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FIRST CLASS MAIL US POSTAGE PAID BOSTON, MA PERMIT NO. 216
June 2013 • Vol. 26 No. 6
The official publication of the Massachusetts State Automobile Dealers Association, Inc
Annual Meeting
2013
MASSACHUSETTS STATE AUTOMOBILE DEALERS ASSOCIATION
2013 A nnual M eeting
Thank You to
Our Sponsors
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St a f f D i r 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 Paul Fellows Administrative Assistant/ Membership Coordinator pfellows@msada.org Aut o D e a l e r M A g a z i n e 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: pfellows@msada.org Postmaster: Send address change to: One McKinley Square, Sixth Floor Boston, MA 02109 Quarter Page: $450 Half Page: $700 Full Page: $1,400
Back Cover: $1,800 Inside Front: $1,700 Inside Back: $1,600
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, 24 Boston Herald, 32 Lynnway Auto Auction, 25 Nancy Phillips Associates Inc, 24 O’Connor & Drew, P.C., 31 Schlossberg LLC, 26 Southern Auto Auction, 23 ADVERTISING RATES Inquire for multiple-insertion discounts or full Media Kit. E-mail tnash@msada.org
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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: Standing Up for the Law THE ROUNDUP: Legislature Passes Spending, Tax Plans Legislative Scorecard INSURANCE: Frequently Cited OSHA Standards AUTO OUTLOOK ACCOUNTING: Dealer-Owned Reinsurance Companies financial services: Be Mindful of the Future
16 Cover Story: 2013 MSADA Annual Meeting
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NEWS From Around the Horn NADA UPDATE: A Franchise System Under Attack NADA Market Beat
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from the President
by Scott Dube, MSADA President
Standing up for the law
The wheels of justice grind slowly, but we’re in this together
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s you’re enjoying your Independence Day celebrations, in addition to remembering the sacrifices our forefathers made to give us the freedoms we enjoy, I hope you’ll keep in mind that the American experiment remains very much an experiment. I thought about this coming away from our Annual Meeting, held during a beautiful first day of Summer at the Marriott Long Wharf. I want to thank the MSADA staff for making the meeting a huge success. While our system of government is the best in the world, freedom and free enterprise seem to be under constant attack in many ways. Just take a look at Tesla attempting to subvert our franchise law as an example. We have a law in this Commonwealth that is clear about not allowing auto manufacturers to directly sell their products to consumers. It’s a system that protects customers, and is rightfully established in law. Unless, of course, people decide to not follow the law and just wing it hoping government officials are so enamored with the idea that they to can see ignoring the law. Then, we’ve seen the legislative branch of Natick, the Board of Selectmen, approve the Tesla store they wanted to open without a dealer. Our protest to the courts unfortunately found a judge who fell for the Tesla’s use of old law. We’re confident that we have a solid case in our appeal of that ruling. And despite the often idiotic rhetoric being spouted by that company’s president, this fight isn’t about him. It’s about the rule of law, and not allowing one exception that could turn into the breakdown of the dealer franchise system across the
country. If our system of government were perfect, MSADA would not be as busy. Instead, we’re constantly battling not just bad policy, which will always be a part of any democracy, but an anti-freedom bent that here can frequently be shrouded as “proconsumer.” Our work to show that dealers have those interests more at heart than manufacturers, or, say, the Chinese auto parts industry, remains a long road ahead. I’d like to use this space to thank former MSADA President Jim Boyle, who as I said at the meeting came into the position when a seismic shift was occurring in the auto industry that we’re still recovering from. He did a great job of streamlining the operation both from a personnel and operational standpoint and really clearing the decks to allow us to be successful as business starts to return. I’d also again like to thank our MSADA staff, our sponsors of the day’s events and most importantly you, our member dealers. As we heard time and again throughout the day, your participation on a grassroots level is what makes all the difference when we’re facing off against those who would curtail our ability to effectively do business here. During the next year, as our Legislature revs up again, you’ll have plenty of opportunities to help look out for your businesses. I hope you’ll join me in doing our part to help this small part of the American experiment, free enterprise, fulfill the vision of our founders.
“Our work to show that dealers have those interests more at heart than manufacturers, or, say, the Chinese auto parts industry, remains a long road ahead.”
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MSADA
A ssociate M ember D irectory Name
Msada Board Barnstable County Gary Beard, Dick Beard Chevrolet
Berkshire County Brian Bedard, Bedard Brothers Auto Sales
Bristol County Richard Mastria, Mastria Auto Group
Essex County William DeLuca, Woodworth Motors John Hartman, Ira Motor Group
Franklin County Jay Dillon, Dillon Chevrolet
Hampden County Jack Sarat, Jr., Sarat Ford
Hampshire County Bryan Burke, Burke GMC
Middlesex County Chris Connolly Jr., Herb Connolly Motors Scott Dube, Bill Dube Hyundai
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
Contact Telephone
ADESA Boston Chris Carli (508) 270-5403 ADP Dealer Services Maria Trezza (973) 404-4466 Albin, Randall & Bennett Barton D. Haag (207) 772-1981 American Fidelity Assurance Co. Tom Trudell (413) 885-5477 AutoRaptor (RAL) Howard L. Leavitt (401) 421-6533 Bank of America Maryanne Recupero (800) 991-1770 Bank of America Merrill Lynch Lawrence Corrente (617) 434-2844 Bellavia Blatt Andron & Crossett, PC Leonard A. Bellavia, Esq (516) 873-3000 Blum Shapiro John D. Spatcher (860) 561-4000 Boston Globe Mary Kelly (617) 929-8373 The Boston Business Advisory Group Paul Cuomo (781) 681-1501 Vincent Saccone (781) 681-1519 Burns & Levinson LLP Paul Marshall Harris (617) 345-3854 Construction Management & Builders, Inc. Kate Sullivan (781) 246-9400 CVR Scott Herbers (800) 668-2332 DealerTrack Ernest Lattimer (516) 547-2242 Downey & Company James Downey (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 Chris Welch (724) 766-6666 First Citizens Federal Credit Union Joe Ender (508) 979-4728 Fisher & Phillips LLP John Donovan (404) 240-4236 Joe Ambash (617) 532-9320 Grant Thornton LLP Alan Oslomowski (508) 926-2200 Huntington National Bank John J. Marchand (781) 326-0823 Key Bank James Q. Moretti (781) 558-5132 Leader Auto Resources, Inc. John Ackermann (518) 857-8853 Lynnway Auto Auction Jim Lamb (781) 596-8500 M & T Bank John Federici (508) 699-3576 MetroMedia Energy Timothy Teevens (800) 828-9427 Micorp LLC Ryan Kim (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 O’Connor & Drew, P.C. Kevin Carnes (617) 471-1120 Performance Management Group, Inc. Mark Puccio (508) 393-1400 Ray-Jurgen Richard Thibadeau (860) 585-0111 R.L. Tennant Insurance Agency, Inc. Walter F. Tennant (617) 969-1300 Resource 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 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 Southern Auto Auction Tom Munson (860) 292-7500 Sovereign Bank Richard Anderson (401) 432-0749 Target Dealer Services Andrew Boli (508) 564-5050 TD Auto Finance BethAnn Durepo (603) 490-9615 TD Bank Michael M. Lefebvre (413) 748-8272 Wells Fargo Dealer Services Christopher Peck (508-314-1283) Wicked Local Media Massachusetts Jay Pelland (508) 626-4334 Zurich American Insurance Company Steven Megee (800) 443-4513
