2024 SEPT AUTO DEALER

The official publication of the Massachusetts State Automobile Dealers Association, Inc

Dealers Head to Capitol Hill

Privacy

Guardian

Workforce

Create

Safety Stay

ComplyCrypt

Schedule

St A ff Directory

Robert O’Koniewski, Esq. executive Vice President rokoniewski@msada.org

Jean Fabrizio Director of Administration jfabrizio@msada.org

Auto De A ler MAg A zine

Robert O’Koniewski, Esq. executive editor MSADA o ne McKinley Square Sixth f loor Boston, MA 02109

Subscriptions provided annually to Massachusetts member dealers. All address changes should be submitted to MSADA by e-mail: jfabrizio@msada.org

AD Directory complyAuto, 2 ethos group, 37 Marcum, 22 Merchant Advocate, 27 ocD tech, 21 PlugStar/Plug in America, 35 reynolds & reynolds, 30 Sprague energy, 46 Withum, 51

ADVertiSing rAteS inquire for multiple-insertion discounts or full Media Kit. e-mail jfabrizio@msada.org

Our Industry Advocacy

By Jeb Balise, MSADA President

This month a contingent of MSADA representatives will head to our Nation’s capital to wave the dealer flag for our industry and provide our Members of Congress with our insights on some of the pressing matters of the day.

Our industry is regulated at all levels – by municipalities, state agencies, and the federal government. Anyone paying attention can see that government never stops growing. State and federal budgets increase unabated, as more regulators are hired to implement an expanding maze of rules designed seemingly to make businesses more difficult to be successful. We all know that, without our constant input, misconceptions and assumptions can get in the way of sound policy.

Each year, however, the same founding American principle is under attack: free enterprise. The small businesses that make up the fabric of our communities are being tugged at the seams. Nature abhors a vacuum. If we do not stand up for ourselves, the inevitable bad policy will emerge and overtake all that we have built. That means we must make the effort and communicate with our elected officials to provide our side of the story.

As part of our on-going efforts, dealers from around the country with their dealer association executives and staff – almost 500 strong – will attend NADA’s Washington Conference to collectively remind the Members of Congress of the extent of our economic footprint. While there, we will be addressing such matters as the FTC’s Vehicle Shopping Rule, the EPA’s new emissions standards that will lead to unrealistic EV mandates on all states, misguided right to repair proposals, and federal efforts to combat the nationwide scourge of catalytic converter thefts.

Every little bit helps in our perpetual advocacy to promote our industry. We may not agree with our legislators on every issue, but, when the chips are down, the time put into establishing these relationships can pay off. It is important to remember that relationships matter, whether we are talking about the local zoning board, our state reps or senators, or Congress.

It is vital to have our young dealers and key managers participate in this process. This year, we will have at least five Next Gen dealership folks attending the Conference: Ruddy Brito, Vinnie Mastria, and Richie Mastria of the Mastria Auto Group; Chad Bouchard of the Ron Bouchard Auto Stores; and Brianna Butler of Midstate Mitsubishi. I encourage you to get involved in any way you feel comfortable, even if it is just to pick up the phone and make a call or send an email to your legislators. While you may worry that time spent with legislators who may seem less than sympathetic is wasted, nothing could be further from the truth. When we do not make our presence felt, we lose by default.

Feel free to reach out to me or our Executive Vice President Robert O’Koniewski for talking points or other tips for representing your business. We are here to help. t

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, Bill Deluca family of Dealerships

Paul Bertoli, Priority chryslerJeep Dodge ram

Franklin County [open]

Hampden County

Jeb Balise, Balise Auto group

Hampshire County

Bryan Burke, Burke chevrolet

Middlesex County 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 [open]

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

chris connolly, Jr., Herb connolly chevrolet

NADA Director

Scott Dube, Mcgovern Hyundai rt.93

OFFICERs

President, Jeb Balise

Vice President, Steve Sewell

Treasurer, Jack Madden, Jr.

Clerk, c harles tufankjian

ACV Auctions

MSADA A SS oci Ate M e M ber S D irectory

Steve Sirko (856) 381-3914

ADESA

Elizabeth Morich (508) 270-5400

Albin, Randall & Bennett

Barton D. Haag (207) 772-1981

American Fidelity Assurance Co.

Kathleen Weisenbach (402) 523-5945

America’s Auto Auction Boston

Chris Colocousis (774) 218-8930

ArentFox LLP

Paul Marshall Harris (617) 973-6179

Sarah Decatur Judge (617) 973-6184

Armatus Dealer Uplift

Joe Jankowski (410) 391-5701

Assurant Dealer Services

Sean Skinner (603) 660-3647

Auto Auction of New England

Steven DeLuca (603) 437-5700

Bank of America Merrill Lynch

Dan Duda and Nancy Price (781) 534-8543

Bellavia Blatt

Leonard Bellavia (516) 873-3000

Broadway Equipment Company

Fred Bauer (860) 798-5869

Brown & Brown Dealer Services

Jason Bayko (508) 624-4344

CDK Global

Rob Steele (508) 564-1346

Clifton Larson Allen

Rick Parmelee (860) 982-9307

Cooperative Systems

Scott Spatz (860) 250-4965

Cox Automotive

Polly Penna (303) 981-1298

Creative Resources Group

Charlie Rasak (508) 726-7544

CVR

John Alviggi (267) 419-3261

Dave Cantin Group

Woody Woodward (401) 465-7000

Dealer Pay

Shannon Wischmeyer (636) 293-8038

Downey & Company

Paul McGovern (781) 849-3100

DP Sales Distributors

Andrew Prussack {631) 842-7549

Driving Dealer Performance

Kimberly Guerin (978) 760-0322

Eastern Bank

David Sawyer (617) 620-3484

EasyCare New England

Greg Gomer (617) 967-0303

Ethos Group, Inc.

Drew Spring (617) 694-9761

F&I Direct

Sean Wiita (508) 414-0706

Michelle Salas (508) 599-0081

Federated Insurance

Kevin Sundberg (559) 547-9694

Fisher Phillips LLP

Joe Ambash (617) 532-9320

Jeff Fritz (617) 532-9325

Josh Nadreau (617) 532-9323

GW Marketing Services

Gordon Wisbach (857) 404-0226

Hilb Group

James Pietro (508) 791-5566

Huntington National Bank

Mark Flibotte (781) 724-3749

iHeart Media

Paul Kelley (757) 328-1431

ION Bank

Timothy Rourke (203) 439-9400

JM&A Group

Chris “KC” Hwang (954) 415-6961

JM Electrical Co.

Christopher Cedrone (781) 581-3328

John W. Furrh Associates Inc.

Pamela Barr (508) 824-4939

Key Bank

Tom Flynn (716) 998-6247

KPA

Abe Cohen (503) 902-6567

M & T Bank

John Federici (401) 642-5622

Management Developers, Inc.

Dale Boch (617) 312-2100

Marcum LLP

Nichole Rene (203) 781-9690

McWalter Volunteer Benefits Group

Shawn Allen (617) 483-0359

Merchant Advocate, LLC

Dan Giordano (973) 897-2778

Mintz Levin

Kurt Steinkrauss (617) 542-6000

Murtha Cullina

Thomas Vangel (617) 457-4000

Nancy Phillips Associates, Inc.

Nancy Phillips (603) 658-0004

National Business Brokers

Amy Burgess (817) 602-8651

NEAD Insurance Trust

Charles Muise (781) 706-6944

Northeast Dealer Services

Johna Cutlip (401) 243-7331

OCD Tech

Michael Hammond (844) 623-8324

Performance Management Group, Inc.

Dale Ducasse (508) 393-1400

Piper Consulting

Jim Piper (207) 754-0789

Plug In America

Joel Levin (237) 925-1364

Portfolio

J. Gregory Hoffman (800) 761-4546

Priority Payments Local

Andrew Pollina (732) 372-4352

Pullman & Comley LLC

James F. Martin, Esq. (413) 314-6160

Reynolds & Reynolds

Austin Ziske (802) 505-0016

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

Shepherd & Goldstein CPA

Ron Masiello (508) 757-3311

Southern Auto Auction

Joe Derohanian (860) 292-7500

Sprague Energy

Steve Borelli (508) 768-5252

The Towne Law Firm P.C.

James T. Towne, Jr. (518) 452-1800

TrueCar

Pat Watson (803) 360-6094

Truist

Andrew Carmer (401) 409-9467

US Bank

Vincent Gaglia (716) 649-0581

Wells Fargo Dealer Services

Josh Tobin (508) 951-8334

Withum

Kevin Carnes (617) 471-1120

Zurich American Insurance Company

Steven Megee (774) 210-0092

A Baker’s Dozen

By Robert O’Koniewski, Esq.

MSADA Executive Vice President

rokoniewski@msada.org

Follow us on X (formerly Twitter) • @MassAutoDealers

Election Stretch Run

Now that we have cleared the Labor Day holiday, our federal and state politicians are all set for the stretch run to the November 5 election day.

In addition to this being a presidential year, all 435 U.S. House of Representative seats will be on the ballot, including our nine incumbent Democrat Congress folks. Also, the election for one of our two U.S. Senate seats, currently held by Democrat Elizabeth Warren, is included among the 34 being contested around the country, the other 66 coming up over the next two and four years. Sen. Warren will face Republican John Deaton, a trial attorney and U.S. Marine Corps veteran who vanquished two opponents in the GOP primary held September 3, the day after Labor Day.

All State House seats also are on the ballot –160 House and 40 Senate. Unfortunately, for those interested in electoral competition, only 42 House districts and 12 Senate districts will feature a contested general election in November. Two incumbents who lost primary challenges on September 3 have been retired early – Rep. Randy Mom (D-Lowell), first seated in 2015, and eleven-term Rep. Susan Williams Gifford (R-Wareham), the third assistant minority leader in the House.

We may be a 50-50 country when looking at how closely split the U.S. House and Senate presently are constituted, and the Trump-Harris presidential race is basically a toss-up at this point, but here in the Bay State our legislature will have Democrat super-majorities controlling both chambers while the Democrat Healey-Driscoll administration have two years remaining on its gubernatorial term.

Finally, what would an election year be if we

did not have to deal with the usual assortment of initiative petitions and ballot questions dealing with matters that the legislature did not take up? This year, there are four:

• Question #1: State Auditor’s authority to audit the Legislature;

• Question #2: Elimination of MCAS as high school graduation requirement;

• Question #3: Unionization for transportation network drivers;

• Question #4: Limited legalization and regulation of certain natural psychedelic substances. Buckle in, because many issues affecting our industry – government oversight of small businesses, economic policy and taxes, control of the Supreme Court, just to name a few – will depend on how all these national elections play out, whether we will have one party control the Congress and the White House or we will have a split government. The immediate and long-term futures of our dealership livelihoods could depend on the outcome.

Upcoming NADA Wash. Conf.

Your MSADA is looking forward to its annual trek to Washington, D.C., on September 16-18 as part of NADA’s Washington Conference to lobby our Congress folks on several issues important to our industry. Our contingent will include our NADA director, Scott Dube, the McGovern Auto Group; MSADA Past President Chris Connolly, Herb Connolly Chevrolet; and five Next Generation dealers – Chad Bouchard, the Ron Bouchard Auto Stores; Ruddy Brito, Richie Mastria, and Vinnie Mastria, the Mastria Auto Group; and Brianna Butler, along with her father, Ray Butler, of

Midstate Mitsubishi.

Issues we will focus on include opposing the FTC’s vehicle shopping rule; opposing the EPA’s recently proposed EV mandates and emission standards; supporting catalytic converter anti-theft legislation; and opposing right to repair legislation.

If you want to participate locally in meetings with your Congressperson, please feel free to reach out to me. Also, think about being part of our traveling group next September. It is a great way to participate in the political process and get a sense of how our federal legislative process works (or does not work).

Check out more about our upcoming trip in our cover story on page 16.

Annual Meeting – Nov. 1, Encore Casino

We will be holding our annual meeting on Friday, November 1, at the Encore Hotel and Casino, in Everett. We are in the process of developing our speakers lineup, running 1-5pm after our Noon welcome reception. The day will conclude with our cocktail reception, 5-8pm. Please use the registration information that we have emailed to you, or the registration form included on page 10, to sign up. We look forward to seeing you on the first.

Our PACs - NADAPAC & NCDPAC

We appreciate the contributions we receive from our member dealers who answer our calls for donations to our PACs.

Each year MSADA expresses itself politically through NADA’s federal PAC, NADAPAC, and through our state PAC, the New Car Dealers Political Action Committee (NCDPAC). We depend on contributions from our dealers to keep these PACs strong, as we need to have an active voice in Washington and on Beacon Hill. Contributions to our PACs are an inexpensive insurance policy. Since by law we cannot use our membership dues or other association revenues for political contributions, the PACs help us to remain strong politically as we advocate for our dealers’ interests in the political process.

If you have not yet given to the PACs this year, please contact me at rokoniewski@msada.org and we can make sure your contributions happen. Thank you.

2025 TIME Dealer of the Year –George Haddad, Haddad Auto Group

Your MSADA Executive Committee has named George Haddad of the Haddad Auto Group in Pittsfield as our 2025 TIME Dealer of the Year. As a result of our selection, George will stand in nomination as the Massachusetts representative for the TIME and Ally dealer of the year award which will be announced at the National Automobile Dealers Association Show on January 25, in New Orleans.

George is one of a select group of over 40 dealer nominees from across the country who will be honored at the 108th annual NADA Show. This will be TIME’s 56th annual award.

Congratulations to George, and best of luck in the national competition in NOLA next year.

Next “Coffee with Coopsys” Webinar – Sept. 17

Our “Coffee with Coopsys” webinar series from our associate member, Cooperative Systems, continues with our next instalment on September 17. Coopsys works with businesses to increase their IT knowledge and understanding. The “Coffee with Coopsys” program is a series of brief webinars we provide to our members to expand upon and improve their experiences regarding IT issues and dealership best practices.

Our upcoming webinar is scheduled for Tuesday, September 17, at 10:00 a.m.: Data Lockdown - Controlling Access to Your Data & How It Is Transmitted

In our webinar we will explore why auto dealerships have become a goldmine for cybercriminals. With increasing digital reliance and vast amounts of sensitive customer data, dealerships are prime targets for attacks. Join us as we discuss best practices for safeguarding your dealership’s data and controlling access to sensi-

tive information.

You can register at https://coopsys.com/ msada/.

Here is the remaining schedule for 2024, with all webinars beginning at 10 a.m.:

• October 8: Driving Integrity - Implementing Vendor Due Diligence In the Automotive Industry

• November 12: AI in Auto - Navigating The Road Ahead With Innovation And Caution

• December 10: What Is A CISO And Why Does My Dealership Need One?

Compliance Alert: Recent Enforcement Actions Demand Your Attention

This Summer, the Federal Trade Commission announced multiple enforcement actions relevant to dealers. The allegations consist of violations of various federal and state laws in connection with the selling and financing of vehicles and voluntary protection products.

Since the FTC’s issuance of the Vehicle Shopping Rule on December 12, 2023, which is currently on hold pending the resolution of litigation, the FTC has continued its trend of high-profile FTC enforcement actions against franchised dealers and the automotive industry. These enforcement actions signal the need for dealers to conduct robust training and oversight in all aspects of their advertising, sales, and finance operations.

As covered in MSADA Bullitin #122 (9/9/24), each enforcement action involves a unique combination of circumstances, but the FTC allegations include such matters as misrepresenting vehicle prices in advertisements; deceptively charging for voluntary protection products and “addons” including charging for products the customer did not agree to, falsely claiming that products were required, or “packing” sales contracts with products to achieve an artificially inflated monthly payment.

Dealers should carefully review the recent enforcement actions with an attorney familiar with federal, state, and local laws governing vehicle advertising, sales, and financing, as well as their dealership oper-

ations personnel to determine appropriate compliance measures to adopt for their dealership.

For more information, please go to MSADA Bulletin #122 (9/9/24).

Federal Judge Blocks FTC’s Non-Compete Clause Ban

On August 20, 2024, a federal judge upheld a challenge to the Federal Trade Commission’s Non-Complete Clause Rule, blocking it nationwide. It was originally scheduled to go into effect on September 4. The Rule, which faced numerous court challenges, aimed to invalidate most non-compete clauses in the United States, subjecting violators to fines, penalties, and injunctive relief. The court’s decision blocks the rule nationwide and businesses do not need to take steps to comply with the rule.

