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
February 2019 • Vol. 31 No. 2
The official publication of the Massachusetts State Automobile Dealers Association, Inc
Don Sudbay
Dealer of the YEAR
Ma s s a c h u s e t t s
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S ta f f D i r e c t o r y Robert O’Koniewski, Esq. Executive Vice President rokoniewski@msada.org Jean Fabrizio Director of Administration jfabrizio@msada.org Peter Brennan, Esq. Staff Attorney pbrennan@msada.org Auto Dealer MAgazine Robert O’Koniewski, Esq. Executive Editor Tom Nash Editorial Coordinator nashtc@gmail.com Subscriptions provided annually to Massachusetts member dealers. All address changes should be submitted to MSADA by e-mail: jfabrizio@msada.org Postmaster: Send address change to: One McKinley Square, Sixth Floor Boston, MA 02109 Auto Dealer is published by the Massachusetts State Automobile Dealers Association, Inc. to provide information about the Bay State auto retail industry and news of MSADA and its membership.
Ad Directory BlumShapiro, 22 Ethos Group, 2 Hub New England, 21 Leader Auto Resources, 31 Nancy Phillips, 20 O’Connor & Drew, P.C., 32 Southern Auto Auction, 23
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The official publication of the Massachusetts State Automobile Dealers Association, Inc
Table of Contents
4 5 6
From the President: A Moment in the Spotlight ASSOCIATE MEMBERS DIRECTORY THE ROUNDUP: The General Court Saunters Along at Its Own Pace
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TROUBLESHOOTNG: VW Settlement Could Spur Mass. Truck/EV Market
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LEGAL: The Anatomy of Employees’ Legal Claims AUTO OUTLOOK
16 Cover Story: Dealer of the Year: Don Sudbay
20 24 25 26 28 29
NEWS From Around the Horn ACCOUNTING: A Simple Plan DEALER PROFILE: David Abatsis nada Market Beat TRUCK CORNER: ATD Salutes Our Leaders nada update: Moving Forward as One
ADVERTISING RATES Inquire for multiple-insertion discounts or full Media Kit. E-mail jfabrizio@msada.org Quarter Page: $450 Half Page: $700 Full Page: $1,400
Back Cover: $1,800 Inside Front: $1,700 Inside Back: $1,600
Join us on Twitter at @MassAutoDealers www.msada.org
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From the President
MSADA
A Moment in the Spotlight
Celebrating TIME Dealer of the Year nominee Don Sudbay
By Chris Connolly, MSADA President As an essential part of the retail business community and community at large, we all have a unique opportunity to serve as civic leaders and beacons of the American dream we are all chasing. Don Sudbay has been one of our dealer community’s greatest champions for many years now, most recently serving as our NADA Director. During his time in that recently concluded role, Don spent countless hours focused on the goings on down in Washington while the rest of us could relax, assured he was representing our needs to our legislators. Don has seen our Association through, shall we say, interesting times on the regulatory front. From the Consumer Finance Protection Bureau to the 2016 elections, he had a front row seat in making sure our voices were heard. There is very little opportunity to properly show our appreciation as an Association for this kind of long-term commitment. So it was an easy choice to finally be able to nominate Don for this year’s TIME Magazine Dealer of the Year award. We go into more detail on Don’s career, and get to know him a little better, in this month’s feature story on page 16. Don being recognized in San Francisco at the NADA Convention was an exciting time not just for Don, his family, and his employees, but also the Massachusetts dealer community as a whole. MSADA is always working diligently to inform the public that our dealer members are neighbors just as much as they are businesses. Having an opportunity to see Don on a national stage is a chance for all of us to feel proud of the work we do every day as a group. It is a reminder that the work we do each day is part of the essential fabric that makes up Main Street America. As we continue to do more than most to help drive our communities forward, Don’s recognition should make us all proud. Please join me in congratulating Don on this milestone, and make sure to start thinking about who we should submit as a nominee this year for 2020. I will also take this opportunity to remind us that we will have a second class of the Massachusetts Auto Dealers Hall of Fame to induct in October -- so be thinking about that as well.
Annual Meeting Preparations Underway Be on the lookout for more information about our MSADA Annual Meeting, which will take place May 3 in Boston. As always, if you have any feedback on past events or ideas for what we’re about to put on in a few months, please reach out to our Executive Vice President, Robert O’Koniewski, at rokoniewski@msada.org. t
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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
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/Mate Dealership Systems Troy Potter (877) 340-2677 Automotive Search Group Howard Weisberg (508) 620-6300 Auto Auction of New England Steven DeLuca (603) 437-5700 Bank of America Merrill Lynch Dan Duda and Nancy Price (781) 534-8543 Bellavia Blatt, 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
EasyCare New England Greg Gomer (617) 967-0303 Eastern Bank David Sawyer (617) 897-1125 Eastern Insurance Group William Gross (508) 620-3349 Ethos Group, Inc. Drew Spring (617) 694-9761 F & I Resources Jason Bayko (508) 624-4344 Federated Insurance Matt Johnson (606) 923-6350 First Citizens Federal Credit Union Joe Ender (508) 979-4728 Fisher Phillips LLP John Donovan (404) 240-4236 Joe Ambash (617) 532-9320 Gatehouse Auto Jay Pelland (508) 626-4334 Gulf State Financial Services Tom Foster (832) 628-1916 GW Marketing Services Gordon Wisbach (857) 404-0226 Hireology Kevin Baumgart (773) 220-6035 Hub International Insurance Brokerage Jim Walsh (603) 494-9016 Huntington National Bank John J. Marchand (781) 326-0823 JM&A Group Jose Ruiz (617) 259-0527 John W. Furrh Associates Inc. Kristin Perkins (508) 824-4939 JP Morgan Chase Bank Alex Khademi (404) 375-4504 Key Bank Mark Flibotte (617) 385-6232 KPA Tim Whelan (303) 802-3019 Leader Auto Resources, Inc. Curt Murray (978) 201-4797 Chuck August (518) 364-8723 Lynnway Auto Auction Jim Lamb (781) 596-8500 M & T Bank John Federici (508) 699-3576 Management Developers, Inc. Dale Boch (617) 312-2100 McWalter Volunteer Benefits Group Shawn Allen (617) 483-0359 Micorp Dealer Services Robert Calhoun 617-285-4833 Mid-State Insurance Agency James Pietro (508) 791-5566 Mintz Levin Kurt Steinkrauss (617) 542-6000 Murtha Cullina Thomas Vangel (617) 457-4000 Nancy Phillips Associates, Inc. Nancy Phillips (603) 658-0004
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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 Piper Consulting Jim Piper (207) 754-0789 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 Rockland Trust Co. Manny Silva (781) 982-6806 Samet & Company John J. Czyzewski (617) 731-1222 Santander Bank Richard Anderson (401) 432-0749 Chris Peck (508) 314-1283 Schlossberg & Associates, LLC Michael O’Neil, Esq. (781) 848-5028 Sentry Insurance Company Eric Stiles (715) 346-7096 Service Credit Union Dave Pasternak (603) 812-8967 Shepherd & Goldstein CPA Ron Masiello (508) 757-3311 Southern Auto Auction Joe Derohanian (860) 292-7500 Sprague Energy Robert Savary (603) 430-7254 SunPower Christie McCarthy (408) 457-2357 Kristin Hodges (707) 694-7759 SunTrust Bank Michael Walsh (617) 345-6567 Target Dealer Services Andrew Boli (508) 564-5050 TD Auto Finance Marc Gerhart (781) 697-1525 TradeRev Amy Davis (617) 512-7033 TrueCar Pat Watson (803) 360-6094 US Bank Vincent Gaglia (716) 649-0581 Wells Fargo Dealer Services Josh Tobin (508) 951-8334 Windwalker Group Herby Duverne (617) 797-9316 Zurich American Insurance Company Steven Megee (774) 210-0092
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The Roundup
The General Court Saunters Along at Its Own Pace By Robert O’Koniewski, Esq. MSADA Executive Vice President rokoniewski@msada.org Follow us on Twitter • @MassAutoDealers
When last we left you, Governor Charlie Baker and Lieutenant Governor Karyn Polito were inaugurated to a second term, and the majority Democrats in the two legislative chambers had re-elected their leaders – Rep. Robert DeLeo (D-Winthrop) as House speaker and Sen. Karen Spilka (D-Ashland) as Senate president. The General Court’s Republicans, albeit in a smaller capacity, re-elected, too, their own leaders; Sen. Bruce Tarr (R-Gloucester) and Rep. Brad Jones (R-North Reading) were chosen by their peers to lead the minority caucus in the Senate and House, respectively. No contest had a surprise ending. Other than that, never expect alacrity with our salons on Beacon Hill. In fact, the beauty of our great Nation, despite the concerted efforts of the big government types residing in DC who want us to toe their line from sea to shining sea, is that each of our fifty states has its own way of doing things. For example, there are state legislatures that meet once every two years; there are those that have sessions that go 45, 90, 120 days. Heck, Nebraska seems to get by just fine with one legislative chamber, not the two that the other 49 seem to need. Here, you can count on our representatives and senators to use the full two years allotted them by our constitution and rules. Having cleared that procedural hurdle of electing a speaker and a president, the legislators were now ready to get down to work in order to pass rules to govern legislative sessions. This needed
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to be accomplished to enable Speaker DeLeo and President Spilka to then put forth for approval their appointments for chairs and membership of the various committees. Although there was a small cadre of rabble rousers in the House who attempted to push a package of rules reforms, those efforts came to naught. Once the speaker and president completed this task, the next move on their agenda was to name their respective leadership teams, committee chairs, and committees’ membership. This all occurred on St. Valentine’s Day. Included in this package, both leaders needed to name a chair to the chambers’ respective Ways and Means Committee, which were vacant. On the Senate side, since President Spilka was last session’s Senate Ways and Means chair even after she was elevated to the presidency, the spot was filled by Sen. Michael Rodrigues (D-Westport). In the House, the chairmanship became vacant when Rep. Jeff Sanchez lost the Democrat primary in September to an upstart local activist. Here, Speaker DeLeo moved up Rep. Aaron Michlewitz (D-Boston’s North End), who had been the House chair of the Joint Committee on Financial Services for the last couple of sessions. There basically are three standing joint committees (comprising House and Senate members) that have jurisdiction of our issues – Consumer Protection and Professional Licensure, Financial Services, and Transportation.
