MSADA, One McKinley Square, Sixth Floor, Boston, MA 02109
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FIRST CLASS MAIL US POSTAGE PAID BOSTON, MA PERMIT NO. 216
May 2019 • Vol. 31 No. 5
The official publication of the Massachusetts State Automobile Dealers Association, Inc
2019 ANNUAL MEETING
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, 23, 31 NEAD, 2 O’Connor & Drew, 32 Southern Auto Auction, 22
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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: Growing Our Roots ASSOCIATE MEMBERS DIRECTORY THE ROUNDUP: Dealers Convene for 79th Annual Meeting and Dealer Day on Beacon Hill LEGISLATIVE SCORECARD TROUBLESHOOTING: Defusing Customer Complaints AUTO OUTLOOK
16 Cover Story: 2019 Annual Meeting
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NEWS From Around the Horn ACCOUNTING: Now is the Time to Focus on Driving Up Absorbtion LEGAL: SJC’s Sleepy’s Decision Changes Landscape nada Market Beat TRUCK CORNER: A Season of Renewal nada update: The Case for the Future of Auto Shows
ADVERTISING RATES Inquire for multiple-insertion discounts or full Media Kit. E-mail jfabrizio@msada.org Quarter Page: $450 Half Page: $700 Full Page: $1,400
Back Cover: $1,800 Inside Front: $1,700 Inside Back: $1,600
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Massachusetts Auto Dealer
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From the President
MSADA
Growing Our Roots Your Association works best with you at the forefront
By Chris Connolly, MSADA President
Msada Board
Those of us who attended our MSADA Annual Meeting on May 3 and walked the halls of Beacon Hill during our Dealer Day on May 22 heard the same message throughout this month: The power of a story to influence change is undeniable. That is why we need yours. We all have built businesses that employ dozens and generate millions of dollars of economic activity each month. Added together, we make economic contributions that amount to almost 20 percent of our Commonwealth’s retail economy. For that reason, I want to thank everyone who made excursions from near and far to Boston for both our Annual Meeting and our Dealer Day on Beacon Hill. Your personal contribution in time and effort is important to establishing a larger narrative that our legislators understand. It helps to have powerful friends, as well. It was wonderful to hear from folks like Gov. Charlie Baker, who has been an important ally and collaborator in new programs that will benefit our industry and our Commonwealth. You will find all of our coverage from the Annual Meeting on page 16 of this month‘s magazine. I also extend my thanks on behalf of the Association to our Annual Meeting sponsors, who we have also recognized in this issue. And as always, my sincere thanks to Executive Vice President Robert O’Koniewski and the Association team who put together another fantastic event. We heard a lot of important information, ideas, and opinions in one of the most luxurious spots in the city. Safeguarding our industry requires a constant watch for threats both new and old, and communication is job No. 1. Our Dealer Day on Beacon Hill is a chance to bring our world into legislative offices to help them understand our issues. These folks are given the opportunity to see how much of the state’s economy we represent, and how we are vital players in any local community. These are the moments legislators remember when we knock on their office doors, and they can make all the difference when our opposition has limitless money to throw against us. As we move into the Summer sales season, I ask that you continue to do your best to keep up on what your Association is doing to protect our community. We need you, our member dealers, to continue to be ready with emails, phone calls, and other grassroots communications as we continue to push our industry’s future forward. While our industry as a whole continues to see upheaval and challenges, we also have to keep in mind that the next regulatory or legislative hurdle is always bubbling under the surface. But if we work together on the problems our industry encounters, our Association will continue to thrive in the face of the challenges that come our way. t MAY 2019
Massachusetts Auto Dealer www.msada.org
Barnstable County
Brad Tracy, Tracy Volkswagen
Berkshire County
Brian Bedard, Bedard Brothers Auto Sales
Bristol County
Richard Mastria, Mastria Auto Group
Essex County
William DeLuca III, Woodworth Motors 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 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 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 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 Micorp Dealer Services Robert Calhoun 617-285-4833 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
Dealers Convene for 79th Annual Meeting and Dealer Day on Beacon Hill By Robert O’Koniewski, Esq. MSADA Executive Vice President rokoniewski@msada.org Follow us on Twitter • @MassAutoDealers
Probably the most important event each year for your Association is our Annual Meeting of the Members. At that time, our member dealers and associate members convene as a group and set aside their competitive spirits for a few hours. We do this to listen to a roster of interesting speakers offering varied perspectives on our industry and current political atmosphere. We also enjoy the camaraderie of our fellow businessmen and women facing the shared challenges today’s economic and political climates present to us. For this one event, we all can truly say we are united as a body to promote the franchised auto dealer system. On Friday, May 3, your Association convened its 79th Annual Meeting of the Members at the Mandarin Oriental Hotel in Boston – a more exquisite setting does not exist in our capital city. At that time, we had a successful turnout of members, and attendees heard from a diverse group of speakers, including: • Your MSADA President, Chris Connolly; • Massachusetts NADA Director Scott Dube; • Massachusetts Governor Charlie Baker, a strong advocate for our industry; • Jason Stein, publisher of Automotive News, who always brings interesting insights on the developments in our industry; • Guido Vildozo, IHS Markit, who provided an economic outlook for the coming years; • Marcos Miranda of Northeast Dealer Services, whose presentation, “The Culture of Accountability”, reaffirmed a number of principles upon which successful dealerships are built; MAY 2019
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• NADA attorney Paul Metrey, who provided an update on current efforts to maintain high standards for providing voluntary protection products to your customers; • Herby Duverne and Jim Helein of Windwalker Group, who covered opportunities to strengthen your dealership through the Massachusetts Workforce Training Fund; and • Peter Brennan and I gave a government affairs report to update members on legislative events so far in 2019 and what we can anticipate heading into 2010.
MSADA Following the meeting, attendees adjourned to our cocktail reception sponsored by the law firm Murtha Cullina to refresh and rejuvenate before hitting a night out on the town. We cannot have such successful events without the strong support of our sponsors. We owe a huge “thank you” to this year’s event sponsors: • ACV Auctions – Welcome Gift Sponsor • Auto/Mate Dealership Systems – Bronze Sponsor • Blum Shapiro – Bronze Sponsor • Burns & Levinson – Break Station Sponsor • Cox Automotive – Luncheon Buffet Sponsor • Downey & Company – Bronze Sponsor • Eastern Insurance – Friend of the Association Sponsor • GW Marketing Services – Friend of the Association Sponsor • Hub International – Friend of the Association Sponsor • Key Bank – Friend of the Association Sponsor • McWalter Volunteer Benefits Group – Friend of the Association Sponsor • Murtha Cullina – Cocktail Reception Sponsor • Northeast Dealer Services – Bronze Sponsor • O’Connor & Drew – Silver Sponsor • SunPower – Friend of the Association Sponsor • SunTrust – Bronze Sponsor • TrueCar – Platinum Sponsor • Zurich – Bronze Sponsor You can read the details of our meeting as part of this month’s cover story beginning on page 16.