The FTC has indicated that they may appeal the case. We will keep members updated as necessary.

Check out MSADA Bulletins #119 (8/21/24) and #120 (8/21/24) for more information.

MSADA Endorsed Vendor Services

Your Association has engaged several vendors this year for newly agreed upon endorsed services:

• Merchant Advocate works with retailers to analyze the credit card fees those businesses are charged and assessed in processing transactions. The savings can be considerable, as Merchant Advocate uncovers duplicate or unsubstantiated fees from the credit card companies. Over the last several years, they have saved retailers across the country over $380 million.

• Plug In America, through its PlugStar program, works with dealerships to train personnel, including salespersons, to be able to best address your customers’ needs and questions regarding electric vehicles. They presently work with dealerships in over 30 states to assist dealerships in the transition to EV sales and servicing.

• ComplyAuto works with dealers’ compliance efforts on privacy and cybersecurity platforms, FTC Safeguards Rule, advertising, AI-powered sales, workplace safety and OSHA-related rules, and HR policies and employee training.

• Sprague Energy works with businesses to analyze their electric and gas charges in an attempt to provide them with reduced charges for such services. Sprague works with a number of Massachusetts dealerships currently in those efforts. In addition, we want to remind you of several vendors who have been long-time partners of your Association:

• Ethos Group , who can improve your F&I products, services, and compliance.

• Reynolds & Reynolds, who, through its LAW Library program, is our partner for forms sales and compliance.

• Withum (formerly O’Connor & Drew), who is our accounting partner.

• American Fidelity, who can assist you with health and other insurance-based benefit products for your employees. Check out the ads for most of these companies in this month’s Auto Dealer magazine.

Tell Us About Your Giving

On August 17, the Lawrence Municipal Airport held its Annual National Aviation Day Open House & Celebration, which had a heavy military presence in appreciation of our U.S. veterans and active service members.

Paula Bouchard of the Ron Bouchard Auto Stores brought a trailer of racing

mementos and displays from the Ron Bouchard Racing Museum in Fitch-

burg, dedicated to her late husband and dealer principal, as well as the car Ron was in to win NASCAR’s 1981 Talladega 500. Paula was celebrating a recent $50,000 donation made to Angel Flight NE, based at the airport and which provides flights and ground transportation so children and adults can access life-saving medical care.

We always love to hear from our dealers about their charitable efforts and community assistance they do throughout the year. Whether it is big or small, makes no matter. It all helps your fellow citizens in some manner. Be sure to pass it on to us so we can recognize these efforts in our magazine.

US House Passes Bill Targeting China That Would Limit EV Tax Credits

Reuters

On September 12, the U.S. House of Representatives narrowly voted to approve legislation to tighten rules limiting Chinese content in vehicles qualifying for U.S. electric vehicle tax credits. The House voted 217 to 192 to approve the bill, which has not been taken up by the Senate, to tighten the definition of Chinese components that make vehicles ineligible for U.S. EV tax credits.

The Alliance for Automotive Innovation, which represents General Motors, Toyota Motor, Volkswagen, Hyundai, and other car companies, said the bill would result in fewer vehicles qualifying and would mean aggressive rules on vehicle emissions and EV targets would need to be rolled back. The automaker group CEO, John Bozzella, said those standards were based in part on the availability of EV tax credits and if the incentives are eliminated “the automotive industrial base faces a serious economic and national security risk from China, the U.S. becomes less competitive, and the rug is pulled out from consumers.”

The bill, sponsored by Representative Carol Miller, would tighten the definition of a so-called “Foreign Entity of Concern” that applies to China and other countries.

She said it would “ensure that Chinese companies can no longer benefit from electric vehicles tax credits meant for U.S. manufacturers.”

The rules required under an August 2022 law are designed to wean the U.S. electric vehicle battery supply chain away from China. Currently, 22 of the 113 EV or plug-in hybrid models for sale in the United States are eligible for the EV tax credit, and just 13 get the full $7,500 credit, Bozzella said.

The U.S. Treasury and Chinese Embassy in Washington did not immediately comment.

In May, the U.S. Treasury gave automakers additional flexibility on battery mineral requirements for electric vehicle tax credits on some crucial trace minerals from China, such as graphite. The department said it would give automakers until 2027 to remove some hard-to-trace minerals like graphite contained in anode materials and critical minerals contained in electrolyte salts, binders, and additives.

Carmakers Scale Down

Electrification Plans as EV Demand Slows

Reuters

Several global automakers are scaling down their electrification targets, hurt by slowing demand for fully electric vehicles due to lack of affordable models, slow roll-out of charging points, growing trade tensions, and increased competition from cheaper Chinese rivals.

The global sales of EVs - either fully electric or plug-in hybrid - rose 20% in the first half of 2024, slower than expected, data from market research firm Rho Motion showed. Europe saw only 1% growth in the same period. Sales of hybrid electric cars, seen as a more affordable compromise between all-combustion and all-electric, have meanwhile increased.

These carmakers have recently tempered their expectations (in chronological order starting with the most recent):

• Stellantis said on September 12 it would suspend production of the fully electric Fiat 500 small car for four weeks due to

sluggish demand.

• Toyota, the world’s biggest automaker, plans to build one million EVs in 2026, compared with its earlier announced sales target of 1.5 million. Toyota said in a statement there was no change to its intention to produce 1.5 million EVs per year by 2026 and 3.5 million by 2030. It said, however, that the figures were not targets but benchmarks for shareholders.

• Volvo Cars scrapped on September 4 its target of going all-electric by 2030 and said it expected to still be offering some hybrid models at that time. It aims for 90% to 100% of cars sold by 2030 to be pure EVs or plug-in hybrids, while up to 10% would be so-called mild hybrids.

• Volkswagen, Europe’s biggest automaker by sales, has not changed its 2030 targets for EVs to make up 70% of sales in Europe and 50% in the U.S. and China, despite repeatedly warning about slowing demand. However, its group technology chief said in August VW’s battery factory building plans were not set in stone and depended on EV demand.

• Ford in August lowered the share of planned annual capital spending dedicated to pure EVs to about 30% from 40%, given its increasing emphasis on hybrids, and said it was killing a planned electric SUV and pushing back a new electric version of its best-selling pickup.

• Porsche , the German premium carmaker, in July watered down its EV ambitions, saying it could only hit its previously communicated aim of 80% all-electric sales by 2030 if demand and developments in the EV sector warranted it.

• Renault CEO Luca De Meo, in early 2022, guided for all the Renault brand’s sales to be fully electric by 2030. However, two years later, the target was changed when the brand CEO Fabrice Cambolive said in an interview with ANE that Renault was seeing a dual strategy with both EVs and combustion-engine cars for the next 10 years, thus beyond 2030. In July, De Meo also expressed doubts over the timeline for

fully shifting its European production to EVs.

• General Motors, in June, cut its EV production forecast for 2024 and in July it declined to reiterate its forecast to produce one million EVs in North America by the end of 2025.

• Mercedes-Benz, the German luxury carmaker, said in February that sales of EVs, including hybrids, would account for up to 50% of the total by 2030, five years later than its forecast in 2021. It has also slowed its battery cell capacity plans as the EV demand did not pick up.

• Bentley Motors had aimed for an all-EV lineup by 2030, but in March then-CEO Adrian Hallmark said hybrids would likely still be on sale after that.

• Aston Martin, the British automaker, in February delayed the launch of its first EV due to low demand.

Columbus Day Holiday Rules Reminder

The Columbus Day holiday, celebrated this year on Monday, October 14, is considered a restricted holiday. This means:

• An employee cannot be required to work.

• An employee cannot be punished or penalized for choosing not to work the day.

• If the dealership is going to be open prior to Noon on the day, a local permit is required.

• REMINDER: As of January 1, 2023, under state law, there is no holiday premium pay requirement. Non-exempt employees, if working the day, need to be paid at least the state minimum wage of $15 per hour for any hours worked the day.

• For employees who do not work the holiday, there is no legal requirement to provide a paid holiday. However, be sure to review your holiday policies in your Employee Handbook to determine whether you have previously agreed to paid holidays. If you have, you will need to follow your policies until they are revised.

• I will attend the MSADA Annual Meeting on Friday, November 1

• I will attend the Cocktail Reception

• I want to Reserve a Room at the Encore Boston Harbor Hotel for Friday evening (Limited number available for Dealers only)

EGISLATIVE S CORECARD

SEPTEMBER 2024

BILL# SPONSOR SUBJECT

S151

H331

H290

H329

S204

H270

H289

S150

H351

Sen Crighton Rep Hunt

Rep Finn

Rep Howitt

Sen O’Connor

Rep Chan

Rep Finn

Sen Crighton

Rep Lewis

Amendments to Ch. 93B, the auto dealer franchise law.

RTR law amendments to fix Model Year start date and consumer notice.

Creates process to appeal improperly issued Class 1 license.

Modernize on-line vehicle purchase process.

S199 Sen Moore Amends definition of heavy-duty trucks in RTR law.

S220 H400 Sen Velis Rep Walsh Open safety recalls notifications.

H354 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.”)

Joint Committee on Consumer Protection held public hearing on July 17, 2023; placed into study.

Joint Committee on Consumer Protection held public hearing on July 17, 2023; placed into extension order.

Joint Committee on Consumer Protection held public hearing on July 17, 2023. H270 reported favorably on Jan. 25, 2024; sent to House Ways and Means.

Joint Committee on Consumer Protection held public hearing on July 17, 2023. H351 reported favorably on Jan. 25, 2024; sent to House Steering & Policy Committee; House ordered to third reading on 2/12/24.

SUPPORT Joint Committee on Consumer Protection held public hearing on July 17, 2023; placed into extension order.

SUPPORT Joint Committee on Consumer Protection held public hearing on July 17, 2023. Redraft H4277 reported favorably on January 25, 2024; sent to House Ways and Means.

OPPOSE Joint Committee on Consumer Protection held public hearing on July 17, 2023; placed into study.

S688

H1095

H1118

S639

H1121

H995

Sen Moore

Rep McMurtry

Rep Philips

Sen Feeney

Rep Puppolo

Rep Donahue

Creates process to increase the insurance reimbursed labor rate paid to auto body repairers.

Protects consumer choice in vehicle service contracts.

S2219 H3255 Sen Cronin Rep Arciero Eliminates initial state inspection for new vehicle.

Joint Committee on Financial Services held public hearing on October 3, 2023; reported redraft H4412 favorably and sent to House Ways and Means.

Joint Committee on Financial Services held public hearing on October 3, 2023; H995 reported favorably and sent to House Steering & Policy Committee.

SUPPORT Joint Committee on Transportation held public hearing on Jan. 24, 2024; placed into study.

H3348 Limit doc prep fee amounts. OPPOSE Joint Committee on Transportation held public hearing on Jan. 24, 2024; reported favorably and sent to House Ways and Means Committee. Rep Howitt

S2210

Sen Crighton

Sen Creem Rep Carey

Safety shutoff for keyless ignition technology.

Joint Committee on Transportation held public hearing on October 17, 2023; reported favorably.

S25 H60 Personal data privacy and security. OPPOSE Joint Committee on Advanced Information Technology, the Internet and Cybersecurity held public hearing on October 19, 2023. On 5/13/24, Committee reported redrafts S2770 and H4632 favorably; each sent to respective Ways and Means committee.

S227 Sen Finegold Mass. Info Privacy & Security Act. OPPOSE Joint Committee on Economic Development and Emerging Technologies held public hearing on October 19, 2023. Bill sent to AITIC Committee on November 2, 2023.

S171 H311 Sen Feeney Rep Gonzalez Protect consumers in auto transactions. OPPOSE Joint Committee on Consumer Protection held public hearing on July 17, 2023; reported S171 favorably on 1/25/24 and referred to Senate Ways and Means. SWM reported redraft S2736 favorably on 4/22/24. Senate engrossed on 4/25/24.

AUTO OUTLOOK

Dealers Head to Capitol Hill

Annual NADA Washington Conference Takes Center Stage Amid Election, Budget Tensions

This month hundreds of franchised new-car and truck dealers, along with their state association leaders, will converge on Washington, D.C., for the National Automobile Dealers Association’s annual Washington Conference to address legislative and regulatory issues affecting the auto industry.

Dealers will be visiting their Members of Congress on Capitol Hill at a time of incredible flux – Election Year 2024. In just weeks, voters will be going to the polls to choose their legislators for all 435 House seats up for grabs, 34 of the 100 Senate seats open in this year’s cycle, and, most importantly, who will be the occupant of the White House for the next four years – current Vice President Kamala Harris (D) or former President Donald Trump (R).

It is a time of great political divide as the Republicans lead the House with a ninevote margin (220-211), the Democrats wield control in the Senate (51-49), and polls show basically a toss-up race for president.

Unfortunately, the fate of our economy and the business community hangs in the balance. It is well-reported the extent to which the current Biden administration has promulgated volumes of regulations designed to make Main Street small business operations more difficult, with many such regulations overturned by the federal courts or still in limbo as litigation plays itself out. And the constant partisan bickering between a Democrat-controlled Senate and the GOP-controlled House – a GOP House caucus which has its own internal conflicts making life difficult in an already tough arena – stymies much legislative progress.

Throw in the fact that this year especially has its own version of electoral MMA nastiness, plus Congress needing to pass another temporary spending plan in the next couple of weeks to keep the government from shutting down, dealers have their work cut out for themselves. Amid the conflicts, the issues NADA and franchised dealers face are piling up.

“Even in times of relative calm, which we have not witnessed in recent years, this process is never easy. Bottomline – a substantial part of what MSADA does for our members is to stay in touch with our U.S.

senators and representatives so that they know that what they are doing, or not doing, has an impact back home at our members’ dealerships,” said MSADA Executive Vice President Robert O’Koniewski. “Our engagement cannot be sporadic. Building relationships through constant communications can help to move policies in certain directions at times while other non-auto legislative fights continue in a more partisan arena.”

“The perception is that government does not really do anything, especially to help the folks back home on Main Street,” O’Koniewski stated. “The reality is, if government does do something, we need to make sure that there is no absence of viewpoint from the franchised dealers. It is always particularly easy for a politician to vote a certain way if they never hear from the concerned parties. That is why our upcoming Congressional visits will be, and always are, so vital.”

The VSR would oVeRwhelm caR buyeRS and Small buSineSS dealeRS wiTh needleSS addiTional coSTS, papeRwoRk, and a lengThened SaleS pRoceSS.

In June, American Truck Dealers, an arm of NADA, gathered its franchised heavy-duty truck dealers to address some of the same matters affecting new-car dealers. And with progressive Democrat regulators often no longer making distinctions between cars versus medium- and heavy-duty trucks, the entire dealer industry can be thrown into the same pot of boiling water on any given day; even more reason for dealer advocacy groups to have their A-game when their members are communicating with their Congressmen and Senators.

Here are the key legislative priorities for this year’s Washington Conference:

FTC Vehicle Shopping Rule

The big picture: NADA continues to pursue an aggressive legal and legislative strategy to stop the Federal Trade Commission’s Vehicle Shopping Rule (VSR) from taking effect. The VSR would overwhelm car buyers and small business dealers with needless additional costs, paperwork, and a lengthened sales process. The FTC finalized this

rule despite significant process flaws and a lack of credible data-driven analysis. This issue impacts car and truck dealers.

What is next in Congress: An NADA-backed provision that would temporarily stop the FTC from spending funds to enforce the Vehicle Shopping Rule (Sec. 530) was included in a House appropriations bill that recently stalled due to unrelated provisions. NADA also supports legislation to stop the VSR and require the FTC to follow essential steps to ensure the Rule is the result of an informed process if it chooses to “REDO” the Rule (H.R. 7101/S. 3014). The legislation, the FY25 Financial Services and General Government appropriations bill (H.R. 8773), is now likely to be rolled into an end-of-the-year omnibus spending bill. NADA will continue to press legislators to include Sec. 530 language in the year-end spending bill and will advocate against “poison-pill” attempts to derail it throughout the congressional appropriations process.

