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FIRST CLASS MAIL US POSTAGE PAID BOSTON, MA PERMIT NO. 216
February 2022 • Vol. 35 No. 2
The official publication of the Massachusetts State Automobile Dealers Association, Inc
Hold the Applause?
Ma s s a c h u s e t t s
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S ta f f D i r e c t o r y Robert O’Koniewski, Esq. Executive Vice President rokoniewski@msada.org Jean Fabrizio Director of Administration jfabrizio@msada.org Peter Brennan, Esq. Staff Attorney pbrennan@msada.org Auto Dealer MAgazine Robert O’Koniewski, Esq. Executive Editor Tom Nash Editorial Coordinator nashtc@gmail.com Subscriptions provided annually to Massachusetts member dealers. All address changes should be submitted to MSADA by e-mail: jfabrizio@msada.org Postmaster: Send address change to: One McKinley Square, Sixth Floor Boston, MA 02109 Auto Dealer is published by the Massachusetts State Automobile Dealers Association, Inc. to provide information about the Bay State auto retail industry and news of MSADA and its membership.
Ad Directory Bellavia Blatt, 2 Nancy Phillips, 19 NEAD, 19 O’Connor & Drew, 28 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
4 5 6 9 10
From the President: Open for Business ASSOCIATE MEMBERS DIRECTORY THE ROUNDUP: The Fun Never Stops LEGISLATIVE SCORECARD AUTO OUTLOOK
14 Cover Story: Hold the Applause?
17 18 20 21 22 24 25 26
TROUBLESHOOTING: Start Now to Comply with New Safeguards Rule NEWS From Around the Horn LEGAL: OSHA Vaccine Emergency Temporary Standard Update ACCOUNTING: Are You Prepared for the FTC Safeguards Rule Requirements? NADA Market Beat AIADA Brief: In Congress, Bad Ideas Are Hard to Kill TRUCK CORNER: Take The Reins on Training in 2022 nada update: See You in Las Vegas!
Back Cover: $1,800 Inside Front: $1,700 Inside Back: $1,600
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Massachusetts Auto Dealer
FEBRUARY 2022
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From the President
MSADA
Open for Business
As we move forward, we must remember the lessons learned
By Chris Connolly, MSADA President At MSADA, we do everything we can at the State House to ensure our dealer community is forcefully represented and that our representatives understand what we contribute to cities and towns across the Commonwealth. The same goes for NADA at the national level, with the addition of a direct relationship with OEMs that can more than occasionally lose the plot. Now more than ever, I want to stress to you, our dealer members, that keeping a close dialogue with your OEM is paramount as the “New Normal” takes hold across everything from inventory to advertising. The COVID-19 pandemic has accelerated many trends your Association has monitored during the past several years, many of them counter to the best practices and interests of both our “We dealers know membership and our customers. Your voice is needed in ensuring that our estabthat remaining lished model evolves in ways that are beneficial for customer- all involved. Without it, our entire way of life remains centric is the at risk. We dealers know that remaining customer-centric is key to surviving the key to surviving for another generation. We have for another to help our manufacturers understand that as well. As generation. We more OEMs explore used vehicle platforms, it is imhave to help our portant to understand that our partnerships need to be centered as the most important contact for buyers in manufacturers local communities. understand that If you have not put in some time with your OEM as well.” representative lately, a good place to catch up would be the NADA Show in Las Vegas. This event is an important demonstration of our national business community’s presence within the larger automotive industry and our American economy. Walking the halls of our nation’s Capitol is an important way to do this, but the NADA Show puts the full power of our industry on display for the world to see. Even if you only make the trip once, it is important to make that one trip. And if you have been waiting for a reason to finally go, we are in great hands with our own Scott Dube’s leadership as this year’s Show Committee Chair. For more information about the event, go to www.nadashow.org or email Executive Vice President Robert O’Koniewski at rokoniewski@msada.org with questions, and we will be happy to help. I hope to see you there! For any other questions about how you can best interact with either your OEM or your local elected officials, please do not hesitate to reach out to either Bob or me. As always, we are here to help. t FEBRUARY 2022
Massachusetts Auto Dealer www.msada.org
Msada Board Barnstable County
Brad Tracy, Tracy Volkswagen
Berkshire County
Brian Bedard, Bedard Brothers Auto Sales
Bristol County
Richard Mastria, Mastria Auto Group
Essex County
William DeLuca III, Woodworth Motors Don Sudbay, Sudbay Motors
Franklin County
Jay Dillon, Dillon Chevrolet
Hampden County
Jeb Balise, Balise Auto Group
Hampshire County
Bryan Burke, Burke Chevrolet
Middlesex County
Chris Connolly, Jr., Herb Connolly Motors Frank Hanenberger, MetroWest Subaru
Norfolk County
Jack Madden, Jr., Jack Madden Ford Charles Tufankjian, Toyota Scion of Braintree
Plymouth County
Christine Alicandro, Marty’s Buick GMC Isuzu
Suffolk County
Robert Boch, Expressway Toyota
Worcester County
Steven Sewell, Westboro Chrysler Dodge Ram Jeep 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, Steve Sewell Treasurer, Jack Madden, Jr. Clerk, Charles Tufankjian
Associate Members MSADA A ssociate M ember D irectory ACV Auctions Steve Sirko (856) 381-3914 ADESA Jack Neshe (508) 626-7000 Albin, Randall & Bennett Barton D. Haag (207) 772-1981 American Fidelity Assurance Co. Kathleen Weisenbach (402) 523-5945 America’s Auto Auction Boston Jim Lamb (781) 596-8500 Armatus Dealer Uplift Joe Jankowski (410) 391-5701 Auto Auction of New England Steven DeLuca (603) 437-5700 Automotive Search Group Howard Weisberg (508) 620-6300 Bank of America Merrill Lynch Dan Duda and Nancy Price (781) 534-8543 BCI Financial Corp. Timothy Rourke (203) 439-9400 Bellavia Blatt Leonard Bellavia (516) 873-3000 Bernstein Shur PA Ned Sackman (603) 623-8700 Broadway Equipment Company Fred Bauer (860) 798-5869 Burns & Levinson LLP Paul Marshall Harris (617) 345-3854 Sarah Decatur Judge (617) 345-3211 CDK Global Rob Steele (508) 564-1346 Chase Auto Ken Miller (508) 902-8908 Clifton Larson Allen Rick Parmelee (860) 982-9307 Coastal Outsourced Solutions Andrea Vieira (508) 979-4733 ComplyNet Adam Crowell (614) 634-8843 Construction Management & Builders, Inc. Nicole Mitsakis (781) 246-9400 Cooperative Systems Scott Spatz (860) 250-4965 Cox Automotive Ernest Lattimer (516) 547-2242 CVR John Alviggi (267) 419-3261 Dave Cantin Group Woody Woodward (401) 465-7000 DealerSafeGuardSolutions Doug Fusco (972) 740-8638 DealerShop Ken Grove (248) 444-6283 Brian Fleischman (716) 864-0379 DealerSocket Marco Suarez (877) 340-2677
Downey & Company Paul McGovern (781) 849-3100 DP Sales Distributors Andrew Prussack {631) 842-7549 Eastern Bank David Sawyer (617) 620-3484 Eastern Insurance Group John Berksza (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 Direct Sean Wiita (508) 414-0706 Michelle Salas (508) 599-0081 F & I Resources Jason Bayko (508) 624-4344 Federated Insurance Matt Johnson (606) 923-6350 Fisher Phillips LLP Joe Ambash (617) 532-9320 Jeff Fritz (617) 532-9325 Josh Nadreau (617) 532-9323 Gulf State Financial Services Mike Sims (817) 689-1735 GW Marketing Services Gordon Wisbach (857) 404-0226 JM&A Jim Beauregard (508) 561-2951 John W. Furrh Associates Inc. Pamela Barr (508) 824-4939 Key Bank Mark Flibotte (617) 385-6232 KPA Abe Cohen (503) 902-6567 LocaliQ Automotive Jay Pelland (508) 626-4334 LoJack by Spireon Kim Carroll and Robin Dukes (800) 557-1449 LotLinx Giovanna Scognemiglio (310) 526-1463 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 Merchant Advocate, LLC Dan Giordano (973) 897-2778 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 Pro-Vigil Sasha Lam-Plattes (408) 569-2385 Resources Management Group J. Gregory Hoffman (800) 761-4546 Reynolds & Reynolds Austin Ziske (802) 505-0016 Rinn Advisors John Corcoran (617) 480-6693 Robinson Donovan Madden & Barry, P.C. James F. Martin, Esq. (413) 732-2301 Rockland Trust Co. Joseph Herzog (508)-830-3241 Samet & Company John J. Czyzewski (617) 731-1222 Santander Bank Richard Anderson (401) 432-0749 Chris Peck (508) 314-1283 Schlossberg, 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 The Towne Law Firm P.C. James T. Towne, Jr. (518) 452-1800 TrueCar Pat Watson (803) 360-6094 Truist Michael Walsh (617) 345-6567 US Bank Vincent Gaglia (716) 649-0581 Wells Fargo Dealer Services Josh Tobin (508) 951-8334 Windwalker Herby Duverne (617) 797-9316 Zurich American Insurance Company Steven Megee (774) 210-0092
