MSADA, One McKinley Square, Sixth Floor, Boston, MA 02109
auto M a s s a c h u s e t t s
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The official publication of the Massachusetts State Automobile Dealers Association, Inc
FIRST CLASS MAIL US POSTAGE PAID BOSTON, MA PERMIT NO. 216
June 2019 • Vol. 31 No. 6
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 BlumShapiro, 22 Ethos Group, 2 LAR, 31 Nancy Phillips, 22 O’Connor & Drew, 32 Southern Auto Auction, 20 ADVERTISING RATES Inquire for multiple-insertion discounts or full Media Kit. E-mail jfabrizio@msada.org Quarter Page: $450 Half Page: $700 Full Page: $1,400
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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: Speeding Ahead ASSOCIATE MEMBERS DIRECTORY THE ROUNDUP: Sleepy’s Decision Upends Dealership Salespeople Pay Plans
10 11 12
LEGISLATIVE SCORECARD TROUBLESHOOTING: Frequently Asked Questions AUTO OUTLOOK
16 Cover Story: Powering EV Infrastructure Into the Future
20 24 25 26 28 29
NEWS From Around the Horn TECHNOLOGY: Is the Automotive Industry Next in Line for the Technological Revolution? LEGAL: Lots of Unknowns and Moving Parts in Massachusetts Employment Law nada Market Beat TRUCK CORNER: Bringing the “Modernize the Truck Fleet” Coalition to Washington nada update: Join Me in Washington
Back Cover: $1,800 Inside Front: $1,700 Inside Back: $1,600
Join us on Twitter at @MassAutoDealers www.msada.org
Massachusetts Auto Dealer
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From the President
MSADA
Speeding Ahead
We cannot ‘wait and see’ what unfolds in the halls of power
By Chris Connolly, MSADA President
Msada Board
As we dealers see our industry wracked with disruption -- mergers, efficiency rules, you name it -- the most important thing we can do is not sit by and watch. Have you called your local city councilman recently and invited them to your showroom floor? What about your State Representative? Congressman? No avenue of power is too small, it turns out, to have an affect on our bottom lines and our livelihoods. While tariffs and trade deals and California’s EPA fight loom across the globe, at home we have an always percolating ”right-to-repair” campaign. While the Summer sales season will prove busy for all of us, we cannot lose sight of the fact that we have to be the grassroots keeping bad laws and overregulation at bay. It Every lawmaker is always the right time to remind our elected wants to have representatives, and the public at large, about a business like the impact our businesses have in our communities. We provide jobs, tax revenue, charitable yours in his or giving, and public service in an age when brickher district. and-mortar retail is otherwise under threat. As MSADA continues to work to ensure Thanks to us, the public learns more about our industry, we most of them do, need you to do your part. When we get bogged down in legislative battles, the individual business owners are the voices that help our legislators understand how vital we are to the community. Every lawmaker wants to have a business like yours in his or her district. Thanks to us, most of them do. What if you have been keeping a regular line of communication with your representatives? I recommend you at least consider making the trip down to Washington, D.C. with our MSADA delegation for the NADA Washington Conference. Meeting Members of Congress on their turf is an important show of commitment, regardless of whether we are received with open arms or arms-length courtesy. More details about the September event are available at www.nada.org and in our monthly NADA Director Update from our own Scott Dube.
It is definitely not too early to begin planning for your attendance at our second annual Massachusetts Automobile Dealers Hall of Fame ceremony, October 2-4 at the Chatham Bars Inn on Cape Cod. For more details, see Bob O’Koniewski’s column on page 6, and email jfabrizio@msada.org should you have any questions. t Massachusetts Auto Dealer www.msada.org
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
Hall of Fame Reminder
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Barnstable County
Brad Tracy, Tracy Volkswagen
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 Bernstein Shur PA Ned Sackman (603) 623-8700 Blum Shapiro John D. Spatcher (860) 561-4000 BMO Harris Bank Steve Gagnon (813) 447-1723 Boston Magazine Noreen Murray (617) 275-2012 Broadway Equipment Company Fred Bauer (860) 798-5869 Burns & Levinson LLP Paul Marshall Harris (617) 345-3854 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 Jeff Hayes 919-719-1333 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 DP Sales Distributors Andrew Prussack {631) 842-7549
Eastern Bank David Sawyer (617) 897-1125 Eastern Insurance Group William Gross (508) 620-3349 EasyCare New England Greg Gomer (617) 967-0303 Enterprise Rent-A-Car Timothy Allard (602) 818-3607 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 Chuck August (518) 364-8723 Lynnway Auto Auction Jim Lamb (781) 596-8500 M & T Bank John Federici (508) 699-3576 Management Developers, Inc. Dale Boch (617) 312-2100 McWalter Volunteer Benefits Group Shawn Allen (617) 483-0359 Mid-State Insurance Agency James Pietro (508) 791-5566 Mintz Levin Kurt Steinkrauss (617) 542-6000
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Murtha Cullina Thomas Vangel (617) 457-4000 Nancy Phillips Associates, Inc. Nancy Phillips (603) 658-0004 NEAD Insurance Trust Charles Muise (781) 706-6944 Northeast Dealer Services Jim Schaffer (781) 255-6399 O’Connor & Drew, P.C. Kevin Carnes (617) 471-1120 Performance Management Group, Inc. Dale Ducasse (508) 393-1400 Piper Consulting Jim Piper (207) 754-0789 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 Rockland Trust Co. Manny Silva (781) 982-6806 Samet & Company John J. Czyzewski (617) 731-1222 Santander Bank Richard Anderson (401) 432-0749 Chris Peck (508) 314-1283 Schlossberg & Associates, LLC Michael O’Neil, Esq. (781) 848-5028 Service Credit Union Dave Pasternak (603) 812-8967 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 TD Auto Finance Marc Gerhart (781) 697-1525 TradeRev Amy Davis (617) 512-7033 TrueCar Pat Watson (803) 360-6094 US Bank Vincent Gaglia (716) 649-0581 Wells Fargo Dealer Services Josh Tobin (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
Sleepy’s Decision Upends Dealership Salespeople Pay Plans By Robert O’Koniewski, Esq. MSADA Executive Vice President rokoniewski@msada.org Follow us on Twitter • @MassAutoDealers
Last month, as originally reported in our Legal Bulletin #27 (5/10/19), the Massachusetts Supreme Judicial Court (SJC), our state’s highest court, threw a roundhouse punch that has knocked dealership pay plans for 100% commission-paid employees to the mat. The after-effects are still being felt, as dealerships are catching up with the enormity of the decision’s impact. On May 8, 2019, in Sullivan v. Sleepy’s LLC, the SJC, in answering certified questions to the federal court regarding litigation to resolve the proper treatment of compensation of 100% commission-paid employees, concluded: • Draws and commissions cannot be retroactively allocated as hourly and overtime wages and Sunday pay, even if these draws and commissions equaled or exceeded the minimum wage for the employees’ first forty hours of work and one and one-half times the minimum wage for all hours worked over forty hours or on Sunday. • Employees are entitled to separate and additional payments of one and one-half times the minimum wage for every hour the employees worked over forty hours or on Sunday. Why This Decision Now: Litigation in federal court (Sullivan v. Sleepy’s LLC) involves the interpretation of our state law regarding the proper compensation for 100% commission-paid employees: Whether retail salespeople who are paid entirely in commissions or draws (i.e., advances on commissions) are entitled to additional overtime or Sunday pay pursuant to Massachusetts law. More specifically, the federal court asked the JUNE 2019
Massachusetts Auto Dealer www.msada.org
SJC to consider whether employers satisfied their obligations under state wage-hour law when they paid draws or commissions that always equaled or exceeded the minimum wage for the employees’ first forty hours of work and one and one-half times the minimum wage for all hours worked over forty hours or on Sunday. According to the opinion, Sleepy’s (a mattress and bedding company - not a car dealership) paid its inside sales employees a recoverable draw of $125 per day and any sales commissions in excess of the draw. As to daily pay, these employees received the greater of: (1) the $125 recoverable draw or (2) earned commissions in excess of the $125 daily draw. The employees’ weekly pay equaled or exceeded the minimum wage for non-overtime hours worked (less than forty per week) and one and one-half times the minimum wage for all overtime hours worked (more than forty hours per week). In its analysis of state law for the federal court, the SJC concluded that draws and commissions cannot be retroactively allocated as hourly and overtime wages and Sunday pay even if these draws and commissions equaled or exceeded the minimum wage for the employees’ first forty hours of work and one and one-half times the minimum wage for all hours worked over forty hours or on Sunday. Rather, the court found that employees are entitled to separate and additional payments of one and one-half times the minimum wage for every hour the employees worked over forty hours or on Sunday.