the local level, whose roots can be found in the interaction of our businessmen and women and politicians in any number of different settings. Until seven years ago, however, dealers had never collectively come together to communicate directly with legislators at their place of business, the State House. On May 22, your Association held its seventh annual “Dealer Day on Beacon Hill” event designed to bring our member dealers right into the political lion’s den where the legislative decisions are made affecting your businesses. Dealers and their key employees convened in the morning at the Parker House Hotel, just down the street from the State House. We provided attendees an issues briefing on our legislative priorities for the 20192020 legislative session as they dined on the available luncheon fare. Relatively speaking, the legislative process is really still in its infant stages as committee hearings just got underway in earnest within the last several weeks. The bills we covered that we strongly support (and on which I have written previously) were the following: • 93B franchise law amendments; • temp tags: • increasing the insurance reimbursed labor rates for auto body repairers; • preserving customer choice in service contracts; • diminished value; and • class 1 license appeals. We also briefly discussed our opposition to legislation that would provide a carveout for Tesla from our franchise law’s prohibition on factory-owned stores, which
Dealers Visit Beacon Hill If our Annual Meeting is a great event for our members to convene and provide a united front in support of our franchised dealer industry, our annual Dealer Day on Beacon Hill event translates that support and messaging for legislators and into the political arena at our State House. Almost every dealer has some sort of relationship with his or her legislators at www.msada.org
we successfully helped to defeat during the last four legislative sessions. We reminded our dealers that, as they make their visits throughout the day, it is important to tell your own stories regarding your role in the community, including your economic impact, the employees you manage, and the taxes they, your customers, and you pay. Legislators know dealers and dealerships exist; they just do not know the long and deep reach of your businesses’ tentacles into the state and local economy and throughout the community, especially through your charitable and other service-related activities. All our dealers were well received, and the dealers’ presence throughout the building created quite a buzz. In order to build on the successes of our “Dealer Day” events, it is vital that we continue to grow our attendance and participation amongst our members for our events. It is extremely helpful to our lobbying efforts for legislators to see their constituents face to face and receive a perspective they don’t have in the normal course of their activities. No one knows your business better than you. That knowledge needs to be conveyed to your legislators in an environment and manner they understand. As a result of our dealers’ input, this event was a success upon which we can build for the future.
Three New Bills To Be Scrutinized This session the Legislature will have three new bills before it that are on your Association’s radar screen – one old dog rearing its ugly head once again, a new gnat of an issue for the auto lender finance entities, and one that should not shock anyone since liberal solons here love to copy all that is California. Right to Repair is back! Just when one would think we put this issue to bed seven years ago and it was safe to stay in the repair waters when a deal was struck with the independent auto repair industry, proponents are now pushing RTR Deux (House 246). Claiming that the factories have not played nice in providing the required repair Massachusetts Auto Dealer
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The Roundup and diagnostic info to the independent garages, the RTR folks are seeking a larger bite of the proverbial apple. Not content to have access to the necessary info, what they are really seeking now is to interfere with the telematics communications that exist between motor vehicles sold by franchised dealers, the owners of those vehicles, and the franchisor factories. This time around, based on early signals, I would imagine the RTR gang will not wait for a legislative deal to be struck, and they will go right to the November 2020 initiative petition process. The first step in that process will be the filing of the petition with the attorney general by the first Wednesday in August this year. My guess is the Consumer Protection Committee, which has the bill, will not have its required public hearing on House 246 by then. Small loan license for certain negative equity deals. To address an administrative ruling by the Baker administration regarding the licensure needed to finance certain motor vehicle transactions, a bill has been filed (House 220) to clarify that licensed motor vehicle sales finance companies do not need an additional small loan license to finance certain contracts with negative equity – loans with negative equity balances of $6,000 or less with interest rates greater than 12 percent. The finance companies are already licensed under state law. The state Division of Banks says that they need to carry also a small loan license. For several months captive finance entities had been contacting their franchised dealers to have us do something about this – regardless of the fact that most franchisors have their own lobbyists in this state always attacking us on franchise law issues. At the May 13 public hearing by the Consumer Protection Committee, your Association was the only party to testify – in favor – and not a single franchisor representative was there. The national trade association – American Financial Services Association – did send its lobbyist, who handed in a letter of support. The next time one of your captive finance entities pushes you on this issue, ask them to have their lobbyists dust themselves off, dig out a map of the State House, and go MAY 2019
track down a couple committee chairmen to talk to in order to get the bill moving. Consumer Data Privacy. Last year California passed the California Consumer Privacy Act (CCPA) which has very broad implications for businesses, including auto dealers. Amongst other provisions, the CCPA includes more stringent privacy notices; requirements to allow consumer access to data stored by a dealer; a required “do not sell my data” button on a dealership’s website; a required option to provide and honor an “opt-out” of data sharing in certain circumstances; the right to require dealers and all of their service providers to delete personal data upon request by a consumer; and a private right of action if an alleged violation occurs. Unsurprisingly, just like a myriad of proposed bills over the last decade, some legislators here have taken the California law and filed in for consideration in our current session. Senate 120 is presently before the Consumer Protection Committee, with no public hearing having been set yet. Your Association will be opposing this onerous proposal. Stayed tuned for developments as they occur.
Connolly Hosts Sen. Pres. Spilka at Dealership On May 10, MSADA President Chris Connolly hosted his state Senator, Senate President Karen Spilka (D-Ashland), for a luncheon fundraiser event at Herb Connolly Acura in Framingham. The Senator met with dealers who attended, discussing current industry developments, and toured the dealership. The event served as an effective way for our area dealers to stay connected with one of the three most powerful members of the Commonwealth’s government.
Massachusetts Auto Dealer www.msada.org
Upcoming Events 2019 Employee Benefits Symposium, June 6, Westborough. Put on by Shawn Allen of McWalter Benefits Group, this event will provide informative presentations on hot topics happening in today’s employee benefits marketplace, such as the paid family medical leave act and employee engagement. Also, health care and employee benefits are evolving at a rapid pace, especially with non-traditional competitors like Amazon entering the arena. Location/Time: Westborough DoubleTree Hotel, 8:00 a.m. – Noon. No charge. Third Annual MSADA-Blum Shapiro Dealership CEO & CFO Forum, June 17, Framingham. Designed to tackle a host of legal, accounting, and tax issues arising in today’s challenging business climate, the forum will address understanding today’s sales effectiveness and performance metrics; trends impacting dealership values; and construction do’s and don’ts. Location/Time: Sheraton Framingham Hotel, Noon – 4:30 p.m., with a cocktail reception following until 6:00 p.m. Cost: $125/person; a dealer principal who registers and attends can bring one key manager at no charge. Check your e-mails for registration materials for both events.
State Lemon Law Stickers Survey Over the last several weeks, representatives of the Massachusetts Office of Consumer Affairs and Business Regulation (OCABR) have been visiting new and used vehicle dealers to test their compliance with the state lemon law stickers requirement. As part of its vast realm of responsibilities, OCABR administers the Massachusetts Lemon Law and Used Vehicle Warranty Law arbitration programs. OCABR conducted a number of field visits at a random sampling of franchised newcar and used car dealerships across the state to assess compliance with state motor vehicle warranty notice laws, especially as they relate to those yellow Lemon Law stickers dealers must have affixed to vehicles offered for sale.