MSADA The Joint Committee on Consumer Protection and Professional Licensure has jurisdiction over such issues as the new- and used-car Lemon Laws, our 93B franchise law, the 93A Consumer Protection Act, doc fees, proposals like the Car Buyers Bill of Rights, and the so-called “right to repair” act. If there is an issue that touches a consumer, one can find it in this committee. As the 2019-2020 session commences, most of the 16 Committee members will be new to the committee, including the Senate chair, Paul Feeney of Foxborough, hometown of yet another Lombardi Trophy – the previous Senate chair, Barbara L’Italien, left to run, albeit unsuccessfully, for Congress. Here are the committee members with their party and hometown (* indicates returning committee member): Rep. Tackey Chan, House Chair (D-Quincy)* Rep. Jay Livingstone, House Vice Chair (D-Boston)* Rep. Jonathan Zlotnik (D-Gardner)* Rep. Adrian Madaro (D-East Boston) Rep. William Driscoll (D-Milton) Rep. Mindy Domb (D-Amherst) Rep. Tami Gouveia (D-Acton) Rep. David Henry Argosky LeBoeuf (D-Worcester) Rep. Steven Howitt (R-Seekonk)* Rep. Joseph McKenna (R-Webster)* Sen. Paul Feeney, Senate Chair (D-Foxborough) Sen. James Welch, Senate Vice Chair (D-West Springfield) Sen. Diana DiZoglio (D-Methuen) Sen. Barry Finegold (D-Andover) Sen. Joseph Boncore (D-Winthrop) Sen. Ryan Fattman (R-Webster)* Another committee that has oversight of some of our issues, such as activities by the Registry of Motor Vehicles, is the Joint Committee on Transportation, chaired by Sen. Joseph Boncore (D-Winthrop) and Rep. William Straus (D-Mattapoisett). This will be their second term together as chairmen of this committee; however, most of the committee members will be new to this assignment. Here are
the 19 committee members with their party and hometown (* indicates returning committee member): Rep. William Straus, House Chair (D-Mattapoisett)* Rep. Adrian Madaro, House Vice Chair (D-East Boston)* Rep. Jonathan Hecht (D-Watertown) Rep. Daniel Donahue (D-Worcester)* Rep. Daniel Ryan (D-Charlestown)* Rep. Joseph McGonagle (D-Everett)* Rep. Paul Tucker (D-Salem) Rep. Natalie Blais (D-Sunderland) Rep. Peter Capano (D-Lynn) Rep. Lindsay Sabadosa (D-Northampton) Rep. Steven Howitt (R-Seekonk)* Rep. Norman Orrall (R-Lakeville) Rep. David DeCoste (R-Norwell) Sen. Joseph Boncore, Senate Chair (D-Winthrop)* Sen. Eric Lesser, Senate Vice Chair (D-Longmeadow)* Sen. Harriette Chandler (D-Worcester) Sen. Diana DiZoglio (D-Methuen) Sen. William Brownsberger (D-Belmont) Sen. Cindy Friedman (D-Lexington) Sen. Dean Tran (R-Fitchburg)* Finally, the third committee that will have oversight of our issues, such as banks and banking, credit unions, lending, and insurance, is the Joint Committee on Financial Services, with two new chairs this session – Sen. Jim Welch (D-West Springfield) and Rep. James Murphy (D-Weymouth); further, most of the 17 committee members will be new to this assignment, too. Rep. James Murphy, House Chair (D-Weymouth) Rep. Christine Barber, House Vice Chair (D-Somerville)* Rep. Bruce Ayers, (D-Quincy) Rep. Thomas Stanley (D-Waltham)* Rep. John Velis (D-Westfield) Rep. Jose Tosado (D-Springfield)* Rep. Daniel Cahill (D-Salem)* Rep. Michelle Ciccolo (D-Lexington) [daughter of our very own, Ray Ciccolo] Rep. Richard Haggerty (D-Woburn) Rep. Jay Barrows (R-Mansfield)* Rep. Shawn Dooley (R-Norfolk)*
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Sen. James Welch, Senate Chair (D-West Springfield) Sen. Michael Moore, Senate Vice Chair (D-Millbury) Sen. Eric Lesser (D-Longmeadow)* Sen. Diana DiZoglio (D-Methuen) Sen. Sonia Chang-Diaz (D-Boston) Sen. Vinny deMacedo (R-Plymouth)* Here, in our Commonwealth, no one is going to accuse our legislature of getting off to a fast start to its full two-year session. While other states have already wrapped up or are close to finishing their legislative session, many who work this process are still digesting the leadership and committee appointments the speaker and president made on Hallmark’s favorite holiday. Once the legislative process gets into gear and the public hearings unfold as bills are sent to committees, the individuals on these three committees will be reviewing some of the most important legislation for dealers.