MSADA The Impact: (1) The SJC’s Sleepy’s decision overturns 16-year old guidance issued by the Massachusetts Department of Labor Standards upon which retailers and employment counsel have relied regarding the proper compensation of 100% commission-paid employees under state laws and regulations. Moving forward, if your dealership uses a pay plan based on 100% commission and/or a weekly draw, such an employee is now entitled to an additional, separate payment of one and one-half times the Massachusetts minimum wage (calculated to $18 per hour based on the minimum wage of $12 per hour) for any time worked over 40 hours in any workweek. The SJC also held the same to be true for Sunday pay, paid at $18 per hour worked, separate and apart from commissions. (The SJC, however, did not address the current phase-out of the Sunday premium pay requirement over the next four years enshrined in law as part of last year’s Grand Bargain, which is another separate and unclear issue entirely.) Be sure to contact your legal counsel and review your pay plans to ensure compliance with the Sleepy’s decision. (2) MSADA filed a brief with the SJC, prior to the court hearing, arguing an interpretation of the law that subsequently has now been found to run counter of the SJC’s decision. We based our brief’s arguments on previous interpretations of case law and guidance issued by appropriate state agencies, as well as advice of counsel. These interpretations and guidance were incorporated into discussions of proper employee compensation as detailed in our 2018 Wage-Hour Guide issued last November. (In our Guide, we noted that certain sections could be subject to change, depending on how Sleepy’s and other pending wage-hour litigation would be resolved.) The SJC’s Sleepy’s decision is now the law in Massachusetts. Accordingly, do not rely on the 2018 Wage-Hour Guide going forward to the extent that it is inconsistent with this decision. MSADA will issue a revised Guide to reflect the new law under Sleepy’s. (3) Importantly, the SJC did not indicate
whether it intended this decision to apply retroactively, potentially going back several years. Obviously, if it were to apply retroactively, it no doubt would result in significant exposure for retailers, including many Massachusetts dealerships. The retroactivity issue is expected to be litigated soon, and we will report back once we have an answer. That said, we are likely to see a flurry of new lawsuits targeting Massachusetts dealerships for past “violations” based on this decision. Conclusion - Next Steps: (1) As of now, it is imperative going forward that dealerships pay any 100% commission-paid employees $18 per hour, separate and apart from their commissions, for any time worked over 40 hours in a workweek or on Sundays. If you are paying a recoverable draw each week, make sure that draw covers at least the number of hours worked (up to 40) multiplied by the current minimum wage of $12 per hour. Do not use a draw to cover OT hours or Sunday pay. That said, the more conservative course, at this point, may be simply to pay, separate and apart from commissions, minimum wage for all hours up to 40 each week, issue a separate and additional check to cover payments of one and one-half times the minimum wage for every hour the employees worked over forty hours or on Sunday, assessing its effect on employee compensation and adjusting commission structures as necessary. (2) Dealerships need to do a complete review of their pay plans with competent counsel and beef up their in-house recordkeeping to avoid wage-hour liability moving forward: • Require the keeping of accurate time cards at your stores; always require employees to record their hours worked. • Monitor overtime hours worked and consider implementing an overtime approval process. • Always pay employees for all hours worked. Write clear, specific, detailed pay plans for each job position. Focus with clarity on the terms used in those plans (hourly rate, regular rate of pay, etc.). Prior to the Sleepy’s decision there were www.msada.org
seven dealership-related cases in state court regarding the compensation of 100% commission-paid employees. Since that decision, as a direct result of plaintiffs’ attorneys soliciting dealership employees, including posting such solicitations throughout all social media sites, as of this writing there are 14 more dealership-related cases filed and eight others involving furniture retailers. This list will continue to grow unabated as the plaintiffs’ attorneys troll the ranks of current and former dealership employees to feed at the litigation trough. If dealers do anything this month, review your pay plans, make the necessary adjustments, and keep a closer eye on all hours worked so that prospective liabilities can be eliminated.
Paid Family and Medical Leave Program Contributions Delayed to October 1 Employer contributions to the Paid Family and Medical Leave Program, which were scheduled to begin on July 1, 2019, have been delayed by three months to October 1, 2019, as a result of legislation Governor Charlie Baker signed into law The so-called “Grand Bargain”, which produced the Massachusetts Paid Family and Medical Leave (PFML) Program (as first detailed in MSADA Bulletin #31/2018), underwent a significant change on Friday, June 14, as Governor Baker signed the employer contributions delay into law. This delay will allow employers across the Commonwealth more time to prepare their organizations and workforces for PFML. Please read below to see how this delay will affect you and your responsibilities under the law. Required Withholding Now Starts on October 1, 2019: The start date for required PFML contributions is now October 1, 2019. On that date, employers must begin withholding PFML contributions from employee qualifying earnings. Employers will be responsible for remitting employee and (if applicable) employer contributions for the October 1 to December 31 quarter Massachusetts Auto Dealer
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The Roundup through MassTaxConnect by January 31, 2020. Contribution Rate Change: The PFML law requires that the Department adjust the contribution rate to offset the shorter period for collections that will result from the three month delay. As a result, the total contribution rate has been adjusted from 0.63% to 0.75% of employee qualifying earnings. This adjustment will ensure that full funding will be in place for the commencement of benefit payments in January 2021. Timeline Extended for Required Employee Notices: Employers now have until September 30, 2019, to notify all covered individuals of their rights and obligations under PFML. Check the Department website at mass.gov/pfml in the coming days for updated notices to provide to your workforce. Timeline Extended for Exemption Applications: Employers that offer paid leave benefits that are at least as generous as those required under the PFML law may apply to the Department for an exemption from making contributions. Employers will now have until December 20, 2019, to apply for an exemption that will excuse them from the obligation to remit contributions for the full period commencing with the October 1 start date. PFML Regulations Will Be Final And Effective on July 1, 2019: The final regulations will be posted on the Department website at mass.gov/pfml on Monday, June 17, 2019. The regulations will be formally published under the title 458 CMR 2.00 DEPARTMENT OF FAMILY AND MEDICAL LEAVE. More About PFML: Beginning in 2021, PFML will provide temporary income replacement to eligible workers who are welcoming a new child into their family, dealing with a serious illness or injury, caring for an ailing relative, or dealing with complications resulting from the military deployment of a family member. The program is funded by payroll-based contributions from employers, employees, and certain contract workers. To learn more about PFML, including information about how JUNE 2019
this new program impacts your organization, more background on exemptions, and details on contribution levels, please visit mass.gov/pfml.
ATD Congressional Fly-In In conjunction with the American Truck Dealers (ATD) Board of Line Representatives Summer meeting, approximately 50 truck dealers and state association staff gathered in Washington in mid-June for the fifth annual legislative fly-in dedicated to medium- and heavy-duty truck dealer issues. Massachusetts was well represented by ATD Board member Kevin Holmes of the Advantage Truck Group, based in Shrewsbury, and yours truly.
The ATD fly-in participants focused on gathering co-sponsors for H.R. 2381, legislation filed by Rep. Doug LaMalfa (R-California) and Rep. Collin Peterson (D-Minnesota), and S.1839, filed by Sen. Cory Gardner (R-Colorado), which would repeal the current 12% federal excise tax (FET) on heavy-duty trucks and trailers. On the books since 1917, initially created to help fund the U.S. effort in sending our Doughboys off to fight the Kaiser in the War to End All Wars, the FET is the highest federal excise of its kind. It brings in approximately $3 billion annually into the federal highway trust fund, about 8% of the fund’s total. The FET adds approximately $20,000 to the price of a tractor truck. In combina-
Massachusetts Auto Dealer www.msada.org
tion with the OEMs’ efforts to comply with federally required emissions technologies that add about $40,000 to the price of the truck, these federal requirements, in effect, inhibit and discourage the sale of cleaner and safer new trucks. It is hoped that the NADA/ATD efforts to highlight the onerous nature of the FET will make repeal part of any infrastructure package later this year and into 2020 once Congress gets to focusing (maybe?) on the deterioration of our roads and bridges. Our legislative meetings (staff and/or elected officials) included Rep. Richard Neal (D-Springfield), the chairman of the House Ways and Means Committee; Rep. Jim McGovern (D-Worcester), the chairman of the House Rules Committee (see picture); Rep. Joseph Kennedy (D-Brookline); Rep. Lori Trahan (D-Westford); Rep. Stephen Lynch (D-South Boston); Rep. Katherine Clark (D-Melrose); Rep. Bill Keating (D-Bourne); and Sen. Ed Markey (D-Malden).