What is next in the courts: Oral argument for NADA/TADA’s legal challenge to the Vehicle Shopping Rule before the U.S. Court of Appeals for the 5th Circuit is scheduled for October 9, 2024. NADA and TADA will continue to show the Court the many reasons why the FTC’s Vehicle Shopping Rule violates federal law and should be set aside permanently, including the fact that the FTC:

• Unlawfully issued this rule without the advance notice required by its own regulations;

• Did not articulate a rational connection between its findings and its decision to impose a far-reaching rule; and

• Unreasonably evaluated the rule’s benefits and costs.

Why it matters: The Center for Automotive Research’s updated study on the costs of the

18 DEALERS HEAD TO CAPITOL HILL

nhTSa’S Rule, combined wiTh The epa’S Rule, cReaTeS a RegulaToRy Regime ThaT aggReSSiVely puSheS Vehicle elecTRificaTion faR ahead of conSumeR demand.

Vehicle Shopping Rule shows that the rule will:

• Require at least an additional hour (60-80 minutes) to complete the vehicle purchasing process (divided between the sales process and the review of financial disclosures and documentation);

• Generate a net cost to consumers and dealers of $24.1 billion over 10 years; and

• Impose upon each dealership location average upfront compliance costs of $31,450 and an average recurring annual cost of $39,862.

The “ask”: Members of Congress should cosponsor the “FTC REDO Act” to stop the flawed VSR and ensure, if the FTC opts to redo its Rule, the agency must follow essential regulatory safeguards to avoid needlessly imposing significant burdens and costs on consumers and small business dealers.

EPA’s De Facto EV Mandate –Light-Duty Vehicles

The big picture: The EPA’s de facto EV mandate is far too aggressive and far ahead of consumer demand. The Biden administration’s regulation could effectively require 56% of car sales to be electric by 2032. However, the charging infrastructure is not ready, the current incentives are not sufficient, and high EV pric-

es will price out millions of consumers, particularly low-income Americans, from the new-car market. See separate discussion of heavy-duty truck rules.

What is next in Congress: NADA will continue efforts to temporarily stop or disapprove EPA’s de facto EV mandates. NADA supports legislation that would slow down or stop the EPA’s de facto electric vehicle (EV) mandate which goes too far, too fast and ignores real world consumer demand for EVs. NADA supports legislation that would temporarily stop funding or disapprove of the administration’s light-duty de facto EV mandate. NADA supports the House Interior, Environment appropriations bill (H.R. 8998), which includes language (Sec. 474) that would temporarily stop EPA’s de facto light EV mandate, and that passed the House on July 24. NADA additionally sent a letter in support of H.J. Res. 136/S.J. Res. 75, joint resolutions which would overturn EPA’s light-duty de facto EV mandate rule.

Why it matters: NADA is highly skeptical that EVs will be adopted at anywhere near the levels required to comply with the EPA’s rules. While dealers have supported the move to electrification with billions of dollars in investments and the purchase of EV inventory, the U.S. lacks an adequate national consumer and commercial vehicle charging network, which makes the rapid

adoption of EVs required by the EPA impractical.

The “ask”: Congress should stop, through the appropriations process or the joint resolutions, the EPA’s de facto EV mandate, which will result in a new vehicle market that is unaffordable and does not meet the transportation needs of average Americans.

NHTSA CAFE Rule

What is new: Rep. Tim Walberg (R-Michigan) and Sen. Ted Cruz (R-Texas) introduced Congressional Review Act joint resolutions to disapprove NHTSA’s final Corporate Average Fuel Economy (CAFE) rule (H.J.Res. 199/S.J.Res. 104). The House Appropriations Committee also approved the FY25 Transportation-Housing spending bill, which includes a NADA-backed policy rider to temporarily stop funding for the CAFE rule. NADA supports enactment of H.J.Res. 199/S.J.Res. 104. This issue impacts car and truck dealers.

Why it matters: NHTSA’s rule, combined with the EPA’s aforementioned rule, creates a regulatory regime that aggressively pushes vehicle electrification far ahead of consumer demand. Dealers’ experience working with consumers every day makes us highly skeptical that consumers will adopt EVs anywhere near the levels required to meet these rules. The charging infrastructure is not ready, the current incentives are not sufficient, and high EV prices will price out millions of consumers, particularly low-income Americans, from the new-car market.

The details: The final CAFE rule will freeze truck and SUV fuel efficiency for model years 2027 and 2028 and increase 2% for the following years – as opposed to 4% year-over-year increases for trucks and SUVs that were in the proposed rule. Passenger car fuel efficiency will increase at 2% every year, as in the proposed rule. By MY 2031, the projected total fleet fuel efficiency will be 50.4 MPG, as opposed to the projected 58 MPG by MY 2032 that was in the proposed rule. The final CAFE rule is generally aligned with the EPA final greenhouse gas rule such that, if manufacturers comply with the EPA rule, they will not be subject to fines under CAFE.

Catalytic Converter Theft

The big picture: NADA has made passage of federal catalytic converter anti-theft legislation a priority. NADA supports the “Preventing Auto Recycling Theft Act” (PART Act) (H.R. 621/S. 154), which would help law enforcement combat this crime by providing a national framework that would mark catalytic converters, establish federal criminal penalties, and create a more transparent market that deters its theft. This issue impacts car and truck dealers.

What is new: In August, NADA led a coalition effort and was joined by 119 organizations representing law enforcement, the auto industry, and consumer advocates in sending a letter to congressional leaders urging passage of federal legislation to combat catalytic converter theft. NADA is urging Congress to adopt an amendment to the annual National Defense Authorization Act

(NDAA), which is identical to the bipartisan “Preventing Auto Recycling Theft” (PART) Act (S. 154) introduced by Sens. Amy Klobuchar (D-Minnesota) and Mike Braun (R-Indiana).

What is next: NADA and this broad coalition will continue to

build bipartisan support for attaching the PART Act and suggested amendments to the NDAA or other “must pass” legislation. Why it matters: This common-sense legislation gives law enforcement the necessary tools to help fight catalytic converter theft. Catalytic converters are being stolen at increasingly higher rates due to their valuable metals, such as rhodium, platinum and palladium. The number of catalytic converter thefts increased by nearly 900% between 2019 and 2023. Stolen catalytic converters can garner $20 to $350 on the black market, with the replacement cost to vehicle owners averaging over $2,500. These thefts are costing businesses and vehicle owners millions of dollars. The urgency of addressing this issue has risen as these thefts have increasingly turned violent, with some victims sustaining injuries and even losing their lives when confronting thieves.

The “ask”: Members of Congress are urged to cosponsor the PART Act to address the growing national problem of catalytic converter theft.

“Right to Repair” Legislation

The big picture: NADA opposes so-called “right to repair” legislation (H.R. 906), which has little to do with repairing a vehicle and raises serious vehicle privacy, security, and safety issues for consumers. This issue impacts car and truck dealers.

Advocates for “right to repair” legislation claim that independent automotive repair shops do not have access to the parts or data necessary to repair vehicles. However, this concern was rectified by a 2014 Memorandum of Understanding, signed by “right to repair” proponents and auto manufacturers, based on the initial Massachusetts repair law passed in 2013. Today, the informa-

20 DEALERS HEAD TO CAPITOL HILL

tion independent shops need to repair vehicles is readily available from every auto manufacturer.

This legislation would also give any third-party remote, bidirectional access to consumer data from vehicles, which raises significant privacy, cybersecurity, and automotive safety concerns. H.R. 906 is built on a faulty premise that independent repair shops are at risk, even though these businesses perform more than 70% of all non-warranty repairs.

The “ask”: Members of Congress are urged not to cosponsor or vote for H.R. 906.

EPA’s De Facto EV Mandate –Heavy-Duty Vehicles

The big picture: In April, the Environmental Protection Agency (EPA) issued its final rule, “Greenhouse Gas Emissions Standards for Heavy-Duty Vehicles – Phase 3,” targeting fleet-wide greenhouse gas (GHG) reductions for model year 2027 through 2032 heavy-duty vehicles. The rule will force the broad adoption of heavy-duty zero-emission vehicles (ZEVs), despite currently being less than 0.3% of sales last year.

Background: On July 2, a bicameral letter led by Rep. Randy Feenstra (R-Iowa) and signed by 156 Members of Congress was sent urging EPA to withdraw its Phase 3 rule. ATD sent a letter to

Sen. Dan Sullivan (R-Alaska) and Rep. Russ Fulcher (R-Idaho) in support of Congressional Review Act joint resolutions (S.J.Res. 74/H.J.Res.133), which would disapprove EPA’s de facto ZEV heavy-duty truck mandate.

What is new: In July, ATD sent a letter in support of the FY25 House Interior, Environment and Related Agencies appropriations bill (H.R. 8998), which includes language (Sec. 475) that would temporarily stop EPA from spending funds to enforce its de facto EV mandates on heavy-duty vehicles (“Greenhouse Gas

(GHG) Emissions Standards for Heavy-Duty Vehicles – Phase 3” rule for model year (MY) 2027-2032). H.R. 8998 passed the House on July 24.

Why it matters: An electric truck has upfront costs two to three times more expensive than a comparable diesel vehicle, and the U.S. lacks a national commercial vehicle charging network, which makes customer adoption of heavy-duty ZEVs and their day-to-day use impractical. A study released by the Clean Freight Coalition found that full electrification of the U.S. commercial truck fleet would require nearly $1 trillion of infrastructure investment and grid network upgrades to meet demand. This rule is unrealistic and impossible to achieve and sets overly aggressive timelines and targets for electric commercial vehicle adoption starting in 2027. Last year, only 0.3% of commercial vehicle sales were ZEVs. New electric trucks cost two to three times more than comparable diesel vehicles, and do not offer comparative performance and range capabilities. When government mandates are too stringent and rushed, they result in business closures, job losses and delayed environmental benefits.

The “ask”: Members of Congress should vote for joint resolutions (H.J.Res. 133/S.J.Res. 74) introduced by Rep. Russ Fulcher (R-Idaho) and Sen. Dan Sullivan (R-Alaska) which would disapprove EPA’s de facto ZEV heavy-duty truck mandate.

Repeal Federal Excise Tax on Heavy-Duty Trucks

The big picture: In order to accelerate turnover of America’s aging truck fleet which will lead to cleaner, safer trucks on the road, Congress should repeal the outdated 12% federal excise tax (FET) imposed on new heavy-duty trucks.

Background: First enacted in 1917 to help pay for the U.S. effort in World War I, this tax routinely adds $22,000 or more to the price of a new heavy-duty diesel truck, or $50,000 to the price of an electric or hydrogen fuel-cell truck, which cost more than twice the price of a new clean diesel truck. The FET is levied in addition to the nearly $40,000 per truck cost due to recent federal emissions and fuel-economy mandates.

While new trucks have made significant environmental gains, such as reducing nitrogen oxide and particulate matter emissions by at least 98%, the FET remains a costly barrier to the purchase of new trucks equipped with the latest environmental technologies. With 47% of the Class 8 trucks on the road today over 10 years old, FET repeal would immediately benefit the environment by incentivizing the replacement of older trucks with cleaner, safer and more fuel-efficient trucks.

ATD and eight trucking organizations sent a letter to Senate Finance Committee and House Ways and Means Committee leadership last year urging passage of bipartisan FET repeal legislation, the “Modern, Clean, and Safe Trucks Act of 2023” (H.R. 1440/S. 694).

The “ask”: Members of Congress are urged to cosponsor H.R. 1440/S. 694 to incentivize the replacement of older trucks with newer, greener, and safer trucks.

NEWS from Around the h orn MSADA

BOSTON

BBJ Names Village auto Group one of the Most Charitable Companies in Mass.

The Boston Business Journal has named Village Automotive Group an honoree in its annual 2024 Corporate Citizenship Awards, a recognition of the region’s top corporate charitable contributors.

The Business Journal annually publishes this list to showcase companies that prioritize giving back to their communities. Village Automotive Group has now been honored at the Corporate Citizenship Awards for its charitable contributions for six consecutive years, from 2019 to 2024.

NORWELL

audi Norwell Named a Top Wholesale Parts dealer by FenderBender

Audi Norwell, a member of Ray Ciccolo’s Village Automotive Group, has been named one of the country’s top wholesale dealers for original equipment manufacturer (OEM) auto parts by collision repair shops in FenderBender magazine’s 2024 Reader’s Choice: OEM Parts Dealers survey.

The dealers recognized as being among the best sources for OEM parts were chosen based on input from survey participants sampled from the qualified circulation of FenderBender magazine. FenderBender is the industry’s leading resource for collision repair shop owners and operators.

“It is with honor that we present our list of the Top Charitable Contributors in Massachusetts – companies who gave $100,000 or more to Massachusetts-based charities in 2023. Collectively, they gave more than $362 million in cash contributions – a true example of the business community coming together to help those in need. We are proud to celebrate these organizations who give both money and time to make Boston a stronger and better place for all,” said Boston Business Journal Market President and Publisher Carolyn Jones.

“Audi Norwell is honored and humbled to be considered one of the best OEM parts dealers by the collision repair professionals we serve,” said Michael Gaughran, General Manager of Audi Norwell. “What separates us from other dealers is the personal interaction and service that we provide. It comes down to the people on our team in our Parts Department that make the difference. Many dealer wholesale business models are online without the ability to interact with a person, whereas at Audi Norwell all customers, including wholesale customers, can always reach a responsive and helpful parts team member to get their questions answered and orders placed.”

BROOKLINE

being inVolVed and giVing back To The aRea iS paRT and paRcel of whaT we do

–Ray Ciccolo

This year, 96 companies qualified for the distinction by reporting at least $100,000 in cash contributions to Massachusetts-based charities last year. The honorees include companies from such industry sectors as financial and professional services, health care, technology, retail, and professional sports.

“Greater Boston is our home,” said Village Automotive Group Founder and President Ray Ciccolo. “This innovative and progressive place has shaped who we are and what we have achieved. Being involved and giving back to the area is part and parcel of what we do.”

Village Automotive Group, whose contributions include both the corporation and its charitable foundation, will be honored at the BBJ’s 18th Annual Corporate Citizenship Awards on Thursday, September 5, at the Seaport Hotel. The evening will feature recognition of all the Charitable Contributors and presentation of the Alan B. Lewis | Alnoba CEO Social Leadership Award and the 2024 Corporate Citizenship Community Collaboration Awardees, as well as numerous networking opportunities.

In Massachusetts, EV drivers Save the Least

By Aaron Pressman, The Boston Globe

Drivers in all 50 US states could save money by switching from gas-powered cars and trucks to electric vehicles, adding up to almost $1,100 a year for an average consumer, according to a new analysis. But Massachusetts drivers would save the least, due in part to the region’s high electricity rates.

Nonprofit research firm Coltura looked at average gasoline prices and residential electricity rates in each state and modeled average gas mileage and electricity used per mile for passenger vehicles. Nationwide, drivers can save over 8 cents per mile driven by going electric if they do most of their charging at home. At the national average of 13,500 miles driven per year, that adds up to about $1,100 a year, Coltura found.

In Massachusetts, however, an average driver would save less than 5 cents per mile, or about $650 a year. That’s because the state’s electric rates are among the highest in the country, while gas prices and gas taxes are fairly moderate, according to Rob Sargent, Coltura’s policy director.

NEWS from Around the h orn MSADA

Hyundai Hope on Wheels Donates $20,000 to Non-Profits

Last month Gary Rome Hyundai hosted two check donations from Hyundai Hope on Wheels: $10,000 to LukeStronger Inc. of South Hadley and $10,000 to Thunder in the Valley of Easthampton.

Dealer Gary Rome is the Eastern Region board member of Hyundai Hope on Wheels and is honored to represent the organization with presenting the grant funds. “At Gary Rome Hyundai, we believe in leading by example and pride ourselves on doing the next right thing. As a Hyundai Hope on Wheels board member for the Eastern Region, I am committed to making a positive impact by supporting local organizations in their fight against childhood cancer,” said Gary Rome. “We are dedicated to striking out cancer and providing hope to those affected by it.”

phoblastic leukemia. Local residents rallied to support his family with, among other things, a benefit golf tournament. Complications and another unforeseen relapse kept Luke at Boston Children’s Hospital for 15 months. In December 2017 he underwent a bone marrow transplant and we are pleased to report that he is doing well!

Since 1998, Hyundai Hope on Wheels has worked tirelessly to support the families, researchers, doctors, and children affected by childhood cancer. To this day, Hyundai Hope on Wheels has awarded grants totaling over $250 million, thanks to Hyundai Motor America and its nationwide dealers. The public is invited to join the movement by raising awareness and supporting our efforts to help #EndChildhoodCancer.