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The Roundup
The Fun Never Stops By Robert O’Koniewski, Esq. MSADA Executive Vice President rokoniewski@msada.org Follow us on Twitter • @MassAutoDealers
As we begin 2022, dealers can expect to devise a compliance plan for yet another regulatory requirement. This time around, dealers and their legal and IT teams need to strategize immediately in order to effect a multi-step process for meeting the demands of the Federal Trade Commission’s amendments to the Safeguards Rule. Many of the changes to the Rule will require significant financial and personnel commitments from dealers who must now implement new information security measures. Like the slothful student who waits until the night before to read the book for the report due in the morning, dealership procrastination is not a viable option; nor is hoping for bureaucratic incompetence or laziness to create enforcement delay. Dealers have until December 9, 2022, to comply with many of the new requirements and should start on a compliance plan today. In case you missed it in the numerous bulletins or magazine articles we have published or webinars we have promoted, the FTC late last year issued amendments to its Safeguards Rule to fill in some voids in the initial rule exposed during litigation and agency actions. The initial rule was based on the federal Gramm-Leach-Bliley Act passed in 2002. There are aspects of the GLBA you should have implemented by now, so we should be beyond the point of wondering “Gramm-Leach what?”. Starting your Safeguards Rule compliance journey, like a 1,000-mile trek, begins with the first step. This also can be the most daunting, because who likes to spend money on yet another thing the government is telling you to do, especially when the law was passed almost twenty years ago and no one has accused you of any wrongdoing during that time. As you read for yourself in two articles in this month’s magazine and in our upcoming bulletins, we can begin by identifying some basic steps to implement the necessary compliance process: 1. Designate a “qualified individual” responsible FEBRUARY 2022
Massachusetts Auto Dealer www.msada.org
for overseeing and implementing your information security program. 2. Perform a data and systems inventory to determine what data you hold and to search for system threats and vulnerabilities. 3. Draft a risk assessment and written information security program (WISP). You should already have a WISP, as it is required under state law; a written risk assessment, however, is a new FTC requirement. 4. Implement technical IT requirements to safeguard customer data. 5. Train your employees and ensure service providers’ qualifications. Remember, you do not need to go at this alone or cut corners trying. Your Association has several associate members who can assist, and NADA will host workshops at the NADA Show in March in Las Vegas. Time is of the essence for dealers to begin the process of complying with the Rule’s new requirements so as to have everything in place by December 9.
EVs, EVs, EVs… Every day we seemingly are fed, through a fire hose, a steady dose of stories detailing the need and whyfor the immediate conversion to electric vehicles. Going hand in hand with these stories is the demand to move to a complete non-fossil fuel energy supply for all our activities ASAP. At the State House, there is a steady supply of legislative proposals to mandate EV-only vehicles by 2030, 2035, or something in between or beyond. Some bills even seek to institute permanent subsidies for the purchase of EV vehicles. As we have testified throughout the session, missing from all these hearings is any discussion of the endgame. For example, in the mad rush by the Baker administration and its progressive minions to eliminate fossil fuels as a home heating source, the backup plan rests on creating more renewable
MSADA energy sources, somewhere down the line. As Winter Storm Kenan blitzed its way through the Commonwealth as we were going to press, I am sure the 52% of homes in Massachusetts heating with natural gas (1.3 million) and the 26% heating with oil were quite happy that those reliable heating sources were in play. Will a 100% green energy portfolio provide that same comfort in the future? To what extent will fossil fuels be used as a reliable component to support the move to a full green energy power commitment? With government bureaucrats pushing for a rapid transition to non-fossil fuel electricity, where and when will the intersection of reliability and need meet so that we do not see the service disruptions experienced in California and Texas in the last couple of years? The elimination of ICE vehicles rests on the backs of regulators and legislators’ instituting calendar year deadlines with purchase subsidies to boot. Goals are aspirational and nice to have, but there is nary a discussion of: • How will the states fill the funding gap on road infrastructure as gas tax revenues shrink with more EVs on the road? The progressives here are loathe to discuss any type of registration fee on EVs in lieu of gas tax revenues, even though many states have already moved in that direction. • If EVs are so great for us, why are policymakers and vehicle manufacturers insisting we need to subsidize the purchase? And for how long? Do we really need to make sure households of up to $800,000 annual income can have a $7,500-$12,000 federal gift to buy an EV? Since June 2014, the state, through the MOR-EV program, has subsidized the purchase of 23,328 EVs and hybrids – one-third of them Teslas – to the tune of $47.7 million. Yet no one wants to discuss whether that is a wise expenditure or not. Could there be better incentives to encourage the purchase of EVs that does not involve giving money to the well-off to make a purchase they most likely would have made anyway? • The recent federal infrastructure law
throws a ton of money at the creation of an EV charging infrastructure across the country. The lack of reliable charging infrastructure (range anxiety) could be the number one reason holding back considerably more EV purchases. As regional utility monopolies control the generation and distribution of electricity nationally, where does that leave the private sector in the development of charging stations which would be committed to a competitive marketplace for delivering electricity at a price consumers could pay. Nothing good can come of a charging infrastructure totally controlled by the federal government, the states, and the utilities whose prices are presently controlled by departments of public utilities in most states. • Finally, as well detailed in numerous publications, the rush to EV battery development comes with a cost of environmental degradation across the globe. At the latest legislative hearing on EV bills, proponents certainly did not want to discuss this issue. Innovative battery technologies and alternative propulsion sources would be a welcome alternative to strip mining the countryside and the ocean bottom. In our rush to save the planet will we be destroying it? Each day’s steady stream of EV news strikes one as more and more of a topdown creation of policy-setting and market manipulation. At some point will consumers be stuck choosing from product that is not reliable or desirable as decided and put forth by federal bureaucrats and multi-national vehicle manufacturers ultimately beholden to those powers, thereby crumbling the retail marketplace presently reliant on franchised dealers and rational consumer choice. Just what will the retail “we are all in on EVs” marketplace look like?