Heavy-duty truck dealers are encouraged to contact their members of Congress to ask them to co-sponsor H.R. 2381.
Temp Tags Bills Move Out of Committee On May 14, the Joint Committee on Transportation conducted the public hearing on our temp tags legislation, House 3031, sponsored by Rep. Tom Golden (D-Lowell), and Senate 2133, sponsored by Sen. Mike Rush (D-West Roxbury). Your Association offered written and oral testimony in favor of the bills, and no other parties testified. Shortly thereafter, on June 6, the committee reported the bills favorably to each’s respective Ways and Means Committee. Temporary registration plates are cur-
MSADA rently legal and have been authorized under the General Laws for several decades in Chapter 90, §2D, dating back to when Gov. Ed King signed the law in the late 1970s. However, the law has never been implemented. These identical bills would direct the Registry of Motor Vehicles (RMV) to design, issue, and regulate the use of temporary license plates (“temp tags”), especially for use by dealers for vehicle sales to customers who live outside Massachusetts and who also have provided the required proof of auto insurance. Temp tags, which are used in the vast majority of other states, would provide considerable flexibility to the increasing number of automobile dealers that sell to out-of-state customers, thereby improving customer convenience. Due to the prevalence of today’s internet economy, dealers cannot afford to ignore online sales, and the current system in place for delivering an automobile across state lines is burdensome to the dealer and the vehicle purchaser. Moreover, the Commonwealth would realize increased sales tax revenue, as more vehicle deliveries would occur in-state versus across our border. It is time for the RMV to implement plate issuance practices for the 21st century, considering we are almost one-fifth of our way through it. However, no Registrar of Motor Vehicles thus far has acted on the authority granted to the office under this 40-year old law, and Massachusetts remains one of the few states in which temporary registration plates are not available.
State EV Rebates Program to End on September 30 Baker Administration officials announced at the June 24 meeting of the Zero Emission Vehicle Commission that it will not extend funding for the five-year old ZEV rebates program past September 30, 2019. Because of stresses on the current funding that was set to expire by July, the Administration earlier this year reduced the rebate amount to $1,500 for the sale or lease of a qualifying vehicle, and the menu of vehicles was limited to only battery and fuel-cell electric vehicles.
During the life of the program, more than 14,000 electric vehicle buyers since 2014 have received rebates totaling $30 million. This is far short of the 300,000 electric vehicles Massachusetts has committed to seeing registered by 2025. Any discussion of the sale and lease of EVs centers on five factors the consumer takes into consideration, to varying degrees: the length of battery charge (and time to charge up); the infrastructure for battery charging sites; vehicle cost, including assistance provided under state and federal programs; vehicle choice; and the price of gasoline. Once the state’s program funding is gone (and with the possible elimination of the federal tax credit program), it will be interesting to see how much those funds drove the sales numbers during the five-year program. Regardless, dealers in Massachusetts, along with their counterparts in the other eight ZEV states, may be looking at inventory collecting dust as vehicles remain untouched on the lots and the clock ticking on the 2025 300,000 vehicle mandate.
TIME Dealer of the Year 2020 It is that time of the year again. The highest honor bestowed on a dealer each year at the NADA convention is the TIME Magazine Dealer of the Year Award (TDYA). The process begins with nominations from each state. At MSADA we consider the state nominee so important that he or she is also designated as the “Massachusetts Dealer of the Year”. Dealers may nominate him/herself or another dealer. Since your Association’s leadership does the selection at the state level, the members of the MSADA Executive Committee are not eligible; neither are the TDYA Recipients for the last four years: Don Sudbay, Frank Hanenberger, Gary Johnson, and Adam Connolly. Please help by nominating candidates for selection as the Massachusetts TDYA. Please give this your careful consideration. Use the form that has been emailed to you to nominate a worthy dealer or e-mail me at rokoniewski@msada.org with your nomination. Nominations must be received www.msada.org
at our office by Friday, July 26. Thank you for your assistance on this matter.
Save the Date: NADA Washington Conference – September 15-17 Each year NADA organizes its fly-in of dealers and state association executives from around the country in order to lobby Members of Congress on issues important to the franchised auto retail industry. Your Association brings a hardy group of dealers to press the flesh and advocate for dealership issues with our nine House members and two Senators. This year’s event will occur on September 15-17. NADA and your Association pick up the travel expenses of our member dealers to attend. If you are interested in being a part of our traveling delegation and seeing first-hand how Congress works (or does not work – that whole “We the People…” thing seems to be have been set aside down there), please email me at rokoniewski@msada.org and we will get you registered. Also feel free to contact me should have any questions. We look forward to hosting you for this event.
Save the Date: Dealer Hall of Fame Ceremony – October 2-4, Chatham In order to honor those who have been titans within our industry in Massachusetts, your Association will conduct its Second Annual Dealer Hall of Fame ceremony October 2-4 at the Chatham Bars Inn on Cape Cod. We will be sending out nomination materials by email and snail mail. If you know a dealer or dealers who should be recognized in our next Hall of Fame class, please submit the nomination form to us when you receive it. Criteria upon which dealers should base their nominations include, but are not 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 forward to our members’ input to help with the selection process. t Massachusetts Auto Dealer
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Troubleshooting
MSADA
Frequently Asked Questions By Peter Brennan, Esq. MSADA
Staff Attorney As you know, Spring is graduation season, and congratulations are due if you celebrated a graduation recently. The following queries are based on real questions received by the MSADA legal office and fit the theme, as we graduate into Summer on June 21. If you have a legal question that you need an answer to, please use the contact information provided at the conclusion of the column. Question: My son is going to college locally in the fall and I would like to provide him with a vehicle to use to get to and from school. Can I put him in a demonstrator with a dealer plate? Answer: Probably not. The following individuals, and only those individuals, may have unrestricted use of a dealer-owned motor vehicle being operated with the general registration plate (which dealer plates are classified as) assigned to the dealer: a dealer; the spouse of the dealer; a co-owner of the dealership (a person who holds at least a 40% proprietary interest in the dealership); the spouse of a co-owner; and any employee who works at least 20 hours per week as a salesperson for the dealership. Anecdotally, your Association has received reports that the authorities have been cracking down on the improper usage of dealer plates. Only those individuals occupying one of the positions described above (and no others), using the vehicle with the permission of the dealer, may use the vehicle at any time and for any purpose, including for personal use. Except for demonstration or sales related
purposes, no other person, including other relatives of the dealer, other dealership employees, or customers, may operate a dealer-owned motor vehicle with a dealer plate attached (which would likely exclude the dealer’s son here). If, however, said dealer’s son was working as a salesperson at the dealership for at least 20 hours per week while taking classes at the local university, then he could legally drive a dealer-plated vehicle to and from campus. However, a dealer-owned vehicle being driven with a dealer plate is technically part of the dealer’s inventory and, thus, must be available for sale or lease. Accordingly, the vehicle must have affixed to it all stickers required on vehi-
past the individuals eighteenth birthday. Additionally, a minor who disavows a contract to purchase a motor vehicle has no obligation to return the motor vehicle to the dealer unless it is still in his or her possession. Thus, a dealership is advised never to sell a motor vehicle solely to a minor. However, a contract where one of the buyers is of majority age and the other buyer is a minor is enforceable against the party who is of majority age. There is also no law that prevents minors, even under 17 years of age, from owning motor vehicles, and MGL c. 175 §113K provides that a minor of sixteen years of age or over is deemed competent to contract for a motor
If a minor is interested in purchasing a vehicle, you can proceed with the transaction so long as someone of majority age is also listed as a purchaser cles offered for sale by state and federal law. Failure to affix the necessary stickers to a vehicle being driven on a dealer plate can result in a traffic citation and an RMV “Section 5” hearing, which may result in the suspension or revocation of one or more of the dealership’s dealer plates. The one common sticker that is not required on a dealer-plated vehicle is a state inspection sticker. Vehicles held for sale by dealers that are being used for demonstration purposes do NOT need, and should not have, an inspection sticker. For more information on dealer plate uses and restrictions, please see Legal Bulletin #76/2013 (December 30, 2013). Question: Can I sell a vehicle to a seventeen-year-old that wants to pay cash and register the vehicle in her name? Answer: Pursuant to MGL c. 231 §85O, a minor may void a contract at any time until they are no longer a minor. In certain situations, the right to rescind a contract made while a minor may extend www.msada.org
vehicle liability policy. Consequently, if a minor is interested in purchasing a vehicle, you can proceed with the transaction so long as someone of majority age is also listed as a purchaser on the motor vehicle purchase contract. The car can still be registered and titled in the minor’s name, and the minor can acquire insurance on the vehicle in their own name. It is important to note that these principles also apply to a contract with a minor for service work on their vehicle, so be very wary of agreeing to large dollar figure repair jobs with those under eighteen years of age. t If you have a question on this or any other legal topic, please contact Robert O’Koniewski, MSADA Executive Vice President, rokoniewski@msada.org, or Peter Brennan, MSADA Staff Attorney, pbrennan@ msada.org, or by phone at (617) 451-1051. Massachusetts Auto Dealer
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RACE TO THE FINISH COVER STORY
Powering EV Infrastructure Into the Future By Jeff Breeze The Dairy Dome in Stoneham was one of the best places to get ice cream north of Boston for decades, but the building was recently razed for the development of condominiums. While that doesn’t seem to have much to do with the automobile business, the original use of the building certainly was: It was home to the first gas station in the area north of the city. Nowadays, one can throw a softball and almost hit three different gas stations from their driveway, but the iconic dome served as a lone beacon. To those commuting to and from the northern suburbs, you had to plot a stop along Route 28 depending on how low your gas gauge was. For car dealers, they’ve never had to explain to customers where the nearest gas station is and how to use it, other than making sure people knew which side of the car to pull to the pump. It has been part of the nature of automobiles since most drivers were handed their first set of keys. However, the advent of EVs has changed that approach, and the infrastructure for how the world drives needs to be reestablished. If a salesman wants to move EVs off the lot, he has to be able to explain to all consumers the logisitics of how, where, when, and why there is such a seismic shift in the approach to getting on the road. “So many people think that electric cars are coming, but they think it is somewhere down in the future, they don’t realize the electric cars are here. People that are waiting for it to happen are misguided in thinking that it is years and years away,” Village JUNE 2019