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The Roundup
Legislature Prepares for Summer by Passing Spending, Tax Plans by Robert O’Koniewski, Esq. MSADA Executive Vice President Fiscal year 2014 begins on July 1. Similar to the student who rushes to complete a book report or term paper on the eve of the project’s due date, our General Court is no different. In the week leading up to the deadline for having an FY2014 fiscal plan in place, the Legislature completed work on one-half of the equation – revenues, dedicated to a transportation spending plan – leaving general spending to the very end. However, this will not be without the usual bumps in the road. As reported previously, the House and Senate during each’s tax debate were in general agreement on what taxes would be raised, dedicated to transportation projects, and the amount sought $500 million in new taxes. In the end, on this they were consistent: The gas tax will increase by 3 cents and tie future increases to inflation; the perpack tax on cigarettes will go up $1; for the first time, the state’s 6.25% sales tax will now apply to computer system design services; and there are several minor business tax changes affecting utilities and others. However, even before the two chambers voted on the final plan, the governor was threatening a veto, because, in his mind, taxes were not raised high enough to cover the portion of the $800 million needed to fund the transportation bill. Regardless of the veto threat, on June 26 the House and Senate approved the final tax plan with veto proof majorities: 105-47 in the House and 34-6 in the Senate. As we go to press, the governor has not indicated whether he ultimately will sign the bill, send it back for further amending, or veto it outright. Dealers should take note - as part of this plan, the Legislature has earmarked all sales tax revJUNE 2013
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enue from motor vehicle sales to a dedicated fund for transportation spending. This should raise an eyebrow at least to the extent that legislators try to revisit this funding source down the road when they need more money. Previous to this change, all those monies went directly to the state’s General Fund. On the spending side, the Legislature will miss the July 1 deadline, probably by a day or two, as the conference committee set up to resolve the differences in the $34 billion House and Senate budgets was just making its report by the weekend leading up to the start of the next month. One note of interest – the agreed upon bill the legislators will be voting on in the first week of July will be out of balance without over $300 million in new tax revenues in the transportation bill the governor is threatening to veto. So, as we begin FY2014, we have a transportation bill that raises various taxes at levels not high enough for the governor, who threatens a veto, upon which the government will depend for the upcoming fiscal year, which must be balanced at its time of passing as required by the state Constitution. Time will tell whether the Legislature moves ahead and votes on a spending plan whose constitutional compliance depends on what the governor does with the tax bill. Stay tuned for the rest of the story.
73rd Annual Meeting On Friday, June 21, your Association convened its 73rd Annual Meeting at the Marriott Long Wharf in Boston. We had a successful turnout of members, and attendees heard from a diverse group of speakers, including Sean Bradley of
MSADA
Dealer Synergy, U.S. Senatorial candidate Gabriel Gomez (R-Cohasset), State Sen. Marc Pacheco (D-Taunton), IHS Global Insight economist George Magliano, RMV Registrar Rachel Kaprielian, Mike Colias of Automotive News, and Frank O’Brien of O’Connor & Drew. You can read the details of our meeting as part of this month’s cover story. We owe a “thank you” to our sponsors for the day, without whose assistance we could not put on such fine events: • Boston Globe/Cars.com – Gold Sponsor • Blum Shapiro – Bronze Sponsor • DealerTrack – Bronze Sponsor • Federated Insurance – Bronze Sponsor • Ethos Group – Welcome Gift • Murtha Cullina – Lunch Sponsor • Zurich – Break Station Sponsor • Bellavia Blatt Andron & Crosset LLP – Cocktail Reception
Auto Body Labor Rate On June 20, the Joint Committee on Financial Services conducted a public hearing on legislation designed to increase the reimbursable labor rate auto body repairers receive from insurance companies – House 969 (Reinstein) and Senate 497 (Welch). Testifying for MSADA along with me in support of the legislation were Essex County director, John Hartman of the Ira Motor Group, and Greg Ross, director of the Ira Collision Center. The Massachusetts average labor rate is presently just under $36 per hour, ranking us 51st out of 51 state jurisdictions and DC. The national average is almost $46 per hour, with no state having an average hourly rate below $40. The rate has remained essentially unchanged since the mid-1980s. The bill made it through the House last year at the tail end of the session, dying in the Senate as time ran out. In previous years the Senate has acted favorably on bills, while the House has been more re-
luctant to consider a legislative solution to this problem. Observers saw last year’s House action as a positive sign for something getting into law during this session. Nevertheless, the monolithic insurance industry will attempt to throw its considerable weight around in order to keep the rate at a level well below that found even in our New England states.
Regional Dealer Meetings Throughout the year we continue to conduct regional meetings across the state at which we provide an update on various legislative and legal issues your Association is addressing, as well as receive input from our member dealers on issues of interest. We also invite area legislators to attend the events to encourage active dialogue between the elected officials and local dealers. On Friday, June 7, we held a dealer legislative meeting at the UMass-Lowell Inn and Conference Center for our members and legislators in the Lowell area. Attendees included State Rep. Tom Golden (DLowell), State Rep. Kevin Murphy (DLowell), and Kara Keefe, chief of state to State Sen. Eileen Donoghue (D-Lowell). On Friday, June 14, we convened a meeting for dealers and legislators in the greater Springfield area at the Springfield Marriott. Attendees included State Rep. Mike Finn (D-West Springfield), State Rep. Aaron Vega (D-Holyoke), and staff from State Sen. Michael Knapik (R-Westfield), State Sen. Jim Welch (D-West Springfield), and State Rep. Angelo Puppolo (DSpringfield).
Congratulations to Andy Crews Recently Andy Crews, dealer principal for the AutoFair Dealership Group in Massachusetts and New Hampshire, was elected Chairman of the Board of Directors for the New Hampshire Auto Dealers Association. The Group’s Massachusetts www.msada.org
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stores are AutoFair Honda of Plymouth and AutoFair Nissan Tewksbury. Congratulations and good luck to Andy during his tenure.
Welcome, Peter Brennan The newest member of our staff is attorney Peter Brennan, who will serve in the capacity of staff attorney, assisting in our legal and legislative matters. Peter comes to us from his most recent endeavor as chief of staff to State Senator Bob Hedlund (R-Hedlund), the assistant minority leader. Prior to that, he was on the staff of former Sen. Michael Morrissey (D-Quincy), who is the current Norfolk County District Attorney. Peter is a graduate of University of Massachusetts-Amherst and Suffolk University School of Law. When you have a moment, please be sure to welcome Peter aboard.
