income (QBI) from partnerships, S-corporations, and sole proprietorships beginning in tax year 2018. Subject to certain limitations and phase-ins, this deduction is a must-use tool for eligible taxpayers. The qualified business income (QBI) deduction is taken on the individual taxpayer’s return and is available to those who itemize or take the standard deduction. While the specifics of what counts as “qualified business income” are open to debate, operating income will generally qualify. This means you could be deducting up to 20% of the ordinary income from your Form K-1. Despite a lack of detailed guidance from the Treasury and IRS, there is enough information available that your business and your accountant should start planning accordingly. As an example, income in the form of wages is not eligible for the QBI deduction. This means that taking large year-end bonuses could be depriving you of a healthy deduction. Keep in mind though, S-corporation owners must still take reasonable compensation; and there are also payroll tax and state tax considerations to weigh in.
The Specifics If a 20% deduction off the top of your income sounds too good to be true, it is because it is. The tax reform legislation includes several limitations. It’s easiest to illustrate the deduction by looking at a simple example: Example 1: Taxpayer is a shareholder in
a qualified business, Operating Co. Taxpayer receives wages of $100,000 and a Form K-1 from Operating Co. with $300,000 of qualified business income. Taxpayer’s maximum deduction is 20% of QBI, or $60,000 [20%*$300,000]. If net QBI from all qualified trades or businesses is a loss for the year, the loss carries forward and reduces future years’ deductions. Example 2: In Year 1, Taxpayer has a loss of ($25,000) from Operating Co. and cannot take a QBI deduction. In Year 2, Taxpayer has QBI of $100,000 from Operating Co. Taxpayer’s maximum Year 2 deduction is $15,000 [($100,000*20%)($25,000*20%)]. A wage limitation phases-in for taxpayers with taxable income of $315,000 for married joint filers, or $157,500 for others. The QBI deduction for these taxpayers is the lesser of 20% of QBI, or the limitation, which is the greater of: • 50% of the taxpayer’s allocable share of W-2 wages paid by the qualifying business, or • the sum of 25% of the taxpayer’s allocable share of W-2 wages and 2.5% of the allocable unadjusted basis of the qualifying business’ qualified tangible property. Example 3: Taxpayer fully owns Operating Co. and is subject to the wages limitation. Operating Co. pays W-2 wages of $800,000 and has qualifying property including buildings and machinery of $2,000,000. The wage limitation is $400,000, which is the greater of $400,000 [($800,000*50%] or $250,000 [($800,000* 25%)+($2,000,000*2.5%)]. Specified service businesses begin to phaseout of the deduction at $315,000 for married joint filers, or $157,500 for other filers. These businesses include those in the fields of health, law, consulting, athletics, financial services, or any business where the reputation of the owner is the primary asset. The deduction is completely lost for taxpaywww.msada.org
ers with taxable income of $415,000 MFJ, or $207,500 for other filers. Example 4: Taxpayer has taxable income of $420,000. Taxpayer makes $80,000 as a sole proprietor doing consulting work and has QBI of $300,000 from Operating Co. No deduction is allowed on the consulting income because it is a specified service business, and Taxpayer’s taxable income exceeds $415,000. Taxpayer may still be able to take a deduction on the income from Operating Co. As a final limit, a taxpayer may not deduct more than 20% of his or her taxable income after subtracting net capital gains, but before deducting the QBI deduction.
