Massachusetts Auto Dealer Magazine August 2022

MSADA, One McKinley Square, Sixth Floor, Boston, MA 02109

M a s s a c h u s e t t s

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FIRST CLASS MAIL US POSTAGE PAID BOSTON, MA PERMIT NO. 216

August 2022 • Vol. 35 No. 8

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

The

Sc ut Returns

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S ta f f D i r e c t o r y Robert O’Koniewski, Esq. Executive Vice President rokoniewski@msada.org Jean Fabrizio Director of Administration jfabrizio@msada.org Peter Brennan, Esq. Staff Attorney pbrennan@msada.org Auto Dealer MAgazine Robert O’Koniewski, Esq. Executive Editor Tom Nash Editorial Coordinator nashtc@gmail.com Subscriptions provided annually to Massachusetts member dealers. All address changes should be submitted to MSADA by e-mail: jfabrizio@msada.org Postmaster: Send address change to: One McKinley Square, Sixth Floor Boston, MA 02109 Auto Dealer is published by the Massachusetts State Automobile Dealers Association, Inc. to provide information about the Bay State auto retail industry and news of MSADA and its membership.

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

Table of Contents

4 5 6 9 10

From the President: Keeping Them Honest ASSOCIATE MEMBERS DIRECTORY THE ROUNDUP: Legislature Needs Extra Time to Complete Work LEGISLATIVE SCORECARD AUTO OUTLOOK

14 Cover Story: The Scout Returns

17 18 20 21 22 24 25 26

TROUBLESHOOTING: Proposed FTC Rule Targets Dealer NEWS From Around the Horn ACCOUNTING: 3 Ways to Prepare Your Dealership for the Electric Vehicle Future LEGAL: EEOC Issues Updated COVID-19 Guidance Practices NADA Market Beat AIADA: Federal Regulators Turn Their Sights on Dealers TRUCK CORNER: Thanking Our Line Reps nada update: Remember the FTC Deadline

Back Cover: $1,800 Inside Front: $1,700 Inside Back: $1,600

Join us on Twitter at @MassAutoDealers www.msada.org

Massachusetts Auto Dealer

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From the President

MSADA

Keeping Them Honest The VW Scout situation is a perfect example of why the franchise system is needed

By Chris Connolly, MSADA President As I write this, the world is waiting to see the final details of Volkswagen’s plan to revive the Scout nameplate. Many are anticipating great vehicles, while dealers are left wondering about much more.

VW dealers have earned their OEM’s trust time and time again over the past decade, if not longer. As reports emerge that the Scout brand may look to evade franchise laws entirely, we need only look at the company’s recent history of deception to understand why dealers are a critical check on their power to ensure consumers are protected.

This is exactly why MSADA has worked tirelessly to explain why our Commonwealth’s franchise dealer laws are so important. When we see a manufacturer like Tesla pull the wool over the eyes of town councils, this is yet another situation that should cast a harsh light on the reality that has been put in play when an OEM starts to make noise about not needing dealers.

Just one example: What is going to happen when Scout vehicles start having the same recall issues any and every manufacturer faces from time to time? Who are their customers going to call when their electric vehicle is making a funny noise or, worse, starts behaving erratically? Especially given the products they are looking to sell, the need for knowledgeable and responsible support which dealers provide will be more important than ever. Yet, bizarrely, they may be looking to ignore 100 years of law and best practices.

Massachusetts’s VW dealers deserve a seat at the table when it comes to their future.

There is much about the industry we cannot change at the moment, but we can control how we act as dealers.

It has been a long road to get to some resolution on the VW emissions scandal, and this recent news about a new brand should have been a joyous moment rather than a question mark.

For now, I want to commit our support to our VW dealers who have offered their customers the service and presence they deserve who may feel undermined by the rollout so far. Your hard work will reap rewards not just for your businesses, but the entire MSADA community, as we continue our fight to ensure all of us have the ability to do the same. t

“Massachusetts’s VW dealers deserve a seat at the table when it comes to their future.”

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Msada Board Barnstable County

Brad Tracy, Tracy Volkswagen

Berkshire County

Brian Bedard, Bedard Brothers Auto Sales

Bristol County

Richard Mastria, Mastria Auto Group

Essex County

William DeLuca III, Woodworth Motors Don Sudbay, Sudbay Motors

Franklin County [Open]

Hampden County

Jeb Balise, Balise Auto Group

Hampshire County

Bryan Burke, Burke Chevrolet

Middlesex County

Chris Connolly, Jr., Herb Connolly Motors Frank Hanenberger, MetroWest Subaru

Norfolk County

Jack Madden, Jr., Jack Madden Ford Charles Tufankjian, Toyota Scion of Braintree

Plymouth County

Christine Alicandro, Marty’s Buick GMC Isuzu

Suffolk County

Robert Boch, Expressway Toyota

Worcester County

Steven Sewell, Westboro Chrysler Dodge Ram Jeep Steve Salvadore, Salvadore Auto

Medium/Heavy-Duty Truck Dealer Director-at-Large [Open]

Immediate Past President [Open]

NADA Director

Scott Dube, McGovern Hyundai Rt.93

Officers

President, Chris Connolly, Jr. Vice President, Steve Sewell Treasurer, Jack Madden, Jr. Clerk, Charles Tufankjian

Associate Members MSADA A ssociate M ember D irectory ACV Auctions Steve Sirko (856) 381-3914 ADESA Jack Neshe (508) 626-7000 Albin, Randall & Bennett Barton D. Haag (207) 772-1981 American Fidelity Assurance Co. Kathleen Weisenbach (402) 523-5945 America’s Auto Auction Boston Jim Lamb (781) 596-8500 Armatus Dealer Uplift Joe Jankowski (410) 391-5701 Auto Auction of New England Steven DeLuca (603) 437-5700 Automotive Search Group Howard Weisberg (508) 620-6300 Bank of America Merrill Lynch Dan Duda and Nancy Price (781) 534-8543 BCI Financial Corp.

Timothy Rourke (203) 439-9400 Bellavia Blatt Leonard Bellavia (516) 873-3000 Bernstein Shur PA Ned Sackman (603) 623-8700 Broadway Equipment Company Fred Bauer (860) 798-5869 Burns & Levinson LLP Paul Marshall Harris (617) 345-3854 Sarah Decatur Judge (617) 345-3211 CDK Global Rob Steele (508) 564-1346 Chase Auto Ken Miller (508) 902-8908 Clifton Larson Allen Rick Parmelee (860) 982-9307 Coastal Outsourced Solutions Andrea Vieira (508) 979-4733 ComplyNet Adam Crowell (614) 634-8843 Construction Management & Builders, Inc. Nicole Mitsakis (781) 246-9400 Cooperative Systems Scott Spatz (860) 250-4965 Cox Automotive Ernest Lattimer (516) 547-2242 CVR John Alviggi (267) 419-3261 Dave Cantin Group Woody Woodward (401) 465-7000 DealerSafeGuardSolutions Doug Fusco (972) 740-8638 DealerShop Ken Grove (248) 444-6283 Brian Fleischman (716) 864-0379 DealerSocket Marco Suarez (877) 340-2677

Downey & Company Paul McGovern (781) 849-3100 DP Sales Distributors Andrew Prussack {631) 842-7549 Eastern Bank David Sawyer (617) 620-3484 Eastern Insurance Group John Berksza (508) 620-3349 EasyCare New England Greg Gomer (617) 967-0303 Enterprise Rent-A-Car Timothy Allard (602) 818-3607 Ethos Group, Inc. Drew Spring (617) 694-9761 F&I Direct Sean Wiita (508) 414-0706 Michelle Salas (508) 599-0081 F & I Resources Jason Bayko (508) 624-4344 Federated Insurance Matt Johnson (606) 923-6350 Fisher Phillips LLP Joe Ambash (617) 532-9320 Jeff Fritz (617) 532-9325 Josh Nadreau (617) 532-9323 Gulf State Financial Services Mike Sims (817) 689-1735 GW Marketing Services Gordon Wisbach (857) 404-0226 Hilb Group James Pietro (508) 791-5566 Huntington National Bank Michael Ham (740) 815-5085 John W. Furrh Associates Inc. Pamela Barr (508) 824-4939 Key Bank Mark Flibotte (617) 385-6232 KPA Abe Cohen (503) 902-6567 LocaliQ Automotive Jay Pelland (508) 626-4334 LoJack by Spireon Kim Carroll and Robin Dukes (800) 557-1449 LotLinx Giovanna Scognemiglio (310) 526-1463 M & T Bank John Federici (508) 699-3576 Management Developers, Inc. Dale Boch (617) 312-2100 McWalter Volunteer Benefits Group Shawn Allen (617) 483-0359 Merchant Advocate, LLC Dan Giordano (973) 897-2778 Mintz Levin Kurt Steinkrauss (617) 542-6000

