MSADA, One McKinley Square, Sixth Floor, Boston, MA 02109
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FIRST CLASS MAIL US POSTAGE PAID BOSTON, MA PERMIT NO. 216
March 2018 • Vol. 30 No. 3
The official publication of the Massachusetts State Automobile Dealers Association, Inc
From Germany to Chicopee
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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 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: 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 Bellavia Blatt & Crossett, P.C., 22 BlumShapiro, 23 Boston Herald, 32 Ethos Group, 2 Lynnway Auto Auction, 24 O’Connor & Drew, P.C., 31 Southern Auto Auction, 20
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The official publication of the Massachusetts State Automobile Dealers Association, Inc
Table of Contents
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From the President: Time to Spring Forward ASSOCIATE MEMBERS DIRECTORY THE ROUNDUP: Dealers Convene in Vegas legislative scorecard TROUBLESHOOTNG: Legal Risks of Free Dealership Wi-Fi ACCOUNTING: The New Pass-Through 20% Deduction AUTO OUTLOOK
16 Cover Story: From Germany to Chicopee
20 25 26 28 29
NEWS From Around the Horn LEGAL: Are Your Pay Plans and Pay Practices Aligned? nada Market Beat TRUCK CORNER: Transitions at ATD nada update: A New Start
ADVERTISING RATES Inquire for multiple-insertion discounts or full Media Kit. E-mail jfabrizio@msada.org Quarter Page: $450 Half Page: $700 Full Page: $1,400
Back Cover: $1,800 Inside Front: $1,700 Inside Back: $1,600
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Massachusetts Auto Dealer MARCH 2018
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From the President
MSADA
Time to Spring Forward By Chris Connolly, MSADA President As we continue to dig out from perhaps the second harshest winter we have had in a while, I am both excited and wary about the challenges facing our industry this year. Being an auto dealer is an all-consuming task. This is not a job so much as a calling -- and a business that requires total dedication every day. MSADA began, and continues, as an organization that looks out for our common interests while you are out doing what you do best. A few of us take on the responsibility of working through the day-to-day and looking ahead at the overall picture of our industry. In addition to our stalwart MSADA Board, our NADA Director position is an essential link between Washington, D.C. and our dealer reality on Main Street in Massachusetts’ cities and towns. I have often expressed my appreciation for Don Sudbay’s hard work in representing us at the national level, and I know he will continue to play an important role as MSADA Immediate Past President Scott Dube takes the reigns as the annual NADA Show comes to a close in Las Vegas. I look forward to continuing to work with them both, as we face a ramp up in legislative activity and continue to plan for the year ahead. And that is where you come in. It is time to make what is hopefully at least a yearly call with your Congressional and State House representatives. While there is always something on our agenda that needs attention, it is just as important to engage them on the ins and outs of your business. Your legislator should care about how your business is doing -- not just how you feel about the hot button issue of the day. As we finally enter Spring, I encourage you to grow your relationship with your legislators at the national and state levels. They are relationships that will always pay off when it counts, and building them can be as simple as a few minutes here and there. While we can point to allies such as Gov. Charlie Baker as evidence of some relief from the onslaught of overregulation, it is never a good time to tally victories with this crowd. So next time you see Scott and Don, likely at our Annual Meeting on May 4, please take a minute to show your appreciation for their efforts. And if you have questions about how you might approach a new representative, or simply have never done this before, be sure to ask them for insight. Our own Executive Vice President, Robert O’Koniewski, remains at your service for these types of questions as well. While not all of us have the time or ability to contribute at the director level, we can all be useful in helping to spread the word about our role in the communities we serve. In addition to hearing what is on our plate at the upcoming Annual Meeting, I encourage you to join us at our annual Dealer Day on Beacon Hill. More details on both are available in Bob’s column on page 6. t
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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 [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 Frank Salkovitz (508) 832-9816 Mid-State Insurance Agency James Pietro (508) 791-5566
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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
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The Roundup
Dealers Convene in Vegas By Robert O’Koniewski, Esq. MSADA Executive Vice President rokoniewski@msada.org Follow us on Twitter • @MassAutoDealers
Put It in the Books – 101st NADA Convention a Success On March 22-25 the National Automobile Dealers Association held its 101st celebration of automotive capitalism at its best in Las Vegas, Nevada, at which franchised dealers, their key managers, vehicle factories, vendors, and media got down to business with the latest trends in technology, auto selling and servicing, educational and compliance tools, and just about anything else associated with our industry. The “Show”, as NADA now markets it, saw over 16,000 industry reps from across the globe engage in the basic celebration of what has made this country great since the early 1900s, including the employment of millions through the years and the winning of two world wars. As for our piece of it, over 80 Massachusetts dealers and their key employees found their way to the City of Lights and had access to over 120 workshops, including scores of new topics, and over 600 vendors exhibiting their wares on a record amount of sold-out floor space. There was plenty of time for non-industry learning and entertainment, too. Guest speakers included Nick Saban, an auto dealer whose fulltime gig is the head football coach for the University of Alabama Crimson Tide; AutoNation CEO Michael Jackson; John Krafcik, CEO of Waymo LLC; and former SEAL Team Six Leader Robert O’Neil, who presented at the inspirational program on Sunday and is a key part of why we remember what happened on May 2, 2011. Dealers also heard from outgoing NADA chairman Mark Scarpelli from Chicago, Illinois, and MARCH 2018
Massachusetts Auto Dealer www.msada.org
incoming chairman Wes Lutz, a Dodge-ChryslerJeep-Ram dealer in Michigan. The convention proved special for one of our member dealers as well.
