June 2014 MSADA magazine

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 2014 • Vol. 27 No. 6

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

Green Thumbpr nt Smaller Footprint

MA S S A C H U S E T T S

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S TA F F D I R E C T O R Y Robert O’Koniewski, Esq. Executive Vice President rokoniewski@msada.org Jean Fabrizio Director of Administration jfabrizio@msada.org Peter Brennan, Esq. Staff Attorney pbrennan@msada.org Paul Fellows Administrative Assistant/ Membership Coordinator pfellows@msada.org AUTO DEALER MAGAZINE 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: pfellows@msada.org Postmaster: Send address change to: One McKinley Square, Sixth Floor Boston, MA 02109 Auto Dealer is published by the Massachusetts State Automobile Dealers Association, Inc. to provide information about the Bay State auto retail industry and news of MSADA and its membership.

AD DIRECTORY BlumShapiro, 22 Boston Herald, 32 Internet Sales Group, 24 Lynnway Auto Auction, 15 M&T Bank, 19 Nancy Phillips Associates, Inc., 22 O’Connor & Drew, P.C., 31 Southern Auto Auction, 21

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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: Getting Greener THE ROUNDUP: Legislature Enters Mad Dash to End of Session TROUBLESHOOTNG: Avoiding Consumer Litigation ACCOUNTING: IRS Says Facility Image Upgrade Program Payment = Taxable Income

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AUTO OUTLOOK LEGAL: Aftermarket Products: The CFPB’S Next Frontier

16 COVER STORY: Green Thumbprint, Smaller Footprint

19 25 26 28

NEWS From Around the Horn Internet Sales 20 Group - Boston NADA UPDATE: A Good Deal for Everyone NADA MARKET BEAT

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

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

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

Massachusetts Auto Dealer JUNE 2014

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from the PRESIDENT

by Scott Dube, MSADA President

Getting Greener

Auto dealerships lead the way in renewable energy

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ore and more these days, people are coming into our dealerships looking for vehicles that they describe as “green.” That can mean many things, depending on what folks are shopping for -- whether it’s sending them toward a hybrid or a truck with an eco conscious engine.

While our customers have come to expect wide arrays of green technology available in whatever vehicle they may choose, what many don’t know is how green our dealerships are behind the scenes.

There’s dozens of little things you and I are doing in our showrooms, our shops, and even our own offices that help the environment. Used oil recycling is becoming more and more popular, for example. Other things are easier for our customers to notice, whether that means solar panels out front or constructing new dealerships that meet the highest standards available throughout the building. A lot of dealers are updating lighting to LED and other highefficiency systems. Dealers are also recycling the car wash water insome cases.

All of this often gets obscured by the features of the metal we’re trying to move off the lot. That’s obviously a good thing most of the time -- people who are excited about new technology are among those most likely to appear in our showrooms looking to see the best we have to offer. But other customers are looking to see a green commitment from their dealers as well as their vehicles. As vehicles last longer and longer, the dealership where they’re serviced has a significant impact on the environment.

All this shows why we should all try to do a better job mak-

ing sure the public understands how far we’re going to green up more than just our inventory. That’s the thinking behind this month’s Auto Dealer magazine cover story -- we’re sharing some of the green practices at dealerships across the state. I encourage you to check out what your peers are up to and to share your own green practices with your customers. And thanks to Adam Connolly, Ray Ciccolo, and Brian Heney for sharing what they’re up to.

As MSADA continues to work to ensure the public learns more about our industry, this is one area we will continue to do more work on. When we get bogged down in legislative battles, these are the kinds of details that help our legislators understand how vital we are to the community. Every lawmaker wants to have green businesses in his or her district, and thanks to us, most of them do.

“Many customers don’t know how green our dealerships are behind the scenes.”

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Massachusetts Auto Dealer www.msada.org

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 hard-earned recognition.