Quick Recap & Highlights • Deduct up to 20% of qualified business income from pass-throughs and sole proprietorships; • Deducted on individual’s tax return, after adjusted gross income; • Available for both itemized and standard deduction filers; • Computed on an entity-by-entity basis; • Qualified business income (QBI) includes items of income, gain, deduction, and losses from a qualified trade or business; • Net negative QBI results in a carryforward loss that reduces future years’ credits; • Wage limitation in place for married joint filers with taxable income above $315,000 (or $157,500 for other filers); • Specified service businesses completely lose deduction for married joint filers with taxable income above $415,000 (or $207,500 for other filers); • Deduction cannot exceed 20% of taxable income, less any capital gains. The QBI deduction rules are complex, but it is a powerful tool for those who understand it. Don’t miss out on this new opportunity for savings. Contact your accountant today to discuss how this deduction may impact your taxes. t
Massachusetts Auto Dealer
MARCH 2018
12
AUTO OUTLOOK
APRIL 2018
Massachusetts Auto Dealer www.msada.org
MSADA
www.msada.org
Massachusetts Auto Dealer
APRIL 2018
13
14
AUTO OUTLOOK
APRIL 2018
Massachusetts Auto Dealer www.msada.org
MSADA
www.msada.org
Massachusetts Auto Dealer
APRIL 2018
15
16
COVER STORY
Race to the Fi MSADA-sponsored Bristol-Plymouth Regional Tech scores top-10 finish in National Auto Tech Competition By JP Bullman This year’s Team MSADA traveled from Massachusetts to New York City’s Jacob Javits Center in order to compete in the annual National Automotive Technology Competition — and they did not go home disappointed. After three years of training and real-world shop experience, Bristol-Plymouth Regional Technical School seniors Shane Clark and Jacob Horsman are coming into their own as techs. They demonstrated how far they have come when they finished “A little tip for anyone on top at the MSADA Auto Tech Competition else coming here, just in February. The victokeep it simple.” ry earned them a MSA-Shane Clark, Bristol-Plymouth Senior DA-sponsored trip to New York City to compete in the National Automotive Technology Competition in April. Together with the trusted guidance of two-time NATC competitor Stephen Ribbe, the pair had proven themselves to be among the most talented young auto techs in the nation. The chance to compete in New York against 27 other pairs of techs from across the country saw them working harder than ever to prepare. The team received technical assistance from dealer Rick Mastria’s team at his Subaru store in Raynham and Manny Martinez of Subaru New England, who provided the 2018 Subaru Legacy that the team was assigned to work on and would be tested on in New York City. They were given six weeks with the car -- studying the ins and outs carefully -- before heading to the final event. APRIL 2018
Massachusetts Auto Dealer www.msada.org
MSADA MSADA
inish The Big Apple
The teams were assigned vehicles at random in the months before the competition. As the hour approached, NATC officials went about adding a predetermined set of bugs to each of the cars. Clark and Horsman were in many ways lucky to be randomly assigned the Subaru by the New York competition official, because both have had experience with similar vehicles. Horsman had owned an older model Subaru, and Clark has been working at Copeland Toyota in Brockton. “They have a lot of the same basics,” Clark said before the competition began. “They are just put together a bit differently. The scan tools have a lot of similarities, and you will have things like a map sensor on the same side.” After coming into Manhattan in the middle of one of the many late spring Nor’easters, the team arrived — along with two mothers and a grandmother — at the Jacob Javits Center ready to tackle the first day of the competition. The first day consisted of a set of 10 workstations where the 28 teams’ knowledge on everything from wheel alignment to job interviews would be tested. On the following day, the teams began actually working on their bugged vehicles. www.msada.org
Massachusetts Auto Dealer
APRIL 2018
17
18
RACE TO THE FINISH “This is probably the most challenging competition that is available to us.” -Steve Ribbe Bristol Plymouth Auto Tech Teacher
In a room full of various vehicles, 56 young technicians from all over the nation — not to mention family members, media, coaches, teachers, and representatives from all-walks of the automotive world — set off on a three-hour race against the clock to get their assigned car started and fix each one of its problems. “Too many problems to keep track of,” according to Horsman. Ribbe, whose team came in third place in the 2016 NATC, could only stand by and watch as his students competed. Like most of the students here, he said, the first day of competition – which counts for 60 percent of teams’ scores – is the most stressful for his team. Still catching their breath after the three-hour heat, Clark and Horsman exhibited knowledge well beyond their years when asked to recount the process they went through to fix the Subaru. “The first customer complaint we had was a no-crank, no-start,” Clark explained. “We spent a little too much time with that, because of a communications issue within the car. It turned out it was just a fuse, but then we ended up making it a little more complicated than we should have.” He added: “A little tip for anyone else coming here, just keep it simple.” Horsman chimed in, “After trying to diagnose that it was something to do with this main module, we traced the wire to the main module. There’s a fuse in there, and it was actually missing. Once we got the car to start, the progress we made was unbelievable.” “When you get the car started,” said Clark, “it just lifts the weight off of you and you get a huge burst of motivation.”
