June 2015 MSADA Auto Dealer

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

June 2015 • Vol. 27 No. 6

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

The Cutting Edge

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

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St a f f D ir e ct 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 Marta Argueta-Guerra Administrative Assistant/ Membership Coordinator mguerra@msada.org Aut o D e a l e r M A g a z i n e Robert O’Koniewski, Esq. Executive Editor Catherine MacDonald Editorial Coordinator macdonaldcs8@gmail.com Subscriptions provided annually to Massachusetts member dealers. All address changes should be submitted to: MSADA by e-mail: mguerra@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 Blum Shapiro, 21 Boston Herald, 32 Ethos Group, 25 G&M, 23 Lynnway Auto Auction, 20 Nancy Phillips, 23 O’Connor & Drew, 31 Southern Auto Auction, 22 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

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

Ta b l e o f C o n t e n t s

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From the President: The Next Level THE ROUNDUP: Are You Staying On Top of Your Compliance?

TROUBLESHOOTNG: Keeping Prize Promotions Legal LEGAL: The Importance of Honesty and Accuracy in Employee Performance Reviews ACCOUNTING: The Consumer Financial Protection Bureau and Responding AUTO OUTLOOK ACCOUNTING: Sales/Use Tax on Loaner Vehicles Revisited Cybercrimes TRUCK CORNER: American Truck Dealers Move the Industry Forward

16 Cover Story: The Cutting Edge

20 24 26 28 30

NEWS From Around the Horn DEALER SERVICES: Profits, Production, or People? nada update: Price Competition Among Dealers Benefits Car Buyers NADA MARKET BEAT SOUND OFF: Foreign Investors are Ready for Retail Join us on Twitter at @MassAutoDealers www.msada.org

Massachusetts Auto Dealer JUNE 2015

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from the President

MSADA

The Next Level Make this Summer about growth

By Scott Dube

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MSADA President

s Massachusetts auto dealers head into Summer, we find ourselves being pulled in ten directions at once. Somewhere between running the business and enjoying the season with our families, I want to encourage you to also keep your eyes on your dealership’s future.

When we think about growth, often we think about our next store, or next two stores, or maybe renovating a space to make more room. Since we’re in Summer, most of our focus is on moving that metal, as it should be. But it’s an important time to be able to think at least two steps ahead. And while the results of that kind of planning are evident at stores, such as the newly re-opened Ira Toyota of Danvers (see our cover story on page 16), how we manage growth in staffing and other areas can be just as important as that next big move.

Staffing is liable to be one of the most overlooked aspects of what we do as businesses. With an average dealership employing 50, and some topping out at more than 200, it can be difficult to make sure we’re getting the right people in the right place. While many of us have fine-tuned our knowledge of how best to go about building a team that drives a dealership forward, it can be a difficult task and an ever-evolving one. The talk about the generational differences between Boomers, Gen-Xers, and Millennials is not just pseudo-science -- each of those groups has grown up in a vastly different world and brings their own set of strengths and weaknesses to the table.

Given all this, we have vendors who are experts at helping us sort it out. On June 24, Ethos Group, our endorsed F&I provider, conducted an an intensive, one-day F&I and leadership workshop at the Verve Hotel-Crowne Plaza in Natick. “Leadership Summit 2015” was designed to give dealer principals and their key managers leadership tools to drive your performance to new height. We hope you took advantage of this complimentary event.

As many of you saw at our Annual Meeting back in May, they have taken a new approach to staffing solutions and the Association is pleased to be offering their services to you in a variety of ways. Be on the lookout for more coverage of the June event in our next issue.

TIME Dealer of the Year Nominations Open Every year, we take time to recognize one of our own as a nominee for TIME magazine’s annual Dealer of the Year program. The broad experience represented by the candidates we’ve chosen the past few years is astounding, and I’m excited to accompany whomever we choose to the NADA Convention to receive some hardearned recognition.

I encourage you to nominate a dealer who fits the mold of the best of the best today. More information and a faxable nomination form is available on page 2. t

JUNE 2015

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 John Hartman, Ira Motor Group

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 Scott Dube, Bill Dube Hyundai 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 James G. Boyle, Tuck’s Trucks

NADA Director

Don Sudbay, Jr., Sudbay Motors

Officers

President, Scott Dube Vice President, Chris Connolly, Jr. Treasurer, Jack Madden, Jr. Clerk, Charles Tufankjian

Associate Members

MSADA A ssociate M ember D irectory Albin, Randall & Bennett Barton D. Haag (207) 772-1981 American Fidelity Assurance Co. Lennox Cornwall (304) 702-7399 American Tire Distributors Pamela Lafleur (774) 307-0707 AutoAlert Don Corinna (505) 304-3040 Auto/Mate Dealership Systems Troy Potter (877) 340-2677 Bank of America Merrill Lynch Dan Duda and Nancy Price (781) 534-8543 Bellavia Blatt Andron & Crossett, PC Leonard A. Bellavia, Esq (516) 873-3000 Blum Shapiro John D. Spatcher (860) 561-4000 Boston Globe Mary Kelly, Tom Drislane (617) 929-8373 Burns & Levinson LLP Paul Marshall Harris (617) 345-3854 Cars.com Heidi Allen (312) 601-5376 CDK Global Chris Wong (847) 407-3187 Construction Management & Builders, Inc. Sarah Macomber (781) 246-9400 CVR John Alviggi (267) 419-3261 Dealerdocx Brad Bass (978) 766-9000 Dealermine Inc. Karen Parmenter (800) 304-3341 x5179 DealerTrack Ernest Lattimer (516) 547-2242 Downey & Company Paul McGovern (781) 849-3100 EasyCare New England Inc. Mike Douglas (770) 246-9724 Ethos Group, Inc. Drew Spring (617) 694-9761 F & I Resources Jason Bayko (508) 624-4344 Federated Insurance John Ballard (859) 312-9896 First Citizens Federal Credit Union Joe Ender (508) 979-4728 Fisher & Phillips LLP John Donovan (404) 240-4236 Joe Ambash (617) 532-9320

Gulf State Financial Services Cliff Lang (713) 580-3143 GW Marketing Services Gordon Wisbach (781) 899-8509 Huntington National Bank John J. Marchand (781) 326-0823 The Institute For Business Excellence Bill Napolitano (508) 643-2299 John W. Furrh Associates Inc. Kristin Perkins (508) 824-4939 KEEPS Corporation Darcy Silver (718) 309-6133 Key Bank James Q. Moretti (781) 558-5132, Mark Flibotte (617) 385-6232 KPA Michael Hurd (207) 400-6535 Leader Auto Resources, Inc. 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 Micorp Dealer Services Frank Salkovitz (508) 832-9816 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 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 Quik Video Jack Gardner (617) 221-5502 R.L. Tennant Insurance Agency, Inc. Walter F. Tennant (617) 969-1300 Reflex Lighting Ping Weiner (617) 269-4510

Resources Management Group J. Gregory Hoffman (800) 761-4546 Reynolds & Reynolds Marc Appel (413) 537-1336 Robinson Donovan Madden & Barry, P.C. James F. Martin, Esq. (413) 732-2301 Samet & Company John J. Czyzewski (617) 731-1222 Santander Richard Anderson (401) 432-0749 Schlossberg, LLC Michael O’Neil, Esq. (781) 848-5028 Sentry Insurance Company Eric Stiles (715) 346-7096 Shepherd & Goldstein Ron Masiello (508) 757-3311 Silverman Advisors, PC Scott Silverman (781) 591-2886 Solect Energy Development Kristen Brandt (781) 733-0223 Southern Auto Auction Tom Munson (860) 292-7500 Sprague Timothy Teevens (800) 828-9427 SunTrust Bank Michael Walsh (617) 345-6567 Taino Consulting Group Herby Duverné (617) 797-9316 Target Dealer Services Andrew Boli (508) 564-5050 TD Auto Finance BethAnn Durepo (603) 490-9615 TD Bank Michael M. Lefebvre (413) 748-8272 TrueCar Pat Watson (803) 360-6094 US Bank Vincent Gaglia (716) 649-0581 Wells Fargo Dealer Services Christopher Peck (508) 314-1283 Wicked Local Media Massachusetts Jay Pelland (508) 626-4334 Zurich American Insurance Company Steven Megee (774) 210-0092

www.msada.org Massachusetts Auto Dealer JUNE 2015

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The Roundup

Are You Staying On Top of Your Compliance?

