MSADA, One McKinley Square, Sixth Floor, Boston, MA 02109
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FIRST CLASS MAIL US POSTAGE PAID BOSTON, MA PERMIT NO. 216
October 2018 • Vol. 30 No. 10
The official publication of the Massachusetts State Automobile Dealers Association, Inc
A New Tradition
MSADA gathers to induct the inaugural class of the Massachusetts Auto Dealers Hall of Fame
Ma s s a c h u s e t t s
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S ta f f D i r e c t o r y Robert O’Koniewski, Esq. Executive Vice President rokoniewski@msada.org Jean Fabrizio Director of Administration jfabrizio@msada.org Peter Brennan, Esq. Staff Attorney pbrennan@msada.org 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: jfabrizio@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., 27 BlumShapiro, 26 Boston Herald, 36 Lynnway Auto Auction, 25 O’Connor & Drew, P.C., 35 Southern Auto Auction, 2 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
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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: Changing Seasons ASSOCIATE MEMBERS DIRECTORY THE ROUNDUP: Inaugural Hall of Fame Honorees Legislative Scorecard TROUBLESHOOTNG: Frequently Asked Questions LEGAL: New Mass. Employment Laws Now in Effect AUTO OUTLOOK LEGAL: Are Your Factory Cost-of-Living Increases Paying Your Dealership for Warranty? ACCOUNTING: Annual Checkup: Planning for Next Year
18 Cover Story: MSADA Dealers Hall of Fame
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NEWS From Around the Horn INSURANCE: Do Your Employees Understand Their Benefits? nada Market Beat TRUCK CORNER: ATD Tackles Workforce Industry Shortage nada update: Bringing Reason to the Table
Back Cover: $1,800 Inside Front: $1,700 Inside Back: $1,600
Join us on Twitter at @MassAutoDealers www.msada.org
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From the President
MSADA
Changing Seasons By Chris Connolly, MSADA President I want to thank everyone who made it to our first ever Hall of Fame induction ceremony in Chatham. It was great to see everyone in a relaxed, beautiful setting where we could take a moment to honor those who have laid the groundwork for our industry. Looking backwards is not in our nature. We are always looking at what is coming down the pike and monitoring what could affect our bottom line. And there is one key aspect we sometimes take for granted: As November 6 approaches, all of us need to go out and vote. We should resolve to be active participants in our democracy. Hundreds upon hundreds of bills get filed through the State House, Congress, and your local Town or City Hall every year. It is an incredible amount of information to keep track of, and frankly most legislators can barely keep track of their own initiatives. That is why it is essential to have friends, or as close to friends as you can ever truly have, in politics. But not playing the game is not an option. If we do not make our voice heard in the items being brought to their attention, if we do not bring our own issues into the discussion, someone else is simply going to have an easier time making our lives difficult. Election time is a critically important event in our calendar, because it gives MSADA a chance to show our legislators, town councilors, mayors, etc. that the issues they are tackling are not in a vacuum. Every bill or ordinance they put forward and every vote they take has the chance to impact our businesses -- positively or negatively. Often the results are much more stark than they realize. Franchised auto dealerships employ more than 25,000 people in Massachusetts, and we are found in every part of the state. We represent a large and quantifiable part of their constituencies, and their agendas hit, or help, us in ways that we have to make sure they understand. The bottom line is, they know the difference we make in their local economy when we show them the numbers. The Teslas and Right-to-Repair outfits of the world cannot make the same case that we can, and they do not provide the constituency that we do. Lawmakers can often be reasoned with, and a lot of times the flashy issue of the day simply needs proper illumination from a local economics perspective. So, as Election Day nears, I encourage you to reach out to your local legislators. If you have not already done so this year, I encourage you to donate to our state Political Action Committee. It’s a key way of keeping our agenda on the table, and it only takes a few minutes. Contact Executive Vice President Robert O’Koniewski at (617) 451-1051 or rokoniewski@msada.org. t
OCTOBER 2018
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 Don Sudbay, Sudbay Motors
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 Bernstein Shur PA Ned Sackman (603) 623-8700 Blum Shapiro John D. Spatcher (860) 561-4000 BMO Harris Bank Chris Peck (508) 314-1283 Boston Globe Anthony Merullo (617) 929-2337 Boston Magazine Leah Palone/Dave Garland (617) 275-2021 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 Daniel Garces (703) 394-1313 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 Eastern Insurance Group William Gross (508) 620-3349 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 Hireology Kevin Baumgart (773) 220-6035 Hub International Insurance Brokerage Jim Walsh (603) 494-9016 Huntington National Bank John J. Marchand (781) 326-0823 JM&A Group Jose Ruiz (617) 259-0527 John W. Furrh Associates Inc. Kristin Perkins (508) 824-4939 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 McWalter Volunteer Benefits Group Shawn Allen (617) 483-0359 Micorp Dealer Services Robert Calhoun 617-285-4833 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 Sprague Energy Robert Savary (603) 430-7254 SunPower Christie McCarthy (408) 457-2357 Kristin Hodges (707) 694-7759 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 Deb Hogan (508) 951-8334 Windwalker Group Herby Duverne (617) 797-9316 Zurich American Insurance Company Steven Megee (774) 210-0092
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The Roundup
Inaugural Hall of Fame Honorees By Robert O’Koniewski, Esq. MSADA Executive Vice President rokoniewski@msada.org Follow us on Twitter • @MassAutoDealers
In 1936 baseball had its inaugural Hall of Fame class of some notable pillars of the sport - Ty Cobb, Walter Johnson, Christy Mathewson, Honus Wagner, and Babe Ruth. This month, your Association similarly inducted five titans of its very own in our industry when we gathered on October 4 at the Chatham Bars Inn on Cape Cod to honor Paul Balise, Ernie Boch, Sr., Ray Ciccolo, Herb Connolly, Jr., and Alvan Tufts Fuller as our inaugural class. The selection process started almost a year ago when we polled our member dealers for nominations. All the submitted names were eventually reviewed by our executive committee, with the board of directors making the final approvals. The purpose of the process was to receive input from our members as to whom they felt were worthy of recognition. The final selections reflect the stature of individuals who have built our industry throughout the last century into what it is today in the Commonwealth. As part of the ceremony, we honored our inductees in chronological order to reflect how our industry was built up over time, and we had current directors present the awards to inductees’ family members (in the case of Ray, he, of course, was able to represent himself). MSADA immediate past president and current NADA director Scott Dube presented the award to Peter Fuller, Jr., who accepted on behalf of Alvan; Franklin County director Jay Dillon, to Jeb Balise, on behalf of Paul; Chris and Dick Connolly accepting on behalf of Herb, Jr.; MSADA past president and current treasurer and Norwood Auto Mile fixture OCTOBER 2018
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Jack Madden, Jr., to Ernie Boch, Jr., on behalf of his dad; and Essex County director Don Sudbay to Ray (Don had succeeded Ray as NADA director seven years ago.) Earlier that day we hosted a breakfast for attendees at which Glenn Mercer provided an update to his “Dealership of the Future” analysis he originally unveiled in 2016. The Chatham Bars Inn was an ideal setting for our event, providing beach-front, relaxed elegance that everyone seemed to enjoy immensely. Be sure to lookout for our materials next year as we plan for our second induction ceremony – a must attend event for next fall’s calendar. Check out our cover story and photo spread in this month’s issue.