The Final Standings After the timed portion of the competition was over, participants and attendees had a few hours to kill before winners were announced. Luckily, the event took place alongside the New APRIL 2018
Massachusetts Auto Dealer www.msada.org
York International Auto Show, which featured hundreds of vehicles from every major manufacturer and several new model unveilings. It also was a time to think about the future for these young mechanics, as thousands of dollars in scholarships were offered from tech schools from across the country, and recruiters from major manufacturer brands made introductions. Before it was over, Horsman received a job offer from Subaru. When all was said and done, Team MSADA walked away in sixth place, with an arm-load of prizes that included partial scholarships to many of the nation’s top post-secondary educational programs, as well as tools and training equipment. Coach Ribbe capped the day off by thanking MSADA for providing the opportunity for the school to compete on such a big stage. “This is probably the most challenging competition that is available to us,” Ribbe said. “And to come in sixth in the nation is quite an accomplishment. I am really proud of these boys.” MSADA Executive Vice President Robert O’Koniewski noted that the team’s showing is a testament to the strength of Massachusetts auto tech programs. “Our Association is proud to support the next generation of auto techs, and this competition is one of the many ways we work to foster young talent,” O’Koniewski said. “We congratulate Bristol-Plymouth on another strong showing, and we look forward to supporting these students in any way possible moving forward. Regardless of the team finish, all these young tech students can proudly say they are in the best in their peer group, representing their states in this competition in the world’s capital city – NYC.” t
MSADA Sound Off
MSADA
Growing Concerns for Dealers Still in Reinsurance By Mike Scolamiero Harbor First
For the fourth consecutive year, the Internal Revenue Service has placed abusive tax shelters on its annual “Dirty Dozen” list. Published in March on their website, the IRS “warned taxpayers to be wary” of these financial structures. So, what does owning a financial structure associated with the “Dirty Dozen” entail? In the auto industry, many dealers participate in the earned premiums of the F&I products sold in their stores, often through a financial structure called a CFC (Controlled Foreign Corporation), and commonly referred to as reinsurance. They generally are incorporated and domiciled offshore for multiple reasons, including lower capitalization requirements and avoidance of heavy state regulations. They make an 831(b) election that enables them to be alternatively taxed as a small insurance company. Additionally, many dealers will create multiple reinsurance companies, incorporating them in their spouses’ and/or children’s names. When detailing the different abuses with tax shelters, the IRS clearly states on its website that they can be “formed to advance inter-generational wealth transfer objectives and avoid estate and gift taxes.”
We did our due diligence when we entered reinsurance. Why would we need to worry? If you have not consulted professionals on recent law changes, then you need to do so. The tax code is continuously being updated. When structures and accounting methods are not being used for their intended purposes, laws need to be rewritten and passed to curb these abuses. Effective January 1, 2017, PATH (“Protecting Americans from Tax Hikes”) introduced requirements for both new and existing 831(b) companies. These strict diversification and reporting requirements may not have been an issue addressed when entering reinsurance, but they need to be now.
I have not heard from the IRS. This must mean I am in a lawful position, right? Hopefully, but not necessarily. It is the responsibility of the IRS “for the collection of taxes and enforcement of tax laws.” The IRS has been aware of abuses with these structures for years, but has not had the resources and prior tax court rulings to effectively go after the abusers. However, their attorneys have been in court, and they have been winning. The IRS states on their website: “Through audits, litigation, published
guidance and legislation, the IRS continues to address those using abusive micro-captive insurance tax shelters.”
Have there been any recent developments? On August 21, 2017, the U.S. Tax Court issued a longawaited decision on an 831(b) Captive Insurance case. The IRS won the case, Avrahami v Commissioner of Internal Revenue, with the Court ruling leaning heavily towards the arguments made by the IRS. The Court decided that their 831(b) filing, to be taxed as a small insurance company, was invalid. The Petitioner is responsible for back taxes and interest.
What do tax professionals say? D. Sean McMahon, of McMahon & Associates PC, and formerly a Senior Attorney with the IRS Office of Chief Counsel and a Special Assistant United States Attorney, remarked, “The recent Tax Court ruling in the Avrahami case declares many commonly promoted captive reinsurance structures involving section 831(b) elections are unlawful. Armed with the clear U.S. Tax Court ruling, the I.R.S. can easily identify captive insurance companies to target for enforcement simply by searching for taxpayers who made 831(b) elections.”
How does this decision affect dealers owning 831(b) reinsurance companies? Although the Court’s decision is based on this taxpayer’s specific situation, it is significant because it gives the IRS continued precedence to challenge 831(b) arrangements. At the moment, there exists another case sitting on the US Tax Court’s docket with the IRS challenging an 831(b) election (James L. Wilson & Vivien Wilson, et al., v. Commissioner). The Court’s highly anticipated decision will further interpret US tax law. As these US Tax Court cases create a more developed interpretation of tax laws and abuses are properly defined, the IRS will have the resources necessary to root out more 831(b) abusers on their own. The IRS is aware that offshore 831(b) companies are being used as tax shelters. The recent U.S. Tax Court’s decision is a huge win for the agency, and it gives them a license to go after any taxpayer that has elected this structure and might be abusing it. Any dealer owning an offshore 831(b) company should be prepared to defend that company’s ownership structure, arrangement, and use. If they have any concerns, then they should consider changing their position to one that does not place an IRS target on their back. t
Have an opinion you want to share? Email rokoniewski@msada.org. www.msada.org
Massachusetts Auto Dealer
APRIL 2018
19
20
NEWS from the NEWS from Around Around the Horn Horn from Around
NEWS the Horn
BOSTON
Volvo Village Fitness Club Helps Keep Customers on Track Automotive News recently profiled efforts by Village Automotive Group owner Ray Ciccolo to help keep his customers in shape, with the use of a world class fitness gym. Boston Volvo Village offers workouts through a partnership with NB Fitness Club, as customers wait to have their vehicles serviced. Automotive News notes that the benefit is in addition to other service amenities, including loaner vehicles and shuttles to local retail stores. “People want to use their time effectively while they’re waiting for their car to be done,” Ciccolo told the magazine. “This affords them the opportunity to go and try
APRIL 2018
Massachusetts Auto Dealer www.msada.org
a health club. If they like it, they might join.” The program offers Boston Volvo Village customers complimentary access to NB Fitness Club’s exercise equipment and spa, as well as yoga, cycling, and dance classes. The dealership gives customers a gym pass when they drop off their vehicles, and they can walk or take a shuttle from the dealership to the club, which is two blocks away. The program launched in October 2017 after Ciccolo said he noticed some customers going for a run or bike ride after dropping off their vehicles. The dealership began marketing the program after the holidays, hoping to take advantage of customers’ New Year’s resolutions.
