Massachusetts Auto Dealer Magazine December 2018

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

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

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

December 2018 • Vol. 30 No. 12

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

2018

IN REVIEW

Ma s s a c h u s e t t s

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

Ad Directory Bellavia Blatt, P.C., 25 BlumShapiro, 21 Boston Herald, 32 Ethis Group, 2 Lynnway Auto Auction, 23 O’Connor & Drew, P.C., 31 Southern Auto Auction, 22

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

Table of Contents

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From the President: Looking Ahead to 2019 ASSOCIATE MEMBERS DIRECTORY THE ROUNDUP: A Fine Man Hangs Up the Gloves Legislative Scorecard TROUBLESHOOTNG: EVs and AVs to Dominate Policy Conversation in 2019 LEGAL: Important Dates for Massachusetts Employers in 2019 AUTO OUTLOOK

16 Cover Story: The Year in Review

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NEWS From Around the Horn nada Market Beat TRUCK CORNER: A Year’s Worth of Hard Work at ATD nada update: Our 2019 Crystal Ball

ADVERTISING RATES Inquire for multiple-insertion discounts or full Media Kit. E-mail jfabrizio@msada.org Back Cover: $1,800 Quarter Page: $450 Inside Front: $1,700 Half Page: $700 Inside Back: $1,600 Full Page: $1,400

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

Massachusetts Auto Dealer

DECEMBER 2018

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From the President

MSADA

Looking Ahead to 2019 As our challenges grow, so does our resolve

By Chris Connolly, MSADA President With 2018 now in the record books, it is time for us to reflect on the challenges and successes of the past year and look ahead to where our industry is heading.

MSADA is here to protect the interests of our member dealers on a small scale and at an industry-wide level. Among the many things I have learned during my tenure as MSADA President so far, I have seen that we are a dedicated bunch. We have a hard-working Board of Directors who put in countless hours working to advocate for the dealer community, and they are always looking for what more can be done.

The same goes for our MSADA office, where Executive Vice President Robert O’Koniewski is always looking for new ways to provide service to our members.

Do not be discouraged by the headlines. We are not “Do not be going to let a few elected officials derail sound policy developed by the many. We are going to continue working discouraged together to make sure the voice of small businesses does by the not get lost in the rhetoric that comes so easily to some of headlines. our representatives. As you will see from the Year in Review featured in this month’s magazine, our Association We are not had a fantastic year. going to let As always, as we work for you, we continue to rely on a few elected your help as well. Hopefully, when you see the stakes we are fighting against, you will think about how you officials can contribute to our efforts in the next year. I am always derail sound willing to help a dealer figure out what makes sense for policy him or her should there be any questions.

I would be more than happy to speak with you at our developed by MSADA New England International Auto Show Charity the many.” Gala and Dealer Summit in just a few weeks. Please see Bob’s column on page 6 for more details on the events that day. I look forward to seeing you there on January 18!

I hope you all have been spending these holidays with those who are most important to you. They are, after all, why we do what we do every day. While the ups and downs of our industry may certainly cause some stress, and even change the course of our lives, we should always remember that we got into this business because we love our communities and our families more than enough to weather any storm.

After all, with the risks involved also come the wonderful rewards of putting people in these beautiful machines every day.

On behalf of the MSADA family, I’d like to wish you all a Happy New Year. t

DECEMBER 2018

Massachusetts Auto Dealer www.msada.org

Msada Board Barnstable County

Brad Tracy, Tracy Volkswagen

Berkshire County

Brian Bedard, Bedard Brothers Auto Sales

Bristol County

Richard Mastria, Mastria Auto Group

Essex County

William DeLuca III, Woodworth Motors Don Sudbay, Sudbay Motors

Franklin County

Jay Dillon, Dillon Chevrolet

Hampden County

Jeb Balise, Balise Auto Group

Hampshire County

Bryan Burke, Burke Chevrolet

Middlesex County

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

Norfolk County

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

Plymouth County

Christine Alicandro, Marty’s Buick GMC Isuzu

Suffolk County

Robert Boch, Expressway Toyota

Worcester County

Steven Sewell, Westboro Mitsubishi Steve Salvadore, Salvadore Auto

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

Immediate Past President [Open]

NADA Director

Scott Dube, Bill Dube Hyundai

Officers

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

Associate Members MSADA A ssociate M ember D irectory ACV Auctions Will Morris (860) 670-7867 ADESA Jack Neshe (508) 626-7000 Albin, Randall & Bennett Barton D. Haag (207) 772-1981 American Fidelity Assurance Co. Dan Clements (616) 450-1871 American Tire Distributors Pamela LaFleur (774) 307-0707 Armatus Dealer Uplift Joe Jankowski (410) 391-5701 AutoAlert Jessica Gates (816) 506-0515 Auto Auction of New England Steven DeLuca (603) 437-5700 Auto/Mate Dealership Systems Troy Potter (877) 340-2677 Automotive Search Group Howard Weisberg (508) 620-6300 Bank of America Merrill Lynch Dan Duda and Nancy Price (781) 534-8543 Bellavia Blatt, PC Leonard A. Bellavia, Esq (516) 873-3000 Bernstein Shur PA Ned Sackman (603) 623-8700 Blum Shapiro John D. Spatcher (860) 561-4000 BMO Harris Bank Steve Gagnon (813) 447-1723 Boston Globe Anthony Merullo (617) 929-2337 Boston Magazine Leah Palone/Dave Garland (617) 275-2021 Broadway Equipment Company Fred Bauer (860) 798-5869 Burns & Levinson LLP Paul Marshall Harris (617) 345-3854 C-4 Analytics LLC Rob Stoesser (617) 250-8888 Capital Automotive Real Estate Services Daniel Garces (703) 394-1313 CDK Global Chris Wong (847) 407-3187 Construction Management & Builders, Inc. Nicole Mitsakis (781) 246-9400 Cox Automotive Ernest Lattimer (516) 547-2242 CVR John Alviggi (267) 419-3261 Dealer Creative Mike Otis (315) 382-3675 Dealerdocx Brad Bass (978) 766-9000 Dealermine Inc. Jane Webb (800) 304-3341 DealerSocket Shelly Del Rosario (949) 900-0300