Bill Filings for 2019-2020 The bill filing deadline for the current session was January 18. At some point, the House and Senate clerks will provide a number to each bill filed by members of their respective chambers and then assign each bill to a committee for review, including a public hearing, which is mandatory for every bill. The issues being addressed by the Association’s legislative proposals are the following: • 93B Amendments. The Legislature last approved amendments to our auto dealer franchise law in 2012. Those amendments included strengthening our warranty reimbursement law by establishing a formula for the parties to rely on to ensure dealers receive actual retail-level reimbursement for warranty and recall work and parts. Issues addressed in this year’s bill, which was filed by Senator Marc Pacheco (D-Taunton), a long-time ally of franchised dealers, and Rep. Daniel Hunt (D-Dorchester), include the following: • Prohibits vehicle surcharges by the
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The Roundup manufacturer to pay for warranty reimbursement at the statutorily-required retail rate; • Limits how often the manufacturer can request a facility upgrade; • Prohibits a manufacturer from requiring a dealer to purchase goods or services from a vendor selected, identified, or designated by a manufacturer or distributor by agreement, program, incentive provision, or otherwise without making available to the dealer the option to obtain the goods or services of substantially similar quality from a vendor chosen by the dealer; • Protects dealer’s customer data from OEMs and other third parties; • Prohibits an OEM from arbitrarily or unreasonably altering the geographic area of responsibility within which it measures the dealer’s performance; • Protects dealers from manufacturers’ using export chargebacks to penalize dealers for cars that get exported without the dealer’s knowledge; • Prohibits manufacturers from placing a surcharge on the vehicle invoice as a means of recouping warranty reimbursement costs directly from dealers; • Clarifies the current limit on manufacturer ownership of dealerships and direct sales of vehicles by manufacturers; and • Addresses various dealer- and consumer-related issues surrounding recalls, including compensation for parking cars while waiting for parts and disclosure of open recalls to consumers. • Motor Vehicle Service Contracts. This refiled legislation would prohibit OEMs from requiring dealers to exclusively sell OEM-only extended service contracts or extended maintenance plans; filed by Sen. Diana DiZoglio (D-Methuen) and Rep. Angelo Puppolo (D- Springfield). • Insurance Labor Rates Paid to Auto Body Repairers. Refiled by Rep. Lou Kafka (D-Stoughton) and Sen. Jim Welch (D-Springfield), this bill would establish a process for setting insurance-reimbursable labor rates paid to auto body repairers that is in line with FEBRUARY 2019
the current economics of the industry in Massachusetts. The average rate presently paid by insurance companies to repairers is the lowest in the country. • Temp Tags. Refiled by Rep. Brian Golden (D-Lowell) and Sen. Michael Rush (D-West Roxbury). A temp tag law already exists, authorizing the RMV registrar to issue such tags; the law, however, has never been implemented. This bill would create a statutory process for allowing temp tags for out-of-state purchasers. • Diminished Value. Refiled by Rep. William Driscoll (D-Milton) and Sen. Patrick O’Connor (R-Weymouth), this bill would create an administrative process for vehicle owners to appeal to get diminished value of damaged vehicles returned to the vehicle owner. • Class 1 License Appeals. This billwould create a process for a party to appeal the alleged improper issuance of a class 1 franchised dealer license by a municipality to an entity. Filed by Reps. Tackey Chan (D-Quincy) and Michael Finn (D-West Springfield), and Sen. Patrick O’Connor (R-Weymouth). We will keep dealers informed as to the date of the public hearings on these bills in order to mobilize our grassroots of dealers to contact legislators. Should you require any additional information on these items or wish to volunteer to get involved in the process, please do not hesitate to contact me.
Save the Date: Dealer Day on Beacon Hill – May 22 A great opportunity for dealers and their key managers to get involved in the legislative process, our annual “Dealer Day on Beacon Hill” will be held on Wednesday, May 22, in Boston. We are sending out information on this event. We are asking our member dealers and their key employees to convene at the Parker House Hotel in Boston beginning at 10:00 a.m. in preparation of walking up to the State House to meet with their
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representatives and senators to discuss those issues in the automotive industry that dealers are presently confronting. We will have an issues briefing and a keynote address to get dealers in a proper frame of mind to provide legislators a dealer’s perspective on your economic footprint locally and throughout the state in the aggregate. For those dealers we know who will be attending, we will schedule your legislative appointments for you. It is extremely helpful to our lobbying efforts for legislators to see their constituents face to face and receive a perspective they don’t have in the normal course of their activities. No one knows your business better than you. That knowledge needs to be conveyed to your legislators in an environment and manner they understand, hence our Dealer Day on Beacon Hill. Please circle the date and plan on visiting Boston on May 22.
MSADA Dealer Support Programs Re-Approved for 2019 – Are You Using Them? Since 2014 your Association has administered a program in which we subsidize the cost of certain compliance efforts dealers go through at their stores. Through this program, we have supported dealers’ use of Fisher Phillips for employment law services, such as pay plans, employee handbooks, etc.; KPA and Furrh Associates for OSHA and environmental compliance; and O’Connor & Drew for tax compliance and cybersecurity protections. Your Board of Directors voted at its December board meeting to continue these programs for 2019, with a vendor addition: Piper Consulting was added to the list of workplace/ environmental services vendors. In addition to the compliance assistance program, your Board voted to reauthorize the community outreach program for 2019, in which we are assisting dealers’ charitable efforts up to $1,500 annually. Directors made a change here, too: Beginning this year, each single/anchor store will be eligible for a $1,500 reimbursement, and each additional member
MSADA affiliate store will be eligible for an additional $250 per store, with a cap of $2,000 total for a dealer group (anchor store + two affiliates). Do not hesitate to contact us regarding these programs so you do not lose out on these services supported by your Association.
NADA 2019 Workforce Study Now Open The NADA/ATD 2019 Dealership Workforce Study is now open. Your chance as an NADA/ATD member to participate ends on April 12. Dealers are encouraged to enroll now at www.nadaworkforcestudy.com to participate in the 2019 Dealer Workforce Study. NADA provides this annual report so both car and truck dealers can use it to fine-tune employee compensation and benefits and promote retention. Only through robust participation does this report allow for valuable information and statistical analysis. Following dealer feedback, NADA has redesigned the survey to obtain more insight into compensation plans for variable operations positions. This will only further assist participants and users of the study in their decision-making with regards to pay structure. All participating NADA/ATD members will receive a complimentary custom report for their store. This exclusive report will give you a Workforce Management Scorecard that compares and ranks your dealership against peer-level dealerships on key metrics related to compensation, retention, and turnover. In addition, all participants will receive a complimentary copy of the 2019 Dealership Workforce Study National and Regional Trends in Compensation, Benefits and Retention Report. Participants will also be granted access for up to one year to the Database Search Tool where they will find all of the data submitted for each of the past workforce studies. Enrollment closes on April 12, 2019. Once enrolled, the deadline for submit-
ting all required data is May 15, 2019. For any questions please contact Joe Fleming at 703-448-5891 or workforcestudy@nada.org.
2019 Dues Invoices In January your Association sent out 2019 dues invoices to all our dealership and associate members. Our members’ dues help fund the Association’s activities on their behalf, including our lobbying on Beacon Hill and in Washington, our member counsel services, and our education and training activities. Over the last several years we have witnessed quite a bit of economic disruption in our industry, including governmental over-regulation. More than ever, our dealers need a strong MSADA. MSADA will continue to lead on the various issues that threaten the viability of our dealerships. We will strive tirelessly to keep you informed of developments in our industry and how they will play out in Massachusetts. These efforts also include working closely with NADA to better serve our members. Our strength lies in our members. With your continued support and membership renewal, we can build on our current foundation and enhance your Association’s core purposes of communication, advocacy, and education.
Save the Dates: Annual Meeting May 3, Boston Dealer Hall of Fame Ceremony October 2-4, Chatham We have a number of important events lined up for our members in 2019. Your Association will conduct this year’s Annual Meeting on Friday, May 3, at the Mandarin Oriental Hotel in Boston. We are lining up a number of exciting industry speakers for the day. We have sent out via emails and snail mail our invitation and registration materials. We will again this year provide a hotel room at the Mandarin for any member dealer who desires one for Friday evening. Be sure to www.msada.org
register before hotel space runs out. Finally, in order to honor those who have been titans within our industry in Massachusetts, your Association will conduct its Second Annual Dealer Hall of Fame ceremony October 2-4 at the Chatham Bars Inn on Cape Cod. We will be sending out nomination materials by email and snail mail. If you know a dealer or dealers who should be recognized in our next Hall of Fame class, please submit the nomination form to us when you receive it. Criteria upon which dealers should base their nominations should include, but not be limited to, the following: commitment to the industry and the Association; time in the business; community involvement; and overall positive impact on the industry. We are looking forward to our members’ input to help with the selection process.