MSADA
DEALER SERVICES BURLINGTON
Mercedes-Benz Store Changes Ownership A new automobile ownership group is set to take over the Mercedes-Benz of Burlington (MBOB) luxury automobile dealership on Cambridge Street. The Lyon-Waugh Auto Group, a luxury car dealership entity out of Peabody, recently earned approval from the Board of Selectmen for a Class 1 Automobile License transfer. The license is being transferred from the previous and only owner of the revamped site, M11 Realty, LLC, the legal entity created by developer, The Collection Auto Group. The Lyon-Waugh Auto Group is doing business as Burlington Motor Sports, Inc. Town Administrator John Petrin detailed the commonality of this license transfer process to The Daily Times Chronicle. “This is simply the transfer of a Class 1 Automobile License from one business owner to another business owner. It is a simple transfer,” said Petrin. “This process is a meet and greet with
the new leadership team.” Paul Harris, a representative of Burlington Motor Sports, Inc., acknowledged the MBOB dealership, which has been in operation since 2014, will stay exactly the same under the new ownership group. With approval from the Selectmen, the new owners will have to go in front of the Planning Board to finalize the permitting process. Harris touched on how smooth the transfer of ownership process has gone to this point and expressed excitement in being a part of Burlington. “[MBOB] has been a good neighbor and will continue to be a good neighbor with [The Lyon-Waugh Auto Group],” Harris recognized.
www.msada.org
Massachusetts Auto Dealer
APRIL 2018
21
22
NEWS from Around the Horn BOSTON
BOSTON
Honda Announces Service Professionals Award Winners Each year since 2016, Honda has announced a group of 150 dealerships nationwide that meet the standards of the manufacturer’s Council of Parts & Service Professionals. The dealerships selected meet the highest standards for customer service. The Massachusetts dealerships receiving the award for 2018 include: • Bernardi Honda, Natick • Commonwealth Honda, Lawrence • Honda North, Danvers
APRIL 2018
Subaru Announces Customer and Community Commitment Awards Subaru recently announced its annual Customer and Community Commitment Award winners for 2018. “Subaru retailers who exhibit remarkable dedication to both pillars of the Love Promise – exceptional service to their customers and extraordinary work in their communities -- are given this award,” the company said in a statement. Massachusetts dealerships receiving the award include: • Atlantic Subaru, Bourne • Long Subaru, Webster • North End Subaru, Lunenburg • Planet Subaru, Hanover • Steve Lewis Subaru, Hadley • Subaru of Wakefield, Wakefield
Massachusetts Auto Dealer www.msada.org
MSADA BOSTON
NuTonomy Halts Autonomous Vehicle Testing in Seaport Autonomous driving startup NuTonomy has temporarily halted its Boston self-driving car pilot in the wake of a fatal accident involving an Uber self-driving car in Arizona, reports The Boston Herald. “We are working with City of Boston officials to ensure that our automated vehicle pilots continue to adhere to high standards of safety,” a NuTonomy statement said. “We have complied with the City of Boston’s request to temporarily halt autonomous vehicle testing on public roads.” NuTonomy, which is owned by Aptiv (the former automotive supplier Delphi), began testing self-driving cars in Boston last year, but only in a small part of the city’s Seaport district. It began giving rides to members of the public later in the year, and Lyft joined the program in December, allowing riders to hail a self-driving car using its app. In addition to the Boston pilot, NuTonomy operates a pilot autonomous taxi service in Singapore.