Used Vehicle Record Book Reform Bill Signed into Law On October 24, Massachusetts Governor Charlie Baker signed into law legislation to reform the manner in which dealers are required to maintain the used vehicle record book. The new law, Chapter 276 of the Acts of 2018, “An Act Relative to the Used Vehicle Record Book”, can be found at: https://malegislature.gov/Laws/SessionLaws/ Acts/2018/Chapter276. The new law will allow a dealer to comply with the current used vehicle recording process, in the alternative of keeping a hand-written book, by maintaining the required information in the dealer’s computer-based DMS, in a form and format approved by the RMV. The reform of this outdated provision will not impair the ability of a dealer to
MSADA make this information immediately available upon request by the RMV or law enforcement officials, with a mere click of a mouse, as it replaces the current, outdated requirement to maintain hand-written records that no longer reflects the realities of today’s modern business technologies. The law will go into effect in ninety days, on January 22, 2019. Please maintain your current used vehicle record keeping procedures, including recording all used vehicle transactions in the book, until at least that date. The Registry of Motor Vehicles will need to issue new regulations regarding the maintenance of used vehicle transaction records pursuant to the new law, so be on the lookout for communications from MSADA regarding any new rules. During the legislative process several senators and representatives were pivotal in getting this done – Speaker Robert DeLeo, Senate Ways and Means chair and now Senate President Karen Spilka, and bill sponsors Sen. Mike Rush and Rep. John Rogers. Of course, it would not be law without the signature of our current governor, Charlie Baker. We owe them all a large debt of gratitude for working with us to eliminate this arcane hand-written requirement dating back to when Woodrow Wilson was president. Finally, we owe a huge “thank you” to our member dealers who answered our call to action when the bill made it to the governor’s desk. Without your emails and phone calls to the governor, we would not have achieved this success. Success has a thousand authors, and the adage is especially true for the legislative process.
Dealer Peter Wirth Hosts Rep. Wagner We love to encourage our member dealers to host legislators at their dealerships to give our elected officials some idea what our businesses are all about. Such a visit gives us an opportunity to tell our stories, unfiltered and face-to-face in the community you have committed million of dollars to your business, employing on
sor manufacturer. We continue to advocate for legislation that is actively alive during the General Court’s informal sessions. Senate 2261, sponsored by Sen. Vinny deMacedo (R-Plymouth), was passed by the Senate earlier this year and sits currently in the House Ways and Means Committee. Additionally, Governor Baker and Lieutenant Governor Karyn Polito are well aware of our plight. After election day next month, please let us know if you want to host a legislator at your store. It is a great way to get your story out to your elected officials you send to the State House to make important policy decisions on your behalf.
Boyle Hosts Fundraiser for Geoff Diehl average 60 people in the legislator’s district. On October 2, Peter Wirth of Mercedes-Benz of Springfield hosted state Rep. Joe Wagner (D-Chicopee) for such a visit. Rep. Wagner presently serves in the Massachusetts House as the House chairman of the Joint Committee on Economic Development and Emerging Technologies. Rep. Wagner has a keen interest in workforce development, especially in the field of auto techs, and was instrumental last session in getting language into state law to develop a stream of auto tech jobs from high school through to community college to dealership employment. An important issue we discussed with Rep. Wagner is the dire need among newly built franchised dealerships for a vehicle inspection station license. Although the new inspection contract that was implemented a year ago has a provision to allow for the issuance of additional licenses outside of the nonsensical cap that is bureaucratically in place, the current registrar of motor vehicles refuses to issue any new licenses, especially to newly constructed multi-million dollar franchised auto dealer businesses that depend on positive customer experiences for their survival with the public and their franchiwww.msada.org
On October 12 former MSADA President Jim Boyle of Tuck’s Trucks helped host a fundraiser for state Rep. Geoff Diehl (R-Whitman), who is the Republican
nominee taking on current U.S. Sen. Elizabeth Warren in her bid for re-election this year. At that fundraiser, we presented a NADAPAC check in support of the Diehl candidacy. Over her six-year tenure, we have met with her staff several times, especially when legislation was pending to overturn the CFPB guidance on auto lending that
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The Roundup was adversely impacting dealership operations and consumer experiences. Sen. Warren has demonstrated time and time again a hostility to our industry. The senator has been the lone legislator in our congressional delegation to express no interest in helping our industry as we confront a number of non-consumer finance related issues – electric vehicles, vehicle autonomy and the protection of state franchise laws, tariffs, obsolete truck excise taxes, etc. Although the Diehl candidacy certainly is a longshot, his election would represent an approach to the office that would be a complete 180-degree difference from the current incumbent.
Election Day – Tuesday, November 6 Next month’s voters will go to the polls in Massachusetts and across the country to select federal, state, county, and other local officials. On Tuesday, November 6, the polls will be open here from 7:00 a.m. to 8:00 p.m. Republicans Gov. Charlie Baker and Lt. Gov. Karyn Polito are up for re-election, as are the other constitutional officers, all Democrats – Secretary of State Bill Galvin, Treasurer Deb Goldberg, Attorney General Maura Healey, and Auditor Suzanne Bump. Additionally, citizens will be voting for U.S. Senator and their local congressperson, as well as state senator and state representative. Under state law, you need to allow an employee up to two hours of unpaid time during the work day to vote, if they request it. As a business owner who is deeply affected by the policies put forth in Washington and on Beacon Hill, please be sure to vote so your voice is heard.
gram, we will support your compliance efforts, from $500 up to $1,000, for your participation in OSHA/environmental workplace compliance services offered by Furrh Associates or KPA; employment law services offered by Fisher Phillips; and tax compliance and cybersecurity protection services offered by O’Connor & Drew. Additionally, under our community outreach program, we will support your community giving up to $1,500 in the year. If you need information or the application for these programs, please do not hesitate to contact me.
Save the Date – 2019 Auto Show, Dealer Summit & Gala Our 2019 New England International Auto Show will be here before you know it. The show will run January 1721, ending on the Martin Luther King holiday. Our Dealer Summit and Gala will be held on Friday, January 18. Be on the lookout for our registration materials.
Congrats to Ray Ciccolo On September 27, Ray Ciccolo held an extraordinary bash to christen the grand opening of his new Boston Volvo Village store in Allston in what was once an International Harvester store almost 100 years ago. With real estate at a premium in that congested Boston neighborhood, the store uses all floors of the building to include a showroom on the second floor
Compliance, Community Outreach Subsidy Reminder As the calendar nears an end, please accept this as our monthly reminder to our member dealers to take advantage of our compliance assistance subsidy program as well as our community outreach assistance program. Under our compliance assistance proOCTOBER 2018
and a drive-through service check-in in the basement. At an age when many are content to sit around and reminisce, Ray keeps going
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MSADA strong with the combined unbound enthusiasm of several men a fraction of his age. Congratulations, Ray! Good luck with the new Volvo store.
Tech Competition to Start Next Month Next month we will begin the process to select our Massachusetts auto tech team to represent us at the national competition at the NY Auto Show in April 2019. On Monday, November 19, we will conduct the written test for students who sign-up through their high schools, the results from which we will select the top ten two-person senior teams from the schools. They will then compete at the hands-on competition, which we will hold on January 19 at the BCEC during opening hours of the Saturday of our auto show. The winning team will then be sent to NYC. During the 2018 national competition our Massachusetts team finished in sixth place, and in 2016 our team was third.