By Robert O’Koniewski, Esq. MSADA Executive Vice President Follow us on Twitter - @MassAutoDealers A franchise dealership is probably the highest regulated business in this country, being accountable to scores of federal and state laws, regulations, and agencies. Making sure your operations remain in compliance with all these laws and rules is a daunting task.

Throughout the year your Association sponsors any number of seminars and webinars designed to improve our member dealers’ compliance activities. These are on top of our writings, such as legal bulletins, guides, and manuals, we issue periodically in print and electronically and make available on our website (www.msada.org).

Under the Obama administration, with its overzealous regulatory mission, dealers are facing two major, continual regulatory challenges coming out of Washington: the Consumer Financial Protection Bureau’s (CFPB) allegations of discrimination when calculating dealer compensation for arranging auto financing and the Federal Trade Commission’s (FTC) enforcement program involving dealer advertising.

Further, our state’s Attorney General maintains continued scrutiny over dealer advertising practices and is not shy to pursue hefty fines and compliance agreements against alleged violators.

The potential legal and financial liability for dealers posed by the recent actions of the CFPB, the FTC, and the Massachusetts Attorney General are considerable. Protect your dealership by learning how to mitigate the risks by attending our seminars and reading our writings.

Another tool our members can take advantage of is our legal compliance program we unveiled one year ago.

At that time, we announced a unique program designed to assist our members in their compliance JUNE 2015

Massachusetts Auto Dealer www.msada.org

with employment laws as well as occupational and environmental safety laws. This program is underwritten in substantial part by your Association in order to reduce costs and encourage all of our members to take advantage of this opportunity.

We initially established a two-part subsidy program to support your use of several compliance services offered by certain vendors: • Employment Law Compliance Program, by Fisher & Phillips, which includes pay plan review, employment handbook/application review, and management training.

• Occupational/Environmental Safety Law Compliance Program through two vendors – John Furrh Associates and KPA. Recently your Association’s Board of Directors voted to expand our legal compliance subsidy program to include sales tax compliance assessment and IT threat and security assessment services provided by our accounting partner, O’Connor & Drew. To sign up, contact OCD’s Ray Lofstrom by phone at (617) 471-1120 or by e-mail at rlofstrom@ocd.com.

To take advantage of our previously offered employment and occupational/environmental safety law opportunities and begin the process, including pricing information, simply contact: • At Fisher & Phillips – Attorney Joe Ambash: (617) 532-9320 or jambash@laborlawyers.com; • At Furrh Associates – Jennie Cormier: (508) 824-4939 or jcormier@johnwfurrhassociates. com; • At KPA – Rob Stansbury: (484) 326-9765 or rstansbury@kpaonline.com.

The MSADA subsidy will remain the same – for each chosen service, MSADA will cover $500 for a single point/anchor store and $300 per affiliate.

MSADA This program is set to expire on December 31, so do not delay in signing up.

Laws and regulations are getting more complicated every year. You can no longer gamble and try to go it alone. We urge every member to take full advantage of this program to keep our dealer body compliant with all pertinent employment and workplace rules.

New Earned Sick Time Law Starts on July 1 As previously detailed in numerous bulletins, seminars, webinars, and other writings, there is a new Earned Sick Time (EST) Law, which takes effect on July 1, 2015.

In order to implement this law, after several versions of draft regulations, the Massachusetts Attorney General, Maura Healey, issued final regulations just before their start date.

This law is the result of a ballot initiative that the voters passed at last November’s election. Under the law, all employers with 11 or more employees must grant their employees up to 40 hours of paid Earned Sick Time in a calendar year. The EST must be given to all employees, including full time, part-time, seasonal, and temporary employees. (For employers with ten or less employees, the accrued time is unpaid.)

Here are some basics of the law: • Employee accrues a minimum of one hour for every 30 hours worked, up to 40 hours of EST per calendar year; • Employees may use the time to care for own, child’s spouse’s, parent’s, or inlaw’s physical or mental illness, injury, or medical condition; attend routine medical appointments; or address psychological, physical, or legal effects of domestic violence; • If leave is foreseeable, employee must make “good faith effort” to give advance notice – for unforeseeable leave, notice must be as soon as practicable; • Employers can require written verification that an employee has used EST for allowable purposes after using any amount of sick time, but medical docu-

mentation can only be required after 24 missed work hours; • If an employee is exhibiting a “clear pattern” of taking leave on days just before or after a weekend, vacation, or holiday, the employer may discipline for misuse unless the employee provides personal verification of authorized use; • Employers cannot interfere with, restrain, or deny the right, or use as a negative in an employee’s evaluation or employment decision.

The regulations contain a safe harbor provision that makes special accommodations in 2015 for employers who had, as of May 1, 2015, a paid time off policy that provided at least some employees the right to use at least 30 hours of paid time off during calendar year 2015. Employers may choose either to use the Safe Harbor or to achieve full compliance by July 1, 2015, and may treat different groups of employees separately in this regard. Employers taking advantage of this Safe Harbor provision for some or all of their employees must be fully in compliance with the Earned Sick Time Law and all final regulations by January 1, 2016.

Finally, as part of the law’s implementation, the Attorney General has published its “Earned Sick Time Notice of Employee Rights”. [Link to http://www.mass.gov/ ago/docs/workplace/earned-sick-time/estemployee-notice.pdf ] This poster must be displayed with all your other required workplace posters – namely, in a conspicuous location accessible to employees in every establishment where employees work, and a copy must be provided to employees. As a result of lobbying by the business community, the poster provides some very helpful provisions for employers, including: • “Sick time cannot be used as an excuse to be late for work without advance notice of a proper use.”

• “Use of sick time for other purposes is not allowed and may result in discipline.”

• “Employees must notify their employer before they use sick time, except in www.msada.org

emergency.”

• “Employers may require employees to use a reasonable notification system the employer creates.”

• “If an employee is out of work for 3 consecutive days OR uses sick time within 2 weeks of leaving their job, an employer may require documentation from a medical provider.”

Moving forward, dealers should consider the following: • Employers who are eligible for the “Safe Harbor” must determine whether it is in their best interest to fully comply with the law on July 1, or to take advantage of the “Safe Harbor” through the end of 2015. Employers who have begun drafting new policies based on the EST law and draft regulations must review those policies to ensure that they are fully in compliance with the final regulations.

• Employers should consider how they plan to communicate these changes to their employees. On July 1, all employers should display the Attorney General’s EST Notice and distribute copies of this notice to their employees.

• This article is merely a summary of certain provisions of the final regulations. Applying these rules to individual policies requires careful legal analysis.

Fisher & Phillips, our employment law compliance partner, provides an Earned Sick Time Compliance Program, which can help you navigate the challenges of the new law. To learn more about this compliance program, please call Fisher & Phillips at (617) 722-0044 or email Amber Elias at aelias@laborlawyers. com or Joe Ambash at jambash@laborlawyers.com.

State Budget Plods Along As we go to press, the Legislature’s budget conference committee has yet to resolve the differences between the House and Senate’s FY2016 budget proposals.

Each chamber has a bottom-line of $38.1 billion, which is close to the total first proposed by the Baker Administration in March. However, there are scores of difMassachusetts Auto Dealer JUNE 2015

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MSADA

The Roundup ferences between the House and Senate documents, which must be resolved by the six-member conference committee, consisting of three Senators and three Representatives. Your legislative team worked throughout each chamber’s process to make sure there were no provisions adversely affecting auto dealers.

Although the intramural skirmishing we have reported on this year took no rest during the budget process, the Senate seems to have won the latest round.

As you may recall, as soon as the Senate approved its FY16 budget plan, the House sent a request to the Supreme Judicial Court for an advisory opinion on the constitutionality of tax policy changes included in the Senate document. The state constitution requires that “money bills”, where taxes can be raised, must originate in the House. As defined by the legislative drafting manual, “money bills” are those that affect state tax revenue for general purposes. A “money bill” may either reduce general state tax revenue or increase state tax revenue.

The Senate budget would freeze the state income tax rate at 5.15 percent, thereby nullifying a 2002 law that calls for that tax rate to fall to 5 percent. The budget would also increase the personal exemption for income taxes and boost the state’s earned income tax credit. The Senate claimed the House opened the door to tax policy in the budget by increasing the conservation land tax credit, thereby providing the Senate with the opportunity to proceed with its own changes to tax laws.