Karl Iagnemma, NuTonomy’s CEO, told The Boston Herald that the response to the Uber self-driving car accident, in which a woman was struck by a car while crossing the street, resulting in fatal injuries, will be crucial to the future of the technology. “The reality is we may work very hard as technology developers and end up with a technology members of the public are uncomfortable with,” Iagnemma said. “If that’s the outcome, then we have failed as an industry, so we have to think very carefully about how we develop, test, and deploy the technology.”
www.msada.org
Massachusetts Auto Dealer
APRIL 2018
23
24
NEWS from Around the Horn METHUEN
Kelly Takes on New Dealership In April, the Kelly Automotive Group acquired the former Clark Chrysler Jeep Dodge Ram dealership. The move affords the Kelly family the opportunity to add Ram and Dodge franchises to their stable. This will be their eleventh dealership – the family has been operating dealerships for 53 years. “The transition from the Clark dealership, which was also family owned and operated for over 60 years to the Kelly family should prove to be seamless as both families emphasize a desire to care for their customers and employees as they do each other,” the Kelly Automotive Group said in statement. The Kelly Automotive Group continues to own a Jeep Chrysler dealership in Lynnfield. BOSTON
Auto Finance Company to Provide $765,000 in Relief to Consumers Who Were Sold Defective Cars A Norwell subprime automobile finance company has agreed to provide $765,000 in restitution and loan relief to consumers who purchased cars from two used Massachusetts auto dealers that routinely sold defective and inoperable cars, Attorney General Maura Healey announced in April. “This company left hundreds of drivers with significant debt for cars they could not use,” said AG Healey. “We will go after schemes by auto dealers and finance companies that mislead consumers and will work to get people their money back.” The AG’s Office entered into an Assurance of Discontinuance, filed in Suffolk Superior Court, with Source One Financial Corporation in April. The settlement resolves the AG’s claims that the company’s business practices violated the Massachusetts Consumer Protection Act. The AG’s Office alleges that Source One facilitated the sale of defective and inoperable cars sold by two dealers, Auto Drive One and Buy-A-Ride, that Source One knew engaged in a practice of selling bad cars. Source One continued to do business with these dealers despite the fact that it repossessed more than 30 percent of the cars these dealers sold. Source One failed to monitor and oversee the dealers, despite its policy not to do business with dealers that sell bad cars. In July 2017, the AG’s Office secured $50,000 in restitution for consumers from Auto Drive One, which also made significant business practice changes related to the routine sale of unreliable cars and unfair and deceptive sales practices. Buy-A-Ride is no longer in business. Under the terms of the settlement, Source One will pay $200,000 in consumer restitution. Source One has agreed that it will waive APRIL 2018
Massachusetts Auto Dealer www.msada.org
more than $565,000 on loans that ended in repossession and will assist consumers with credit repair. The terms of the settlement also provide for business practice changes to improve oversight of dealers’ sales practices and track consumer complaints. The AG’s Office continues to look into deceptive practices in the auto industry. Over the past year, the AG’s Office sued JD Byrider for misleading consumers and selling them high priced, poor quality cars financed with high cost loans – a package that consistently leads to repossession. The AG’s Office has also shut down a dealership for selling unsafe cars and obtained an injunction against another dealership to stop it from selling unsafe cars and from providing consumers with incomplete or inaccurate sales transaction contracts BOURNE
Former Dealership Employee Caught Stealing, Again A Bourne woman convicted of stealing from a car dealership where she worked has been accused of stealing $630,000 from another dealer. The Cape Cod Times reports that 50-year-old Christien Atwood-Calverley is accused of writing checks to herself from Nissan of Bourne, where she worked as an office manager. Investigators say the theft started in 2013 and was discovered last year after the dealership was sold. Atwood-Calverley has pleaded not guilty to a charge of larceny. She was sentenced to probation in 2009 for stealing $43,000 from Stagg Chevrolet in Harwich. By the time of her guilty plea, she had already started working for the Bourne dealership. HYANNIS
Prime Motor Group to Close Mercedes Store Prime Motor Group closed its Mercedes-Benz pre-owned dealership and service center at 95 Falmouth Road in April, according to a statement from the dealership. Customers are being directed to Mercedes-Benz of Hanover for sales and service needs, or one of Prime’s other two dealerships on the Cape — Hyannis Toyota or Orleans Toyota. Mercedes-Benz of Hanover is offering all local service customers complimentary pickup and delivery from anywhere on the Cape, according to the statement. Prime Motor Group attributed the closure to restructuring, while saying the company was experiencing “rapid and exciting growth.” The Westwood auto group, which owns 17 other dealerships in Massachusetts, bought the Mercedes-Benz dealership from Trans-Atlantic Motors in Hyannis in 2010 and moved the new-car sales to its Mercedes-Benz dealership in Westwood at that time. t
MSADA
TRUCK CORNER
Carrying the Torch Forward By Jodie Teuton Chairwoman, American Truck Dealers ATD Chairwoman Jodie Teuton is vice president of Kenworth of Louisiana and Southland Truck Leasing in Gray, Louisiana.