Chevrolet Presents Red Sox Slugger Steve Pearce with the 2018 Willie Mays World Series MVP Award
Pearce, 35, grew up a life-long Red Sox fan. Traded from Toronto to the Red Sox in late June for a minor league infielder, Pearce became the first position player to win a World Series MVP while playing 50 or fewer games for the winning team in his career. Congratulations for a true Cinderella story. t
Troubleshooting
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Troubleshooting
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Frequently Asked Questions By Peter Brennan, Esq. MSADA
Staff Attorney Here at your Association we field legal inquiries from dealers and dealership employees every day. Many of these questions resurface from time to time, and this column will periodically review some of the most frequently asked questions that we answer for our members. Question: Do I have to include in the advertised price of the vehicle the preparation fee that we charge on every vehicle, or is it fine to simply list the fee in a disclaimer or elsewhere in the advertisement? Answer: Dealership advertisements are regulated at the state and federal level. Federally, the Federal Trade Commission monitors auto dealer advertising for compliance with federal truth-in-advertising rules and has recently brought several large cases against dealers for violating these rules. In Massachusetts, the Attorney General’s regulations, at 940 CMR 5.02, govern motor vehicle advertising. 940 CMR 5.02(3) states the following (emphasis mine): (3) It is an unfair or deceptive act or practice for a motor vehicle dealer to advertise the price of motor vehicles unless such price includes all charges of any type which are necessary or usual prior to delivery of such vehicles to a retail purchaser, including without limitation any charges for freight, handling, vehicle preparation and documentary preparation, but excluding taxes and optional charges for the dealer’s preparation of title and assistance in registering a vehicle. Consequently, the amount of any document preparation fee regularly charged by OCTOBER 2018
a dealership must be included in the advertised price of the vehicle. Dealers that run advertisements, which do not include the document preparation fee in the advertised price of a vehicle but instead list the amount of the fee in a disclaimer or elsewhere in the advertisement, may be putting themselves at risk of violating Chapter 93A, the Massachusetts Consumer Protection Act. Question: May our dealership charge every service customer a set fee or percentage of their bill for the disposal of environmentally hazardous materials, regardless of whether we took in hazardous materials during the repair? Answer: A dealership may charge a fee for the disposal of environmentally hazardous material, but only if hazardous materials are actually removed and disposed of
Any fee charged to the customer for the disposal of hazardous materials is subject to the sales tax. by the dealer during the repair. Charging a fee for any service not performed during a service visit is a clear violation of the Attorney General’s regulations at 940 CMR 5.05. Any disposal fee charged should be reasonable in relation to the services performed and can be included as a set amount or percentage of the total charge for particular services, presuming the fee is disclosed to the customer at the time that the customer authorizes the repair. The disposal fee should be explicitly stated on the customer’s receipt. Posting a conspicuous notice regarding the hourly labor rate, parts costs, shop supplies charge, and other potential fees, such as the disposal fee, in an area where the notices will be visible to
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the customer is a good way to show actual notice under the regulations and will protect dealers that face a customer complaint based on “hidden costs”. Any fee charged to the customer for the disposal of hazardous materials is subject to the sales tax. This is the case whether the fee is charged as a percentage of the total repair or as a flat fee. Question: I would like to give customers that buy or lease a car from me a $250 Amazon gift card. Is this legal? Answer: Yes, presuming that a few legalities are observed. First, if advertised as a “gift”, then it must be treated as a gift and the cost of the gift card must not be included in the advertised price or final purchase price of the vehicle. Additionally, the value of the gift card must not be used to reduce the purchase price of the vehicle for sales tax purposes. If the promotion is advertised, then the dealership must honor the terms of the advertisement. For instance, if the advertisement states that a gift card is given for the purchase or lease of any vehicle, then the dealership must not attempt to limit the promotion to certain vehicles once the customer is in the store. The dealership must also consider how the Internal Revenue Service treats business gifts when designing a promotion around gift cards or other gifts. The IRS allows businesses to deduct all or part of the cost of gifts given in the course of trade or business; however, the deduction is limited to $25 per gift. As always, you should seek the advice of counsel when designing any promotion since advertising and promotion rules vary from state to state. t If you have questions regarding the topics covered here, 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.
MSADA
Legal
By Joseph W. Ambash and Jeffrey A. Fritz
New Mass. Employment Laws Now in Effect
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.
Two new laws bearing on Massachusetts employers went into effect in October. One concerns non-compete agreements between employers and employees and the other modifies the Massachusetts “Ban the Box” law to limit further what an employer can ask about applicants’ criminal backgrounds. This article provides a brief overview of both new laws.
New Non-Compete Law On October 1, “An Act Relative to Economic Development in the Commonwealth” went into effect in Massachusetts. This new law includes significant changes as to how Massachusetts treats non-compete agreements. A non-compete agreement is an agreement between an employer and employee under which the latter agrees not to engage in certain specified competitive activities with the former after the employment relationship has ended. Under the new law, non-compete agreements now must be: (1) in writing, signed by both employee and employer, and expressly state that the employee has a right to consult with counsel; (2) no broader than necessary to protect the employer’s trade secrets, confidential information, and/or goodwill; (3) no longer than twelve months in duration (unless the employee breaches his/her fiduciary duty to the employer or unlawfully takes the employer’s physical
or electronic property, in which case it can be extended to two years); (4) reasonable in geographic scope; (5) reasonable in the scope of proscribed activities; (6) supported by a garden leave clause (such that the employee receives at least 50% of his/her pay during the (first twelve months of the) restricted period or “other mutually-agreed upon consideration”); and (7) consistent with public policy. Where a non-compete agreement is to be entered into before an individual begins employment (i.e., pre-hire and as a condition of employment), it must be provided to the employee the earlier of (1) the date of formal offer of employment or (2) ten business days before his/her employment begins. Conversely, where a non-compete agreement is to be entered into by a current employee, it must be supported by “fair and reasonable consideration” (over and above continued employment) and provided at least ten days before its effective date. The new law does not apply to: (1) non-compete agreements entered into prior to October 1, 2018; (2) covenants not to solicit or hire employees of the employer; (3) covenants not to solicit or transact business with customers, clients, or vendors of the employer; (4) non-compete agreements made in connection with the sale of a business entity when the party restricted is a significant prior owner; (5) non-compete agreements outside of an employment relationship; (6) forfeiture agreements; (7) nondisclosure or confidentiality agreements, (8) invention assignment agreements; (9) garden leave clauses; (10) non-compete agreements made in connection with a termination of employment (so long as the former employee is given seven days after signing to revoke); and/or (11) no re-apply agreements. Accordingly, employers are free to continue such agreements as they have previously, consistent with existing law. Finally, the new law makes clear that non-compete agreements no longer are enforceable against: (1) employees who are non-exempt under the Fair Labor Standards www.msada.org
Act; (2) student interns; (3) employees terminated “without cause or laid off”; and/or (4) employees who are eighteen years old or younger. Exactly how the new Massachusetts non-compete law will be interpreted and applied remains to be seen. If your dealership enters into non-compete agreements after October 1, you should pay attention to developments in this area as they occur, and consult counsel well-versed in this developing area as necessary.