Frank Hanenberger of MetroWest Subaru in Natick carried the honor of Massachusetts TIME magazine Dealer of the Year into the competition against 53 other representatives from across the country. (You may recall Frank graced our February Auto Dealer magazine cover along with a full story inside.) The state honor is based on a compilation of works on behalf of the state association, efforts for social and charitable organizations, and commitment to the community. Although Frank did not receive the national award, he and his colleagues on the stage that day are all winners for the successes on behalf of their fellow dealers and fellow citizens where they live and work. Following Saturday’s convention session at which the TIME Dealer of the Year nominees
MSADA were honored, we held our state cocktail reception at the Encore Hotel, jointly sponsored by our accounting partner O’Connor & Drew, where MSADA President Chris Connolly welcomed Massachusetts dealers, their spouses and families, and our associate members in town for the festivities. Last year you may recall NADA celebrated its 100th birthday in New Orleans. Since its founding, NADA has experienced many major milestones, and so have its dealers. Each dealer’s story is an integral part of the NADA story, especially since so many generations of dealers have been steadfast NADA members. These stories range from store openings and mergers to dealers meeting with their members of Congress on Capitol Hill. Many dealerships were originally blacksmiths or wagon makers before selling automobiles. The NADA has established the Century Award to celebrate those dedicated dealerships that have been in the transportation business for 100 years or more. To apply for the award, visit nada. org/centuryaward. Also as part of the Show, the American Truck Dealers (ATD) held their annual convention, at which time they elected Louisiana truck dealer Jodie Teuton its new chairwoman. A Kenworth dealer, Jodie is now the first woman to hold that position at ATD. (For more on the ATD convention, check out this month’s Truck Corner column.) Kevin Holmes of Tri State Truck Center in Shrewsbury sits on the ATD board of directors representing the Freightliner dealers. Finally, prior to the NADA convention, the Automotive Trade Association Executives (ATAE) held its winter meeting. ATAE, housed in NADA’s Virginia headquarters, works with NADA on its national dealer organization programming and matters of federal advocacy on dealer issues, including participation in the annual Washington Conference; the ATAE network consists of the CEOs of over 100 state and metro new car dealer associations in the United States and Canada,
including this writer. This year’s winter meeting included presentations and discussions on a number of legislative and regulatory issues, including assaults on the dealer franchise system and a recap of NADA’s stair-step report, provided by Michael Regan, NADA’s senior vice president of industry relations. Be sure to mark your calendar for the 2019 NADA/ATD Show, January 24-27 in San Francisco.
AIADA 48th Annual Meeting The American International Automobile Dealers Association, which represents the international nameplate dealers, held its 48th annual meeting in Las Vegas on March 25 in conjunction with the NADA Convention. At that time, AIADA announced that Brad Strong, a Volkswagen, Audi, and Porsche dealer in Salt Lake City, Utah, will serve as its 2018 chairman. Strong actually took over officially in February but was recognized at this month’s annual meeting. The Strong family dealerships have been in operation since the 1940s. Brad has been on the AIADA board since 2009. He replaced the now Immediate Past Chairman, Paul Ritchie, of Hagerstown, Maryland. Also during the annual meeting AIADA president Cody Lusk presented Chicago dealer Mike McGrath with the 2018 David Mungenast Sr. Lifetime Achievement Award. The primary topic of discussion throughout the annual meeting was trade and the various impacts on international nameplate vehicle sales and costs potentially resulting from the Trump Administration’s efforts on existing and prospective trade deals, including its announced schedule of tariffs, NAFTA negotiations, and on-going talks with China, Japan, and South Korea. Needless to say, these dealers and their franchisor factories are quite concerned as to anything that will adversely affect consumer product price and material availability and costs. www.msada.org
Tariffs Debate, Consumer Affordability – Special Note from NADA President Peter Welch “While at the Geneva Auto Show, one topic dominated conversations among OEMs and dealers of all nameplates: President Donald Trump’s tariffs on imported steel and aluminum. As you know, despite the objections of economists and numerous domestic industries, as well as bipartisan concerns in Congress, recently the president ordered tariffs of 25% on imported steel and 10% on imported aluminum. Whatever the issue, NADA will always be on the side of maintaining vehicle affordability for our customers. Not only do we weigh every proposal against that affordability test, we ask policymakers to do the same thing so that we can sustain economic growth. Consumer demand drives the U.S. economy, and franchised dealers contribute almost 20% of retail sales nationally. NADA is engaged on this issue, just as we were in 2017 when Congress first floated the idea of a border-adjustment tax (BAT), and the President decided to renegotiate NAFTA. And as with the BAT and NAFTA, we are extremely concerned about what any proposed tariff might mean for vehicle affordability and the ability of our customers to purchase the new cars and trucks they need to continue driving the American economy forward.”
New NADA Guide on Tax Reform Law This month NADA released to its members A Dealer Guide to the Tax Cuts and Jobs Act of 2017. The guide summarizes many of the business and individual changes brought about by the tax reform law signed by President Trump on December 22, 2017, and represents the collective drafting efforts of three accounting firms (Boyer & Ritter LLC, Crowe Horwath LLP, and Dixon Hughes Goodman LLP) that provided substantial support to NADA’s successful advocacy efforts while the tax reform legislation was being considered by Congress. We encourage dealers to Massachusetts Auto Dealer
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The Roundup share this reference with their tax advisor to assist them with their tax planning and reporting responsibilities. In addition, senior CPAs with the three accounting firms that authored the guide discussed the tax reform law during the 2018 NADA Show at a workshop, “Explore Hot Tax Topics with Industry Experts,” which is available to members through the NADA website.
New NADA Truth in Lending Guide As part of the expansive range of Driven guides to assist dealers with compliance responsibilities, this month NADA released A Dealer Guide to Federal Truth in Lending Requirements. Prepared by experienced financial services attorney Randy Henrick, the guide details the many technical disclosure requirements that the Truth in Lending Act (TILA) and its implementing regulation (Regulation Z) impose on dealer credit operations as well as certain related credit issues. The guide explains important topics such as how to properly disclose in a consumer credit transaction the finance charge, amount financed, annual percentage rate, total of payments, total sale price, negative trade equity and amounts paid to others. Dealers are encouraged to share the guide with their attorney to help ensure their credit operations comply with TILA and Reg Z. For more information, dealers can contact NADA Regulatory Affairs, regulatoryaffairs@nada.org.