MSADA According to OCABR, its inspectors visited 167 dealerships in 77 cities and towns in Massachusetts and audited a total of 2,174 cars. Of the dealerships inspected, 105 were 100% compliant, meaning all of the vehicles onsite had a Lemon Law sticker, while 31 dealerships had 0% compliance. According to OCABR, 0% compliance here means that fewer than 50% of the total number of vehicles audited at the dealership displayed stickers. A link to OCABR’s blog on the survey can be found here https://blog.mass.gov/consumer/massconsumer/spring-2019-lemonlaw-audit-results/ , and the full audit report can be found here: https://www.mass.gov/ files/documents/2019/04/26/Spring%20 2019%20Dealer%20Audit%20Report.pdf. As a reminder to our member dealers, in addition to the various notices/stickers required by federal and state law, Massachusetts law requires dealers to comply with the following two Lemon Law sticker requirements when offering vehicles for sale, the contents for which are specifically detailed in the OCABR regulations: 1. New and Lease Car Warranty Law sticker. For new motor vehicles and those used motor vehicles still within the term of protection which are sold, offered for sale, or displayed in Massachusetts, dealers must post on the vehicle the Massachusetts Lemon Law notice, as required by MGL Chapter 90, Section 7N½ and the regulations at 201 CMR 11.23. This is a yellow sticker and details a purchaser’s new vehicle warranty rights under state law. 2. Used Vehicle Warranty Law sticker. For every used motor vehicle covered by the warranties established under MGL Chapter 90, Section 7N¼ that a dealer sells, offers for sale, or displays in Massachusetts, dealers must affix to the vehicle’s window or the dashboard the Massachusetts Used Car Warranty Law notice, as required by MGL Chapter 90, Section 7N¼ and the regulations at 201 CMR 11.22. This is a yellow sticker and details a purchaser’s used vehicle warranty rights under state law. Where Can One Obtain the Stickers? These stickers can be purchased directly from Reynolds & Reynolds through
our MSADA-Reynolds forms purchasing program, the LAW Massachusetts F&I Library. Call a sales representative at 800344-0996 or visit www.ReySource.com.
Vehicle Rental Contract Surcharge The Massachusetts Department of Revenue recently issued the final regulations pertaining to the surcharge on vehicle rental contracts that went into effect on January 1, 2019. Keeping consistent with what your MSADA has advised since the law took effect on January 1, 2019, the final Technical Information Release issued by the DOR explicitly exempts socalled “loaner” agreements from the surcharge. Accordingly, dealers do not have to collect the $2 surcharge when issuing a repair customer a “loaner” vehicle and using a rental agreement document with no charges on it. However, dealers must collect and remit this surcharge when entering into a vehicle rental contract with a paying customer and will be charged the surcharge when entering into a vehicle rental contract with a rental company. Look for more details on this in our upcoming bulletin.
Save the Date: Dealers 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 Auto Dealers Hall of Fame ceremony October 2-4 at the Chatham Bars Inn on Cape Cod. We have sent 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. www.msada.org
Motor Sports’ Greatest Day There is no better day in motor sports racing than the Sunday of Memorial Day weekend when we have the Monaco Grand Prix winding its way through Monte Carlo, followed by the historic Indy 500 at the Brickyard, and capped off with NASCAR’s longest race, the Coca-Cola 600 from Charlotte Motor Speedway. Alas, a dark cloud hung over Monaco this year with the passing of past champion and racing icon Niki Lauda on May 20, to whom race teams dedicated this year’s competition. Congratulations go out to Englishman Lewis Hamilton for his wire-to-wire victory in Monaco, Frenchman Simon Pagenaud, who delivered an 18th victory at the Indy 500 for Team Roger Penske, and New Jersey native Martin Truex Jr., who survived an early crash in his Toyota Camry to bring Joe Gibbs Racing to Victory Lane in Charlotte. A full day of racing to be enjoyed by fans worldwide.
Economic Impact Study Survey Form – Please Complete and Submit Fax to (610-640-2907) or Email to AUTOOUTLOOK@ICLOUD.COM Once again we are asking you to assist us in creating our annual Economic Impact Report, which we use with legislators and opinion makers to demonstrate the real dollar and cents economic impact that dealers have on our Commonwealth and in their cities and towns. People not involved in our industry, including lawmakers, are consistently surprised by the fact that our dealers’ businesses account for almost 20 percent of the total retail economic activity in Massachusetts. Please take a few minutes and complete the survey form that has been emailed to you for each of your dealerships. Once completed, either fax it to Auto Outlook at (610) 640-2907 or email it to autooutlook@icloud.com. Your submitted survey is strictly confidential. Thank you for your assistance in this project. Should you have any questions, please do not hesitate to contact me. t Massachusetts Auto Dealer
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Troubleshooting
MSADA
Defusing Customer Complaints By Peter Brennan, Esq. MSADA
Staff Attorney Once again, this year automobile dealers ranked near the bottom in a consumer poll of the most and least trusted professions in the United States. In the 2019 Gallup poll, “car salespeople” were rated only above telemarketers and members of Congress in terms of honesty and ethical standards. While those of us that work in the industry realize that this poor public image is likely based on interactions with some charlatan at a “string-of-lights” used car lot and not a franchised, new vehicle dealership, the perception that most dealers have a penchant for dishonesty and unfair dealing is something that our members have to combat on a daily basis. This image problem has a real impact when a customer thinks that they have been taken advantage of at a dealership, as the customer’s confirmation bias may result in the person escalating or taking public their gripe more quickly than they would in a similar transaction with another business. Dealers know that they will be a target for consumer complaints, no matter how unjustified, and should have a process in place to deal with these situations when they do occur. When a customer raises a complaint against the dealership, how the complaint is initially handled is often the difference between a resolution of the dispute or an escalation. The dealership should assign an employee to deal with customer complaints, so that when a complaint is lodged the resolution process can begin immediately. The best time to prevent an escalation of the complaint is immediately
after the customer has registered his or her complaint with the dealership. The dealership also should establish a written policy for handling customer complaints that is adhered to by all dealership employees. As part of this policy, dealership employees should be required to keep accurate records of all complaints and all interactions with customers during the complaint process. While the purpose of the policy is dispute resolution, accurate and detailed record keeping procedures will benefit the dealership and its legal counsel if the complaint results in litigation. You should consult an attorney
Dealers know that they will be a target for consumer complaints, no matter how unjustified, and should have a process in place to deal with these situations when they do occur. to help your dealership develop a legally sound policy. It is not uncommon these days for a customer to take to the internet with an angry post on social media before he or she bothers to register the complaint with the dealership directly. Once the dealership is alerted to such a post, the designated employee should immediately contact the customer and see if they can diffuse the situation. The initial contact should include an acknowledgment of the complaint and an invitation for the customer to contact the dealership to discuss the customer’s experience and work towards a resolution. While it might seem like ignoring the post could diffuse the situation by keeping the fuel from the fire, this is rarely the case. The disgruntled customer will likely use the lack of response to build their case against the dealership in the court of public opinion, which could have a snowball www.msada.org
effect if other customers come out of the woodwork to air their own grievances. The initial response should be succinct. A dealership should never engage in a debate on the merits of a consumer complaint in a public online forum. Some people can not be reasoned with and would rather trash a business online than work towards a resolution of the complaint. Even if the complaint is demonstrably meritless, and can be proved as meritless by the dealership, the website that hosts the online forum where the complaint is posted is unlikely to do anything that might stifle the free speech of its users. Generally, a cease and desist letter directed towards the website will be ignored or, worse, used by the host or consumer to illustrate that the complaint must have merit. When a dealership’s complaint resolution process fails to achieve the desired result, more aggressive measures may be considered. One option is a cease and desist letter aimed at the disgruntled customer personally. If taking this route, the likely threatened cause of action would be for defamation and the associated damages. Dealerships should avoid threatening an injunction or anything that could be seen as limiting the customer’s free speech. Defamation is commonly defined in the law as any intentional false communication, either written or spoken, that harms a person’s (or company’s) reputation; decreases the respect, regard, or confidence in which a person is held; or induces disparaging, hostile, or disagreeable opinions or feelings against a person in the eyes of the community. Notable here is that the customer’s communication must be intentionally false. If the customer’s complaint is rooted in truth, then any action for defamation will not succeed. 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
2019 Massachusetts State Automobile Dealers Association
79 TH ANNUAL MEETING
“We need to make sure people can be able to afford the cars we sell.”