LukeStronger Inc. is a local 501(c)(3) nonprofit that provides assistance to local families dealing with pediatric cancer so that parents can spend time with their children. LukeStronger originated when Luke Bradley, a then 10-year-old boy from South Hadley, relapsed with acute lym-

Local drivers “don’t save a lot of money, because of the unique combination of relatively high electricity prices and relatively low gasoline prices . . certainly relative to the other states that have high electricity prices,’’ Sargent said.

Only California and Hawaii consumers paid more for electricity than Massachusetts residents as of June, according to data from the US Energy Department. And both of those states have much higher gas prices than Massachusetts.

Knowing firsthand the financial struggle, Luke’s family created a nonprofit to help other families by continuing the golf tournament tradition. Together with friends, in its short history, LukeStronger has helped seven local families fill in the income gap caused by pediatric cancer. All profits go to the family. LukeStronger does not expect repayment.

Unbroken Wings Inc./Thunder in the Valley Festival is a a local 501(c)(3) nonprofit created to support the Children’s Miracle Network Hospitals. Every summer, they host firework displays and music events in Easthampton. All funds raised are used to improve the experiences of children staying at the local Children’s Miracle Network Hospital, which is located at Baystate Children’s Hospital.

The Thunder in the Valley Music Festival brings the sounds of the biggest names in rock, country and blues music to the heart of Easthampton. This year marks their 9th year celebration, and they continue to grow with each passing year. Much of their success is led by their driving force, Unbroken Wings, who have worked tirelessly to make the festival a reality.

But the picture should improve for Massachusetts EV drivers as the state adds more renewable energy projects and reduces reliance on higher-cost natural gas generation, said Kyle Murray, Massachusetts program director at the nonprofit Acadia Center in Boston.

“The state continuing to keep the pedal to the metal . . . on solar and other low-cost renewables will be incredibly important,’’ Murray said. And the state is moving toward enacting lower electricity rates at night when the grid has excess capacity, which would reduce the cost of charging EVs at home overnight, he said.

Coltura has tracked potential EV savings for the past five years. The average savings peaked at more than 13 cents per mile in the second quarter of 2022, when gas prices spiked to a decade-high because of Russia’s invasion of Ukraine. EV sales jumped 66 percent that year.

HOLYOKE

from Around the h orn

Lately, EV sales growth has slowed, rising 11 percent in the second quarter, jeopardizing Massachusetts’ climate goal of convincing almost 1 million drivers to switch to electric by 2030. In addition to shrinking savings, consumers surveys find hesitance due to the lack of affordable EV options and fears about charging on the road.

A more effective way to combat climate change might be to target EV incentives to people who drive the most miles, Sargent said. Coltura’s research has found that the top 10 percent of drivers by mileage driven account for one-third of all gasoline usage in the country, more than the bottom 70 percent of drivers.

A bill under consideration in California would add miles driven as part of the calculation for offering larger incentives to low-income drivers who switch to an EV. And Burlington Electric in Vermont offers a larger rebate to EV drivers who drive at least twice as many miles as an average driver. In Massachusetts, the current MOR-EV rebate program offers $3,500 back for an EV purchase with additional incentives for lower-income buyers and consumers who trade in a gas vehicle.

“We have got to really try to figure out how to focus on these higher-mileage drivers and identify the obstacles to getting them behind the wheels of EVs,’’ Sargent said.

AUSTIN, TEXAS

CdK Global Says Employee, Customer data Safe after Cyberattacks

Mark Hollmer, Automotive News

CDK Global said a pair of cyberattacks in June that forced a shutdown of its dealership management system across North America don’t appear to have involved the theft of dealership employee or consumer data.

“We are pleased to report that after conducting a thorough third-party expert review of the June 19th cyber incident, we have not discovered a compromise of reportable dealer employee or consumer personally identifiable information that would give rise to any notification obligations relating to the incident,” a CDK spokesperson told Automotive News in an August 26 emailed statement. “Dealers can now reassure both their employees and consumers that their data is secure and continue to focus on providing excellent experiences throughout the car buying and owning journey.”

CDK, of Austin, Texas, said in early July that it would handle a Federal Trade Commission Safeguards Rule requirement collectively for dealerships if it determined the attacks — a ransomware event — involved the theft of dealership employee or customer data.

The amended Safeguards Rule requires car dealerships and other nonbanking financial institutions to notify the agency no more than 30 days after discovering a security breach in which there was access to unencrypted information for at least 500 customers.

CDK has been working with third-party experts since the attack to safely reboot its systems and address whether employee and customer data was stolen.

CDK’s disclosure offers some good news for the 15,000 dealerships affected by the attacks, which forced CDK to shut down its DMS for two weeks. Dealerships scrambling to maintain operations relied on pen and paper and third-party software workarounds during the shutdown. They took hits to their second-quarter net income, as the shutdown happened toward the end of a crucial sales month and quarter. The company compensated its customers with a one-month rebate, dealers have said, but some thought the gesture was not enough.

CDK has not yet disclosed what caused the attacks or steps it has taken to minimize the risk of future incidents. It also was unclear how CDK’s data security announcement may affect pending lawsuits against the company. Some dealership employees and customers have sued CDK in federal court alleging that the cyberattacks placed their data at risk.

Mass. Dealers in the News:

George Haddad, owner and president of the Haddad Auto Group in Pittsfield, was the cover feature in the May edition of F&I and Showroom magazine in an article titled “90 Years of Lessons Learned – Haddad Auto Group’s third generation owner looks back on business skills passed down and ponders the one’s he’s learned.”

In the August 26 edition of The Wall Street Journal article “Plug-In Hybrids, Once Shunned, Win Over Buyers in Second Look”, John Morrill, owner of Planet Chrysler Jeep Dodge Ram in Franklin, commented on federal tax credits and “very aggressive” manufacturer discounts used to support plug-in hybrid Jeep sales and leases.

The August 29 Automotive News, in a piece titled “Behind the Scenes: A Dealership Transaction in New Jersey”, featured Matt McGovern of the McGovern Auto Group, based in Newton, and its purchase of Contemporary Motor Cars Mercedes-Benz in Little Silver, New Jersey.

Fraud in the Parts Department –Is Your Dealership Protected?

By Laura Everett CPA, Albin Randall & Bennett

Our Auto Dealership Services Team recently shared an article which centered on a Parts and Service Director charged with defrauding his auto dealership employer. This employee’s scheme involved ordering and receiving expensive manufacturer parts outside of the dealership’s dealer management system (DMS), selling the parts on Facebook at a discount, utilizing his personal PayPal account to accept customer’s payments, and using the dealership’s FedEx account to cover shipping costs. Meanwhile, the dealership was being billed and remitting payment to the manufacturer for these parts. Over less than two years, this employee’s fraudulent actions cost the dealership and its insurance company an estimated $600,000!

Cases of fraud, such as the one described above, take a financial and emotional toll on a business, but can be used as a learning opportunity for other business owners to determine if their current processes and controls could prevent and detect fraud. Take a moment to consider the following as it relates to your dealership:

• Parts pad to General Ledger (GL) reconciliation: In the above example of fraud, the stolen parts were never included in the DMS inventory-on-hand, but payments were made to the manufacturer and would have been recorded in the GL parts inventory account. This would have created a growing variance between the parts pad and the GL. A parts pad to GL reconciliation should be prepared each month by the accounting

team to determine that any variances between the parts pad and GL are known and expected. Any unknown and unexpected reconciling items should be researched fully.

• Parts inventory cycle counts and yearend physical inventory counts: These are key internal controls in the parts department. They also help with making sure your operation runs smoothly. Cycle counts are when a part is selected from the parts pad, traced to its location in the parts department, counted and compared to the number of units reported in the parts pad. The idea is that each part in the parts department is counted during the year and adjustments made, as necessary. Additionally, a best practice is to engage a third party on an annual basis to perform a physical parts count. Like cycle counts, having a physical count completed would ensure the parts pad is accurate based on inventory-on-hand. Neither of these internal controls would have necessarily caught the scheme above, but they are still an important internal control to consider. They can be done in conjunction with the monthly and yearly general ledger to parts pad reconciliation.

• Segregation of duties: The segregation of duties involves the assignment of responsibility in such a manner that more than one employee is involved in the processing of a transaction. If an employee’s duties include the ordering of parts, receiving of parts, and controlling the communications with the factory and the accounting department, the risk of intentional or unintentional errors increases. A review of your dealership’s processes and internal controls, including the adequacy of segregation of duties in all departments, is key to protecting all dealership assets.

• Review of expenses: A dealership’s accounting department should always include in its month-end procedures a detailed review of monthly expenses to

ensure expenses are in-line with expectations and free of unusual trends. If your dealership does not prepare a detailed budget to include expenses nor performs monthly budget-to-actual analysis, your dealership is missing a valuable tool to monitor the dealership’s performance and take note of fluctuations outside of expectations.

• Auditing vendor statements: Before bills are paid, vendor invoices and statements should be reviewed, compared to supporting documentation, and approved. Comparing the FedEx charges to supporting sales documents and sales proceeds could have led to identifying these fraudulent actions. Parts receiving procedures and a purchase order system can help detect these schemes as well.

• Review of Key Performance Indicators (KPIs): If the OEM continued to bill the dealership and the dealership continued to pay for these expensive parts without ever selling and relieving inventory, an ever-increasing parts inventory GL balance would exist. Paying attention to KPIs, including frozen capital, days supply in inventory, and performing inventory flux analysis, could help to identify anomalies in the dealership’s financial statements. Unfortunately, like death and taxes, fraud in the business world is a certainty and can occur where it is least expected. Business owners should expect there will always be employees who are motivated enough, able to rationalize, and can identify opportunities to commit fraud. Review your insurance policies and understand how instances of this type of fraud are covered and whether your coverage is adequate. Investing in the design, implementation, and monitoring of internal controls is also a small price to pay to protect your dealership from the financial and emotional costs of fraud. Contact an ARB Auto Dealership Services Team member if you would like to discuss this further.

The Mystery of Work-In-Process

By Jen Moylan

Lead Consultant, Withum

Work-in-process reconciliation is often a misunderstood accounting task, so we would like to take an opportunity to review it.

Accounting never matches the service department’s WIP report. As a result, many of us were taught to make an entry to make them match. Just debit or credit the WIP inventory and offset the difference against cost-of-sales, other service payroll expense, or accrued payroll and then reverse that entry next month and repeat. This is important for month-end because the general ledger balance will often be a credit due to unposted payroll. Most manufacturers will not accept a financial statement with a credit in an asset account.

What if there is a deeper issue driving the two balances further apart? This is often the case over years, and this difference can snowball into a five or six-figure write-off.

Technician time is a saleable inventory item, just like a part on the shelf. We purchase an hour through payroll and then sell that hour on a repair order. If one single RO has been closed on the last day of the month but that day’s payroll will not be posted to accounting until the following week, at month-end, we would have a credit balance on the general ledger for the labor cost of that RO.

Step one is to run the flag sheets for all technicians for the last days of the month that will not be paid and posted until the following month. This entry will debit Workin-Process and credit Accrued Payroll. Giving this a control like “TECHPAY” or something similar is a good option. Then, we will reverse that journal entry on the 1st of the new month so we do not double up on the WIP inventory when that payroll is processed.

The second step is that once the payroll accrual is posted, we want to compare the GL balance with the service department’s Work-in-Process report and run it at the end of the day on the last day of the month. Be sure to run it once they are done for the day, so that anything service is working on late to get into the month will be closed and left off the report. You should be able to set this report to run overnight. It is critical that the service cutoff is the same as accounting’s cutoff. The total labor cost on the report represents purchased time that hasn’t yet been sold. This amount should be the debit balance in your general ledger.

In a perfect world, your GL balance will tie precisely to the WIP report. It is okay to allow a small variance of a couple hundred dollars, as it is probably not worth your time to chase down the difference. Often, this variance can be closer to a thousand dollars or even higher if this process has not been followed. Finding that difference is step three.

Why would there be a difference?

• The wrong technician is flagged on a repair order. If you see handwritten notes on the weekly tech time report turned in for payroll, adding hours to one technician and deducting from another, that is the likely reason. If we have costed out a repair with a C tech making $18 per hour for a six-hour repair, the RO will reduce your WIP GL balance by $108. If the service manager made a note on payroll to deduct six hours from the C tech and pay the A tech instead (who is paid $36 per hour), your purchased payroll for that job would be $216 – twice what was sold. If this happens on a weekly basis, that will grow to over $5,000 in one year. This is a common issue, and the best way to correct it in accounting would be to adjust the repair order to match the correct cost of sale. This can be time-consuming, and a lump sum adjustment at the end of the month may be more efficient.

• A voided line on repair orders. A technician performs a repair, and for some

reason that job, or maybe even the entire repair order, is voided. If the service department does not make these adjustments before payroll, the tech will be paid, but the time will never be sold. Look at your voided documents or exception report and compare the time paid to technicians for that repair order. This may happen occasionally, but usually a voided RO occurs for ‘no show’ appointments and no time was flagged. This is a worthwhile exercise since these voided transactions could be fraudulent. If a repair is completed and then voided, what happened to the parts and the tech time? Is it possible the customer paid cash, and the advisor removed some work after collecting payment? Is the technician being paid intentionally for ‘phantom’ work, and is some of the pay being kicked back to the advisor? Completed work that is not covered under warranty and will not be paid by the customer should be changed to an internal repair, not simply voided as if it did not happen. This may not be theft of cash; an advisor may be hiding a mistake. • Pay rate changes. I once worked with a dealership that had never reconciled their work-in-process in over twenty years. For that same length of time, pay rate increases were never entered into the service side of the DMS. The service manager assumed that was a function of the accounting department, and accounting thought service would adjust technician rates on their own side. Needless to say, this is my example with the six-figure write-off. We found technicians who were paid over $40 per hour but were still costed out on repairs at their entry-level rate back in 2002 of $9.00! While this is an extreme situation, there could be timing differences between service and payroll’s adjustment reflecting rate increases that would affect your work-in-process reconciliation. Service changes will not be retroactive, so significant differences will build up if the manager forgets about an increase and does not correct it for a few days (or weeks!). Service must enter the

increase on the morning of its effective date. Likewise, setting it up too soon will cause an imbalance as work is costed out at a higher rate than purchased.

• Bonus pay. Service managers usually incorporate some sort of spiff or bonus into the technicians’ weekly payroll. The most common is the ‘bump’ for flagging over 45 hours where a tech may be paid an additional dollar per hour for the week; higher tiers of time earn higher bumps. Any additional pay above the standard pay rate should not be posted to the WIP account. If you are posting all tech pay to the asset account, the general ledger balance will grow much higher than the true work-in-process, as these bonus pays are never ‘sold’ on a repair order. Bonuses should go to cost-of-sale, split between customer pay, warranty, and internal accounts based on the percentage each contributes to overall department sales. Use the statistics on the financial statement to determine how to split that.

• Hourly technicians. Lower-skill level techs usually do not flag as many hours as they spend at work, and it is often a debate about how their pay should be applied. The correct application would be to post pay for flagged hours to work-in-process and unproductive time to your ‘service other’ payroll expense account. Some service departments will argue that these employees should not go to work-in-process at all, but that is not accurate. For example, the oil does not change itself! If there is a labor sale, there more than likely is a cost associated with that work. In the unusual situation where an hourly tech earns overtime and does flag all of those hours, only straight time pay should be posted to the WIP account. For example, a tech earning $15 per hour worked and flagged 42 hours; gross pay will be $645 ((40 * 15) +(2*22.50)); post $630 (42 * 15) to the work-in-process account, and $15 to labor cost of sale since the repair orders do not include overtime in the cost.

• Unapplied time. If you have technicians on a guarantee, their unproductive hours should not be posted to the work-in-process account. It is not being sold on an

RO, it should not be purchased as WIP. Of course, training and paid time off should be expensed accordingly, as well.

• Incorrect payroll reports. Service reports for time flags were incorrectly set in the DMS to not only display the current pay cycle flag time; this report was giving the sum total of all flag time for any repair order that had new flags added in the cycle. A job that a technician flags one hour this week should only show one hour on the weekly payroll report. The parameters for this incorrect report gave the total accumulated time for any repair order worked on in the pay cycle; all technicians were being significantly overpaid. It is possible for weekly flag reports to have incorrect dates, and it is easy to make a typographical error that leads to extra time being paid and posted to the general ledger. In most DMS flag reports, the start and end dates are entered each time the report is generated. Always look at the time period at the top of the report to ensure the hours reported fall within your current pay cycle. Do service managers see what the technicians are paid on each check? Your payroll person may not question big hours being earned, but the service manager should know what looks ‘off.’