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Murtha Cullina Thomas Vangel (617) 457-4000 Nancy Phillips Associates, Inc. Nancy Phillips (603) 658-0004 NEAD Insurance Trust Charles Muise (781) 706-6944 Northeast Dealer Services Jim Schaffer (781) 255-6399 O’Connor & Drew, P.C. Kevin Carnes (617) 471-1120 Performance Management Group, Inc. Dale Ducasse (508) 393-1400 Piper Consulting Jim Piper (207) 754-0789 Pro-Vigil Sasha Lam-Plattes (408) 569-2385 Resources Management Group J. Gregory Hoffman (800) 761-4546 Reynolds & Reynolds Austin Ziske (802) 505-0016 Rinn Advisors John Corcoran (617) 480-6693 Robinson Donovan Madden & Barry, P.C. James F. Martin, Esq. (413) 732-2301 Rockland Trust Co. Joseph Herzog (508)-830-3241 Samet & Company John J. Czyzewski (617) 731-1222 Santander Bank Richard Anderson (401) 432-0749 Chris Peck (508) 314-1283 Schlossberg, LLC Michael O’Neil, Esq. (781) 848-5028 Shepherd & Goldstein CPA Ron Masiello (508) 757-3311 Southern Auto Auction Joe Derohanian (860) 292-7500 Sprague Energy Robert Savary (603) 430-7254 The Towne Law Firm P.C. James T. Towne, Jr. (518) 452-1800 TrueCar Pat Watson (803) 360-6094 Truist Andrew Carmer (401) 409-9467 US Bank Vincent Gaglia (716) 649-0581 Wallbox USA, Inc. Sean Ugrin (720) 220-1711 Wells Fargo Dealer Services Josh Tobin (508) 951-8334 Windwalker Herby Duverne (617) 797-9316 Zurich American Insurance Company Steven Megee (774) 210-0092

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The Roundup

Legislature Needs Extra Time to Complete Work

By Robert O’Koniewski, Esq. MSADA Executive Vice President rokoniewski@msada.org Follow us on Twitter • @MassAutoDealers

The legislative machinations as the session clock winds down never get boring, especially during full-on all-nighters.

For Governor Charlie Baker, who is not running for a third term this year, July was his final participation in the end of legislative formal sessions’ mad dash. It was not without controversy, however, as his eleventh-hour invocation of an obscure state tax rebate law sent the Legislature into a full-on tizzy, causing it to drop the ball on passing the important economic development legislation both chambers had supported unanimously.

Our Beacon Hill solons operate within a heavily one-party dominated body with no effective GOP opposition to hold anyone accountable, and, as a result, are wont to do whatever they want – when one writes the rules and controls their use, one can always just suspend the rules.

In a manner that would make any Premier League football observer proud, our legislators used “extra time” to extend the July 31 midnight deadline by almost another half-day by working well into the mid-morning of August 1 in order to complete work on a number of conference committees that had been languishing for the previous week or longer.

By the time the session ended well after 10 a.m. on Monday, August 1, the Legislature, through spasms of activity highlighted by long recesses through Sunday into the morning hours, finally approved and sent to Gov. Baker bills dealing with transportation infrastructure funding, clean energy and climate initiatives, legalized sports gambling, AUGUST 2022

Massachusetts Auto Dealer www.msada.org

mental health treatment reforms, cannabis license approvals, and Judiciary IT improvement with updated gun control law changes.

What did not get done was the conference committee on the $4 billion economic development package that included large spending initiatives out of current tax collection surplus and ARPA funds.

The House and Senate bills also included proposals for permanent tax cut changes to the estate and short-term capital gains taxes as well as tax relief for low- and moderate-income taxpayers. Leading up to the conference committee, these bills were ultimately passed 154-0 in the House and 39-0 in the Senate – obviously legislators were committed to getting this done.

The legislators, however, just could not get past reconciling these tax changes with the potential $2.5-$3 billion in mandatory rebates that Gov. Baker announced will likely flow to taxpayers under Chapter 62F, a 1986 law everyone seemed to have forgotten about, except the governor’s office.

Instead of focusing on the task at hand and dealing with the bills directly in front of them, House and Senate leadership, plus their rank and file, got bogged down by who knew what and when and irrelevant side conversations on affordability. Until the State Auditor certifies in September whether the law will kick in or not, no one knows whether the billions will be refunded to taxpayers. But chasing “what-ifs”, real or perceived, is what the Legislature does best.

House and Senate leaders are now talking about taking up pieces of the economic development bills

MSADA individually during the informal sessions, which will run through the remainder of the year, when bills can get approved only with the unanimous consent of those present. Further, the Legislature could approve rules to deal with the legislation and create an extended formal session just as they did in 2020 due to the Covid emergency. This time a foreign virus is not to blame.

Your association was active on the economic development bills. The House and Senate versions of the bills contained at least five things of interest to franchised dealers: In Senate 3030: • Auto Body Labor Rate Advisory Board: Creates a process to review the labor rate amount at which body shop repairers are reimbursed on insurance-pay work. After initially setting the rate at $55 per hour, the process subsequently would be implemented to adjust the rate based on economic and industry factors.

• EV Sales Incentives Funding: Provides $50 million for the revised Massachusetts Offers Rebates for Electronic Vehicles (MOR-EV) rebates program.

• EV Charging Infrastructure Funding: Provides $50 million to commence charging stations buildout.

In House 5034: • $300 Million UI Trust Fund Balance Reduction: Commits another $300 million to reduce the UI fund deficit additionally and ease the burden on small businesses who are being surcharged to pay off the deficit.

• Auto Loan Classifications: Fixes current requirement for duplicate licensure on auto finance loan companies for certain loan types containing negative equity.

Although the Senate economic development legislation contained specific $50 million amounts for each a revised MOREV rebates program and EV charging infrastructure, all is not necessarily lost for now in the EV realm. The state’s FY 2023 budget, which the governor signed at the end of July, albeit three weeks late due to legislative tardiness, contains $27 million from RGGI monies to support the current

MOR-EV program through June 30, 2023.

The transportation bond bill, as discussed below, has more than ample financial commitments to building out an EV charging network across the Commonwealth.

The House-Senate accords were sent to the governor for his review and signature or veto. He will have ten days upon receipt to act. Gov. Baker will essentially have the ability to veto matters without legislative response since the formal sessions are now completed. The Legislature’s next formal session technically will be the start of the new legislature on January 4, 2023. Informal sessions of the current legislature will run right up to that day.

Here are the key components of the agreements on the Transportation Bond legislation and the Clean Energy and Climate bill that are of interest to our industry: Transportation Infrastructure Bond: • $5,000,000 for the MOR-EV rebates program to establish a truck grant program to support zero-emission vehicle charging and fueling infrastructure projects and the purchase of vehicles; • $225 million combined for various EV acquisition projects and statewide charging infrastructure supported with federal spending programs; • $2.8 billion for Highway Division projects on the interstate and non-interstate federal highway system with unspecified funding for electric vehicle charging infrastructure; • $920 million for local transportation projects, including $13.1 million for local electric vehicle charging programs.

The Clean Energy and Climate Bill contains numerous Green Transportation initiatives, which have not changed in the new amendments sent to the governor on Sunday and first explained in MSADA Bulletin #66 (7/26/22). Sunday’s amendments dealt with non-auto related matters.