Gathered in a ballroom at the Mandarin Oriental Hotel in Boston, the 79th Annual Meeting of the Massachusetts State Automobile Dealers Association took place on Friday, May 3, 2019. With a slate of speakers representing all facets of the auto industry and an appearance by the governor, attendees migrated in to their seats from the casual luncheon that kicked off the event. MSADA President Chris Connolly provided a welcome with a look back at a year that included the creation of the Auto Dealers Hall of Fame last October and a look forward to the implementation of the Skid School program and working to keep an even keel during any political tumult. “We live in interesting times,” Connolly said. “When a dealer asks ‘How is this going to affect my business?’ I can reply ‘It is not going to, because of the work of MSADA.’”
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Massachusetts Auto Dealer www.msada.org
“If you are trying for the best work, you need to have people who have done it.”
MSADA Scott Dube
Massachusetts NADA Director Dealing with all of the chaos of Washington, D.C. politics, Scott Dube is now in his second year representing the state‘s auto dealers as NADA director. This year there were three main points of focus: a technician shortage, VPP compliance, and vehicle price. NADA has created a Dealer Workforce Initiative to help deal with the growing shortage in automotive technicians. There are 20% more retirees than those entering the workforce. Students who do not opt to attend vocational high schools may not even realize that these jobs are available, but there are nearly 28,000 dealership jobs in the state with an average salary of over $65,000. NADA established a web presence at nadafoundation.org to promote the benefits of dealership careers with prospective employees. Most dealerships provide extended service contracts to fill the gaps in the manufacturers warranties, but these Voluntary Protection Products (VPPs) are under massive scrutiny due to a few scandals. NADA is working to improve the transparency within these VPPs and to ensure all dealerships are working to agree to clean up the system. With the average cost of a new car in the state at nearly $37,000, dealers need to recognize customers wariness to spend and spend. Subscription models may be one of the waves of the future, but there need to be other means to give people the opportunity to buy a new car in a world where salaries have plateaued. “We need to make sure people can be able to afford the cars we sell,” Dube said.
Charlie Baker Governor, Commonwealth
of
Massachusetts
While the billions of dollars that Massachusetts has dedicated to upgrading the MBTA in the coming years may not have much direct effect on car dealers, it is a sign of how Governor Charlie Baker’s regime is dedicated to improving the infrastructure of the state. The bond bill that is in place is set to devote between $18-$20 billion to upgrading roads and bridges across the Commonwealth. “My focus is the core,” Baker said. The state is trying to “spend the resources so that it does not cause disruptions. However, no matter how you try, all of the work that needs to get done cannot be completed between 1 a.m. and 5 a.m. If there is an issue, make sure the state is aware of it. We have plenty of resources, but do not have enough time.” Baker highlighted other achievements during his administration, most prominently the inmate training program and legislation on inspections and reforming the used vehicle record book. With the legalization of marijuana, the next issues that Baker has his attention set on are safe driving and impaired driving as regulations currently only apply numerical limits to alcohol consumption. With his focus turned back toward infrastructure, Baker looked at the larger obstacles that need to be addressed like the Tobin Bridge and Rutherford Avenue, and said it is like a “pig in a python, you just get through it.” As the MBTA tried for years to fix problems internally, Baker has been unafraid to bring people from outside to help fix the problems here. “If you are trying for the best work, you need to have people who have done it.”
“Make the customer experience personal.”
Jason Stein Publisher, Automotive News
When Jason Stein started making fun of some of the grandiose proclamations that Automotive News, the magazine he publishes, had made in the past, from the world giving up on cars to a radically accelerated timetable for the full implementation of electric vehicles, it was apparent that he knew any predictions being made at this moment are really just a guess. He even concluded his talk with “a piece of reality: we do not always get it right.” Having spent 16 years at the magazine, Stein admitted, “It is never been more fascinating.” With the average price of a car at $34,319 and vehicles staying on the lot 72 days on average, “the fundamentals are good, but the signals are bad.” He hedges that “it is not cataclysmic, it is not ’08-’09.” That crash may have seemed to be an oblivion for the industry at the time, but instead it provided opportunity and got the industry to the precipice of the electric vehicle. These days every dealer has an EV option, but the world is still a very long way from a fully automated vehicle fleet. While the conditions around the industry may be in flux, Stein says that the best thing any dealer can do is “make the customer experience personal.” Whether a customer is buying or leasing or flexing or subscribing, the dealership is about creating a relationship where the customer trusts you to do the service and repair and they come back to you for their next vehicle. “Be brilliant at the basics.”
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Government Affairs Report Robert O’Koniewski and Peter Brennan With new chairpersons on several important House and Senate committees on Beacon Hill, including both Ways and Means, this year’s legislature has been slow to get rolling as it begins its two-year term that will not expire until December 2020. Robert O’Koniewski said that more than 300 of the over 6,000 bills filed directly impact car dealers. Dealers that are members of MSADA are more involved in the political process, and when they have a situation that demands action they are more able to mobilize and have their voice heard by legislators who can help do something about it. For those looking for direct engagement with their representatives, Dealer Day on Beacon Hill is May 22 and the NADA Washington Conference is September 16-17. O’Koniewski reminded dealers that MSADA can help with legal and compliance issues with legal questions answered by the Member Counsel Service and the Compliance Subsidy Program being extended through 2019. New Car Dealer Political Action Committee (NCDPAC) and federal PAC (NADAPAC) are the political action committees that speak for MSADA members on Beacon Hill and in Washington, D.C., respectively. O’Koniewski also addressed the renewed call for right to repair. Third parties are seeking to tap into new vehicles’ ability to signal to the vehicle owner, the dealer, and the manufacturer when there is an issue with a car. While some claim they are just looking to get info to fix a car, the precipice is a fuzzy line that is likely to be a hot-button issue when it hits the chamber floor, and MSADA will there “to help our dealers and to protect our dealers.” Peter Brennan provided an update on electric vehicles. As of January 1, the maximum rebate for consumers buying an EV is now only $1,500, and hybrid vehicles no longer qualify. The state has given out over 14,000 rebates during the life of the program totaling just under $30 million. The rebate program is seeking a permanent funding source.