MSADCF Auto Tech Scholarships Available Applications for the Massachusetts State Auto Dealers Charitable Foundation’s 2019-2020 Auto Tech Scholarships are now available on our website at www. msada.org. The Foundation’s auto tech scholarship program awards scholarships to eligible applicants for use at post-secondary educational institutions that offer auto tech training programs. Since its inception in 2003, the Foundation has awarded over $1 million to more than 200 students. A scholarship award is worth $6,000-$13,000 over two years for each student selected. Ten years ago the Foundation’s scholarship program expanded to include not just manufacturer-backed programs but also general automotive technology programs at a greater number of colleges in the Massachusetts area. This gives dealers an even greater chance to capitalize on a highly-skilled base of potential employees. To obtain additional information on the scholarship program, contact Jean Fabrizio at MSADA at (617) 451-1051 or by e-mail at jfabrizio@msada.org. The application deadline is Friday, May 24, 2019. t
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Troubleshooting
MSADA
VW Settlement Could Spur Mass. Truck/EV Market By Peter Brennan, Esq. MSADA
Staff Attorney Many moons ago, this column detailed the legal fallout from the Volkswagen emissions scandal, where the company admitted to using software designed to cheat emissions tests on several “clean diesel” vehicle models across the Volkswagen, Audi, and Porsche brands (collectively, “Volkswagen”). To put the charges behind them, Volkswagen entered into a massive settlement with the U.S. government and several states and paid a record number of fines and penalties. Since the settlements were finalized the states involved have been working with the federal government to establish the parameters of the trusts that will oversee the disbursement of the funds. In what should be a spark to the Massachusetts market for both electric vehicles as well as new heavy and medium-duty trucks, the Baker-Polito Administration recently announced that it had finalized the beneficiary mitigation plan related to the Volkswagen case settlement, under which Massachusetts received a total of $75 million. The Massachusetts Department of Environmental Protection is currently accepting applications for two grant programs, a $7.5 million Open Solicitation Grant Program and a $5.5 million Massachusetts Electric Vehicle Incentive Program (MassEVIP), which are part of a multi-phase approach by the state to spend the VW settlement monies over fifteen years. In August, when a draft of the beneficiary mitigation plan was released, your Association submitted written testimony that encouraged MassDEP to dedicate a significant portion of the settlement towards the replacement of older heavy-duty and FEBRUARY 2019
medium-duty diesel trucks and engines in order to get the most “bang-for-its-buck” in terms of emissions reductions compared to dollars spent. Your Association also advocated for settlement monies to be used towards fleet purchases of electric vehicles and funding for electric vehicle infrastructure, within the parameters allowed by the settlement, in order to jumpstart the market for these vehicles. Under the $7.5 million Open Solicitation Grant Program, applicants may apply for up to $500,000 in competitive funding to replace either an older medium-duty or heavy-duty diesel vehicle with an equivalent new diesel, alternate fuel, or electric version, or replace the engine of a diesel vehicle. Eligible diesel vehicles include medium and large trucks, school buses, transit buses, and shuttle buses with 2009 and older model year engines. Applications are due March 18, 2019. Interested applicants can find further information on the Open Solicitation here: www.mass.gov/how-to/applyfor-a-vw-open-solicitation-grant. The expanded MassEVIP program is designed to encourage ZEV adoption in the Commonwealth and offers grants to property owners and employers of up to $50,000 per address to install light-duty electric vehicle supply equipment for public fleets, workplaces, or the general public. Massachusetts cities, towns, state agencies, and public colleges and universities can also apply for a grant to purchase electric vehicles for their fleets or install charging stations. Interested applicants can find further information on the MassEVIP programs here: www.mass.gov/guides/volkswagen-diesel-settlements-environmental-mitigation. Under the terms of the settlement, states are prohibited from directing settlement funds toward rebates for zero emission vehicles, which is somewhat unfortunate based on the current state of the Commonwealth’s MOR-EV rebate program. As was previously covered in this column and in a legal bulletin, the state announced a major change to the MOR-EV rebate program in December 2018. As of January 1, 2019, the program
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provides 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) are no longer eligible for any rebate. Future funding for the MOR-EV program, even in its limited current state, may also be at risk. The program has always relied on funds from Regional Greenhouse Gas Initiative auctions, but the Baker administration has not committed to continuing this arrangement indefinitely, and a permanent funding source for the rebate program has not been identified by the administration. The legislature has likewise been unable to pass legislation that would create a permanent funding source for the MOR-EV program, although several bills have been filed for the 2019-2020 legislative session that would fund the rebates through a broad carbon tax. Perhaps the Baker administration is confident that ZEVs have turned a corner and will no longer require a rebate to move off dealer lots. In the fourth quarter of 2018, alternative powertrains (hybrid, plug-in hybrid, and battery electric vehicles) broke the market share record in Massachusetts, garnering almost six percent of the new vehicle market. However, this total was buoyed by a five hundred percent jump in battery electric vehicle registrations between Q2 and Q4, where the segment jumped from 0.5% market share to 2.5%, likely due to Tesla filling as many Model 3 orders as possible before the new year. Whether this momentum will carry into 2019 remains to be seen, but the phase out of some federal tax credits and trouble with the MOR-EV program look like dark clouds on the horizon. Hopefully, the Volkswagen settlement grants can provide an umbrella. 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.
LEGAL
MSADA
By Joseph W. Ambash and Jeffrey A. Fritz
The Anatomy of Employees’ Legal Claims This column usually focuses on developments in labor and employment law and offers practical guidance for minimizing risk. This month, we wanted to give you an overview of what typically happens in the event one of your employees (or former employees) pursues a claim against your dealership.
Letter from Employee’s Lawyer Most often, an employer learns of a legal claim in the form of a letter from the employee’s attorney. Regardless of the merits of a claim, most aggrieved parties can find counsel to represent them, as employees’ attorneys regularly take cases on a contingency basis, meaning they take a percentage of any money obtained with little or nothing up front or along the way. The letter typically outlines the employee’s version of what happened and the lawyer’s legal theories, and makes a demand (for money) to resolve the claims. We strongly recommend employers not respond to these letters directly (unless they have in-house counsel), and that they hire an attorney to represent them at this point.
Administrative Charge If an employee claims he or she was discriminated against, harassed, and/or retaliated against, the employee cannot simply just file a lawsuit. The employee first must exhaust his or her “administrative remedies,” which usually means filing a charge of discrimination and/or retaliation with the Massachusetts Commission Against Discrimination (“MCAD”) and/or the U.S. Equal Employment Opportunities Commission (“EEOC”). The employer receives notice from these agencies of the charge (which normally proceeds at the MCAD) and is afforded an opportunity to respond. An opportunity sometimes exists for mediation, and the MCAD typically engages in investigation to determine whether reasonable cause exists to support the employee’s claims. Assuming the matter stays with the MCAD (and in the event of a reasonable
cause finding), the matter then proceeds to discovery (i.e., depositions, interrogatories, requests for documents) and, ultimately, to an evidentiary hearing before an MCAD hearing officer. This process typically lasts a couple of years and can be very expensive. That said, employees can (and if represented by counsel, generally do) request that the MCAD and EEOC release jurisdiction so they can file their claims in court. They typically do this to request a jury trial, which generally is riskier for employers, and to try to obtain larger awards.
Litigation In the absence of an enforceable arbitration agreement, employees routinely file lawsuits against employers in the Massachusetts Superior Court, although some cases are filed in federal court, in the United States District Court for the District of Massachusetts. Regardless of which forum, the general procedure is very similar. The matter customarily begins with the filing of a Complaint against the employer, which is served along with a Summons upon the employer. The employer then has a certain amount of time to respond. During such time, the employer must engage counsel—ideally, early on—to prepare an appropriate response. While the opportunity to file a motion to dismiss the employee’s claim may exist, most frequently, a firm basis of dismissal at that early stage may not, and the matter must proceed to discovery, which can be very expensive, depending on a number of factors, including how aggressive the employee’s attorney is. At the conclusion of discovery, an employer typically has an opportunity to file a motion for summary judgment, which, in effect, asks the Court to dismiss the case at that point for lack of sufficient evidence. In the event an employer is unable to obtain summary judgment, the matter then ultimately proceeds to trial, either before a judge or jury as fact finder, unless it settles before. In the event the employer and employee www.msada.org
have entered into an enforceable arbitration agreement, the matter then, in lieu of court, should proceed in a private arbitration proceeding. The arbitration process is somewhat more streamlined than the court process but, frankly, not by much in most cases. Moreover, summary judgment frequently is not an option in arbitration; cases either are resolved through settlement or proceed to an evidentiary hearing in front of an arbitrator or a panel of arbitrators. Regardless of in which forum an employee pursues his or her legal claims, the process typically takes at least a year, more frequently several, and can be very expensive.