RTR Update In November 2020, the voting public approved an initiative petition to amend the 2013 Massachusetts right to repair statute (MGL Chapter 93K), which took effect in December 2020. Within days of the 2020 law’s passage at the ballot, the Alliance of www.msada.org
Automotive Innovation filed suit in federal court to overturn the law on several grounds, including potential conflict with current federal law and regulations. After the federal trial in mid-2020, we await a decision which the judge has postponed several times since last July. Procedurally the post-trial consideration has been delayed by events such as Subaru’s decision to turn off telematics capabilities in Model Year 2022 vehicles and beyond. The judge has set February 2 for yet another post-trial discussion of the issues with the affected parties – the Alliance on behalf of the motor vehicle manufacturers that brought suit and the Massachusetts Attorney General’s Office which is defending the law. In the meantime, the legislative Joint Committee on Consumer Protection held a hearing in late January on a bill we filed to delay the law’s implementation to Model Year 2025. Consistent with our arguments before the same committee in January 2020, we maintain that the law cannot be implemented as written, and ultimately passed, because at that time the manufacturers did not have the capability to install the required equipment by MY22 vehicles. The manufacturers still do not, as MY 23 vehicles will be heading to dealer lots shortly. The legislature will not address any amendments to the RTR law as long as the court case exists. Even once a decision is rendered, we will have to wait and see if any appeal is filed by a losing party. As events unfold, we will provide any necessary updates.
LIFO Update As you may recall from November 2021, 20 Senate Democrats and 91 Democrat and Republican members of the House of Representatives, including Massachusetts Cong. Lori Trahan (D-Westford) and Cong. Jake Auchincloss (D-Newton), sent letters to the U.S. Department of the Treasury urging it to act expeditiously to provide relief to dealers on new vehicle LIFO who will experience significant LIFO recapture as a result of unprecedented inventory declines
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THE ROUNDUP caused by actions related to the pandemic. In letters the Treasury Department sent on November 29, 2021, to members of United States Senate and United States House of Representatives who petitioned Treasury to expeditiously grant auto dealers temporary LIFO relief under Section 473 of the Internal Revenue Code, Treasury stated: (i) “Businesses that primarily source and produce inventory within the United States are not eligible for [Section 473] relief…”; and (ii) “If relief is provided, businesses with global supply chains would need to demonstrate… that the decrease in closing inventory… is directly and primarily attributable to the foreign disruption in the supply chain.” In response, NADA sent a letter to Treasury stating: (i) The first condition imposed by Treasury is not present in either the statute (section 473 of the Internal Revenue Code) or its legislative history and therefore should not preclude relief to otherwise eligible dealer taxpayers; and (ii) The second condition has been met by a very strong letter that the Alliance of Automotive Innovators sent to Treasury on January 21, 2022, at NADA’s request. The Alliance letter certified and provided supporting data demonstrating that (a) “auto dealers have been unable to acquire a sufficient number of new vehicles from manufacturers to replenish their depleted inventories”; and (b) “[t] his decreased inventory production is primarily a result of the foreign supply chain disruptions caused by actions related to the COVID pandemic, especially with respect to semiconductor shortages.” The NADA letter also cited a Fact Sheet released by The White House on January 21, 2022, that supports the Alliance’s certification by explaining that pandemic-related disruptions to foreign semiconductor factories have resulted in the reduced production of automobiles. The NADA letter stated that the information provided by the Alliance – as supported by the White House Fact Sheet FEBRUARY 2022
– satisfies Treasury’s second condition for relief, and that Treasury should therefore move forward with the issuance of a Federal Register notice authorizing LIFO relief for affected dealers. NADA further stated that it is prepared to assist Treasury and the Internal Revenue Service with the subsequent development of election and calculation procedures that dealers would need to claim the relief. NADA expressed its gratitude to the Alliance for its efforts to quickly generate and deliver a compelling letter supporting its franchised dealers on this issue. Be on the lookout for additional NADA updates on subsequent related developments. MSADA thanks NADA for its continued efforts with this fight as well as extends our appreciation to Cong. Trahan and Auchincloss who have been advocating on our behalf. Their support has been invaluable on this matter.
OSHA Ends Vax-or-Test Mandate, For Now The Biden administration announced that, effective January 26, 2022, it is withdrawing its emergency Covid-19 vaccine-or-test mandate. However, the administration also announced that it is still considering whether to issue a Covid-19 vaccine-or-test mandate utilizing standard notice-and-comment rulemaking procedures. The mandate’s future had been uncertain since the January 13, 2022, U.S. Supreme Court decision which said that OSHA could not enforce the standard while an appeals court considered the rule’s legality. This ruling indicated that the Supreme Court was likely to decide that the standard exceeded OSHA’s legal authority to prevent workplace health hazards. For dealerships, the administration’s announcements mean the following: • For the time being, the specter of a federal Covid-19 vaccine-or-test mandate has ended officially; • The possibility of a new rule from OSHA imposing such a mandate remains, and dealers should continue to monitor updates on that rulemaking
Massachusetts Auto Dealer www.msada.org
MSADA from NADA; and • Dealers should review and follow their state and local Covid-19 workplace health and safety requirements, as the end of federal involvement – temporary as it may be – may spur states or localities to adopt their own mandates.
2022 NADA Dealership Workforce Study Now Open NADA is excited to announce the automotive retail industry’s leading workforce study is open for enrollment in its 10th year. Your participation in this confidential study is valuable in offering insights into employee compensation, demographic trends, benefits, and retention. How to Participate: • Enroll at nadaworkforcestudy.com; • Complete a confidential online questionnaire; • Export and upload your Payroll File (no personal or dealer identifiable data is reported). For Your Participation You Will Receive: • Custom Comparison Report - How Your Dealership Compares - Comparison report of your data vs. other dealerships in your region, brand, sales volume and more. • Trends Report - 2022 NADA National & Regional Trends in Compensation, Benefits & Retention - National and regional summary and analysis of auto dealership employee compensation, benefits, demographics and retention trends. • NADA Online Database Search Tool Exclusive one-year access to an online database with payroll and retention data from all workforce studies. Custom search data from over 60 positions by brand, region, state and more. The study will close April 15, 2022. Any questions or issues, please contact workforcestudy@nada.org. To enroll you will need your store or group NADA Member ID number. Contact NADA’s customer service team at (800) 557-6232 to request your ID. t
MSADA
L EGISLATIVE S CORECARD JANUARY 2022
BILL#
SPONSOR
SUBJECT
STATUS
S183 S239 H407
Sen Crighton Sen Pacheco Rep Hunt
Amendments to Ch. 93B, the auto dealer franchise law.
SUPPORT
Joint Committee on Consumer Protection held public hearing on July 19, 2021.
H365 H400
Rep Finn Rep Howitt
RTR Law amendments to fix Model Year start date and consumer notice.
SUPPORT
Joint Committee on Consumer Protection held public hearing on January 10, 2022.
H336 H361 S234
Rep Chan Rep Finn Sen O’Connor
Creates process to appeal improperly issued Class 1 license.
SUPPORT
Joint Committee on Consumer Protection held public hearing on July 19, 2021.
S180 H421
Sen Crighton Rep Lewis
Modernize on-line purchase process.
SUPPORT
Joint Committee on Consumer Protection held public hearing on July 19, 2021.
H345
Rep Cusack
Clarifies licensure to finance small loan contracts with negative equity.
SUPPORT
Joint Committee on Consumer Protection held public hearing on July 12, 2021; reported favorably; referred to House Ways and Means.
S226
Sen Moore
Amends definition of heavy-duty trucks under RTR law.
SUPPORT
Joint Committee on Consumer Protection held public hearing on July 19, 2021.
S245 H470
Sen Velis Rep Walsh
Open safety recalls notifications.
OPPOSE
Joint Committee on Consumer Protection held public hearing on July 19, 2021.
H423
Rep Linsky
Allows an OEM to open a factoryowned store, without a dealer, if there is no same line-make dealer in the state. (The so-called “Tesla Exemption.”)
OPPOSE
Joint Committee on Consumer Protection held public hearing on July 19, 2021.
H1152 H1178 S711
Rep McMurtry Rep Phillips Sen Moore
Creates process to increase the insurance reimbursed labor rate paid to auto body
SUPPORT
Joint Committee on Financial Services held public hearing on September 15, 2021.
H1183 S657
Rep Puppolo Sen DiZoglio
Protects dealers from OEMs’ restrictions on selling non-OEM service contracts.
SUPPORT
Joint Committee on Financial Services held public hearing on September 15, 2021.