New Criminal Justice Reform Law On October 13, “An Act Relative to Criminal Justice Reform” went into effect in Massachusetts. While it bears on more than just employment, this new law amends the Massachusetts “Ban the Box” law and further limits what an employer can ask during the hiring process. First, the amended law has decreased the time period for disclosure of misdemeanor convictions. Before, Massachusetts employers could ask about (certain) misdemeanors within the prior five years. Now, that has been reduced to three years. Second, the amended law prohibits Massachusetts employers from asking applicants about sealed or expunged criminal records. And third, in the event a Massachusetts employer asks about prior convictions (not on an application, of course, which is prohibited), the amended law requires any such form also to include the following language: “An applicant for employment with a record expunged pursuant to section 100F, section 100G, section 100H, or section 100K of chapter 276 may answer ‘no record’ with respect to an inquiry herein relative to prior arrests, criminal court appearances, juvenile court appearances, adjudications, or convictions.” If you ask about criminal background history, you should make sure to include this statement on any such document going forward. t
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Are Your Factory Cost-of-Living Increases Paying Your Dealership for Warranty? By Leonard A. Bellavia Leonard A. Bellavia is the founding partner of Bellavia Blatt, PC. Mr. Bellavia is considered a nationally recognized authority in the field of automotive franchise law and has represented the most well-known and largest franchised dealer groups nationwide for over
30 years. He can be reached at (516) 873-3000, or
lbellavia@DealerLaw.com.
Your dealership may be party to a contract with your manufacturer that provides you with incremental increases to your warranty labor rates. While such a contract ensures that your dealership will receive increases to your reimbursement rates for warranty labor, you may be foregoing an even larger increase to this labor rate that is granted to you under Massachusetts law. Submitting for warranty labor reimbursement at retail rates will generate several thousands of dollars in additional profits annually for your dealership. With the help of experienced legal counsel working behind the scenes to help you respond to a factory’s legal arguments, your dealership can maximize the warranty labor rates you receive from any submission to your factory. Some manufacturers, such as Ford and General Motors, provide for automatic increases to their warranty labor rates. While these periodic increases may appear to be a favor from the factory, the adjusted labor rates are nearly always less than the actual retail customer labor rates charged by your dealership. In many instances, even with annual cost-of-living increases, dealerships are not reimbursed at rates that are comparable to what they receive from retail customers. The good news is that dealerships are not locked into these agreements. Receiving retail warranty reimbursement for labor OCTOBER 2018
is a right granted to all franchised motor vehicle dealers in Massachusetts. The existence of an agreement between you and your manufacturer does not deprive your dealership of this statutory right. Typically, a medium-sized dealership will perform approximately 400 hours of warranty labor services per month. Dealers receive a typical increase of $15.00 per hour after submitting for increases to their warranty labor rates. This means, without cutting staff or investing in new equipment to operate more efficiently, dealers may realize an extra $6,000.00 in monthly profits by submitting for warranty labor reimbursement at retail levels. Some dealers are hesitant to submit for increases to their warranty labor rates out of fear of retaliation or disfavor by the manufacturer. In our experience, dealerships have seen no such action by a manufacturer. These laws were agreed to by your manufacturer, and you are simply taking advantage of the laws. Getting outside support can provide you with the resources and expertise needed to get your submission done in a timely manner. A dealership could formulate a submission on its own, but the process is labor-intensive and can take one or multiple dealership employees away from their everyday responsibilities. If performed by dealership staff, you risk losing thousands of dollars in profits for every month your staff has delays in putting together the submission. Why submit a delayed request that may not yield the best results? A firm providing warranty reimbursement services should be able to formulate a submission within a week. The benefits of retaining an attorney extend beyond the preparation of the submission. If you receive a rebuttal or counter-offer rate from the factory that is less than what you submitted for, you can either accept the rate or choose to have your attorney negotiate for a rate that is closer to what was originally re-
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quested. Manufacturers have their own legal counsel or hire outside law firms to respond to dealer submissions, so dealers should be armed with their own counsel to respond to manufacturer rebuttals, which normally state legal arguments against granting your proposed labor rate. In responding to manufacturers, a law firm should work behind the scenes to draft letters on dealer letterhead so as not to let the factory know you have retained counsel. Writing on dealer letterhead conveys a non-adversarial tone, which will aid your dealership in quickly obtaining your warranty labor rate increase. If a flex of muscle becomes necessary, your attorney can switch your letters over to his or her firm’s letterhead to let the factory know you are taking this matter seriously. In addition to hiring an outside law firm to rebut your submission, each factory has its own set of rules regarding how they review warranty labor submissions. However, as stated above, Massachusetts state law always trumps factory policies regarding submissions. In responding to factory rebuttals, your attorney can keep the focus on what matters – your rights under Massachusetts state law. Occasionally, factories will attempt to pass off an agreement between itself and your dealership as proof of the fact that you are not entitled to receive retail reimbursement under state law. This is also where experienced legal counsel can step in and articulate your rights under Massachusetts state law. Do not let sternly worded responses to your submission, likely drafted by factory attorneys, persuade you into accepting reimbursement rates that are less than that to which you are entitled. These agreements can last for multiple years and, unless you are aware of your rights under Massachusetts state law, you will be unnecessarily sacrificing hundreds of thousands of dollars in profit over the duration of these agreements. t
ACCOUNTING MSADA MSADA
MSADA
Annual Checkup: Planning for Next Year By Kevin Carnes
O’Connor & Drew With
over
20
years of
public accounting experience,
Kevin joined 1993 and became a Principal in 1997. His practice is primarily focused on family-owned commercial clients and working with automobile dealerships throughout the country. Reach him at kcarnes@ocd.com. the firm in
ing it. Also, decide if it will be a bottom line amount of profit for each month and year or a return on sales or gross profit calculation. Once this is established, you will need to create the road map on how to get there. Determine how many new and used vehicles you are going to sell and what the gross profit will be. Then, calculate how many hours will be generated in the shop and at what gross profit. Once these things are established you can back into the personnel needed to obtain these volumes and grosses. Your fixed expenses are what they are — hence, the name fixed. So, it is important to make sure that once the gross profit estimates are determined that you back out your fixed expenses and overall profitability goals, so you can determine the amount you can afford to spend in variable/semi-fixed expenses. For exam-
each month and move this cash out of the operating account and into the CMA or savings account. It may not be possible to turn 100% of profits into cash because of working capital requirements or debt repayments, but establish a policy to turn a percentage of profits into cash. For example, if you establish a policy to turn 75% of profits into cash and you make $50,000 in the month, within 30 days of month end you should be able to move $37,500 to a separate cash account. If you cannot, you should identify the reason why, i.e., increased used equity or contracts, etc.