I am calling this a reconciliation, but it is not a formal spreadsheet like your bank or floorplan rec. It is more of a check and balance to ensure the general ledger ties in with the true work-in-process. If you notice a difference between the two, run through these suggestions and make sure you are not experiencing any of the problems I have described. If you still cannot find the reason for your discrepancy, scheduling work-in-process will provide the answer. Few dealerships schedule work-in-process. It requires much more work in accounting, as the time flags now have to be posted individually so they will be paired directly with the RO. Accomplish this by posting each tech’s weekly flags as a journal entry, debiting your work-in-process account, and using the repair order number as the control. Each line on the report will be its own line on the journal entry. Then the lump sum total will be posted as a cred-

it, again to the work-in-process account, but now use the technician’s employee number as the control. These can be posted daily, weekly, or even monthly if that is what works best for your team. Just make sure you are posting activity in the month it was performed.

Be sure to set the control as the RO number but allow overrides to ensure that the credits on repair orders will pull for you. When payroll is processed, you will post the technician’s pay for total flagged labor hours as a debit to the work-in-process, using their employee number. The posting of the flag sheets will ‘wash out’ since you are debiting and crediting the same account, and your general ledger balance will remain unaffected until payroll is posted. You will still need to post the accrual at month end, even if the flags have been posted.

Some DMS’s will allow the flag reports to be printed to excel worksheets, making it simple to then drop into a power posting template. However, you may need someone to key them in manually. Depending on the size of your shop and volume of business, this may be too big of a task to undertake. If you have a significant problem that you cannot find the solution for, remember you may only need to schedule the account for a couple of months to find the problem; you can return the account to be unscheduled once you have solved the mystery.

When you have that schedule, the differences will be obvious. We can now clearly see when we have paid $100 in labor on a particular RO, and it was costed out at only $60. There should be no debit balance on the schedule once the repair order is closed, and credits should clear one pay cycle after the RO is posted – no one is working on the car once it has left the dealership, right? Look for patterns that lead to the problem: Is it always the same technician or advisor on the repair? Are there duplicate entries of time being posted? How much per hour is coming from the time flags as opposed to the per hour sold on the RO? When you find a common difference, you will know how to correct it.

Do you have a work-in-process story? Drop me an email at jmoylan@withum.com

Trust LAW ®

There are over 1,500 attorneys in the United State who focus on legal actions against car dealers.

Who reviews your F&I documents for legal or regulatory changes?

What if your dealership had access to a complete suite of documents needed in F&I?

Only the LAW F&I Library™ provides:

A complete set of state-specific F&I documents in both pre-printed and electronic formats.

An industry leading team of in-house and outside legal resources reviewing forms for legally required and best practice updates.

A trained team of compliance consultants who can work with you to manage your compliance risks.

Connelly Decision Impacts Succession Planning

By Tom Vangel, Esq., James Radke, Esq.,William Morgan, Esq., Murtha Cullina LLP

Many auto dealership owners and coowners have proactively engaged in succession planning for their dealerships. There are many techniques involved with implementing succession planning. One frequently used technique involves using life insurance to fund the purchase of a dying dealer’s ownership interest by the remaining dealership co-owners, family members, employees, or a combination thereof.

There are two most-used methods of using life insurance for these kinds of “buy-sell” situations. The first is called a “cross-purchase” arrangement in which each owner buys insurance on the life of his or her shareholders. The second method, known as stockholder redemption, involves the business purchasing life insurance on the lives of its shareholders, so that when an owner dies, the business would receive the insurance proceeds and use those proceeds to buy back the shares or membership interest of the dying shareholder, leaving the remaining owners with the business.

The Supreme Court’s June 6, 2024, holding in Connelly v. United States (144 S. Ct. 1406) requires revisiting dealers’ succession plans based on business-owned life insurance. Before Connelly, many stockholder redemption agreements funded by corporate-owned life insurance were implemented on the assumption that the insurance proceeds received by a corporation upon a shareholder’s death would have no effect on the value of the deceased shareholder’s stock because the corporation’s obligation to redeem the stock on the corporation’s balance sheet would offset the value of the insurance proceeds. Connelly decimates that advantageous tax treatment, which may well result in higher estate taxes and reduced inheritances to the decedent’s loved ones. Fortunately, there is a work-around through the use of cross purchase agreements rather than corporate redemptions.

Case Background

Brothers Michael and Thomas Connelly were the sole shareholders of a construction business, Crown C Supply (“Crown”). To en-

sure the business stayed in the family, Crown purchased insurance on each brother’s life to provide cash to redeem the shares of the first to die. When Michael died, Crown used the life insurance proceeds to redeem his shares, representing 77.18% of Crown, for $3 million. Michael’s estate paid estate tax valuing Michael’s shares at the $3 million redemption price without increasing the value of his shares by a corresponding 77.18% of the insurance proceeds. An outside accounting firm later valued Crown at $3.86 million as of Michael’s death. In doing so, the accounting firm offset the redemption obligation by the $3 million of insurance funding the redemption. The accounting firm relied on Estate of Blount v. Commissioner, 428 F. 3d 1338 (11th Cir. 2005), a case with similar facts to Connelly. Blount held that a corporate redemption obligation offsets the value of the insurance used to pay for the redemption in valuing shares for estate tax purposes.

The IRS disagreed with the estate’s treatment, concluding that the $3 million in life insurance proceeds received by the corporation were not offset by the corporation’s obligation to redeem Michael’s shares, resulting in Crown being worth just under $7 million ($3.86 million plus $3 million in insurance proceeds). The IRS thus calculated Michael’s shares as worth $5.3 million (77.18% of $6.86 million) instead of the $3 million value as filed on the estate tax return, resulting in an additional $889,914 of estate tax. The Executor paid the deficiency and then sued the United States for a refund. The United States District Court ruled in favor of the government, and, on appeal, the Eighth Circuit Court of Appeals affirmed the District Court. The Executor then appealed to the United States Supreme Court.

The Supreme Court sided with the IRS and rejected the estate’s position that the redemption obligation reduced Crown’s value. The Court held that a corporation’s obligation to redeem shares is not necessarily a traditional balance sheet liability that reduces the value of a company’s shares for federal estate tax purposes, because the redemption

obligation does not impact a stockholder’s economic interest in the corporation or how a buyer would view the value of the corporation in an arm’s-length purchase.

Key Takeaways

The IRS effectively taxes the life insurance proceeds as a corporate asset through the deceased shareholder’s estate, even if those proceeds will be used to redeem the decedent’s outstanding shares, which results in no economic change for the estate.

The Court acknowledged its decision “will make succession planning more difficult for closely held corporations.” Also, the Court identified “other options,” such as cross-purchase agreements, that remain available to accomplish the same goals as the company-owned life insurance redemption in Connelly, recognizing those options pose drawbacks of their own.

Structuring a buy-sell agreement for any business has complexity. Connelly introduces additional complexity, and dealers are urged to consult with their advisors when adopting or amending buy-sell agreements.

The Connelly decision highlights the importance of careful coordination with business owners’ business succession and estate planning with the potential need to restructure the ownership and use of life insurance policies. Although there are many complicated tax issues in switching an insurance-funded redemption agreement to an insurance-funded cross-purchase agreement, this change should definitely be considered.

The risk to individuals caught on the wrong side of the Connelly decision will be even greater after 2025, when the federal estate tax exemption is projected to automatically decrease by approximately 50%. This will result in greater estate tax, since the amount passing free of estate tax will be half of today’s $13.61 million, adjusted for inflation.

If you own a closely-held business with at least one other partner or shareholder, please contact your advisors to review your business succession plan and discuss its viability in light of the Connelly decision.

Supply Chain Risk and the Oversight of Service Providers

Nick Reed

OCD Tech

In light of the FTC Safeguards and the rise of high-profile security incidents, the automotive industry is tightening its security programs. However, not all service providers, vendors, and partner organizations may be equally vigilant, potentially making them the weakest link in your supply chain. It is crucial to take precautions when choosing your business partners and determining the level of access they have to your systems and data.

Ensuring that your providers have firm security measures in place will support your business objectives and prevent excessive downtime, data breaches, and other security failures that can jeopardize your bottom line. The FTC Safeguards Rule mandates that businesses take reasonable steps to select and retain service providers capable of safeguarding customer information, conduct periodic risk assessments, and enforce security measures through contracts. This ensures a comprehensive approach to managing supply chain cybersecurity and offers an excellent starting point to refine how you manage your service providers.

The first step to effectively managing service providers is to identify all service providers you work with and assess the level of access they have. Once an inventory is established, determine if they have credentials to your network, integration into key applications, or access to sensitive data. This allows for further classification and risk-based analysis. Service providers rated at a higher risk level should be reviewed more frequently than those with adequate protection and minimal business impact. This allows organizations to focus

resources on providers that present the greatest risk. Examples of high-risk service providers might include those with immature security programs, a history of past breaches, those handling extremely sensitive information, or those with deep integration into your critical systems.

Next, ensure your providers have appropriate privacy and security protections, such as a SOC 2 accreditation or alignment with credible frameworks like NIST’s Cyber Security Framework or ISO/IEC 27001. Evaluate service providers committed to complying with the legal obligations of their clients. A provider dedicated to meeting their customers’ security needs demonstrates a strong commitment to security. Do not hesitate to ask about the security measures of your providers, even if they are already a provider under contract. Simply making the inquiry shows your dedication to security and will influence businesses providing service to do their part.

Closely examine your service provider contracts to ensure they include appropriate protections for your organization. Provisions that give your organization audit rights can aid in the risk assessment process. Additionally, service delivery guarantees can provide indemnity should loss of service disrupt your business. Be sure to look for other specific contract details such as encryption standards, incident response procedures, and data disposal standards.

The final aspect of the Safeguards Rule requirement involves enforcing appropriate security measures through contractual agreements. Rather than viewing this as a demand for security to your providers, consider it an opportunity to establish a mutual understanding. By delivering these contracts, you ensure that the security expectations of your organization are clearly communicated to your service providers, who, in turn, agree to uphold these measures. This process eliminates any ambiguity regarding the responsibilities and expectations for protecting sensitive information.

Do not make exceptions for service providers who are unwilling or not capable of upholding the safeguards you require. Ultimately, your organization is legally responsible for the protection of customer information and choosing providers who can protect this information. If a provider that you inadequately vet or make exceptions for has a data breach, your organization could be found liable.

When considering the risk of your supply chain, visualize a broader system beyond just organizational service providers. Assess the security of both upstream providers (those supplying key information or services to you) and downstream providers (those receiving information or products from you). Understand the impact on your operations if there are issues with either. Take note of key points in the supply chain that are critical to your operations, and, where possible, have contingency plans and alternate processing options available should issues arise.

Diversification is crucial here. Relying solely on one provider can leave the organization vulnerable in the event of a disruption. Maintain relationships with multiple vendors who can supply key parts and materials or provide critical services. While all-in-one solutions or vendors can streamline processes and reduce overhead, the effects of their unavailability are also greatly magnified.

Even with a thorough service provider management process, inherent risks remain present. Supporting requirements, such as an incident response plan and data encryption, add extra layers of protection to help you respond effectively to incidents and securely store your data. Additionally, ensure providers are provisioned with least privilege access, minimizing their access to systems and data to only what is required for them to effectively carry out their duties.

By addressing these key areas, you can enhance the security of your supply chain and ensure that your service providers are not the weak link in your security program.

CDK Global Settles Antitrust Lawsuit Amid Data Breach Backlash

In a Summer marked by significant challenges, CDK Global has agreed to settle a long-standing antitrust lawsuit for $100 million, pending the court’s approval. The settlement comes amid ongoing scrutiny over a recent weeks-long data breach that has diminished the company’s reputation, resulted in a purported ransom payout of $25 million, and led to a class action lawsuit

On August 16, CDK Global agreed to settle the antitrust lawsuit originating from claims made by auto dealerships and automotive software vendors alleging that both CDK and Reynolds and Reynolds charged in excess for dealer management systems (DMS) and related data integration services. The lawsuit also accuses the company of violating antitrust laws by employing unfair business practices to eliminate competition among vendors offering automotive solutions in the data integration services sector.

This case, which has been ongoing for nearly seven years, was filed against both CDK and Reynolds and Reynolds. Reynolds settled their side of the claims back in 2018 for $29.5 million. The assets from the Reynolds settlement have been stored in an escrow account, and, with the court’s endorsement of the CDK settlement, these assets, together with those from the CDK case, will then be allocated to the plaintiffs.

The trial, scheduled to begin in September, would no longer proceed if the settlement were to be accepted by the court. As part of the proposed settlement, neither CDK nor Reynolds’ earlier settlement did not admit any wrongdoing or accept liability for their alleged actions. The lawsuit alleged that CDK violated the Sherman Act as well as multiple state antitrust and consumer protection laws through anticompetitive conduct. The case has been intensive, resulting in significant discovery efforts, including the production of over 1.2 million documents and over a hundred depositions.

The class action includes over 200 software vendors that have purchased data integration services from CDK and Reynolds since 2013. These vendors create applications to meet dealers’ needs and depend on DMS data to provide their services to automotive dealers. Previously both CDK and Reynolds allowed open access to authorized third-parties to access and process dealers’ data. Gradually, the DMS providers restricted access to integrators while offering their own data integration services at increased prices.

According to the judge’s written opinion from 2019, Reynolds and Reynolds and CDK controlled approximately 75% of the DMS market, leading to claims that they had effectively monopolized the entire segment. Also noted in the opinion, switching DMS providers is a difficult operation that takes intense preparation, leaving few alternative options for afflict-

ed dealers. In support of this takeover, horizontal agreements were allegedly made between the two defendants to strengthen each other’s third-party access agreements and to deny access to vendors seeking to integrate their services. This not only limited competition and drove up prices, but also restricted dealers’ access to their own data, which, when processed, could provide valuable insights.

Other alleged dealings include illegally tying products together for purchase. This was done by either requiring the purchase of additional products or, alternatively, excluding other products as a purchasing option. Also cited in the case were exclusive dealings that cut out competitors by locking them into unfair contracts for extended terms.

The plaintiffs in the antitrust suit originally sought damages of $395 million. This antitrust settlement will not impact claims against CDK due to the June 2024 breach.

Implications for the Industry

As the industry continues to evolve, this settlement highlights the importance of ethical business practices and the importance of consumer choice. With regulators and industry members closely scrutinizing the landscape, the outcome of this case may influence future business practices and regulation within the automotive industry. Industry frontrunners would be wise to make decisions regarding competition very cautiously after CDK’s staggering potential payout.

This case serves as a reminder to vendors that they must maintain a fair playing field and that industry leaders are not above the law. An increase in vendors and product offerings is a benefit to dealers. It will give them more choices, increase competition, inspire innovation, and ultimately give them fair prices for the services they require.

This settlement has far-reaching implications for the automotive industry. As vendors increasingly move toward all-in-one products, the exclusion of competition becomes a significant concern. The recent CDK data breach highlights the risks associated with relying entirely on a single system to streamline business needs. In the event of an outage, the consequences can be severely magnified. Auto dealers are advised to consider the redundancy of their key vendors and create contingency plans for outages to mitigate such risks.

The crowning achievement of this case is that the automotive industry demonstrated its ability to unite in pursuit of fair practices. Both dealers and software vendors came together throughout a long-fought battle, ultimately achieving a successful resolution.

New Massachusetts Pay Transparency and Pay Data Reporting Laws

By Jeff Fritz, Esq., and Joshua Nadreau, Esq., Fisher Phillips LLP

Beacon Hill just added another obligation to your plate – employers with more than 25 employees in Massachusetts will soon need to disclose salary range information on job postings and provide certain pay range information to current employees. Thanks to the onerous bill signed in early August by Governor Healey, Massachusetts will become the 11th state to mandate pay transparency by requiring employers to disclose salary ranges. Here’s what Massachusetts Dealerships need to know about the new law that will take effect next year and other pending bills in the legislature.