The House disagreed – hence, the advisory opinion request to the SJC. Well, the SJC recently determined that the Senate action was proper; the House, in fact, with its proposed, albeit minor, tax changes, did create a “money bill” that opened the door for the Senate to address other taxes.

Regardless of this squabble, it does not mean the Senate proposals, or the House changes for that matter, will be in the final document. The conference committee will not complete its work by the beginning of the FY16 fiscal year, which starts JUNE 2015

on July 1. To accommodate the tardiness, the Legislature has passed and the governor approved a temporary spending plan to allow for the General Court to have a couple of more weeks to complete its book report.

ATD First-Ever Fly-In In conjunction with the American Truck Dealers (ATD) Board of Line Representatives summer meeting, approximately 30 truck dealers and state association staff gathered in Washington in mid-June for the first-ever legislative fly-in dedicated to medium- and heavyduty truck dealer issues. The ATD fly-in was focused on gathering co-sponsors for H.Con.Res.33, a concurrent resolution that would put Congress on record opposing an increase in the 12 percent Federal Excise Tax (FET) on heavy-duty trucks and trailers. As a member of the ATD Board, we met with Rep. Katherine Clark (D-Melrose), Niki Tsongas (D-Lowell), and Seth Moulton (D-Peabody), and staff for Rep. Richard Neal (D-Springfield), who sits on the powerful House Ways & Means Committee. Dealers are encouraged to contact their members of Congress to co-sponsor the resolution.

TIME Dealer of the Year 2016 It is that time of the year again. The highest honor bestowed on a dealer each year at the NADA convention is the TIME Magazine Dealer of the Year Award (TDYA). The process begins with nominations from each state. At MSADA we consider the state nominee so important that he or she is also designated as the “Massachusetts Dealer of the Year”.

Please help by nominating candidates for selection as the Massachusetts TDYA. Use the form on page 2 of this month’s magazine to nominate a worthy dealer.

Dealers may nominate him/herself or another dealer. Since your Association’s leadership does the selection at the state level, the members of the MSADA Executive Committee are not eligible; neither are the TDYA Recipients for the last four years nor current NADA directors,

Massachusetts Auto Dealer www.msada.org

including Scott Shulman, Brian Kelly, Ray Ciccolo, and Don Sudbay.

Please give this your careful consideration and e-mail me at rokoniewski@ msada.org with your nomination. Nominations must be received at our office by Friday, July 17. Thank you for your assistance on this matter.

Next Level Leadership and F&I Summit, June 24 On June 24, at the Verve Hotel in Natick, your Association sponsored an intensive, one-day F&I and Leadership workshop that was hosted by our endorsed partner, Ethos Group. This complimentary event was open to all of our valued dealer members and was designed for Dealer Principals, General Managers, Finance Managers, and General Sales Managers. We had an excellent turnout for the day and received considerable positive buzz from our members. We look forward to scheduling similar events in other parts of the state in the coming months. Check out our cover story in next month’s magazine.

Sen. Tom Kennedy, RIP On Sunday, June 28, State Senator Thomas Kennedy, a lifelong Brockton Democrat, passed away after a lengthy illness at the age of 63. Sen. Kennedy had served in the Massachusetts General Court since 1983 – first, in the House of Representatives until 2008, and then in the Senate since 2009. He was re-elected to the Senate last November with 67% of the vote. In recent years, as the Senate Chairman of the Joint Committee on Consumer Protection and Professional Licensure, Sen. Kennedy was a voice of reason and professional temperament at a time when considerable legislative turnover brought less experienced officials into the Legislature. Sen. Kennedy always presented himself with class and intelligence through his years in both chambers. He will be truly missed as a quality individual, which is a rare thing in today’s political arena. t

Troubleshooting

MSADA

Keeping Prize Promotions Legal

By Peter Brennan, Esq.

MSADA Staff Attorney As our dealer members know, the franchise system benefits consumers by maximizing competition for their businesses. With roughly four hundred dealerships in the Commonwealth alone, car-buyers looking for a particular make and model have no shortage of options when it comes time to purchase a new or pre-owned vehicle. Dealers are forced to keep their prices as low as possible in order to compete, but low prices alone are sometimes not enough to acquire and retain customers.

In order to distinguish themselves from the competition, dealers use a variety of creative marketing methods and are responsible for some of the funniest and most effective radio, television, print, and online advertising today. Occasionally, a dealership will run a promotion centered on a prize, where potential customers can enter a drawing to win a prize simply by test driving a vehicle, stopping by the dealership to put their name in a hat, or some other method.

Whether the prize is a brand new car, a vacation, or something less valuable like an ipad, dealers need to be very careful when conducting a promotion involving a prize and raffle combination. In any prize giveaway that includes a raffle or other element of chance, the first step for the dealership is to avoid inadvertently setting up an illegal lottery.

Under Massachusetts law, for a pro-

motion to constitute an illegal lottery, three elements must be present: (1) the payment of a price, (2) a prize, and (3) some element of chance. “Payment” is defined in the Attorney General’s regulations as “providing money, property or anything of value” (940 CMR 30.03), with “anything of value” more concisely described as “consideration” later in the same regulations.

To avoid conducting an illegal lottery, dealerships that offer chance-based prize promotions must ensure that they do not require participants to provide anything that would constitute “consideration” as a condition to participating in the promotion.

This can be trickier than it may initially appear. Obviously, requiring a participant to exchange money for the right to enter the contest would violate the regulations. What about requiring a participant to test drive a vehicle at the dealership, or create a social media post that is favorable to the dealership, or simply provide the dealership with the participant’s personal information?

A test drive alone is unlikely to rise to the level of “consideration”, as the dealership receives little value from a person taking a spin in one of their vehicles.

One of the only direct opinions on the issue comes from the state of Texas, in which the state Attorney General determined that requiring entrants to test drive a car in order to be entered into a drawing for a new car did not constitute an illegal lottery under Texas law. Texas and Massachusetts have very similar laws on illegal lotteries, but the opinion would only control in a Texas court.

However, if a dealership is collecting a participant’s personal information as part of the promotion, either in conjunction with a test drive or separately, the legality of the promotion may depend on what the dealership plans to do with the information that it collects. If the dealership only uses the collected personal inwww.msada.org

formation to notify the winning entrant, then providing the personal information would likely not be interpreted as “consideration”. However, if the dealership plans to market to the individual using the personal information that they provided, or provide the personal information to a third party for commercial purposes, then providing the information could be construed as “consideration”.

Similarly, if a participant is required to create a Facebook, Twitter, or other social media post extolling the virtues of the dealership in conjunction with a test drive or separately, the dealership could be seen as having received some advertising benefit from the participant which may rise to the level of consideration.

In order to comply with state and federal laws and avoid any issues regarding the consideration required to enter the promotion, many contest promoters conspicuously provide would-be participants with an Alternative Method of Entry (AMOE). For an AMOE to be effective, it must have the same deadlines and eligibility requirements as the primary entries and be conspicuously advertised on all ads for the promotion.

A dealership that wishes to pursue a prize giveaway promotion that includes an element of chance should remember the following: (1) no consideration required, of any kind, to enter; (2) include an alternative method of entry; (3) as always, consult with legal counsel while designing the promotion. t

If you require any additional information regarding prize promotions or any other issue, 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.

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Legal

By Joseph W. Ambash and Jeffrey A. Fritz

MSADA

The Importance of Honesty and Accuracy in Employee Performance Reviews

Periodic written performance reviews can be very valuable, in real-time, for both employers and employees. They can serve as regular reminders to employees of an employer’s expectations of performance and as feedback to employees as to whether they are, in their employer’s view, meeting those expectations. Indeed, periodic performance reviews can recognize exceptional performance, indicate perceived performance deficiencies, and offer assistance, guidance, and suggestions for improvement.

Periodic written performance reviews (unfortunately all-too-frequently) must serve another purpose: as evidence in litigation of an employee’s job performance.

Performance reviews that do not honestly and accurately assess an employee’s deficiencies can be particularly problematic in that regard, especially where an employer claims such deficiencies persisted over time, notwithstanding repeated and reasonable coaching efforts.

Sometimes, managers simply would prefer not to have a difficult conversation or to point out an employee’s shortcomings in order to avoid confrontation, controversy, or bad feelings. When it comes to review time, they tend to sugarcoat, downplay, or outright ignore those employees’ performance deficiencies. Rather than giving honest feedback to the employee, such managers may focus on the employee’s strengths in the written review, and may think polite verbal coaching or guidance on model behavior may affect appropriate changes.