2018 NADA Dealership Workforce Now Open The 2018 Dealership Workforce Study (DWS) is now open for enrollment. NADA and ATD members that complete a questionnaire and submit their payroll records by April 30, 2018, will receive two complimentary reports and a one-year subscription to the DWS Database and Search Tool. The two complimentary reports are: • Automotive Retail: National & Regional Trends in Compensation, Benefits & Retention, which is the industry’s top resource for helping dealers meet their MARCH 2018
No. 1 challenge of attracting and retaining productive employees. It contains a clear analysis of employment trends, including national and regional data for 60 light-vehicle and commercial-truck dealership career positions as well as data on pay, benefits and turnover and more; and • Compensation, Benefits and Retention: How Your Dealership Compares, which is an individualized comparative report for each participating dealership. Dealerships that participate in the study will also receive access to the entire online DWS Database and Search Tool, which includes more than 1.6 million payroll records from over 10,000 dealerships. The Search Tool categories include: report type (compensation or tenure), franchise/brand, sales volume, geographic location (national, regional and state), dealership department, and job title. For example, a dealership can compare compensation for all service positions in neighboring states by using the Search Tool. Enroll today at www.nadaworkforcestudy.com. For questions, contact Dorenda Fisher at (703) 556-8583 or email workforcestudy@nada.org.
2018 Dues Invoices In January your Association sent out 2018 dues invoices to all our dealership and associate members. Our members’ dues help fund the Association’s activities on their behalf, including our lobbying on Beacon Hill and in Washington, our member counsel services, and our education and training activities. Over the last several years we have witnessed quite a bit of economic disruption in our industry, including governmental over-regulation. More than ever, our dealers need a strong MSADA. MSADA will continue to lead on the various issues that threaten the viability of our dealerships. We will strive tirelessly to keep you informed of developments in our industry and how they will play out in Massachusetts. These efforts also include working closely with NADA to better serve our members. Our strength lies in our members. With
Massachusetts Auto Dealer www.msada.org
your continued support and membership renewal, we can build on our current foundation and begin to enhance your Association’s core purposes of communication, advocacy, and education.
Save the Dates: Annual Meeting – May 4 Dealer Day on Beacon Hill – May 23 Dealer Hall of Fame Ceremony – October 3-5, Chatham We have a number of important events lined up for our members in 2018. Your Association will conduct this year’s Annual Meeting on Friday, May 4, at the Mandarin Oriental Hotel, in Boston. We are lining up a number of exciting industry speakers for the day. 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. Also, be sure to circle Wednesday, May 23, for our annual Dealer Day on Beacon Hill, when we schedule meetings for our attending dealers with their legislators at the State House, to lobby on the important issues of the day for dealers and our industry. Finally, 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. t
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Troubleshooting
MSADA
Legal Risks of Free Dealership Wi-Fi By Peter Brennan, Esq.
MSADA
Staff Attorney To compete for business and achieve top Customer Satisfaction Index (CSI) scores from customers, many dealerships have equipped their waiting areas with top-of-the-line amenities. Arguably the most sought after of these amenities, after the free coffee, is a Wi-Fi hotspot that customers can access while at the dealership. Free Wi-Fi Hotspots for customers have become so ubiquitous at businesses that shoppers have come to expect to be able to log on the internet via a mobile device at most retail establishments and will likely become irritable and confused if denied access. Irritated customers are bad for CSI scores. Providing the free Wi-Fi Hotspot to customers in your dealership’s waiting area being something of an obligation, the dealership must then consider the potential legal exposure that may result. It seems that the experts that have been warning of network vulnerabilities and the weakness of our connected data systems are proven correct in newer and more audacious ways each day. Recently, hackers were able to take down the city of Atlanta’s municipal government network for several days with ransomware that left the city at the mercy of a shadowy cabal of hackers that demanded a ransom in bitcoin to call off the attack. Cybercriminals have been known to target public Wi-Fi networks where their MARCH 2018
actions will be harder to trace, such as the one in the waiting area of your dealership. Consequently, the dealership should contemplate its exposure if the network is used to commit a crime and consider taking steps to prevent any misuse of the network and reduce the dealership’s liability should any malfeasance occur. Could a dealership be held responsible if a customer steals protected information while using the dealership’s Wi-Fi network? Could the dealership be found liable for copyright infringement if a customer uses the Wi-Fi network to stream or download copyrighted material? What if someone is using the network to prey on underage victims? Well, as we attorneys love to say, “It depends”. Massachusetts and federal law on the issue is somewhat vague, and while some cases have been litigated, the technology is still new enough that there is not much explicit guidance in case law. In Massachusetts, M.G.L. c. 266, §120F makes it illegal to gain unauthorized access to a Wi-Fi network, with the offense treated akin to a trespass on real property. Under the statute, the burden is on the network owner to require that users enter a password or other form of authentication to gain access to the network. If your network is unprotected, then you could be inviting trouble from whomever is in range to gain access to it. Several years ago, a company named Liberty Media Holdings (LMH) made some quick money by acquiring the rights to several humorously titled pornographic films and filing copyright infringement actions against illegal downloaders, as well as the owners of the internet networks through which the films were pirated. LMH claimed, under a state law negligence theory, that the network owners knew or should have known of the activity and should have taken steps to prevent it. Several network owners fought the charges, and two federal courts ultimate-
Massachusetts Auto Dealer www.msada.org
ly ruled that residential internet network owners were protected by safe harbors in Section 512 of the Digital Millennium Copyright Act and Section 230 of the Communications Decency Act (CDA), especially when access to the network was unauthorized. It seems plausible that a business offering free Wi-Fi could be held to a higher standard than a personal network, and that a court could find a business negligent if it installs no safeguards on its public WiFi network and allows users to pursue any base desires they so choose on dealership property. It is recommended that, at a minimum, the dealership set up a “splash” page that requires customers to sign in to access the Wi-Fi network. The splash page should consist of a space for the customer to enter their name and email address and the terms and conditions that the customer must agree to before gaining access to the network. Customers are used to jumping through such minor hoops to gain Wi-Fi access and should not feel unduly burdened by a such process at your dealership. The terms and conditions should cover the basics of the activity that you are trying to prevent on your network: any illegal activity, improper access or use of copyrighted material, pornographic content or content that could offend others, etc. When possible, certain categories of websites should be blocked. Additionally, the splash page should contain a disclaimer warning users that the network is unsecured and that the dealership is not liable for any harm that befalls the customer as a result of their internet usage. 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
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AUTO OUTLOOK
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AUTO OUTLOOK
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COVER STORY
From Germany to Chicopee Western Massachusetts welcomes back Mercedes-Benz with state-of-the art facility and dynamic duo
“If there ever were a MercedesBenz family, that would probably be us”
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Stand nearly anywhere in the new 37,000-square-foot Mercedes-Benz of Springfield and you will have a clear vantage point of everything from its extensive showroom to its service area. A mix of iconic Mercedes design cues blend with its glass-filled modern design to create a dealership that is both instantly recognizable and distinct. “We tried to use as much glass as possible not just outside, but between the offices and the departments as well,” explains co-owner and General ManPeter Wirth, whose many decades of retail experience informed By Gabi Gage ager the design of the $12 million dealership. “The idea behind that is, it is easy for customers to maneuver; it is not compartmentalized; and it communicates that we are one team. It is all about transparency,” he adds. What you will not see is a cashier or receptionist on the premises. “Everyone is a receptionist. Why would we bounce a customer around if you are already comfortable with one of our advisors?” Wirth reasons. “We want to make things easier, friendly, and efficient, and a lot of that is reflected in our facility.” In October of 2017, Peter and his wife and partner Michelle Wirth—who manages marketing and public relations— celebrated the grand-opening of the 295 Burnett Road dealership in Chicopee. For Mercedes-Benz owners and luxury car seekers alike, the prom-
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MSADA MSADA inent Chicopee location along Interstate 291 and the Massachusetts Turnpike was a welcome and much-anticipated addition. For roughly a decade, Mercedes had been absent from the Western Massachusetts market. The couple, along with business partner Rich Hesse, saw great potential in the market when they were first approached in 2014 by Mercedes-Benz Corporate with the idea. “A lot of luxury manufacturers are present in this market, and they are doing well. We felt that, if we brought the same level of customer experience and luxury car experience that we are already providing in New York to Western Massachusetts, we would do well,” says Peter Wirth. “Early indication is that we are.”