Our PACs - DEAC & NCDPAC Each year MSADA expresses itself politically through NADA’s federal PAC, Dealers Election Action Committee (DEAC), and through our state PAC, the New Car Dealers Political Action Committee (NCDPAC). We depend on contributions from our dealers to keep these PACs strong, as we need to have an active voice in Washington and on Beacon Hill. Every dealer should be contributing to both PACs every year. It is an inexpensive insurance policy. Defeating the original right to repair bill, which would have severely hurt your parts sales, and fighting for the dealer exemption to the federal Wall Street reform law are two great examples why we need to be strong politically. If you have not yet given to the PACs this year, please contact me at rokoniewski@msada.org and we can make sure your contributions happen. Thank you.
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Insurance
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Frequently Cited OSHA Standards By Steven Megee
Steven Megee is regional sales manager a t t h e F r a m i n gh a m R e g i o n a l O f f i c e f o r Z u r i c h N o r t h A m e r i c a C o m m e r c i a l ’s Programs & Direct Markets’ business unit. He can be reached at steve.megee@zurichna.com.
Ideally your business should be in compliance with all state and federal regulations. However, this is often difficult due to limited resources. So let’s talk about using your time to get the “biggest bang for the buck”. A business should put their effort towards complying with those specific OSHA regulations most frequently identified as problem issues. Let’s review the top ten list and recommended solutions.
Hazard communication This has been the number one cited standard since being issued in the 1980’s. Compliance is not easy due to the complexity of the program. Requirements include a written program, chemical list, material safety data sheets (MSDS) to match each chemical listed and employee training. The closing paragraph will guide you to additional sources of help.
Respiratory protection Once again this is too complicated of a standard to address in this small space. Requirements include a written program, hazard evaluation, medical evaluations of affected employees, employee training and equipment storage and maintenance.
Electrical – General requirements
This standard addresses electrical hazards in the workplace. Electrical equipment must be free from recognized hazards that are likely to cause death or serious physical harm to employees. It states that circuit breakers or other “disconnecting device” must be labeled/marked to “identify its purpose.” Also it requires a three-foot clear
zone (no storage) in front of electrical panels, fuse boxes and other electrical equipment.
Abrasive wheel machinery Bench and pedestal grinders must be equipped with a tool rest, spindle guard and tongue guard. The tool rest and tongue guards must be adjusted close to the grinding wheel, within 1/8th of an inch. Grinders must be attached to the bench or floor to keep them from moving while in operation.
Personal protective equipment Provide adequate PPE for employees including eye wear; splash shield, gloves and apron (for handling battery acid); and respiratory protection where required. Recent revisions require the employer to complete a written hazard evaluation of the workplace to determine employee hazards and the PPE necessary to protect them.
Electrical – Wiring, components and equipment
Describes general requirements for permanent and temporary wiring. Citations on this standard often involve improper or overuse of extension cords (temporary wiring) where permanent wiring (in conduit) is required.
General requirements – Housekeeping and floor loading Addresses among other things the employer’s responsibility to maintain a clean workplace, clear aisle ways and to post safe floor load limits where required. One of the most common citations results from the failure to post a safe floor load limit sign in mezzanine or second floor storage areas. The standard states: “In every building… the loads approved by the building official shall be marked on plates of approved design…”
Medical services and first aid This standard requires “ready availability” of medical services for injured employwww.msada.org
ees. The second part of this standard is the more frequently cited portion as it requires “suitable facilities for quick drenching or flushing of the eyes and body (read eye wash stations)” where eyes or body are exposed to corrosive chemicals or materials.
Portable fire extinguishers Where portable fire extinguishers are provided and employees are expected to use them to fight incipient–stage fires, the following apply: extinguishers must be mounted and identified (on a wall with proper signage); adequate in number and type for the existing fire hazards; inspected (visually each month) and maintained (annually); and employee training (at hire and at least annually thereafter). There are many more requirements that you should become familiar with.
Spray finishing with flammables/ combustibles
Establishes minimum standards for spray paint booth and spray operations. This standard is quite extensive and addresses everything from clogged filters to the need to post “No Smoking” signs. Most importantly, it requires that the booth and upstream and downstream sides of the filters must be protected by an automatic sprinkler system (or other fire protection system).
Where to find help There is help available for businesses, some of it from OSHA. For additional help you can contact your local OSHA office or visit their website at www.osha.gov. The best help is available in the “Outreach - Small Business” section where you can find sample programs. There are also areas for “frequently asked questions” and “interpretations.” Complete standards can be printed off of the website if desired. Our Loss Prevention Guidebook includes information on these standards and sample programs.
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AUTO OUTLOOK
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Accounting
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Dealer-Owned Reinsurance Companies and IRS Reporting of Foreign Assets: An Update by Mitchell S. Halpern Mitchell S. Halpern is a principal at O’C onnor & D rew, P.C., MSADA Tax Counsel
Back in March 2012, I wrote about the new IRS requirements for reporting foreign assets. In short, “specified individuals” holding interests in “specified foreign assets” exceeding certain threshold amounts were now required to report these assets on Form 8938, Statement of Specified Foreign Financial Assets. Form 8938 is attached to the taxpayer’s income tax return starting with the 2011 tax year. This reporting requirement is separate and distinct from Form TD F 90-22.1 (the “FBAR” form) and the filing of one form does not affect the filing of the other form. In that article there were two situations with respect to producer owned reinsurance companies that I stated would not currently require the filing of Form 8938. One such situation was if the dealer owned reinsurance company is owned by a domestic entity, i.e. a partnership, non-single member LLC, corporation or non-grantor trust. In those situations, Form 8938 was not required to be filed since the reporting requirements did not include “specified foreign assets” owned by domestic entities. This currently remains the case for tax years through 2012, but could change as early as tax years beginning in 2013. Please note that dealer owned reinsurance companies owned by the dealer directly, or by a single member LLC or grantor trust, are subject to the Form 8938 filing JUNE 2013
requirements assuming all other requirements are met (please refer to my March 2012 column). The other situation that did not require the filing of a Form 8938 as stated in my earlier column was when the dealer owned reinsurance company was a controlled foreign corporation (“CFC”) with a 953(d) election in place. The reasoning behind this was that a 953(d) election is an election to treat a foreign insurance company as a domestic corporation for income tax purposes. It logically seemed to follow that a dealer owned reinsurance company that elected to be treated as a domestic corporation for income tax purposes would not be included in the definition of “specified foreign assets” because it would be considered a “U.S. Person” and thus would not be considered a “foreign entity”. This was the prevailing industry treatment of CFCs for purposes of the Form 8938 filing requirements. The IRS recently issued final regulations under the Foreign Account Tax Compliance Act (“FATCA”), which instituted the Form 8938 and its reporting requirements. These regulations contain the following within its definition of “U.S. Person”: . . . the determination of whether an insurance company is a U.S. person is made without regard to an election by a company not licensed to do business in any State to be subject to U.S. income tax as if it were a domestic insurance company. Thus, a foreign insurance company not licensed to do business in any State that elects pursuant to section 953(d) to be subject to U.S. income tax as if it were a U.S. insurance company is not a U.S. person. This definition effectively requires Form 8938 reporting of all dealer owned reinsurance companies, other than those
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owned by a domestic entity (and assuming the total specified foreign asset owned by the taxpayer exceeds the thresholds for reporting), regardless of the fact that a 953(d) election may have been made for the company. There currently does exist, however, some uncertainty as to whether owners of dealer owned reinsurance companies with a 953(d) election in place are required to file Form 8938 with their 2012 income tax returns or whether this requirement first becomes effective with the filing of their 2013 income tax returns. There are some advisors taking the conservative approach that Form 8938 should be filed with 2012 income tax returns and, if your 2012 income tax returns have already been filed, the return should be amended to include the Form 8938. There are others that take the approach that since the recently released FATCA regulations that define a “U.S. Person” as excluding foreign insurance companies with valid 953(d) elections are not effective until January 28, 2013, that Form 8938 is not required for owners of these types of entities until 2013. The price of non-compliance is steep – a penalty of $10,000 could be assessed. Even those advisors taking the more conservative approach that filing should commence in 2012, have expressed the thought that the IRS most likely would be lenient with respect to failure to file in 2012 for 953(d) companies. It is my understanding that industry counsel is in communication with the IRS attempting to obtain clarification of the effective date. Hopefully further guidance on this will be issued shortly. In any event, the application of these filing requirements for the 2013 tax year appears clear.