Downey & Company Paul McGovern (781) 849-3100 Eastern Bank David Sawyer (617) 897-1125 Eastern Insurance Group William Gross (508) 620-3349 EasyCare New England Greg Gomer (617) 967-0303 Ethos Group, Inc. Drew Spring (617) 694-9761 F & I Resources Jason Bayko (508) 624-4344 Federated Insurance Matt Johnson (606) 923-6350 First Citizens Federal Credit Union Joe Ender (508) 979-4728 Fisher Phillips LLP John Donovan (404) 240-4236 Joe Ambash (617) 532-9320 Gatehouse Auto Jay Pelland (508) 626-4334 Gulf State Financial Services Tom Foster (832) 628-1916 GW Marketing Services Gordon Wisbach (857) 404-0226 Hireology Kevin Baumgart (773) 220-6035 Hub International Insurance Brokerage Jim Walsh (603) 494-9016 Huntington National Bank John J. Marchand (781) 326-0823 JM&A Group Jose Ruiz (617) 259-0527 John W. Furrh Associates Inc. Kristin Perkins (508) 824-4939 JP Morgan Chase Bank Alex Khademi (404) 375-4504 Key Bank Mark Flibotte (617) 385-6232 KPA Tim Whelan (303) 802-3019 Leader Auto Resources, Inc. Curt Murray (978) 201-4797 Lynnway Auto Auction Jim Lamb (781) 596-8500 M & T Bank John Federici (508) 699-3576 Management Developers, Inc. Dale Boch (617) 312-2100 McWalter Volunteer Benefits Group Shawn Allen (617) 483-0359 Micorp Dealer Services Robert Calhoun 617-285-4833 Mid-State Insurance Agency James Pietro (508) 791-5566 Mintz Levin Kurt Steinkrauss (617) 542-6000 Murtha Cullina Thomas Vangel (617) 457-4000

www.msada.org

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. Mark Puccio (508) 393-1400 PreOwned Auto Logistics Anthony Parente (877) 542-1955 R.L. Tennant Insurance Agency, Inc. Walter F. Tennant (617) 969-1300 Reflex Lighting Daryl Swanson (617) 269-4510 Resources Management Group J. Gregory Hoffman (800) 761-4546 Reynolds & Reynolds Mike O’Connor (860) 462-7958 Robinson Donovan Madden & Barry, P.C. James F. Martin, Esq. (413) 732-2301 Samet & Company John J. Czyzewski (617) 731-1222 Santander Bank Richard Anderson (401) 432-0749 Chris Peck (508) 314-1283 Schlossberg & Associates, LLC Michael O’Neil, Esq. (781) 848-5028 Sentry Insurance Company Eric Stiles (715) 346-7096 Shepherd & Goldstein CPA Ron Masiello (508) 757-3311 Southern Auto Auction Joe Derohanian (860) 292-7500 Sprague Energy Robert Savary (603) 430-7254 SunPower Christie McCarthy (408) 457-2357 Kristin Hodges (707) 694-7759 SunTrust Bank Michael Walsh (617) 345-6567 Target Dealer Services Andrew Boli (508) 564-5050 TD Auto Finance Marc Gerhart (781) 697-1525 TrueCar Pat Watson (803) 360-6094 US Bank Vincent Gaglia (716) 649-0581 Wells Fargo Dealer Services Deb Hogan (508) 951-8334 Windwalker Group Herby Duverne (617) 797-9316 Zurich American Insurance Company Steven Megee (774) 210-0092

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The Roundup

A Fine Man Hangs Up the Gloves

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

For almost forty years, Jim Hurrell represented this association as our outside contract lobbyist on Beacon Hill and in Washington, D.C. After four decades of helping franchised auto dealers in their legislative fights for pro-dealer laws as well as defeating anti-dealer proposals, Jim decided this year to retire from the legislative arena.

Jim always represented our dealer association with integrity, a deep passion for our industry, and a commitment to fight for the best interests of our member dealers and their customers. Initially serving as a Senate page, he then earned distinction as one of the youngest members to be elected to the Massachusetts House of Representatives as a Democrat from the Town of North Andover – at a time before each legislator had his or her own office, a telephone, or an aide. Upon retirement from the House Jim got into the lobbying gig and picked up several clients, including MSADA. In the process he became a well-known and respected fixture in the halls and offices of the state capital. The rest, as they say, is history.

We all have learned quite a bit from Jim over the years – immeasurable knowledge that is invaluable and not found in the proverbial “text books.” During that time, he has been instrumental in working with our members and their legislators toward innumerable successes over the decades, ensuring that franchised dealers never suffered any take ways while garnering many statutory victories.

With his retirement, we express our deepest gratitude for his commitment to and efforts on our members’ behalf, as well as wish him the best of luck DECEMBER 2018

Massachusetts Auto Dealer www.msada.org

hanging out with his wife Nancy, their children and grandchildren. Jim, thank you and good luck.

MSADA Officers Re-Elected At the December 6 meeting of the MSADA Board of Directors, the directors re-elected the following association officers for two-year terms: President Chris Connolly, Herb Connolly Acura; Vice President Charles Tufankjian, Toyota of Braintree; Treasurer Jack Madden, Jack Madden Ford; and Clerk Steve Sewell, Westborough Mitsubishi. Congratulations to our officers, and good luck over the next two years.

Berkshire County Dealers Legislative Meeting On Friday, December 7, we held our annual luncheon meeting of Berkshire County member dealers along with their legislators to discuss on-going issues and concerns with the automotive industry, especially the current auto tech employment situation, which dominated our discussions. Also attending the luncheon were representatives from McCann Technical High School, located in North Adams.

We as an association are trying to encourage our member dealers to get more involved with the high schools in their areas that provide certified automotive technical training. More involvement with local tech schools can lead to a solid foundation for identifying students who could later become your future tech employees. The current tech work force is not getting any younger, and dealers across the nation struggle to maintain a tech work force that

MSADA is well-trained and committed to the franchised industry.

As a follow-up to our outreach in Berkshire County, on December 19 Taconic High School in Pittsfield hosted a group of our Pittsfield area dealers for a tour and discussion of the new school’s training facilities, especially the newly constructed and expanded auto mechanic facilities in the school.

These schools are trying to encourage local students to grasp the opportunities that are available for meaningful employment in their home county in the Berkshires. As industries have shut down throughout the area, the county is suffering a drop in population, especially among their younger citizens. Dealerships offer today’s youth a great opportunity for rewarding work and are willing to work with schools to identify and train those worthy of future employment.

If you wish to get more involved with these activities in your own area, please contact me at rokoniewski@msada.org.

Inspection Station Licensing One issue that has been a continual struggle with the state Registry of Motor Vehicles has been that of the availability of licenses for auto inspection facilities at new car dealerships. This problem has become extremely acute as a number of new dealerships have been built and opened over the decade since the end of the last recession.

For almost twenty-five years the RMV has operated the inspection program with some phantom, self-imposed cap on the number of licenses it will issue to dealerships, auto repair facilities, and other auto-related shops to conduct the annual vehicle inspections. With the advent of the latest inspection contract with Applus that commenced in October 2017, there is a provision in the contract that will allow for at least 200 new licenses to be issued to qualifying applicants. The RMV has yet to create a process to handle such requests.

In the meantime, two things have been occurring. For the past three legislative

sessions we have been advocating for legislation that would allow a franchised dealer who has expended a specific amount of money to construct a new dealership or rehab an existing store to apply for and obtain, upon request, a license to conduct vehicle inspections. This session, the Senate quickly passed a bill (Senate 2261) earlier this year and sent it on to the House. As we were going to press, the House passed the legislation (House 5007) with a non-controversial amendment that will require Senate concurrence before the two chambers enact the bill and send it to the governor. We are working diligently to make sure the bill gets through the legislative process, which will end at midnight on Tuesday, January 1, New Year’s Day. (The next Legislature will be sworn in on Wednesday, January 2, 2019).