H1070 S719
Rep Driscoll Sen O’Connor
Creates administrative appeal process for vehicle owners to seek diminished value of damaged vehicle returned to vehicle owner.
SUPPORT
Joint Committee on Financial Services held public hearing on September 15, 2021.
S46 H142
Sen Creem Rep Vargas
Mass. Information Privacy Act
OPPOSE
Joint Committee on Advanced Information Technology held public hearing on October 13, 2021.
H3477 H3494 S2372
Rep Golden Rep Howitt Sen Rush
Creates statutory process for allowing temp tags for out-of-state sales.
SUPPORT
Joint Committee on Transportation held public hearing on December 13, 2021. H3477 reported favorably; referred to House Ways and Means.
H3450
Rep Ehrlich
Mandates automatic shutoff for keyless start vehicles.
OPPOSE
Joint Committee on Transportation held public hearing on January 18, 2022.
H3441
Rep Dooley
Eliminates initial state inspection for new vehicle.
SUPPORT
Joint Committee on Transportation held public hearing on January 25, 2022.
H2004
Rep Jones
Sleepy’s-related affirmative defense.
SUPPORT
Joint Committee on Labor and Workforce Development held public hearing on November 9, 2021.
H3321 H3368 H3888 H4134
Rep Hill Rep Roy Rep Golden Rep Pupollo
Promote sale of EVs.
SUPPORT
Joint Committee on Telecommunications, Utilities, and Energy held public hearing on July 28, 2021, and December 14, 2021.
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AUTO OUTLOOK
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RACE TOSTORY THE FINISH COVER
Hold the Applause? GM enters the online used inventory game with CarBravo. What does it mean for dealers? By Stephanie Power With the click of a button, General Motors is driving into the online, used-car game. This year the Detroit-based automaker introduced CarBravo, their new digital retail marketplace that will list used inventory from participating Chevrolet, Buick, and GMC dealers, as well as used vehicles owned by GM and their consumer finance arm, GM Financial. According to GM, the approximately 3,800 GM dealers nationwide have 400,000 used vehicles in inventory, while GM Financial has another half a million annually. Dealers are currently enrolling and CarBravo will launch for consumers in Spring 2022, GM representatives said. “CarBravo will give customers more choice and access to shop significantly expanded inventories of both the dealer and a national central stock of GM used vehicles. Importantly, the program features will also be offered on non-GM used vehi-
“They are trying to use the stre is something Carvana a
– Jim Boyle, T
cles,” President of GM North America, Steve Carlisle, said in a statement. “CarBravo is designed to provide customers the convenience to shop how they want, where they want, online, at the dealership, or both.” FEBRUARY 2022
The CarBravo program is slated to offer: • Clear dealer pricing, vehicle history reports, and 360-degree virtual view of vehicles; • A standard warranty coverage of six months or 6,000 miles on most vehicles; • Listed vehicles inspected and reconditioned to meet GM standards; • Customers will be eligible to receive online offers from Black Book to buy their vehicle, even if they do not purchase a car from CarBravo; • Roadside service, courtesy transportation, OnStar and SiriusXM trials on eligible vehicles; and, • Access to GM’s nationwide network of dealerships for service and maintenance. The program joins a similarly themed Ford initiative, Ford
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MSADA A Question of Focus
ength of the dealer body, which and Vroom do not have.”
Even with supply chain kinks that have come to define doing business in the pandemic, Cox Automotive reported used-vehicle sales set new records in 2021 at both overall and retail levels. Overall sales across the U.S. last year are estimated at 40.9 million, with retail sales at 22.3 million. According to Reuters, that is twice the number of new cars and trucks sold annually. Auto manufacturers are largely separated from those profits, and some dealers are not buying in to CarBravo yet, taking a wait-and-see approach until important questions are answered. “I do not think I could sign up for it at this point until we resolve certain issues,” Jim Boyle, former MSADA President and dealer principal at Tuck’s Trucks GMC in Hudson, said. “It is a big deal and still very complicated. When do warranties start? What will be covered? How do we sell someone else’s inventory?” Boyle, who has been to one seminar on CarBravo so far, said the program will cost participating dealers a monthly charge to buy into the brand, plus another approximately $1,000 for a CarBravo sign. He said CarBravo essentially wants to be a car dealer, without the $10 million investment or 55 employees per store. “They are trying to use the strength of the dealer body, which is something Carvana and Vroom do not have. You have to pay a set amount per month for the ability to use the brand, but unlike Vroom, you could bring it into my shop and get it fixed.” Because used-vehicle companies like Vroom and Carvana are seeing success without a dealership component, MSADA President Chris Connolly of Herb Connolly Motors said he can see why the online model would entice manufacturers. Connolly also suspects an underlying motive of the CarBravo platform is to provide GM access to used-vehicle customer data. That data can be sold to third party companies who
Tuck’s Trucks
Blue Advantage, which launched in early 2021. Currently, Carvana and CarMax are the top used-car retailers. According to GM’s Carlisle, CarBravo will compete by offering shoppers a range of benefits not available to them through other retailers. Customers will have the opportunity to choose from more used-car intentory at GM dealership locations than CarMax offers, he said. Reuters reported in January that a statement from Carvana did not address GM’s move directly but underscored that Carvana “pioneered online car buying” and has bought and sold over 1 million vehicles. Carvana has a market value of $34 billion. CarMax Chief Marketing Officer Jim Lyski said in a statement, “While we are still learning about the newly announced service from GM, what they have set out to do is difficult.”
market and sell other products to the client, showing up as automated advertisements that pop up during a routine social media scroll, for example. “That is the name of the game: Data, data, data,” Connolly said. “As dealers, we do not like giving out that information about our clients, and manufacturers do not like that. Because they presently only get direct client information on new-car leads, I suspect they now are looking to get direct client information on used-car leads, too.” NADA Director Scott Dube of Bill Dube Hyundai is all for
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RACE TO THE FINISH HOLD THE APPLAUSE?
MSADA
“If we have learned anything over the last couple of years it is that ‘just-in-time’ inventory models are very vulnerable.” – Scott Dube, NADA Director
automakers supporting dealers to improve business, but he is interested to see if CarBravo will achieve that goal. “I am not sure how CarBravo will really play out, if it will be a partnership or another top-down factory program designed and implemented by non-retail people.” Dube would like to see all OEMs focus on stabilizing the supply chain. “If we have learned anything over the last couple of years it is that ‘just-in-time’ inventory models are very vulnerable,” he said. “Mitigating that risk for our industry and their own business should be a top priority.” Herb Connolly Chevrolet President Adam Connolly said that, like other dealers, he is still determining whether the program is a good fit. “In the coming weeks I will be on a call with the CarBravo folks and will be doing my research to get a better idea of the opportunity,” Connolly said.