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Searching... I just turned 63 and during my life I have experienced many fixtures - - things I never thought would change. I started my career near Wall Street in lower Manhattan and the Port Authority was completing construction on the World Trade Center - - I thought
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Financial Services
Be Mindful of the Future Family Owned Businesses: Will They Last?
By Vincent Saccone, LUTCF and Paul Cuomo of The Boston Business Advisory Group Business owners have long been admired for their entrepreneurial spirit, ability to recognize opportunities, and risk. They’ve worked long, hard hours to build and achieve great success with the vision of passing their business on to the next generation. But will the business actually make it to the next generation? Every business has a story. Whether the business started as a vision, by accident or by matter of circumstance, business owners have sacrificed a great deal to see their business to fruition. So why is it that only one in three family-owned businesses make it to the second generation?
Percentage of Family Firms Surviving Future Generations 1st Generation – 100 % 2nd Generation – 30 % 3rd Generation – 12 % 4th Generation – 3 %
The grand plan for many small business owners is to pass the business down to future generations. More often than not, however, it is unsuccessful. A family owned business has roughly a 1 in 3 chance of ownership succession. What’s more, only 3 percent of family businesses make it to the fourth generation. Makes you wonder what’s happening, doesn’t it? Well, actually, it’s pretty simple. Improper planning for business succession, lack of communication and lack of funds to pay estate taxes are the three leading causes of why many family owned businesses do not make it to the next generation, and in almost 50 percent of the cases, the death of the founder occurred prior to the business being passed on, according to a University of Connecticut Family Business Program survey of 800 family-owned businesses.
Consider this Business Owners’ Story Jen and John are proud people and have instilled good values in their children. They started their Auto Dealership, an S-Corporation, on a shoe string budget more than 30 years ago. It hasn’t been easy and meeting payroll every Friday was sometimes tough. Their business has a tendency to mirror the up-and-downs of the economy, so at times, life is difficult and the income isn’t always there. They love working for themselves and hope to pass the business on to their children. During the past 30 years, they persevered and put all of the profits back into the business. Now, the business is valued at $20 million and it represents the primary source of their wealth. However, they can’t access it.
Current Situation • Jen: age 50, John: age 56 with heart condition
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• They want to retire in 4 years and have multiple goals • They have two children, Mary and Susan • Mary, age 30, is a school teacher and has no interest in running the business, although she wouldn’t mind owning a piece of the business. • Susan worked in another industry before joining her parents a few years ago. She is now 28 years old, is a sales manager for their Auto Dealership and her business style is a little different than her parents’. She loves what she’s doing and wants to move into management and eventually take over the company. • Mark works for the Dealership as their CFO. He is the longest term employee and his style is similar to the owners.
Goals and Issues • Jen and John want to access 100 percent of the value of their business within 4 years and be able to retire with comfort and flexibility. They also want to minimize taxes. • They are not sure what they should be doing and what their options are. • They want to do what’s best for the business, their children, and their key employee. Having a large company and generating more revenue is no guarantee for survival. Survival is dependent upon proper planning and the business owners’ frame of mind. Below are a few tips to help with a smooth transition: • Business owners may want to first reflect on why they started the business. Was it to keep the business in the family for generations or was it to provide for the family for generations? • If the purpose of the business is to keep the business in the family for generations, then the business owner may want to reframe the dialogue on succession
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rent business owner with fresh perspective on technology, new ideas, market research and where they see the business/ industry going. At any given time, 40 percent of U.S. businesses are facing the succession issue, according to a May 2009 Study by the SBA titled “Transferring Management in the Family-Owned Business.” Transitioning to the next generation is a process that may extend over many years depending on the business owner’s age and on the successor’s age. It occurs in phases and over time, while the next generation is being educated on the family business. There are many benefits to early planning, including (1) reassuring employees, suppliers and customers regarding the next leader, (2) giving sibling’s time to adjust to the decision and to make alternative career decisions, if necessary, and (3) enabling the business owner to prepare and plan for retirement. The next generation can help to move the family legacy forward. Business owners can choose how their business will live on. Passing on a healthy, wellplanned business will help ensure a smoother transition and help ensure the “labor of love” lives for many generations to come.