On March 24 at the American Truck Dealers (ATD) Show in Las Vegas, I had the privilege of accepting the role of ATD chair. I am humbled and excited by the weight of this responsibility. There is much opportunity coming to truck dealers, and I urge everyone to take advantage. Truck sales are healthy, as Class 8 orders continue to skyrocket, with volumes doubling from last year’s numbers. And in January, medium-duty orders came in third highest since July 2006. Thanks to our OEMs and suppliers, our trucks are the cleanest, safest, and most fuel-efficient that they have ever been. But like other sectors, we have to adapt to changing technology. The commercial truck industry is seeing the advent of new power sources, so dealers must understand how autonomous, and assisted, vehicle legislation will affect our business and customer demand. The great news is that the environment in Washington, D.C., right now is pro-business. Those who run truck dealerships must cope with complex regulatory burdens. ATD will work hard to capitalize on legislation coming our way, including the infrastructure bill and the new tax code. I will make it my mission to advocate on your behalf and work toward legislation that makes it easier for us to do our jobs, not harder. Finally, let’s challenge ourselves to work together and continue our high standards each day. Let’s take a closer look at our most valuable resource: our employees. The hard truth is that our dealership landscape is experiencing issues of recruiting, hiring, and retaining long-standing teams.
As dealers, it should be our priority to attract the best hometown talent no matter where you operate. We provide well-paying local jobs that support families and communities, so let’s strive to be the employer of choice. The quality of our operations rests in the teams we build, and we must manage growth and cultivate the workforce that we currently have in our dealerships. The bottom line is that education and training matter in every stage of our business, from general managers and operators to service technicians. I urge members to take advantage of ATD’s membership offerings: join an ATD 20 Group, send an employee candidate to the ATD Academy, and sign on to NADA online and take a class. Let’s get everyone excited about dealership jobs and continue to build a culture of inclusion. Never forget that ATD is here to help every step of the way. Also, put on your calendar our fourth annual Dealer Fly-In in June when we will convene to meet with our federal legislators in Washington, D.C. We have grown our attendance every year, and we look forard to another successful event this year. Please think about participating in June. In the Louisiana oilfields where I am from we have a saying: “God, give us one more boom and don’t let us blow it.” Our national boom is here, and ATD members are poised to make the most of it. Let’s seize this moment. It is my honor to carry the ATD torch and pick up where Steve Parker, our immediate past chairman, left off—in serving ATD and all its members for the next two years. t
“Our national boom is here, and ATD members are poised to make the most of it. Let’s seize this moment.”
www.msada.org
Massachusetts Auto Dealer
APRIL 2018
25
26 MARCH 2018
Patrick Manzi
NADA Senior Economist
Boyi Xu
Economist
APRIL 2018
Massachusetts Auto Dealer www.msada.org
MSADA
NADA MARKET BEAT
JANUARY 2016
www.msada.org
Massachusetts Auto Dealer
APRIL 2018
27
28
Sound Off
MSADA MSADA
New England Energy Market Developments – A Market in Flux By Claude Peyrot Sprague Operating Resources
While 2018 started with record cold temperatures, we are slowly seeing the signs of Spring. Electricity generation resources were available to meet the system demands imposed by this extreme winter weather; however, it did require the use of generation resources that at many times of the year are idle. Under normal weather conditions, natural-gas fired electric generation units provide roughly half of the electricity consumed. During this winter’s cold snap, when natural gas prices hit all-time record prices, oilfired electric generation was producing over one third of the electricity consumed – this is in stark contrast to a normal weather day in which oil-fired electric generation would be producing a share of electricity consumed in the single digits. In the near term, ISO-New England – the entity that oversees the New England electric grid – has indicated that there are adequate resources on hand to meet expected generation needs. However, in its recent Fuel Security Analysis, ISO-New England identified that New England’s limited fuel infrastructure, primarily natural gas and oil, will eventually cause severe electric reliability issues if fuel security is not addressed. And in recent news, Exelon Generation, the owner of the Mystic Generation Station in Everett, Massachusetts, announced its intention to retire generation units 7, 8 and 9 and a jet-fuel fired unit by June 2022. Generation units 8 and 9 are natural-gas fired units with a combined generation capacity of over 1,400 megawatts and unit 7 is a natural-gas or oil-fired generation unit with a capacity of slightly below 600 megawatts. This is a combined electric generating capacity of 2,000 megawatts, which represents approximately 7 to 10
percent of New England’s peak electric demand depending on the time of year. As a result of this announced retirement, ISO-New England has indicated that it will seek permission from federal regulators (the Federal Energy Regulatory Commission) to keep two of the electric generation units, particularly units 8 and 9, online asserting that the retirement of those could put electric reliability at risk. Specifically, the closure of units 8 and 9 with a combined electric-generation capacity of 1,600 megawatts would pose an unacceptable fuel security risk in the region during the winter months. Accordingly, ISO-New England will be discussing this matter at its reliability committee meeting in late April and expects to file with federal regulators a proposal to prevent reliability risks from retirements in the future. This will likely increase electricity prices in the region, as funding for a mechanism to ensure reliability will be borne by market participants. In the short term, the energy situation in New England is in relatively good shape; however, with the pending Mystic Station changes and fuel reliability issues, the longer term is a bit less clear. Many factors can affect energy markets including weather-related events and operational factors affecting energy generation and delivery. These events can arise quickly and result in significant market changes that can impact your energy costs. Be sure to have the tools needed to understand and manage your business in a changing energy marketplace.