Pay Data Reporting 101

Under federal law, private employers with at least 100 employees are required to annually file EEO-1 reports with the United States Equal Employment Opportunity Commission. An EEO-1 report provides company demographic data by displaying the number of individuals employed by job category and sex and race or ethnicity. Typically, EEO-1 reports must be submitted and certified no later than March 31, but the data timeframes and submission deadlines have been subject to change since 2018. EEO-1 employers have to file these reports annually.

Under the recently enacted Massachusetts law, EEO-1 reports must be separately submitted to the Commonwealth. Employers have until February 1, 2025, to submit their first round of EEO and pay data. The Massachusetts Executive Office of Labor and Workforce Development will publish the aggregated reports on its website.

Massachusetts Pay Transparency

The biggest change under this new law, whose provisions take effect on July 31, 2025, will require employers with 25 or more employees to include a pay range on all job postings. Likewise, employers must disclose the pay range for a position to existing employees who receive a promotion or a transfer to a new position with differ-

ent responsibilities, and provide pay range information for a particular position to an employee who holds the position or to an applicant upon receipt of any request.

The law defines “pay range” as the annual salary range or hourly wage range that the employer reasonably and in good faith expects to pay for such position at the time of posting or request. Employers are not required to include bonus or commission information in posts.

Employers are also prohibited from retaliating against an employee or applicant who exercises their rights under this law. Fortunately, however, this bill does not create a private right of action and is enforceable only by the Attorney General.

In enforcing the law, the Attorney General’s Office can seek injunctive or declaratory relief and impose fines for non-compliance. A first offense is subject only to a warning, while second violations can result in penalties of up to $500, third violations in penalties up to $1,000, and further violations in penalties between $7,500 and $25,000.

What to Do Now

We recommend you create a wage scale or salary range for all positions and develop a process for consistently publishing information in external job postings, and providing meaningful updates to salary ranges as economic or other conditions dictate. If you operate in more than one state, be sure to assess any pay transparency obligations in other jurisdictions as well. You should also consider conducting a pay equity audit. Working with an attorney on such an audit preserves the attorney-client privilege, which may prevent certain information from being discoverable in litigation.

What’s Next from Beacon Hill?

While August of an election year is a historically sleepy time on Beacon Hill, here are a couple of pending bills to keep an eye on:

• An Act Updating Overtime Protections to Protect the Commonwealth’s Middle Class Workers (H4440): This overhaul of the state overtime statute would eliminate several overtime exemptions, including the garagemen exemption, as well as increase the salary threshold for other exempt employees to $63,000 in 2025, $73,000 in 2026, and $83,000 in 2027. In 2028 the threshold would be tied to inflation and automatically increase every year.

• An Act Preventing a Dystopian Work Environment (H1873): The bill mandates employers to provide transparency in data collection, particularly from automated decision systems (ADS), and imposes strict limitations on how worker data can be used. Employers must notify workers of data collection practices, ensure accuracy, and allow data access and correction. Electronic monitoring and ADS usage are restricted to essential job functions, and any employment-related decisions based on these systems require human oversight and corroboration.

• An Act Clarifying the Process for Paying the Wages of Dismissed Employees (H4443): This bill would create a “right to cure” an alleged wage act violation stemming from an employee’s termination. The employee would have to submit a demand letter. If the employer remedies the alleged violation within 15 days, there would be no liability for treble damages or attorneys’ fees. If there is still a disagreement and the employer can prove to the court it acted in good faith, the court would not be required to award automatic triple damages, even if the employer were found liable. While no one can predict whether either of these bills will become law, they are a good view into how the Legislature is looking at the Commonwealth’s workplaces.

I N C R E A S E E V S A L E S W I T H E V C E R T I F I C A T I O N

PlugStar com connects consumers and certified dealers to drive EV sales Designed to enhance the EV shopping experience, the PlugStar program provides dealers with tools, knowledge, and ongoing support through education, certification and resources. Plug In America, the organization behind PlugStar, represents America's deepest pool of EV drivers and is the national leader in EV consumer education

T R A I N E D sales staff sell 4 x as many EVs as U N T R A I N E D

a l e r s c a n b e c o m e a P l u g S t a r

C e r t i f i e d D e a l e r s h i p

P r i o r i t y d e a l e r o p p o r t u n i t i e s t o p a r t i c i p a t e i n P l u g

I n A m e r i c a ' s r i d e - a n d - d r i v e e v e n t s , w h i c h p r o v i d e

f a c e - t o - f a c e i n t e r a c t i o n s w i t h p o t e n t i a l c u s t o m e r s

P R O V E N T R A I N I N G

Our convenient online training takes about two hours to complete and covers:

E V f u n d a m e n t a l s

E V c h a r g i n g b a s i c s

K e y E V s e l l i n g p

Since the launch of the PlugStar program five years ago, Plug In America has trained thousands of dealer and manufacturer sales staff from almost every major automaker. Each PlugStar program has recorded improvements of up to 80% in EV salesperson confidence while discussing utility rates and programs, government incentives, the availability and costs of charging at home and on the go To learn more, visit PlugInAmerica.org/PlugStar.

Leading High Performers

By Nate Blevins

Ethos Group

Is there truly a talent shortage in the automotive industry today? Why do some dealerships consistently attract top-level talent, while other dealerships have trouble finding even average people to staff their business?

At Ethos Group, through decades of experience, we know there are fundamental differences between high performing organizations and those performing at or below average in the industry. Building a high-performance culture starts with the leaders and the vision they create to attract the right people who can execute their plan at the highest level. Creating a culture that fosters the growth of high performers is a crucial component of taking any organization from simply competing to dominating their market.

High performers have an uncanny ability to generate new business, create income, exceed sales goals, attract new clients, attract new employees, inspire their peers, and thereby help the organization succeed. In the case of high performers, what separates them from their peers is the fact that they are self-motivated and have high levels of personal accountability. What high performers need most from leadership is to remove obstacles that decrease productivity, demotivate them, and when left unchecked, cause them to exit the organization.

If your organization is serious about hiring and retaining the very best, here are five of the most common mistakes you need to avoid.

Unclear Vision and Values

High performers want to be part of something bigger than themselves. They

need to connect with the greater purpose of the organization and want to feel they have a personal connection to the company’s vision and core values. Leadership needs to provide high performers with a compelling vision of “why” they would want to work in the organization and how their work will contribute to the fulfillment of that vision.

Most ambitious employees want to work for leaders and companies that have a strong vision of what they want to achieve and find value in the commitment to making it happen. When high performers fail to reach self-actualization due to a lack of vision, they will look elsewhere.

Promotions Based on Tenure, Not Performance

Promoting an employee because they have “earned the opportunity” based on tenure and not results will kill your organization’s momentum and make the high performers question the leadership’s commitment to excellence. Your best employees will consistently deliver exceptional results, are self-motivated, and by nature, will challenge weak managers.

High performers crave a culture where employees earn rewards, pay, and promotions through measurable performance standards. They want a culture based on merit and will not stick around to work for managers that were promoted because of tenure and not performance.

When an organizational culture rewards longevity and not results, it sends the message that not getting fired is more important than consistently exceeding expectations. High performers will not stick around to work for a manager they don’t feel will add value to their professional and personal growth.

Weak Leadership

High performers do not quit a company; they leave due to poor management. When an organization promotes average people into management positions, they do not magically become great managers. These new managers will lack the same drive and high level of personal accountability that

the high performers have, which means these weak managers will consistently struggle to lead the high performers. Over time, these managers will hire people who are average and will not be able to elevate employees on their team beyond their average skill level. Weak managers will put any organization on the fast track to mediocrity.

Lack

of Recognition

According to a recent case study published in the Harvard Business Review, high performers can deliver as much as 400% more productivity than the average employee. Behavior that gets recognized and rewarded gets repeated, and this is especially important in motivating your high performers. They are intrinsically driven to achieve results, but they want to be recognized and paid for their contributions. If they are not recognized, they will find that recognition with another organization.

No Accountability for Weak Performers

When you ignore poor performance and do not address employees who fail to live up to the performance standards, it will diminish your credibility as a leader. If you are a leader who talks about your vision of being the best in your market and then sit by idly while employees fail to hit your high standards, your employees will rightfully question your commitment. High performers will show up to work on time, follow the process, display a great attitude, and see their contributions as a crucial part of achieving your dealership’s team goals. When they feel your words as a leader are not aligned with your actions, they will look for leadership in another organization that will share their commitment to winning. t

For more information on how Ethos Group can help your dealership develop more leaders in your F&I office, sales management tower, and your sale’s floor, contact Drew Spring by email at dspring@ ethosgroup.com or phone at 617-694-9761.

Patrick Manzi NADA Senior Economist

August 2024 Sees Lower SAAR Despite Strong Sales Volume

New light-vehicle sales in August totaled a SAAR of 15.1 million units, down 1.1% from August 2023’s 15.3 million. The August 2024 sales calendar included Labor Day weekend this year, which led to a raw sales volume totaling 1.42 million units, an increase of 7.6% year over year. Even so, after seasonal adjustment, August 2024’s SAAR was down slightly. Through the first eight months of the year, raw sales volume totaled 10.5 million units, up 2.2% compared with the same period last year.

As in July 2024, only the small-car and CUV segments posted year-over-year market share gains, with the biggest market share declines in the midsize and luxury car segments, which dropped 0.8 and 1.0 percentage points, respectively. Alternative-fuel vehicle sales increased in August. Sales of hybrids, plug-in hybrids (PHEVs) and battery electric vehicles (BEVs) together represented 19% of all new vehicles sold this year. Through the first eight months of 2024 hybrid sales were up 35.3%, PHEV sales rose by 17.8%, and BEV sales grew by 6.8% year over year.

New light-vehicle inventory has increased throughout 2024, and as vehicle inventory has risen so has OEM incentive spending. According to J.D. Power, average incentive spending per unit should total $3,035 in August, an increase of 59.5% from August 2023. J.D. Power expects the average new-vehicle transaction price this August to be $44,039, down 4.1% year over year. Average transaction prices have decreased because of higher OEM incentives and discounts.

For September, we forecast that sales will be down year-overyear because Labor Day holiday weekend results were included in August. But markets do expect that the Fed will announce the first interest rate cut to the federal funds rate in September, which should help consumers with vehicle affordability. The magnitude of the expected rate cut and the timing of subsequent cuts remain difficult to pin down, yet should be a tailwind for both new- and used-vehicle sales.

Let Washington Know: Dealers Do Good

By Cody Lusk President & CEO, American International Auto Dealers Association

It is no secret that auto dealers have a sometimes-mixed reputation among the general American populace. In recent years in particular, dealerships have taken the brunt of consumers’ frustrations with lack of vehicle availability and rising costs. Fair or not, according to Gallup’s 2023 Honesty and Ethics Survey, just eight percent of respondents ranked the honesty and ethics of car salespeople as “very high” or “high.”

The only profession ranked lower? Members of Congress.

For me, this is a head scratcher. I have worked with dealers and dealership employees for the better part of my 30+ year career in Washington, D.C. Through good times and bad, the men and women of this industry have consistently shown themselves to be trustworthy and hard workers. Dealers, at their core, are entrepreneurs, and they are unfailing creative, tenacious risk takers when it comes to growing their businesses. All characteristics that are, supposedly, highly valued in this country.

Not surprisingly, I do not place much value in surveys like this one. In my experience, most people like and trust the dealer from whom they bought their last vehicle very much. Similarly, most people have generally positive feelings about their individual Representative in Congress. It is only when they pull back, and listen to the accepted narrative about that industry, that people fall back on pre-conceived notions of who is “trustworthy.”

The good news is dealers can change that narrative. The facts are all there – we just need to spread the word. Dealers are economic engines for their communities,

creating jobs, paying taxes, and providing crucial services to their neighbors. Dealers do not stop there. They are also charitable engines, giving back wherever they see a need in the communities they know so well.

At AIADA, we recognize that our members, while more than adept at advertising their stores, are often less comfortable trumpeting their own altruism. We are working with dealers to push pass that reluctance and share some of their efforts, not just with local media, but with the lawmakers on Capitol Hill who can be quick to see the worst of our industry. I love seeing your stories roll in and sharing them on our website and in our daily FirstUp newsletter, not because they surprise me at all, but because they remind me of just why this industry is worth preserving. Whether it is a blood drive, a backpack stuffing event, or a golf tournament to raise money for cancer research, dealers are always looking for ways to give back to the country that has given them so much.

When dealers submit their pictures and stories to our Dealer Do Good initiative, they are moving the needle on how the public and the government perceives them. Why does it matter? Because it is much easier for our federal politicians to

unleash the FTC and CFPB on an industry that is not trusted than one that is recognized for its generosity and deep community ties.

Now, more than ever, we need to raise awareness of the good dealers do. If we want the American public, and specifically Washington, D.C., to have a more balanced view of dealers, we must be willing to share our side of the story. To submit your stories to AIADA, email PublicAndIndustryRelations@aiada.org or tag your pictures with #DealersDoGood on social media.

Over the next few months, lawmakers on Capitol Hill will be laser focused on the upcoming election and the messy business of politics. Meanwhile, dealers, as they always are, will be focused on the business of America. You will be selling and fixing vehicles, training and hiring workers, and navigating the red tape that makes running a small business in this country so challenging. Through it all, you will also be watching out for your communities and stepping up when you see a need.

At AIADA we are going to be focused on highlighting your efforts and changing how dealers are viewed. Because you deserve to be seen for what you are: generous and trusted members of your communities.

By Scott Pearson Chairman, American Truck Dealers

Dealers Prepare for Washington Conference

Our advocacy on important issues affecting the trucking industry never ends. In June, ATD member dealers gathered in Washington, D.C., for our annual Congressional Fly-In. This month, we will join our fellow franchised car dealers for NADA’s annual Washington Conference, September 16-18. As a reminder, we continue to work on the following issues:

• Emissions Regulations: The EPA’s de facto heavy-duty truck mandate will lead to significant negative impacts on truck dealers, truck buyers, and the economy;

• FET Repeal: Repeal of the 12% federal excise tax on heavy-duty trucks would promote the transition to a cleaner, greener, and safer truck fleet;

• “Right to Repair”: We oppose the “REPAIR Act” as it is overbroad and would regulate heavy-duty trucks despite having no application to the consumer market; and

• Catalytic Converter Thefts: We support the passage of catalytic converter anti-theft legislation, which would help law enforcement combat these crimes across the country.

Look for our report next month recapping our Conference activities.

Issue Update: CARB Rules Continue to Wreak Havoc on Trucking Industry

Truck dealers in California have experienced a steep drop off in truck sales for 2024 trucks due to the three new CARB regulations that came into effect this year. These rules are leading to severe inventory shortages at truck dealerships throughout the state, reducing 2024 vehicle inventory by 80-90%.

Sales have dropped off exponentially, with the exception of limited legacy product from 2023.

Customers are still surprised when they cannot purchase a diesel truck because of the market restrictions of the Advanced Clean Trucks rule and the CARB Low NOx-Omnibus rule.

These rules require an untenable ratio of clean diesel truck sales to electric truck sales, based on varying OEM credit scenarios. The demand for electric trucks is not materializing, making these ratios impossible to achieve regardless of the massive investment truck dealers have made to sell and service electric trucks. Truck dealers cannot survive in the

current environment without relief from the California Air Resources Board.

On August 14, the EPA held a virtual hearing on the waiver for the Advanced Clean Fleets Rule. Kim Mesfin, ATD Volvo Line Representative with Affinity Truck Center based in Fresno, California, testified on behalf of ATD and shared her concerns with the waiver and other regulations as well. Following is Kim’s testimony.

Testimony by the American Truck Dealers Division of NADA Before the U.S. Environmental Protection Agency

Washington, D.C.

August 14, 2024

My name is Kim Mesfin, President of Affinity Truck Center in California, and I am speaking for the American Truck Dealers or ATD. ATD represents over 3,800 franchised commercial motor vehicle dealers nationwide. ATD’s small business dealer members work with truck owners and operators every day and together we employ more than 239,000 people.

ATD supports policies that reduce greenhouse gas emissions for America’s trucks, and truck dealers are making $1 billion in investments this decade to sell and service ZEVs. But reducing emissions requires more than just imposing new standards. The successful path must accommodate the crucial considerations of the commercial truck industry and our country, which depends on trucks to deliver everything.

When emissions standards are too stringent and rushed, they result in business closures, job losses, and delayed environmental benefits. That is precisely the situation California truck dealers are facing today due to CARB’s technology-forcing emissions standards.