Secondly, we are discussing with the RMV the creation of a process for taking new applications for license requests, as allowed for under the current contract. I know of at least a score of dealerships who are in need of such a license. If you would like to pursue such a vehicle inspection license, please forward me your information so we can get it in front of the RMV. The RMV has been quite intransigent on this subject matter for time immemorial. With the allowance of a process in the current contract for new licensees, we will continue to advocate zealously for geting more dealerships licensed.

2019 Auto Show, Dealer Summit & Charity Gala Circle the dates – MSADA’s 62nd edition of the New England International Auto Show will run January 17-21, 2019, at the Boston Convention and Exposition Center in South Boston.

In order to celebrate our Auto Show, dealers, their families, and key employees are invited to attend on Friday, January 18, our Twenty-Second Annual Auto Show Charity Gala at the BCEC, from 5:00 p.m. to 10:00 p.m. The Gala benefits our Charitable Foundation’s Automotive Technician Scholarship Program. www.msada.org

Prior to the Charity Gala we will conduct the Dealer Summit at the BCEC from Noon to 5:00 p.m., at which we will have several speakers discuss on-going events in our industry.

Please contact Jean Fabrizio in our office (jfabrizio@msada.org; 617-451-1051) to register for our events.

State Makes Changes to MOREV Rebate Program – Effective Jan. 1, 2019 The Baker Administration recently announced changes to the MOR-EV program that offers rebates on zero-emission vehicles: • Starting on January 1, 2019, the program will provide a $1,500 rebate to eligible battery electric vehicles (BEVs) or fuel cell electric vehicles (FCEVs) with a purchase price below $50,000.

• Plug-in hybrid electric vehicles (PHEVs) will no longer be eligible for any rebate, as the focus of the program shifts to fully electric vehicles – BEVs and FCEVs. • The rebate application process will stay the same. Rebate eligibility is based on the purchase price of the vehicle.

• Current rebate levels and qualifications will continue through December 31, 2018, and consumers must submit a complete MOR-EV rebate application within three months of the vehicle purchase.

Since the rebate program’s inception in 2014, the state has issued 11,300 rebates, totaling approximately $23 million, to Massachusetts consumers who purchased or leased plug-in or other electric vehicles.

Recently, increased consumer use of the program put its long-term financial sustainability in question.

There will be no change to the administration of the rebate program – consumers are still required to apply directly to the state to receive the rebate.

The MOR-EV website (www.mor-ev. org) has posted the changes to the program and will issue a new list of eligible vehicles. MOR-EV staff is available by email at mor-ev@energycenter.org and by phone at (866) 900-4223 to answer any questions.

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The Roundup New MSADA 2018 Wage-Hour Guide Available The new MSADA Wage-Hour Guide is now available, updated to include various 2018 statutory and regulatory changes as well as new laws to look out for in 2019.

Since 2004 your Association has published a guide to assist franchised dealers in answering questions regarding overtime requirements, hiring practices, compliance procedures, and other wage-hour issues.

The November 2018 Guide addresses recent law changes, including the state Pregnant Workers Fairness Act, the state Pay Equity Act, and the “Grand Bargain” law addressing minimum wage hikes, premium pay, and paid family and medical leave.

We are sending each member dealer principal a complimentary hard copy. The Guide is available in a downloadable PDF file on the MSADA web site, www.msada.org, for free with your member log-in.

Contact Jean Fabrizio at jfabrizio@msada. org to order the Guide.

New Inspection Rules for TNCs’ Vehicles (Uber, Lyft) Take Effect Jan. 1, 2019 Starting January 1, 2019, inspection stations and inspectors will be able to provide a new type of inspection required for vehicles used by drivers for Transportation Network Companies (TNCs), such as Uber and Lyft. Called the “TNC inspection”, it may be performed by all currently licensed non-commercial inspectors and public inspection stations. The TNC inspection fee is $15, which the inspection station shall retain entirely.

TNC vehicles are required to obtain this new TNC inspection at the vehicle’s next annual inspection, or within 12 months of obtaining a transportation driver certificate. The TNC inspection is expected to be done at the same time as the regular annual inspection, because the vehicle must have passed its annual inspection and have an attached certificate of inspection (540 CMR 4.04) prior to the TNC inspection.

Before beginning the TNC Inspection, the inspector needs to verify that the vehicle has a valid state Certificate of RegisDECEMBER 2018

MSADA

tration; verify that the vehicle has a current passing state inspection sticker (if registered in MA) and the vehicle has properly affixed registration plate(s) and decal; and collect the $15.00 fee for the TNC inspection. Importantly, the entire $15 TNC inspection fee is retained by the station.

The TNC safety inspection includes the brakes and suspension systems that are listed in 540 CMR 4.04 for regular annual inspections, as well as the interior items listed below: • The vehicle’s heating, defrosting, and air conditioning systems are in “good working order”; • All interior lights are operational and illuminate the interior of the vehicle; • There are no holes, tears, sharp edges, or springs or wires protruding in seats and interior panels; • The open door warning devices are in proper operating condition for all doors; • The vehicle’s interior rear-view mirror is securely affixed; • Both of the operator and passenger sun visors are in place; • The door and window handles, locks, and interior panels are in good working order; • There are no loose items on the front dash or rear shelf; • The seats, including the areas beneath them, and the rear floor area are free from debris; • The vehicle’s trunk is clean and free of debris; and • The vehicle’s doors and windows operate as designed.

Please be on the lookout for more information, including training videos from Applus Technologies, regarding the new TNC inspection rules.

31 of the subsequent calendar year that the business has filed a Form 8300 regarding the cash transaction with the customer.

(If a letter was sent to the customer at the time of the transaction and the filing of the Form 8300, a second letter is not required.)

Neither the code nor the regulations mandate a specific format for the customer letter; the regulations, however, do require the following minimum requirements in the letter: • The name and address of the dealership and a contact person there submitting the Form 8300; • The aggregate amount of reportable cash, received by the dealership filing the Form 8300 during the calendar year, in all related cash transactions; • A statement that the information contained in the letter is being reported to the IRS. As an alternative to filing the paper Form 8300, businesses may file electronically the Form 8300 using FinCEN’s Bank Secrecy Act (BSA) Electronic Filing System. E-filing can be done at no charge, and it is a quick and secure way for individuals to file their Form 8300s. Filers receive an electronic acknowledgement of each submission. To receive more information, visit the BSA E-Filing System at http://bsaefiling.fincen.treas.gov/main.html.

Additional information regarding the Form 8300 requirements is available at these IRS links: • http://www.irs.gov/Businesses/SmallBusinesses-&-Self-Employed/Reportof-Cash-Payments-Over-10000-Received-in-a-Trade-or-Business-MotorVehicle-Dealership-QAs • http://www.irs.gov/pub/irs-pdf/f8300. pdf

IRS Form 8300 IRS Reporting

by January 31

Reminder: On January 1, 2019, the Massachusetts minimum wage increases to $12 per hour, and the Sunday/holiday premium pay multiplier decreases to 1.4 times the employee’s regular rate of pay (from the current 1.5).