A ‘Wait and See’ Approach GM dealers have more questions than answers at this point. MSADA Executive Vice President Robert O’Koniewski says the Association continues to monitor CarBravo and other OEM maneuvering in the used-vehicle realm closely. “Given the competitive nature of the used-vehicle retail FEBRUARY 2022
marketplace, I can understand why GM is trying to monetize an online process in partnership with its franchised dealers,” O’Koniewski said. “On first blush, a factory-run program like CarBravo can give the manufacturer control, without the risk, over the one aspect of the dealer’s business they have no real say in right now – the dealer’s used-vehicle inventory.” “Ultimately, however, the proof will be in the taste of the pudding,” O’Koniewski added. “Our dealers already advertise and sell used-vehicles, rather successfully, within their own market areas and beyond – many into states outside New England. One needs to ask, does a dealer, in the future, need to join the program and pay GM a piece of each vehicle he or she sells already without handing over such tribute to the factory. For such a program to work, participating dealers will need to achieve a measurable improvement in revenue, profit, and customer satisfaction. If dealers, and their customers, do not see those benefits, the program will not survive on a grand scale.” t
Massachusetts Auto Dealer www.msada.org
MSADA
Troubleshooting
Start Now to Comply with New Safeguards Rule By Peter Brennan, Esq. MSADA Staff Attorney
By now, you undoubtedly have heard about the long-awaited updates to the Federal Trade Commission’s Safeguards Rule. The new Standards for Safeguarding Information is the first update to the Rule since it was implemented as part of the Gramm-Leach-Bliley Act (GLBA) in 2002 and has been in the works since 2016 in response to several high-profile data breaches. While dealerships and other affected businesses may have escaped some of the most onerous regulatory updates that had been proposed by the FTC, the updated Rule is expected to impact every Massachusetts dealership. Now is the time to start working on your compliance in order to be ready when the majority of the Rule goes into effect on December 9, 2022. Automobile dealers are regulated as “financial institutions” under GLBA and are the most regulated entity in the automotive retail space under the Safeguards Rule. The Safeguards Rule already required covered businesses to safeguard customer information but did not contain details or specific criteria about what exactly businesses were required to do. The updated Rule imposes specific requirements and eliminates most of the guesswork. The prior iteration of the Rule gave businesses some leeway in adopting policies to comply with the law, which worked for some companies but created too much confusion for others. Federal jurists seemingly agreed that the “reasonableness” standard needed to be updated, as several decisions went against the FTC
when it brought enforcement actions. Amendments originally proposed by the FTC would have added hundreds of thousands of dollars to every dealer’s bottom line. While some of the more arduous proposals were eliminated in the final language, dealerships need to start now to meet the December 9, 2022, deadline for compliance with the new requirements. Where to start? As a practical matter, some of the required actions will have to be completed before others. One of the biggest changes that the Rule requires is that dealers must designate “a qualified individual responsible for overseeing and implementing your information security program and enforcing your information security program.” Therefore, it would make sense to name (or hire) this “Qualified Individual” and make sure that they are properly trained and ready to take on the responsibilities of the new role. This role needs to be filled by one person; the FTC wants to know where the buck stops should there be an issue. This function can be outsourced, but the organization’s appointed individual will be responsible for overseeing the third party and will ultimately have to answer for any compliance failure. The individual that you choose must be able to perform the job. The FTC did not mandate that the person has a certain degree or training, although there will be training requirements in the future. Next, after the Qualified Individual has been vetted and appointed, do an inventory of your data to determine what paper and electronic data you hold and look for threats and vulnerabilities. You will need to evaluate all dealership systems, not just those that you know contain customer information, such as your dealership’s DMS. Some other places to search during the inventory process would be the dealership’s website, computers used by dealership employees, and even the cars themselves. Once you have determined what you hold, you need to draft a written security
MSADA
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risk assessment that contains and addresses certain areas of risk at your dealership. This assessment will need to be performed periodically, although that term is not defined. You also need to draft a written information security program (WISP), which is already required in Massachusetts under 201 CMR 17.00, and a written incident response plan. These documents should detail the steps that your dealership will take to protect covered data and what you will do in the event of a hack or other issue. They should be maintained at the dealership in case they are requested by regulators. Should an incident occur, regulators will want to see that you had a reasonable plan in place and followed the plan when responding to the incident. At least once a year, the Qualified Individual must report in writing to the board of directors (or ownership) about the steps being taken by the dealership to comply with the Rule. Once the plan is in place and the required documents have been drafted, you need to begin to implement the required technical IT requirements, including the encryption of data, multi-factor authentication, systems monitoring, and penetration testing. These requirements will also apply to vendors that receive data from the dealership, and vendors should be put on notice about the new requirements as soon as possible. An updated NADA Driven Guide that incorporates the changes to the Rule should be available soon. In the meantime, do not procrastinate, because December 9, 2022, will be here sooner than you think. t
If you have any questions regarding this column, please contact Robert O’Koniewski, MSADA Executive Vice President, at rokoniewski@msada.org or Peter Brennan, MSADA Staff Attorney, at pbrennan@msada.org or by phone at (617) 451-1051.
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NEWS NEWS the NEWSfrom from Around from Around Around the Horn Horn NEWS
NEWS the Horn DETROIT
Ford Halts Maverick Orders, Citing High Demand Ford announced in January that it was overwhelmed with orders for its $20,000-range Maverick truck, citing supply chain issues paired with high customer demand. Sentry Auto Group President Chris Lemley told The Wall Street
tem be equipped with an inter-operable, standardized and open access platform, but such a platform does not currently exist in the market, thus making compliance impossible.” So the carmaker has simply turned off its telematics system in new models, to buy time. The Massachusetts law, passed by referendum in 2020, requires all carmakers doing business in the state to give consumers access to a car’s telematic data — diagnostic information provided over a wireless connection. This would let consumers get their cars fixed at the repair shop of their choice, by ensuring that independent shops could get the same diagnostic data as retail dealerships. But enforcement of the law was put on hold when the carmakers filed their lawsuit. The auto companies say that only the federal government, not the states, may pass such a law. In addition, the law requires compliance starting with the 2022 model year. Carmakers have said they need more time to install the technologies needed for compliance. The case went to trial in the summer of 2021, but Healey has since submitted new evidence. In October, she informed the court about Subaru’s telematic system shutdown and on January 14 revealed that Kia has done the same. HOLYOKE
Journal that the move was unusual, “but it is appropriate under the circumstances to avoid customer disappointment.” The Maverick has thus far proven to be a hit with consumers and critics alike, earning awards including 2022 North American Truck of the Year. BOSTON
Kia Shuts Off Telematics Amid ‘Right-to-Repair’ Enforcement
Gary Rome Hyundai Installs New Superchargers Gary Rome Hyundai recently became the first dealership in Western Massachusetts to install Level 3 electric vehicle chargers, which power up cars within 20 minutes. The store also installed updates to its Level 2 chargers.