Building from Scratch The Wirths say they recognized the enthusiasm in the area for the return of Mercedes, but were anticipating more of a gradual increase of business from opening. Instead, it has been “like flipping a light switch,” according to Peter Wirth. “Our service department has been at 100 percent capacity since the day we opened.” Sending the Wirths to build the dealership from scratch made sense. “If there ever were a Mercedes-Benz family, that would probably be us,” says Peter Wirth. Not to mention their combined years of experience at every level of the brand. Mercedes Corporate recruited Michelle as an engineer while she was still in college.
“While I was working as an environmental and safety engineer, I caught a glimpse of understanding how emission certifications and standards, as well as motor vehicle safety standards, work,” recalls Michelle. She helped institute night vision on the S-class prior to moving from engineering to product and technology public relations for Mercedes-Benz Corporate for the next four years. She worked her way up the marketing ladder, along with media planning and communications, before leaving corporate to focus on retail marketing at the highly-successful Nanuet, New York, Mercedes-Benz dealership to join her husband and Hesse. “I just like cars,” jokes Peter of his relationship to the brand. He began working for Mercedes while still in college in his native Germany, first in product management before transitioning to retail. From business development center to sales, sales manager, general sales manager, and now this opportunity. “We fell in love with the brand and with each other,” says Peter of meeting his wife while both working for the company.
A Warm Welcome Their new venture was not without its challenges. Unlike most dealerships starting on fresh land, the location contained a pre-existing business— the Plantation Inn— that required demolition and clean-up prior to construction. But the process also provided opportunity for the newcomers to coordinate/ www.msada.org
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From Germany to Chicopee collaborate with the local community. “The support that we received from the municipality and the state was amazing,” says Peter Wirth. “They really were business-minded and helping us at points where they could by calling special meetings and giving us a heads up during the process.” Both Michelle and Peter cite the community’s warm welcome as one of their favorite parts of the new business. “People have been very open, welcoming, and willing to help out. I think that is the key to our success now and in the future— the
people. Their desire to also see us succeed,” says Michelle. “That has been really excited and really makes you feel good as a business owner and just as a person moving your whole family to this location,” adds Peter, who has been on-site the past year, as Michelle has split time between states while also coordinating the move for their four children. Part of the “people” component has also been building a strong team, something their looking to build upon in the
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coming year. “The biggest challenge since we have unlocked the doors is keeping up with hiring,” says Peter. The Mercedes-Benz of Springfield team has grown from just over 20 to 30 employees since opening. “It is a good problem to have.”
‘Deserving the Best’ Another task for their first year is continuing to spread the word and reintroducing customers to the brand and its many exciting updates in the past decade. “We started our marketing long before we opened the doors,” explains Michelle. “We have been first and foremost forging relationships with people in the community, but our media plan has involved pretty much all media—television, radio, print, billboards, digital, social.” Their exclusive—and extensive— terrain includes more than 165 zip codes covering Western Massachusetts, Northern Connecticut, Southern Vermont, and Southern New Hampshire. “Our overall message we are trying to get across is: We want people to fall in love with Mercedes, the same way that we fell in love with the brand,” says Michelle. “The products are the best in the world— we are biased obviously,” she says. “We need to make sure people know that that they deserve the best and they can have the best because it is now in Western Massachusetts.” “And it is affordable,” Peter adds. “We have cars starting at $32,000, new cars, commercial vehicles, high-performance vehicles, and everything in between.” The Wirths are proud also of the company’s certified pre-owned program, one of the most comprehensive in the industry according to Peter. The Wirths have set the bar high for both performance and customer service. “We do not think of it as competing with the next luxury dealer,” says Michelle. “We look at the best luxury hotel, the best cruise lines, for example, and why their customers return.”
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“Only the best customer service is good enough,” adds Peter. “And that is our track record at the New York store.” Their success is also tied closely with their strong belief in the product. “We are pretty connected to this brand, and we feel pretty strongly about it,” he says. “We want to mimic on
the retail side what Mercedes-Benz is as a brand.” With clean lines, modern design, and a historic track record of success, the outlook for the Wirth’s Chicopee dealership promises to do just that. t
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NEWS from the NEWS from Around Around the Horn Horn from Around
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Rosenberg Offers Audi Insight, New Company Outline to Automotive News Prime Automotive Group CEO and Audi National Dealer Council Chair David Rosenberg offered his take on the company’s profitability and new product line in an interview with Automotive News in March. Rosenberg praised the company’s new loaner program as evidence of the company being one of the few manufacturers that is a “true partner” to dealers. “Now, when we take these cars, we own them for the right amount of money,” he said. “We’re not upside down on them. We actually make money selling these cars. Before, we were losing $3,000 or $4,000 on each one. Just in my stores alone it was about a $700,000 swing in net profit last year. It’s a great program. It is pretty amazing.” He also offered insight on the upcoming A8, which will deploy an autonomous driving system on divided highways at under 35 mph.