The IRS requires any person who receives more than $10,000 in cash in a single transaction or a series of related transactions while conducting his or her trade to file a Form 8300 with the agency.

Under the IRS rules, a business must notify its customers, in writing, by January

Massachusetts Auto Dealer www.msada.org

Here’s Wishing You a Successful and Healthy New Year! t

Troubleshooting

www.msada.org

Massachusetts Auto Dealer

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Troubleshooting

MSADA

EVs and AVs to Dominate Policy Conversation in 2019

By Peter Brennan, Esq. MSADA

Staff Attorney While you were busy wrapping gifts and gearing up for the end-of-year madness, officials in the Commonwealth were making moves that seemingly assured that any policy conversation regarding automobiles in 2019 is likely to focus on new(er) technologies, such as electrification and automation. What this portends for our Massachusetts franchised dealers is hard to predict, but understanding what the people who make the laws and regulations think of these technologies will be more important than ever in the new year.

Much like the general population, lawmakers at the state and federal level remain conflicted on automated vehicles.

Some think that the technology will revolutionize transit and require the redesign of cities and roads, while others envision a more limited application with human drivers required in all but a few select circumstances. Thus far, both the state and federal legislatures have taken a “wait-and-see” approach to regulating the autonomous vehicle industry. In late 2018, it looked as though a federal compromise had been reached on AV legislation before the bill fell apart and hope for passage during the current legislative session was abandoned.

It remains to be seen how Democrats, who will assume control of the U.S. House of Representatives in 2019, will address and prioritize AV regulation.

In Massachusetts, the Autonomous Vehicles Working Group, which was created by the legislature and directed to issue a report on AV issues in the state, released a draft DECEMBER 2018

of its final report in late November. Despite being 112 pages long, the Draft AV Report is scant on substantive policy recommendations. Essentially, the draft report recommends that: (1) MassDOT appoint a permanent committee to deal with connected and autonomous vehicle issues and (2) the legislative and executive branches should figure out the complicated issues, such as those regarding insurance and liability, and pass laws and regulations as required based on the findings.

Not to be outdone, the Commission on the Future of Transportation issued a report in early December that was so comprehensive it needed two separate volumes and weighed in at 237 pages. The Commission was created through executive order and directed to advise the Baker administration on the state’s future transportation needs and challenges over the next twenty years.

One problem the commission attempted to tackle was how to meet the greenhouse gas emissions reductions called for under the state’s Global Warming Solutions Act. Under the 2008 law, the state must reduce its emissions to 25 percent below its 1990 levels by 2020, and 80 percent below 1990 levels by 2050. Of the eighteen recommendations made by the commission, most notable is a goal that all new cars, light duty trucks, and buses sold in Massachusetts be electric, or use another technology to meet the same emissions standards, by 2040. The commission also recommended updates to the electrical grid, a long-term plan for AVs, and infrastructure to support electric vehicles.

Of course, the recommendations made by the commission are just that, recommendations, and carry no weight of law or regulation. However, the report is sure to give progressive legislators another arrow in their quivers as they ramp up the competition with their compatriots in New York and California to prove that the Commonwealth is the greenest of them all.

In a related move, the Baker administra-

Massachusetts Auto Dealer www.msada.org

tion recently announced that Massachusetts was joining together with eight states (Connecticut, Delaware, Maryland, New Jersey, Pennsylvania, Rhode Island, Vermont, and Virginia) and the District of Columbia in an agreement to work together over the next year to develop the framework for a regional program to address greenhouse gas emissions in the transportation sector. In a statement announcing the pact, the Governor singled out the transportation sector as the largest contributor to carbon emissions in the state. One idea the group will examine is a carbon pricing mechanism designed to cap emissions and invest revenue back into the states. While such a program could, in theory, provide a permanent funding source for something like the MOR-EV rebate program, the devil will most certainly be in the details. Speaking of which…

In a policy change that will have an immediate impact on dealers in 2019, the state recently announced a major change to the popular MOR-EV rebate program for zero emission vehicles. Starting on January 1, 2019, the program will provide only a $1,500 rebate to eligible battery electric vehicles (BEVs) or fuel cell electric vehicles (FCEVs) with a purchase price below $50,000. Plug-in hybrid electric vehicles (PHEVs) will no longer be eligible for any rebate, despite, or perhaps because of, the popularity of hybrid vehicles amongst consumers in the state.

A wise man once said that it is tough to make predictions, especially about the future. However, if MGM Springfield would allow a wager on it, I would bet that the transportation policy focus remains on AVs and EVs in Massachusetts in 2019 and beyond. t If you have a question on this or any other legal topic, please contact Robert O’Koniewski, MSADA Executive Vice President, rokoniewski@msada.org or Peter Brennan, MSADA Staff Attorney, pbrennan@msada.org or by phone at (617) 451-1051.

MSADA

Legal

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By Joseph W. Ambash and Jeffrey A. Fritz

Important Dates for Massachusetts Employers in 2019 A hundred years ago, on January 15, 1919, two million gallons of molasses flooded Boston’s North End when a storage tank burst, killing 21 people and injuring many. We assume molasses storage technology has advanced significantly since then, and, accordingly, Massachusetts employers can safely assume they face no real exposure on that front in 2019.

That said, here’s a list of things about which Massachusetts employers need to know in the coming year.

Minimum Wage Increase The Massachusetts minimum wage has increased as part of the “Grand Bargain,” effective January 1, 2019, to $12 per hour.

(Note: It will continue to increase January 1st of each subsequent year, reaching $15 per hour effective January 1, 2023.)

In ensuring compliance, it is not sufficient simply to ensure your hourly employees are paid at least $12 per hour. Employers also must review their pay practices for their other employees (i.e., salaried, piece rate) as well, to ensure their “regular rates of pay” equal or exceed minimum wage. And for 100% commission-paid employees, Massachusetts employers need to ensure their weekly commissions (whether in the form of weekly draws or not) are sufficient to cover the new minimum wage and any overtime that would be due on top.

Sunday/Holiday Premium Pay Decrease The only part of the “Grand Bargain” one reasonably could characterize as a “bargain” for employers is the gradual phase-out of the Massachusetts Blue Laws’ Sunday/holiday premium pay requirement. Effective January 1, 2019, such premium pay need only be paid out at the rate of 1.4 times an employee’s “regular rate of pay” (as opposed to 1.5 times, which it has been for some time). (Note: This rate will continue to decrease by 0.1 on January 1 of each subsequent year, un-

til it is completely phased-out effective January 1, 2023.)