Preparation Starts Now The time to start preparing for claims by employees is not after they have been made, but before. The time is now. Have you had your pay plans reviewed for compliance with state and federal law? Do you have appropriate HR oversight of your employment practices? Do you have adequate avenues for employees to raise concerns? These are just a few of a number of questions employers periodically need to be asking themselves. In litigation, attorneys ultimately have to play the cards they are dealt. The better the hand you can give them, the better the results are likely to be. 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
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DEALER SERVICES
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RACE TO THE FINISH COVER STORY MSADA
Dealer of the YEAR
Don Sudbay By Jeff Breeze
Walking into a car dealership, there is one scent that is so redolent Crayola made it into scratch-and-sniff crayons and air fresheners have adopted it. “New Car” may be the expected smell when stepping inside Sudbay Chysler/Dodge/ Jeep/Ram, but instead it is a greeting of the Fourth of July full of barbecued meats that overpower the vehicles. It is something Don Sudbay and his brother Dave have done every Presidents’ Day weekend as long as he can remember, “back when the day was known as Washington’s Birthday.” Dave is manning the grills and keeping a consistent supply of chicken, ribs, hamburgers, and hot dogs in serving trays, along with nearly every side dish someone might want. “We have some customers who came here every year for Washington’s Birthday just to see what new vehicles we have,” Don Sudbay said. On a blustery, snowy day, there is a little more space at the tables, since nobody is getting a decent test drive in these conditions. The Cape Ann community does show to support Sudbay, as they know how much he gives back to Gloucester and the surrounding towns. The admiration is mutual. FEBRUARY 2019
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A Community Pillar
Just in case the meal was not enough, those that venture into the adjacent property Sudbay Chevrolet/Buick/Cadillac/GMC walk out with a half-gallon of Cherry Hill Farm ice cream. “One year we decided to skip the ice cream since it was a cold February, and, boy, did we hear it,” Sudbay laughed. Though his father had purchased Gloucester’s Pontiac/Cadillac/Buick dealership in 1965 and he had worked there through his youth, Don Sudbay had not “That to me planned to become a car dealer. Initially setting off to the Univeris one of the sity of Vermont with dreams of nice things becoming a doctor. He switched about being a his major to economics and business administration. He was lookdealer, that ing for a job at General Motors you really feel simultaneous to the energy crisis in 1974 that had GM laying off responsible much of its workforce, never mind for your hiring. The GM district manager for Sudbay’s father planted the employees and suggestion that the solution might their families.” be as easy as bringing Don back home to work at the dealership. “I graduated from UVM on a Saturday and drove my car out to Flint, Michigan on a Sunday, to go to dealer son school as it used to be called,” Don Sudbay recalled. “I was out there for a month, came back here, and started out as a salesperson, made my way to sales manager, and a lot of the things we learned at school I started to implement. Then, after three years my father had some health issues and was told to rest and stay in Florida for winters. So I am 26 and running the place.”
Sudbay established himself well on a foundation that included a focus on the service shop where he worked growing up, and the body shop, in addition to the sales floor. Those strong pillars of business allowed Sudbay to thrive, and he participated in the community serving as president of both the Rotary Club and the Chamber of Commerce. He also serves on the Rockport Council of Aging and as a board member of the North Shore United Way, a charity that he still matches contributions by any of his employees. In 1992, the Sudbays bought both a local Chrysler dealer and a Jeep/Chevy/Oldsmobile dealer who had financial problems during that recession and combined the three stores into two. The thing he may wind up most remembered for is that in 2003, Don Sudbay bought a bowling alley. “There was a candlepin bowling alley that opened in 1960, probably a quarter mile from where I grew up. I spent a lot of time there as a kid. I was 8 or 10 years old and saw the place being built. I was there every day watching them build it, and I ended up bowling as a kid. I really enjoyed it; I was in leagues.”
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RACE TOOF THE FINISH DEALER THE YEAR It was in rough shape, and word was that the space was going to be transitioned into a storage facility. “I went down there and I could not see that happening,” Sudbay said. “This is a recreation place; this is a place where kids come. Guys go down there and bowl in leagues. It is a good place, but it had been run down. I ended up buying the business and totally refurbishing it. And I did not do it for the money. I did it because it was something that our community needed.” Sudbay put lots of work and money into the lanes, and still enjoys visiting. Upon Don’s entering, the new owner tells him Cape Ann Lanes has passed the next stages in hopes to add a brew pub in part of the space, the latest expansion after the arcade and concessions. Most of it remains the same since his wife Jeannie and daughter Chrissy ran Cape Ann Lanes until they sold it. “We ran it for six or seven years, my wife did and I was helping out. So I was in the bowling business for a while. We did it over in such a way that this place will last forever. The work we did saved the bowling alley and got it back on its feet.” Sudbay is proud of the clanging and ricocheting sounds crashing around him he stands behind the lanes in the guts of the operation. Pointing out all of the things they replaced, improved, and simplified, he showed that everything in the alley operated on some ingenuity and basic mechanical principles. With motors and belts and balls and pins dancing around him, Sudbay smiled admiring it all and said, “It really is a Willy Wonka operation.”
Down the Road While the bowling alley was a fun outlet, Don Sudbay has always been a car man. It was so in his blood that he did not even know his grandfather was the manager of Gloucester Garage back in the 1930s. “Back in the ‘50s when I was 3 or 4 years old, I would sit on the porch, and as cars went by, I would name the brand. I knew every car, every make and model that went by. You could not do that today,” Sudbay smiled. “I guess you can tell I love cars.” Sudbay served as the Massachusetts representative on the NADA Board of Directors between 2012-2018, even running for Chairman during that term. Laughing that he was glad not to win, Sudbay is proud he ran and is disappointed that there have not been any contested elections since. “In the debates, I brought up a lot of issues that had not been brought up before.” “Don has been a rock-solid part of the Massachusetts auto FEBRUARY 2019
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dealer community for decades,” MSADA Executive Vice President Robert O’Koniewski said. “In addition to the commitment he has shown his business and his community, the dedication he has put into representing our interests at the national level have kept Massachusetts at the front of important policy discussions even after his NADA tenure. The Association could not have picked a better TIME Dealer of the Year candidate.” Sudbay brought dealer-manufacturer issues to the fore and still is ardent in his views “The biggest thing we need to keep an eye on is the distribution system and we need to really be vigilant that the franchise system remains intact. There has always been a tendency by some of the manufacturers to think that maybe they can eliminate dealers and go direct to customers.” That is where much of his focus is today as his son Brad Sudbay and son Tim Sullivan along with brother Dave manage the operation. (The brothers have worked together for nearly four decades). “Right now I am more involved with strategic issues, dealing with financial issues, and looking at dealing with the manufacturers. I am the guy who is looking at what is down the road here, and I am here to help the other guys.” There are things to worry about, such as the make-up of the service department, as consumers migrate to self-driving and autonomous vehicles, which is a big factor facing the future of the industry. “Used to be that you could take someone who was a dropout out of high school and teach him to do oil changes. Then he’ll move up to brakes and then he can move on to engines because he’s able to work with his hands. If you could work with your hands you’d be successful. And now working with your hands is a secondary thing. You’ve got to work with your head.” Every year the service department spends more time learning and reading manuals compared to diving in and getting greasy. Sudbay is in the right place for someone who loves cars and has grown up in the Cape Ann area and wants access to skiing, boating, and golf. His love for the area is as apparent as it is for the vehicles he sells and the family he has around him and the job that he does. “We are like any other dealer. We have been able for all these years to provide wonderful well-paying jobs to a lot of people. That to me is one of the nice things about being a dealer, that you really feel responsible for your employees and their families.” t
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NEWS NEWS the NEWSfrom from Around Around the Horn Horn from Around
NEWS the Horn MSADA
BOSTON
Mercedes Reveals New SUV at Herb Chambers Showroom The brand-new 2020 Mercedes-Benz GLE made its New England debut at Mercedes-Benz of Boston’s state-of-theart showroom in Somerville. On St. Valentine’s Day, Mercedes-Benz of Boston, a Herb Chambers Company, held an exclusive unveiling of the brand-new 2020 completely redesigned SUV. It is currently the only 2020 GLE on display in the region. Herb Chambers, President of the Herb Chambers Companies, greeted Pictured (from left to right): Jeff Davis, the excited crowd General Manager at Mercedes-Benz of before the GLE was Boston; Herb Chambers, President of the Herb Chambers Companies; Alan McLar- revealed to a standen, CEO of the Herb Chamber Companies. ing ovation. CEO Alan McLaren was also in attendance and was joined by Mercedes-Benz of Boston General Manager Jeff Davis. Davis announced that interest in
FRAMINGHAM
Herb Connolly Acura Celebrates 30 Years Acura representative Matthew Phillips stopped by Herb Connolly Acura to bestow a plaque commemorating three decades in business with the Connolly family. MSADA President Chris Connolly, Jr. accepted the honor on the dealership’s behalf.