To date, manufacturers do not have a truck with a CARB-compliant engine for sale. Customers are also not purchasing Model Year 2024 engines because, under the rules, dealers can only sell them a diesel truck if they sell them an electric truck first. But customers are reluctant to purchase electric trucks due to cost, lack of charging, and performance challenges. California truck sales are gridlocked by

tru CK C orner

CARB’s aggressive standards. Without significant modifications, some dealers and their customers will start going out of business.

The EPA should have heeded ATD’s advice and required CARB to revise its ACT rule to reflect the minimum lead time and stability periods mandated as a condition for receiving a waiver. The situation will be even more dire if EPA does the same with CARB’s current waiver request.

ATD urges EPA to consider CARB’s ACF waiver request carefully and with skepticism. This is a first-of-its-kind regulation and significant questions regarding the ACF rule are pending in the courts. ATD urges EPA to refrain from acting on CARB’s request until after these legal issues are resolved to avoid being drawn into the litigation, which would only increase existing regulatory uncertainty and be detrimental to the trucking industry.

There are also significant questions regarding whether the ACF rule satisfies the requirements for a waiver. If EPA acts on CARB’s waiver request, I urge EPA to require CARB to revise its ACF rule to reflect the minimum lead time and stability periods mandated in the Clean Air Act.

This requirement ensures new emission standards result in vehicles that lower emissions, and are affordable, dependable, and fuel efficient. Note that the cost difference between an electric Class 8 truck today and a comparable diesel-powered vehicle is nearly $220,000.

Fleet turnover is imperative for real air quality improvements, as the success of new emissions mandates depends on getting new clean vehicles on the road. The process will take time, and nobody is ready for the implementation of ACF.

ACF could conceivably benefit dealers in due course, but we believe CARB’s combined rules move too far too fast. Requiring CARB to comply with the lead time requirements will give the industry, market, and infrastructure time to catch up and better position all parties for compliance. EPA has a unique opportunity to mitigate some of the harm caused by its decision not to follow the lead time requirements on the waiver granted for CARB’s ACT rule.

Thank you for your time.

ATD Show 2025 Registration & Housing Now Open!

Mark your calendars and get ready to head down to the Big Easy! Registration and housing for ATD Show 2025 is officially open. Join us in New Orleans, January 23-25, for an unforgettable experience packed with industry insights, networking opportunities and the legendary NOLA charm.

Whether you are a dealer, manager, OEM representative, or industry affiliate, ATD Show is the place to forge new alliances, strengthen existing partnerships, and engage in thought-provoking discussions that will reshape your business strategies and reinvigorate the truck industry.

New Orleans provides the ideal setting for both the ATD Show and NADA Show. Only ATD Show registrants get access to it all!

Get ready to immerse yourself in the city’s vibrant culture, indulge in world-class cuisine, and experience the legendary Southern hospitality! NADA Fest promises to be an evening filled with the infectious fun and flair for which New Orleans is famous!

ATD Show 2025 will be held at the Hilton New Orleans Riverside. But we have partnered with 45 hotels across three distinct neighborhoods to ensure you find the perfect accommodation for your needs and preferences.

Warehouse/Arts District: Immerse yourself in this sophisticated and trendy neighborhood that boasts award-winning dining and stylish boutiques, as well as museums and art galleries.

Central Business District: This bustling hub offers a vibrant mix of cultural attractions, trendy restaurants and convenient access to other areas.

French Quarter: Experience the iconic charm of New Orleans in its most famous neighborhood. Explore world-famous Bourbon Street and soak up the bohemian atmosphere.

Don’t Miss Out! Register Today! Head over to www.ATDshow. org to secure your spot and book your hotel stay. We cannot wait to see you in New Orleans!

2024 ATD Dealer Attitude Survey Update

ATD is excited to announce the final response rate for the 2024 Dealer Attitude Survey: 59.9%! This year was the third best response rate in the last 10 years and an increase of nearly 7% from last year. We would like to thank all the truck dealers who took the time to participate in the survey, as well as the OEMs for taking action and supporting ATD. The dealers who completed the survey will receive a summary of the results meeting after the presentation occurs this fall.

More News and Updates on ATD’s Social Media Channel

Are you following ATD on social media? If not, follow ATD’s social channels to get more updates, news, see the latest blog posts, and more. Follow ATD on Facebook, Twitter, LinkedIn, and join our ATD NextGen group on LinkedIn.

Class 8 Truck Sales End Nearly a Year of Declines – July Sales Inch Up 1.8% to 21,398 Units

Transport Topics

U.S. Class 8 retail sales ended 11 consecutive months of yearover-year declines with a small uptick in July, according to data from Wards Intelligence.

Truck sales for the month inched up 1.8% to 21,398 units from 21,021 last year. They also increased 18% from 18,134 units reported the previous month. Year-to-date sales are down 14% to 134,920 units from 156,821. The last year-over-year increase was in July 2023.

“A lot of this goes back to the running underlying theme,” ACT Research Vice President Steve Tam said. “The industry has been challenged to produce and deliver units. I think some of those factors, some of the challenges, they were able to get some solutions.”

Tam is encouraged by the sales figures but noted actual demand hasn’t changed much. He views a lot of this demand as still being from carriers trying to stay on their replacement cycle and the still-lingering orders on backlog. The parts shortage has improved over the past couple of years, but there still are some trucks that lack critical components.

“If I look back on last month, the month before, our expectations for retail sales have not changed,” Tam said. “And to me, retail sales is the final arbiter of demand. Production can go up or down for a lot of different reasons, but making the customer happy is, to me, the key measure. And so, our expectations, again, from a demand perspective, are that things really have not changed. It’s just finally the realization of some of that demand that you’re seeing manifest in these numbers.”

Tam also pointed out that these figures would put sales 1.5% below average for July. Because of that, the nominal number gets a small boost when adjusted for seasonal factors. He noted this puts the number above expectations but not enough to change his forecast.

The data showed that only two of the seven major brands saw lower sales from last year. Freightliner, a brand of Daimler Truck North America, received the largest market share with 7,562 trucks, accounting for 35.3% of all sales for the month, but volume declined 0.6% from 7,610 the prior year. Western Star, also a DTNA brand, saw the largest year-over-year percentage increase, with sales up 30% to 885 units from 681.

“The latest sales data demonstrates a movement to market normalization as we continue to navigate through the aftermath of an elevated market,” said David Carson, senior vice president of sales and marketing at DTNA. “As anticipated, sales impacted from mirror supply disruptions are moving through the pipeline. Heavy vocational continues to benefit from the injection of spending from construction segments and replacement of old inventory.”

Mack Trucks sales increased 8.3% to 1,480 units from 1,366 reported during the year-ago period. Volvo Trucks North America sales increased 10% to 2,139 units from 1,944. Mack and VTNA are brands of Volvo Group.

“July’s Class 8 truck sales showed encouraging growth, with a 15.4% increase from June and a slight uptick from last year,” said Jonathan Randall, president of Mack Trucks North America.

“While we’re navigating challenges in the freight market, the vocational sector remains strong, driven by robust construction and manufacturing activity. These mixed conditions showcase our industry’s resilience. We’re optimistic about the heavy-duty truck market’s long-term prospects and remain committed to supporting our customers with innovative solutions.”

Navistar’s International brand decreased 24.6% in sales to 2,290 units from 3,039. Peterbilt Motors Co. sales increased 6.3% to 3,534 units from 3,325, and Kenworth Truck Co. saw sales rise 15.3% to 3,490 from 3,026. Peterbilt and Kenworth are Paccar Inc. brands.

Commercial Truck Trader reported that buyer interest in its truck listings has grown significantly over the past couple of months. The online marketplace for new and used commercial vehicles tracks interest by calculating page views across vehicle categories.

“This gives us accurate insight into demand by category, make, model and condition,” said Charles Bowles, director of OEM and strategic partnerships at Commercial Truck Trader. “We saw a significant rise in buyer interest from June to July for both Class 8 sleepers and day cabs. However, we’re seeing supply substantially outpace demand across all classes of vehicles as inventory continues to build on dealer lots.”

Bowles expects to see some fluctuations in used unit valuations as these trends play out. He also noted interest jumping for new sleepers in recent months was surprising given the relatively low cost of many used units.

ACT Switches Up Forecasts as Inventories Hit New High Trucks, Parts, Service

ACT Research reported last month its medium- and heavy-duty truck forecast for 2025 shifted down sharply, even as 2024 forecasts push higher.

ACT says the biggest driver of Classes 5-7 and Class 8 forecast changes are driven by excessively strong build relative to retail sales that have led to sharp inventory gains. ACT reported the analysis in its most recent North American Commercial Vehicle Outlook.

“The forecast changes are driven by across-the-board stagnant, and in some cases worsening, fundamentals,” says Kenny Vieth, ACT president and senior analyst. “At calculated levels, Classes 5-7 and Class 8 inventories are at record levels. Industry backlogs are increasingly consumed. Private fleets have taken around 6% market share from for-hire carriers since early 2023, leaving the fore-hire market swimming in capacity despite rising freight volumes. For-hire carrier profitability remained at generationally low levels in Q2 2024. And, among other factors, with elections and Fed rate cuts inbound, corporate decision making is likely to be increasingly defensive into the fall season.”

CARB Lacks Sufficient EV Truck Incentives, Frustrated Operators Claim

By Jay Traugott, Clean Trucking

The California Air Resources Board (CARB) is not providing sufficient financial support for trucking operators to update their fleets to zero-emission vehicles per the agency’s own desired mandate, according to industry sources.

CARB’s Advanced Clean Fleets (ACF) regulation has a 2036 deadline requiring manufacturers to sell only zero-emission medium- and heavy-duty trucks in the Golden State. Several other states, including Colorado, Massachusetts, New Jersey, New York, and Washington have fully adopted this mandate.

tru CK C orner

To be implemented, the ACF requires a Clean Air Act waiver from the Environmental Protection Agency (EPA). A public hearing was held earlier this month by the EPA where the waiver’s opponents and proponents were allowed to argue their cases. The trucking industry, which largely opposes the waiver, was outnumbered by those in favor, specifically healthcare professionals, environmental groups, and community leaders.

Trucking’s general argument is that it fully supports a healthy environment but is against this particular mandate because the federal and selected state governments have set unrealistic goals

build scale and lower costs.”

While the industry is making impressive progress with zero-emission semis and the necessary charging infrastructure, small businesses are realizing they can’t afford those products without additional subsidies. Even the current cost of doing business has increased past the point of feasibility for many.

“Right now, California can and should be doing a lot more to support this industry,” Browning continued. “This year, the legislature didn’t put up anything for trucks and truck incentives. The Low Carbon Fuel Standard (LCFS) credit can reduce the cost of running a zero-emission vehicle quite a bit.”

While the industry is making impressive progress With zeroemission semis and the necessary charging infrastructure, small businesses are realizing they can’t afford those products Without additional subsidies.

for the century-old industry to transform itself from fossil fuel dependent to zero tailpipe emissions.

Clean Trucking previously reported on how CARB’s policies “don’t reflect reality,” and not only could it be potentially bad business for a trucking operator to publicly protest the agency’s policies due to retribution concerns, but also that bad politics are involved in decision making. This perceived gap between policy and reality has resulted in a critical problem many operators are now facing: potentially losing their businesses due to a lack of sufficient financial assistance to purchase newly mandated zero-emission semis to replace existing diesels.

“CARB has the most ambitious clean trucking policies in the world. It’s incredible,” said Adam Browning, executive vice president of policy at Forum Mobility, a zero-emission trucking and charging infrastructure provider for drayage in California. “However, achieving success will take an all-government approach to

A few years ago, that credit was around $170. Today, it hovers at about $70. While still readily available, that delta means the average drayage driver is spending over $1,000 a month on previously reimbursable expenses. In other words, complying has become even more expensive than it used to be. The CARB board has scheduled a hearing on November 8 to consider cost-cutting amendments to the LCFS.

The California Public Utilities Commission, meanwhile, has offered to add funds to help lower the costs of installing chargers but there’s a proposal to eliminate that program. Doing so would raise electrification transition costs even more.

“We need a policy and consistent support to ensure we have diesel parity as a way to exit the scene. Nobody is going to make a million-dollar investment [in zero-emission vehicles] and then they’ll operate at a loss. We need a product that can compete with diesel,” Browning emphasized. “No one will make the necessary investments if they can’t make money.”

So how do small fleets survive? “Just figure it out,” is how Matt Schrap, CEO of Harbor Trucking Association, describes California’s current message to independent operators. “Go figure it out with a trucking as a service company (TaaS) [such as WattEV]. Maybe work with a dealer for a 90 percent discount, or even work as a driver for another company that already has ZEVs.” Either way the message is clear: it’s on you to find and get funding.

While CARB does offer incentive programs towards the purchase of electrified commercial trucks, specifically the On-Road

Heavy-Duty Voucher Incentive Program (VIP) and the Hybrid & Zero-Emission Truck & Bus Voucher Incentive Program (HVIP), and the federal government also has the Commercial Clean Vehicle Tax Credit worth up to $40,000, many claim these incentives are insufficient. Some operators, however, remain unaware of the full scope of these incentives, and of what some of the original equipment manufacturers provide in terms of financing and infrastructure setup.

“We’re trying to convince regulators that instead of spending money on PR, they should first help early adopters get these trucks working,” says Bill Aboudi, president of AB Trucking, a Port of Oakland-based drayage operator. “But we’re very supportive of the new [powertrain] technologies.”

Some operators remain hesitant to begin the ZEV transition due to concerns that CARB may change the regulations. There is precedent for this fear, specifically 2008’s California Truck and Bus Regulation which required all heavy-duty diesel truck and bus operators to either retrofit or replace older diesel engines with new engines equipped with particulate matter filters.

“Most of these guys went and bought trucks to have coverage [to meet the new regulation],” Schrap adds. “Then CARB pulled the rug out and essentially changed the rule [to now require operators to buy ZEVs].” Operators who made the required investments to meet those standards are now being asked to so again at an even higher cost and risk.

Operators and regulators, while often at odds, are working towards the same ambitious, complex end. A continual reinvention of an extremely vital industry, that can’t afford to pause as they evolve. Robust credit and incentive programs are key to ensuring that operators are not unfairly burdened as they attempt to evolve in a way that benefits the future. However, as quickly as a program can be put in place to aid compliance, it can be removed when the winds of power blow a different way. Hopefully, regardless of the political climate, those in power will continue to invest in a critical industry.

Scalability for Your Dealership: Increasing Rooftops with Automation

ATD

Sponsored Content from DocuPhase

Imagine your heavy truck dealership thriving: sales are up, customer satisfaction is high, and expansion is on the horizon. But scaling up – opening new rooftops, managing more inventory, and handling increased customer interactions – can be challenging. Automation, however, turns this complexity into opportunity.

The Scalability Challenge: Scaling up is both exciting and challenging. Growth promises more revenue but introduces complexity. Each new location adds operational hurdles, making tasks like invoice processing cumbersome. These processes can be streamlined with automated solutions. Automated workflows standardize approvals, ensuring operations run smoothly and making expansion efficient.

Automation: The Key to Efficient Growth: As your dealer-

ship grows, so does the workload. From inventory management and sales processes to customer service and administrative duties, demands multiply. Automation handles repetitive tasks, allowing your team to focus on high-impact activities.

For example, automated inventory systems track stock levels in real-time, ensuring you’re never caught off guard. Automated tools manage follow-up emails and inquiries, maintaining engagement without constant manual input. By integrating these automated processes with your existing Dealer Management System (DMS), you enhance overall efficiency and customer satisfaction, creating a cohesive and streamlined operation.

Enhancing Dealership Efficiency: Automation isn’t just about faster tasks; it’s about integrating these processes with your existing DMS for maximum efficiency. This ensures that every aspect of your dealership’s operations is synchronized, driving growth and enhancing performance.

Driving Sales and Managing Inventory: Proactive inventory management is another significant advantage. Automated systems predict when stock levels will dip, helping prevent stockouts. Automating parts of the sales process can also boost productivity by 10-15%. Automation allows your dealership to operate with greater precision, ensuring that growth doesn’t come at the cost of efficiency.