t and longevity. Many business owners are reluctant to train the next generation of leadership, give up control, and transfer the business. This mindset may harm the success rate of the successor owners because the next generation may not have been able to develop their decision making process, leadership and management skills. • If the purpose of the business is to provide for the family for generations, then maximizing its value in a sale to third parties may be the better way to go because successor leadership within the family may not be available to keep the business successful. The business owner should, however, also be taking out value over time, perhaps through a qualified re-
tirement plan. • Also, business models or leadership styles should never be permanent. It needs flexibility in order to adapt to change, new environments, and to survive. • Business owners may want to collaborate more with the next generation and make sure everyone in the family is on the same page. For example, the business owner can groom the next generation on business knowledge, long-term perspective and cash flow. The business owner should also pass on the values of the entrepreneurial spirit and discourage the sense of entitlement which may result in passivity and improper management and operation of the business. • The next generation can provide the cur-
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Saccone & Cuomo, Registered Representatives and Saccone, Financial Advisor of Park Avenue Securities LLC (PAS), 160 Gould Street, Needham, MA 02494, 781-4494402. Securities products/services and advisory services are offered through PAS, a registered broker-dealer and investment advisor. Financial Representatives, The Guardian Life Insurance Company of America (Guardian), New York, NY. PAS is an indirect, wholly owned subsidiary of Guardian. Neither Guardian nor its subsidiaries, agents or employees provide tax or legal advice. You should consult your tax or legal advisor regarding your individual situation. The Boston Business Advisory Group is not a registered investment advisor. The Bulfinch Group is not an affiliate or subsidiary of PAS or Guardian. Life insurance offered through The Bulfinch Group Insurance Agency Inc., an affiliate of The Bulfinch Group, Inc. The Bulfinch Group is not licensed to sell insurance. Neither Guardian nor any of its subsidiaries, employees or agents provides tax or legal advice. PAS is a member of FINRA, SIPC. 2013-6203
The Boston Business Advisory Group will address your Financial Issues on a monthly basis. Email specific questions or suggestions for future articles to vsaccone@glic.com.
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MSADA Cover Story
MSADA Annual In
his first meeting as MSADA president, Scott Dube outlined the path laid before him and the challenges ahead. He began by thanking Immediate Past President Jim Boyle. “When Jim took over we were right there in a very tough time in our industry,” Dube said. “He did a great job of streamlining the operation both from a personnel and operational standpoint and really clearing the decks to allow us to be successful as business starts to return.” Outlining the past year on the State House, Dube said the “Right to Repair” battle will have one final chapter as two different bills must be reconciled. “Franchise law enhancements as part of legislative affairs are one of the pillars of our existence,” Dube added. “Our franchise law has helped in focusing our argument against Tesla.” Noting the recent MSADA appeal of the court decision allowing a manufacturer-owned dealership in the Commonwealth, Dube said he was confident the truth would win out. “The judge fell for their use of old law, and we’re really confident we have a solid case on the appeal. But the wheels of justice grind slowly,” he said. “It’s important not because we’re worried about Tesla per se, but the concept of allowing a manufacturer to own a store could be abused in a lot of ways. We see this as a threat to the franchise system, as does NADA.” NADA Director Don Sudbay echoed Dube’s concerns about Tesla, and said NADA has continued to make protecting the franchise system a priority. “We all realize the franchise system is under attack,” he said. “There’s no question about it. NADA will be committing their resources. MSADA has the resources. We do have the wherewithal, and we do have the resolve. And I think all of us have to understand why the franchise concept is the best system for our customers.” On Capitol Hill, Sudbay noted that without former NADA Director Ray Ciccolo, F&I changes being pushed through by federal regulators would have been worse. “My predecessor Ray did the best he could to stop what could have been a really bad situation,” Sudbay said of the Consumer Finance Protection Bill. “Ray managed to exclude dealers from the law, with the help of his contacts in Congress. “If dealers had been included, there
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Meeting would be bedlam right now.” “As far as where we’re going, NADA is putting all its resources into this issue,” Sudbay said. “We all have a 2 percent cap right now on our finance reserve and what the CFPB has said is that we have taken that 2 percent and have not been fair about who we’ve discounted. They haven’t been able to show us any data at all to justify what they’re saying.” ATD Chairman Dick Witcher, introduced by Sudbay as “a tremendous advocate for the franchise system,” gave a stark outline of how over-regulation continues to stifle growth in the commercial truck market. “Sales volume in general has been down since 2007, all related to emissions issues,” Witcher said. “Business owners are uncertain. They are facing the lowest interest rates, and the shortest lead times from orders to receipt that we’ve had in years.” As MSADA Executive Vice President Robert O’Koniewski outlined, the key to pushing back on over-regulation is staying on top of what’s coming down the pike at the legislature. “The stuff on the legislature’s plate is scarier than it’s been in the past,” O’Koniewski said. “There is a more pro-consumer bent, as opposed to a pro-business bent.” While the “Right to Repair” situation will be patched up as best it can, O’Koniewski said the Association as made it a priority to put a stop to Tesla’s encroachment on dealer franchise law.
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“It’s not about the car or Elon Musk, whether he’s a visionary or PT Barnum,” O’Koniewski said. “We’ve filed a lawsuit because they were trying to open a store in Natick illegally.” “They’re doing everything a dealer does in Massachusetts except having a dealer,” he added. “And while he’s talking about the merits of buying a car on the Internet, he’s having dealerships that do everything you guys and gals do.” MSADA lobbyist Marty Corry stressed that in any legislative fight, local support is key to winning over legislators. “The best work we can do is at the local level,” Corry said. “It’s easy to brush us off when we’re in the building, but it’s hard to ignore five business people in the district down on Cape Cod., for example. I thank you for your participation an hope you’ll get involved at that level.”
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Pacheco to dealers: Get involved in government State Sen. Marc Pacheco (DTaunton) praised dealers for strengthening Massachusetts’ economy during times of widespread financial downturn. Pacheco began by citing friend and MSADA Board Member Rick Mastria, whose business he described as vital to his district’s economy. To help dealers succeed further, he said government needs to learn more about their relationship with manufacturers. “We need to better understand your pain,” Pacheco said. “We need to better understand the fact that manufacturers continue to squeeze every penny out of every victory you’ve achieved in these challenging times.” Pacheco described Senate Bill No. 129, which he filed in hopes to “re-establish the level playing field once had between manufacturers and franchise dealers” by fixing loopholes in national legislation that affect dealers in the Commonwealth. He encouraged attendees to get involved. “If you take anything away from this meeting, I hope you understand the power each and every one of you have to make Massachusetts a friendlier environment to your particular piece of business,” he said. “I’ve aimed to help create a climate in which your businesses can thrive in this state. Your message needs more leaders to articulate the obstacles you face. We can’t put these policies in place without you at the table.” Emphasizing the power of press coverage for moving bills forward, Pacheco recommended dealers invite their legislators to see the reality of running their businesses. “Have [your legislator] come through and say, ‘That sign by the road, the manufacturer didn’t give that to you, it’s a cost of doing business.’ Show them all the things that have a tremendous economic impact. Let the press see it,” he said. Most importantly, Pacheco said, stay optimistic. “There’s nothing better for sales than a positive attitude about our future, a positive attitude about our state.” Photos by Shawn Musgrave
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RMV continues online push Rachel Kaprielian has been the Registrar of the Massachusetts Registry of Motor Vehicles since 2008, which means she has reached a certain milestone: a whole license cycle. “My signature is on every license in the state,” she said. In her remarks, Kaprielian emphasized the move to online — for both RMV customers and dealers. “We were doing 1.8 million [RMV] transactions online, now we’re doing 3.2 million,” she said. She said the RMV has made progress with the EVR program, and encouraged dealers to join in.“If you’re not on EVR, get with it, join us,” Kaprielian said. “It’s a good place to be.” Kaprielian also addressed the recent audit of state inspections, noting she was mindful of the effect it was having on dealers. “I know that many of you have been individually been speaking to my staff,” she said, “but I ask for your patience as we continue this internal review. We’re moving things along as quickly as possible.” She concluded by saying her door is always open, and that her goal is to make life easier for dealers. “It’s very simple,” she said, “What do you need for your customers? What’s unnecessary?”