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Guido Vildozo IHS Markit
For many, Guido Vildozo is the go-to opinion on the future of the automotive market, but even he was having difficulty seeing through the obfuscating smog emanating from Washington, D.C. For Vildozo, the biggest factor is the White House’s implementation of the 232 Tariff. The tariff, so named as it is from Section 232 of the Trade Expansion Act of 1962, was declared on the importation of steel at 25% and aluminum at 10%, and came into effect on March 23, 2018. The price of raw materials is vital to the production of an automobile and can radically affect the sticker price of a vehicle. Lots more political negotiating has delayed the enacting of these, but firm decisions are pending soon. Whether these tariffs will be universal to all countries, or exempt within the NAFTA region is still under negotiation. With so many variables in place and a market prepared for “more weaknesses ahead,” the future is uncertain.
MSADA Marcos Miranda
Sales Training Manager, Northeast Dealer Services Speaking on “The Culture of Accountability,” Marcos Miranda offered up an organizational structure that works from the top down while incorporating all employee opinions at a foundational level. In order for a leader to be seen as a leader, the rest of the staff needs to buy-in. The way to show employees the qualities of a leader is with what Miranda brands as the “5 Cs”: character, competence, consistency, commitment, and compassion. Leaders must then present a clear message that expresses the vision and values of the company. The process of codifying that message should involve input from everyone, because, as Miranda said, “People will support what they help create.” Once this is established, a good leader will make sure that change is implemented, continue to measure the results, and let people know how they are faring. “Provide honest, timely, and helpful feedback. However, never mix praise with criticism.”
Paul Metrey NADA, VP of Regulatory Affairs
Paul Metrey wants to make it clear that the most important word in Voluntary Protection Products (VPPs) is “voluntary.” They are an optional product, an “add-on,” and there’s nothing that implores customers to buy these extended services when they buy a car. The Consumer Financial Protection Bureau has found a few problems with VPPs over the years and has filed suit against dealers with particularly egregious practices. As a result, the whole world of VPPs is in disarray, and, as Metrey said, “there is a lot of hostility and venom directed at us.” Going forward, Metrey has worked with 16 trade associations who are connected to the auto industry and has vowed to create a modern dealership policy to try and keep VPPs under the purview of local associations and not subject to government regulation. The two-part plan involves assisting dealerships with proper compliance and then advocacy showing that NADA can fill the perceived regulatory void.
Herby Duverne Jim Helein Windwalker
Herby Duverne was astute when he said, “The state tries to tax as many times as they can.” Between sales, business, property, income, and countless other taxes, every dollar gets whittled away until it seems like just a toothpick. The state does many things in return beyond just keeping the peace and filling potholes. Duverne’s company Windwalker is designed to find those programs the state provides and helps a dealership take best advantage of them. Massachusetts has a Workforce Training Fund of $14 million that is designed to improve job growth, job retention, and wages. Each location can apply for grants from $10,000-$250,000 to cover a two year program. Jim Helein tagged in to take over the microphone for the specifics of the process. Windwalker helps dealerships figure out what they might be eligible for and then assists the business to complete the applications and secure the grant. For those that win the grant, Windwalker develops the training program that delivers whatever is required for the qualified employees, and then assists with reporting requirements.
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“Thank You” To Our Annual Meeting Sponsors ACV Auctions Welcome Gift Sponsor Auto/Mate Dealership Systems Bronze Sponsor Blum Shapiro Bronze Sponsor Burns & Levinson Break Station Sponsor Cox Automotive Luncheon Buffet Sponsor Downey & Company Bronze Sponsor Eastern Insurance Friend of the Association Sponsor GW Marketing Services Friend of the Association Sponsor Hub International Friend of the Association Sponsor Key Bank Friend of the Association Sponsor McWalter Volunteer Benefits Group Friend of the Association Sponsor Murtha Cullina Cocktail Reception Sponsor Northeast Dealer Services Bronze Sponsor O’Connor & Drew Silver Sponsor SunPower Friend of the Association Sponsor SunTrust Bank Bronze Sponsor TrueCar Platinum Sponsor Zurich Bronze Sponsor
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Massachusetts Auto Dealer www.msada.org
NEWS NEWS the NEWSfrom from Around Around the Horn Horn from Around
NEWS the Horn MSADA
MSADA
BOSTON
Prime and BFIT Seek to Solve Employee Shortage A shortage is developing as fewer young people want to be automotive technicians and existing workers retire and leave the field. The U.S. Bureau of Labor Statistics estimates 46,000 new automotive technicians will be needed nationwide each year within six years. Prime Motor Group, the second-largest automobile dealership group in New England, has joined with Benjamin Franklin Institute of Technology (BFIT) on a program to help the company fill its demand for trained and motivated technicians. Prime sells 22 car brands at 39 dealerships in Massachusetts, Maine, New Hampshire, and Vermont. BFIT is a private, non-profit twoyear technical school in Boston with half of its nearly 600 students coming from the neighborhoods of Dorchester, Roxbury and Mattapan. According to Tony Benoit, president of BFIT, more than 94 percent of its graduates are placed in jobs or continue into advanced higher education within six months of graduation, earning an average first-year salary over $38,000. While Prime has for years hired BFIT graduates into its automotive service positions, the company and the school developed a formal program to help Prime meet more of its hiring demand. In 2018, they launched the Prime Scholars program, through which 15 students receive a customized education coupled with a pre-graduation job at Prime to provide them with real-life work experience in the automotive industry. BFIT and Prime connect with students coming out of high school who have an interest in the automotive field, and Prime provides a scholarship to support col- BFIT’s Tony Benoit lege attendance along with a part-time job working at one of its dealerships. While the students are not required to work for Prime after they graduate, that is the company’s goal. “We’d like to hire all of them,” said Dave Rosenberg, CEO of Prime. “We offer above industry pay and benefits and we have a career path for all of the students. This was an easy decision for us. By investing in
these students, we’re investing back in our future as a business because we’re going to need them. I’d rather have the higher quality candidates and support them during their education.”
BFIT’s automotive curriculum focuses on cutting-edge knowledge of the industry. The Prime Scholars are being trained as line mechanics, and their work at the dealership exposes them to other hands-on aspects of the service industry to give students the foundation they need for a variety of roles. “We customize the students’ educational experience to match their work environment,” said Benoit. “The job provides practical application of what the students are learning, motivation to learn more, and a paycheck to pay the bills while in school.” Among the advantages of being a Prime Scholar is the BFIT class schedule, which begins at 8 a.m. and finishes as early in the day as possible so students can get their work experience at a Prime location. At Prime’s dealerships, students service cars, assist customers, and work in the parts department. As the Prime Scholar program moves forward, Prime plans to assist more students in broader ways. One of the company’s goals is to provide housing near the dealerships where students are employed. Rosenberg said Prime plans to buy multifamily houses and “set up some apartments so the students don’t have to pay the majority of their income as rent.” “Dave Rosenberg is progressive in his thinking,” said Benoit. “He understands the workforce of the next 50 years is going to be different than the workforce of the last 50 years. Companies that invest now will reap the benefits in the coming decades.” The Prime Scholars Program has become a template for BFIT’s business development efforts. The college is currently in negotiation with several employers to create similar programs in other fields. Benoit said that BFIT is working on customized learn-andearn programs in advanced manufacturing, computer technology, construction management, medical electronics, and opticianry, all fields in which there is high demand for skilled employees. www.msada.org
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NEWS from Around the Horn AMHERST
UMass Shows off EVs on Campus The University of Massachusetts hosted an Electric Vehicle Ride and Drive on campus at the end of April in the parking lot outside of UMass Transit Services. Those in attendance had the chance to test drive several electric vehicles and participate in an EV overview workshop. Electric and hybrid vehicles from automobile brands including Tesla, Mercedes-Benz, and BMW were on display for members of the public to inspect. Chevy Bolt, Hyundai Ioniq, and Nissan Leaf were available to test drive -- Tesla owners only allowed attendees to sit behind the wheel. The Ride and Drive was co-sponsored by several groups including UMass Transit Services, UMass Parking Services, Sustainable UMass, UMass Workplace Education, and the Pioneer Valley Electric Automobile Association. UMass offers a 20 percent discount on parking permits for EVs as a reward for commuters who reduce their environmental
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impact with their automobile. There are arrays of ChargePoint Charging Stations on and around campus for drivers, while the nearest Tesla superchargers are located along Interstate 91 in Hadley, West Springfield, and Brattleboro, Vermont.