For more information about the criteria, please see Executive Vice President Bob O’Koniewski’s Roundup column on page 6, and a tear-out fax form is available on page 2. Please be sure to get in your nominations soon.

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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 III, 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 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

A ssociate M ember D irectory Name 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 AutoAlert Don Corinna (949) 398-7008 AutoRaptor (RAL) Howard L. Leavitt (401) 421-6533 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 (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 Cars.com Heidi Allen (312) 601-5376 CitNOW Jack Gardner (617) 221-8008 CloudDOCX Michael DeCarlo (585) 704-6826 Construction Management & Builders, Inc. Kate Sullivan (781) 246-9400 CVR John Alviggi (267) 419-3261 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 Grant Thornton LLP Alan Oslomowski (508) 926-2200 GW Marketing Services Gordon G. Wisbach Jr. (781) 899-8509 Huntington National Bank John J. Marchand (781) 326-0823 Key Bank James Q. Moretti (781) 558-5132 Leader Auto Resources, Inc. Brendan J. Murphy (518) 878-6341 Lynnway Auto Auction Jim Lamb (781) 596-8500 M & T Bank John Federici (508) 699-3576 Management Developers, Inc. Dale Bosch (617) 312-2100 MetroMedia Energy Timothy Teevens (800) 828-9427 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 O’Connor & Drew, P.C. Kevin Carnes (617) 471-1120 Performance Management Group, Inc. Mark Puccio (508) 393-1400 R.L. Tennant Insurance Agency, Inc. Walter F. Tennant (617) 969-1300 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 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 TrueCar Steve White (774) 392-2904 Wells Fargo Dealer Services Christopher Peck (508) 314-1283 Wicked Local Media Massachusetts Jay Pelland (508) 626-4334 Windstream Rick Caruth (978) 296-0313; (413) 977-6111 Zurich American Insurance Company Steven Megee (774) 210-0092

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Massachusetts Auto Dealer JUNE 2014

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The Roundup

Legislature Enters Mad Dash to End of Session

by Robert O’Koniewski, Esq. MSADA Executive Vice President Minimum Wage Hike, UI Reforms Now Law The Massachusetts Legislature is quickly approaching the July 31 end of its formal sessions. As we go to press, there are several major outstanding issues demanding attention, including the FY2015 budget which begins on July 1, economic development proposals, expansion of the Boston Convention and Exposition Center, new gun control measures, charter schools expansion, and welfare reform, just to name a few.

Two issues the General Court cleared off its plate this month were passage of a minimum wage increase and reforms to the state’s unemployment insurance (UI) system, taken together in the same bill.

On June 26 Governor Deval Patrick signed into law the legislative compromise approved the week before by the House and Senate that increases the minimum wage, in three steps, to $11 per hour over the next 30 months and reforms the UI system to prevent spikes in rates to employers and reward employers with stable workforces.

The legislative compromise on the minimum wage that is now law will pre-empt the proposed initiative petition for the November 2014 ballot, as petition proponents will not move forward with their effort. Although the compromise minimum wage law does not include any automatic hike based on the Consumer Price Index, which proponents sought, proponents are pleased for now to have the three-step hike in the wage over the next 30 months.

Under the compromise bill, the current $8/hour minimum wage will increase in three steps as follows: • $9 per hour on January 1, 2015; • $10 per hour on January 1, 2016; and JUNE 2014

Massachusetts Auto Dealer www.msada.org

• $11 per hour on January 1, 2017.

The bill also includes reforms to the Unemployment Insurance system as follows: • The taxable wage base will be raised from $14,000 to $15,000.

• Starting in 2018, the employer experience rating will be calculated based on the employer’s use of the unemployment insurance system of the past three years, rather than the current practice of looking at only the preceding year.

• The Director of Unemployment Assistance is permitted to participate in the federal Treasury Offset Program.

• The employer required contribution percentages to the Workforce Training Fund and the Employer Medical Assistance Contribution are amended to hold employers harmless from any possible increases due to the increase in the taxable wage base.