Transition to Electric Vehicles: • Mandates new vehicle sales be ZEVs starting in 2035 and bans the sale of any non-zero emission vehicles by December 31, 2035; • Gives the DPU’s division that manages TNCs (Transportation Network Compawww.msada.org

nies, like Uber and Lyft) an emissions reduction role; • Requires DOT to compile a motor vehicle database so municipalities and the public can better plan for vehicle electrification in their neighborhoods; • Instructs MassCEC to develop a guide and website detailing the costs and availability of electric vehicles.

EV Incentives: • Creates an Electric Vehicle Adoption Incentive Trust Fund to be expended by the Division of Energy Resources for funding electric vehicle incentive programs; • Increases by $1,000 (to $3,500) the rebate for qualifying purchases and leases of zero-emission passenger cars and light duty trucks costing $55,000 or less, and offers an additional $1,000 to purchasers who are trading in an internal combustion vehicle; • Adds an additional $1,500 rebate for lowincome customers; • Requires MOR-EV to offer rebates to medium- and heavy-duty zero-emission vehicles; • Defines ZEVs and qualifications for MOR-EV, removing hybrid and plug-in hybrid vehicles from the current program eligibility list; • Creates a new outreach program for underserved and low-income communities, as well as communities with high proportions of high-emission vehicles; • Requires an annual MOR-EV review that includes participation from low- and moderate-income households and organizes data by race and ethnicity. Cost-effectiveness is reviewed every 3 years.

EV Charging: • Amends state law to require the state building and electrical codes to include requirements for EV charging for residential and commercial buildings; • Establishes an intergovernmental coordinating council to implement an EV charging infrastructure deployment plan; • Requires MassDOT, in consultation with the MBTA, to make provision for installing and maintaining EV charging stations for public use on the MassPike, parking lots of at least 5 commuter rail Massachusetts Auto Dealer

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THE ROUNDUP stations, parking lots of at least 5 subway stations, and a parking lot of at least one ferry terminal; • Requires electricity distribution companies to submit off-peak time of use rate proposals for electric vehicle charging stations within 6 months.

Public Transit: • Requires the MBTA and the regional transit authorities to develop plans for and purchasing vehicles for 100% electrification of bus fleet by 2040.

Since the governor initially offered amendments to the Legislature after the clean energy bill was sent to him and before signing it, he can only approve it in whole or veto it. Although he did veto green energy legislation passed at the end of 2020, which was then re-passed in March 2021, there has been no word yet as to what he will do this time around.

Finally, as for the disposition of Chapter 62F, nothing is certain about the excess revenues in question until the state auditor executes her role in the process and certifies that tax rebates are owed to taxpayers.

While legislative leaders have been all over the place on what they want to do about the law, the proposed permanent tax changes in the economic development bill, and other new spending initiatives, legislators really need to see how the existing statutory certification process plays out over the next couple of months before reacting. If certification does not happen, the Legislature would have abdicated their economic development legislative responsibility for naught.

Temp Tags Bill in House In late March, the state Senate gave unanimous approval, on a 39-0 roll call vote, to our temp tags bill. The bill now sits before the House Ways and Means Committee.

With the Legislature focusing on major bills as discussed above as well as those requiring a constitutionally mandated roll call needing a super-majority of approval, your average regular bills receive no attention. We now will have the opportunity to work the House process during the informal sessions through the end of the year to hopefully get this bill over the finish line AUGUST 2022

MSADA

and to the governor’s desk.

As a refresher - The bill would direct the Registrar of Motor Vehicles to design, issue, and regulate the use of temporary license plates, especially to accommodate vehicle sales to out-of-state customers, thereby allowing dealers to avoid continued deliveries across the state line. For decades, temporary registration plates have been authorized under Chapter 90, section 2D, of the Massachusetts General Laws.

However, a string of successive Registrars has refused to issue the plates. Temp tags are used in the vast majority of other states, and delivery of vehicles to out-of-state customers at Massachusetts dealerships will generate additional sales tax revenue for the state.

RTR Decision Delayed – Again On July 1, federal district court judge Douglas Woodlock pushed off for the sixth time the date by which he would issue his decision on the federal litigation challenging the constitutionality of the amendments to the Massachusetts right to repair law passed on the November 2018 ballot.

The litigation, Alliance for Automotive Innovation v. Healey, was filed in mid-November 2018. After the completion of the federal trial in mid-2020, the judge initially set his decision deadline for August 20, 2021. The judge subsequently moved the deadline, in succeeding steps, to September 20, 2021; November 2, 2021; March 7, 2022; April 15, 2022; and now past July 1, 2022.

This time around, the judge did not set a specific date for a decision. If and when a decision is rendered, we will provide the necessary information to our members.

FTC Safeguards Rule Compliance Reminder Since late last year, your MSADA has issued numerous writings, including through this publication, and conducted webinars for our member dealers with several of our associate members regarding the Federal Trade Commission’s final amendments to the Safeguards Rule, with which dealers must comply by December 9, 2022.

That compliance date becomes closer

Massachusetts Auto Dealer www.msada.org

with the passing of each day. Have you started your compliance efforts?

We cannot stress enough that time is of the essence for dealers to begin the process of complying with the Rule’s new requirements in order to have everything in place

by December 9. Many of the changes to the Rule will require significant financial and personnel commitments from dealers who must now implement new information security measures. This certainly is not a case of buying the novel the weekend before the book report is due.

To continue with our education efforts on behalf of our member dealers in this subject matter, join us on Wednesday, August 10, when Doug Fusco, CEO of MSADA associate member Dealer Safeguard Solutions (DSGS), will conduct a complimentary webinar on the tools they have available to assist dealers with their FTC Safeguards Rule compliance. The webinar will run from Noon to 1:00 p.m., with time allotted for Q&A from participants.

Use the registration link in MSADA Bulletin #73 issued on August 2.

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. t

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L EGISLATIVE S CORECARD JULY 2022

BILL#

SPONSOR

SUBJECT

STATUS

S183 S239 H407

Sen Crighton Sen Pacheco Rep Hunt

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

SUPPORT

Joint Committee on Consumer Protection held public hearing on July 19, 2021; placed into study.

H365 H400

Rep Finn Rep Howitt

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

SUPPORT

In the Joint Committee on Consumer Protection held public hearing on January 10, 2022; placed into study.

H336 H361 S234

Rep Chan Rep Finn Sen O’Connor

Creates process to appeal improperly issued Class 1 license.

SUPPORT

Joint Committee on Consumer Protection held public hearing on July 19, 2021; placed into study.

S180 H421

Sen Crighton Rep Lewis

Modernize on-line purchase process.

SUPPORT

Joint Committee on Consumer Protection held public hearing on July 19, 2021; reported favorably, referred to respective SWM and HWM.

H345

Rep Cusack

Clarifies licensure to finance small loan contracts with negative equity.

SUPPORT

Joint Committee on Consumer Protection held public hearing on July 12, 2021; reported favorably; referred to House Ways and Means.

S226

Sen Moore

Amends definition of heavy-duty trucks under RTR law.

SUPPORT

Joint Committee on Consumer Protection held public hearing on July 19, 2021; placed into study.

S245 H470

Sen Velis Rep Walsh

Open safety recalls notifications.

OPPOSE

Joint Committee on Consumer Protection held public hearing on July 19, 2021; H470 reported favoably, referred to HWM.

H423

Rep Linsky

Allows an OEM to open a factoryowned store, without a dealer, if there is no same line-make dealer in the state.

(The so-called “Tesla Exemption.”)

OPPOSE

Joint Committee on Consumer Protection held public hearing on July 19, 2021; placed into study.

H1152 H1178 S711

Rep McMurtry Rep Phillips Sen Moore

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

SUPPORT

Joint Committee on Financial Services held public hearing on September 15, 2021; redraft S2928 reported favorably, referred to SWM; redraft H4868 reported favorably, referred to House BTR.

H1183 S657

Rep Puppolo Sen DiZoglio

Protects dealers from OEMs’ restrictions on selling non-OEM service contracts.