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Automotive Group President Ray Ciccolo said. “Range anxiety is the biggest problem for anyone considering electric cars, but with the new Audi e-tron, once you get to the final 20% of your battery capacity, the dashboard will show you where the nearest electric charging stations are. On top of that, Electrify America is putting charging stations all over the country. You’re going to find these absolutely everywhere, and that will start to remove that kind of anxiety.” For most consumers it is a lack of faith in this new system that holds them back from buying an EV right now. While a network of charging stations is slowly building up and the technology is increasing as well, a complete conversion will take decades in a world where the average American vehicle remains in use for 16.6 years. With gasoline prices remaining consistently low, there’s no direct impetus for change for many who are in the market for a new vehicle. “Range anxiety is one, recharging anxiety is another too, “how far can I go and where do I recharge along the way?’” Expressway Toyota General Manager Robert Boch said. Boch, who is a member of the Massachusetts Zero Emission Vehicle Commission, added, “The biggest impediment to electric sales is still the price of gasoline. It is still cheap compared to what it once was. I think when gas hits $4 a gallon, we’ll see electric sales and hybrid sales go up. and that range anxiety level will go down because it hurts so much at the pump. If there were that much pain at the pump, the average customer would be home plugging the car in and wouldn’t be as concerned about that anxiety and would be more happy about the money they are saving driving an electric vehicle.” Only 66% of EV drivers have a Level 2 charger installed at their home, and for any customer looking to convert, a salesman on the floor needs to be able to explain the nature of home charging. There are lots of different systems that can be installed, and some rather inexpensively, but any customer needs to learn how to transfer kWh of energy to miles driven and the cost thereof. That salesman needs to become an electrician and explain the options available and the expense of different charging installations. A salesman also needs to be able to tell a customer when
MSADA ing to be a novelty car,” Ciccotheir wiring is too old or lo said. “Electric vehicles don’t otherwise problematic in have any drivetrains and torque a way that might make converters and all that stuff. a traditional gas vehicle They provide direct power to the best option for now. the wheels and these things go Be prepared to know like sting. People that are lookthat EVs are a revolution. ing for performance are going to They will change the way start to migrate to electric cars. that people interact with It is a game changer; it is going their vehicles. A new into change the entire industry. frastructure needs to be Time flies, and people that think developed to make them it is going to take forever are goas normal to the environing to be left out.” ment as anything else on Bill Dube Hyundai Presithe street. The end result They’ve never had to explain dent and Massachusetts NADA may use the same roadDirector Scott Dube drives a ways to get people where to customers where the Hyundai Kona for his daily they need to go, but evnearest gas station is and commute that often approacherything under the hood es 120 miles, but given that the is an entirely different how to use it charged capacity is 258 miles, beast. The best way to range isn’t really an issue. describe this to a custom“We’ve got to sell more of these cars. I think the car is a blast to er is the difference between a typewriter and a computer: Both drive, I enjoy driving it, I like the performance, and it makes it will help you write a letter, but while one is a loud mechanical fun again to drive, so there are a lot of reasons to drive one. With beast that requires some oiling and a full bottle of Wite Out by over 200 miles per charge, range anxiety doesn’t really exist your side, the other is a whirring mass of circuitry with a backgiven that the average commute is only around 30 miles a day.” space key that relies on a power cord. While both results are the The reality is though, that the EV market is still a fraction of same, even the medium of transmission is different from paper total sales, and in order for change to come, something must that you send off and wait days for a response, versus an email spur such action in car buyers. “The EV market is maybe 1% that expects near immediate reply. of the total market in the country and in Massachusetts,” Robert Ray Ciccolo recently visited Germany and viewed the giant Boch said. “Unless the government is willing to spend a whole new Porsche plant dedicated to EVs; the company plans to bring lot of money to incentivize people to go to electric vehicles, 10,000 EVs to the US by the end of the year. Manufacturers which is not the case nationally and isn’t going to be the case in from Europe and China have spent considerable R&D to break the state anymore, the only way the market will do it is a spike into this burgeoning segment of the US market, and new cars in the price of gasoline. That’s the only way the customer will and even new companies will soon be competing for their piece convert to electric right now.” of the pie. With the pending demise of the MOR-EV rebate program [see “Porsche is coming out with their new electric and its not gosidebar], Massachusetts may not be providing discounts to new EV consumers, but it is on the forefront of the technology. Our government understands the necessity for building a strong infrastructure to help the conversion to EVs and to put the state closer to its zero emission goals for the next decade. “Adopting clean technology and promoting additional zero emission vehicles is a critical piece of meeting our emissions reductions goals,” said Governor Charlie Baker. “[The Commonwealth’s] zero emission vehicle legislation makes major strides towards providing consumers with confidence that charging stations will be available to them, whether on a long trip or at work, a commonly cited hurdle in transitioning from traditional to zero emission vehicles.” In April, Baker’s administration awarded $370,566 in grants www.msada.org
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RACE TO THE Powering EVFINISH Infrastructure to support alternative fuel vehicles and related infrastructure across the Commonwealth through one of their most successful programs: the Massachusetts Electric Vehicle Incentive Program (MassEVIP) Fleets and Workplace Charging initiatives. The announcement was made at Brockton City Hall’s Earth Week celebration; the city is a shining jewel in MassEVIP’s crown as the grant they were awarded this year brought the city’s EV fleet to 14 vehicles. The MassEVIP Workplace Charging funds are part of Massachusetts $75 million allocation under the Volkswagen emissions cheating scandal court case. The MassEVIP Fleets program provides up to $7,500 per vehicle to purchase or lease plug-in EVs and up to another $7,500 to install the stations needed to charge them. The MassEVIP Workplace Charging program funds 60% of the cost of charging stations, up to $50,000 per address, for employers with at least 15 employees on-site. “Massachusetts continues to lead the nation in addressing climate change through continued investments in transportation solutions that work to reduce greenhouse gas emissions,” said Governor Baker. “The Massachusetts Electric Vehicle Incentive Program is an important tool for the continued development of infrastructure and technologies that promote a cleaner, more resilient transportation system.” Since its inception in 2013, the MassEVIP Fleets program has provided $2.66 million to 83 separate public entities supporting 267 EVs and 92 publicly accessible EV charging stations. The program builds upon government efforts to reduce carbon emissions from the transportation sector and ensure electric vehicle charging stations are more widely available across Massachusetts. MassEVIP Fleets is one of several Department of Environmental Protection open grant programs aimed at making EVs and EV charging stations more widely available across Massachusetts. While the state is trying to help provide a system for the infrastructure to develop, there are a dizzying number of companies looking to make their stamp on the charging market. Most public parking areas have designated spots that are just for EV charging, with different companies competing to for those positions. While companies like ChargePoint have taken over much of that space, it is those already in the electricity business that have been making massive strides. The Town of Bedford recently partnered with Eversource to install six EV charging stations. Eversource is also working with the Towns of Greenfield, Medway, and Milton, as well as working with the Homewood Suites in Hadley, the Marine Biological Laboratory in Falmouth, and several Mass Audubon sites to install EV charging stations. “Massachusetts is working diligently to meet its greenhouse gas reduction goals. Thanks to our partnership with Eversource, we are proud to expand EV charging access and encourage our staff, students, and parents to charge while visiting our schools,” Bedford Director of Facilities Taissir Alani said. “Additionally, JUNE 2019
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we hope residents and visitors will take advantage of the stations around town hall as they visit our downtown area.” Eversource’s EV Charging Station Program is committed to installing nearly 3,500 individual EV ports in up to 400 locations across Massachusetts by 2020. Through its EV charging station program, Eversource covers all electrical infrastructure costs needed for the stations and manages the process. Any municipality only needs to purchase and install the charging equipment. Companies like Forestdale’s SunRa Solar is using their position as a solar energy leader to call for consumers installing charging systems to go almost completely green and set up panels on their home. SunRa Solar already has created nearly 2.5 Gigawatts of installed generating capacity. Instead of worrying about the price per fuel mile, most home solar systems provide enough energy to make money for those who have panels installed. Finding chargers nearby is increasingly easy, as most vehicles will now provide an alert when the battery is low and are able to locate the nearest charger. The US Department of Energy keeps tabs on all chargers at their Alternative Fuels Data Center website afdc.energy.gov. There are so many options that there are 15 different charging networks you can choose from when you search www.plugshare.com for the nearest public charging station. With eight different plug styles on the market, dealers must know what is available in the area and how to let the customer know what is right and available for them. Each of these systems also will have their own way to pay, though Massachusetts was good in being preemptive a few years back and forbade companies from requiring a membership fee to log into any system. The world is catching up to the needs of new technology and the electrical network that has been the biggest hindrance to EV adoption is quickly establishing itself. In Massachusetts there is a strong support system already in place and it will only grow stronger as the years go on. Dealers need to embrace the change and learn to ease the anxieties of their customers, lest they become relics of the past like a fine antique car, you know, one that still guzzles gasoline.