It is that time of year again. It is time for Enhance your employees an annual checkup! This is the time when Most people want to advance in their you get to play Monday morning quarcareers. They want to learn new things terback and look back at all the mistakes and avoid becoming too complacent. In that were made throughout the year and looking towards 2019, take a look at your wonder, “What if?” It is a time when you employees. Assess employee strengths reflect upon the goals that you set at the and weaknesses and idenbeginning of the year and tify the areas where they realize how far you strayed currently do, or potentially By quantifying your goals, you will be from them. Once you are could, add value to your done torturing yourself able to make better business decisions business. Set individual with the “Could haves and and will be able to hold yourself and goals to further develop Should haves,” remember your employees accountable. employees, whether it is by that you need to learn from giving them more responsipast mistakes rather than bilities to do more things in their current ple, if you determine that the monthly continue to dwell on them. It is time to position, attend outside training sessions gross for the store is $350,000 and your move forward! to build upon their skills, or to begin a fixed expenses are $60,000 and you So, what are you going to do about new position within the company. Most want to return 15% on gross or $52,500 next year? What are you expecting from of the time you get what you pay for, so ($350,000*15%) this leaves you with yourself? Your employees? How is evhopefully if you invest in your people $297,500 to spend on variable and semieryone supposed to know what you are you will get a return on your investment. fixed expenses. expecting if you have not taken the time Although 2018 is not done yet, it By quantifying your goals, you will be to figure it out yourself? should be a relatively good year in the auable to make better business decisions The following are some suggestions to tomobile business. Although you would and will be able to hold yourself and your consider when looking towards 2019. rather be lucky than smart in this busiemployees accountable. Quantify your goals ness, preparing for the upcoming year Turn your profits to cash should increase your odds of enjoying a Whether you prepare detailed forecasts “Cash is King.” This is something you successful 2019. Hopefully, a year from or budgets, or you scratch numbers on have always heard, and it still holds true. now you can look back at what you have a napkin after your morning coffee, you So, establish cash goals. Profitability is accomplished and see that you reached need to quantify your goals. In doing this, the means to generate cash; however, more of the goals that you set for youryou should establish parameters that are oftentimes companies are profitable and self and your business than not. Then you important to you and your company. won’t have to beat yourself up too much still go broke because they do not manBegin with the basics. Determine when you reflect back again next year. age their cash. One approach that I would where you want your profitability to be t recommend is to turn profits into cash and determine how to go about measurwww.msada.org
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RACE TO THE FINISH COVER STORY
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New Tradition MSADA gathers to induct the inaugural class of the Massachusetts Auto Dealers Hall of Fame On Thursday, October 4, at the Chatham Bars Inn on Cape Cod, your Association honored five pioneering franchised auto dealers as the inaugural members of the MSADA Auto Dealers Hall of Fame – Paul Balise, Ernie Boch, Sr., Raymond Ciccolo, Herb Connolly, Jr., and Alvan Tufts Fuller. While our living legend Ray Ciccolo was there to accept his award in person, your Association presented the other individual awards to surviving family members who were there on behalf of our
honorees – Jeb Balise, Ernie Boch, Jr., Chris and Dick Connolly, and Peter Fuller, Jr. Hall of Fame attendees had the opportunity to hear from automotive analyst Glenn Mercer, who provided an updated version of his 2016 “Dealership of the Future” prognostication at Thursday morning’s breakfast. Enjoy the pictures of our events over the next several pages. I hope to see you there next year. (Photos by Steve Baty)
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RACE TOHALL THE OF FINISH MSADA FAME I have been extraordinarily blessed. Get involved in the community and give back. It is a wonderful thing to do, and it makes you feel wonderful.
–Ray Ciccolo
From there my Grandfather’s business acumen and sales skills kicked in and he built an enormously successful automotive enterprise.
–Peter Fuller, Jr.
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Massachusetts Auto Dealer www.msada.org
MSADA The Connolly family is extremely fortunate to have been part of a vibrant Massachusetts dealer community for 100 years. The the relationship we share with our customers is something we have been building on consistently for a century. –Chris Connolly, MSADA President
We are humbled and honored to have Paul Balise chosen for the inaugural induction of the MSADA Hall of Fame. I am sure he never imagined we would grow to the size we are now or be able to make the difference we do in our local communities. –Jeb Balise, MSADA Director www.msada.org
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RACE TOHALL THE OF FINISH MSADA FAME I am ecstatic to be accepting this award on behalf of my father. He loved being a dealer and building his business and making sure his customers had a great experience at a great price. –Ernie Boch, Jr.
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NEWS the NEWS from Around Around the Horn Horn from Around NEWSfrom
NEWS the Horn
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Village Volvo Opens State-of-the-Art Facility Boston Volvo Cars, of Ray Ciccolo’s Village Automotive Group, has relocated to 61 North Beacon Street in Allston, adjacent to its previous home at 75 North Beacon Street. The new, state-of-the-art dealership showroom held its grand opening on September 27. In a unique vertical showroom design, the new store utilizes three floors of the building, occupying 42,000 of the total 71,300 square feet. A service intake area is located on the basement level (accessed through the rear of the building); the main showroom is found on the street level, with additional showroom space on the second level. The vehicle service area remains at the previous location. In the early 20th century, this Allston area was known as Boston’s Auto-Mile, or “Truck Mile” to some, as International Harvester manufactured trucks and other machinery. Boston Volvo Cars’ move returns the historic commercial building to
OCTOBER 2018
its original use as an automobile showroom. The stately brick building was built in 1925 and served as headquarters for International Harvester and New Balance in the following decades. As Boston Volvo’s new home, the building underwent an adap-
tive-reuse project to preserve its red brick façade with architectural details of its original 20th-century commercial character. “In 1963, our original Volvo showroom was bare-bones and simple. Just as 21st century Volvos have transformed from solid and boxy to sleek and stylish, so has their flagship home in Boston,” said Ray Ciccolo, President and Founder of Village Automotive Group. “We wanted to create an interior that combines beautiful Swedish simplicity with unique functionality. While our home has changed, you can still expect the same family-owned dealership and service.” Boston Volvo Cars’ new facility will accommodate changes in the automotive industry and provide customers with better access and flow for more convenience, including updated amenities in customer waiting areas. Village Automotive has been implementing green initiatives at many of its dealerships, and the new Boston Volvo Cars store is no exception, with 285 solar panels, seven EV charging stations, high-efficiency windows, and sustainable building products.
Massachusetts Auto Dealer www.msada.org
MSADA
NEWS from Around the Horn
HYANNIS
Prime Motor Group Acquires Beard Chevrolet and Subaru in Hyannis Prime Motor Group has announced that it has acquired both a Chevrolet and Subaru dealership in Hyannis, on Cape Cod. Prime Motor Group is one of the largest and most successful family-operated auto businesses in New England, operating 32 dealerships across the region. “We are pleased to announce that we’ve acquired these two dealerships to provide our Cape customers with even greater selection,” said David Rosenberg, president and CEO of Prime Motor Group. “With these new dealerships located near our flagship Hyannis Toyota, as well as our recently acquired Land Rover Cape Cod dealership also in Hyannis, we can bring the Prime philosophy to even more customers here in Hyannis, and throughout the Cape – providing the very best in customer service.” The Chevrolet and Subaru stores will be managed by Bryan
Scarpellini, the long-time General Manager of Hyannis Toyota and Orleans Toyota. Scarpellini’s leadership will ensure that customers can expect to receive the same level of high-quality customer care they have grown accustomed to at Prime’s other locations over the past 20 years. Both dealerships provide premium amenities, including a drive-thru service reception area, complimentary shuttle service, on-site loaner vehicles, and a comfortable waiting area serving refreshments and featuring massage chairs and a large screen television. Customer workstations with Wi-Fi will also be available. “These dealerships offer an easy and convenient option for those looking to service or purchase vehicles on the Mid-Cape,” added Rosenberg. “You’ll have access to a wide variety of new and used vehicles—from work trucks to electric vehicles to exciting new models—all in one convenient footprint, managed by top-notch professionals with strong local roots in the community. The addition of Chevrolet and Subaru to our Cape Cod portfolio enables us to meet the needs of even more Cape customers, who will find our same ‘Fast, Fair and Simple’ customer service pledge in these new locations.”