• The pool of seasonal employers eligible to request certification from the Department of Unemployment Assistance is expanded to employers open for 20 weeks, rather than the current 16 week cap.

• The small farm exemption from inclusion in the unemployment insurance system is made available for farms that pay less than $40,000 in quarterly wages, an increase from the current $20,000 cap.

• In addition, small farms that lose the exemption by paying over $40,000 in wages per quarter are eligible to re-qualify for the exemption from the unemployment insurance system if the small farm pays less than $40,000 in wages for 8 consecutive quarters. This is similar to the federal provision.

• New whistle-blower protections are included to protect employees that report employer abuse or

MSADA noncompliance with the unemployment insurance system.

• The Department of Unemployment Assistance is required to provide employers with notice of their experience rating

by January 31 of each year.

• Closes various loopholes which allow employers to take advantage of the unemployment insurance system and provides reforms for employees who, due to technicalities currently in the law, are deemed ineligible for unemployment insurance when they would otherwise qualify.

Legal, OSHA Compliance Assistance Program On June 2 we issued a letter to every MSADA member dealer detailing a new compliance assistance program of which we encourage our members to take advantage.

Your Association’s Board of Directors approved a plan to enhance the value of your membership. This unique program is designed to assist our members in their compliance with employment laws as well as occupational and environmental safety laws. This program will be underwritten in substantial part by your Association in order to reduce costs and encourage all of our members to take advantage of this opportunity.

Beginning last year, the MSADA Board of Directors undertook a review of the current services offered to our members and sought input from you as to how to best expand our services to you in a substantive and cost effective manner. The Board initially created the Dealer Services Committee to undertake this task, and it is chaired by our Immediate Past President, Jim Boyle.

As announced at our Annual Meeting, in our first step to improve your membership experience and build upon the services presently available to you, we have established a two-part subsidy program to support your use of several compliance services offered by certain vendors, as described below.

Employment Law Compliance Pro-

gram: The MSADA has worked out an arrangement with Fisher & Phillips LLP, the national labor and employment firm with which we have worked for years, to provide the following services to our members, at a special discounted fee.

The MSADA will underwrite a portion of each member’s legal fee for participating in any portion of the program in the following manner: • If you are a single point dealer, the MSADA underwritten portion of one of the three items offered below will be $500.

• If you have an anchor store and one or more affiliates, the MSADA underwritten portion of one of the three items offered below will be $500 for the anchor store and $300 per affiliate.

The three Fisher & Phillips services dealers can partake in are the following.

We encourage you to utilize each service; the MSADA financial assistance, however, is only available for a single choice: 1. Pay Plan Review: Fisher & Phillips will review each dealership’s pay plans for all of its employees for compliance with Massachusetts and Federal wage and hour law. It will advise each dealership accordingly. The cost for this review is $1200, minus the MSADA portion of $500 (per single point/anchor)/$300 (per affiliate), for a total to you of $700/$900, if this is your selected choice.

2. Employment Handbook/Application Review: Fisher & Phillips will review each dealership’s employment handbook and application form for compliance with Massachusetts and Federal law and make recommendations accordingly. The cost for this review is $1200, minus the MSADA portion of $500 (per single point/anchor)/$300 (per affiliate), for a total to you of $700 (per single point/anchor)/$900 (per affiliate), if this is your selected choice.

3. Management Training and General Audit: Fisher & Phillips will come to your dealership to provide special training to your managers about compliance with employment laws and the risks to the managers themselves and the dealership of failing to comply with employment laws. www.msada.org

This includes training to avoid harassment and interference with employee rights on social media. In addition, Fisher & Phillips will meet with top management to perform a general audit of employment law compliance, such as I-9 forms and FMLA. The cost of this training and audit is $1700, minus the MSADA portion of $500 (per single point/anchor)/$300 (per affiliate), for a total to you of $1200 (per single point/ anchor)/$1400 (per affiliate), if this is your selected choice.