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No More MOR-EV With funding for the MOR-EV program running out, it was announced at the Zero Emission Vehicle Commission meeting on June 24 that the program will be extended for the last time to cover electric vehicle purchases made through September 30. The program dispensed its first rebates in June 2014. The MOR-EV program has been funded by discretionary funds coming from the Regional Greenhouse Gas Initiative, which is a carbon cap-and-trade program for power plants, but it
has not had its own dedicated funding source. The state Department of Energy Resources proposed two amendments during the Fiscal Year 2020 legislative budget to extend the program, but the amendments were not adopted by the Legislature. The state’s Zero Emission Vehicle Commission voted to express its support for the program and are calling on the Legislature to find a way to continue funding the rebates. “I don’t think we should accept the idea that MOR-EV is dead,” Massachusetts NADA Director Scott Dube said. “Governor Baker and the Legislature need to find a way to do more because they are the ones that have signed us on and agreed with nine other states that 30% of our vehicles have to be zero emission by 2025, so they have an obligation to participate in creating a market where none exists. Dealers need to start to consider what their plans are, because as long as the government imposes
these sales requirements, then we are going to have a problem. Dealers have to talk to their legislators and say that it is premature to pull out.” Under the program, more than 14,000 electric vehicle buyers since 2014 have received rebates totaling $30 million; 9,007 zero-emission vehicles were sold in Massachusetts in 2018, up 175% over 2017. Through March 31, more than 23,000 EVs were currently registered in the Commonwealth, a first step on the way toward its 2025 sales target of 300,000 ZEVs. “2018 really saw a boom in Massachusetts of folks using the program to adopt a zero-emission vehicle, and the demand outpaced the resources,” said Amy Laura Cahn of the Conservation Law Foundation, who is on the state’s Zero Emission Vehicle Commission, which oversees the program. “But part of that has to do with the fact that there hasn’t been a dedicated funding source to rely on.” The fourth quarter of 2018 saw a massive spike in rebates that drained the fund. While much of that was due to many of the rebate programs ending or changing, there was also a flooding of the market as Tesla made the majority of its deliveries during the final months last year. “The administration is pleased to extend the MOR-EV program through September, and will continue its work to reduce greenhouse gas emissions and move Massachusetts in the direction of a clean transportation future through the Commonwealth’s other grant programs that incentivize the electrification of the transportation sector and efforts like the multi-state Transportation Climate Initiative,” Katie Gronendyke, a spokesperson for the Executive Office of Energy and Environmental Affairs, said. She added that the rebate program had “spurred the widespread adoption of electric vehicles in Massachusetts.” With EV sales still at negligible levels, Dube, who previously sat on the Massachusetts Zero Emission Vehicle Commission, is afraid that the Commonwealth is leaving dealers high and dry just as a government jump start is most needed. “The next thing that gets in the way is price, and that will come down as it becomes more mass market,” Dube said, “but the state can’t shirk its commitment to help consumers after signing on to the zero emissions initiative. I’m not for government telling people what kind of car they ought to drive in the first place, while I personally drive an EV, I don’t think the government should be telling me I have to. Further, I don’t think the government should be telling the manufacturers that they should be selling them in some quantity. There are a lot of things that need to be done, and they are not going to be accomplished if the government, who forced the situation in the first place, bails out on their responsibilities.” Two other EV discount programs for consumers ended on July 1, as Nissan Leaf’s $5,000 Drive Green finished and Tesla’s federal rebate was lowered to $1,875. t www.msada.org
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NEWS NEWS the NEWSfrom from Around Around the Horn Horn from Around
NEWS the Horn MSADA
DETROIT
Laham Sits For a Fireside Chat Facebook may be the first place you check in the morning for the local news from your friend group, but it’s not necessarily where you expect to go to find qualified discussion of the state of auto dealerships. However, Bob Lanham, head of Automotive Retail at Facebook, made sure their Executive Automotive Event was full of enlightening discussions about the state of the industry When it came time for a one-on-one fireside chat, Lanham brought in Premier Auto Group President Joe Laham for that event. According to Lanham “The feedback on our #firesidechat was off the charts. His candid remarks (and quotes), honest opinions, and, more importantly, his knowledge of not only the industry but his business. Joe is one of the only Dealer Principals I know that knows where 100% of his #advertising and #marketing money is spent. While I respect Joe as a business person, I respect Joe more as a person.”