SUPPORT

Joint Committee on Financial Services held public hearing on September 15, 2021; placed into study.

H1070 S719

Rep Driscoll Sen O’Connor

Creates administrative appeal process for vehicle owners to seek diminished value of damaged vehicle returned to vehicle owner.

SUPPORT

Joint Committee on Financial Services held public hearing on September 15, 2021; reported favorably, referred to respective SWM and HWM.

S46 H142

Sen Creem Rep Vargas

Mass. Information Privacy Act

OPPOSE

Joint Committee on Advanced Information Technology held public hearing on October 13, 2021; redraft (S2687) reported favorably, and referred to SWM.

H3477 H3494 S2372

Rep Golden Rep Howitt Sen Rush

Creates statutory process for allowing temp tags for out-of-state sales.

SUPPORT

Joint Committee on Transportation held public hearing on December 13, 2021; H3477 and S2372 reported favorably; referred to House and Senate Ways and Means. SWM reported redraft (S2797) favorably, which Senate approved; referred to HWM.

H3450 S2298

Rep Ehrlich Sen Crighton

Mandates automatic shutoff for keyless start vehicles

OPPOSE

Joint Committee on Transportation held pblic hearing on January 18, 2022; redrafts (H4480, S2638) reported favorably.

H3441

Rep Dooley

Eliminates initial state inspection for new vehicle

SUPPORT

Joint Committee on Transportation held public hearing on January 25, 2022; placed into study.

H2004

Rep Jones

Sleepy’s-related affirmative defense.

SUPPORT

Joint Committee on Labor and Workforce Development held public hearing on November 9, 2021; placed into study.

H3321 H3368 H3888 H4134

Rep Hill Rep Roy Rep Golden Rep Pupollo

Promote sale of EVs.

SUPPORT

Joint Committee on Telecommunications, Utilities, and Energy held public hearing on July 28, 2021, and December 14, 2021; extended to May 2, 2022. Pieces included in S2819, which Senate passed on April 4, 2022.

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AUTO OUTLOOK

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COVER STORY

The

Sc ut Returns

By Tom Nash and Stephanie Power

After nearly a half-century, an iconic nameplate will remerge with a new, electric mission.

Are dealers in the picture?

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MSADA “The lack of information from Wolfsburg has left some VW dealers angry and shocked.”

Automotive News

MSADA

T

he rumblings began in May that Volkswagen would enter the electric off-roader market by reviving the beloved Scout nameplate. As the news was confirmed earlier this Summer, much about the rollout remains hazy, including the role dealers might play.

Initially produced by International Harvester from the 1960s through 1970s, the Scout brand will return as an electric SUV and pickup truck designed for the domestic market beginning in 2026.

VW, a major truck manufacturer all over the world except within the United States, has not shared how it plans to bring the vintage-mod brand to the market. Dealers are left wondering whether the automaker might mimic Tesla and Rivian’s direct-sales model or set up new franchises that would effectively bypass them.

A Storied Past, a Guarded Future The first Scout prototypes are expected to debut next year. VW has not yet confirmed a production location for the new Scout units, though there is speculation that an EV facility could be added to the company’s existing stateside Chattanooga plant. The original Scout models were on the market from 1961–1980.

Built at International Harvest’s plant in Fort Wayne, Indiana, the only similar vehicle on the road at the time was the Jeep “CJ”, aka Citizen Jeep.

“The significance of this is of course that it is really

MSADA the grandfather to the Bronco, the Blazer, in some ways to the modern crossover,” mused car reviewer and journalist Roman Mica about the Scout’s historical significance on the auto news Youtube channel TFLnow. “People think that the Bronco was the first, but really, it was the Scout.”

At one time, the “People’s Wagon”, VW, was the number one import brand in the United States, outselling other foreign makes like Nissan, Honda, and Toyota by a wide margin. In 1970, VW sold 574,000 vehicles, and, by 1993, that number dwindled to 62,000. The Wolfburg company thought about dropping out of the U.S. market entirely. Presently, 40 percent of the company’s sales and 50 percent of profits come from China, while annual sales in the U.S. have recovered to about 350,000 units.

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THE RETURNS RACESCOUT TO THE FINISH Moving the Metal

MSADA “Every week or so seems to bring a new scheme by a manufacturer to by-pass their franchised dealer network,” said MSADA Executive Vice President Robert O’Koniewski. “They seem to have developed amnesia that the franchised dealer system has ensured considerable success for the manufacturers for over a century. More importantly, the system has served consumers well, with price competition and guaranteed reliable service throughout the country. Why the factories want to poke their customers in the eye is beyond me.”

The Wall Street Journal reports that VW hopes to sell 250,000 Scouts yearly, with a starting price of $40,000. Obviously that represents a tremendous amount of new vehicle sales to which dealers

According to Inside EVs, VW Group CFO Arno Antlitz stated that Scout “will be a separate unit and brand within the Volkswagen Group to be managed independently. This aligns with the new group steering model—small units that act agilely and have access to our tech platforms to leverage synergies.”

With purchasing Navistar, the truck company that International “The longer dealers go Harvester shapeshifted into after a CEO tried to cut costs (includwithout information and ing wages to union workers) in the 1970s, resulting in a 172-day strike answers to their questions, and irrecoverable financial loss, the the more that speculation German giant hopes to amp up its once proud stateside presence. will fill the void.”

The lack of information from –Mike Stanton Wolfsburg has left some VW dealNADA President and CEO ers angry and shocked, Automotive News reports. One dealer told the would otherwise be privy. publication, on condition of anonymity, that they felt VW might “We are excited and eager for innovation from our OEM partgo with direct sales for the Scout brand. ners, but not at the expense of safety, our customers, or our liveli“If we were going to have any involvement, they would have hoods,” MSADA President Chris Connolly says. “In Massachutold us something. But they have not said a word to us, either setts, the dealer system is here to protect consumers and has been before or after the announcement.” in place for a century. MSADA’s first priority is ensuring that the On May 13, VW of America sales and marketing boss Andrew dealership model is preserved on all fronts as we continue to play Savvas told the brand’s 650 dealers in a letter that Scout will be a part in the next generation of vehicles.” an independent brand within the group and that they will have no t claim on its products.

The letter did not do much to ease concern among dealers.

Carbuzz ran a late-May headline stating VW dealers are “freaking out,” with a sub-head that reads: “The NADA is gravely concerned that the Scout move is the beginning of the end.”

NADA expressed its concerns in an open letter to VW, encouraging VW Group of America President Scott Keogh to quickly and clearly communicate Scout’s distribution plan to dealers who have “made significant investments to support VW’s business model and transformation to electrification.”

In the letter, NADA President and CEO Mike Stanton added that “the longer your dealers go without information and answers to their questions, the more that speculation will fill the void.”

State-level dealer associations are also chiming in.

AUGUST 2022

Massachusetts Auto Dealer www.msada.org

MSADA

TROUBLESHOOTING

Proposed FTC Rule Targets Dealer Practices

By Peter Brennan, Esq.

FTC Act: (1) To make any misrepresentation in the purchasing, financing or leasing of a vehicle, including the availability of any rebates or discounts; (2) to fail to make clear and conspicuous disclosures about the true “Offering Price” of a vehicle, the price of add-on products and services, and the total amount and number of payments that the consumer will pay; (3) to charge consumers for add-on products that provide no benefit, or to charge the consumer for any add-on product without obtaining a consumer’s express, informed consent for the charge.

As Massachusetts dealers know, many, if not all, of the practices that the FTC seeks to prohibit in the proposed Rule are already considered unfair and deceptive practices under Massachusetts law. For example, dealers already must clearly and conspicuously disclose all included and excluded charges in any advertised price of a vehicle as well as the expiration date of any advertised price, and it is unfair or deceptive to refuse to sell a vehicle for the price advertised. 940 Code Mass. Regs. 5.02(3)-(4), (6), & (8); 940 Code Mass. Regs. 3.02(3). Additionally, it is already considered unfair or deceptive for automobile dealers to make misrepresentations, including misrepresentations about the value of a vehicle by, among other things, posting or advertising inaccurate prices or prices they will not honor.