To take advantage of this unique opportunity and begin the process, simply contact attorney Joe Ambash, the Boston Managing Partner of Fisher & Phillips, by phone at (617)532-9320 or by email at jambash@laborlawyers.com. Fisher & Phillips will coordinate with MSADA to ensure that members receive the reduced fee underwritten by MSADA. Occupational/Environmental Safety Law Compliance Program: In addition to the employment law compliance program, MSADA has worked out an arrangement with two workplace safety compliance firms that many dealers use presently: John Furrh Associates and KPA. The Association’s financial commitment is the same as in the employment law compliance program. The MSADA will underwrite a portion of each member’s fee charged by either Furrh Associates or KPA for services rendered to your dealership(s) during the year in the following manner: • If you are a single point dealer, the MSADA underwritten portion of either’s service fee for the year will be $500.

• If you have an anchor store and one or more affiliates, the MSADA underwritten portion of either’s service fee for the year will be $500 for the anchor store and $300 per affiliate.

To take advantage of this opportunity and begin the process, simply contact: • At Furrh Associates – Jennie Cormier: (508)824-4939 or jcormier@johnwfurrhassociates.com • At KPA – Rob Stansbury: (484)3269765 or rstansbury@kpaonline.com Each company will coordinate with Massachusetts Auto Dealer JUNE 2014

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The Roundup MSADA to ensure that members receive the reduced fee for services as underwritten by MSADA. 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.

Should you have any questions, please do not hesitate to contact me.

Electric/Zero Emission Vehicles As for the $36.5 billion budget that includes no new taxes currently being hammered out in a legislative conference committee, one item of note concerns the creation of a special commission on electric vehicle/zero emissions vehicle.

In an effort to study the economic and environmental benefits and costs of increased use of electric and other zero emission vehicles in Massachusetts, the Massachusetts House and Senate each included within its own final FY2015 budget proposal a special commission on such matters. The House electric vehicle commission would consist of 23 members, while the Senate zero emission vehicle commission would have 27 members including 2 of whom would be Class 1 franchised dealers who sell electric vehicles as a segment of their vehicle inventory. The budget conference committee will need to resolve these differences.

In both versions, the commission would study and make recommendations for policies to further expand access to electric and fuel cell vehicle infrastructure, encourage the purchase and lease of electric and fuel cell vehicles, and indentify strategies for removing barriers to electric and fuel cell vehicle deployment. An action plan would be created by September 2014 and draft legislation filed with the legislative clerks by April 2015.

This proposed special commission is partly in reaction to eight states – California, Connecticut, Maryland, Massachusetts, New York, Oregon, Rhode Island, and Vermont – coming together to create JUNE 2014

a plan to reduce greenhouse gas emission levels by encouraging consumers to purchase more electric-powered vehicles.

The states seek to promote the sale of over three million zero emission vehicles by 2025 through a combination of consumer incentives and regulatory actions. (Presently there are only 200,000 nationwide.)

The project aims to install recharging stations at workplaces, expand cash/non-cash incentives for buying electric cars, and push dealers to promote electric vehicles.

Toward this end, on June 18 the Commonwealth of Massachusetts launched the Massachusetts Offers Rebates for Electric Vehicles (MOR-EV) program.

Funded by the Executive Office of Energy and Environmental Affairs’ Department of Energy Resources (DOER), the MOR-EV program is part of the MultiState Zero-Emissions Vehicle Program, which was created in October 2013 through a Memorandum of Understanding entered into by the governors of the aforementioned eight states.

Massachusetts drivers can now apply for rebates of up to $2,500 for the purchase or lease of new electric vehicles, including battery electric, plug-in hybrid electric, fuel cell electric vehicles, and zero-emission motorcycles. Applicants must apply for the rebate directly within three months of the completed transaction, and the approved applicants will receive their checks directly from the state. There is no action required on the part of the dealer.