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NEWS from Around the Horn BOSTON
Edmunds Analysis: Connecticut and Massachusetts Lead the Country in Responsible Car Shopping Behavior With average transaction prices, loan term lengths, and interest rates for new vehicle purchases sustaining highs not seen since before the recession, buying conditions are becoming far less favorable for American car shoppers. To get a sense of how consumers are adapting to this changing environment, the car shopping experts at Edmunds conducted an in-depth analysis of transaction and finance data to rank all 50 states on responsible car shopping behavior. Connecticut, Massachusetts, Rhode Island, Michigan, and New Jersey lead the country in responsible car shopping behavior; Oklahoma, Mississippi, Alaska, Arkansas, and New Mexico bottomed out the list. Analysts also dug into economic and Edmunds site data to pinpoint exactly why consumers in certain states seemed to be more responsible car buyers. They learned that the amount of time shoppers spent using car shopping calculators on Edmunds had more of a direct correlation on responsible behavior than any other indicator analysts studied. According to Edmunds site data, shoppers from the top five ranked states typically spent 55 percent more time on calculators versus shoppers from the bottom five.
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“While some states have unique environmental conditions or regional preferences that may impact purchasing decisions, the primary driver behind responsible shopping is simply how informed shoppers are and how much they do to prepare before they even step foot into the dealership,” said Ivan Drury, Edmunds’ senior manager of industry analysis. “Responsible car shopping behaviors vary from state to state, but, on balance, these differences are not driven holistically by economic factors or income levels.” Leveraging insights gleaned from more than 842,000 vehicle transactions between May and September of 2018, Edmunds experts defined “car shopping responsibility” by analyzing four components: the average percentage of trade-ins with negative equity, the average amount owed on negative equity trade-ins, average loan term lengths, and average auto loan interest rates across each state. Each state was ranked within each individual metric and then given an overall aggregate score. The highest ranked state, Connecticut, scored top marks across the board in terms of lowest share of trade-ins with negative equity (10 percent), lowest amount owed on trade-ins
MSADA ($4,500), shortest average loan term lengths (64.2 months) and lowest annual percentage rates (APRs) of 4 percent. New Mexico ranked lowest in the nation in terms of shopper responsibility due to holding the second-highest share of transactions with a negative equity trade-in (32 percent), the second-highest amount owed on underwater vehicles ($6,600), the second-highest average APR of 7.1 percent, and the highest loan term lengths in the nation at 72.4 months on average. “While there are certain things about shopping for a car that are out of your control, like your budget or needs, being smart about your research is something every consumer can do,” said Matt Jones, Edmunds’ senior consumer advice editor and former car salesman. “Buying a car is a significant investment that can affect your financial stability for years to come, and you can avoid falling into the negative equity trap if you’re mindful about a few key things up front.” BEVERLY
Brian Kelly Saves A Piece of Town’s Oldest Dealership The city’s oldest surviving car dealership is coming down, making way for two new apartment buildings. The development company Beverly Crossing last week be-
gan knocking down the former Ford dealership at 211 Rantoul Street. It plans to build a five-story apartment building with 98 units on that site and a five-story building with 28 units on a vacant lot across from that building. Beverly Crossing, an arm of Windover Development, bought the Ford dealership building for $3.3 million in 2015. It was built between 1919 and 1924 as a Ford showroom/garage and was the longtime home of the Thomas Ford dealership and, most recently, Kelly Ford. The dealership building was deemed “historicalHarper’s Garage, circa 1937 ly significant” by the Beverly Historical Commission last year, but the commission deadlocked on whether to delay its demolition, a power the board can use in hopes of preserving buildings. Brian Kelly, who owned the most recent dealership to occupy the site, told The Salem News that he will keep the 30-foottall Ford sign that was on the property. “They’re very collectible,” he told the paper. “They are worth a lot on the secondary market.”
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NEWS from Around the Horn WARWICK, R.I.
Tesla Floats New Dealership Plan Tesla has renewed its effort to begin selling vehicles in Rhode Island. The state Motor Vehicle Dealers License and Hearing Board earlier in October approved Tesla’s application to sell cars from a building across the street from the Warwick Mall. The new location is several miles north of the 870 Quaker Lane building that Tesla received a license for late last year. The California company never reached a lease agreement with the owner of that former Hyundai dealership. The license is subject to another state site inspection and Tesla getting a local dealers permit from Warwick. A Tesla spokesperson declined to comment. BOSTON
Herb Chambers Among Inaugural Sponsors for ‘Game on for Autism Research’ Foundation A new program that donates state-of-the-art computerized glasses to help children with autism improve social interactions is off to a very strong start, thanks to the generous financial support of the Herb Chambers Automotive Family and other philanthropic donors. The GoFAR Family Assistance Program, developed by the Game on For Autism Research (GoFAR) charitable foundation, is giving scores of families affected by autism access to Empowered Brain™ from Brain Power, a brain-science-based device that transforms Google Glass into a groundbreaking neuro-assistive and educational system that encourages human contact. The Herb Chambers Automotive Family, the foundation’s first corporate sponsor, has led the funding effort that has raised more than $70,000 to date. Other donors include the Endicott Family, Rodman for Kids, the Plimpton Shattuck Fund at the Boston Foundation, the Litch Family, and the Mosko Family of the Bahamas. The GoFAR Family Assistance Program is the brainchild of Jamie Menhall, the foundation’s teen founder who is currently a 12th grader at Boston University Academy. “Mr. Chambers’ generosity was critical in getting GoFAR off the ground,” said Menhall. “He took a chance on a teen with a vision of advancing autism research and innovating new assistive technologies. The financial support he and our other generous donors have provided is helping to change the lives of children and their families affected by autism spectrum disorder.” The program gives families in need at no cost Google Glass technology that automatically coaches kids through social-emoOCTOBER 2018
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tional interactions and helps develop social skills that are difficult for most people with autism to learn. Empowered Brain includes a heads-up wearable computer and several game-like software modules that use the latest artificial intelligence and augmented reality to give the wearer points for appropriate social interactions. BOSTON
U.S. Vehicle Sales Fall in Third Quarter Vehicle sales are slowing down despite a run on big SUVs. Major automakers said that U.S. sales fell 7 percent in September and 4 percent for the June-through-September quarter, compared with the same periods last year. Weaker numbers for September and the third quarter wiped out a 1.8 percent gain during the first half of the year, and left auto sales on pace with 2017. Some analysts had cautioned that the first-half gains were driven by incentives and low-margin sales to fleet buyers like rental car companies. Industry officials blamed the recent weakness partly on hurricanes — in both 2017 and 2018. Ford sales analyst Erich Merkle suggested that the September numbers were hurt by Hurricane Florence, which flooded parts of the Carolinas. That made it tougher to compete with September 2017, when sales were boosted by owners replacing cars after Hurricane Harvey hit Houston, he said. Edmunds analyst Jeremy Acevedo also noted that, while prices and interest rates for auto buyers are rising, favorable credit deals are getting harder to find. “The trickle-down effect of elevated interest rates really started hitting car shoppers in September,” he said. General Motors Co.’s chief economist, Elaine Buckberg, predicted 2018 will be the fourth-straight year with industry sales above 17 million vehicles. She said a new trade agreement among the U.S., Mexico and Canada will ease uncertainty for the auto industry, and consumer confidence remains high because of the strong job market. Confidence might explain why more consumers are gravitating toward SUVs and trucks despite having to spend more for gasoline to keep them running. Jack Hollis, general manager of the Toyota division in North America, said on a call with reporters that the industrywide ratio of truck and SUV sales to car sales is nearing 70-30, adding that he is “not so sure that it’s stopping quite yet.” While industry officials expressed optimism in the economy, automakers have other concerns. New U.S. tariffs on imported steel and aluminum could increase their costs. A new trade deal also could make vehicles more expensive by raising the amount of content required from North America to avoid duties, and requiring that at least 40 percent of a car’s content be built where workers earn $16 an hour. t
INSURANCE MSADA
MSADA
Do Your Employees Understand Their Benefits? By Rich Datz American Fidelity
“You do not know what you do not know.” That common adage is especially true for benefits enrollment. The simplest way to avoid confusion is to ask the right questions up front, during enrollment. But for an employee who doesn’t know what they don’t know, it can be hard to discern what questions they should ask. Are your employees asking the right questions? Nearly all employees agree it is important to understand their benefits—yet only one-third say they actually understand them well. Even for seasoned employees, understanding the details of their coverage may not seem necessary until it is time to use it, so basic benefit questions may not be on their minds at enrollment. Proactively providing this information before they enroll can help your employees feel more comfortable enrolling in benefits and may contribute to their satisfaction with the benefits they elect. Some questions employees may not know to ask: What annual wellness benefits do I have? Many supplemental insurance products like Cancer Insurance and Accident Insurance offer annual wellness benefits. Do I have dental checkups included in my coverage? Some employees may see their dental insurance deductible amount and assume that it applies to every appointment. It’s important they understand their checkups may be covered without a dental insurance deductible so they are sure to take advantage of preventive services. Are benefits paid to me or to my medical provider? This can be confusing for employees because different types of insurance pay in different ways. For example, medical insurance will pay the provider directly for eligible expenses, but supplemental insurance, such as Disability Insurance, is paid directly to employees.