940 Code Mass. Regs. 3.02(2); 940 Code Mass. Regs. 3.04; 940 Code Mass. Regs.

3.05; 940 Code Mass. Regs. 5.02(9).

The Massachusetts Consumer Protection Law also contains a catch-all disclosure provision, in 940 CMR 3.16(2), which states, “Without limiting the scope of any other rule, regulation or statute, an act or practice is a violation of [the Act] if: … (2) Any person or other legal entity subject to this act fails to disclose to a buyer or prospective buyer any fact, the disclosure of which may have influenced the buyer or prospective buyer not to enter into the transaction;.” According-

MSADA

MSADA Staff Attorney

In late June, the Federal Trade Commission (FTC) issued a proposed Rule, titled the “Motor Vehicle Dealers Trade Regulation Rule”, that seeks to, in the FTC’s summation, eliminate “junk fees and bait-and-switch advertising tactics that can plague consumers throughout the car-buying experience”. In its proposed rulemaking, the FTC seems eager to regulate dealers in ways that the Consumer Protection Financial Bureau (CFPB) is unable to, due to the exemption from CFPB jurisdiction that your MSADA helped to carve out and attain when the Dodd-Frank Act, which created that agency, was passed over a decade ago.

It should come as no surprise that the FTC is moving forward with new regulations now. Alvaro Bedoya was sworn in as an FTC commissioner in May after being confirmed by the Senate in a 51-50 vote. His confirmation gives Democratic appointees a 3-2 majority on the Commission, allowing the FTC to pursue new rules and enforcement actions that are favored by progressives (although in this case the vote was 4-1 in favor of the proposed Rule). New and used auto dealers are always going to be a popular target for regulators, even if there is little justification behind it.

The 126-page proposed Rule is full of hypothetical problems and customer anecdotes that illustrate the type of sales tactics that the FTC wants to prohibit. If enacted, the proposed Rule would define the following as unfair or deceptive acts practices in violation of Section 5 of the

MSADA

MSADA

ly, MSADA has consistently advised our members that the failure to disclose any information that could potentially impact a customer’s decision to enter into a vehicle transaction, including any prior vehicle damage (regardless of dollar amount), or the existence of an open recall, is an unfair and deceptive practice.

The proposed FTC Rule will not supersede Massachusetts law where current laws and regulations are consistent with the Rule. However, as currently drafted, the proposed Rule would create additional paperwork, duplicative disclosure requirements, and banned practices for dealers to comply with. The Rule may be amended before it is finalized; comments are due on the proposed Rule by September 12, 2022. For now, dealers should monitor the progress of the proposal as it makes its way through the rulemaking process, as NADA and other trade groups are sure to comment.

As regulators at all levels have taken an increased interest in automobile dealer practices, dealers should ensure compliance with all state and federal laws and regulations, especially as related to sales and advertising practices. The first step in any advertising campaign should be a careful review of the Massachusetts Motor Vehicle Advertising Regulations at 940 CMR 5.00 and NADA’s “Dealer Guide to Federal Advertising,” followed by a conversation with your legal counsel.

As always, do not hesitate to contact your MSADA with questions on how to comply with the multitude of state and federal laws and regulations that are already in effect. t

www.msada.org

If you have any questions regarding this column, please contact Robert O’Koniewski, MSADA Executive Vice President, at rokoniewski@msada.org or Peter Brennan, MSADA Staff Attorney, at pbrennan@ msada.org or by phone at (617) 451-1051.

Massachusetts Auto Dealer

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NEWS

from Around the Horn

Holyoke

Gary Rome Joins Board of Directors for Hyundai Hope On Wheels Gary Rome, president of Gary Rome Auto Group, was sworn in as a member of the National Board of Directors of Hyundai Hope On Wheels on Wednesday, July 20. Rome, owner of Gary Rome Hyundai in Holyoke, will represent the Eastern Region and their 169 Hyundai dealerships.

Hyundai Hope On Wheels is a 501(c)(3) non-profit organization that is committed to finding a cure for childhood cancer.

Launched in 1998, Hyundai Hope on Wheels provides grants to eligible institutions nationwide that are pursuing critical research

aimed at improving treatments and saving lives. Hyundai Hope On Wheels is one of the largest non-profit funders of pediatric cancer research in the country. Primary funding for Hyundai Hope On Wheels comes from Hyundai Motor America and its more than 820 U.S. dealers. Since its inception, Hyundai Hope On Wheels has pledged $200 million in support of more than 1,000 childhood cancer research grants.

“Hyundai Hope On Wheels is honored to welcome Gary Rome to our board of directors. The leadership and vision that Gary brings will be instrumental in our mission to help young people who are fighting cancer and to fund vital research and support,” said John Guastaferro, Executive Director, Hyundai Hope On Wheels and Genesis Inspiration Foundation.

“I want to make an impact and inspire others. I hope that my AUGUST 2022

Massachusetts Auto Dealer www.msada.org

commitment and involvement in philanthropy and community outreach will be a power of example to others,” said Gary Rome.

“But quite simply, it makes me feel good.”

2022 marks the 24th year of Hyundai’s fight against pediatric cancer. Gary Rome Hyundai has been an active supporter of Hope On Wheels each year, especially during the month of September, which is designated as pediatric cancer awareness month.

HOLYOKE

Western Mass. Dealers Speak on Vehicle Demand Electric cars are starting to gain popularity for their rechargeable batteries during these times when gas prices are higher. 22News spoke to car dealerships across western Massachusetts on how they are keeping up with the high demand for electric cars.

Car dealerships across western Massachusetts are seeing a rise in demand for electric cars despite a supply shortage. President of TommyCar Auto Group Carla Cosenzi said, “We have a lot of ordering at the dealerships so for consumers interested in an electric vehicle; they usually have to preorder it at this point.”

“We are trying to stock a good amount of pre-owned vehicles for those customers that need a vehicle right now, “expressed

MSADA Northampton Volkswagen general sales manager, Joshua Gamache.

Recent buyers that pre-ordered an IONIQ 5 from Gary Rome Hyundai said it took them a while to find one in stock.

First-time electric car buyer from Deerfield, Lee Easton, said, “These vehicles are hard to get, so we are thrilled to get one.”

Consumers said they are being drawn to the charging stations and the amount of money they are saving on gas. “You can charge an electric vehicle at 80 percent with our supercharger in 18 minutes at 34 cents each minute. Costs $7 to basically fill up this car or costs you $100 to fill up your tank at the gas pump,” Gary Rome Hyundai President Gary Rome said.

WALTHAM

Village Automotive Hosts Employee Appreciation Event

• 43 years in business • 400+ transactions • 550+ appraisals

• Dealership Brokerage • Appraisals • Consolidation • Litigation • Consulting

Hire Gordon Wisbach

Village Automotive Group held an Employee Appreciation Night at the Reagle Music Theatre in Waltham in July. Employees from across all of their dealerships, family members,

(

508-395-2500

*

Gordon@gwmarketingservices.com

:

GWMarketingServices.com

Village Automotive HR Director Deb Dempsey photographed with Ray Ciccolo and Kathy McQuade, Sales Administrator for Boston Volvo Cars.

and some long-time customers saw the theatre’s production of the 1957 musical “West Side Story” and celebrated at a reception during intermission with delicious refreshments. t www.msada.org

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ACCOUNTING

MSADA

3 Ways to Prepare Your Dealership for the Electric Vehicle Future Benjamin DeForest O’Connor & Drew, P.C.

Is your dealership ready for the electric vehicle takeover?