Kia has switched off the wireless “telematic” data systems of its new cars sold in Massachusetts as a way to comply with the state’s controversial right-to-repair law, The Boston Globe reports. Kia’s policy was revealed by Massachusetts Attorney General Maura Healey in documents submitted to Boston federal court in January. Healey is fighting a lawsuit filed by the Alliance for Automotive Innovation, an association of the world’s top carmakers, which seeks to overturn the right-to-repair law. Kia is following the example of Japanese car company Subaru, which adopted a similar strategy last year. It is unclear when Kia adopted its policy, but an October 2021 press release from the company warned that the wireless feature, called Kia Connect, “may currently be unavailable for Model Year 2022 and newer vehicles sold or purchased in Massachusetts.” According to a statement issued by Kia America, “The new law requires that 2022 and newer vehicles that utilize a telematics sysFEBRUARY 2022
Massachusetts Auto Dealer www.msada.org
MSADA
NEWS from Around the Horn
MEDFORD
Herb Chambers Purchases New Property The Herb Chambers Co. has purchased the former Century Bank Headquarters in Medford for $20,500,000. Located at 400 Mystic Avenue, the property sits on 4.87 acres and comprises 89,000 SF across two buildings. “We have been active in Boston’s urban fringe for the Chambers team over the past several years,” said Peter Considine, Partner at Atlantic Retail, who represented Herb Chambers. “The former Century Bank HQ building is a large tract, a functional modern building, and a beacon off I-93.” No plans for the building have been announced. BOSTON
Poll: Massachusetts Voters See Electric Vehicles in Their Future The Energy News Network reports that a majority of Massachusetts voters say they are likely to buy an electric vehicle in the next five years, according to a new poll conducted for two clean energy organizations. The results suggest a faster timeline is feasible for phasing out the sale of gasoline-powered vehicles in the state, advocates said. “Consumers have expectations that [electric vehicles] are going to be here very quickly for the mass market,” said Larry Chretien, executive director of Green Energy Consumers Alliance, a Boston-based nonprofit that partnered on the poll with Seattle-based clean energy activist group Coltura. “And they are supportive of policies that can get us there quicker.” The poll was conducted as part of a broader effort to assess attitudes toward the adoption of electric vehicles nationwide as well as in 10 states, including Massachusetts. Climate Nexus Polling, in partnership with the Yale Program on Climate Change Communication and the George Mason University Center for Climate Change Communication, conducted the survey. The Massachusetts results, based on responses from 347 registered voters in the state between October 12-18, 2021, paint a picture of a population very willing to embrace the electrification of passenger cars. Perhaps the most telling number, Chretien said, is the 56% of respondents who said they are likely to buy an electric vehicle within five years. The poll’s margin of error was plus or minus 6%. Electric vehicle adoption in the state has been somewhat sluggish so far. Currently, fewer than 40,000 of the more than 5 million vehicles registered in Massachusetts are electric. The state’s decarbonization roadmap says 1 million zero-emission vehicles will need to be on the road by 2030 to keep emissions reductions on track. It also has a goal of making all new cars sold in the state electric by 2035. t www.msada.org
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LEGAL OSHA Vaccine Emergency Temporary Standard Update By Joseph W. Ambash, Jeffrey A. Fritz, and Joshua Nadreau of Fisher Phillips, LLP Back in November, the United States Department of Labor’s Occupational Safety and Health Administration (OSHA) issued its Emergency Temporary Standard (ETS) on vaccination, which would have applied to employers of 100 or more employees, effective January 10, 2022. Among other things, the ETS would have required such employers either to establish, implement, and enforce (1) a mandatory COVID-19 vaccination policy or (2) a policy allowing employees to elect either to get vaccinated or undergo weekly COVID-19 testing and wear a face covering at the workplace. The ETS also required such employers to (1) maintain records of each employee’s vaccination status and (2) provide up to four hours of paid time to allow employees to get vaccinated. The legal battle ensued shortly thereafter and, on January 13, 2022 (three days after the law was slated to have taken effect), the U.S. Supreme Court blocked the ETS from being enforced. That same day, U.S. Secretary of Labor (and former Boston Mayor) Marty Walsh issued a statement expressing disappointment with the decision and urging all employers to require workers to get vaccinated or tested weekly. He closed his statement by saying, “Regardless of the outcome in these proceedings, OSHA will do everything in its existing authority to hold businesses accountable for protecting workers, including under the Covid-19 National Emphasis Program and General Duty Clause.” In short, while OSHA cannot require employers to require workers to get vaccinated or tested weekly, OSHA can, in certain instances, conclude employers failed to provide a work environment “free from recognized hazards that are causing or are likely to cause death or serious physical harm.” Thus, OSHA appears poised to take an aggressive approach even in the absence of an enforceable mandate. Employers can minimize risk by considering, and implementing as appropriate, the following measures: FEBRUARY 2022
Create a Roster If you have not already, you should consider creating a roster of your employees, noting whether they are fully vaccinated. This question should be asked as a “yes or no” proposition (so as not to run afoul of the Americans with Disabilities Act) and recorded as such. You should require vaccinated employees to provide adequate proof of their vaccination status. Contrary to what certain of your (uninformed) employees may claim, requiring employees to provide such information does not in any way implicate HIPAA. Consider Whether to Impose Mandate While the U.S. Supreme Court’s decision blocked OSHA’s enforcement of its ETS, it does not prohibit an employer from imposing such a mandate on its workforce, if it so chooses. Factors to consider in making this decision may include (1) identifying known concerns among your workforce and providing information to help employees understand how vaccinations can reliably promote health and safety for themselves; (2) taking into account the unique environment at your dealership, figuring out the best way to communicate your policy to employees; (3) considering related logistics, including compensation issues that may be implicated; (4) considering how your employees and customers may respond to the policy; and, importantly, (5) developing a clear and robust reasonable accommodation policy to address religious and/or disability issues. Consider Whether to Impose Safety Obligations and/or Testing Requirements for Non-Vaccinated Employees Should you decide to make employee vaccination voluntary, you can and should consider what measure(s) you will take to help safeguard health and safety and prevent spread. You can require non-vaccinated employees to wear masks, adhere to social distancing rules, restrict business-related travel, and other safety con-
Massachusetts Auto Dealer www.msada.org
cepts relevant to your dealership. You can also require regular testing of your non-vaccinated employees. To that end, consider four main points: (1) communicate this policy to your workforce in a clear and direct manner; (2) determine how often you will require such testing, taking into account the unique safety-related concerns at your dealership; (3) ensure compliance with all applicable wage-and-hour laws: if you require testing, you should pay your employees for the time they spend getting tested; and (4) consider the availability of testing in your community. Consider Whether to Impose a Health Insurance Surcharge or Provide Incentives Employers generally can impose a health insurance surcharge on health insurance premiums for unvaccinated employees. This can offset costs and also act as a “stick” incentive for employees to get vaccinated (and therefore avoid the surcharge). You can also consider offering “carrot” incentives as well, such as cash, non-monetary items, or eligibility for prizes. The U.S. Equal Employment Opportunity Commission has confirmed employers can offer any incentives for employees to get vaccinated, with no apparent limitation. Of course, developments in this area of the law are constantly evolving, as time marches on and legal battles are fought and decided. You can keep up-to-date on these developments by visiting our website, www.fisherphillips.com, and signing up to receive our Insights. As you consider how best to approach this thorny thicket, feel free to reach out to us. t Joe Ambash, Jeff Fritz, and Josh Nadreau are Partners in the Boston office of Fisher & Phillips, LLP, a national labor and employment firm representing hundreds of dealerships in Massachusetts and nationally. They may be reached at (617) 722-0044.
MSADA
ACCOUNTING
Are You Prepared for the FTC Safeguards Rule Requirements? By Kate Upton OCD Tech The Federal Trade Commission (FTC) recently released their Final Rule to amend the Standards for Safeguarding Customer Information. The final Rule includes five primary modifications to the existing Safeguards Rule in order to provide covered financial institutions with more guidance on how to develop and implement an information security program; to improve accountability of financial institutions who are trusted with customer information; to exempt some financial institutions from certain requirements if they hold records for less than 5,000 customers; to expand the definition of “financial institutions” to include “finders”; and to define several terms and providers related examples for the Rule’s requirements. Automotive dealerships may question how this applies to them. Many automotive dealerships provide financial services to customers, such as automotive loans. These types of continuing financial relationships are what trigger the applicability of the FTC Safeguards Rule. Included in the amendment to the Safeguards Rule is the change from requiring organizations to have a Chief Information Security Officer (CISO) to a Qualified Individual. Now, organizations must designate a Qualified Individual to facilitate their information security and compliance program. This Qualified Individual must be someone whom the organization can prove is trained in, and understands, information security. Indeed, larger deal-
erships may elect to hire someone fulltime for this role. However, smaller dealerships may already have someone on staff who can fulfill this role in addition to their other job duties. Organizations may also outsource this requirement to a third-party. A Virtual CISO (hereafter vCISO) may be leveraged by a dealership to provide objective information security guidance and leadership. In some ways, hiring a vCISO can be more cost prohibitive than hiring a dedicated full-time resource, for many vCISO offerings are facilitated via retainer. No matter the avenue for establishing a Qualified Individual, it is imperative that organizations do this first, for all subsequent requirements must be facilitated by that Qualified Individual. The other requirements established by the Final Rule include: • Perform a written risk assessment; • Identify and manage assets (including data, personnel, devices, systems, and facilities); • Encrypt data in transit and at rest; • Establish a Secure Development Lifecycle (for organization’s that develop software in-house); • Establish multi-factor authentication; • Establish a procedure for securely disposing data; • Establish a procedure for change management; • Log activity of authorized users and detect unauthorized access; • Test or otherwise monitor effectiveness of controls; • Continuously monitor the system or perform an annual penetration test and biannual vulnerability assessment; • Establish a security awareness training program; • Actively manage service providers (MSPs) (including updating contracts to require those MSPs to implement and maintain the Safeguards); www.msada.org
• Establish a written Incident Response Plan; and • Provide a written status report by the Qualified Individual to organizational leadership at least annually. The Safeguards Rule has an exemption for financial institutions that hold data for less than 5,000 customers. The FTC clarified that the exemption for less than 5,000 consumers is total, not annual. Meaning, at any point in time the organization must retain less than 5,000 customers’ data, not just annually. This exemption absolves organizations of responsibility for the following requirements: • Performing a risk assessment; • Continuous monitoring or performance of penetration testing; • Written incident response plan; and • Annual written update by the qualified individual for management. To be clear, all financial institutions are responsible to meet all other requirements of the Rule. This means that financial institutions, including automotive dealers that hold data for even one customer, must implement data security controls within the Rule such as encryption, multi-factor authentication, and access controls. The Final Rule is effective January 2022, and organizations have until December 9, 2022, to comply with all parts of the Safeguards Rule. Organizations may find that they can meet these controls in-house. Others may determine that they require assistance from a third-party to establish and maintain their compliance program. Time is of the essence. All organizations need to be considering their avenue for compliance, for December 9 will be here before you know it. t Kate Upton is Government Compliance Team Lead at OCD Tech. She can be reached at kupton@ocd-tech.com.