Keep in mind: This reduction does not impact any overtime premium pay that may be due, which is separate and apart from the Sunday/holiday premium pay requirement, and which still must be paid out at 1.5 times an eligible employee’s “regular rate of pay.” For example, if an eligible employee earning $12 per hour works 45 hours in a workweek, and works 8 of those hours on a Sunday or holiday, effective January 1, 2019, she would be paid (1) 1.5 times her “regular rate of pay” for the 5 hours of overtime, (2) 1.4 times her “regular rate of pay” for the 3 hours of Sunday/holiday pay that is not also subject to the overtime premium pay requirement, and (3) her regular rate of pay for all other hours worked. Her compensation that week, therefore, would amount to $584.40 ($12/hour X 45 hours) + ($4.80/hour X 3 hours) + ($6/hour X 5 hours). Of course, if the same employee worked 48 hours in a workweek, 8 of which were on a Sunday, all 8 hours of overtime/Sunday work must be paid out at 1.5 times her “regular rate of pay,” amounting to $624 ($12/hour X 48 hours) + ($6/hour X 8 hours).

Paid Family & Medical Leave Deadlines We have written previously on the substantive aspects of the new Massachusetts Paid Family and Medical Leave Act (the “MAPFMLA”). While the benefits do not begin paying out to eligible employees until 2021, there are some deadlines in 2019 that Massachusetts employers should keep in mind.

The MAPFMLA leaves many questions unanswered about how the new program will work. The newly-created Department of Family and Medical Leave (“DFML”) is expected to issue regulations by March 31, 2019, that hopefully will answer many of them (although if history is any guide, they also are likely to raise new ones). We will report on these regulations once they issue. www.msada.org

As enacted, the MAPFMLA will require employers to contribute an amount equal to 0.63% of each employee’s wages to a fund, ultimately to pay out to program-eligible employees. (What percentage of that contribution can be passed through to the employee remains to be seen, and it likely will be adjusted each year.) This contribution requirement is slated to begin July 1, 2019, so Massachusetts employers must ensure compliance by then. We expect the anticipated regulations will provide logistical guidance on how to do so.

We also expect the DFML will issue a poster that Massachusetts employers must post in a conspicuous place by July 1, 2019. Employers also must provide written notice to all employees (and, thereafter, to any new employees, within 30 days of the start of their employment) explaining, among other things, the availability of benefits under the law (including the right to reinstatement after leave); the employee’s and employer’s contribution amounts and obligations under the law; and instructions on how to file for benefits.

Massachusetts employers also must obtain and maintain written acknowledgments of such notice from all employees.

With that, we wish our esteemed readership a very Happy, Healthy, and Compliant New Year. t

Joe Ambash is the Managing Partner and Jeff Fritz is a partner at Fisher Phillips, LLP, a national labor and employment firm representing hundreds of dealerships in Massachusetts and nationally. They can be reached at (617) 722-0044.

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AUTO OUTLOOK

DECEMBER 2018

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RACE TO THE FINISH COVER STORY

2018 IN REVIEW

As the auto industry faced the usual state of upheaval in

living inductee among its inaugural class hosted the grand

one area or another, 2018 was the year that MSADA began

re-opening of his cornerstone store that same week. 2018

a new tradition of inducting dealers into a Hall of Fame.

was the year MSADA and its dealer members honored its

As just one of many highlights from the year, the only

past while charging into the present and beyond.

January The 2018 New England International Auto Show MSADA Dealer Summit brought dealers from across the region. Following the summit, dealers and their families enjoyed the annual New England International Auto Show Charity Gala, benefitting the MSADA Auto Tech Scholarship fund.

February Massachusetts TIME Dealer of the Year Frank Hanenberger was fêted in Las Vegas at the NADA Show. The award honors dealers who excel not only with financial success, but also in their dedicated efforts for community service.

Hanenberger offered his take on the future of the industry in this month’s profile: “We have to open the eyes of state leaders to make the car buying process more customer friendly. The end goal is to make a better experience for the customer.”

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Massachusetts Auto Dealer www.msada.org

MSADA March Western Massachusetts saw its first Mercedes-Benz dealership in years with the opening of Mercedes-Benz of Springfield by Michelle and Peter Wirth. “The biggest challenge since we have opened our doors is keeping up with hiring,” Peter told Auto Dealer. “It is a good problem to have.”

April MSADA sponsored BristolPlymouth Regional Tech’s Shane Clark and Jacob Horsman at this year’s National Auto Tech Competition as our Massachusetts team at the New York International Auto Show, the top competition for young auto techs in the country. This was the school’s second team to head to the stage in three years.

May Meeting at the Mandarin Oriental Hotel in Boston, the 2018 MSADA Annual Meeting focused on embracing new technology. MSADA President Chris Connolly and NADA Director Scott Dube led speakers in a call to work together to continue the future growth of the industry.

June The general consensus seemed to be that brakes were needed on the rush toward self-driving vehicles in 2018, following a high profile fatal accident in Arizona. Auto Dealer asked several dealers where they thought technology was taking the industry locally and internationally.

The consensus: Dealers will need to be the protective barrier that keeps the ambitions of manufacturers from trampling the wants and needs of customers. www.msada.org

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RACEIN TO THE FINISH 2018 REVIEW July Auto Dealer outlined the charitable works many MSADA members are undertaking, in addition to highlighting the matching funds the Association encourages dealers to utilize in their communities. “While our contributions to the economy in jobs and tax dollars amount to hundreds of millions each year,” Executive Vice President Robert O’Koniewski said, “as an Association we want to help dealers do more.”

August As the international automotive industry began to shake in the midst of trade war fears, the inaugural class of the MSADA Hall of Fame was announced in advance of the ceremony weekend to be held in Chatham. The first group of dealers pulled from nearly 100 years of Massachusetts automotive history.

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Massachusetts Auto Dealer www.msada.org

MSADA September Your Association sent a team of fellow dealers and MSADA staff to Washington, D.C. to meet with nine members of our state’s Congressional delegation. MSADA discussed autonomous vehicles and the need for franchise protections, overbroad recalls, and tariffs as the issues most pressing to area dealers.

October As dealers and family gathered to celebrate the legacy of its first MSADA Hall of Fame class, inductee Ray Ciccolo held the grand re-opening of a state-of-theart Volvo Village store within the same week. Ciccolo has operated the dealership for more than five decades and has not made any signals of slowing down.

November The Paragon Group announced this year’s star cars at the New England International Auto Show, which will feature an array of new technologies from electric vehicles to driver assists and improved fuel economy. Whether drivers are looking for the flash and flair of a roadster or the reliability and convenience of a CUV, the show promised to offer something for everyone.

December As worldwide auto industry headlines hinted at more uncertainty, from more tariff talk to Nissan’s CEO turmoil, Massachusetts dealers prepared for a 2019 that will bring promising new models and still more technological advancements to their customers. Stay tuned. www.msada.org

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Sound Off

MSADA

Buy Your Health Insurance Smarter and at a Lower Cost

By Shawn Allen McWalter Benefits Group

Are double-digit increases and a lack of options an issue for you when it comes to offering health insurance to your employees?