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Looking at Cars for a Cause With the coming of Summer, drivers get a chance to remember why they love driving, even if they do not have a convertible top to put down on a weekend. Massachusetts offers fun options nearly every weekend. Not only will it remind you why you love cars, but sometimes it is for a good cause as well. Endicott College hosts their 10th Annual Misselwood Concours d’Elegance in Beverly from July 19 to 21. The 2019 show will feature Italian Classics, Paul Russell and Company restored cars, and pre-war motorcycles showcased at at Endicott College’s Misselwood Estate on a small neck with unobstructed views of the Atlantic Ocean. All funds raised from the show go directly to Endicott College Student Scholarships. Celebrating excellence, style, and elegance on Boston’s North Shore, the Misselwood Concours has become a premier event in New England. The Misselwood Concours welcomes some of the world’s most unique and stunning car marques as they compete for the coveted Best of Show Award during a judged competition. The show brings together high-end fashion, stunning art, breathtaking automobiles, and for one weekend it becomes the classic car hub of New England. Serving as a scholarship fundraiser for Endicott College and run on a volunteer basis, the show benefits current and future students by providing them with much needed financial help. Other events in July include Herb Chambers kicking off their Cars and Coffee series with an event on July 7 at Herb Chambers Lexus of Sharon. The popularity of these events has made it so that Chambers has reduced the number of events to three
for 2019 and only holding them at larger locations that can handle the increased traffic and parking. The Larz Anderson Auto Museum in Brookline has a full schedule of events catered to different specific interests most weekends through October. July’s features include a Microcar Classic and an American Car & Truck Day. “It’s a really fun, informal event that brings a broad mix of cars [and people] together,” Jennifer Corriveau, of the museum’s marketing team. “People come for the cars but also for the beautiful park with a great view of Boston at the top of the hill.” The Bug Club presents their 20th Annual Volks Fair at the Herbert Candy Mansion in Shrewsbury on Saturday, July 27. This is an all air-cooled VW show featuring food, ice cream, sweets, music, and more on the beautiful grass show field of
Hebert’s. Their are 14 show classes, participant judging, and trophies awarded to 3rd place as well as special awards to Best of Show, Interior, Engine, Paint, and Worst of Show. SHREWSBURY
Accurate Collision Does Real Damage Massachusetts authorities filed charges in April against 42-year-old Adam Haddad of Shrewsbury, who has been accused of using sledgehammers and mallets to cause further damage to cars he was repairing. Haddad owns Accurate Collision Inc. in Worcester and ADH Collision of Boston Inc. in Everett. Attorney General Maura Healey said Haddad had been indicted on 42 charges, including 18 counts of insurance fraud. Howard Smith turned in his new Maserati Quarttroporte to Haddad on March 2, 2016. After only owning the car for three weeks, he came outside after he visited a barbershop for a haircut to find a cracked right taillight, a small dent in the bumper, and a misaligned trunk hood. After Smith brought the vehicle to Accurate Collision and was told it would be ready in two weeks, the repair shop dismantled and then reassembled it, and the battery terminal and electrical wires in the trunk had been cut. Each tire had a razor-like cut on the surface that hits the roadway. Throughout the entirety of the 2 ½-year period that the car was at Accurate Collision, the repair estimate climbed quickly from $4,000, to $9,000, to $16,000 and $22,000, and finally a fifth repair estimate of $33,000. Smith filed a lawsuit against just to www.msada.org
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NEWS from Around the Horn retrieve his car, which had to be towed because it was no longer operable. Attorney General Maura Healey’s office began its investigation of Accurate Collision in 2017, after a referral from the state Insurance Fraud Bureau. The ongoing probe has found that several motor vehicle owners and 18 insurance companies have allegedly fallen victim to Haddad’s longtime complex motor vehicle fraud scheme, in which he used mallets and hammers to cause more damage to vehicles he was to repair in order to steal or try to steal $170,000 in fraudulent insurance claims. Haddad was recently indicted by a statewide grand jury for charges of motor vehicle insurance fraud (18 counts), larceny by false pretenses over $1,200 (15 counts), attempted larceny (three counts) and malicious destruction of property (six counts). Since the public announcement of the indictment on April 1, the AG’s office continues to receive additional complaints. IRVINE, CA
New-car prices up almost 4% Compared to last year, vehicle prices have increased, but the downward slide in 2019 continued for a fifth straight month. The estimated average transaction price for a light vehicle in the United States was $37,185 in May 2019 according Kelley Blue Book. New-vehicle prices increased $1,320 (up 3.7 percent) from May 2018, despite decreasing $208 (down 0.6 percent) from April. “Although May’s sales tally is expected to be down, the good news is that average prices for those sales rose nearly four percent from one year ago,” said Tim Fleming, analyst for Kelley Blue Book. “SUVs bounced back in May 2019 and drove many of those increases for automakers, especially those with new and redesigned models on dealer lots. However, with this expected to be the fifth down month in a row, the question for this year remains whether automakers will start to trade some of their pricing power for greater incentives and more sales.” Fiat Chrysler had another strong month, posting more than a six-percent increase, thanks to Ram and Jeep. Ram prices were up nearly five percent on the strength of the RAM 1500 and the new Ram 2500. Meanwhile, Jeep prices also were up five percent, as the Wrangler was up seven percent. In addition, the Gladiator pickup showed a strong launch skewed greatly toward the Rubicon trim, with average prices in the high $50,000 range. Subaru has another strong increase, as average transaction prices rose by five percent, with the new Ascent SUV helping the brand’s average the most. In addition, the redesigned Forester posted a four-percent year-over-year increase. JUNE 2019
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Lamoureux Earns 25th President’s Award Lamoureux Ford is once again the proud recipient of Ford’s most prestigious award for 2018, the President’s Award. This marks the 25th year overall and 22nd year in a row that Lamoureux Ford has won this award, given to only those who display the highest dedication to customer sales satisfaction. The Ford President’s Award recognizes Dealerships that have made a commitment to consistently deliver exceptional sales, service, and vehicle ownership experiences to their customers. Lamoureux Ford was among a select group of Ford Dealerships, less than 10% of all dealers nationwide, to be recognized with the 2018 President’s Award by Ford Motor Company. The prestigious award honors dealerships that have excelled in automotive retailing in 2018 by providing exceptional customer sales and service satisfaction. According to owners Marc and Lionel Lamoreux, “Earning this award is a reflection of our entire staff’s commitment to delivering the best customer experience possible. We couldn’t be more proud to receive this recognition, especially since it
SALEM
Car Thief Gets a Choice On May 24, a Salem Superior Court judge had an interesting deal for Miami resident Elvis Francois. The accused car thief on Friday could be free on $10,000 bail if he agreed to stay in Massachusetts and wear a GPS bracelet or he could return to Florida and await trial at home, if he was willing to post twice as much. Francois and Robert Pagliarulo of Kingston, New Hampshire, were allegedly behind a scheme to swindle at least seven Massachusetts residents who were shopping for new vehicles along a stretch of Route 114 in Danvers packed with dealerships, back in 2016. Pagliarulo would allegedly approach people looking at cars on a dealer’s lot, telling them he was a salesman who had access to another vehicle for sale at a bargain price. The bargain was due to the fact that the vehicles — from luxury sedans and SUVs to a Ford Mustang — were all stolen from car rental agencies in Florida. Francois’ role in the scheme was to obtain the vehicles, alter the vehicle identification number on visible locations and then ship them to Pagliarulo in Massachusetts, prosecutors say.
comes from the people we value most - our customers. They’re the reason we were able to achieve this award.” The President’s Award was developed in 1998. Dealers become eligible through survey responses from customers related to their service, satisfaction, and overall dealership experience. Ford Motor Company’s President’s Award is reserved for the best of the best - only 450 out of nearly 5,000 Dealerships received this prestigious award. Every year, this award is given to Dealers who provide their customers with first-rate treatment throughout the life of their vehicle. “The President’s Award signifies our gratitude for those dealers who reach beyond daily tasks and make a difference to their customers,” says Frederiek Toney, Vice President of Ford Customer Service Division. “We award our dealers for their outstanding commitment to our customers because just as Ford strives to deliver the highest quality products and technologies to customers, our dealers share that same passion in providing a world-class experience in vehicle sales and service.”