MSADA SHARON
Cars & Coffee Returns to Herb Chambers Herb Chambers has announced dates and locations for 2019 “Cars & Coffee” season. This seasonal event series invites car aficionados to Herb Chambers’ dealerships throughout Massachusetts to showcase their pride and joy rides while admiring the prized cars and trucks of other automotive devotees. Due to the physical restraints of some of the properties and attendance figures that dwarf the reasonable capacity limits, there will only be three shows during the 2019 season. While Chambers is reasonable in holding events only in locations with the appropriate ground space to accommodate all of their guests, he said, “We look forward to seeing you and your ride this summer. We will provide the coffee and donuts; you provide the show.” The first Cars and Coffee event of the season will be held July 7 at Herb Chambers Lexus of Sharon.
Additional events will happen on Sunday, August 11, at Herb Chambers Ford of Westborough and on Sunday, September 15, at Herb Chambers Lexus of Hingham. Herb Chambers Cars & Coffee is New England’s premier car event showcasing antique, classic, exotic, hotrods, motorcycles, and motorsports collections from the New England area and around the world. For information, go to herbchamberscarsandcoffee.com.
STOW
Non-Profit Car Dealership Licensed On April 24, Selectmen from the town of Stow approved a Class II auto sales license for Dan Holin’s non-profit business Second Chance Cars. The non-profit will provide working vehicles to low-income veterans and residents who would otherwise not be able to travel to their jobs or to medical care. Cars would be donated to the charity and then refurbished to ensure they were ready to be put back on the road. The cars would be sold for $900 with a one-year loan at no interest. Holin anticipates processing 25 to 30 cars annually. A few, perhaps five to 10, higher quality cars would be sold to the public to cover expenses. Holin came before the Board of Selectmen because Second Chance Cars needed to be licensed despite the fact the business would not earn a profit since the Commonwealth of Massachusetts does not believe there’s such thing as a non-profit car dealer. www.msada.org
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Now is the Time to Focus on Driving Up Absorption By Ray Lofstrom O’Connor & Drew rlofstrom@ocd.com
(617) 471-1120
The first quarter of 2019 was trying; New car volumes are down, margins continue to be squeezed, interest rates have risen, and costs continue to rise. Most analysts forecast that this year’s industry sales will slip below 17 million for the first time since 2014, resulting in many new car departments losing money or just barely making a small profit. Usually, the most profitable dealers have figured out that fixed operations not only can drive significant profits for the dealership, but also can help to combat a downturn in the new and used vehicle market. Focusing your efforts on driving up absorption can ensure that the majority, if not all, of your profits from new and used car sales can go directly to the bottom line. There are differing opinions on how exactly absorption is calculated. Manufacturers and financial experts all have differing opinions on what expenses should and should not be included. Rather than focusing on some of the nuances in the calculation, focus on improvement based on the way you are currently calculating absorption. As a base line definition, absorption compares how much gross profit you generate in parts, service, and the body shop to how much it costs to run the dealership, excluding variable sales expense. To increase your absorption, you need MAY 2019
to do one or a combination of the following: Increase your gross profit in the parts, service, and the body shop department and/or decrease the expenses in those departments and adjust the fixed expenses of the dealership. Here are several key areas to focus on: • Create a marketing plan for fixed operations. So much time, effort, and money is focused on advertising for the new and used vehicle departments. Ensure you are analyzing also what is spent in fixed operations and gauge whether this advertising is effective. • Analyze customer retention. Have you determined why customers do not come back? Are you trying too hard to hold margin on service and parts? Sometimes a margin of 5 to 10 points lower is better than no margin at all. • Focus on increasing throughput of internal work through the service department. The more quickly and efficiently you can process used car reconditioning through the shop will both generate more gross for the service department and will also help in providing more sales opportunities for used vehicles. • Analyze Internal Rates. Have you reviewed your internal rates? Many dealers still discount internal parts and service. Consider bumping rate closes to retail rates. This will generate additional gross for parts and service and usually will not impact your overall gross on used vehicles. • Review staffing levels in your service department. Do you have enough techs? Do you have the right mix of techs? Do you have the right number of service writers? The right combination of personnel can make all the difference to ensure the highest productivity levels with minimal idle time. • Shop your retail rates against your competition. A modest bump in your
Massachusetts Auto Dealer www.msada.org
rate can have significant impact to your gross profit. • Apply for a warranty labor rate increase with the manufacturer. Get the labor rate you’re entitled to by law. Many manufacturers pay a much lower warranty rate than the dealer charges to its retail customers. As a result, a warranty labor rate increase could add thousands or even tens of thousands of additional gross profit per month directly to your bottom line. • Apply to be reimbursed at retail rates for warranty parts. Manufacturers are reimbursing dealers for their warranty parts at a much lower rate than the law allows. Typically, manufacturers reimburse their dealers at cost plus 40%, but dealers have the potential of earning upwards of cost plus 90% back on warranty parts. Reimbursements average between $75,000 and $125,000 annually and, in many cases, even more. • Consider extending your hours service hours. Poll customers to see if they would be more likely to have their vehicles serviced outside your normal business hours or perhaps extend service operating hours one night during the week and see if you see a bump in business. If so, then consider extending hours on other nights. If not, then you can go back to your original schedule. • Consider incentivizing techs and writers for additional work generated. Perhaps try a new bonus program just for the quarter – maybe with additional prizes awarded for the top earners – and gauge its merit for the dealership for the long haul. Take the time now to re-focus your efforts on your dealership’s fixed absorption to put yourself in the best possible position to weather an unforeseen downturn in vehicle sales. t
LEGAL
MSADA
By Joseph W. Ambash and Jeffrey A. Fritz
SJC’s Sleepy’s Decision Changes Landscape The Massachusetts Supreme Judicial Court (SJC) issued a decision on May 8, 2019 in Sullivan v. Sleepy’s that will change the way many, if not most, Massachusetts dealers pay their nonexempt 100% commission-paid employees, such as salespeople and F&I Managers, and could result in significant liability for your dealership. In essence, paying nonexempt employees who work over forty hours in any workweek, or any time on Sundays or premium pay holidays, entirely on commissions is no longer permissible. Instead, this decision requires—separate and apart from any commissions earned—an additional payment of 1.5x Massachusetts minimum wage (currently calculated this year at $18 per hour) for any time worked (1) over forty hours in any workweek, and/or (2) on a Sunday and/or premium pay holiday. (The SJC did not address the gradual phase out of Sunday premium pay as a result of last year‘s Grand Bargain.) The Massachusetts overtime statute requires employers to pay nonexempt employees 1.5x their “regular rate” of pay for any time worked over forty hours in any workweek. Commissions, however, specifically are excluded from the “regular rate” calculation. Since 2003, the Massachusetts Department of Labor Standards (DLS) has taken the position (through formal opinion letters and other guidance) that for nonexempt 100% commission-paid employees (whose “regular rate,” accordingly, would be $0), so long as they receive commissions sufficient to cover (1) Massachusetts minimum wage up to forty hours and (2) 1.5x Massachusetts minimum wage for all time worked above forty hours, the employer is in compliance (and, if not, the employer has to supplement). After an ambiguous change in 2015 to the Massachusetts overtime regulation, plaintiffs’ attorneys began filing lawsuits against employers, including dealers, claiming, contrary to DLS’ guidance (which remained in effect even after the regulatory change), that nonexempt 100% commission-paid
employees were entitled to an additional payment of 1.5x the Massachusetts minimum wage (i.e., $18 per hour) for all time worked over 40 hours and/or on a Sunday/ premium pay holiday. The issue ultimately was presented to the SJC in the Sleepy’s case, which was just decided on May 8. The SJC ultimately agreed with the plaintiffs. In so doing, it looked to the purposes of the overtime requirement, which, in the Court’s view, are to (1) reduce the number of hours of work, (2) encourage the employment of more persons, and (3) compensate employees for the burden of a long workweek. In keeping with these purposes, the Court reasoned, the overtime law requires separate and additional payments at a rate of no less than 1.5x the Massachusetts minimum wage for all time worked (1) over forty hours a week, and/or (2) on a Sunday or premium pay holiday.