O’Brien outlines warranty parts reimbursement law Frank O’Brien of O’Connor & Drew spoke on the new warranty reimbursement law in 93B, which established a formula to calculate the retail rate at which manufacturers must reimburse dealers for their parts. “A lot of dealers have been reluctant to move forward, not wanting to rock the boat,” he said. O’Brien attacked several common misconceptions, the first being that there is minimal bottom line impact. In fact, he said, dealers could be earning hundreds of thousands of dollars by utilizing the law. That being said, he added that there is no direct evidence of manufacturer retribution for participating, and that the fear of manufacturers resisting approval is overblown. Finally, he noted that time is of the essence. “Waiting to participate is equivalent to throwing money away.”
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Gomez: For national-level help, elect a different kind of politician A businessman and former Navy SEAL turned Senate candidate, Gabriel Gomez said the political status quo is creating roadblocks for auto dealers. “Things may look good on paper. But they’re drawn up by career politicians and lawyers and not people who have worked in the private sector,” Gomez said. Political newcomer Gomez was the GOP candidate in the June 25 special election to fill the Senate seat vacated when John Kerry resigned to become U.S. Secretary of State. Gomez recognized dealers as responsible for about 20 percent of Massachusetts’ economy, and said companies of all scopes and scales have the same concern: The burden of the cost of doing business. The solution, he says, is to elect representatives “who aren’t lawyers or career politicians.” “I’ve had the honor to work with a lot of small companies, and I have a pretty unique perspective in terms of policies helping the economy,” Gomez said. Elected officials who are more like him, Gomez said, would best serve dealers at the national policy level.
Bradley delivers Internet sales pep talk Sean Bradley, founder and CEO of consulting firm Dealer Synergy, shared pearls of wisdom from his more than 13 years of automotive internet sales and business development experience. Dealers aren’t doing enough to meet their financial goals, Bradley warned. “If the economy is up why aren’t you up with it? There aren’t dealers that are absolutely knocking it out of the park right now,” he said. He emphasized a focus on Internet marketing to buoy sales. “If you only have your toe in the water, as it relates to internet sales, then what do you expect? You can’t eat the fish if you aren’t scuba diving where the fish are at,” Bradley said.
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Economic recovery possible if Washington cooperates, Magliano says
Automotive News reporter talks GM Award-winning, Detroit-based Automotive News reporter Mike Colias shared insights from his time spent covering General Motors. Colias said that as a journalist, he has the access to executives needed to know the inside story -- and the freedom to call it as he sees it. “Our job is to come back and filter that and provide context for the reader,” Colias said. The number one question he gets is whether he sees GM slipping back into its prebankruptcy ways. “I think that’s the risk,” he said. “If those who are still there forget how they got into the mess, beating up dealers. If they start doing that stuff, it’s an indication of a backslide.” But the line-up, he said, is strong. “I don’t remember the last time I talked to a dealer who was unhappy with the product the company was shipping them,” he said.
George Magliano, a senior principal economist at IHS Automotive, said economic recovery is occurring, but it will continue to be slow. A weak dollar and messy fiscal policy are just two of the reasons we’re “living from day-to-day,” he said. “The great recession has broken the back of retail inflation; it’s broken the back of oil prices,” said Magliano. “Housing, I can finally sit up here and say it has turned a corner. Every day the numbers get better.”
The economic climate has affected customers -- it’s changed what they’re looking for in a car. “Consumers are seeking less ostentation and more value,” Magliano said. Magliano said if policy at the federal level settles down, the industry can continue the recovery and continue to post higher sales. “At the end of the day, we’ve grown sales from 10 million to around 15 million. Our forecast for this year stands at 15.3 million. If we can get rid of the fiscal fiasco, we have bigger potential,” he said. www.msada.org
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NEWS
from Around the Horn FRAMINGHAM
STONEHAM
In Memoriam
Connolly Chevrolet Holds Gomez Fundraising Event
Alan Melkonian Longtime MSADA member Alan K. Melkonian of Stoneham died in his home on Friday, June 7. He was 58. For 36 years, Melkonian led Stoneham Ford, a premier new and used Ford dealer located on Route 28. He served on the Board of Directors at StonehamBank for 18 years. Melkonian graduated from Middlesex Community College with an associate in arts degree in Retail Management in 1975. Previous “Citizen of the Year,” Melkonian was often recognized as a contributor to his community. He donated time and funds to organizations ranging from Stone Zoo to Stoneham Theater. He is survived by his wife, Joyce Melkonian; his daughters, Jenna Melkonian and Laura Dierksmeier, and son-in-law Claus Dierksmeier; his father, John Melkonian and his wife Gail; his brothers, Ralph Melkonian and his wife Kathleen, Ron Melkonian and his wife Carleen, and Mark Melkonian and his wife Claire; as well as many nieces and nephews. Melkonian was predeceased by his mother, the late Alice Melkonian. A memorial service was held June 10 in the Barile Family Funeral Home. A funeral service was held on Tuesday, June 11 in St. Patrick Church. Donations in Melkonian’s memory can be made to Compassionate Care.
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Republican Senatorial candidate Gabriel Gomez recently appeared at a fundraising event hosted by MSADA Vice President Chris Connolly and his brother, Adam, at Connolly Chevrolet. Pictured, from left, Jerry Chase, Framingham Ford; Gabriel Gomez; Chris Connolly; and MSADA Executive Vice President, Robert O’Koniewski. MENDON
Local Car Dealers Adding Staff to Keep up With Sales With auto sales on the rise, car dealerships in the area are opening their doors to new employees in nearly every department. Michael Penner, general manager at Imperial Cars in Mendon, told The Worcester Telegram & Gazette the dealership is doubling its sales team and adding jobs all over the company. May car sales were up 8.1 percent from 2012, totaling about 1.4 million vehicles sold nationwide, according to Edmunds.com, a car-shopping website that also tracks trends in the industry. Penner estimated that company-wide, he has hired an additional 50 people so far this year, and plans to add another 50 people to the “family” of about 300 at the site. Imad Benelkour, the sales manager at Herb Chambers Toyota in Auburn, said every month so far this year has beat last year’s numbers. He reported that he filled five positions so far this year. With a sales team of 21, he plans to add another three or four people. NADA reported that new-vehicle dealership sales totaled $15.5 billion in 2012, an average of $38.4 million per dealership. On average, Massachusetts dealerships that sell new cars employ 49 people, who earn about $62,000 per year, the association reported.