Although EVs make up only 1% of the 250 million cars and light-duty trucks on the road in the United States today, the future is looking ever-more electric in the automotive industry. Environmental worries, exploding gas prices, and improving EV infrastructure have consumer interest in electric vehicles on the rise. While customers still have concerns, such as range anxiety, charging speeds, charger infrastructure, and higher vehicle costs, the electric revolution has certainly begun, and dealers need to be ready. Here are three ways to prepare your dealership for the future of electric vehicles: Improve Your Infrastructure Upgrading infrastructure to accommodate EVs is certainly one of the biggest hurdles for dealerships. Some manufacturers have already begun to require certain EV upgrades while others have left it up to the dealerships. Even if not required by the manufacturer now, it is likely a matter of time before these upgrades become mandatory. They will certainly be necessary to compete in the future electric vehicle market. Infrastructure improvements include upgrades to charging stations, separate battery storage facilities, new tools for electric vehicles, and showroom/lot improvements.

Since the most important (as well as the most expensive and time-consuming) upgrades will relate to installation of charging stations, it is important to evaluate your dealership’s electrical power systems in anticipation of the installation.

Most dealerships have a similar electrical setup to a typical household, meaning they AUGUST 2022

are likely strong enough to power Level 1 or Level 2 charging stations, but generally not powerful enough for Level 3 charging stations. Level 3 chargers can cut down the charging time for an electric vehicle to under an hour for a full charge. With existing and future EV customers demanding faster charging times, installing Level 3 charging stations on site could be a differentiator for your dealership.

There is certainly a bit of sticker shock that comes along with the installation of Level 3 charging stations. The equipment and installations for fast-charging stations can cost $200,000+ per store, with additional annual maintenance costs of $2,000 to $3,000. There will likely be heavy involvement with your utility company due to the significant power drawn by the fastcharging stations. Keep in mind that some manufacturers offer subsidies to help offset some of the upgrade costs so this may not be entirely out of pocket. It is wise to perform this legwork now so as to be prepared for the onslaught of electric vehicles that will be arriving over the next decade.

Train Your Team about EVs While EVs are set to explode over the upcoming years, there is still a lack of knowledge and information about them at the dealership level.

Training on unique EV features, technical specifications, tax incentives, and other benefits will be key to overcoming the knowledge gap. The sales staff must understand not only the EV vehicles themselves but the ownership experience in general, including service requirements and charging.

Being able to convey the expertise to customers is critical to building credibility and attaining customer trust to sell a new and unfamiliar product. Although the information about electric vehicles is becoming more available and piquing customer interest, having a knowledgeable sales team that is capable of educating the client on every aspect of the vehicle could make a big difference in the dealership’s future bottom line.

Some dealerships are choosing to have

Massachusetts Auto Dealer www.msada.org

an EV expert on hand to ensure all staff and customer questions regarding EVs are answered quickly and accurately. Questions on different chargers, confusing tax incentives, battery life, and much more can be answered by this expert.

The training on EVs is not limited to the sales team. The service department will also need to be provided with significant training and certifications to be qualified to repair the ever-changing technology in the electric vehicles.

Get Creative With lower sales margins on electric vehicles compared to their ICE counterparts and less maintenance work required, there may be a strain on dealership profits as electric vehicles become more and more popular. Dealerships will likely need to get more creative in how they approach their future business, both on the front and back ends.

Dealers could consider offering a more comprehensive front end sales experience that includes providing installation of the at-home charging stations. Also, dealers can focus on offering more electric vehicle specific F&I products (such as those related directly to the battery) and more tire sales and storage. Finding new profit centers and enhancing existing ones will be vital as dealerships evolve into the electric vehicle era.

Electric vehicles are one of the largest disruptors the automotive industry has ever seen. President Biden’s goal is that, by 2030, half of all new vehicle sales in the United States will be zero-emissions cars.

If rising gas prices and concerns about the environment persist, it may even happen earlier. Will your dealership be ready? As Henry Ford once said, “If you don’t think of the future, you won’t have one.” t Benjamin DeForest, CPA, MBA is an audit manager at O’Connor & Drew, P.C. where he has experience in a wide array of industries including working in the Higher Education, Not-For-Profit, and Automobile Dealerships sectors. He can be reached at bdeforest@ocd.com.

LEGAL

MSADA

EEOC Issues Updated COVID-19 Guidance

By Joseph W. Ambash, Jeffrey A. Fritz, and Joshua D. Nadreau On July 12, 2022, the U.S. Equal Employment Opportunity Commission (EEOC) issued revised guidelines on COVID-19, its first update since March. This article summarizes the focus of the revisions.

Return-to-Work Note from Medical Professional The EEOC’s updated guidance confirms an employer can (but need not) require an employee to produce a note from a health care professional clearing him or her to return to work. Alternatively, an employer simply may follow CDC guidance and allow an employee to return to work so long as he or she has met the isolation or quarantine criteria.

Viral Test Okay Under Certain Circumstances Under the new guidance, an employer may, as a mandatory screening measure, administer a COVID-19 viral test when evaluating an employee’s initial or continued presence in the workplace, but only if the employer can show such test is “job-related” and “consistent with business necessity.” Possible considerations in making this determination include, for example, the level of community transmission, employees’ vaccination status, the accuracy and speed of processing for different types of COVID-19 viral tests, the level of contact with other individuals in the workplace, and the potential impact on operations if the employee enters the workplace. In the event you decide to administer viral tests to employees, you should consult counsel before implementing.

No Antibody Tests The updated guidance also confirms the antibody test remains unreliable in detecting a current infection and, accordingly, an employer may not require an employee to submit to it.

Screening of Applicants After Conditional Offer Under the new guidance, an employer may screen job applicants for COVID-19

symptoms, but only after conditionally offering employment and only if it does so for entering employees for the same job type. Employers may exclude from the workplace those who exhibit symptoms. Of course, if the employer screens everyone entering the worksite (i.e., applicants, employees, customers), it can screen pre-offer applicants, too. That said, employers generally should not screen employees who work remotely or otherwise do not have in-person contact with others as part of their job.

Withdrawing Offer if Positive In the event an employer needs an applicant to start working immediately, but he or she tests positive for COVID-19, the EEOC guidance says, such employer who follows CDC guidance addressing the individual’s situation may withdraw the offer if (1) the job requires an immediate start date, (2) CDC guidance recommends the person not be in proximity to others, and (3) the job requires such proximity to others, whether at the workplace or elsewhere. An employer may not withdraw a job offer (or postpone a start date) out of concern that the individual is older, pregnant, or has an underlying condition that puts him or her at increased risk from COVID-19.

COVID-19 May Justify Interactive Process Delay The Americans with Disabilities Act requires employers and employees to engage in an interactive dialogue to determine whether a reasonable accommodation exists that would permit the employee to perform the essential functions of his or her job. While this interactive process should be prompt and reasonably expeditious, the EEOC’s new guidance confirms the pandemic may result in excusable delay and/ or may result in an otherwise reasonable accommodation no longer being possible.

Personal Protective Equipment An employer still can require employees to wear masks and other personal protecwww.msada.org

tive equipment and/or observe other infection control practices in the workplace. If an employee requests an accommodation due to a medical condition and/or based on his or her religion, the employer should engage in an interactive dialogue with the employee to determine whether a reasonable accommodation exists, or whether any such accommodation would cause an undue hardship on business operations.

Employers faced with these considerations should consult counsel.

Mandatory Vaccination Policy The EEOC has confirmed employers still may require all employees to be fully vaccinated against COVID-19, subject, of course, to reasonable accommodation requirements based on a disability and/or religion. Reasonable accommodations here could include wearing a mask, practicing social distancing, working a modified shift, getting periodic COVID-19 tests, teleworking, or reassignment.

Keep Vaccination Status Confidential The updated guidance confirms employers must maintain the confidentiality of employees’ vaccination status confidential and only share with employees with a legitimate business need to know.

No Limit on Value of Incentives The EEOC continues to hold employers can provide whatever incentive they want (including rewards or penalties that do not violate any other law, obviously) so long as the employer is not administering the vaccine. Employers who go this route should pay careful attention to wage and hour laws as well, to ensure any “reward” is properly considered with respect to overtime regulations, if applicable.