Will This Be Retroactive? The SJC did not address whether its decision would be retroactive (notwithstanding the fact that the MSADA specifically raised this important issue in its amicus brief). In other words, the SJC did not indicate whether this would simply be the rule going forward or, rather, whether Massachusetts employers could be on the immediate hook for “noncompliance” going back three years from the filing of any lawsuit. This issue is likely to be addressed in the coming months, with employers arguing (correctly, in our view) this new rule should not be enforced retroactively. This, however, remains to be seen and, if it is determined to be retroactive, Massachusetts dealers could face significant exposure.
hour (in 2019, increasing to $19.13 in 2020, and so on) for all time worked over forty hours and/or on a Sunday and/or premium pay holiday (i.e., New Year’s Day, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, and Christmas Day), and can consider adjusting commission rates as necessary. You also can consider reducing or eliminating overtime completely and hiring additional employees, of course, but still need to pay any overtime worked regardless. And in light of some of the language in the Sleepy’s decision, and the seeming uncertainty as to how the SJC will interpret Massachusetts wage-hour laws going forward, an even more conservative approach would be to pay minimum wage as well, for all hours worked up to forty in any workweek (and adjusting commission rates). This decision is unfortunate. In our view, the SJC did not appear to comprehend or appreciate its full impact—and how it ultimately will affect your employees; in particular, your better performing employees who are likely to be negatively impacted— and the plaintiffs’ attorneys likely do not care much about such things. While dealers may ultimately be able to distinguish certain pay plans if ever challenged, it seems one way to fix this regrettable development will be through legislative channels, which is never an easy process. t
What Should You Do Now? Whether retroactive or not, the past is past and you cannot change how employees were paid. That said, going forward (unless and until things change), if you have nonexempt “100%-commission-paid” employees, you should pay them separate and additional compensation of $18 per www.msada.org
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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Massachusetts Auto Dealer www.msada.org
MSADA
NADA MARKET BEAT
JANUARY 2016
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TRUCK CORNER
MSADA MSADA
A Season of Renewal
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.
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cently in New York City this Spring for the annual When I look around and see flowers in bloom Automotive Forum, and I had the pleasure of hearand new foliage on the trees, I am reminded that ing from Fred Diaz, president and CEO of MitsubSpring is a season of newness and renewal. ishi Motors North America. He spoke about the All commercial-truck dealers would benefit from importance of diversity in how we think and how bringing a spirit of renewed energy to our own we perceive the world as business owners. This lives. In the truck business, our vocational customwas enriched by a presentation from the legenders go to work in the Spring, and we, as dealers, ary Bob Carter, executive vice president of Toyota must be ready for new business and the next cycle Motor North America. Bob was part of a rousing of servicing customers. I have personally had great discussion regarding what we can expect from the moments of revived energy throughout the year, future of the industry as it relates to personal veparticularly at our most recent ATD Show and Auhicle ownership and alternative powertrain strattomotive Forum, thanks to a host of inspirational egies. speakers and the chance to network with the best At some point and brightest in our in the year, every industry. NADA and ATD I urge all dealmember would do ers to take advan“I urge all dealers to take well to attend one tage of these seof our forums and lect opportunities advantage of these select listen to these imwhere you can do portant discussions an internal “spring opportunities where you with our industry’s cleaning” and bring can do an internal spring best. some fresh air to Finally, there’s a your business. cleaning.” lot of debate as to When it comes how truck dealers to newness, all will cope with dismembers should ruption such as digbe aware that the ital ledgers like “Blockchain” or additive manunext ATD Show has a new date in 2020: February facturing. Every industry is undergoing some form 14-17. ATD is excited to return to Las Vegas, the of disruption due to the rise of technology. These entertainment capital of the world and one of our new elements in our business have the potential most popular show locations. Attendees will hear to change how we operate our dealerships day-tofrom a new array of speakers, just as they did at day. But again, let us look at how nature operates our last show. For those who did not attend ATD during this time of the year. We should embrace Show 2019, I’d like to briefly highlight Kat Cole, these changes and look at them not as disruptors the COO and president of Focus Brands for North but as new beginnings. Every new element in our America. industry presents an opportunity for us to bloom Kat was a keynote speaker at the NADA Show, and reach fruition. and I had the pleasure of interviewing her on stage. Final reminder: Our annual ATD Congressional She opened her first international franchise at age Fly-In is June 19-20 in Washington D.C. Please 19, and I personally learned about her “hot shot consider attending to lobby your member of Conphilosophy,” which entails learning to be your gress as we work to eliminate the federal excise tax own best self-coach. Like all our show speakers, on heavy-duty trucks. We need your dealer input in Kat provided eye-opening perspectives for anyone order for us to be successful. in the business world. If you do not want to miss I wish all our members a great Spring season once-in-a-lifetime experiences like this, start planof renewal and new beginnings. I look forward to ning to attend ATD Show 2020, because it is never seeing you at our next ATD event. too early to prepare. Speaking of great perspectives, I was most ret
Massachusetts Auto Dealer www.msada.org
NADA Update
By Scott Dube
The Case for the Future of Auto Shows 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. I hope all of you who had the chance to attend the MSADA Annual Meeting enjoyed hearing our update on NADA activities from NADA Vice President of Regulatory Affairs Paul Metrey and me. I hope you will join me in expressing our appreciation to Paul for taking the time to visit with us. You can add to the list of NADA causes a rigorous defense and vision for the future of auto shows, which we have seen some OEMs begin to shrink from during the past few years. As Peter Welch says below, the numbers say it all. As dealers, I encourage you to make sure your manufacturer understands that auto shows are a cornerstone of our industry, even and especially in the 21st century.