Such less-than-honest written performance reviews unfortunately are all-toocommon. Even more unfortunately, this behavior undermines the performance review’s fundamental purposes and can turn a potential benefit into a potential liability: Less-than-honest written performance reviews are, in many instances, less preferable to none at all.

An honest and accurate assessment is JUNE 2015

useful to put an employee on notice of any deficiencies and to offer thoughts on methods for correcting those deficiencies. If an employer fails to point out an employee’s deficiencies, the employee is much less likely to improve on those deficiencies. If an employee receives a review essentially communicating “all is good,” he or she most likely will continue doing what he or she is doing, and his or her performance will not get better.

A performance review that does not honestly and accurately assess an employee’s deficiencies also can engender resentment from better-performing employees, especially if their performance review results are related to their compensation in some way. If they do not believe their employer is recognizing and rewarding their strong performance, they are more likely not to work as hard or, worse yet, to leave for another employer who they think will give them the recognition and reward they think they deserve. Conversely, if such employees believe their employer recognizes and rewards their strong performance, they are more likely to maintain such strong performance.

Finally, a performance review that does not honestly and accurately assess an employee’s deficiencies creates a problematic record in litigation of an employee’s job performance, especially when an employee has been terminated for performance-based reasons. In litigation over a performance-based termination, an employer ideally can present a record both of (1) notifying the employee (repeatedly, if feasible) of his or her performance-based deficiencies and (2) the employee (repeatedly) failing satisfactorily to improve on that performance.

A well-crafted, honest, and accurate written performance review can do just that. But one that is not honest and accurate about performance deficiencies not only does not do that, but serves as evidence that could be

Massachusetts Auto Dealer www.msada.org

used to show the employee’s performance was not in fact deficient (because if it truly was deficient, certainly the employer would have pointed it out in his or her annual performance review, says the plaintiff’s attorney to the jury). Even if it was deficient, the employer never notified him or her it deemed his or her performance to be deficient (which is fundamentally unfair). Such evidence makes it easier for a plaintiff’s attorney to characterize the legitimate reasons for the termination as untrue and as merely a pretext for some illegal reason, such as discrimination and/or retaliation.

Managers need to know they cannot avoid difficult conversations or hurting their subordinates’ feelings by sugarcoating or ignoring deficiencies in their performance reviews. Honest and accurate performance reviews can help improve performance reward and maintain strong performance, and create a useful record of deficiencies if and when employees challenge adverse employment actions, such as termination, based on performance. Managers need to know their failure honestly and accurately to assess the performance of subordinates can result in greater risk of liability for both their employer, and themselves personally. t

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

Accounting

MSADA

The Consumer Financial Protection Bureau and Responding By Christopher S. Ernest CPA, MSM BlumShapiro Christopher E rnest, CPA, MSM, is a manager with B lum S hapiro , specializing in provid ing accounting , tax , and business advisory services to the automotive industry . B lum Shapiro is the largest regional business advisory firm based in N ew E ngland , with of fices in C onnecticut , M assachusetts , and R hode Island.

Automotive dealers were largely exempted from the Consumer Finance Protection Bureau’s (CFPB) jurisdiction after a long and tumultuous battle on Capitol Hill, but that has not stopped the CFPB from finding ways to regulate dealers.

In March 2013, the CFPB issued guidance stating that auto finance sources would be held accountable for discriminatory pricing resulting from indirect lending by dealerships. Their concerns surround “dealer-assisted financing” or “dealer participation”, the process whereby a dealership arranges an auto loan or lease with a bank, credit union, or other financial institution. These processes typically provide the dealer with the discretion to increase the rate offered by finance providers as compensation for acting as an intermediary between the institution and the consumer. The CFPB believes that dealers’ discretion with respect to rate mark-up, known as dealer reserve, creates an opportunity for discrimination and violation of the Equal Credit Opportunity Act (ECOA).

The CFPB guidance was issued without prior public comment or hearing and admittedly without fully analyzing its impact on consumers. In response, several bills have been introduced in Congress which

aim to nullify the guidance and require public participation in developing future CFPB guidance before they are issued.

The bills have garnered bipartisan support and the endorsement of the National Automotive Dealers Association (NADA), state dealership associations, and automotive dealers nationwide, but none has been enacted to date.

Meanwhile, Senator Elizabeth Warren (D-Massachusetts) is drafting legislation that would give the CFPB the authority it needs to oversee dealers as a result of their sale of financial products and loans. Given that Republicans control both chambers of Congress, passage of Senator Warren’s proposed bill in the near future is highly unlikely, but her remarks have certainly gotten the attention of dealers across the country.

Regardless of the outcome of the political efforts surrounding the jurisdiction of the CFPB and guidance issued to automotive dealers and lenders, dealers can expect more scrutiny of their activities whether by federal or state regulators or finance providers, who are under pressure from the CFPB to monitor dealers more closely.

Fortunately, NADA has developed and released a useful tool known as the “Fair Credit Compliance Policy & Program” (the Program) to help dealers navigate the scrutiny of rate participation policies and compliance with ECOA. The Program is based on a 2007 Department of Justice consent agreement that sought to address alleged rate discrimination at two dealerships.

Dealers using the Program establish a preset amount of compensation included in financing offers to every customer and would only offer discounts based on legitimate factors that can affect finance rates such as budget constraints, competition, or incentive programs, among others. Dealers would then document any deviation from the preset amount of compensation, an imwww.msada.org

portant procedure designed to respond to inquiries from lenders or regulators about their pricing practices. Through its fair credit website (www.nada.org/faircredit), the NADA has provided dealers with all of the guidance and templates necessary to successfully implement the Program, working with their legal counsel.

At the 75th Annual Meeting of the Massachusetts Automotive Dealers Association on May 1, 2015, NADA Chairman Bill Fox indicated that he has implemented the Program within his own Fox Dealership Group in upstate New York and strongly urged the Association’s membership to do so as well. He noted that this voluntary approach to compliance is designed to help dealers promote their commitment to fair credit compliance and demonstrate that they have taken a consistent approach to the pricing of consumer credit.

Further, public dealer groups have been receptive to the Program. Group 1 Automotive, for example, has indicated that it would implement the program across all of its stores, while Auto Nation, Inc., is piloting the program within selected stores.

There is no doubt that the environment surrounding dealer-assisted financing and participation is changing. Dealers should not sit on the sidelines watching the battles in Washington, but rather take a proactive approach to compliance management.

Implementation of the Program is a legitimate step towards compliance with ECOA and can provide protection against not only the CFPB, but also other federal and state regulators. The Program also puts dealers in a better position to respond when faced with a situation in which pricing decisions are being questioned and they could otherwise be accused of discriminating against a customer. Every dealer should review the resources made available by the NADA and consider implementation of the Program within their store(s). t

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AUTO OUTLOOK

JUNE 2015

Massachusetts Auto Dealer www.msada.org

MSADA

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Accounting

MSADA

Sales/Use Tax on Loaner Vehicles Revisited By Mitchell S. Halpern M itchell S. H alpern is a P rincipal at O’Connor & Drew, P.C., MSADA’s Tax Counsel.

One of the most frequent topics we addressed as tax counsel to MSADA is the sales/use tax treatment of loaner vehicles.

Nothing has changed in this arena since 2001. Due to the frequency of inquiries regarding loaners, however, I thought it would be a good idea to revisit the sales/ use tax implications of loaner vehicles in Massachusetts.

Background Registry of Motor Vehicle regulations prohibit dealer plates from being used on loaner vehicles. As a result, dealers are required to register these vehicles as the owner. The registering of loaner vehicles in this manner results in Massachusetts sales/use tax being due. Prior to 2001, this sales/use tax was to be paid in a single-lump sum payment. This resulted in significant sales/use taxes being paid on loaners that may only be in service for a short period of time.

For example, if a dealership has four service loaners available to its customers, each with a wholesale cost of $25,000, each placed in service for six months and then replaced by similar vehicle at the same cost, the sales/use tax cost to the dealer would be $12,500 ($25,000 x 6.25% x 4 vehicles x 2 for replacement after 6 months).

Massachusetts Directive: DD 01-01 As the result of efforts by MSADA and its tax counsel, O’Connor & Drew, P.C., JUNE 2015

the sales/use tax burden of maintaining a loaner fleet has been reduced. In 2001, the Massachusetts Department of Revenue issued a Directive (DD 01-01) addressing the tax on loaner vehicles.