The July 2022 guidance on COVID-19 is not the EEOC’s first and certainly will not be its last. Employers are well-advised to remain informed on their rights and obligations, for the health and safety or their employees, and to minimize the risk of legal exposure. t Massachusetts Auto Dealer

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22

JUNE 2022

Patrick Manzi

NADA Senior Economist

Boyi Xu

Economist

New light-vehicle sales in June 2022 were down year-over-year but up slightly from last month. June 2022’s SAAR of 13 million units was down 16% compared with June 2021 but up 2.3% compared with May 2022. June’s sales brought the second-quarter SAAR to a total of 13.4 million units—a decrease from the first quarter’s 14.1

AUGUST 2022

Massachusetts Auto Dealer www.msada.org

million. Demand is still outpacing supply, and a lack of inventory continues to be the biggest factor limiting sales. According to Wards Intelligence, inventory at the start of June 2022 was down 25% yearover-year and was less than a third of the pre-pandemic level. t

MSADA

MARKET BEAT

www.msada.org

Massachusetts Auto Dealer

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AIADA Brief

MSADA MSADA

Federal Regulators Turn Their Sights on Dealers

By Cody Lusk AIADA President & CEO

Fresh off the success of May’s Washington, D.C., Fly-In, dealers might be tempted to relax and enjoy their Summer. As much as I want to say, “Go ahead – you’ve earned it!,” instead I have to say, “Not so fast.” Congress is back in session, and dealers have a number of threats to track on Capitol Hill.

Important advocacy work still needs to be done on issues like Right to Repair, EV tax incentives, and Federal Trade Commission (FTC) regulations. After months of hearings, most of the current administration’s officials are now appointed and getting comfortable in their new agency positions. Dealers should expect a corresponding onslaught of proposed regulations. The Biden White House and the Democrat-controlled Congress have your businesses in their crosshairs. More than ever, a dealer must be involved in federal policy in order to protect their stores, employees, and customers from government officials who have never sold a car in their lives.

The FTC issue is particularly troublesome because it reveals a world view that categorizes dealers as bad actors who are actively seeking to rip off their customers.

That is not exactly a sustainable business model, but common sense does not always get you far on Capitol Hill. The FTC is alleging that dealers are using bait and switch pricing practices and racking up hundreds of thousands of complaints each year related to vehicle sales, service, rentals, leasing, warranties, and transactions.

AUGUST 2022

The agency is responding by proposing new advertising and finance and insurance rules.

Wondering just how costly these new rules could be? Recently, the National Independent Automobile Dealers Association, representing 38,000 used vehicle dealers in the United States, estimated that the FTC’s proposed new regulations would raise vehicle prices and make the buying process more complex. The NIADA estimated dealers would pay at least $1.4 billion over the next decade complying with the rules, “driving up prices for consumers and making the car-buying process longer and more difficult.”

Unless you like the idea of another layer of government red tape determining how

The Biden White House and the Democrat-controlled Congress have your businesses in their crosshairs.

you run your business, you are going to want to weigh in on this issue. AIADA is working hard to present a more accurate picture of dealers in Washington, D.C. We need your help. I urge you to visit www.Regulations.gov and type “P204800” into the search bar. Click on the first result to leave a comment detailing how your business and employees work to serve (and keep) your customers, and how new regulations will act as an added burden to dealers already being impacted by supply shortages and inflation.

Keep in mind, whatever regulations that the FTC comes up with are not put to a vote of Congress — they will issue their findings and then enforcement will begin

Massachusetts Auto Dealer www.msada.org

soon thereafter.

While leaving a public comment is an excellent way to make your voice heard, you will have an even bigger impact if you meet with your elected representatives in-person to discuss the issue. By arranging a Dealer Visit through AIADA, you will be able to meet with your representative in your dealership and ask them directly to use their constitutional powers to reign in the FTC. A Dealer Visit provides the ideal backdrop to raise these concerns with your lawmakers. When a legislator stands in your store and sees first-hand how your employees operate and the investment you have made in their district, it will be hard for them to accept the FTC’s allegations. AIADA will handle contacting the legislative office, scheduling the meeting, and will even provide you with tips and talking points to ensure that the visit goes smoothly. I truly believe that a Dealer Visit is worth 1,000 written words, and I encourage all of AIADA’s members consider setting one up as soon as possible.

Visit AIADA.org/DealerVisit to get started. And while you are at it, consider submitting a story to AIADA’s Dealers Do Good campaign. Through this effort, we share on our social media feeds and in our publications positive stories of dealers helping their communities. Too often dealers are reluctant to publicly promote their generous donations and activities.

But now more than ever, we need to raise awareness of the good dealers do. If we want Washington, D.C., to have a more balanced views of dealers, we must be willing to share our side of the story. To submit your information, email PublicAndIndustryRelations@aiada.org or tag your pictures with #DealersDoGood on social media.

As always, I look forward to partnering with you to make the dealer’s voice heard on Capitol Hill. t

MSADA

TRUCK CORNER

Thanking Our Line Reps ATD Line Reps work tirelessly to ensure their fellow dealers get a fair shake

By Scott McCandless Chairman, American Truck Dealers Scott McCandless is president of McCandless Truck Center in Aurora, Colorado, and a truck industry veteran with 40 plus years of experience.

I have the privilege of working with some of dealer representatives to their OEMs, and they help the most dedicated men and women at ATD, and present the results of our annual dealer attitude I am proud of the leadership each displays as an surveys to OEM executives and suppliers. In fact, ATD Board of Line Representative. I would like to the 2022 Dealer Attitude Survey of Manufacturers welcome our newest line representative to the team: is now open at www.atdsurvey.org. This survey Scott Pharr, President of Piedmont Truck Center in gauges each OEM and encourages them to have Greensboro, North Carolina. As ATD’s newest Ford constructive and beneficial discussions with their line representative, Scott begins his term immedi- dealers to improve business practices. I encourage ately and serves until the last day of the 2026 ATD all our members to participate so your line representative can directly advocate on your behalf.

Show.

Securing the future of commercial truck dealerWhile NADA directors are elected by geographical region, ATD line representatives serve a three- ships is paramount in everything the ATD board year term and are elected based on the OEMs they does. Our agenda contains critical long-term goals that would not be possible represent. All ATD line reprewithout the dedication and sentatives have the extraordi“Securing the future leadership of our line repnary responsibility of advoresentatives. They serve on cating for their fellow truck of commercial important committees for dealers and fulfilling roles that truck dealerships NADA as the truck dealer are central to ATD’s overall is paramount in voice including legislative mission, including our curaffairs, regulatory affairs, rent strategic planning process everything the ATD and dealership operations which we are kicking off this board does.”

– our line reps are at the month. front lines of our most critThe line representatives actively participate in ATD events throughout the ical battles. They interact with the regulators and year, such as the ATD Show and the annual ATD elected officials who have the power to impact our Legislative Fly-in in Washington, D.C., which we day-to-day operations.

I encourage all ATD members to establish a relaheld in June. Their participation in our Fly-In is key and helps drive our advocacy on important ATD tionship with their respective line representatives. legislative priorities, including garnering support They want your businesses to be successful, and they for S. 2435 and H.R. 8116—bills which aim to re- are here to listen to what matters to you, your cuspeal the 12% FET on most heavy-duty trucks. Si- tomers, and employees. Please get to know them and multaneously, we are working to educate Congress consider all that it takes to step into this critical role.

ATD is currently tackling important issues, such on our concerns for the new NOx rule pending with the EPA and our support for deploying clean trucks. as the transition toward electric trucks and alterATD line representatives are also working to gen- native fuels, EPA’s pending NOx regulation, FET erate support for H.R. 6394, the “Preventing Auto repeal, and much more. Our association is always Recycling Theft (PART) Act,” a bill to curb rising looking for the next generation of leaders and we catalytic converter thefts. Finally, we are voicing welcome all those who have a passion for progress opposition to H.R. 6570, the “REPAIR Act,” which and service to consider running for a seat on our compels truck or auto manufacturers to provide any board in the future.

Please join me in thanking our amazing line rep“aftermarket parts manufacturer” the information necessary “to produce or offer compatible aftermar- resentatives for the work they do for us all! I have no doubt that our collective future is in good hands. ket parts.”