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“Safety is one of the most important product qualities that people consider when buying a vehicle, and you have to sell the autonomous driving function as a safety feature,” Rosenberg said. “The body shop’s going to be a little less busy, but that’s OK.” Rosenberg also outlined the new business structure of Prime Automotive Group, a combined entity created alongside GPB Capital’s former Capstone Automotive Group. The company will have its eye on vertical integration within the industry. “So anything that touches the retail car business, we’re interested in it,” Rosenberg told the magazine. “There are trucking companies, non-manufacturer parts, collision centers, and accessories.” The full Audi interview and separate story about Rosenberg’s new company are available at www.automotivenews. com.
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DEALER SERVICES BOSTON
Herb Chambers Plans Three-Story Jaguar Land Rover Store Herb Chambers has plans for a contemporary, streamlined three-story building for its proposed Jaguar Land Rover auto dealership on Commonwealth Avenue in Allston, according to The Boston Herald. The paper says that Somerville company’s new 143,338-squarefoot building would include showrooms, offices, service bays, vehicle storage, and customer amenities, including lounges at
1186-1190 and 1192-1198 Commonwealth Avenue, currently the sites of Herb Chambers Honda and Infiniti car dealerships. The store would be adjacent to the company’s BMW/MINI and Porsche dealerships on Commonwealth Avenue.
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FCA Announces 2018 Customer First Award for Excellence Winners FCA recently announced its list of Chrysler, Jeep, Dodge, Ram, and FIAT dealerships that have earned certification as 2018 Customer First Award for Excellence winners. By achieving this elite status, these FCA US dealerships are recognized by consumers as leaders in customer sales and service experience. The winning dealerships touch 24 percent of FCA retail sales volume in the U.S. “Our dealers are striving to not just improve the customer experience in their facilities, but to become the industry leaders in customer satisfaction on both the sales and service sides of the business,” said Al Gardner, Head of Dealer Network Development, FCA – North America. “We now have triple the amount of winning dealerships that may proudly market themselves as Customer First Award for Excellence achievers. Consumers will know that they are in a Customer First dealership from the logos, but more importantly, they will experience the evolution of these elite stores.”
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VW Names Dealer Award Winners Volkswagen announced the latest recipients of two awards for its dealership partners. Members of the elite Customer First Club are selected by Volkswagen customers through a Customer Experience Survey. The selected dealers include: • W. Paul Clark III, Paul Clark Volkswagen • Lawrence Gordon, Colonial Volkswagen of Westborough, Colonial Volkswagen of Medford, and Wellesley Volkswagen • Brian Kelly, Kelly Volkswagen, Danvers • Richard A. Mastria, Jr., Mastria Volkswagen of Raynham The Wolfsburg Crest Club Award is a prestigious recognition given to Volkswagen dealers who provide incredible sales and service to their customers. Dealers must meet the highest expectations in order to earn this award. Volkswagen’s 2017 recipients include Lawrence Gordon, who earned the crest at a platinum level for his Medford store and gold level at his Westborough store.
The Massachusetts recipients include: 495 Chrysler Jeep Dodge Ram, Lowell Acton Chrysler Dodge Jeep Ram Best Chrysler Jeep Dodge Ram, Plymouth Central Chrysler Dodge Jeep Ram of Raynham Chrysler Jeep Dodge Ram 24, Brockton Colonial Dodge Chrysler Jeep Ram, Hudson Herb Chambers Chrysler Dodge Jeep Ram Fiat of Danvers Herb Chambers Chrysler Dodge Jeep Ram Fiat of Millbury Kelly Jeep Chrysler, Lynnfield Planet Chrysler Jeep Dodge Ram, Franklin Priority Chrysler Dodge Jeep Ram of Salisbury Quirk Chrysler Dodge Jeep Ram, Marshfield Quirk Chrysler Jeep, Braintree
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NEWS from Around the Horn PEABODY
Kelly Eyes New Maserati/Alfa Romeo Location The Peabody City Council will consider a special permit for a Maserati/Alfa Romeo dealership at the former Borders Books building at 151 Andover Street. Brian Kelly has owned the former Borders property since 2011 and used it for the outdoor storage of approximately 250 motor vehicles.
Kelly currently owns a Maserati/Alfa Romeo dealership in Danvers, but he is looking to relocate to Peabody since the Danvers lease is expiring. The special permit from the council is needed because of a planned addition to the rear of the existing building. “If granted this special permit, Mr. Kelly will be investing another $3.7 million into this site, which is an economic benefit to the entire city, and being a low volume business, it will be unobtrusive to the abutting residential neighborhood,” said Athan Vontzalides, the attorney representing Kelly before the council. SOMERVILLE
Herb Chambers MercedesBenz Earns ‘Best of the Best’ Award Mercedes-Benz USA recently announced Herb Chambers Mercedes-Benz of Boston as a recipient of its annual “Best of the Best” award. Mercedes-Benz recognizes the top 22 percent of its retail network with the Best of the Best recognition. The award, which is presented annually, goes to top performing Mercedes-Benz dealerships for demonstrating superior performance in various areas of business.