This Directive provides: When a vehicle is removed from a dealer’s inventory and used as a free loaner to customers who are having their own vehicles repaired, the dealer has made a taxable sale or use of that vehicle and may elect to remit tax as follows: 1. Paid in a single payment at the time of registration; or 2. Paid on a monthly basis. Dealers elect-

by another 4 vehicles used for 6 months each)]. This is a savings of $10,250!

Implementing the Rules of DD 01-01 1.In order to utilize the monthly payment option, a dealer must register as a lessor. The loaner must be registered as a leased vehicle, and the dealer must apply to be placed on the Department of Revenue’s Motor Vehicle Leasing List by filing Form MVU-5A. 2. If a dealer elects to pay the tax due on loaner vehicles on a monthly basis, tax is due each month on each loaner vehicle,

In 2001, the Massachusetts Department of Revenue issued a Directive (DD 01-1) addressing the tax on loaner vehicles. ing this option must register the vehicle as a lessor and remit sales or use tax monthly based on the higher of the following: a. Actual monthly payment or other credit or compensation received from the vehicle manufacturer for providing the loaner vehicle to the dealer’s customers; or b. Five percent (5%) [now 6.25%] of three percent (3%) of the wholesale cost, including all accessories, of each vehicle designated as a loaner.

If the dealer elects to pay tax on vehicles designated as loaner vehicles on a monthly basis, tax is due each month on each such vehicle, regardless of whether the vehicle is actually loaned to the dealer’s customers during a particular month.

Applying the rules of this Directive to the example above, which cost the dealer $12,500 in sales/use taxes, would result in a total sales/use tax of $2,250 [$25,000 x 3% x 6.25% x 6 months x 8 vehicles (4 vehicles used for 6 months each replaced

Massachusetts Auto Dealer www.msada.org

regardless of whether the vehicle is actually loaned to the dealer’s customers during a particular month.

Please note that trade-in allowances are not allowed with respect to loaner vehicles. Some dealers that have paid the sales/use tax in full have claimed a tradein allowance when replacing the loaner vehicle. This is not allowed under Massachusetts law.

Abatement Opportunity If you have been paying sales/use tax on loaner vehicles in a single lump sum payment and wish to change to the monthly payment option, you may be able to apply for an abatement of sales tax paid for any tax periods still open under the statute of limitations, which is three years or 36 months.

For more details regarding the sales/ use tax on loaner vehicles, including a discussion of rental fleets, please refer to MSADA 2001 Bulletin Number 3. t

MSADA

TRUCK CORNER American Truck Dealers Move the Industry Forward

By Eric K. Jorgensen Eric Jorgensen is chairma n o f t h e A m e r i c a n Truck Dealers, a division of the N ational A u t omo b i l e D e al e r s Association, in McLean, Va. He is president and CEO of JX Enterprises, Inc. in Hartland, Wisconsin, which sells and services Peterbilt, Volvo, and Hino brand trucks. For more information, visit www.atd.org.

Every day thousands of the nation’s commercialtruck dealerships – our ATD members – meet the specific needs of their customers and provide service after the sale. America’s truck dealerships are part of an industry that moves more than 70 percent of all the freight tonnage annually and employs about 8.7 million people nationwide.

Moving heavy- and medium-duty trucks out of dealerships to America’s highways is not a singular effort.

We could not do what we do without our manufacturers, suppliers, and vendors who provide the products and tools required to move forward.

Trucks, which are cleaner, safer, and more fuelefficient than they’ve ever been, reached a near sales high in 2014. Sales of medium- and heavy-duty trucks (classes 4-8) increased to 406,707 units last year, a 15.6 percent gain from 351,737 units the previous year.

The success of our dealerships – and our customers – often depends on what happens in Washington, D.C. With federal regulations at an all-time high, we must reach out to members of Congress and government regulators and inform them about our challenges and work together on solutions. They have the power to regulate our dealerships, but they don’t really understand how our businesses operate. We must continue to change that.

We recently met with officials from the Office of Information and Regulatory Affairs (OIRA) to discuss the EPA/NHTSA Phase II commercial truck fuel economy proposal. OIRA, part of the White House’s Office of Management and Budget, reviews the economic impacts of regulatory proposals. During the meeting, we expressed our support for continuous improvements in vehicle fuel economy. We stressed our concern that trucks must be affordable and reliable and that past regulations have dramatically disrupted the market.

More than 60 members of Congress have visited truck dealerships since the ATD began its grassroots advocacy initiative to inform lawmakers and policymakers about the commercial-truck industry and how laws and regulations can have adverse consequences.

Last year, as part of an ATD ongoing initiative, we met with officials from the EPA and the Department of Transportation. We informed them about the truck dealership business and the negative impact that poorly planned and poorly executed regulations have on the industry.

We are making progress with meetings and phone

calls. If we don’t talk to the people who make decisions for us, someone else will. We must step up and make the effort. And we’ve included our partners in our efforts.

ATD hosts policy roundtables with our manufacturers and other industry representatives to share our concerns.

With all the rulemaking coming out of the nation’s capital, our message is simple: The rules affecting truck dealerships should be technologically feasible and economically practical.

Eventually every policy decision, regulation, or vote – whether related to taxes, highway funding, the environment, or road safety – leads back to our dealerships on Main Street.

Right now Congress is struggling to achieve a bipartisan agreement on funding our nation’s roads and highways. As Congress attempts to solve the Highway Fund revenue problem, there are those who would seek to simply raise the 12 percent heavy-duty truck federal excise tax (FET). We feel that this is an unacceptable proposal.

Any increase in the FET would depress new heavy-duty truck sales, and it would also delay the deployment of cleaner, safer, and more fuel-efficient trucks.

In fact, ATD has stepped up its efforts to fight the FET by supporting legislation, H. Con. Res. 33, filed by Reps. Reid Ribble (R-Wis.) and Tim Walz (D-Minn.), which would reaffirm congressional opposition to any increase of the excise tax on the sale of new heavy-duty trucks. It now has 24 co-sponsors.

The existing 12 percent levy on heavy-duty trucks is already the highest excise tax imposed by Congress on a percentage basis. With a highway bill and comprehensive tax reform on the agenda in Washington, H. Con. Res. 33 sends a clear message to Congress that hiking the FET on commercial trucks should not be on the table. Since all the heavy-duty trucks sold in the United States in 2014 were manufactured in North America, increasing the FET would hurt American jobs.

This is ATD’s No. 1 legislative priority. ATD strongly supports this legislation and is urging all its members to contact their congressional representatives and request their cosponsorship of H. Con. Res. 33.

Ideally, as Congress debates a Highway Fund solution, we are hopeful that eliminating the FET will be part of the conversation. This concurrent resolution helps to shine a spotlight on the need to reconsider this tax going forward.

www.msada.org

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Cover Story

The

“Ira Toyota is a wonderful community partner in Danvers. We were very thankful.”

— Gayla Bartlett, Kiwanis Club of Danvers President

JUNE 2015

Massachusetts Auto Dealer www.msada.org

MSADA

Cutting Edge With its grand opening, the new Ira Toyota of Danvers offers a glimpse of its community impact.

By Catherine MacDonald The gleaming Samurai sword presented to Toyota dealers on auspicious occasions represents more than a nod to the company’s home country. For Ira Toyota of Danvers, its presentation represented a new beginning both as a business and an increasing presence in a vibrant community.

While the dealership is owned by the national company Group 1 Automotive, the grand re-opening of Ira Toyota of Danvers came as an opportunity to share its close ties to the local community. The wide variety of customers, lawmakers, and community members who made up the 200 people present represented a crosssection of how the dealership’s relationships are being built brick by brick alongside its gleaming new facilities.

Each of those present, whether it was Massachusetts State Representative Ted Speliotis or the Kiwanis Club of Danvers or executives from Toyota and Group 1 CEO Earl Hesterberg, all play vastly different roles in the community. But the grand reopening served as a reminder of how small businesses -- even small businesses with 270 employees — bring the economic and relationship building power of international companies to bear for the benefit of one town.

And across all those sections, Chief Operating Officer John Hartman said the one theme is simple: “We’re always looking for opportunities.”

Rising to the Challenge

The push for a new set of facilities for Ira Toyota of Danvers came alongside the desire to have a more unified campus for the dealership group’s network for franchise facilities, which includes Subaru, Lexus, Porsche, and Audi services. www.msada.org

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The Cutting Edge

the same footpath for business,” he said. “We had to create new habits.