Data-Driven Decisions: Automation empowers informed decision-making by leveraging data analytics. Understanding customer behavior and inventory trends becomes easier, enabling timely decisions. Document management systems ensure that necessary documents are accessible and organized, reducing time spent searching and increasing efficiency. When these systems work together seamlessly, your dealership can maintain its edge in a competitive market.

Overcoming Implementation Hurdles: While the benefits of automation are clear, implementing these systems can be challenging. There may be a learning curve as your team adapts. However, by starting small – perhaps with inventory management – and gradually expanding, the transition can be manageable. Involve your team in the process. Provide training and encourage feedback to ensure everyone is on board. When your staff sees how automation improves their tasks, they’re more likely to embrace it.

The Future of your Dealership: As you plan for the future, envision a dealership network where each rooftop operates with efficiency and precision. Automation can make this vision a reality by streamlining processes, reducing manual workloads, and improving customer interactions.

Pathway to Growth: Scaling up your dealership doesn’t have to be overwhelming. With the right automation tools and a committed team, you can expand operations efficiently and confidently. DocuPhase offers tools designed to streamline operations, manage inventory, enhance customer service, and boost sales, making scalability straightforward.

NADA Show 2025 Right Around the Corner

ScoTT dube, paRTneR aT mcgoVeRn

hyundai RT. 93, RepReSenTS nada’S maSSachuSeTTS membeRS on The nada boaRd of diRecToRS he can be Reached aT Sdube@ mcgoVeRnauTo.com.

As Team MSADA prepares to head to our Nation’s capital for our annual NADA Washington Conference, registration is open for our 2025 Show in New Orleans, running January 23-26. Our NADA Show staff are planning a great line-up of speakers, workshops, educations sessions, Super Sessions, a sold-out expo hall, and our Thursday night kick-off night party at the Mississippi Heritage Park and the Sugar Mill. Register today at https://www.nada.org/nada-show-attend so you do not miss out on our 2025 Show.

Don’t Let the Clock Run Out: Register Now for NADA Show 2025

We are counting down to NADA Show 2025!

Do not delay - Hotel rooms are going fast, so be sure to register today. NADA partners with hotels to offer you the best rates. On average, rooms are 31% cheaper than if you booked directly.

You cannot afford to miss out on four days packed with education sessions, an Expo triple the size of the Superdome, main stage speakers and networking opportunities. There’s something for everyone!

Learn at Your Own Pace: Prepare for a multi-faceted learning experience featuring world-class speakers and engaging education sessions, tailor-made by subject track. Choose from 80+ education sessions, where you’ll gain insights into the latest strategies and emerging trends.

Gain Momentum with Main Stage Speakers:

• Ryan Leak, best-selling author and executive coach, Leading By Example: 6 Keys to Success

• John Cena, actor, producer, author, philanthropist and WWE superstar, From the Ring to the Road

• Coach K, head men’s basketball coach, Duke University (1980-2022), Victory Through Teamwork and Leadership Meet With OEMs: Learn the latest updates and chang-

es happening within your franchise, directly from its senior leadership.

Experience Expo: Explore the industry’s premier marketplace of products, services, and technology. Connect with current providers and shop for new suppliers among 500 exhibitors across 800,000 square feet – that’s triple the size of the Superdome!

Network and Reconnect: NADA Show truly is the Auto Industry Event of the Year. And you cannot afford to miss the non-stop networking among fellow dealers and managers, OEM representatives, exhibitors, and industry affiliates.

Thursday night Welcome Party at the Mississippi Heritage Park and the Sugar Mill: Let the good times roll at our fun and festive welcome reception. Part jazz fest, part bayou bash — with all the flair of NOLA — rolled into one unforgettable event! You will not want to miss out! Network with fellow dealers, OEMs, exhibitors, and industry affiliates, as you:

Enjoy a taste of New Orleans, from po’boys and jambalaya to bourbon and beignets!

Experience jazz where jazz was born. Revel in the music of Grammy Award winner Trombone Shorty!

Be entertained by alligator handlers, tarot card readers, and so much more!

See you in New Orleans!

Dealerships Help Prep for Back to School Rush

The school year has officially arrived! Parents and families are gearing up for the 2024-2025 school year, and with it comes the inevitable rush to buy backpacks and fill them with school supplies. Local dealerships are once again rising to the occasion to make sure our students have everything they need to succeed in the classroom.

Whether it is backpacks, notebooks, markers, or pencils, dealers are stepping up to make sure kids in their communities are equipped with everything they need and easing the strain on teachers as they purchase new supplies.

Check out how our dealers are supporting local students and teachers:

• Ancira Auto Group in San Antonio, Texas, helped organize a raffle and donated the grand prize vehicle that helped raise more than $415,000 for school supplies in the state.

• Avondale Toyota provided over 400 backpacks to students at Union Elementary School in Tolleson, Arizona, as part of their 3rd Annual Big Summer Giveback Program.

• Buckhannon Toyota in Buckhannon, West Virginia, partnered with the Kids in Need Foundation to donate over 400

backpacks loaded with supplies for local students.

• CMA Valley Dealerships collected over 1500 school supplies from customers that came into their dealerships and donated them to Riverheads Elementary School in Staunton, Virginia.

• Lost Pines Toyota in Bastrop, Texas, was part of a collaborative effort with other local dealerships that provided 100 backpacks to students in its community.

• Vester Auto Group of Wilson, North Carolina, managed to donate 1000 backpacks filled with school supplies to the Wilson County School System.

Best Employers for High School Graduates –Look to Auto Retail

by caTheRine yoRk Manager NADA Communications

The American Opportunity Index recently published an analysis of the best employers for high school graduates who do not plan to enroll in college. According to their research, about 40% of 2024 high school graduates do not plan to enroll in college this fall. While reasons vary, a recurring theme is financial concerns. This generation of high school graduates are wary of increasing tuition rates and taking on significant debt.

The Index focuses on “the 50 best large companies for those with high school degrees to start their careers… based on an assessment of entry-level workers’ career trajectories over the past five years.” The leaders include Chipotle Mexican Grill, Lowe’s, and Walgreens Boots Alliance.

The American Opportunity Index based their rankings on how well firms hire entry-level workers and how will firms provide opportunities for their workers to advance within and beyond. While this analysis focused on large corporate entities, the same metrics can easily be applied to the many career opportunities in franchised automotive dealerships for high school graduates.

Experience is not required for many automotive retail jobs. And the experience that is valued in many of these roles is not what you’d expect. There are entry-level positions in all dealership departments that include on-the-job training (often including opportunities for higher education at the employer’s expense), full benefits and competitive wages. In the same four years a student spends in college, a dealership employee could move from a product specialist to a high-earning salesperson on the management track. A service technician could have earned multiple certification levels through on-the-job training, increasing their pay and decreasing their hours. And, of course, it does not stop there. At every dealership across the country, 19-year-old cashiers have worked up the ladder. Some of them are now running their own stores and buying more. They will all tell you that the most valuable education for their careers came from their time on the job.

Want proof? Here are just a few stories (check out their stories at www.nada.org):

• Carmen Hinton: from receptionist to service manager

• Glenn Kashima: from parts delivery driver to parts and service director

• Diana Kennedy: from high school runaway to general manager

These stories of growth often exist within the same dealership. There are salespeople who have built relationships with generations of customers and master technicians who have graduated to the role of mentor and trainer – all at the same store.

But there are also many automotive retail careers that involve transitions to new stores – or even new industries – to grow experience and seek new challenges and opportunities. No matter what an employee’s next step may be, a job in automotive retail opens up multiple paths for a successful career.

J.D. Power Cuts EV Sales Forecast in US Bloomberg News

As mainstream car buyers continue to shun electric vehicles, automotive researcher J.D. Power said in late August that battery-powered models will account for just 9% of sales in the US this year, down from its previous forecast of 12.4%. The revised projection comes a week after Ford Motor Co. retrenched its EV strategy, canceling an electric sport-utility vehicle and delaying a new plug-in pickup truck by almost two years. Other automakers, such as Volkswagen AG, have also pushed back production of EVs in response to slowing demand.

“One major driver of the slower-than-expected EV growth rate in the first half of this year has been increased competition in the market for gasoline-powered vehicle alternatives” such as gas-electric hybrids, J.D. Power said in a statement. “The other headwind on EV sales has been ongoing consumer concerns with public charging infrastructure.” These factors have led to EV sales growing “in a less predictable, more volatile fashion,” J.D. Power said.

J.D. Power data shows that EV sales were 7.6% of US vehicle sales last year. The researchers said it sees EVs accounting for 36% of US sales by 2030, well below the target of 50% set by President Joe Biden. Bloomberg New Energy Finance projects that EVs will account for 10% of US vehicle sales this year.

Ford Pulls Back Further From EVs With $1.9 Billion SUV Pivot

Bloomberg News

In late August, Ford Motor Co. announced it is recalibrating its electrification strategy yet again, canceling plans for a fully electric sport utility vehicle in a shift that may cost the carmaker around $1.9 billion. In addition to scrapping an all-electric three-row SUV that already had been delayed,

Ford will further postpone a next-generation electric pickup and reduce spending on EVs to 30% of its annual capital expenditures, from about 40% previously. The automaker also announced it is shaking up battery-sourcing plans, citing the need to better compete with lower-cost Chinese competitors.

The actions amount to further pullback by Chief Executive Officer Jim Farley, who initially accelerated Ford’s shift to EVs when he took over the top job almost four years ago. The automaker incurred significant costs spooling up production as industry sales growth began to taper off, leading Ford to forecast that its EV unit will lose as much as $5.5 billion this year. Farley is now betting Ford can deliver EVs that are priced on par with traditional vehicles, including a battery-powered midsize pickup truck due to debut in 2027, and turn a profit on these models within a year after they launch.

“This is a tremendous pivot for us, and we’re not going to make a tremendous pivot without doing a lot of homework to convince ourselves this is the exact right plan,” Farley, 62, said in an interview. “I’m very confident.”

cial non-cash charge of about $400 million related to writing down the value of manufacturing assets it will no longer use. The Canadian plant where the electric SUV was going to be built is now slated to produce highly profitable, combustion engine-powered pickups. Ford may also incur as much as $1.5 billion in additional expenses, including cash expenditures, in future quarters as special items tied to canceling the electric SUV and shifting powertrain options.

While the SUV will fall by the wayside, Ford is going to produce a new fully electric commercial van in Ohio starting in 2026, followed by two new pickups in 2027. One of those trucks will be a medium-size model based off a platform

foRd haS ReSponded To The eV demand Slowdown by cRanking up ouTpuT of gaS-elecTRic hybRid modelS, which haVe been beTTeR ReceiVed by conSumeRS

Ford shares rose 2% in New York on the announcement. The stock had dropped 12% this year through the market’s close.

Ford has responded to the EV demand slowdown by cranking up output of gas-electric hybrid models, which have been better received by consumers. Farley is particularly high on a type of hybrid called extended-range electric vehicles, or EREVs, that have taken off in China. The vehicles use a small gasoline engine to keep an on-board battery charged while driving, enabling longer driving range.

Ford now is considering extended-range EV technology for its next-generation three-row SUVs, as it looks at offering a range of powertrain options throughout its lineup. But the automaker ultimately determined it couldn’t make money on an all-electric big SUV.

“We loved our three-row crossover, and I was so excited to show everyone the work we did,” Farley said. “But there was just no way it would ever meet our criteria of being profitable.”

As a result of this change of plans, Ford will take a spe-

headed up by the former engineering lead of Tesla Inc.’s best-selling Model Y. The other is a next-generation truck Ford will build in Tennessee about two years later than initially planned.

To improve the financial performance of its EV business, Ford will boost its mix of battery production in the US to qualify for manufacturing tax credits included in the Biden administration’s 2022 Inflation Reduction Act. The carmaker is working with one of its cell suppliers — South Korea’s LG Energy Solution — to shift some of the battery output needed for Mustang Mach-E electric SUVs to Holland, Michigan, from Poland next year.

“An important enabler to achieving that profitability is around the mix of the battery production that’s in the US that’s going to qualify for the advanced manufacturing tax credit,” John Lawler, Ford’s chief financial officer, said in an interview. “That’s going to be a big part of our walk to profitability.”

BlueOval SK — Ford’s joint venture with another South Korean cell manufacturer, SK On — also will start making batteries for the automaker’s current E-Transit vans earlier than planned, beginning in mid-2025. By late next year, BlueOval will produce cells for the commercial van that will be built in Ohio. The automaker has found its commercial customers have been more receptive to EVs.

Ford is on track to start making lower-cost lithium iron phosphate, or LFP, batteries in Michigan beginning in 2026. The automaker expects this to be the first LFP cell plant in the US and for the batteries to qualify for IRA tax credits of up to $7,500 for consumers. Ford pared back the planned capacity for the factory by almost half late last year. Farley said the midsize pickup that will be powered by the LFP battery made in Michigan will be cheaper to own and operate than a traditional internal combustion engine or hybrid model. “It’s a game-changing product from a cost-of-ownership standpoint,” Farley said.

He wouldn’t say when Ford’s EV unit, called Model e, will turn a profit. Those answers may come in the first half of next year, when the company plans to provide an update on its electrification strategy. For now, Farley said Ford’s approach to any proposed new EV is simple: “We don’t approve ’em unless they’re going to be profitable in the first year.”

BMW Trims 2024 Profit Margin on Technical Issues, Weak China Demand Reuters

BMW cut its 2024 profit margin outlook on September 10 due to sluggish demand in its key Chinese market and problems related to a braking system supplied by Continental, sending the carmaker’s shares to a near two-year low. Shares in BMW and Continental were both down around 9% on the news, making them the top decliners on Germany’s benchmark DAX index and also dragging down European auto stocks.

BMW said delivery hold-ups linked to the braking system would have a negative sales effect in the second half of the year, adding more than 1.5 million cars were affected. Around 1.2 million of those vehicles have been already delivered to clients and can be remotely checked for faults via over-the-air software, but the remaining 320,000 vehicles cannot be handed over for now, BMW said. Overall, BMW said it will incur “a high three-digit million amount” in warranty costs in the third quarter as a result.

The German luxury carmaker said it expects its margin on earnings before interest and tax to be between 6% and 7% for 2024, having previously guided for a figure between 8% and 10%.

Deliveries are now expected to fall slightly in 2024, while the group had previously forecast a slight increase.

Continental in a separate statement said that only a “small

proportion” of the braking systems it produces and supplies to BMW would be partially replaced due to an electronic component that it said is possibly impaired. The car supplier said it had set aside provisions in the mid double-digit million-euro range and that it assumes that this amount will cover the warranty.

BMW also flagged ongoing muted demand in China affecting sales in the country, joining the group of automakers facing difficulties in the world’s second-biggest economy, which is also the world’s largest auto market.

“Despite stimulus measures from the government, consumer sentiment remains weak,” BMW said in a statement.

Volvo Cars Abandons Near-Term EV-Only Ambitions

Reuters

Swedish automaker Volvo Cars scrapped its target of going all electric by 2030 on September 4, saying it now expected to still be offering some hybrid models in its lineup at that time. Major automakers have seen slowing demand for EVs partly due to a lack of affordable models and the slow roll-out of charging points, and Volvo Cars is also bracing for the effects of European tariffs on electric cars made in China.

Volvo Cars said in a statement that by 2030 it now aimed for between 90% and 100% of cars sold to be fully electric or plug-in hybrid models, while up to 10% would be socalled mild hybrid models if needed. Volvo Cars sells a mix of electric and hybrid cars and had until now remained steadfast on its plans to only sell fully electric cars by 2030 even as its rivals began scaling back their ambitions.

Many automakers have witnessed growing demand for hybrid cars, prompting a strategic shift across a sector that had initially aimed to phase out hybrids in favor of fully electric vehicles. A slow introduction of charging infrastructure and drivers’ concerns about EVs driving ranges are among the reasons buyers have gravitated towards the often more affordable and convenient hybrids.

Volvo Cars, which is majority-owned by China’s Geely, said it was responding to changing market conditions and customer demands. By 2025, Volvo Cars now expects electrified cars, which includes both full EVs and hybrids, to account for between 50% and 60% of sales volumes. The previous 2025 target was for at least 50% fully electric cars, with the rest hybrids.

“We are resolute in our belief that our future is electric,” CEO Jim Rowan said. “However, it is clear that the transition to electrification will not be linear, and customers and markets are moving at different speeds.”

The company also called out for “stronger and more stable” government policies to support the electrification.