ATD’s line representatives are also the truck t www.msada.org

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NADA Update

By Scott Dube

Remember the FTC Deadline December 9 will arrive more quickly than you think

Scott Dube, Partner at McGovern Hyundai Rt. 93 and MSADA Immediate Past President, represents NADA’s Massachusetts members on the NADA Board of Directors. He can be reached at sdube@ mcgovernauto.com.

As we hopefully enjoy some Summer relaxation, your NADA has been busy working to ensure the playing field remains fair for dealers across the country and in Massachusetts. The most recent issue: The return of Scout.

You will read in this month’s cover story the general update from the headlines about VW’s plans to repurpose the brand. As stated there, NADA remains dedicated to ensuring dealer voices are at the table and that this new venture does not become another front in the erosion of the franchise dealer model that has served the public for more than a century.

Please stay tuned for the latest and for any update on what action may be needed.

NADA Chairman Michael Alford’s Column: FTC Deadline Looms There has never been a more exciting time to be a part of the auto retail industry. For many of us, including myself, the changing day-to-day is what keeps us engaged and interested in coming to work every day. Some of the changes we deal with on a regular basis make our businesses stronger and make our customers happier, but some changes, including those mandated by the federal government, add tenuous requirements to our daily operating procedures and negatively impact our ability to serve our customers.

One such issue that is particularly timely is the Federal Trade Commission (FTC) Safeguards Rule, which was amended in 2021. The Rule mandates a significant number of new and expanded technical and systems’ requirements that financial institutions, including dealers, must implement to meet their information security obligations regardless of an organization or dealership size. The FTC provides insights into the requirements in their guidance publication, FTC Safeguards Rule: What Your Business Needs to Know.

As of December 9, 2022, all dealers must be in compliance with the amended Rule. In response to NADA’s input, the FTC made significant changes and provided clarity to the AUGUST 2022

Rule, but many of the amendments in the final rule require dealerships to adopt significant new information security measures.

While the heat of the Summer makes December feel very far off, dealers should begin to lay the foundation for their compliance strategy. Luckily, www.NADA.org has a number of member resources to get you started, including a set of FAQs, several webinars (including “A Dealer’s Solution for the Revised Safeguards Rule and The Amended FTC Safeguards Rule - Overview and Update”), and a comprehensive and updated Driven Guide, “A Dealer Guide to the FTC Safeguards Rule,” containing extensive templates, exhibits, IT guidance, and more.

These materials can serve as informational resources for you, your legal counsel, and your IT compliance experts as you take steps to ensure compliance by the FTC’s deadline.

Please do not wait to focus on this new Rule. We all have a number of issues we are handling on behalf of our businesses.

This is not a Rule you can comply with overnight, and it takes some time. Get started NOW on this important compliance deadline – it cannot wait!

NADA Responds to Proposed FTC Pricing Rules NADA President and CEO Mike Stanton released the following statement in response to the Federal Trade Commission’s (FTC) proposed rule affecting franchised auto dealers: “The FTC’s proposed rule would impose a vast array of new, completely unwarranted, redundant, and ineffectual requirements that will cause great harm to consumers by increasing prices, extending transaction times, and making the customer experience much more complex and inefficient.

“Unfair and deceptive acts or practices in any part of the vehicle advertising, sales, or financing process are reprehensible and should continue to be policed by federal regulators, including the FTC. But the Commission has failed to support or justify that this proposed rule is warranted in the market.

“It is imperative that regulators conduct proper, thorough, and evidence-based analyses before proposing rules that would have such drastic ramifications on consumers and market participants, especially small businesses. Instead, what the FTC is proposing here would inject massive amounts of inefficiency and complexity into the vehicle sales process at a time when the entire auto industry is united behind an effort to simplify and streamline vehicle sales and pricing policies, shorten transaction times, and improve the customer experience.”

Massachusetts Auto Dealer www.msada.org

MSADA NADA Issues Second Quarter Economic Report NADA has issued its analysis of U.S. auto sales and the economy for the second quarter of 2022.

“As has been the case in recent months and for the last year, new-light vehicle sales continue to be limited by inventory constraints across all OEMs,” said Patrick Manzi, NADA chief economist. “At the end of the second quarter, inventory levels were up by 8.3% compared to the start of the year but remain down 12.3% year-over-year.”

The second quarter of 2022 closed with new-light vehicle sales in June totaling a SAAR of 13.0 million units, a decline of 16% compared to June 2021; however, sales were up by 2.3% compared to May 2022’s SAAR of 12.7 million units.

For the second quarter, new light-vehicle sales averaged a SAAR of 13.4 million units, down 5% from 14.1 million units in the first quarter of 2022.

Alternative-fuel vehicles continued to gain market share with consumers showing increased interest in electrified vehicles, including battery electric, hybrid, and plug-in hybrid vehicles, given increasingly high fuel prices. Through the second quarter, battery electric vehicles (BEVs) accounted for 4.8% of sales, hybrid vehicles accounted for 5.9%, and plug-in hybrid vehicles (PHEV) accounted for 1.4% of sales.

Year to date, franchised dealerships sold more than 106,000 BEVs, 32.5% of all BEVs sold. This number is anticipated to continue rising as more BEVs from traditional auto manufacturers hit dealership showrooms.

In June 2022, the average transaction price for a new light-vehicle was the highest on record at $45,844, an increase of 14.5% compared to June of 2021, according to J.D. Power. Prices have continued to rise as OEMs have prioritized the production of higher trim level, more expensive models while simultaneously reducing incentive spending.

According to J.D. Power, average incentive spending per new vehicle was $930 at the end of June 2022, a decrease of 59.4% year-over-year and the second consecutive month below $1,000.

Monthly payments, in line with transaction prices, have also increased and reached $698 in June 2022, an increase of $79 or 12.8% versus June 2021, J.D. Power says. According to Edmunds, 12.7% of consumers who financed a new vehicle in June 2022 had a monthly payment of $1,000 or more, the highest on record and up from 7.3% in June 2021.

“With fewer new cars available, many consumers have turned to the used vehicle market, and that increased demand has helped sustain these high used vehicle prices that we’ve seen over the past year,” added Manzi. “Used vehicles’ values have fallen from recent highs, but not by much, and in recent weeks we have seen an uptick in values at auctions for smaller, more fuel-efficient vehicles given the high gas prices we’re seeing nationwide.”

At the macro level, inflation continues to impact the U.S. economy with prices surging for many consumer essentials such as food, energy, and housing.

“Despite solid wage and jobs growth, many Americans feel that this inflationary environment is leading to reductions in their standard of living, which is reflected in recent consumer confidence surveys,” noted Manzi.

The University of Michigan’s Index of Consumer Sentiment recorded its lowest level on record at the end of June 2022. A recent report from Moody’s Analytics estimates that the average American household is spending an extra $460 each month because of inflation.

In an effort to rein in inflation, the Federal Reserve in-

“While the heat of the Summer makes December feel very far off, dealers should begin to lay the foundation for their compliance strategy.”

creased interest rates twice during the second quarter of 2022, bringing the target range of the Fed Funds Rate to 1.5% to 1.75%. Given such persistent and high inflation, we expect that the Fed will increase rates by 75 basis points at their July meeting and that the Fed Funds Rate at the end of 2022 will be in the range of 3% to 3.25%. Following the increases in the Fed Funds Rate, the average interest rate on a new vehicle finance contract reached 5% in June 2022, the highest since the start of the pandemic.

“We should see average interest rates for new- and used-vehicle finance contracts at or above their pre-pandemic levels by the end of the Summer when factoring in the Fed’s trajectory on interest rates,” said Manzi. “As rates climb higher, interest rates will shift from a tailwind for vehicle affordability to a headwind.”

Given the persistent production disruptions during the first half of the year and the resulting diminished sales performance, NADA has reduced its 2022 new light-vehicle sales forecast to 14.2 million units, down from our initial estimate of 15.4 million units at the start of the year.

“Despite this forecast reduction, we expect that 2022 will be another very solid year for America’s franchised dealers,” added Manzi. t

www.msada.org

Massachusetts Auto Dealer

AUGUST 2022

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