Three months in, he says the work has paid off. Both employees and customers now know their way around.

“It makes everybody really proud that we pulled together as a team,” he added. “We’re happy to see what this facility can produce.”

New Partnerships

General Manager Chuck Rocha says consolidation brings many advantages for customers. “It offers some leverage,” he said. “Putting everyone in one spot makes it easy to find.”

The year-long project involved renovations and renewal at all levels of day-to-day operations. The service bays were expanded to 60, and the size of the service drive doubled. The company put $11 million into a new showroom and bumped up sales desks from 30 to 50.

And that extensive list of changes brought with it unique challenges. Toyota representatives were consulted at every step of the process.

“It was challenging,” Rocha said, “But Toyota is very process-driven, and they had special consultants work with us on everything imaginable. We had committees for service, for sales -- every aspect of our business.”

As work finished up on construction, Rocha rallied the staff to get ready for their own new patterns. “There was no longer JUNE 2015

Massachusetts Auto Dealer www.msada.org

Along with the new digs came a renewed push for building relationships within Danvers. While Rocha says the dealership has always been civic-oriented, it’s always served a larger area both in customer base and its philanthropic efforts. So they were on the lookout for ways to contribute to the community.

“We didn’t want just a one-time event,” Rocha said. “We wanted something we can consistently give to and have an impact in the community where we operate.”

They didn’t have to look further than the used vehicles department -- where the son of a selectman pointed Ira Toyota toward the Kiwanis Club.

“Ira Toyota is a wonderful community partner in Danvers,” said Gayla Bartlett, President of the Kiwanis Club of Danvers. “They do a lot in the community, and when they came to the meeting and found out about the scholarship they decided to donate.”

The dealership gave the Kiwanis Club $5,000, which was split between a male and female student bound for university.

Danvers High School Class of 2015 graduates Sean Lundergan, who is bound for Washington University in St. Louis, and Harvard-bound Raquel Leslie were this year’s recipients.

“This was a huge scholarship for students to receive,” Bartlett added. “We’re excited to have a new partner, because

MSADA

Ira does so much in the community. It was an honor and a privilege for us to be considered.”

Bringing Business and Community Together

With both the new facilities and new partnerships intact, Hartman said Ira Toyota of Danvers and Group 1 are optimistic about the outlook for the business and community as a whole. MSADA Executive Vice President Robert O’Koniewski credits Hartman’s commitment to service on the Association’s board as Essex County Director as an example of how the dealership is looking out for its own business community as well as its hometown.

“John’s been managing many hats during these past several years, and overseeing a project of this size while also serving his fellow dealers on the Association’s board is quite a feat,” O’Koniewski said. “Seeing the grand opening, and the community excitement that came along with it, shows the ways all the roles dealers serve in strengthening communities and bringing them together.”

And Hartman says Group 1 is eager to see where the dealership and the company go next, whether in business or within the community at large, with General Manager Rocha adding, “It’s our community, too, and our people live here. We want to be as positive and active as we can.” t

By the Numbers

50,000: the square-footage of the dealership’s new collision center $5,000: given to the Kiwanis Club for student scholarships this year 270: total employees at the dealership 200: customers at the grand opening

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NEWS from Around the Horn from Around

NEWS the Horn

HOLYOKE

City Council Approves Hyundai Dealership Proposal Western Massachusetts dealership group owner Gary Rome successfully petitioned for zoning changes that paved the way for a new Hyundai dealership in Holyoke last month, after making the case for the jobs and income the store would generate for the city.

“I believe in Holyoke. I want to stay in Holyoke,” Rome told the City Council before its unanimous vote. “Holyoke is looking for a catalyst to get it going, and I want to be that catalyst. I believe this is the start of that process. The process was a little challenging. I’m in it for the long run.”

Rome has said his project will provide 50 new full-time jobs, some part-time jobs, thousands of dollars a years in property tax revenue, and an increase in employee payroll to more than $7 million from the current $4.6 million. His current dealership at 1000 Main Street will stay open.

Mayor Alex B. Morse supported Rome’s zone-change petitionand applauded the City Council’s support for “this great business.”

“The Gary Rome Hyundai expansion will generate tax revenue, create jobs, and contribute to overall quality of life for our residents. (The) vote demonstrates Holyoke’s continued commitment to its economic resurgence,” Morse told MassLive.com.

JUNE 2015

Massachusetts Auto Dealer www.msada.org

MSADA

ACTON

Bob Moran Profiled in Boston Globe Acton Toyota owner Bob Moran recently earned recognition from The Boston Globe from a Sunday profile feature on his life and career.

Moran grew up in an adoptive home and took a job as a gas station attendant and later a mechanic at a dealership early in his career. He has since gone on to own both Acton Toyota and other development interests in the area. In addition to citing his work with Lazarus House, a homeless shelter in Lawrence, Moran is asked for his key to success.

“The backbone of my business has always been service,” Moran told The Globe. “You have to remember that if it wasn’t for the customer, you’d be lost.”

The complete story is available on Boston.com.

NEWS from Around the Horn

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BOSTON

Boch Puts Up $20K for Lucille Ball Statue As controversy erupted over a sculpture of Lucille Ball erected in the “I Love Lucy” star’s Western New York hometown of Celoron, Boch Automotive owner Ernie Boch Jr. resolved to get it replaced. So he donated $20,000 to erect a new statue.

“I found her amazingly attractive, and I was drawn toward her growing up. I was such a crazy fan of the show — I actually loved Lucy,” Boch told The Boston Globe.

The current sculpture, located in Lucille Ball Memorial Park, earned scathing reviews and prompted the sculptor to apologize.

“But if you looked at the statue and didn’t know it was supposed to be her, you wouldn’t know it was,” Boch said. “It looks like something from a creature double-feature movie.”

Boch told The Globe that Ball should be honored with an “amazing statue,” which is why he felt compelled to call the mayor’s office in Celoron and donate the large sum of money.

NORTH ATTLEBORO

Nissan Village Installs First Electric Car Charger Ray Ciccolo, President & Owner of Village Automotive Group (left), with Mike Neville, the General Manager at Nissan Village (right), with a newly installed electric car charger at Nissan Village in North Attleboro.

The charger can power up vehicles in 20 minutes, and all cars are welcomed and encouraged to use the service for free. This is one of the first charging stations of its kind in the Northeast, and the only one in Southeastern Massachusetts. www.msada.org

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NEWS from Around the Horn BOSTON

Herb Chambers Serves Ice Cream at ‘Scooper Bowl’ Herb Chambers was a “celebrity scooper” at the Jimmy Fund’s 33rd annual “Scooper Bowl” to benefit the Dana Farber Cancer Institute at City Hall Plaza in Boston earlier this month. Chambers chose Ben & Jerry’s as his featured ice cream brand.

In March, the Jimmy Fund and the Herb Chambers Companies announced a year-long campaign designating the industry’s leading automotive family as an official partner of the Jimmy Fund that included an initial gift of $225,000.

The campaign supports Dana-Farber Cancer Institute through raising funds for adult and pediatric cancer care and research to improve the chances of survival for cancer patients around the world. The Herb Chambers Companies partners with the Jimmy Fund through numerous community initiatives like the “Scooper Bowl” to increase fundraising and awareness.

JUNE 2015

Massachusetts Auto Dealer www.msada.org

NEWS from Around the Horn

MSADA

BURLINGTON

Mercedes Dealer Shares Customer Tips Bernie Moreno, who founded the Ohio-based Bernie Moreno companies and owns Mercedes Benz of Burlington, shared some of his customer relations knowledge with CBT News in a recent profile piece.

The piece focused on Moreno’s experience in luxury sales, which comes with its own high-demand workplace culture. Moreno said helping employees find a balance is key.

“The work-life balance is critical,” Moreno said.

“If it’s tipped too far to the work side, you just burn out that team member. We don’t want our people to be burned out.”

The full story is available at cbtnews.com.

BEVERLY

2015 Ford Edge Secures Five-Star Overall Vehicle Score from NHTSA The redesigned 2015 Ford Edge is now available with a range of driver-assist features to help prevent accidents, but should the worst happen, the National Highway Traffic Safety Administration (NHTSA) has given the crossover SUV its top rating for crash protection. The 2015 Edge recently received a five-star Overall Vehicle Score in the NHTSA’s New Car Assessment Program.