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Tesla Employee Says Company Sold Damaged Cars as New Tesla faces a whistleblower suit from a former employee who says the upscale electric car maker fired him for complaining about damaged vehicles that were fixed up and sold as new. Adam Williams of Lumberton, New Jersey, filed the suit in Burlington County Superior Court in January, and a lawyer for Tesla removed it to federal court in Camden in March. Tesla has vehemently denied the allegations in the complaint and contended that Williams is not entitled to any recovery, the company said in its notice of removal. However, the company concedes that the District Court’s jurisdictional level of $75,000 in controversy has been met. Tesla said in its removal notice that Williams’ salary at the time of dismissal was $120,000. If the case were to proceed to trial in one year, Williams’ back pay would be $180,000, the company said. Williams, who worked at the company’s showroom in Springfield, New Jersey, brought his suit under the Conscientious Employee Protection Act. He asserts that the company made high-dollar, predelivery damage repairs to its vehicles without
disclosure to buyers. Williams also reported to bosses that Tesla’s practice of selling cars designated as “lemons” as used cars, demos, or loaners was illegal or fraudulent. Williams joined Tesla in 2011. He says he first made the reports about sales of damaged vehicles in late 2016 to his supervisor, Matt Farrell; vice president, Jerome Guillen, and Lenny Peake, an East Coast regional manager. In early 2017, Williams was demoted from regional manager to service manager by Brian Applegate, a director for Tesla who is the boss of Farrell and Peake. Applegate told Williams he has a “brand” at Tesla and that there is no place for him in the company, the suit claims. In July 2017, Williams was again demoted to the position of mobile manager, despite performing his job duties up to the expectations of the company, his suit claims. And in September 2017, Williams was terminated by Albert Grice, who told him the decision was made by Applegate, according to the suit. The stated reason for his termination was performance, but he was performing up to expectations, the suit claims.
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Governor Suspends Uber Self-Driving Car Testing The governor of Arizona suspended Uber’s ability to test self-driving cars on public roads in the state following a fatal crash in late March that killed a 49-year-old pedestrian. The decision to block Uber Technologies Inc.’s testing is a blow to the ride-hailing company, which sees its future success
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reliant on driverless vehicles, and trails competitors such as Alphabet Inc.’s Waymo in developing the technology. Arizona had been a key hub for Uber, with about half of the company’s 200 self-driving cars and a staff of hundreds. In a letter sent to Uber Chief Executive Dara Khosrowshahi and shared with the media, Governor Doug Ducey said he found a video released by police of the crash “disturbing and alarming, and it raises many questions about the ability of Uber to continue testing in Arizona.” Police and safety regulators are investigating the March 18 fatality in which a woman crossing a four-lane road at night was struck and killed by an Uber self-driving SUV. The incident has focused new attention on the lack of clear safety standards for such vehicles. Ducey called the crash “an unquestionable failure.” “In the best interests of the people of my state, I have directed the Arizona Department of Transportation to suspend Uber’s ability to test and operate autonomous vehicles on Arizona’s public roadways,” Ducey said.
MSADA
Legal By Joseph W. Ambash and Jeffrey A. Fritz
Are Your Pay Plans and Pay Practices Aligned? The most common litigation concerning dealer pay plans likely centers on the issue of overtime: Does state and/or federal law require the dealership to pay individuals of a certain job category overtime; if so, did the dealership pay those individuals overtime; and, if so, did the dealership pay it correctly? These issues are very important, as even innocent missteps can lead to class action lawsuits, treble damages, and significant attorneys’ fees. Equally important, however, is the even more basic question: Does the dealership pay its employees everything their pay plans promise? Put another way: Does the dealership deduct from commission calculations things that are not specified or permitted under their pay plans? If so, the dealership may be exposing itself to significant liability, as well. Indeed, salespeople and their attorneys have been filing class action lawsuits against dealerships across the country, claiming breach of contract, fraud, and violation of state wage payment laws. Typically, these salespeople claim the dealership promised to pay them a percentage of the “gross profit” on each sale and failed to do so. They allege that by deducting “packs” and/or other undisclosed charges from the gross profit before calculating their commissions, the dealership breached their pay agreement and failed to pay them all they were due. They sometimes also claim the dealership must include all payments it receives from a manufacturer, lender, or other vendor as well as the doc fee in calculating the actual “profit” on a deal. And they usually also claim the dealership violated the law when it made a deduction from the salesperson’s earnings that was not explicitly disclosed in the pay plan. For example, a class of employees sued a New York automotive group in 2009 for unpaid wages (under state and federal law) and for breach of contract. With respect to
the contract claim, the complaint alleged the pay plan stated the sales employees were to be paid 20% of the “front end sales gross,” which would be reduced by “(1) commission pack, (2) transportation, (3) open repair order, and (4) adjustments for market conditions (i.e., fluctuations in gas prices).” While the pay plan did not specifically permit it, the dealer also deducted “auction expenses.” The plaintiffs in that case also claimed the dealer made other deductions from their commissions for disciplinary issues, damage done to vehicles, and “mechanical problems” with the vehicles they sold (which likely resulted in courtesy repairs). The case did not even go to trial. The United States District Court for the Eastern District of New York granted summary judgment in the plaintiffs’ favor. Sometime thereafter, the case settled for nearly six million dollars, to be divided amongst some 89 class members. What are some of the takeaways from these cases and cases like them? You should review your pay plans (we recommend annually) not only for wage-andhour compliance, but also to ensure your pay practices are aligned with them. Are you making deductions that are not specified or permitted by your pay plans? (To answer this question, you should ask both your managers and the individuals charged with performing the calculations.) If you are making deductions that are inconsistent with your pay plans, you either should conform your practices to your pay plans, or revise your pay plans to conform to your practices. Do your pay plans speak in terms of percentages of “gross profit”? If so, consider revising them to refer instead to “commissionable gross profit,” and define the term in the pay plan as to what it includes, what it excludes, and what sorts of deductions can and will be made from them. www.msada.org
Do your pay plans talk about deducting “costs” from “gross profit” or “commissionable gross profit”? Be sure to define them—or better still, refer to them instead as “charges” or “fees”—and specify whether they include only the actual cost to the dealership (i.e., parts and labor on a brake job) or the retail cost the dealership would have charged. You should specify in the pay plan that such costs may include profit to the dealership. Whatever the charge, you should ensure it fairly approximates the cost at issue, and is not unreasonably inflated. These examples and suggestions are by no means exhaustive or all encompassing, but the overarching take-away is that your pay plans should accurately set forth how commissions are to be paid, and you should pay your employees consistent with them. Such pay plans should include appropriate definitions and references to specific lines in your monthly financials, such that a non-industry individual (such a judge or juror) can readily follow it. To minimize the risk of such claims, and to minimize the risk of an adverse judgment (and publicity) in the event of such a claim, you should consider having your pay plans periodically reviewed by competent counsel. t
Joe Ambash is the Managing Partner and Jeff Fritz is a partner at Fisher Phillips, LLP, a national labor and employment firm representing hundreds of dealerships in Massachusetts and nationally. They can be reached at (617) 722-0044.