Rebate amounts are based on vehicle type and are available in the following amounts: • $2,500 rebate for fuel cell vehicles and plug-in electric vehicles with large batteries; • $1,500 rebate for plug-in electric vehicle with smaller batteries; and • $750 rebate for electric motorcycles.

For a complete vehicle list, please visit https://mor-ev.org/eligible-vehicles-list.

In order to be eligible, applicants must meet the following requirements: • Purchase or lease an eligible vehicle on or after the program start date of June 18, 2014;

Massachusetts Auto Dealer www.msada.org

• Choose a lease term of at least 36 months, where applicable; and • Apply for the rebate within three months of vehicle purchase or lease date.

Your Association has been working with the MOR-EV program administrators on the program’s roll-out. For more program details and requirements, dealers can: • Visit the MOR-EV program website at www.mor-ev.org; • Directly contact the Center for Sustainable Energy, the program administrator, by e-mail at mor-ev@energycenter.org or by phone at (866) 900-4223; or • Contact MSADA attorney Peter Brennan by e-mail at pbrennan@msada.org or by phone at (617) 451-1051.

Furthermore, beginning on June 25, the Massachusetts Department of Environmental Protection (DEP) is accepting grant applications from employers interested in installing electric vehicle charging stations at their business. Massachusetts employers with 15 or more employees in non-residential places of business are eligible, and the Commonwealth will provide 50% of funding (up to $25,000) of hardware installation costs for accepted applicants. Applications are processed on a first come, first served basis until all program funding is expended.

“Massachusetts Electric Vehicle Incentive Program (MassEVIP): Workplace Charging” is a DEP open grant program that provides incentives to employers for the acquisition of Level 1 and Level 2 electric vehicle charging stations. Massachusetts employers with 15 or more employees in non-residential places of business are eligible. DEP will provide 50 percent of the funding (up to $25,000) for hardware costs to employers installing Level 1 and Level 2 charging stations.

Workplace charging refers to the electric vehicle charging infrastructure or electric vehicle supply equipment (EVSE) which is available for electric vehicles at or near places of employment.

According to the DEP materials, workplace charging: • Allows access to EV charging for em-

MSADA ployees who do not have charging at home; • Demonstrates the employer’s leadership to employees, customers and the surrounding community; • Furthers employer goals for improving employee commuting practices and reducing greenhouse gases and other vehicle emissions; and • Enhances employee benefits packages and helps employers recruit and retain employees.

According to the program guidelines, DEP will review all employer applications for completeness and eligibility. The agency will, within 30 days of receiving an application and finding it satisfactory, issue to the successful applicant a Grant Application Approval, including an EndUser Agreement that defines the terms and conditions of the grant award. After returning its signed End-User Agreement to DEP, an approved employer will have up to 180 days to complete the acquisition and installation of its charging station(s).

DEP will provide incentive payments directly to charging station vendors on state contract.

Interested dealers are encouraged to review additional information and download the grant application at http://www. mass.gov/eea/agencies/massdep/air/ grants/workplace-charging.html.

Save the Date: Internet Sales 20 Group - Boston On September 22-24, at the Marriott Newton Hotel, we will be joining forces with DealerSynergy to provide our member dealers and other affiliated industry entities throughout New England the opportunity to participate in a three-day series of workshops billed as “Internet Sales 20 Group – Boston”.

DealerSynergy has conducted five similar events around the country, most recently in Atlantic City, with increasing attendance and success at each one.

Check out our ad in this month’s publication as well as an article written by DealerSynergy CEO Sean V. Bradley, who has presented at MSADA meetings

in the past. Look for our registration materials in the coming weeks or register today at www.internetsales20group.com.

This event will provide you with everything you need to move your dealership’s needle in the right direction. Learn more than just the information. Learn how to evaluate, strategize, and execute a solid action plan to rise above your competition.