the GLE is extremely high, with more than thirty cars already sold at the dealership. Delivery of the new model is expected in March. The fourth generation GLE has redesigned exterior styling and Mercedes progressive all-new SUV interior design – highlighted by 12.3” digital instrument clusters, a 12.3” touchscreen media display and a new generation steering wheel with touch controllers. FEBRUARY 2019
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NEWS from Around the Horn
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NORWELL
Pontiac Dealership With No New Pontiacs Pontiac disappeared Halloween 2010, the primary victim of General Motors’ financial woes and bankruptcy. More than eight years on, Joseph’s Pontiac in Norwell remains. The family-owned dealership does not have any new Pontiac models on the lot, but the business has survived by dealing in used cars and relying on the service center. The store has a 2008 replica of an old Pontiac Blade sign hanging from the building, with the original having been donated to the American Sign Museum in Cincinnati only when replacement parts were no longer available. There are gorgeous photos of the dealership in its former glory when the lots were full of new vehicles. Instead, the fleet of old Pontiacs on display makes it seem like you have stepped onto the set of a historical reenactment. The dealership opened in 1928 with Herb Joseph as owner. Herb’s two sons Art and Philip took over. The current operations are managed by Art’s children, Art and John, who are the the third
generation to run the dealership. The dealership found success by focusing on service, which included remembering customer names and preferences. It built a loyal following, serving as a gas station, service center, and dealership for the town. Another key to the dealership’s success was ordering cars other area dealerships would not. Vehicles would be ordered with upgraded wheels, air conditioning, or FM radio—just a little something to set the new vehicles apart from others. The dealership would stock Firebirds with minimal options to keep prices low and would order stripped-down versions of others to help keep costs down for budget-conscious buyers. More than 90 years after the dealership first opened, the gas station and service center continue to thrive. Returning customers are keeping the business alive, and the dealership’s lengthy history shows how far excellent customer service can go in making a business successful.
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NEWS from Around the Horn BOSTON
CAMBRIDGE
MIT Professors Sue Ford Over Fuel Injection Technology Three professors patented a way to combine port and direct fuel injection. Ford is allegedly using the technology without paying a royalty. The engineers from the Massachusetts Institute of Technology (MIT) allege that Ford engines have their patented process for combining port and direct fuel injection, and the automaker isn’t paying for the technology’s use. They have now filed a lawsuit against Ford in federal court and have requested an unspecified royalty for every vehicle sold containing the technology, according to Bloomberg. Leslie Bromberg, Daniel R. Cohn, and John B. Heywood came up with the method of combining port and direct fuel injection that allegedly creates a better fuel-air mixture. After coming up with the idea at MIT, the university gave them ownership of the patent, and they established a company to license the technology. The men contacted Ford in 2014 about licensing the patent to the automaker, but their offer was rejected the offer. However, Ford later began using a combination of port and direct fuel injection. For example, in 2017 the company touted the tech’s introduction to many of its engines, including the 3.3-liter naturally aspirated V6, 2.7-liter EcoBoost V6, 3.5-liter EcoBoost V6, and 5.0-liter naturally aspirated V8. The engineers allege that Ford’s implementation of combined port and direct injection is their patented method. The lawsuit claims that the automaker knows it is in the wrong, too. Ford’s chief intellectual-property officer allegedly met with the men in April 2015 and asked them to agree “not to assert the patents against Ford,” according to Bloomberg citing the lawsuit. In exchange, Ford would have worked with Bromberg, Cohn, and Heywood to market some of their other technologies. The court will need to decide whether Ford’s method of integrating the two forms of fuel injection is really the same as these engineers’ patent, because combining port and direct injection is not exclusive to Ford powerplants. For example, General Motors’ LT5 supercharged V8 in the Corvette ZR1 uses it, and the technology shows up in many of Toyota powerplants, including the V6 in the latest Avalon and the boxer mill in the GT86 and Subaru BRZ.
FEBRUARY 2019
The Light is Much Too Bright NuTonomy has been testing its autonomous vehicles on the streets of Boston since June 2018 without any accidents. The biggest problem so far has come from solar glare making it tough for some self-driving cars to read whether traffic lights are red, yellow, or green. MIT spinout NuTonomy said that on some recent occasions, the “low evening sun and solar glare” have occasionally kept its autonomous vehicles from being able to read the color on traffic signals. “In a sense, the challenge for an AV’s sensors resembles the challenge for human drivers: It can be difficult to perceive the state of a traffic light while staring into the sun,” the startup said in a quarterly operations update to Boston transportation officials. The company explained its self-driving systems are equipped to keep the cars from blowing through a red light because they assume every traffic signal is red until it confirms there is a green light. And if there is a safety risk in waiting for that to happen, human drivers take over. The issue adds another challenge to the list of human-simple, machine-difficult driving skills that companies developing autonomous vehicles still have to overcome. (People can put on sunglasses or use a sun visor to manage the blinding sun. Machines need an engineered solution.) The complexity of seeing traffic signals and interpreting how to respond has long been an issue for computers. For example, some have
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MSADA read brake signals as red trafstreets in the Seaport neighborhood and “in “In a sense, the challenge fic lights and others have seen the periphery of South Boston,” the compafor an AV’s sensors patterns of leaves on trees as ny said. It also ran its cars in manual (hugreen lights, according to reman-driven mode) throughout the Seaport resembles the challenge searchers. and South Boston to collect data for mapping for human drivers: it can To counter the glare issue, purposes. be difficult to perceive NuTonomy said it has started No cars were involved in any collisions enhancing its computer vision during the testing in the quarter, and there were the state of a traffic light algorithms by collecting lowno unanticipated “failures or disruptions” in the light data that can pick up col- while staring into the sun,” same time period, the company said. ors from the traffic signals. During the fourth quarter, human drivers “We have also made hardware adjustments, such as changing in the vehicles occasionally took over control of the AVs when the exposure of a camera or adding glare shields,” the startup emergency vehicles were nearby, when police were directing said in the update. “In the meantime, we have trained our safety traffic, when construction vehicles obstructed the lane of travel, drivers to be aware of this issue and know when to take over when oncoming vehicles or bicycles violated lane boundaries, manual control preemptively.” or when other vehicles were “exhibiting erratic behavior.” NuTonomy, owned by automotive technology company ApNuTonomy claimed that, with improvements in its software tiv, has had permission from Boston authorities to operate its and additional technology development, its cars will be able to autonomous vehicles throughout the entire city since June 2018. handle those situations without a human driver. It did not share That said, its cars stuck to their familiar routes during the fourth a projected timeline. quarter of last year, running in autonomous mode on certain t
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ACCOUNTING
MSADA
A Simple Plan
Why you need a plan you actually use every day
Mark Dow
O’Connor & Drew, P.C. Mark Dow, CPA, MST is a principal at O’Connor & Drew, P.C. and has serviced and advised auto dealers for over thirty years.