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MSADA WILBRAHAM
Balise Ford Opens New Wilbraham dealership Balise Ford has opened a new dealership in Wilbraham on Boston Road. A ribbon cutting ceremony was held May 23 at the 27,000 square-foot dealership. The additional showroom and service space means that the company expects to add about 20 jobs from the previous dealership, which was located on the same property. That brings their total workforce up to 60 people. “This was a long time coming,” Balise Auto Group President Jeb Balise told WWLP. “Just because of the credit crunch and everything that happened with the auto industry, this store got delayed.” The dealership remained open during the ongoing construction; it operated out of the former Medeiros-Williams Chevrolet dealership about a half a mile down Boston Road.
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NEWS from Around the Horn NORTH ADAMS
Toyota Honors K-M Motors for 50-Year Partnership Toyota Regional General Manager Cooper Erickson awarded K-M Motors with a glass trophy 50-year award recently during a brief ceremony at K-M Motors’ Curran Highway showroom. Owner Dennis Dubie said K-M Motors is the only new-car retailer in North Adams — the waves of recessions have left them the last standing. He said that designation is special, but Derek Dubie, left, Dennis Dubie, Cooper feels empa- Erickson and Nancy Kolac pose with the trophy for the 50-year partnership thetic toward between Toyota and K-M Motors. owners who discontinued service because of the difficult economic climate. Henry Kolac first opened K-M Motors, formerly known as Nash North Adams, in 1945. The store was later renamed to K-M Motors after taking a different franchise. Dubie joined K-M Motors in 1980, partnering with Henry Kolac. After Kolac’s death in 1991, Dubie took sole ownership. His son Derek Dubie is the general manager of the shop. BOSTON
Infiniti Honors Massachusetts Dealerships Infiniti of Norwood and Kelly Infiniti have been recognized with the 2013 Award of Excellence. “The Infiniti Award of Excellence is a recognition program designed to honor those who contribute to building the Infiniti brand by consistently delivering a unique and personalized experience for their customers,” the company said in a statement. “This experience is measured in part by the Total Ownership Survey – a survey that your sales and service customers receive. “The Award of Excellence not only recognizes and rewards dealerships that excel in sales and satisfaction; it also reinforces the standards of excellence set for all by describing the key actions that will produce a powerful awareness of the Infiniti brand.” JUNE 2013
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MSADA WALTHAM
‘Key to Success’: Waltham Graduate Wins Car A June graduate from Waltham High School won a certified pre-owned car as part of this year’s Keys to Success program. Maria Millan is the sixth winner of Keys to Success, an incentive program that rewards high school students who achieve excellence. Monthly, students are given prizes for excelling in various categories during the school year. At the end of the year, those recognized have the opportunity to compete to win the car. Honda Village in Newton kicked off the 2012-13 program to motivate and recognize Waltham students to excel in various areas including attendance, community service, improvement in grades and other categories. Honda Village supplies the certified pre-owned car that the students compete to win. To coordinate this effort and manage the program throughout the year, the dealership works with the faculty at Waltham High School. Millan volunteered as a translator for several school events. She assisted and translated for families and parents who do not speak English during the open houses and other school assemblies. She just got a job with the Waltham Rec Department.
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NEWS from Around the Horn RAYNHAM
New England Motor Press Association Lauds Styling of 2014 Mazda6 Typically, the design lines of a concept vehicle are toned down significantly before they ever see the light of the showroom on a production model. That was not the case for the bold Mazda TAKERI concept, which was modified only slightly before it arrived at dealers as the 2014 Mazda6. The New England Motor Press Association recently applauded that potentially risky move by Mazda, honoring the automaker’s new midsize sedan with its 2013 Gene Ritvo Award for Design and Elegance. Named after the prolific automotive photographer who passed away in 2009, the Gene Ritvo Award for Design and Elegance is presented annually to the concept or production vehicle that offers the best of design in the auto industry, whether it is through an overall design, a marketing campaign or a specific style element. The 2014 Mazda6 incorporates Mazda’s new KODO, or Soul of Motion, design language, donning swept-back headlights, an aggressive hexagonal grille and
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flared fenders that flow back into contoured design lines. “Midsize sedans are usually designed to appeal to the lowest common denominator of buyers’ tastes, but the new Mazda6 instead appeals directly to their hearts,” said Barry Chew, sales manager of Mastria Mazda. “The Mazda6’s responsive driving dynamics reflect that sense of excitement as well, but the car remains highly practical by offering great fuel economy for the daily commute.”
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by Don Sudbay MSADA
NADA Update
A Franchise System Under Attack 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). It was great to see many of my fellow dealers at the MSADA Annual Meeting in Boston. Certainly, it was a well planned event that gave all of us valuable information. Kudos to Bob O’Koniewski, Scott Dube and the staff of MSADA for bringing us all a first class event. As I mentioned in my remarks, the franchise system is under attack. I know that NADA and MSADA have the resources and the will to defend what we know is the most efficient and consumer-friendly distribution and sales system for vehicles in the world. It is important that we all “talk up” the franchise system and understand and be able to discuss the benefits that this distribution system brings to our customers.
New NADA President Testifies before Senate on Rental Car Recall Bill NADA President Peter Welch testified May 21 before a Senate consumer protection subcommittee on Senate 921, a bill concerning rental car recalls. During his testimony, Welch emphasized the vital role that auto dealers play in fixing recalled vehicles. While supporting the purpose behind the bill, Welch informed Senators that recall work can sometimes be delayed because the part needed to remedy the recalled vehicle has not yet been designed or manufactured. Under the bill, a rental vehicle would have to be put out of service if the part needed was unavailable. NADA’s president cautioned Senators against regulating “multinational corporations with fleets of hundreds of thousands of rental vehicles” the same as “auto dealers with fleets of five loaner vehicles.” Welch also raised concerns that the bill would subject dealers to new federal inspections, new federal reporting requirements and stiff new penalties.