That no longer has to be the case. There is a way for your mid-sized company to realize the same great premiums that larger organizations see today. The use of a health care purchasing coalition, or HPC, gives you the purchasing power of a large company needed to achieve greater “The path for cost savings. If you are a your mid-sized member of MSADA you now have access to a local company to HPC. obtain a lower Large companies pay on average eight to cost on health eighteen times less the insurance must amount smaller ones pay provide health care go through an to insurance, according to information provided by HPC.” the National Conference of State Legislatures. This means that there is a huge disparity between what large employers pay for their employee’s health care benefits and the cost of these benefits for mid-sized and small firms.

Greater Purchasing Power Large employers pay less for their health insurance than smaller companies, such as mid-sized employers of 100–499 employees. You certainly understand as a CEO or CFO that the greater number of buying units available means higher demand and lower costs. Since as a mid-sized employer you lack a critical mass in numbers, you lack the ability to force insurers into bringing their prices down to where they become competitive and affordable for your business.

The Power of Large Numbers The Law of Large Numbers is a basic insurance concept that states that expected results are easier to predict within a large sample or data set of similar units. Specifically, the greater

your employee pool, the more predictable claims are and the easier it is for an insurer to price the riskiness of your group.

Large companies benefit greatly from their large numbers.

Mid-sized companies do not bring the same level of numbers to the table needed to drive the cost of their health care down to pay what large companies do.

Breaking the Status Quo Organizations regularly have their insurance consultant conduct a market analysis. These typically result in an annual increase in cost, a decrease in coverage, or a need to change carriers. Break away from the “norm” and implement strategies that can have an immediate impact on reducing your claims without hurting your employees’ coverage.

Turning Your Mid-Sized Company into a Large Health Care Purchaser The path for your mid-sized company to obtain a lower cost on health insurance must go through an HPC. The coalitions are designed to provide your mid-sized business with a large company’s purchasing scale. As a member of the HPC, not only are your costs for coverage lower, you also benefit from being able to demand greater price transparency from your insurer and the various participants in your health care supply chain.

A health care purchasing coalition provides you with the mechanism needed to fight for cost-effective benefits that do not break the bank or shift cost burden from you as an employer to your employees. HPCs have greater flexibility when it comes to implementing cost containment strategies, as an HPC does not require the approval of an insurer to meet the cost savings needs of its coalition members. The result for you is a better way to obtain a lower cost of coverage without having to add 500 or 1,000 employees.

Rising health care costs and the negative impact it has on your bottom line is not sustainable for most. Implementing proactive strategies, such as biometrics and independent nurse care management coupled with increased purchasing power (Health Care Coalition), are a powerful and proven solution to one our biggest business concerns today. The time has come that lower cost benefits with great coverage for your employees is no longer based solely on size. If you want the insurance carriers to treat you like a fortune 500 company, then look to join a coalition. t

Have an opinion you want to share? Email rokoniewski@msada.org.

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Massachusetts Auto Dealer www.msada.org

NEWS the Horn MSADA

NEWS the NEWS from Around Around the Horn Horn from Around NEWSfrom HOLYOKE

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Marcotte Ford Holds Grand Re-Opening Following more than a year of construction, Marcotte Ford, led by CEO Mike Marcotte, hosted a grand re-opening event

was the service department, survived.

Marcotte Ford includes 142 employees and hired eight workers for the expansion. That number includes three new employees who work at the cafe.

A video commemorating the event and offering a history of the dealership is available here: https://www.youtube.com/ watch?v=pjpMr5lxgMA&feature=youtu.be

that drew family, friends, employees, and industry peers from around the country.

The project doubled the dealership’s square footage to 45,000 sq. ft. and features a restaurant, the LugNutz Cafe, a life-long ambition for owner Bryan Marcotte.

The new building covers most of the old footprint of the 1962 building. Some of the structure, from what

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NEWS from Around the Horn

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HAVERHILL

Commonwealth Motors Hosts Annual Christmas Basketball Tournament The Commonwealth Motors Annual Christmas Basketball Tournament banquet took place at DiBurro’s Banquet Hall in December, featuring scholarship awards from Commonwealth Motors presented by dealer Charlie Daher.

This is the fourth year of the Commonwealth Scholars -- a significant part of the mission of the tournament. To date over $64,000 has gone toward the scholarship.

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Massachusetts Auto Dealer www.msada.org

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NEWS from Around the Horn

NORWOOD

Deer Takes Dealership Tour A deer was caught on video running loose through a Norwood car dealership, where employees said it caused thousands of dollars of damage.

Workers at Central Jeep Chrysler Dodge RAM Fiat of Norwood said they sprung into action when they heard a loud noise and spotted a deer inside the building. “I was like, ‘That’s a deer,’” employee Dwayne Girard told WFXT-TV. “My friend thought it was a moose because it was so huge.”

Employees chased after the animal in an attempt to guide it back outside. “I ran down one aisle,” Girard said. “Chased it down there, came up another aisle. I went and told Peter and everyone, ‘Rudolph was here shopping,’ but no one believed me.”

Girard said the deer was inside the business for about 20 minutes. “Eventually I chased it, and it went right out through the door,” Girard said. “We got it out safely, and then it was still okay when it left.”

The deer left behind an expensive mess.“It got its antlers caught in everything,” worker Nick Baraiolo said. “It destroyed thousands of dollars in dealership equipment.”

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NEWS from Around the Horn NORWOOD

Ernie Boch, Jr. Profiled in Business Jet Traveller Ernie Boch, Jr. recently offered a glimpse into his home and business life to Business Jet Traveller, offering readers a few choice insights into the industry.

“To me it is not the automotive business,” he told the magazine. “It is the transportation business. People need to get around, and we Boch with his son, Alex, at the building where he keeps the majority of his vintage autos. Photo: Bill Bernstein are fortunate to be in home was not an option; we’d rather sleep on the street than the United States with this incredible road system. It was difgo home.” ferent when I was growing up than it is to today. An automoThe full profile is available here: bile meant freedom. You wanted a license the day you were https://www.bjtonline.com/business-jet-news/ernie-boch-jr eligible, and you wanted to move out of your house. Going BOSTON

Herb Chambers Makes Morrissey Boulevard Move A Herb Chambers dealership is set to move into a property on Morrissey Boulevard that up until recently housed a J.D. Byrider used car business, and before that, Westminster Dodge, according to the company.

Herb Chambers Companies plans to move their Herb Chambers Honda store on Commonwealth Avenue in Allston to the site at 720 Morrissey Boulevard sometime early next year.

“We are very excited that, after a successful 30+ years run in our current Commonwealth Avenue location, we will be re-locating our Herb Chambers Honda in Boston dealership to 720 Morrissey Boulevard in early 2019,” a press statement said.

The car dealership conglomerate, which describes itself as the largest dealer in New England, also hinted at future alterations to the property.

“At the outset, we will be operating the business out of the existing building there but are already developing the plans for a brand new, multi-level, state-of-the-art Honda dealership that will help us deliver an even greater customer experience in the future.”