Prosecutor Alexander Grimes asked the judge to set bail at $50,000, noting Francois’ long history of similar crimes in Florida, as well as his residence out of state. Francois was arrested on Florida auto theft charges in March, when officials there discovered the 2017 Massachusetts warrant. His lawyer, Scott Gleason, urged the judge to set no more than $2,500 bail, saying his client would lose his job at Miami International Airport if he were held any longer. Gleason also called some of the Florida cases the result of a “misunderstanding,” saying Francois’ record is not as bad as it might appear. He also offered to have his client stay with a woman in the Bradford section of Haverhill if the judge wanted him to stay in Massachusetts. Drechsler said he was concerned both by Francois’ ties outside the state and the fact that his record is primarily “crimes of deception and dishonesty.” For now, Francois is choosing to come up with $20,000, and Judge Thomas Drechsler also ordered that Francois not leave the continental United States while awaiting trial. “I don’t like to get on planes,” the airport worker told the judge. “That doesn’t encourage me, Mr. Francois,” Drechsler responded, telling him he’d have to return to court, presumably by flying back to Massachusetts, if he posts bail. A status hearing is scheduled for July 2. t www.msada.org
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TECHNOLOGY
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Is the Automotive Industry Next in Line for the Technological Revolution? By Michael Lydon OCD Tech Michael F. Lydon is the Business Development Manager at OCD Tech. He can be reached at mlydon@ocd-tech.com
Consider the industries that have changed the most over the last 25-50 years due to advances in technology. The News & Media industry has always been dependent on advertising dollars. Publishers wanted to increase readership, so they could charge higher ad-rates; before the internet gaining more readers meant printing more newspapers. As we all know, things are very different today; publishers print less hard-copy newspapers than ever before and have several full-time social media managers on staff. Other industries morphed by technology include the travel & hospitality industry (which has been disrupted by Airbnb) and the farming industry (farmers once accounted for 50% of the U.S. work-force, today it is less than 2.5%). Here at O’Connor & Drew we have asked ourselves: Has the automotive industry gone through its technological renaissance yet? From our viewpoint, the biggest changes have yet to come. Automotive Industry products (vehicles) have certainly improved over the years. New features like rear-facing cameras and radar enabled self-stopping technologies have successfully improved safety. Self-driving technology is still under development; however, as the technology continues to improve, ride-sharing players like Uber and Lyft could become larger threats. Uber and Lyft’s long-term profitability and existence depends on JUNE 2019
successful implementation of self-driving technology, so look for those organizations to push the technological development. Hopefully we can agree that modern vehicles leverage more technology than ever before in order to meet consumer-expectations. But how much has the traditional auto-dealership model evolved to keep pace with the changing consumer decision-making landscape? It seems clear that consumers still want to see and touch products for significant purchases such as vehicles. Therefore, it
seems unlikely, at least in the short term, that online retailers like Amazon will win large portions of business from traditional dealerships. With that said, it is worth noting that Hedges & Company reports “online sales of new auto parts and accessories on mobile devices will account for $7.5 billion in the U.S. in 2019. That is about a 30% increase over 2018 when mobile nearly hit $6B. Today most parts and accessory websites get more than 60% of total traffic on mobile devices.” Additionally, a Hedges & Company
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consumer survey shows a majority of consumers use four main “online” sources when conducting shopping research. These are online search (74% of all consumers), auto parts retailer websites (73%), manufacturer websites (57%), and automotive forums (47%). What does this all mean for Massachusetts’s auto dealers? In short, it means auto dealerships must start engaging with the modern car-shopper before they come to the dealership. As outlined by Hedges & Company, consumers now have virtually unlimited research resources available instantaneously, giving shoppers the ability to study vehicle details and compare models at the touch of a button. As we enter the second half of 2019, auto dealerships face tougher competition than ever from the likes of Carvana, CarGurus, and others. It is no secret that auto dealerships have started collecting and storing more sensitive data relevant to their consumers to stay competitive. With that said, Massachusetts auto dealerships face regulations and laws that require that appropriate measures be taken to protect sensitive consumer information. Is your dealership prepared to handle the legal and regulatory hurdles that must be met in the modern automotive industry? Not sure where to start? Consider consulting with an IT Audit and Cybersecurity professional to ensure that your dealership meets state guidelines as well as to help prevent any private data from falling into the wrong hands. t
LEGAL
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By Joseph W. Ambash and Jeffrey A. Fritz
Lots of Unknowns and Moving Parts in Massachusetts Employment Law It is difficult to imagine how the Massachusetts Legislature and courts could have made things any more difficult for Massachusetts employers, including auto dealers, in 2019. From the eleventh hour adjustments to the paid family and medical leave law, to the very unfortunate and misguided Sleepy’s decision, to the drafting errors and unintended consequences of the Blue Law premium pay phase-out, Massachusetts employers have a fair amount of very legitimate gripes and concerns. This article outlines the current status of these issues. MA Paid Family and Medical Leave Law. Family and medical leave benefits under this new law are not available to employees until 2021. Such benefits will be funded, however, largely by employer and employee contributions, which initially were slated to begin July 1, 2019 (unless you have less than 25 employees, in which case, you do not have to pay any employer contribution). Fortunately, in mid-June 2019, the Legislature announced a threemonth delay to that deadline, but with an increase to the contribution level (from 0.63% of each employee’s first $132,900 in wages, to 0.75%). Keep in mind, however, there are notice requirements (poster and written notice, to be signed by employees) that you should address now. So what does this mean? Employers who wish to pass on some of this new tax onto their employees must begin withholding such amounts to be submitted to the Department of Family and Medical Leave beginning October 1, 2019. How much? Of the 0.75% tax on wages, the employer must pay at least 49.6%, and the employee can be required to pay upwards of 50.4%. In essence, this means the employer is on the hook for at least 0.372% of employee wages, and the employee can be required to pay up to 0.378%. For example, assuming your total eligible wages for the quarter amount to $1 million, the total contribution amount would be $7,500
(0.75% of $1 million). Of this amount, the employer has to pay at least $3,720 (0.372% of $1 million), and can pass on $3,780 (0.378% of $1 million) to its employees. What happens after that? You need to remit the full contribution amount, along with a quarterly filing, by January 1, 2020. Of course, you’ll need to continue withholding contributions during the first quarter of 2020, with remission and another quarterly filing by April 30, 2020, and so on, with contribution rates being adjusted (likely upward) each year. The Sleepy’s Decision. The fallout from the Sleepy’s decision continues. In essence, the Sleepy’s decision says, contrary to long-standing guidance from the Massachusetts Department of Labor Standards, 100% commission-paid employees must be paid an additional amount (separate and apart from commissions) equal to 1.5x Massachusetts minimum wage, for all time worked over 40 hours in any workweek and/or on Sunday and premium-pay holidays, regardless of whether their commissions are sufficient to satisfy that obligation. Plaintiffs’ attorneys eager to take advantage of the decision and line their own pockets are filing class actions against employers of 100% commission-paid employees, including auto dealers, at a heightened pace. Will it apply retroactively? If the Sleepy’s decision is held to be retroactive, then dealers with 100% commission-paid employees face immediate and significant exposure, going back 3 years, with automatic treble damages (plus attorneys’ fees) in the event of a lawsuit. This issue, however, is unlikely to be decided for some time. What Should Dealers Do Now? If you haven’t already, you need to review your pay plans with competent counsel to determine your potential exposure and where changes are required. Then you should implement those changes with all deliberate speed. At a minimum, and for the foreseewww.msada.org
able future (unless and until things change), you should ensure you pay your 100% commission-paid employees—separate and apart from their commissions—1.5x Massachusetts minimum wage (currently $18 per hour) for all time worked (1) over 40 hours a week, and/or (2) on a Sunday or premium pay holiday. Sunday/Holiday Premium Pay PhaseOut. As we have reported, as part of the “Grand Bargain, the Blue Law premium pay requirement is slated to phase out by 2023. It was initially 1.5x regular rate of pay, is currently 1.4x, will decrease to 1.3x in 2020, and so on until it is phased out completely. Between failing to include some holidays due to a drafting error and the unintended consequence of this adjustment potentially resulting in increased cost to the employer, it is hard to imagine this phase-out being rolled out more poorly. To avoid potential problems, it likely makes sense simply to continue to pay it at 1.5x regular rate of pay until it is phased out completely. In light of all these changes, unknowns, and moving parts, we strongly recommend you have your pay plans reviewed by counsel to minimize the risk of liability for costly wage-hour violations, which can result in significant exposure for your dealership. 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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Bringing the “Modernize the Truck Fleet” Coalition to Washington ATD is working across the industry to bring needed change
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.
The Modernize the Truck Fleet (MTF) coalition rallied on Capitol Hill as part of Modernize the Truck Fleet Week, June 17-21, to urge congressional support for bipartisan legislation repealing the 12% federal excise tax (FET) on the sale of heavy-duty commercial trucks and trailers. The FET was first enacted to help pay for World War I. This tax may have made sense in 1917, but today the FET delays heavy-duty truck fleet turnover by adding more than $20,000 to the average price of a new truck. On June 17-21, we held our annual ATD Congressional fly-in, attended by over 60 truck dealers, key managers, and ATAE leadership – our largest attendance ever. We spent our time on Capitol Hill meeting with Members of Congress to urge them to cosponsor H.R. 2381 and S. 1839, bills that would repeal the FET and encourage the deployment of the newest trucks and trailers. Members of Congress joined myself and other industry representatives at a press conference announcing the legislation. “The FET made sense when it was implemented 100 years ago, but just like trucks that were designed in 1917, it’s no longer viable in the modern world. Today, it is a cost-prohibitive barrier for small businesses looking to upgrade their outdated trucks to safer, cleaner, more modern vehicles,” said U.S. Representative Doug LaMalfa (R-California), sponsor of H.R. 2381, a bill to repeal the FET. “The average age of most heavy-duty trucks on the road today is nearly 10 years old – that means a decade worth of technological advancements is effectively being sidelined. The 12% FET limits
truck replacement by discouraging truck owners from upgrading their outdated vehicles – leading to higher emissions and more dangerous roads. We won’t truly see a modern truck fleet in the U.S. until it’s repealed,” LaMalfa added. U.S. Senator Cory Gardner (R-Colorado), sponsor of S. 1839, the Senate FET repeal bill, said, “This burdensome tax creates excessive costs that are passed on to truckers, who play an essential role in maintaining our nation’s economy. I was happy to introduce legislation to repeal it.” The MTF coalition, launched in January, is urging Congress to repeal the FET and identify an alternative source of revenue that reflects today’s modern truck fleet. The coalition includes ATD, Truck Renting and Leasing Association (TRALA), NTEA — The Association for the Work Truck Industry, Truck and Engine Manufacturers Association, National Trailer Dealers Association (NTDA), and National Tank Truck Carriers Association. America’s trucking industry wants safer, cleaner, and more fuel-efficient vehicles to move America’s economy. Repealing the FET and replacing it with a tax based on road use paid over the life of a vehicle is part of that solution. The FET is an indiscriminate, upfront tax. It makes no sense that a truck which drives 15,000 miles a year pays the same tax as a truck driven 150,000 miles.” There is an opportunity, right now, to modernize the nation’s infrastructure, modernize the truck fleet, and modernize the Highway Trust Fund. Repeal of the FET means more trucks rolling on our nation’s highways that are cleaner and safer. t
“Repeal of the FET means more trucks rolling on our nation’s highways that are cleaner and safer.”