Letter to CFPB Demands Release of Information Supporting its Fair Lending Allegations A letter circulated by Rep. Terri Sewell (D-Ala.) and signed by 12 of her Democratic colleagues on the House Financial Services Committee was sent to CFPB director Richard Cor-
dray on May 28. The letter asks for the analysis and methodology supporting the CFPB’s assertion in recent fair lending guidance issued to finance sources that there may be disparate impact discrimination in indirect auto lending. The CFPB is using this allegation to push finance sources to compensate dealers with flat fees instead of dealer reserve. Despite numerous requests, the CFPB has steadfastly refused to release this information or any data supporting its efforts to eliminate the dealer’s ability to discount the interest rate offered to consumers. This lack of transparency, coupled with the members’ concern that “credit markets function competitively and efficiently,” prompted this inquiry. The other signers of the letter were Reps. Joyce Beatty (Ohio), William Lacy Clay (Missouri), John Delaney (Maryland), Bill Foster (Illinois), Denny Heck (Washington), Dan Kildee (Michigan), Gregory Meeks (New York), Patrick Murphy (Florida), Ed Perlmutter (Colorado), Gary Peters (Michigan), David Scott (Georgia) and Kyrsten Sinema (Arizona)
Guidance/Model Forms Issued for Required Health Care Reform Law Notices The U.S. Department of Labor (DOL) on May 8 provided “temporary guidance” regarding the written notice employers are required to provide to their employees under the Patient Protection and Affordable Care Act (PPACA). PPACA requires that applicable employers must provide each employee with a written notice providing the employee with information about the state and federally-facilitated health insurance exchanges and how to request assistance, describing the availability of a premium tax credit (if applicable) and outlining the implications for the employee if they choose to purchase a qualified health plan through an exchange. The notice requirement was originally scheduled to take effect on March 1, 2013, but subsequent guidance has indicated that the timing for distribution of notices will be the late summer or fall of 2013 in coordination with the open enrollment period for exchanges. Along with technical release, the following model notices have also been issued by the DOL: •Model notice for employers who offer a health plan to some or all employees; •Model notice for employers who do not offer a health plan; •COBRA model election notice; and •COBRA model election notice redline version Dealers should consult their health care consultant, insurance carrier or other outside professional to determine which form is appropriate for your dealership, and how to properly complete and distribute that form to your employees.
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NADA Market Beat
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Produced by NADA’s Industry Analysis Group • Angela Lisulo, Economist
Review of Second Quarter Light New Vehicle Sales The U.S. automobile industry sold 1.4 million light vehicles in May 2013 – this marked an increase of 12.3 percent from April 2013 and an increase of 8.0 percent over last May. May 2013 YTD figures bring total light vehicle sales to 6.4 million up 7.1 percent from a year ago. The May 2013 SeasonallyAdjusted Annual Rate (SAAR) for light vehicle sales is 15.2 million units up from the SAAR value of April 2013 which was 14.9 million units. In May 2013 YTD figures, car sales held a market share of 50.1 percent and were up 3.4 percent from a year ago while corresponding figures for light trucks put the light truck share at 49.9 percent with sales up 11.1 percent from a year ago. See Figure 1.
growth in YTD sales, from a year ago, at 12.5 percent, followed by Chrysler (9.3 percent) and then General Motors (8.3 percent). An assessment of the performance of major brands in the U.S. market – Ford (not including Lincoln), Chevrolet, Toyota, Honda, Nissan and Dodge – revealed the dominance of the Ford brand leading this group with a May 2013 YTD market share of 15.7 percent followed by Toyota with 14.3 percent and Chevrolet in third place with a share of 12.9 percent. Focus: The major brands with a geographic base in Asia/Pacific – Toyota, Honda, Nissan, Hyundai and Kia Motors. With the exception of Kia Motors, all brands experienced an increase in May
FIGURE 1
Brands
The Detroit 3 brands held the largest market share of light vehicle sales in May 2013: 45.9 percent of the market. This was followed by brands based in Asia/Pacific at 45.4 percent and then brands based in Europe at 8.7 percent. The OEM/brand categories, by geographic base – Detroit 3, Asia/Pacific and Europe – all experienced growth in light vehicle sales in May 2013 YTD figures from last May. In May 2013 YTD figures, the Detroit 3 also held the largest share of U.S. light vehicle sales at 46.0 percent. This was an increase from 44.8 percent a year ago. The corresponding share held by all the Asia/Pacific-based brands was 45.1 percent and that for all the Europe-based brands was 8.9 percent of U.S. sales YTD. Of the Detroit 3, Ford has experienced the most
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2013 YTD sales over last year. In this group, Nissan had the largest growth figure of 7.2 percent in YTD sales and it is the only brand that has held its market share of 8.1 percent of total U.S. sales YTD from a year ago. The other brands – Toyota, Honda, Hyundai and Kia Motors – all experienced declines in their YTD market share from a year ago. See Figures 2, 3 and 4.
Segments
Of all the segments, the cross utility vehicle (CUV) segment continues to hold the largest share in sales YTD figures; for May 2013 YTD figures, the CUV share was 24.8 percent. In terms of YTD segment market share, this is followed by middle cars (21.3 percent) and small cars (19.7 percent), respectively. It must be noted that the CUV segment share has grown from last
29 FIGURE 2
FIGURE 3
FIGURE 4
year while those of middle cars and small cars have contracted. For May 2012 YTD values, the CUV share was 22.8 percent while those of middle cars and small cars were 22.5 percent and 20.1 percent, respectively. The greatest growth in May 2013 YTD sales, from a year ago, was in the CUV segment (16.4 percent) followed by pickups (14.1 percent). Within the CUV segment, for May 2013 YTD, all sub-segments experienced growth from a year ago and the middle CUV had the largest number of sales with 1,004,952 units. Within the pickup segment, for May 2013 YTD, the large pickup had the largest number of sales with 747,577 units and it is the only sub-segment that has experienced growth from a year ago (the only other subsegment (the small pickup) has experienced a decline in sales since last May). See Figures 5 and 6.
FIGURE 5
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NADA Market Beat FIGURE 6
Power source
Note: All data provided by WardsAuto unless otherwise stated. WardsAuto does not include vehicle sales delivery information for Tesla Motors. Although gasoline exhibits clear dominance in U.S. light vehicle sales by power source, its share continues to be in slight decline – gasoline held a market share of 93.6 percent of May 2013 YTD light vehicle sales while its share was 94.0 percent a year ago. The diesel category held its YTD market share from a year ago: 2.7 percent of U.S. light vehicle sales. Electric vehicles, hybrids and plug-in hybrids have each experienced growth in sales from a year ago, in YTD figures. In May 2013, for the alternative power category, the U.S. automobile industry sold 2,537 electric vehicles, 48,247 hybrid vehicles, 3,209 plug-in hybrid vehicles and no fuel cell vehicles amounting to 53,993 light vehicle sales. Focus: Electric vehicles. In the alternative power category, May
FIGURE 7
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2013 YTD figures put electric vehicles with the greatest growth in sales at 175.4 percent from a year ago. Within the electric vehicle category, for May 2013 YTD, the Nissan Leaf is the vehicle with largest number of sales with a value of 7,614 units – nearly 4⁄5 of reported electric vehicle sales. However, it must be noted that there is additional information pertaining to electric vehicle sales in the U.S. – according to LMC Automotive, 6,322 units of the Tesla Model S electric vehicle by Tesla Motors were sold in April 2013 YTD. See Figure 7.
Models
From the list of top selling vehicles for the month, the leading 2 vehicles were pickup trucks: Ford F Series and the Chevrolet Silverado. Third, fourth and fifth place were occupied by cars: Toyota Camry, Honda Accord and Nissan Altima, respectively. This marked a difference from April 2013 sales numbers when the 5 leading vehicles for the month consisted of 3 pickup trucks and 2 cars. See Figure 8.
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FIGURE 8
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