The J.D. Byrider dealership that had operated on the premises since 2012 abruptly closed in early December. Soon thereafter, DECEMBER 2018

a Herb Chambers banner was hung on the facade of the vacant building, along with signs that read: “Herb Chambers Honda Opening Soon.”

In the statement, the auto dealer indicated that it chose the Dorchester site for its accessibility.

“In relocating our Honda dealership, we set out to find a location that would be close and convenient for our huge customer base and easy to access. We’re very glad we’ve been able to deliver on that goal and look forward to the next successful 30 years of Herb Chambers Honda in Boston.”

Massachusetts Auto Dealer www.msada.org

MSADA SOUTH DEERFIELD

TommyCar Auto Group Adds Volvo Franchise The Volvo Cars Pioneer Valley dealership, formerly Pioneer Valley Volvo, is under new ownership by the TommyCar Auto Group.

“This is a brand that we have been looking at for a long time because it fits in well with the other manufacturers we have in the group plus it’s a great location and it’s a perfect size for us,” said Carla Cosenzi, president of TommyCar Auto Group. “We are really attracted to Volvo and everything it stands for in terms of luxury and convenience it provides to customers, the value of the brand, and the safety of the vehicle.”

“Our focus moving forward is really going to be on customer satisfaction and convenience,” Cosenzi added.

TommyCar Auto Group has contributed over 4 million dollars to local organizations, schools, and the Dana Farber Cancer Institute (over $950,000).

Volvo Cars Pioneer Valley will commemorate the new ownership with an Eat-Meet-Greet event on January 16, from 5:00

p.m. to 7:30 p.m. Customers can look forward to the first look of the long-awaited 2019 Volvo S60, hors d’eouvers from Seth Mias Catering, cocktails from Hitchcock Brewing, along with amazing giveaways. t

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Patrick Manzi

NADA Senior Economist

Boyi Xu

Economist

DECEMBER 2018

Massachusetts Auto Dealer www.msada.org

MSADA

NADA MARKET BEAT

JANUARY 2016

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TRUCK CORNER

MSADA MSADA

A Year’s Worth of Hard Work at ATD

By Jodie Teuton Chairwoman, American Truck Dealers ATD Chairwoman Jodie Teuton is vice president of Kenworth of Louisiana and Southland Truck Leasing in Gray, Louisiana.

DECEMBER 2018

trade association executives converged on Capitol Anyone who knows a truck dealer knows that we Hill in June for our annual ATD Legislative Fly-in. are not afraid of work. After my first year serving as I would like to thank all those passionate advocates your chair of the American Truck Dealers (ATD), for truck dealers.

I can tell you that the value of a year’s hard work, We encouraged Congress to revisit the FET, and with the power of a strong association behind you, we worked hard to garner support for H.R. 2946, is immeasurable. “the Heavy Truck, Tractor and Trailer Retail FET We have accomplished so much together in 2018.

Repeal Act.” Our efforts during the fly-in resulted Our network of truck dealers has worked harder than in 10 new cosponsors on the House bill. We were ever to navigate an ever-evolving market and the also successful in getting a Senate FET repeal bill advent of new technology. On top of that, we con(S.3052) introduced by Sen. Cory Gardner (R-Coltinuously steer through our mainstream challenges orado). This fall, ATD launched our World War I like complex manufacturer and supplier product poster theme to highlight that this tax was started demands, ever-increasing big data, government in 1917. ATD issued a press release in conjunction regulations, and, most importantly, the demands of with the 100th anniversary of Armistice Day that our consumers. With all these challenges around highlighted our FET repeal efforts. And finally, us, ATD proactively commissioned ACT research ATD is in the process of forming a new FET repeal to examine the future landscape of our market. The coalition to grow the voice and the drum beat surthemes that emerged from the research are guiding rounding FET repeal. our strategic planning and focusing our energy toFinally, I congratulate fellow truck dealers on ward the most critical aspects of our dealerships. your successes this In that regard, I am year! Truck sales proud that NADA “...we are selling the cleanest, are as healthy as and ATD are taking ever with Class 8 the initiative to tackle safest, and most fuel-efficient trucks ever” sales up 32.5 perour industry’s workcent compared to force shortage. For last year and medium-duty sales up 6.8 percent. I dealers to meet future staffing demands, our indusam proud to say that we are selling the cleanest, saftry needs thousands of skilled technicians by 2026. est, and most fuel-efficient trucks ever. I thank those And in the truck industry, diesel technicians are who have worked to improve performance and have even harder to find. This is a critical issue that ATD taken advantage of their ATD membership. Plan is facing head-on. In September, I had the privilege to join an ATD 20 Group; send an employee to the of attending the White House economic summit ATD Academy; or sign on to NADA online and take with fellow NADA and ATD leaders. We are spearan educational class. Never forget that your associaheading our industry’s effort to address the job skills tion is here to help every day of the year. crisis; to recruit and retain technicians; and to raise Allow me to congratulate you on a job well done national awareness about dealership jobs. I am exat the ATD Show in San Francisco from January 24cited to tell you about our initiative at ATD Show 27. It has been four years since we have had our 2019. annual celebration in the City by the Bay. If you haOur advocacy for you on Capitol Hill has been ven’t registered for the ATD Show, do it now so you as forceful as ever. ATD’s top legislative priority in do not miss the greatest commercial-truck dealer 2018 has been to repeal the federal excise tax (FET) industry event of the year! enacted in 1917. Yes, we are fighting a tax that was On behalf of ATD, have a happy holiday season levied 101 years ago. It has long outlived its useand a successful 2019.Thank you for your year’s fulness. The tax has ballooned from 3 percent to 12 hard work with us! percent, and it makes it harder for our customers to afford a new truck. Truck dealers and automotive t

Massachusetts Auto Dealer www.msada.org

NADA Update

By Scott Dube

Our 2019 Crystal Ball Scott Dube, President of Bill Dube Hyundai and MSADA Immediate Past President, represents NADA’s Massachusetts members on the NADA Board of Directors. He can be reached at scott@dubecars.com.

As you will see below, the future looks bright for our industry as a whole. The work of next year at your Association and at NADA will be ensuring dealers have a seat at the table when policy makers are making decisions that impact our industry.

I encourage you to make a resolution for the New Year to reach out for the first time or the tenth time to your representative and tell them where you stand on our issues. Should you have any questions about what those issues are, or who to reach out to, please be in touch.

I wish your family a wonderful and prosperous new year!

NADA Predicts 16.8 Million Vehicle Sales in 2019 NADA has released its annual sales forecast for new light vehicles in 2019.

“We are forecasting sales of 16.8 million new cars and light trucks in 2019,” said Patrick Manzi, NADA senior economist, at an industry briefing. “This would represent a falloff in sales of about 1.1 percent compared to 2018.”

Based on a strong November, new-vehicle sales are expected to reach 17 million units in 2018, which would mark the fourth straight year of U.S. auto sales above 17 million units.