Abandon Auto Shows at Your Peril By Peter Welch, NADA President and CEO There is no doubt that the way we market new vehicles has changed radically during the past few years. OEMs and franchised new-car dealers have more ways to spend their marketing budgets than ever before, and pinpoint e-commerce tools and digital targeting have enhanced these marketing advances. But one star continues to shine: auto shows. In 2005, the average customer visited a dealership 6.1 times prior to purchasing a new vehicle. Today that number has dropped to 2.4 visits. So where do consumers go to actually touch and feel new vehicle product? Given their physical presence, auto shows are a unique, experiential channel where consumers, armed with information gathered online, can evaluate vehicles first-hand across all segments and brands. And while auto shows measurably ignite consumer excitement for a brand, perhaps their greatest impact is on vehicle purchase consideration and brand loyalty—the two metrics that just so happen to matter more than any other in today’s ultra-competitive market. Auto shows do this by concurrently introducing new potential customers into a
brand’s pipeline while reaffirming the brand’s unique value proposition for current customers in a meaningful way. For example, we know that many millennials delayed their first new-vehicle purchase until later in life than previous generations. As a result, their introduction to OEM brands was delayed. But millennials today are buying new cars at a higher rate than they did a decade ago. According to a recent Strategic Vision report, the percentage of new-vehicle sales to consumers under the age of 35 was 19.3 percent. In 2007, it was 16.6 percent, and guess who’s coming to many auto shows at a higher rate than any other demographic? That’s right - millennials. And they buy. Dr. Richard Waterman, a professor at the University of Pennsylvania’s Wharton School who has been examining auto show impact on consumers for 20 years, finds that auto show attendees are consistently twice as likely to make a new-vehicle purchase in the year following their show visit than the general population. According to Foresight Research, auto show attendees cited show attendance as more influential on their purchase decision than digital advertising, direct marketing, or event sponsorship. What’s more, among new-vehicle buyers who attended an auto show prior to making a purchase, 56 percent indicated their purchase was influenced by the show they attended, with 21 percent of buyers attending an auto show purchasing a brand they were not already considering before the show. And of those who reported they would be in the market to buy a new vehicle within a year of attending one recent auto show, 90 percent said their auto show visit had influenced what vehicle they would ultimately purchase. The numbers simply do not lie. When it comes to generating meaningful consumer experiences that enhance purchase consideration and brand loyalty—and that lead to sales—local-focused content and events are king. Local and regional auto show organizers and involved dealer groups know what will move the needle, and an OEM has the opportunity to communicate with current and potential consumers in their own backyards, often with local brand representatives who speak to consumers in terms with which they are comfortable and who will heighten their relationship with the brand. Unfortunately, a number of OEMs have recently decided to pull back their investments in auto shows — often in favor of new digital tools. And while digital’s potential for marketing is growing, the gritty reality is that many consumers require an in-person experience with a product before purchase. www.msada.org
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NADA Update Luckily, OEMs don’t have to reinvent the wheel. America’s auto shows are a proven investment that pays high dividends, not just in raw sales but in brand excitement and customer experience—particularly when consumers are questioning whether the time is right to buy a new vehicle at all. This is why smart automakers don’t see auto shows as a relic of the past, but rather as a launchpad for their digital marketing prowess. It is true that show costs have unfortunately escalated in recent years—as convention centers have raised rates, displays have become more sophisticated, and the cost of lo-
The numbers clearly tell us that showing the metal is still the best way to move the metal. gistics continue to rise. But that’s no justification for throwing the baby out with the bathwater. And the brand gurus know this. There’s a big difference between expenses and investments. We hope the OEMs come back around to what dealers know and what the numbers show: Auto shows drive sales and brand loyalty. Let us find a way to harness that reality and make auto shows work better for us. The numbers clearly tell us that showing the metal is still the best way to move the metal.
NADA Launches Voluntary Protection Products Policy By Charlie Gilchrist, 2019 NADA Chairman Voluntary protection products are offered to consumers to protect their investment in vehicles which they purchase or lease; this includes GAP Waiver and extended service contracts. On April 2, NADA released our optional Model Dealership Voluntary Protection Products Policy to all NADA car and light-duty truck members. The model policy aims to assist auto dealerships in developing and maintaining a compliant, consumer-friendly process for marketing and selling voluntary protection products (VPPs). This is especially important in today’s environment as challenges to VPPs have arisen in different quarters. Just like NADA’s 2014 Fair Credit Compliance Policy and Program, the VPP policy was rolled out with our friends at NAMAD (the National Association of Minority Automobile Dealers) and AIADA (the American International Automobile Dealers Association). It offers critical guidance on how dealerships can successfully navigate the VPP terrain by: • Affirming the dealer’s unequivocal commitment to a transparent and professional VPP process; • Stating how the dealership will implement and maintain MAY 2019
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MSADA the policy; and • Identifying tasks the dealership will perform throughout the lifecycle of VPPs. This begins with product selection and then moves through a process for product pricing, advertisement, presentation, sale, cancellation and, should they arise, customer complaints. I want to emphasize that this policy is a template that is not mandated by federal law, and its adoption is completely optional. A dealership may decide not to adopt it or to adopt some, but not all, aspects of the policy. In addition, it also does not address specific state requirements that may apply, so it’s important to review any communications on this topic from your respective state dealer association and to consult with legal counsel in deciding whether, and how, to adopt the policy template. I am proud that NADA is, as always, committed to proactively helping our members remain compliant with today’s federal regulations. We’re happy to once again collaborate with our industry allies, and we’re proud that this guide was strengthened by input from many experts including dealers, dealership managers and attorneys, state and metro dealer associations, VPP providers and finance sources, finance trainers and many others. I have implemented the policy in one of my dealerships, and it works very well. I’m in the process of using it in all my dealerships, so I hope you find it to be a valuable resource and that it serves to enhance your ability to meet the needs of your customers too!
Save the Date for the 2020 NADA Show The automotive industry event of the year is back in Las Vegas, Friday to Monday, February 14-17, 2020. Do not miss NADA’s signature annual Show as we take over Valentine’s Day weekend in the city we love. Get ready for more: more Expo, more education, more networking – more to love. NADA continues to lead the industry, educating our members on dealer operations, marketing and digital strategy, personnel management, and the latest automotive regulations and legislation. Our show’s attendees get the most upto-date information on data management, EVs, and OEM relations directly from NADA’s own Academy instructors and industry experts. Plus, NADA Show 2020 will offer more opportunities than ever for networking, with franchise meetings and direct connections to industry leaders. Do not forget, this year our Show dates have changed, covering the holiday weekend from Friday to Monday. With more than 22,000 annual attendees, the best hotel selections always fill up quickly. So, be sure to mark your calendars: attendee registration and housing will open on July 22, 2019. t
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