In the near term, ISO-New England has indicated that there are adequate resources on hand to meet expected generation needs.
t Founded in 1870, Sprague is one of the largest independent suppliers of energy products and services in the Northeast with a network of strategically located petroleum and materials handling terminals throughout the Northeast. Claude Peyrot can be reached at cpeyrot@ spragueenergy.com or (603) 817-5779.
Have an opinion you want to share? Email rokoniewski@msada.org. APRIL 2018
Massachusetts Auto Dealer www.msada.org
NADA Update
By Scott Dube
Looking Ahead at Ownership S cott D ube , P res i d e nt o f B ill D ube H yundai and I mmediate Past President of MSADA, represents MSADA members on the NADA Board of Directors. As auto dealers, the long job description includes staying on top of the latest trends in the industry. One of those, of course, is the once-fabled autonomous vehicle. While the safety promises have taken a dose of reality recently, we should also pay attention to the implications of vehicle ownership itself. While we have Ford and GM making moves to push autonomous vehicles into fleet service for Uber and Lyft, we need our manufacturers to understand that our customers are not going to walk away from personal vehicle ownership any time soon. NADA has been working on how to communicate this reality, and below you will see the results of a recent survey that shows the personal vehicle ownership model is in no danger of disappearing. I invite you to take a look and absorb, and, as always, let me know if you have any input you would like me to pass along to NADA. Below, you will also find an opportunity to submit proposals for our NADA Show 2019. I should take this chance to add that the valuable content that comes from these seminars, classes, and roundtables is now included as part of NADA membership at no extra charge. Those materials will be in addition to a timely webinar series, 20 Group, and NADA Academy online resources that will also be included with membership as an added benefit for you. So, in addition to thinking about whether you may have a contribution to our next big gathering, be sure to carve out some time to check out what is there at your fingertips. As always, all of this is available at a www.nada.org.
nology is normalizing things today that for decades were not even on anyone’s radar. We are also living in an era that rewards bold predictions far more than rationality. But as we all know, rationality still drives behavior. So the NADA has been probing to find out what people really think about AVs, ride-hailing, car sharing, and personal ownership. NADA commissioned a large-scale research project that included consumer focus groups and a national survey about the future of personal transportation. And what we found cuts against much of the “conventional wisdom.” Here are the key findings: Car owners have little, if any, interest in giving up their car keys. Only 11 percent of car owners in our survey were interested in giving up their personal vehicles to move exclusively toward a ride-hailing service—even under the assumption that the service was widely accessible, safer, and more affordable than human-operated vehicles. This was true among all demographics—age groups, geographic regions, and education and income levels. Cars are convenient to own. Silicon Valley and Wall Street have been pushing the false narrative that owning a car is a hassle—an expensive, unnecessary purchase that folks would rather do away with. The survey showed the complete opposite. It found that only 6.5 percent of car owners viewed car ownership as a hassle.
The Future of Personal Vehicle Ownership
Millennials are not much different. Talk to anyone on the topic of millennials and you will hear something about how they are a virtually different species of consumer. But millennials in our survey were not that different from the rest of consumers. Only 19 percent of them would give up car ownership for exclusive ridesharing. And most of those were the youngest, most urban, and mostly single subset. But put a 30-year-old millennial in the suburbs with kids, and they start looking, thinking, and acting just like the rest of us. Actually, millennials are buying new cars at a higher rate today than 10 years ago. Last year, the percentage of new-vehicle sales to consumers under the age of 35 was 19.3 percent vs. 16.6 percent in 2007.