“This was unexpected. We were expecting sales to fall off a little more than they have this year, but then the new tax law was passed which put more money in the pockets of consumers, and they certainly purchased new vehicles at dealer showrooms,” Manzi added. “The majority of these sales, following the trend of past years, have been light trucks, such as crossovers, pickups, and SUVs.” NADA Chairman Wes Lutz, president of Extreme DodgeChrysler-Jeep-Ram in Jackson, Michigan, who provided a dealer perspective on the state of auto retailing during the briefing, added that sales of 16.8 million new vehicles would still be a robust year in 2019 but was concerned about “price creeping” that could take some consumers out the market.

“If incentives continue to go down and interest rates go up, it will put tremendous pressure on consumers with ris-

ing monthly payments,” Lutz added. “The level of interest rates moving forward will be a wildcard.”

In 2018, consumers continued to abandon car segments.

Light trucks are on track to account for about 70 percent of sales, while cars will account for nearly 30 percent of sales.

In 2017, the ratio was 64.5 percent light trucks and 35.5 percent cars. About 10 years ago, the sales mix consisted of 48 percent light trucks and 52 percent cars.

“One of the main factors for this shift has been continued low oil and gasoline prices and the fact that crossover utility vehicles are nearly as fuel efficient as their sedan counterparts. And we have seen fuel economy increases across the board, not just on crossovers but also traditional SUVs and pickups,” Manzi said. “We also expect gasoline prices to remain relatively low in 2019, not as low as present but still low enough not to cause a panic and a consumer shift back to the car market.”

Incentive spending, on average, per unit was down in November 2018 compared to the same month a year ago, according to industry sources.

“We have seen more discipline from auto manufacturers with their production this year. They have properly aligned production with demand and as a result have relied less on incentives, although some incentives applied on less popular segments may spike in December 2018 as well as fleet sales at the end of the year,” Manzi added. “We expect incentives to continue to fall and automakers to remain disciplined in 2019.”

The Federal Reserve Board is expected to raise rates at its meeting in December 2018. One or two more rate increases are likely during the early half of 2019 and then rates are expected to hold steady.

A positive trend for both consumers and new-car dealerships has been the growth in manufacturer-backed certified preowned (CPO) sales. CPO sales are up 2.2 percent through November 2018.

Why Some OEMs Cannot Seem to Do the Right Thing Peter Welch, NADA President and CEO

As we wind-down another good year of new-vehicle sales and get ready for what could be tougher sledding, I have a request for some of our OEM business partners: Do the right thing by your dealers—it’s also smart business.

The ongoing proliferation of unfair stair-step incentive programs, especially overly complicated and short-term programs that favor larger and urban dealers, continues to erode brand loyalty, brand value, residual values and the consumer experience.

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NADA Update On paper, these programs are designed to stimulate targeted sales by lowering prices on specific vehicles. While these ever-complex programs may temporarily boost sales, they’re a showroom disaster for consumers. By cutting prices for some customers, but not all customers, these programs result in huge price discrepancies for all consumers.

Consumers see these discrepancies for the same vehicles across different dealers, or at the same dealer at different points in time. They often see discounts applied to vehicles they don’t want but that can’t be applied to vehicles they do want. Worse, unfair stair-step programs aren’t transparent because, being manufacturer-to-dealer incentives, consumers simply don’t see them, don’t understand them, and view the results as stereotypical old-school shenanigans.

These ill-advised programs with a lack of consistency, lack of transparency, and lack of explanation usually lead to a lack of consumer trust—not only for an individual dealer, but also for every dealer who carries that brand. And when you have created a lack of trust in every dealer of a given brand, you have instilled a lack of trust in the brand itself.

Once brand trust erodes, erosion of brand loyalty inevitably follows.

Last year, NADA commissioned an independent examination of what the use of unfair stair-step incentive programs accomplishes—both good and bad—in the marketplace. The research concluded that these programs have severe unintended consequences for consumers, which lead to severe unintended consequences for manufacturers.

Among other things, the report found that: “Stair-step programs can increase sales volume in the short run while simultaneously decreasing demand. However, an increase in sales due to an aggressive stair-step program should not be confused with an increase in either consumer demand or the value of the manufacturer’s brand. In fact, manufacturers who use stair-step programs aggressively risk damaging their brand in the long run and entering a death-spiral of declining demand that eventually no amount of discounting can profitably overcome.” There are better ways to structure incentives and increase sales.

According to the latest Cox Automotive Car Buyer Journey Study, brand loyalty across all manufacturers is down to 56 percent. This should be alarming. With more than half of new-car buyers ready to jump to another ship, the last thing OEMs should be doing is deploying marketing strategies that essentially give those car buyers an extra push out the door.

At the same time, Cox found that car buyers who identified their dealer as promoting transparent pricing reported significantly higher dealer satisfaction scores—71 percent versus 53 percent—than those who said their dealership was not promoting transparent pricing. What successful dealers have learned during the past decade is that it’s a DECEMBER 2018

MSADA lot easier to sell or lease another vehicle to the same happy customer than to convert a new customer.

OEMs have a right to require and enforce dealer compliance with reasonable and attainable sales performance standards, but those standards must measure sales effectiveness fairly and accurately. Digital commerce has reduced the relevance of geographic sales territories. Yet many OEMs still rate their dealers’ effectiveness primarily on performance in an assigned market area and don’t control for numerous variables such as unique locations, size and shapes of the areas of responsibility, the layout of roads and thoroughfares, demographics, geography, local brand preferences, etc.—factors that make the statistical analyses currently in vogue unfair and unreliable.

OEMs using these outdated and ineffective standards should adopt new methodologies that encourage compliance with reasonable standards by 100 percent of their dealers, rather than standards that use “zero sum metrics” that make it a certainty that “lower performing” dealers don’t get to participate in certain incentive programs or, worse yet, get a termination notice. OEMs have lost recent cases in New York, California and Texas challenging unfair methodologies. But instead of adopting new standards that are fair, OEMs that have lost these cases are filing appeals.

Rather than stand behind their products, many OEMs continue to fight with their dealers over the reasonableness of compensation for fixing the OEMs’ product defects and mistakes. But dealers are part of the solution to the recall and warranty challenges, not part of the problem.

OEMs need to do a better job of getting timely recall parts into the hands of their dealers to perform recall repairs. Nothing destroys brand loyalty more quickly than a defective product that takes forever to get fixed.

Thirty-four percent of NADA members sell 300 or fewer new vehicles per year. Smaller-volume dealers typically operate in rural areas, so they provide a vital link for consumers seeking a choice of new vehicles, as well as convenient access to factory-trained technicians for service, warranty, and recall repairs. Some OEMs seem to have forgotten that volume is built one sale at a time and that maintaining a national presence in all markets is key to universal brand recognition.

Small-volume dealers don’t need to be saddled with the same facility and “program” requirements as high-volume dealers. And these dealers cost OEMs next to nothing to maintain but serve as goodwill ambassadors for millions of loyal customers. Rather than finding ways to make life harder for smaller-volume dealers, OEMs should fully embrace them for what they are—a competitive asset—and create a scalable business environment so these dealers can thrive.

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