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NADA Update
By Scott Dube
Join Me in Washington 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 get ready for the full swing of Summer, I need you just for a moment to think about what you will be doing in the third week of September. I hope you will join me in D.C. from September 15-17 for the NADA Washington Conference, an annual event that has grown every year as the web of regulations and laws cast around our industry expands exponentially. The bottom line is, we need your voice ringing in the halls of Congress in order to make the impact of our collective strength fully understood. Please reach out if you have any questions about whether you should attend (yes!) or logistics. We need you now more than ever.
Dealer Data and Related Digital Issues are High Priority for NADA By Charlie Gilchrist, 2019 NADA chairman Dealers do not need to be reminded that the world of dealer data is changing. The volume of information generated and stored has exploded, and that information is more sensitive and more valuable than ever. It is no longer just the dealer generating this information: “Big data” companies and data brokers hold vast amounts of data, and vehicles themselves are now generating data about drivers, owners, passengers, and others. At the same time, dealers must meet long-standing federal privacy obligations while understanding the implications of new laws, such as the EU’s General Data Protection Regulation (GDPR), state laws like California’s Consumer Privacy Act (CCPA), and others. There are also a number of federal legislative proposals that would vastly broaden U.S. federal privacy law. None of these laws are aimed specifically at the auto industry, but they will have significant effects on dealerships. For the dealership model to continue to thrive, we must meet these technical and legal challenges. Dealers should know that NADA is here for you! As chairman, I can assure you this is a top priority at NADA. For many years, we have worked closely with regulators, manufacturers, dealer vendors, and others to ensure that dealers have the tools they need to comply with the law and are ready
for the technical, cybersecurity, and data challenges for the future. Those efforts continue today. You can help by prioritizing these issues at your store. Double down on compliance efforts. Talk to your manufacturer about these issues, and let them know how important they are to you and your business. Work with your vendors to ensure you know and understand how your customer information is handled and shared. Remind your employees how important it is that this information is treated with the utmost care. Simply put, the data you maintain is at the heart of your customer relationship, your reputation and the value of your business. We dealers are swimming in increasingly challenging waters, but, with the help and guidance of NADA, we stand ready to exceed expectations, providing our customers with world-class products and services as well as cutting-edge technology and privacy protections.
What is the ‘Consumer Review Fairness Act’ and Why Should Dealers Care? NADA knows how important customer reviews are to your business. Your dealership strives to exceed customer expectations, and you hope to see those efforts manifest themselves in positive reviews. Unfortunately, it is not uncommon to experience an unfair, negative review that dulls the varnish on your dealership’s reputation. While these reviews are unwanted and may be unwarranted, one thing is clear – you cannot restrict a consumer’s ability to post a review. In 2017, Congress passed the Consumer Review Fairness Act (CRFA) in response to concerns that some businesses were using contracts with provisions intended to prevent or punish consumers for posting negative reviews about their products and services, such as provisions allowing businesses the right to bring a lawsuit or otherwise penalize consumers for posting reviews. The CRFA voids any provision in a “form contract” that impedes consumer reviews by prohibiting or restricting the ability of an individual from reviewing a business and makes it unlawful for a person to offer such a contract to consumers. A “form contract” is a contract with standardized terms used in the course of selling or leasing goods or services and imposed on a customer without a meaningful opportunity to negotiate the standardized terms. Violations of the CRFA are deemed to be violations of Section 5 of the Federal Trade Commission (FTC) Act, also known as the Unfair or Deceptive Acts or Practices (UDAP) Provision, and may be enforced by the FTC or state attorneys general. On June 3, 2019, the FTC announced the second in a series of recent enforcement actions against a variety of small businesses under www.msada.org
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NADA Update the CRFA. The announcement outlined two proposed FTC administrative complaints and orders against businesses who allegedly were using form contracts to impede honest customer reviews as well as proposed settlements. How can you take action to ensure your dealership is compliant? Review the FTC guidance on the CRFA as well as NADA’s Consumer Review Fairness Act FAQ document, which provide further details about the rule; review the FTC’s enforcement actions to see what kind of contract terms are prohibited; and consult with your attorney to review your own form contracts to be sure that no provisions violate the terms of the CFRA. Lastly, remember that this is not the only way you can run afoul of federal regulators with respect to consumer reviews. You should understand other FTC restrictions and requirements, such as those on improperly skewing positive reviews; the requirement to make certain disclosures about compensation for reviews; and those broadly governing endorsements.
Creating a Culture of Coaching at Your Dealership By Mike Fullam, NADA Academy Instructor If you truly want to create a culture of coaching at your dealership, here are some statistics that might persuade you. According to a recent study by the Human Capital Institute and the International Coach Federation, among the organizations that identified as having a strong coaching culture, 61% were also classified as high-performing organizations; 78% of the organizations agreed that their employees valued coaching; and 75% of senior executives valued coaching. There are also competitive advantages to creating a culture of coaching in your dealership. High-performing organizations with a strong coaching culture also see benefits when compared to their competitors, which include higher customer satisfaction (82%), improved employee productivity (65%), and increased profitability (64%). In addition, according to an internal NADA survey, leadership and coaching represents one of the most sought-after topics of interest to dealership group executives with three or more stores. Ninety percent of dealer execs consider it a critical topic for success. And if that is not enough to convince you, consider this: Dealerships that consistently create a culture of coaching often experience improved customer satisfaction, along with greater employee engagement, retention and higher net profit. The most successful dealerships that coach and develop their staff in all departments have higher net profit as a percent of sales than their non-coaching counterparts. Before we get too far down the road, it is important to clearly define the two key elements. The first part is culture. Culture is defined as the values, beliefs, and attitudes that characterize JUNE 2019
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MSADA your store, both internally (employee engagement) and externally (customer interaction). The second part is coaching. We define that as being about helping employees we believe in to reach their potential by assisting them in discovering their path to success and encouraging them along the way. Here are a few things you can do right away to begin creating a culture of coaching at your dealership and experiencing the benefits of doing so right away: • It starts at the top with you. Creating a culture cannot just be delegated, although you will certainly want to involve key leaders and managers. But if anything is going to change for the better, your employees will need to see that you not only support it, but that you are leading them through it. • Be consistent. Coaching and developing your employees is not a once-in-awhile thing. In fact, if that is your approach, you will likely end up doing more harm than good. Consistency is critical. • Understand coaching. There is a significant difference between coaching, teaching, and mentoring. All three are required as you develop your team, but knowing what to do and when is an important skill to learn. • Have a plan. There are specific critical skills that effective coaches use to help their team reach their potential. Simply telling them what to do or berating them when they make a mistake are not two of those skills. Identify resources and tools that will help you and your leaders. To be clear, coaching is not for everyone. We hear the usual push back: “Not enough time,” “not enough resources,” and “I do not know how.” It is your decision. But if you truly want to get to the next level in a competitive marketplace, coaching your team to improve performance is a winning situation for them, you, and your dealership. NADA provides the resources, seminars, and workshops that cover all aspects of dealership operations and profitability, including how to create a culture of coaching, which will be covered in the upcoming seminar, Leadership Master Class, in Tysons Corner, Virginia, from September 23-27. Two critical topic areas – change management and coaching – will be covered in depth in the new class. Dealership managers will receive the tools they need to create a positive and productive work environment as well as learn how improve communications with their staff. Fullam brings a wealth of knowledge and experience to the NADA Academy. His career spans more than 30 years in the auto industry working in the retail side of the business and at Chrysler where he trained dealers, dealership groups, and OEM field staff in financial management, process improvement, leadership, and profitability. Fullam attended Georgetown University and earned a master’s degree in education from Penn State University. t
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