Who is covered by my benefits? Surprisingly, some employees may not realize they have family coverage for certain benefits. For example, American Fidelity’s Critical Illness Insurance extends coverage to dependent children at no additional cost. What is the difference between outof-pocket expenses and a deductible? Defining basic insurance terms is also helpful. It is never safe to assume all your employees know the basics.
Create opportunities to evaluate coverage While you can offer many ways for your employees to learn on their own, sometimes it is best to manually audit an employee’s benefits to ensure they have the coverage they need and to help them understand the benefits they’ve elected. One efficient way to do this is to conduct an annual Dependent Verification Review. These reviews can offer an opportunity for a one-on-one benefit review, as well as a chance for you to receive updated information on your employees, their dependents, and beneficiaries.
Offer multiple education options Employees are more likely to participate in benefits communication when they can choose which communication methods work best for them. In an age in which information is available in a variety of mediums, it is important that benefits education is available in all mediums as well. “One size fits all” communication is no longer acceptable in employee benefits. Employers must continue to find ways to communicate with their employees in a language they understand, through channels they prefer. We understand your human resources department doesn’t have the time or resources to educate each employee individually, so American Fidelity has created educational programs to help take the work off your plate. Here’s how we can help: One-on-one benefit reviews: These inwww.msada.org
dividual meetings provide your employees an opportunity to meet with our salaried account managers to review benefit options, evaluate needs, and create a personalized benefit package recommendation. Account managers take a consultative approach and will walk your employees through the entire enrollment process. At the end of the meeting, we will provide a summary of all their elected benefits. Group meetings: An efficient enrollment process means less time your employees spend away from their work. Group meetings help educate all of your employees and answer benefits questions prior to annual enrollment. These meetings allow us to present those questions your employees may not know to ask. We can provide education on all your benefits, including your medical, dental, and vision benefits, and how they work together. Additionally, our account managers can help explain how a High Deductible Health Plan works, how to use medical reimbursement accounts, and more. Custom enrollment materials: For employees who prefer to read on their own, or for those who wish to discuss benefits with their spouses at home, we offer print and digital educational materials. Our suite of educational material includes brochures, flyers, emails, and videos. And all of your material will be customized to reflect your group’s enrollment date, location, and offerings. Custom benefits site: To help your employees prepare, American Fidelity can create a custom benefits website that provides educational information about all of your available benefits, including your medical, dental, and vision benefits. Additionally, the site provides employees with answers to common questions before enrolling. View a sample site here: americanfidelity.com/abcemployer. Whatever your enrollment education needs, we’re here to help. t Rich Datz, northeast region manager at American Fidelity, can be reached at Rich.Datz@americanfidelity.com.
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Patrick Manzi
NADA Senior Economist
Boyi Xu
Economist
OCTOBER 2018
Massachusetts Auto Dealer www.msada.org
MSADA
NADA MARKET BEAT
JANUARY 2016
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MSADA MSADA
ATD Tackles Industry Workforce Shortage 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.
From my front porch, I can see that my neighbors are starting to put up decorations to celebrate Halloween. But sometimes the real world can be the most surreal of all. A scary part of our reality today is our truck industry’s workforce shortage. It is time that we come together and tackle this monster head-on. For years, truck dealerships around the nation have struggled with a technician shortage that threatens the health of our businesses and local economies. For dealers to meet future staffing demands from retiring workers and those learning about new technologies, our industry requires thousands of skilled people, especially technicians, by 2026. A drought in our workforce means that many well-paying local jobs will remain unfilled, and we will have difficulty getting the necessary people, and skill sets – to move the trucks that move
trade policies. Meetings like this come on the heels of President Trump’s executive order that established the President’s National Council for the American Worker and the American Workforce Policy Advisory Board. The council is developing a national strategy to address critical workforce issues, including a national campaign to raise awareness of the urgency of a job skills crisis. ATD applauds the president’s efforts as our industry struggles with recruiting and retaining technicians. Improving our pool of potential employees with skilled workers is a top priority, and I am proud that the ATD and NADA leadership have been in discussions with the Trump administration to examine how we can be involved in this vital initiative. As the year progresses, ATD will also work to promote the value of careers at dealerships by launching national campaigns. While we work
“Together, we produce $85 billion in sales, but the heart of our businesses rests in our people who work with us day in and day out.” America. This can harm the financial health of our dealerships, and the costs can trickle down to our customers and, ultimately, all consumers served by trucking. Last month I had the privilege of attending the White House economic summit with fellow NADA and ATD leaders. We had a unique opportunity to meet with White House officials, like National Economic Advisor Larry Kudlow and Treasury Secretary Steven Mnuchin, who spoke about critical issues, such as economic, budget, tax, and OCTOBER 2018
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hard on this, I urge you to log on to mydealership. org and share the truck dealership spot on your own websites and social media channels. All told, our industry runs on more than 2,000 commercial-truck dealerships with more than 145,000 employees. Together, we produce $85 billion in sales, but the heart of our businesses rests in our people who work with us day in and day out. We will tackle our workforce issue head-on so that the future of our industry remains strong. t
NADA Update
By Scott Dube
Bringing Reason to the Table Scott Dube, President of Bill Dube Hyundai and MSADA Immediate Past President, represents NADA’s Massachusetts members on the NADA Board of Directors. He can be reached at scott@dubecars.com. As we run through the election season and begin to look to 2019, NADA is preparing an incredible show in San Francisco and looking ahead to our organization’s next leaders, who will pursue our policy agenda to the hilt. You will see below that our industry is fighting back against prevailing narratives about vehicle ownership being on the decline and the economy stalling in general. Our incoming chairman, Texan Charlie Gilchrist, will have his work cut out for him. Remember to vote on Election Day (November 6) and please be in touch if you have not invited your congressman to your dealership this year.