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DECEMBER 2021
Patrick Manzi
NADA Senior Economist
Boyi Xu
Economist
New light-vehicle sales totaled 14.93 million units in 2021, up 3.1% from 2020’s 14.47 million. December 2021’s SAAR totaled just 12.44 million units, down 23.7% from December 2020. Since the summer, light-vehicle sales have been held back by limited
FEBRUARY 2022
Massachusetts Auto Dealer www.msada.org
inventory caused primarily by the ongoing global semiconductor microchip shortage’s impact on new-vehicle production. Otherwise, sales would likely have topped 17 million units for the year. t
MSADA
MARKET BEAT
www.msada.org
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AIADA Brief
MSADA MSADA
In Congress, Bad Ideas are Hard to Kill By Cody Lusk AIADA President & CEO
If dealers have learned one thing from watching Congress over the years, it must be that we should never underestimate the staying power of a bad idea. Case in point: The Chicken Tax. The Chicken Tax is a 25 percent tariff on light trucks imported to the U.S. The tariff was imposed by an executive order from Lyndon Johnson in 1964. It was meant to be a temporary retaliation for European tariffs on American chicken imports. Now, 58 years later, it remains in place, ensuring that not a single truck imported from outside of North America is sold in the United States. The average U.S. tariff rate on industrial imports currently stands at 2 percent. The chicken tax is a wild and impactful outlier, propped up by the special interests it protects and nearly six decades of congressional inaction. The lesson? Once formed, bad ideas are difficult to extinguish. Once signed into law, they are nearly impossible to remove. That is why AIADA and all international nameplate dealers are entering the new year with a sense of trepidation. Our efforts to defeat the deeply flawed UAW-only electric vehicle tax incentives contained within the Biden administration’s multi-trillion dollar so-called FEBRUARY 2022
“Build Back Better” bill have been at least temporarily successful. The proposal is on the backburner, for now, while infighting among Democrats slows the bill’s movement. But is the idea of prioritizing union jobs over other American jobs dead? Hardly. President Biden, who once vowed to be the “strongest labor president you have ever had,” is living up to that promise every day. He and his administration clearly distinguish between American jobs and American UNION jobs, and have no problem prioritizing the latter over the former.
how good, and highly sought after, those jobs actually are. Unfortunately, the bad idea of prioritizing some American workers over others will not be easy to kill. The current administration has given it plenty of oxygen, and the UAW has no shortage of political influence in Washington, D.C. International dealers cannot assume that the EV tax credit is dead and the battle is over. We must remain vigilant and continue to bang the drum against the intrusion of politics into the auto retail marketplace. If we do not want Congress setting prices on our lots, we must get involved. Sometimes, advocacy in D.C. can feel a little like whack-a-mole. As soon as you beat one bad policy down, it pops up in a different spot. AIADA enters 2022 fully expecting union-favoring policies to pop up again and again. Fortunately for our members, we stand ready, stick in hand, to whack each and every one. After all, dealers and their customers deserve better than bad ideas and flawed policy.
In addition to trying to pass a $4,500 tax credit for buying a union-built electric vehicle, as I mentioned earlier, Biden has signed an executive order creating a White House Task Force on Worker Organizing and Empowerment, invited union leaders to the White House to promote his electric vehicle push, and has consistently put unions at the center of his economic strategy. The president likes to talk about “Good American jobs,” but those jobs never seem to include non-unionized American workers at U.S. plants operated by Toyota, Honda, Kia, BMW, and others. His policies never seem to protect them – no matter
AIADA Annual Meeting
Massachusetts Auto Dealer www.msada.org
Our 52nd Annual Meeting luncheon will be held on Sunday, March 13, at the Westgate Resort and Casino, in Las Vegas. The luncheon will feature a look ahead from incoming chairman John Connelly, a presentation of AIADA’s Daniel F. Mungenast Lifetime Achievement Award to Florida and Colorado dealer Michael E. Marone, and keynote remarks from Dave Gardner, Executive Vice President of National Operations and General Manager of Auto Sales for American Honda. Register at www.aiada.org. See you in Las Vegas! t
MSADA
TRUCK CORNER
Take the Reins on Training in 2022 By Steve Bassett Chairman, American Truck Dealers Steve
is
the
dealer
General Truck Sales in Muncie, Indiana. He also has locations in Indianapolis, I ndiana , and T oledo , O hio . H e sells V olvo , Isuzu, H ino, and M ack trucks. principal
of
instructor-led classes on everything from parts and If you are still looking for a New Year’s resolution, I am happy to offer one: Utilize your ATD service to the EV revolution. I find incredible value membership often and take the reins when it comes in the online courses for my own employees where to training your dealership employees. When I start- they can access education and training from the ed in this business, dealers solely trained their own comfort of a computer. The dealership environment people, and I know it is different today. Lucky for is always changing. Content is regularly updated, us, ATD provides a wealth of training guides and and all offerings continue to meet our needs. So, make this new year’s resolution with me. resources at our disposal but it is up to you to take When it comes to training, do not take the path of advantage of them. least resistance. Visit ATD today and take the reins As truck dealers, our job is to sell trucks and teach other people how to sell them properly and back on training. Industry Update efficiently, too. ATD is the only place where we can Trucking entered 2022 still reeling from the efget dealership-branded training for all our employfects of a supply chain hangover. Commercial vehiees. That is extremely unique, because there is no other entity that creates and aggregates this body of cle production continues to lag far behind demand, and shortages of key materials such as steel, alumiwork for us, not even third parties like manufacturnum, and plastics have led to sharp price increases ers and vendors. When I looked at the ATD website just last month, globally. Gaps between maxI saw more than imum Class 8 truck 400 online resourcproduction and actual es available for any ATD is the only place where production stem from dealer to use at any we can get dealershipsupply chain diffitime. The educaculties, which have tional materials run branded training for all come up short by the gamut: Acadeour. employees. about 25%, according my, Driven Manto FTR Transportaagement guides, tion Intelligence data. seminars, webinars, and workshops, just to name a few. The best Pent-up demand measured from April to December feature of these resources is that they were tailored 2021 is about 93,000 units, a direct result of lower for employees like mine. The goal of ATD training semiconductor deliveries to the OEMs, FTR noted. is dealer-specific, and its ultimate purpose is none But there is a light at the end of this pandemic tunother than to make our businesses stronger and more nel: Once the supply chain stabilizes, commercial resilient for the years ahead. vehicle production will increase significantly, Don ATD’s education equips our talented men and Ake, FTR’s VP of commercial vehicles, pointed out women with the knowledge and skill to succeed during a January 13 State of Freight discussion. and move through the dealership ranks. And, most “We are looking for a higher build in 2022 and of all, it creates well-rounded employees who know a very robust build in 2023,” Ake noted. “We are how to represent interests which are distinct to a expecting a gradual improvement in the build rates dealership. throughout 2022. We have heard some indications I have said this before, and I will say it again: You that things are loosening up some. January will probshould take full advantage of your ATD memberably start [out] tough. We think as we go throughout ship and join our signature programs like the ATD the year, there will be steady improvement.” t Dealer Academy. The Academy provides top-notch, www.msada.org
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NADA Update
By Scott Dube
See You in Las Vegas!