It is hard to attend an automotive conference these days without hearing about the end of personal vehicle ownership. According to so-called “conventional wisdom,” the proliferation of ride-hailing options like Uber and Lyft combined with autonomous vehicles (AVs) are destined to align and make the prospect of owning your own vehicle too inconvenient or too costly. I get it. We are living in exciting, changing times, and tech-
People will not trade time for money. According to the U.S. Department of Transportation, the average U.S. household takes about 10 trips per day (stopping at the grocery store on the way home from work counts as two trips). The survey we commissioned found that the ride-hailing users on average waited nine minutes for each Uber or Lyft ride. Do the math—that is a lot of waiting. And even if ride-hailing services save money, folks are not willing to trade their time for that savings. Half of the people surveyed reported that they
By Peter Welch, NADA President & CEO
www.msada.org
Massachusetts Auto Dealer
APRIL 2018
29
30
NADA Update
MSADA
would need to save at least $50 per day to compensate for an extra hour of waiting for ride-hailing services. Under the rosiest scenarios, autonomous taxis might lower transportation costs—but nowhere near enough to compensate for the additional cost and inconvenience of waiting. People want the freedom, flexibility, convenience, and control that only vehicle ownership provides. Fully 90 percent of car owners surveyed said that, at every moment, their car provides them the freedom and flexibility to go where they want, when they want. Respondents cited a number of reasons—including the ability to make multiple trips on an errand-run, take an impromptu trip to another city or state, drive unexpectedly to an emergency room, and have the ability to leave an event earlier or later than planned— as key benefits of personal vehicle ownership. Such benefits would all disappear if they relied exclusively on ride-hailing. The survey found that ride-hailing services provide some great benefits, especially in urban areas and in places where parking is an inconvenience. But if real consumers have anything to say, the future of transportation will be built upon the foundation of personally owned vehicles, whether human operated or autonomous. Consumers will continue to purchase their own vehicles and use ride-hailing services as a supplement whenever it is more convenient. Consumers want both, not “either/or.” In the future, ride-hailing services will supplement personal vehicle ownership, not supplant it.
America’s franchised auto dealers strongly believe that every customer deserves to be treated fairly, and that there is no room for discrimination of any kind in auto retailing – period. S.J.Res. 57 and H.J.Res. 132 are narrowly tailored resolutions that in no way modify or affect the enforcement of any fair credit laws or regulations – including the Equal Credit Opportunity Act (ECOA) – by the CFPB or any other agency. But they do take the important step of ensuring that consumer discounts in auto lending are safeguarded for every consumer. Fair credit is critical for consumers everywhere. Fortunately, there is a way to ensure fair credit in auto financing while preserving the dealer discounts that promote competition and consumers savings in the marketplace – and that is the NADA Fair Credit Compliance Policy and Program. NADA continues to urge the government to endorse this compliance program, which is based on a Department of Justice (DOJ) model that preserves consumer discounts on credit for legitimate business reasons. In the meantime, we hope Congress acts on these important resolutions, because it would mean that the CFPB could not re-issue a new guidance in substantially the same form – absent subsequent authorization by Congress – and in doing so further threaten consumer auto loan discounts. [Note: As we are going to press, the Senate passed S.J. Res. 57 in a 51-47 vote, with only one Democrat voting in the affirmative.]
NADA Supports Efforts in Congress to Preserve Consumer Auto Loan Discounts
NADA Seeks Proposals for 2019
Two separate measures are under consideration in Congress to repeal the Consumer Financial Protection Bureau’s (CFPB) deeply flawed and anti-consumer auto financing guidance from 2013 that pressures indirect auto lenders to eliminate the ability of local dealerships to offer discounted auto loans to their customers. Senate Joint Resolution 57, introduced on March 22 by Sen. Jerry Moran (R-Kansas), and H.J.Res. 132, introduced on April 10 by Rep. Lee Zeldin (R-New York), are unique Congressional Review Act (CRA) resolutions that allow Congress to “fast track” disapproval of an agency rule. Three hundred and thirty two members of Congress – including 88 Democrats – have already voted to repeal the CFPB’s flawed guidance and preserve important auto loan discounts for their constituents. These CRA resolutions are simply a continuation of this bipartisan effort to keep auto loans affordable and accessible for all consumers. NADA supports these CRA resolutions because, like H.R. 1737, the “Reforming CFPB Indirect Auto Financing Guidance Act of 2015” – a bipartisan bill that passed the U.S. House by a veto-proof majority of 332-96 – their primary purpose is to preserve the rights of dealership customers to receive discounted auto loans in the showroom. APRIL 2018
Massachusetts Auto Dealer www.msada.org
We are already making plans for our next shows in San Francisco, January 24-27, 2019! A big part of what makes our annual shows great is the educational programming that we put together from industry experts, NADA Academy instructors, and experienced dealers and vendors who have their fingers on the pulse of what is happening in both the automobile industry and the commercial truck industry today. We design workshops, education sessions, and roundtable discussions based on trending topics, current events, legislative and regulatory updates, and other issues that our members know are major factors in their businesses’ success. Now, we are looking for our next round of educational speakers who will deliver top-notch learning sessions at NADA Show 2019 and ATD Show 2019. Do you have expertise on a topic that is timely and relevant for car dealers or commercial truck dealers today? Could you be the next NADA Show or ATD Show educational speaker? Visit the NADA Show or ATD Show websites to learn more and submit your proposal for next year’s program. The call for proposals deadline is 11:59 p.m. EDT on Tuesday, May 1. Go to www.nada.org for details on how to make submissions. t
MSADA
31