He can be 617-471-1120 or mdow@ocd.com reached at
When you hear the term strategic plan, your instinct may be to run for the door. What does a strategic plan really mean, and will it improve my business results? Certainly, having such a plan makes you sound sophisticated and allows you to check that box when asked the question by a “consultant.” A more realistic approach to having a strategic plan is to have a Simple Plan that you can diligently work towards, every single day. Success is often achieved by simply doing those things that you know need to be done. You should put most of your effort towards the items that will make the biggest impact. Execute the plan. Floorplan Interest: It is not debatable that this cost is now double or triple what it was a few years ago. Order inventory carefully. Set rules regarding pricing based on days in stock. Turn difficult product around fast (a better deal isn’t coming) and let used cars “go” after a certain number of days; no exceptions. Payroll: Measure payroll as a percentage of gross profit in each department. If it is too high, determine if the cause is the personnel or the lack of sales. Whatever the underlying cause, make the necessary adjustments to get it in line. Internet: Employ the latest technology. Be sure that technology is user friendly and that all leads are handled timely and FEBRUARY 2019
with the appropriate follow-up. Leadership: Who’s managing in the trenches? Ensure that someone in management is very familiar with the financial and operational status of each department. Familiarity with the details will allow you to quickly understand how external changes will impact your results. This requires a certain level of discipline and persistence. People: “The grass isn’t always greener.” That’s a phrase that cuts both ways. Spend time to properly train and work closely with your current employees, and you will get the most out of them. Far too often, the “new” service or sales manager who is going to save the day doesn’t work out and the cost of a sputtering department and getting another hire up to speed is enormous. Businesses frequently
this critical area. A well-run service and parts department can be the cornerstone of a dealership. By its nature, the net income from these departments is more predictable and can cover much of the dealership’s overhead. Be sure to pay attention to this area, as it is often overlooked. Proper labor rates, manager approval for policy adjustments, parts matrix pricing, the right mix of technicians, and inventory control are all important factors to watch. Keeping CSI scores high is a key element, as this can impact factory incentive payments. Also, be sure you are maximizing your manufacturer reimbursements on warranty parts…we can help you with this one. Sales: In the end, it is true that you often cannot expense your way to a profit. Most dealerships run lean, and the cost
“Success is often achieved by simply doing those things that you know need to be done. You should put most of your effort towards the items that will make the biggest impact. Execute the plan.” analyze the different parts of their business, make certain adjustments, set goals, measure the results, and then find little to no change. Having good people always helps; having the right people in the right seats on the bus can make all the difference. Be sure to understand the realistic operating metrics that each department should be achieving and then work to find the right people to manage each area. Service & Parts: Pay close attention to
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consciousness from the Great Recession is generally still in place. You must be open for business and invite the consumer into your showroom – either in person or via the internet. Growing sales can be a challenge; however, it is often the biggest difference maker. Review your plan on a regular basis. Once you identify any gaps or shortfalls, be sure to act quickly. Sound simple? t
DEALER PROFILE
A Few Minutes with … Acton Ford’s David Abatsis This month we are introducing a new feature – “A Few Minutes with…” – to profile one of our member franchised dealers found across the Commonwealth. We decided to start right at the top of the list – David Abatsis of Acton Ford. David started as a lube technician at 16, eventually taking on a Lincoln Mercury dealership in Acton in 1990. After adding on a Ford franchise, he split that store off in 2007, which he runs today with his son Chris operating as the store’s general manager. David finds joy in being part of his local community. After starting as a technician, he sees the changing nature of cars and service as the biggest factors in the future of the industry.
What is it that you love about this business? It is always changing. There are always constant changes, and it is never boring. You come to work every day and you have a set plan, and that plan is usually out the window by 2 o’clock. Sometimes sooner. And I like that part of the industry. I also like the customer part with our clients and service in particular. It is a real opportunity to meet people in the community and engage them and make them part of our family. My father was a service manager for a Lincoln Mercury store and had a small piece of the store as well. I did not really have any car background, and he passed away when I was 16. I took a part-time job at a car store. I worked as a lube technician and then a regular automotive technician. Back then in the ‘80s, they started coming out with a lot of electronics, and nobody wanted to touch that stuff. It was a great starting point. I worked at a Lincoln Mercury store in Wellesley, and one day they asked me to run their service department. Then they offered me their fixed ops, and eventually I was able to get a dealership.
What is the biggest challenge you face today in the industry? Right now, it is the technician force aging. We are seeing a lot of defection and a lot of people leave the industry and not many coming back in. If we even get new people in this business, they are wondering how that career is going to go for them because of autonomous vehicles, electric vehicles, and BEV vehicles coming on in force, and what does that really mean for the future of the automobile technician?
If you could start again what would you do differently? I would have spent a lot less time being a micromanager and a lot more time planning. As a younger owner of the business, when I was 40 or so, I really wanted to carry everybody on my back. Today, I realize it is not about that. It is about managing our business to make sure we have a good, stable future.
What do you think the industry will be like in 20 years? Certainly a lot more BEV vehicles, a lot more vehicles that are built on the same platform with different variations on that. I think once the infrastructure for BEV comes along in 10 or 15 years, you are really going to see that take over the industry, and the I think once the gasoline engine as we know it toinfrastructure day will not be the same player. for BEV comes You talk about a car that has BEV along in 10 or technology, there are 140,000 dif15 years, you are ferent moving parts whereas a car really going that we are building today has a to see that couple thousand. With that, it is take over the going to change what we do in industry, and service and what we do in sales the gasoline and the longevity of the vehicle. engine as we The affordability issue, for everyknow it today one in this industry to provide a will not be the product that the client can actualsame player. ly afford, is a big deal.
MSADA is important to our community: They represent us on Beacon Hill. They do an excellent job of bringing value up to the legislature. For example, what they did with the inspection machines recently was really a great win for a lot of dealers that did not have that ability to have those. They have protected us on our franchise laws and articulated what the concerns are for us in business. Without that we would not have any representation. It would be just a few dealers talking to their representative, and that does not necessarily work. They do a wonderful job in trying to make everybody see the value in these stores and what they do for the community. t www.msada.org
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Patrick Manzi
NADA Senior Economist
Boyi Xu
Economist
FEBRUARY 2019
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TRUCK CORNER
ATD Salutes Our Leaders
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.
FEBRUARY 2019
February is the month to show our love and appreciation, so here at ATD, I would like to salute my fellow ATD leaders, past and present. Each seat at ATD carries enormous weight and responsibility, and I am privileged to be working with some of the most passionate men and women in our industry. In that regard, I want to acknowledge one of the most dedicated ATD leaders I have had the pleasure of knowing and learning from: Immediate Past Chairman Steve Parker. While Steve’s term has ended, the mark he made during his six and a half years on the board remains. Steve had a hand in the advent of the ATD Strategic Plan and led us through the start of a technological evolution in our industry. As chairman, he increased communication among all ATD members and industry stakeholders. Personally, it will always be my honor to have picked up the ATD torch where Steve left off. This association will forever be influenced by his tireless leadership and enthusiasm for our industry and all ATD members. If our past leadership is any indication of our greatness, then I am pleased to introduce our current ATD leaders to you. The ATD board upholds the central mission of our association: To serve and represent the needs of truck dealer members through federal advocacy, industry relations, education, and other key services. This is a mission that we all take to heart and work to advance every day. Your elected board members work hard to solidify ATD’s mission each year. I am pleased to announce that Steve Bassett is our new ATD vice chairman. And Kim Mesfin, president of Affinity Truck Center in California, is our new Volvo line representative. Kim
has the distinguished honor of being one of the six nominees for 2019 Truck Dealer of the Year. Remember that every ATD leader is your advocate. And as truck dealers from around the country, we are fueled by our love of the business and integrity, professionalism, and community. I encourage all our members to put names to faces and build a relationship with the ATD board of line representatives. Visit our ATD leadership page, and send us your feedback throughout the year. It is our job to listen to you, so let us know about your successes and challenges; stay up to date on truck dealer issues with our core publications, ATD Insider, ATD Performance Measurement Guide, and ATD Truck Beat; and join us at the annual ATD Show and other industry events. ATD is also your bridge with manufacturers and suppliers, so I encourage everyone to participate in the dealer attitude surveys that we circulate twice a year. The greater the participation from our members, the more meaningful our presentations are with the OEMs and suppliers. As I said on the ATD Show stage, seeing the grit in all of you inspires me each day. It is a great honor to serve all our members through the highs and lows of our industry. I am forever grateful for our ATD leaders—past and present—who have influenced me and are wholly dedicated to the entire ATD family. Finally, our annual ATD Congressional Fly-In is June 19-20 in Washington, D.C. Please consider attending to lobby your member of Congress as we work to eliminate the federal excise tax on heavy-duty trucks. We need your dealer input in order for us to be successful. t
I encourage all our members to put names to faces and build a relationship with the ATD board of line representatives.