Join us for what will be the most memorable NADA Show yet. NADA Offers 2021 Auto Sales Analysis
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. We are getting ready for NADA Show 2022 — live and in-person — in Las Vegas, March 10–13. Plans are underway and everything is setting up nicely. It is exciting to be together again as an industry after such a challenging couple of years. These are the most resilient, optimistic, hard-charging businesspeople in the world! And we are better together. Better than ever. It has been my privilege to serve as this year’s Show Committee Chairman, and I am incredibly excited to finally share the results of our work. If, somehow, you are not convinced already, here are five reasons to join us March 10–13: 1. Education — Learn the latest strategies and emerging trends on more than 75 topics at 100-plus workshops and sessions. Follow a track or chart your own course! 2. Expo — Visit with 550+ exhibitors, offering new and exciting ways to help grow your business. Plus, experience TED-style talks on hot topics from industry leaders. 3. Franchise meetings — Hear directly from top automakers and interact with other successful dealers under your brand. 4. Electrification — Discover resources to prep your dealership for selling and servicing EVs, from the EV Solutions Center to Electric Avenue. 5. Welcome Kickoff Reception — Experience the fun and excitement of a sports tailgate at Allegiant Stadium, brandnew home of the NFL’s Las Vegas Raiders. Enjoy a musical performance by Grammy Award-winning band Train — as you reconnect with old friends and make new industry connections. If you still need to register, go to show.nada.org/2022/ home. See you in Las Vegas! FEBRUARY 2022
NADA has issued its analysis of 2021 U.S. auto sales and the economy. “The major theme for new-vehicle sales in 2021 was constrained inventory,” said NADA chief economist Patrick Manzi. “The coronavirus pandemic and resulting microchip shortage and production cuts significantly constrained newcar and truck inventory at dealerships across the country. Constraints further led to suppressed new-vehicle sales, as well as used-vehicle inventory shortages and increased vehicle prices.” 2021 came to a close with new-light vehicle sales of 14.93 million units, an increase of 3.1% compared to 2020’s sales volume of 14.47 million units. December 2021’s SAAR totaled just 12.44 million units, a decrease of 23.7% compared to December of 2020. When contrasting vehicle sales to inventory, inventory levels at the end of December 2021 totaled 1.12 million units, up 7.4% compared to the end November 2021, but down 59.1% compared to the end of December 2020’s total of 2.75 million units. While microchip shortages, one of the causes for diminished inventory, are slowly improving, shortages are expected to last through at least the second quarter of 2022. Auto Forecast Solutions expects that 11.3 million vehicles will not be produced globally as a result of the chip shortage. Moving into 2022, NADA anticipates new-vehicle sales of 15.4 million units – an increase of 3.4% from 2021. While holding a comparably small percentage of market share versus internal combustion engine vehicles, alternative fuel powertrains accounted for 9.5% of all new-vehicle sales in 2021. Hybrid powertrain sales were 5.4% of all-new vehicles sales, up from 3.1% in 2020, while plug-in hybrid vehicle (PHEV) sales were 1.2% of all sales in 2021, up from 0.5% of sales in 2020. Battery electric vehicles (BEV) also continue to gain market share, accounting for 2.9% of all new-vehicle sales in 2021, up from 1.6% in 2020. As new BEV product continues to reach showrooms, franchised new-car dealers sales of BEVs continue to grow; in 2021, franchised dealers sold more than 31% of all new BEVs sold in the U.S. Due to limited new-vehicle inventory, some consumers sought transportation in the used-vehicle market. Tight new vehicle inventory led to rising used vehicle prices throughout
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MSADA the year. Through October 2021, the average used vehicle transaction price at a franchised dealerships was $25,904, up 19.1% year-over-year. At the macro level, inflation is a major concern for consumers; in November 2021, inflation hit 6.8% year-over-year as measured by the Consumer Price Index (CPI). This increase marks the steepest 12-month increase since 1982 with indexes for gasoline, shelter, food, used vehicles, and new vehicles among the largest contributors. Price levels are expected to remain elevated through at least the second quarter of 2022. Consumers are, in turn, feeling the effects of rising prices. They are concerned that their standard of living will decrease as wage gains are not sufficient to mitigate rising prices. Despite this sentiment coming as a result of increased inflation, real personal consumption expenditures surpassed pre-COVID levels starting in the second quarter of 2021 and increased throughout the remainder of the year. This contradiction is likely due to increased spending by higher income households with lower- and middle-income households feeling the impact of inflation more directly. In the labor market, the U.S. unemployment rate fell to 3.9% in December 2021. In November, a record 4.5 million Americans quit their jobs with 6.7 million hired. There were 1.5 job openings per unemployed person at the end of the November 2021, the best job-seekers market on record. While the economy continues to add more jobs than have been resigned each month, the COVID Omnicron variant could impact employment numbers in the coming months if increasing numbers of infection continue. At franchised new-car dealerships, employment totaled 1.079 million at the end of October 2021, virtually unchanged from prior months; throughout 2021, employment at franchised dealerships has hovered at approximately 4% to 5% below preCOVID levels. “We expect employment at franchised new-car dealerships to return closer to prepandemic levels as new vehicle production picks up and the microchip shortage slowly dissipates,” said Manzi. “Furthermore, pent-up demand continues to build, which should help push sales rates closer to pre-pandemic levels once the chip shortage is behind us.”
NADA Responds to Misleading Op-Ed The following letter was sent to the editor of The Washington Post, concerning an op-ed about dealers and EVs that drastically missed the mark. Dear Editor: Liam Denning’s piece on car dealerships (“Car Dealership Laws Aren’t Fit for the Electric Age,” January 5, 2022) uses decades-old tropes to make the case for direct sales as the best path to EV adoption. But he misses the mark by failing
to grasp what is actually involved when average Americans buy or lease a new vehicle. The truth is, America’s 16,500 dealerships and million-plus highly skilled product specialists and technicians are essential to achieving the government’s goals for broad EV adoption. Here’s why: The next stage of EV adoption won’t mean getting affluent buyers into $100k+ luxury or performance vehicles. It will mean getting average consumers into mass-market vehicles they depend on every day to get to work and manage family life. It will mean helping those customers figure out how to finance their vehicles and how to handle their trade-ins. It will mean educating them about the differences EVs present. And it will mean keeping these vehicles on the road when inevitable repairs and recalls happen – without long wait times. Today’s EVs are great vehicles – but they’re not perfect. It’s possible that EVs may need less service in the future, but in 2021 the data shows they require more service and repairs than ICE vehicles. Tesla’s recent recall of some half million vehicles and GM’s recent recall of some 100,000 Bolts suggest that EVs are not immune to safety issues that must be fixed. Because local dealerships compete for customers on sales and service, the result is that pricing is competitive, and service is plentiful — from multiple same-brand dealers. It means you can always get a dealer on the phone, and you can always get a local appointment, with no waiting or frustrating 1-800 calls. With new complex new products like electric vehicles, personal service and education is needed more than ever. EV buyers agree. In the largest and most comprehensive survey ever conducted of future EV buyers in the U.S., the analytics firm Escalent presented future EV buyers with a factory sales model and a franchise dealership model. Only 20% preferred the direct approach, 23% were neutral, and a full 57% chose the current dealership model. When 20,000 future EV buyers demand for dealerships to be a big part of their EV purchase experience, it is clear that the franchise dealership model works just as well for EVs as it does for traditional vehicles. America’s car and truck dealers are all-in on EVs and raring to get going in promoting them. Our best environmental policy is to leverage the network of America’s 16,500 dealerships to help America successfully make the transition to EVs. Sincerely, Mike Stanton President and CEO National Automobile Dealers Association
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