“From performance to technology to interior materials, Ford has made the 2015 Edge better in every area, but safety was really top-of-mind for the engineers throughout the entire redesign,” said Jeff Klein, general sales manager of Thomas Ford. “Buyers can rest easy knowing that the new Edge has met some of the strictest criteria for crash protection in the industry, and if they want additional peace of mind, they can opt for new driver-assist features that breed confidence and convenience on the road.”

In addition to coming standard with a rearview camera and active glove-box knee airbag, the 2015 Edge is available with inflatable rear safety belts and active-safety technologies like adaptive cruise control, a Blind Spot Information System with cross-traffic alert and a Lane Keeping System. To help drivers avoid fender-benders while navigating parking lots and tight spaces, a newly available 180-degree front camera provides a clearer view around corners, while the enhanced active park assist can direct the Edge into perpendicular parking spots or even fully steer the vehicle during parallel parking. www.msada.org

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Dealer Services

MSADA

Profits, Production, or People?

By Rob Sneed Rob Sneed is a development rep and motivator for Ethos Group Consulting Services and the author of various articles in the automotive industry.

Ethos Group

provides franchised

automotive dealerships with an integrated program

of

results-driven

income-develop-

ment services, comprehensive training, robust recruiting and industry-leading products.

Today’s consumers are willing to pay for what they consider an exceptional experience. Think about it – why do consumers pay more when purchasing from Neiman Marcus or Apple? The products they sell are certainly exceptional, but the value of those products is influenced by the experience a customer has while making the decision to purchase an item.

Automotive dealers recognize this, and, as a result, they invest valuable resources to give their dealerships an edge in the marketplace. In order to make your dealership the most competitive, you must make a commitment to strengthen your most valuable resource: people.

Finding the right people and placing them in the right positions can be challenging.

Many confuse a willing applicant with an able one, so they rush the hire and hope for the best. This practice quickly leads to a culture of compromise that is plagued by turnover. Your customers see, sense, and respond to it negatively – and a negative experience will never produce a completely satisfied customer.

If you want to hire the best people, you need to have the best interviewing and hiring practices in place.

More Juice From the Squeeze Quality people do better work in less JUNE 2015

time, and are happier doing it. Based on our experience within the industry, we estimate that happy employees are up to 30% more productive than unhappy employees. Not only do happy employees produce more, we believe they are two times more likely to stay on-task, have six times more energy, use ten times fewer sick days, and intend to stay in their position four times as long as the unhappy employees.

You need to hire individuals that possess the professionalism, ability, and desire to make the difference that your customers deserve. You need to hire difference-makers.

Power of the Process Through our years of experience with dealerships, one of the observations we have made is that management in the automotive industry tends to rush the hiring process. They have a desperate need, and, because of it, they end up making a desperate hire. Profits will plummet when customers complain. In order to get new results, you have got to quit doing the same old thing.

Remember, while applicants are selling themselves to the dealership, the dealership is also selling itself to the applicants. Putting your best foot forward means you need to plan your steps. Structure a process that will ensure you leave an impression with able people, not just willing people.

Conduct Multiple Interviews A quality hiring process does not have to be a lengthy or complicated one. It has to be a focused one. Insist that an applicant interview a minimum of two to three times before extending an offer. Schedule multiple interviews during the same visit. By conducting three interviews, you will gain three perspectives on the person’s capability, but you will also show the applicant that you do not hire just anyone. It makes a potential job-offer more exclusive. People like exclusivity, because they do not want to be thought of as just another employee-number.

Use the dealership’s resources to get the most out of interview time. While the first

Massachusetts Auto Dealer www.msada.org

interview is introductory and should be conducted by a manager, the second interview can be more casual and conducted by a group of peers. If the candidate passes both rounds, the final interview should be conducted by the department head, who can then make an offer to the applicant.

Ask the Right Questions Interviews should be efficient, while indepth. You cannot afford to hire an individual simply because he or she looks the part and “talks the talk”. In today’s highly competitive market for top talent, you need to ask questions that determine the candidate’s competency and capacity for growth and development.

The purpose of an interview is to determine whether a candidate is qualified for the position, so the interviewer should ask nontypical interview questions that require the applicant to think quickly and communicate clearly. Rather than saying “tell me about yourself”, say “tell me about the decisions that have made you who you are today”.

Rather than “what are your strengths and weaknesses”, ask “give me an example of when you faced conflict and how you handled it”. Ask questions that reveal character and trainability rather than existing skills.

Great interviews are about what is communicated, not just about what is said. Evaluate communication skills, both verbal and non-verbal, watching for body language, attitude, and demeanor.

The Greatest Investment You cannot discount the impact that people have on the customer experience. Quality people allow a dealer to leverage their business in a way that pays dividends in the form of overwhelming success. When done properly, that leverage comes at an exceptionally low risk!

Profit, Production, or People? You can have it all. Focus on the people, and the production will increase your profits! Speed your business up, by slowing down the hiring process! t

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Protect Your Dealership Against Cybercrimes

Herby DuvernĂŠ Principal & CEO of Taino Consulting Group Hduverne@TainoCG.com

Matthew Riley

Operations Manager at Taino Consulting Group MRiley@TainoCG.com

www.msada.org

Massachusetts Auto Dealer MAY 2015

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NADA Update

By Don Sudbay

Price Competition Among Dealers Benefits Car Buyers Don Sudbay, President of Sudbay Automotive Group, represents MSADA members on the NADA Board of Directors. He welcomes your

questions

and

concerns

(donsudbayjr@sudbay.com).

As our Chairman, Bill Fox, says in the following article, “Price competition among same line make dealers drives down consumer costs often by $500 per car.” We, as dealers, live with that reality on a daily basis, as we compete with each other for the consumer’s dollars. The franchise system is efficient, and it ensures that the dealer who meets the need of the buyer both in price and in service is rewarded.

“Factory stores” have never been, and will never be, able to serve the customer as well as the franchised dealer. We all need to let our customers and the media know the true facts.

A Special Note from NADA Chairman Bill Fox “What’s in 2.2 percent? As a percentage of total sales, it’s a number that represents the average pretax, net profit at U.S. franchised new-car dealerships, according to NADA Data 2014.

“And what may be a startling fact is that the 2.2 percent profit, which accounts for sales in the new- and used-vehicle, service and parts departments, is more than a onepercentage point less than what many other retailers earn.

“This figure has remained the same for the third straight year. And this dynamic is attributed to fierce competition at dealerships that benefits car buyers. In fact, a recent study from the Washington, D.C.-based Phoenix Center proves that price competition among auto dealers lowers car prices for consumers, often by $500 or more per car.

“Employment at new-car dealerships is also at a near alltime high. Last year, more than 1 million people worked at dealerships across the country, which was higher than any other auto-related industry. Dealers, on average, employed 64 people per dealership in 2014.

“Additionally, dealers pay one of the highest wages for any retail trade. Nationwide, the annual payroll last year was more than $58 billion—with employees, on average, earning more than $55,000 a year.

“Combined recall and warranty work performed at newJUNE 2015

Massachusetts Auto Dealer www.msada.org

car dealerships increased by 21.6 percent to 8.5 billion last year—all at no cost to our customers.

“Taking all of this into account indicates that the retailautomobile industry is a pillar of the nation’s economy, and the dealer-franchise network remains the best, most competitive and most cost-efficient way to distribute and sell new cars.”

Broad Industry Coalition Backs Congressional Repeal of Flawed CFPB Guidance A broad coalition of auto industry organizations, led by NADA, has expressed strong support for bipartisan legislation that would rescind a 2013 guidance from the Consumer Financial Protection Bureau (CFPB) designed to pressure lending institutions into eliminating the availability of auto financing discounts for car buyers.

Nine industry groups representing businesses that manufacture, sell, service, auction, and finance the purchase of cars, trucks, recreational vehicles, and motorcycles urgedCongress to support H.R. 1737, the “Reforming CFPB Indirect Auto Financing Guidance Act.” The legislation, which has 45 Republican and 37 Democratic cosponsors, would rescind the CFPB’s flawed 2013 guidance on auto finance and require the CFPB to reissue it only after going through a transparent, collaborative, and informed process.

“H.R. 1737 is needed to produce a more informed guidance compared to the 2013 guidance, which lacked public input, transparency, consultation with the CFPB’s sister agencies and, by the CFPB’s own admission, any study of the impact of the guidance on consumers,” the groups wrote in a letter to members of the House Financial Services Committee, which recently began review of the bill on Thursday as part of a hearing on “legislative proposals to preserve consumer choice and financial independence.”