New Chairman Elected for 2019 NADA’s 63-member board of directors elected Charlie Gilchrist as chairman for 2019. “I am truly honored and excited to represent and advocate for all new-car dealerships across the United States,” said Gilchrist, who represents new-car dealers in Northern Texas on NADA’s board. “I look forward to a great year.” Gilchrist, who is currently serving as NADA vice chairman, succeeds Wes Lutz, president of Extreme DodgeChrysler-Jeep-Ram in Jackson, Michigan, as chairman. “We are facing many challenges, but we will also have many opportunities as we journey throughout the year,” added Gilchrist, president of Gilchrist Automotive, which includes Buick-Chevrolet-GMC, Chrysler-Dodge-JeepRam, Ford, Nissan, and Volkswagen franchises at five dealership locations in the Dallas-Fort Worth area. “With each dealer’s involvement and the great NADA team, we can navigate and adapt to any challenge in our industry.” Rhett Ricart, who represents new-car dealers from Ohio on NADA’s board, was elected NADA vice chairman for 2019. “I am deeply honored to serve as NADA vice chairman and look forward to working with our accomplished NADA board and the extremely talented NADA staff,” said Ricart, president of Ricart Automotive Group in Groveport, Ohio, which includes Ford, Hyundai, Kia, Mazda, Mitsubishi, and
Nissan franchises. Bill Willis, president of Willis Chevrolet-Buick and Willis Ford in Smyrna, Delaware, was re-elected as secretary. Bob Shuman, president of Shuman Chrysler-Dodge-JeepRam in Walled Lake, Michigan, was re-elected as treasurer. The new terms begin at NADA Show 2019 in San Francisco in late January.
New-Car Dealership Wages Continue to Rise Through the first half of 2018, the nation’s 16,794 franchised new-car dealerships employed more than 1.1 million people, up 0.8 percent compared to same period a year ago, according to a new report released by NADA. “In addition to the direct employment provided by dealerships, more than 1 million other jobs in local communities are dependent on dealerships,” said Patrick Manzi, NADA senior economist. NADA Data 2018: Midyear Report, a biannual financial profile of new-car dealerships (selling domestic, import, luxury, and mass-market brands), includes an analysis of dealership departments as well as retail-auto industry milestones through the first half of 2018. In 2017, the annual payroll at new-car dealerships was $65.3 billion, up 2.2 percent, according to the most recent data available from the Bureau of Labor Statistics. “For the past several years, dealership employees have seen steady increases in their incomes as well as in their total compensation,” Manzi added. “Dealership jobs offer significantly higher compensation than other retail sectors, and dealerships continue to offer one of the highest average salaries of all industries.” The average annual earnings for employees at new-car dealerships was $71,916 per year in 2017, up from $69,784, a 3.1 percent increase.
No Sign of the Personal Vehicle Owner Apocalypse Sheryl Poe, NADA Contributor Despite media reports, Silicon Valley predictions, and Wall Street prognostications to the contrary, the principle of personal vehicle ownership in America is not under threat from autonomous vehicles and ride-hailing services. That is according to NADA’s Senior Vice President of Public Affairs Jonathan Collegio, who, in the latest NADA video, is busting the myth on the end of personal vehicle ownership. “One of the things you hear a lot about in the automotive industry and the retail technology sector is the convergence of autonomous vehicles and ride-hailing services like Uber or Lyft,” Collegio said.
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NADA Update “The media reports suggest that autonomous technology will make ride hailing so cheap that people will get rid of their personal automobiles and go exclusively to using ride hailing,” Collegio explained. “Now, representing automobile dealers, this is obviously something we need to look into, because we sell cars. We wanted to know if people were really as interested in getting rid of their vehicles as reports from Silicon Valley and Wall Street have suggested.” What NADA has found instead is that consumer demand for personal vehicle ownership remains overwhelmingly strong across all demographics. A recent NADA-commissioned survey found that, even after hearing about all the benefits of using ride-hailing services, nine in 10 consumers said they would rather keep owning their car. The survey oversampled millennials, the largest group of consumers, and found that four out of five millennials said the same thing—they prefer to own their own car. “The results were really interesting. They go against the conventional wisdom that is out there, that folks are going to get rid of their vehicles and move exclusively to these services,” Collegio said. “It grounds us in a reality that people like their cars.” Consumers like their cars because the value proposition of owning a car goes beyond getting from one place to another, Collegio noted. “It is more than that. It is the ability to go wherever you want to go, whenever you want to go with no waiting. With no one controlling your agenda. Just being able to get in the car and go.” And Americans are increasingly on the go. The Department of Transportation estimates that the average U.S.
If you consider what your life would look like if you had to use Uber or Lyft or a ride hailing service for each of those mundane trips, it starts to not look all that attractive, mainly because of wait times. household takes 10 car trips per day. Most of them are extremely mundane but necessary trips like going to the grocery store, the dry cleaner, going to a friend’s house, taking the kids to school or to soccer practice, Collegio pointed out. “Trips that are so mundane, you don’t think of them three hours later. That is how people generally use their cars.” What is more mundane than trips for household chores? Waiting. The average wait time for an Uber or Lyft is about OCTOBER 2018
MSADA nine minutes. For 10 trips a day, a customer completely dependent on ride-hailing services would spend 90 minutes a day waiting. “If you consider what your life would look like if you had to use Uber or Lyft or a ride-hailing service for each of those mundane trips, it starts to not look all that attractive, mainly because of wait times,” Collegio explained. “A lot these reports do not estimate the time cost of money. People value their time, and suddenly adding an aggregate block of 90 minutes waiting time to your day is not something people want to do.” If people really do believe the old adage that time is money, their wallets are in for some sticker shock when it comes to ride-hailing services. Most pro-ride hailing reports suggest that the cost savings of using ride-hailing services over owning a car is $3,445 per year per household. That probably sounds pretty good to the average consumer. However, the numbers do not bear out when consumers dive deeper. Even on the conservative side of calculating for an average six minute wait for a ride-hailing service multiplied by 10 trips a day for 365 days a year, the cost savings of ride hailing over personal vehicle ownership comes out to under $10 per day, Collegio said. “You are talking about exchanging an hour a day in waiting for a savings of about $9.44 per day. That is less than minimum wage in 16 states.” NADA Chairman Wes Lutz recently made a similar point on the overly optimistic cost savings reports of ride-hailing services in remarks to the Automotive Press Association in Detroit. For most consumers, the savings would have to be a lot more than $10 a day for them to give up their time. Of the 1,200 consumers surveyed by NADA, 88.5 percent said they would have to save at least $15 in order to give up an hour of their day to waiting, 50 percent said it would need to be $50 or more in savings, and 35 percent said they would not take any amount of money to wait an hour a day. “Silicon Valley and Wall Street are just kind of ignoring the fact that time is valuable and that there are a lot of people who are not interested in saving money if it means giving up their time,” Collegio pointed out. The threat to personal vehicle ownership is not going to come from a free and open marketplace or lack of consumer appetite for owning a car, as the NADA survey shows. “If there is a threat,” Collegio said, “it is more than likely going to come from lawmakers tilting the scales too much when it comes to regulating the marketplace.” “If it is going to come from anywhere, it is probably going to come from state and local governments that are being pressured by large companies,” Collegio said. “That is the thing for our customers to really be aware of.” t
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