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Patrick Manzi
NADA Senior Economist
Boyi Xu
Economist
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NADA MARKET BEAT
JANUARY 2016
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Transitions at ATD By Charles Cyrill NADA/ATD Director of Media and Public Relations
In his final remarks as chairman of the American Truck Dealers, Steve Parker urged the nation’s commercial-truck dealers to work with their members of Congress to repeal the “outdated and harmful” federal excise tax on the sale of heavy-duty trucks and trailers. “I urge you to continue reaching out to your federal legislators. Host your elected officials at your dealership. Let them meet your employees,” Parker said in a keynote address to dealers in the audience at ATD Show 2018 in Las Vegas. “We were prepared to handle the onslaught of changes last year because we had solid grassroots.” Parker, who served two years as chairman, highlighted several of ATD’s recent accomplishments on Capitol Hill, such as a tax cut for pass-through entities, maintaining the LIFO inventory accounting method, and doubling the exemption on the estate tax, but added that “poisonous taxes, like the federal excise tax, are still here.” “ATD supported new legislation, H.R. 2946, which would eliminate the archaic federal excise tax altogether,” said Parker, 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. “And although we haven’t crossed the finish line yet, truck dealers across the nation are united on this issue.” The bill, introduced by Rep. Doug LaMalfa (R-California), currently has 15 bipartisan co-sponsors. Parker added that over the past two years ATD has continued to grow in several departments across the association—from adding more ATD 20 Group moderators, expanding its truck-related economic research and data, and commissioning a new landmark study, “Commercial Truck Dealer Future Landscape.” “Because we have tackled the changing truck dealer landscape head-on – despite rapidly evolving times – we will continue to make headway on new issues like highly-automated vehicles, electric vehicle legislation, and the changing truck dealer role,” he said.
Jodie Teuton Elected Chairwoman of American Truck Dealers In her first remarks as chairwoman of the American Truck Dealers (ATD), Jodie Teuton outlined MARCH 2018
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several challenges facing the nation’s mediumand heavy-duty truck dealerships—from adapting to changing technology, legislative and regulatory issues, to cultivating the next generation of dealership employees. “We are seeing the advent of new power sources,” said Teuton in keynote remarks at the ATD Show in Las Vegas. “We need to understand how autonomous and assisted-vehicle legislation will affect our industry in the future, and how new technology will impact customer demand.” Teuton, vice president of Kenworth of Louisiana and Southland Truck Leasing in Gray, Louisiana, also urged dealers to take an interest in legislative issues that impact truck dealerships, such as the President’s infrastructure proposal, changes to the tax code, and regulatory burdens. Teuton added that she will continue to champion ATD’s advocacy efforts. “Let us continue to build bridges with our lawmakers and regulators. Invite them to the dealership. Let them see the faces of your business. Help them understand our challenges. And let them know the rules affecting our business should be practical for both dealers and the customers we serve.” Concerning the dealership workforce, Teuton added that, since dealerships currently face challenges in recruiting, hiring, and keeping the best talent, they should widen their employment pools. “We want to be the employer of choice. We provide well-paying jobs that support families and communities. The quality of our operations rests in the teams we build,” she said. Teuton is the first woman to be elected chair of ATD, which was founded in 1970. “Women and millennials are untapped resources in our industry,” she said. “As a parent of a 17-yearold in Generation Z, I know there is a dynamic job force that is coming on the heels of millennials. We just need to attract them to our business. Let us get everyone excited about dealership careers.” In addition, Teuton highlighted the importance of education and training and encouraged ATD members and their employees to take advantage of ATD’s offerings from joining an ATD 20 Group, sending candidates to the ATD Academy, and completing online classes. t
NADA Update
By Scott Dube
A New Start Scott Dube, President of of Bill Dube Hyundai & Immediate Past President of MSADA, represents MSADA members on the NADA Board of Directors. As I return from Las Vegas and a great NADA Show, I am excited to begin my new role as your Massachusetts NADA Director. As MSADA’s Immediate Past President, I look forward to continuing to build on relationships with our legislators that we have built during these past several years. I thank Don Sudbay for his tireless work during his tenure in this position. He has been an incredible asset for Massachusetts auto dealers and I trust that we will continue to rely on his depth of knowledge going forward. It became abundantly clear to me this past week the size of the shoes I was going to be trying to fill. Don is well respected amongst our colleagues and the staff at NADA and to a person they expressed just how much they will miss him. As you will see from our new NADA Chairman’s first remarks from Las Vegas, we have many challenges and opportunities ahead. I look forward to being on the front lines with you. As always, should you have any questions about engaging with your elected officials, please reach out to me or MSADA Executive Vice President Robert O’Koniewski. Now is the time to engage – early and often – before the next crisis arrives on our doorstep. In the meantime, I am eager to begin serving you.
New NADA Chairman Wes Lutz Outlines Goals, Focus Areas for Coming Year Personal vehicle ownership is stronger than ever and auto dealers will continue to bring exciting, inspiring, life-changing products to their customers, just like they have have been doing for the last 100 years, Wes Lutz said in his first official speech as 2018 chairman of the National Automobile Dealers Association. “It is true, technology makes sharing a car more convenient than ever. But, what the naysayers forget, is that technology also makes owning a car better than it used to be,” said Lutz, who has been a dealer since 1976. “Auto dealers are going to sell the vast majority of electric cars sold… The automobile is the most exciting platform for innovation in the next 100 years.” Lutz, president of Extreme Dodge-Chrysler-Jeep-Ram
in Jackson, Michigan, outlined his priorities and focus for his coming year as chairman, including advocating new-car dealer concerns within the industry and in the legislative and regulatory affairs arenas, as well. Lutz said he will also encourage dealers to continue adapting to the retailing challenges ahead. “Just because a new system pops up, does not mean the ‘old one’ is dead. Just because technology changes, it does not mean that a car’s usefulness is gone. At almost every turn, dealers have faced challenges — some major ones. But our troubles did not define us. How we responded to them did.” As car ownership continues to break records — global sales of 90 million in 2017 — Lutz noted that auto dealers have a role to play in the future of the industry, investing in new franchises, new facilities, and new technologies. And NADA will have an important role to play, according to Lutz. “NADA will continue to fight for you in our Nation’s Capital — in the face of regulatory and legislative burdens. We will continue to reach out to manufacturers and build strong relationships moving ahead.” Lutz served on NADA’s board of directors until 2004. He came back to NADA’s board in 2013, serving as chairman of the association’s regulatory affairs committee. He also served as president of the Michigan Automobile Dealers Association in 2012, and was the TIME Dealer of the Year Award winner for Michigan in 2009. Most recently, Lutz served as NADA vice chairman under outgoing Chairman Mark Scarpelli. His new term as chairman officially began at the 2018 NADA Show in Las Vegas.