“As a consequence of being issued without these essential safeguards, the CFPB’s guidance could potentially: (1) eliminate a dealer’s ability to discount credit in the showroom; (2) raise credits costs; and (3) push marginally creditworthy consumers out of the auto credit market entirely,” the letter continued.

NADA was joined by, among other groups, the American Financial Services Association and the Alliance of Automobile Manufacturers in signing the letter.

In addition to calling for passage of H.R. 1737, the groups also pointed out that NADA has already operationalized the most-effective way of addressing fair credit risk in the marketplace - through the voluntary NADA Fair Credit Compli-

NADA Update ance Policy and Program for motor vehicle dealers.

“Apart from the fact that the guidance should not be used as a means to make sweeping policy and market changes, the CFPB auto guidance does not effectively manage fair credit risk in the showroom, which is its purported goal,” the letter read. “The Department of Justice (DOJ), however, has created a better approach to address fair credit risk without decreasing competition and harming consumers. The DOJ model was used as a template for a comprehensive compliance program that the National Automobile Dealers Association, National Association of Minority Automobile Dealers, and American International Automobile Dealers Association issued last year to their respective members.

This compliance program addresses fair credit risk where it matters - in the showroom - while preserving a dealer’s ability to discount credit.”

NADA President Peter Welch said it was no surprise that such a wide swath of the industry signed the letter in support of H.R. 1737.

“There is increasing recognition that there is a way to address fair credit concerns that doesn’t involve Washington stripping away the right every consumer has to negotiate and benefit from a better deal on an auto loan,” Welch said.

H.R. 1737 was introduced by Reps. Frank Guinta (RN.H.) and Ed Perlmutter (D-Colorado), and is identical to legislation (H.R. 5403) that garnered 149 bipartisan cosponsors in the previous Congress.

The letter was signed by: NADA; the Alliance of Automobile Manufacturers; the American Financial Services Association; the National Independent Automobile Dealers Association; AIADA; the Recreational Vehicle Dealers Association; the Recreational Vehicles Industry Association; the National Auto Auction Association; and the Motorcycle Industry Council.

NADA Responds to Inaccurate and Irresponsible NYT Editorial On June 16, NADA President Peter Welch sent the following letter to the editor of The New York Times in response to a Sunday editorial, “Putting an End to Abusive Car Loans”. The editorial contained false statements and discredited rhetoric about auto finance.

Honesty Matters at the Dealership.

It Should Matter to The New York Times.

Consumers have a number of rights when it comes to buying a car. They have the right to negotiate, they have the right to look for a better deal wherever it exists, and they have the right to choose the financing that is best for them.

These are real financial advantages that save Americans billions of dollars.

Washington, however, wants to take those rights away.

MSADA Washington wants to limit consumer choice and deny Americans the ability to benefit from the discounted financing rates that are often available at their local dealerships. It doesn’t take a study or an expert to see how wrong that is.

Consumers also have the right to something just as important - the truth. But they were denied that on Sunday, when a Times editorial, “Putting an End to Abusive Car Loans,” chose to ignore the truth about a now-thoroughly debunked statistic claiming that Americans lose - rather than save money when they finance vehicle purchases through their local dealerships.

Even the Center for Responsible Lending - the original source of the figure used by the Times - has acknowledged that this number is flawed. And numerous sources have explained in detail how CRL’s claims about auto financing are patently false.

For reasons they did not explain, the editorial board of the Times chose to gloss over this reality.

Consumers deserve to know why. They deserve to know that when they’re getting information about how Washington wants to involve itself in auto financing, they’re getting facts. They deserve to know that they’re being told the truth.

Americans take the process of buying a car very, very seriously - and rightly so. In this instance, The New York Times could stand to learn a thing or two from many of its readers.

- Peter Welch, President, National Automobile Dealers Association

EPA/NHTSA Emissions Rule for Trucks Will Harm Consumers, Economy, and Emissions Goals The NADA and American Truck Dealers (ATD) released the following statement in response to EPA and NHTSA’s proposed Phase 2 emissions and fuel-efficiency standards for medium- and heavy-duty trucks: “Affordable transportation is the bedrock of the American economy, and adding - by the Administration’s own estimate - an average of just under $12,000 to the cost of a new truck through mandates based on potentially untested technologies is a great risk to a still-fragile economy. Recent history has shown that mandates with underestimated compliance costs result in substantially higher prices for commercial vehicles, and force fleet owners and operators to seek out less-expensive and less fuel-efficient alternatives in the marketplace. The costs could even drive small fleets and owner-operators out of business, costing jobs and only further impeding economic growth. While supportive of affordable fuel-economy improvements, ATD is closely reviewing the proposal and the many potential impacts it will have on truck dealerships and their customers.” t

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Produced by Steven Szakaly, NADA Chief Economist

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Sound Off

Foreign Investors are Ready for Retail

By Nancy Phillips With much of the rest of the world in turmoil, the United States remains the biggest car industry with the most open market place. In fact, A.T. Kearney’s FDI Confidence Index has ranked the United States as the top automotive market in 2014, reaffirming its place holder as the world’s most attractive investment location.

Foreign auto companies began entering this market in the 1970’s based on the idea that it made sense to produce where you sell. There are now companies from Japan, Germany, Korea, and other countries with manufacturing plants here and an increase in foreign investment at the retail level is a logical progression.

Not long ago automakers preferred local dealers who were loyal to their brand over mega dealers. But an evolution has taken place and today it is the large dealership group that is favored – whether public, private, homegrown or foreign.

The power is in the lap of the franchisor, where it shall most likely remain.

As smaller dealers exit, consolidation will continue to benefit dealership groups whose market share will increase. The math simply works to their advantage: The more dealerships owned, then the more cost savings, efficiency, inventory control, and market saturation. Dealers should recognize that the tradition of the American car dealer is falling by the wayside and use consolidation to their advantage when planning their own exit strategy.

How hard is it for a foreign investor to purchase a dealership, get franchisor approval, and obtain floor plan and real estate financing in the United States? We orchestrated one of the more recent foreign entries into the US market – the acquisition of Farrell Volvo of Southborough, Massachusetts, in December 2014 by Coast 2 Coast Auto Group (C2C). C2C is a new company established by foreign investor Alexey Nusinov and partner Stephan Chernysh. When the investor is Russian and that country begins to unravel, the ruble plummets and our government imposes a major crack down on investments from there – it is very hard indeed.

Despite the excellent qualifications and financial capability of the purchasers, the banking industry made obtaining floor

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plan a nearly impossible proposition. Over 40 financial institutions were not interested in foreign investment regardless of the criteria. When C2C finally had a floor plan commitment in hand, the federal government imposed new regulations particularly aimed at Eastern European investment and the commitment was rescinded just prior to the scheduled closing. This led to difficulties between the buyer and seller that needed to be managed as well as a new search for a lender with little time to meet deadlines.

In the midst of all of this, the value of the ruble dropped radically. The purchaser was put in the position of liquidating assets in a tumultuous market place in order to consummate the transaction and satisfy difficult floor plan lender requirements.

Why was C2C so adamant about following through with this transaction despite monumental obstacles? The partners had been planning for several years to invest in the US due to concerns over economic volatility and their children’s future.

Nusinov is the former co-owner of one of the top five dealership groups in Russia, holding multiple franchises including Volvo; Chernysh represented the Joe Verde Automotive Sales and Management Training Group there.

The highly enthusiastic Chernysh is bullish on Volvo. With the opening of its new plant just announced to be built in South Carolina, he believes the franchise has the potential to triple sales in the next 4 years. While C2C could have entered the US market by spending millions on a more desirable franchise, it chose instead to stand up for Volvo. If the future with Volvo turns out as Chernysh prophesizes, the decision will prove to have been brilliant.

When asked why he and Nusinov decided to invest in the United States, Chernysh summed it up in a word – potential – the potential of the US market above all others.

It was enthusiasm, perseverance, and the shared commitment of Coast2Coast and Nancy Phillips Associates that determined the success of this acquisition. Neither one, despite every obstacle you could imagine and some you couldn’t, ever gave up – and that is what it took. t

Nancy Phillips Associates specializes in sales, acquisitions and evaluations of franchised automobile dealerships. Contact Nancy Phillips at (603) 658-0004 or email auto@nancyphillips.com.

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TRUCK CORNER American Truck Dealers Move the Industry Forward

By Eric K. Jorgensen

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