Massachusetts Auto Dealer www.msada.org
NADA Update
By Scott Dube
Moving Forward as One 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 we get deeper in 2019, NADA has more on its plate than ever. You will see the broad overview from 2019 NADA Chairman Charlie Gilchrist, below, who has operationalized NADA into a new acronym. NADA is ready to get into the weeds on a number of issues. We started the year with a renewed commitment to taking back the narrative on the Military Lending Act, which will mean working with the Department of Defense and Congress to push back on meddling that is doing the opposite of what they think they are accomplishing. Then there are storylines such as autonomous vehicles, for which studies have shown upwards of 90 percent of Americans are not looking to give up personal ownership. These are just two of many, many issues playing out in the halls of power currently. Stay tuned for more as an already busy year marches on.
ness realities, develop comprehensive and competing plans, and defend the franchise system. Accountability. We hold ourselves and others responsible and accountable, and work with our NADA team to deliver results for each member. Dealers are getting hit from all sides, and NADA is the force that unites us against the obstacles we could not overcome individually. Today, we face an evolving business model with intense pressure on our sales departments. At the same time, our service departments, which are busier than ever, have the responsibility to get cars back on the road safely and efficiently. And whether it’s preserving affordability of new vehicles, battling against proposed industry tariffs, or getting skilled technicians through every dealership’s doors, we must tackle our issues as a team. Each and every member is what makes NADA great. It is a comfort that we’ve never been alone in our challenges, but we need your engagement more than ever. Give us your feedback. Be active and involved in our latest Workforce Initiative for auto technicians. Try to host your member of Congress at your dealership if you haven’t already. It’s time we all roll up our sleeves and take accountability for the future of our industry. One voice has carried us through more than a century in the automobile industry. One NADA will carry us through the next.
By Charlie Gilchrist, NADA chairman
Even With USMCA Exemptions, 232 Tariffs Remain Biggest Threat to Vehicle Prices, Jobs, Consumers
It’s time we stop thinking of NADA simply as an organization we belong to. If you are part of NADA, it’s not just a membership; it’s a badge of honor. Because all of us are, in fact, NADA. One NADA: It is a mantra that I want you to remember this year. As dealers, we embody powerful traits. But as one association, these individual traits come together and form our character. Our character defines who we are; how we respond when things get tough; and how we rely on each other through the highs and lows. During the 2019 NADA Show in San Francisco, I passed out a card that symbolizes how we are one NADA: Nurture. We nurture and develop our dealers and train them for excellence. We set high expectations and inspire others. Advocate. We work with state and metro association partners to advocate for policies—with manufacturers, the government, and the media—that help local dealerships, their employees, and customers flourish. Deliver. We deliver results, deal positively with our busi-
Even after taking into account the mitigating effects of the new United States Mexico Canada Agreement (USMCA), tariffs on autos and auto parts under Section 232 of the Trade Expansion Act of 1962 would still be extremely detrimental to consumers and the U.S. economy and cause significant vehicle prices increases and job losses, according to new research by the Center for Automotive Research (CAR). In July 2018, CAR found that across-the-board tariffs on autos and auto parts would lead to substantial increases in the price of all new vehicles sold in the U.S. – along with significant decreases in both annual new-car sales and auto industry jobs. CAR’s new analysis provides 10 scenarios based on different combinations of U.S. trade policies and deals including: Section 232 autos and auto parts tariffs; the USMCA; current (as of Jan. 21, 2019) Section 301 tariffs on Chinese imports; and current Section 232 steel and aluminum tariffs. If the USMCA is implemented in its current form, other tariffs continue unmodified, and the Section 232 auto and
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auto parts tariffs are imposed – even with exemptions for Canada, Mexico and South Korea – CAR estimates that: - As many as 366,900 U.S. jobs will be lost, including as many as 77,000 franchised dealership jobs; - U.S. light-duty vehicle prices will increase by $2,750 on average; - U.S. new light-duty vehicle sales will drop by up to 1.3 million units per year; - Many consumers will be forced into the used car market; and - The cost of maintaining and repairing vehicles will go up. In fact, CAR found that broad-based Section 232 autos and auto parts tariffs would still be responsible for more than 90 percent of the total economic harm caused by implementation of the collective trade policies currently being pursued. “This analysis confirms that broad Section 232 tariffs on autos and auto parts still present the biggest trade-policy threat to consumers and the U.S. economy,” said NADA President and CEO Peter Welch. “NADA understands and
Regrettably, however, almost all of the immediate media coverage failed to place these statistics in the proper context. As a result, the emerging media narrative about what the Fed data actually showed was entirely wrong. Here are the relevant facts that were missed by many. First, annual new vehicle sales increased steadily from 2010 through 2016 and fell only slightly in 2017 and 2018. As new vehicle sales have grown, so too have used vehicle sales. With growth in vehicle sales comes growth in new auto loans. In other words, while the number of loan delinquencies have gone up, so too have the number of loan originations. As the authors of the report themselves note, “The level of loan originations has been commensurate with auto sales, with a steady 50 to 60 percent financing share of combined new and used vehicle purchases—a percentage surprisingly stable in our sample period, which suggests that car loans have been tracking the growth seen in motor vehicle sales.” Secondly, the authors provide historical data on the total number of borrowers with an auto loan and the number of
“This analysis confirms that broad Section 232 tariffs on autos and auto parts still present the biggest trade-policy threat to consumers and the U.S. economy” Peter Welch NADA President and CEO
appreciates the Administration’s attempts to level the trade playing field and eliminate unfair trade practices, but expansive Section 232 auto tariffs are the wrong tool for the job because they will lead to dramatic price increases, depressed vehicle sales, and job losses.” Welch, who testified on the topic last July before the Department of Commerce, again encouraged the Administration to avoid imposing broad-based tariffs on autos and auto parts. “We should continue to work together to address genuine trade concerns, but without hurting American consumers and small businesses in the process,” Welch added.
Auto Loan Delinquency Doesn’t Suggest the Sky is Falling; It Suggests the Exact Opposite By Patrick Manzi, NADA Senior Economist Over his 30-year career, Nick Latino has held just about every job in the service division of a new-car dealership, from porter to service advisor to service manager. “It’s good to know every position so when you’re managing someday, you know exactly what to expect from that individual,” said Latino, fixed operations director at Toyota Hackensack. FEBRUARY 2019
borrowers 90 or more days delinquent on their payment. The data show that at the end of 2010, 8.8% of borrowers were 90 or more days delinquent. Compare that to the end of 2018 when the share of delinquent borrowers was a full percentage point lower at 7.8% of borrowers. Again, context is important and it is important to consider the entire market when examining changes in segments of it. Third, the authors note that the increase in delinquent borrowers have primarily come from younger and less creditworthy sectors of the population. This makes sense as these buyers are more likely to be offered loans with higher rates as they tend to have less credit history. These buyers are also more likely to be dealing with other additional debt such as student loan debt. The total student loan debt balance has grown at roughly the same rate as the auto debt balance from 2010-2018 and represents a significant chunk of the debt portfolios of these younger groups. Statistics are at best meaningless and at worst misleading if they are not viewed in the correct context. In this case, the proper context was there, but it was unfortunately overlooked by many reporters. The resulting headlines were certainly attention-grabbing, but they weren’t at all accurate. t
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