NADA Foundation Launches Major Workforce Initiative The NADA Foundation’s Board of Trustees has approved plans and funding for a largescale workforce initiative to promote the value of dealership jobs, especially service technicians, in the automotive retail industry. The initiative – which will include a new NADA Foundation website, videos, digital and social media content, and outreach to opinion leaders – will be developed in 2018 and launched at the 2019 NADA Show in San Francisco. The Foundation will also begin fundraising for the initiative in 2019. “Local dealerships provide more than a million good-paying jobs in sales, management, and service, which benefit communities everywhere,” said NADA Foundation Chairman Annette Sykora, who is the dealer principal of Smith South Plains Ford and Lincoln in Levelland, Texas, and a former NADA chairman. “And the future of our industry is the dealership workforce. Considering the shortages that dealerships now face, especially in recruiting, training, and
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NADA Update retaining technicians, the time is now for our Foundation to educate America on the value of these jobs to workers and local communities.” The NADA Foundation developed the framework for its workforce initiative over the course of 2017, after identifying the great need to harmonize efforts from automakers, training centers, and dealerships – especially on recruiting technicians. There is currently very little brand-neutral information on training centers. “What we found are a lot of competing silos that do not appear to be talking to each other, which makes getting into a technician career unduly burdensome on potential recruits,” said Jonathan Collegio, NADA’s senior vice president of Public Affairs, whose department administers the NADA Foundation. “We plan to provide compelling information on these good-paying careers at dealerships.” There is also a lack of targeted messaging and marketing to promote the careers, which Collegio says the NADA Foundation will address in its marketing efforts.
Autonomous Vehicles Will Benefit Drivers and Dealers, Says AutoNation, Waymo CEOs Partnering with self-driving technology company Waymo made perfect sense for the nation’s largest car dealer, AutoNation Chairman & CEO Mike Jackson said during a wide-ranging discussion on technology’s role in the future of the auto industry at NADA Show 2018 on March 24. “My thinking is, if I look at AutoNation as a company, marketplace is 75 percent personal use and that is where we are today, and then I look at the 25 percent shared use…and clearly a company like Waymo is going to disrupt shared use to a great extent, so if I can have added value with Waymo then I am in 100 percent of the marketplace,” said Jackson. “And ultimately where that line goes between sharing and personal use I am in the game.” Jackson joined NADA President and CEO Peter Welch and John Krafcik, CEO of Waymo, to discuss why AutoNation partnered with Waymo to provide maintenance and repair services for its autonomous ride-hailing fleet of Chrysler Pacifica minivans. “What really impressed me was, first, I liked that Google was doing it with deep pockets because I knew it was going to be a long, difficult journey,” Jackson said. “Second, that it was a passion of the founders of Google to make the world a better place, to save lives, and reduce fatalities, so I knew they would not give up.” But what really earned Jackson’s respect, he said, is that Waymo and parent company, Alphabet, “did not take any short cuts. They perfectly understood the difficulty and complexity and that they needed this capability to work 99.99 percent of the time.” Krafcik pointed out that Waymo is focused on technoloMARCH 2018
MSADA gy, not building and servicing cars. “We are a self-driving technology company. We are specifically not a car company,” Krafcik said. “We believe our role in the world is to make these drivers, not the cars. And to do that well we are going to have to have great partners like AutoNation.”
Consumers Overwhelmingly See Personal Vehicle Ownership as Key to Future Mobility Consumer demand for personal vehicle ownership remains overwhelmingly strong across all demographics, according to a new study commissioned by the National Automobile Dealers Association. Released at the 2018 Automotive Forum in New York, the study consisted of a large national survey of U.S. consumers on their attitudes toward autonomous vehicles, ride-hailing, car sharing, and personal vehicle ownership. The survey’s findings run contrary to a number of recent reports predicting that the convergence of electric vehicles (EVs), autonomous vehicles (AVs), and ride-hailing services will dramatically cut the number of personally owned vehicles. “Consumers overwhelmingly prefer the freedom and flexibility of owning a personal vehicle to ride-hailing services,” said Jonathan Collegio, NADA’s senior vice president of public affairs. “This sentiment cuts across all demographics and is a durable, fundamental desire of most consumers, even millennials. Ride-hailing will continue to supplement personal vehicle ownership going forward, but it will not supplant it.” Key findings from the study include: • Nine out of 10 respondents (89%) said they would rather continue owning a car, versus one out of 10 respondents (11%) who said they would prefer using ride-hailing as their exclusive mode of personal transportation. This question was asked after presenting the strongest arguments for the safety, affordability and accessibility of autonomous ride-hailing services. • This sentiment is overwhelming, even among millennials, who prefer vehicle ownership by a 80-20% margin. Importantly, millennials in the suburbs or rural areas were six points less interested in ride-hailing than their urban counterparts. • Consumers overwhelmingly view vehicle ownership as a convenience, not a cost-drag or nuisance to own, as several studies suggest. Only 6.5% of consumers in the survey viewed owning a car as a hassle or costly nuisance. • Consumers view wait times as a significant drawback of ride-hailing services. More than 88% of consumers said they would need to save at least $15 per day to incur an hour of aggregate waiting for ride-hailing services over a day. Half of consumers in the survey said they would need to save $50 per day to incur an hour of aggregate waiting time. t
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