Congratulations, Don Sudbay For the last three years Don Sudbay of the Sudbay Auto Group in Gloucester has served as our Massachusetts representative on the National Automobile Dealers Association’s Board of Directors. Over that time, Don has committed countless hours in travel, meetings, and conferences in his national advocacy efforts on behalf of our Massachusetts dealers.

Recently NADA conducted an election for the seat, and Don was re-elected by acclamation, with no opposition. We offer our warm congratulations to Don as he continues fighting for our member dealers here and in Washington DC.

ATD Legislative Visits On June 20 the American Truck Dealers (ATD) Board of Line Representatives held its June board meeting in Washington DC. During the meeting, the ATD board members were briefed by the NADA-ATD staff on key issues and later met with members of Congress. The ATD Board is chaired by Eric Jorgensen, president and CEO of JX Enterprises in Hartland, Wisconsin, which operates 16 dealership locations in Wisconsin, Illinois, Indiana, and Michigan.

Included in the group, Massachusetts truck dealer and ATD Immediate Past Chairman Dick Witcher, president and CEO of Minuteman Trucks in Walpole, met with U.S. Reps. Patrick Kennedy (DBrookline), and David Cicilline (D-RI), as well as staff members for Rep. Stephen Lynch (D-South Boston), and our two U.S. Senators, Edward Markey and Elizabeth Warren, both Democrats.

Issues discussed included H.Con.Res. 52, which puts Congress on record in opposition to an increase in the federal www.msada.org

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excise tax on sales of new heavy-duty trucks; possible changes to Last-In, FirstOut (LIFO), an accounting method used by many truck dealers; and the impact of modifications to bonus depreciation.

As we see with our auto dealers who visit DC for the annual NADA Washington Conference each September, taking time away from your business and coming to Capitol Hill to advocate for issues that impact dealers’ bottom lines truly helps to move the needle with Congress.

If you are a heavy-duty truck dealer and interested in hosting a member of Congress at your dealership this summer for a visit and tour, contact Patrick Calpin, NADA-ATD Director of Grassroots Advocacy, at pcalpin@nada.org or (202) 547-5500.

TIME Dealer of the Year 2015 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. Important criteria are community service, industry leadership, and being a quality businessperson.

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. The last four TDYA honorees were: Brian Kelly, Ray Ciccolo, Ann Regan Flynn, and Bill DeLuca III. 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, August 8. Thank you for your assistance on this matter.

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Troubleshooting

MSADA

Avoiding Consumer Litigation

By Peter Brennan, Esq.

Staff Attorney, MSADA As our member dealers know all too well, disputes with customers happen in every business. Not every customer is going to be a satisfied customer. When a dispute arises, how the complaint is initially handled by the dealership is often the difference between a resolution of the dispute or an escalation towards time-consuming and financially painful litigation.

At the root of every consumer lawsuit is an angry and unhappy customer. The best time to prevent the lawsuit is immediately after the customer has registered his or her complaint with the dealership.

If a dispute escalates, it is generally because the customer was not satisfied by the dealership’s initial reaction to the complaint. If a customer is not satisfied by the dealership’s response to his or her complaint, then their next phone call is going to be to an attorney.

The dealership should establish a written policy for handling customer complaints that is adhered to by all dealership employees. As part of this policy, dealership employees should be required to keep accurate records of all complaints and all interactions with customers during the complaint process.

While the purpose of the policy might be to avoid litigation, accurate and detailed record keeping procedures will benefit the dealership and its counsel if litigation does occur.

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When designing the dealership’s customer complaint policy, it may be useful to review past complaints to see what worked (placated the customer) and what did not (resulted in a lawsuit). If necessary, consult an attorney to help your dealership develop a legally sound policy.

The primary reason to avoid litigation is cost: the certain cost of defending a lawsuit plus the potential cost of a judgment in favor of the consumer. Massachusetts has some of the most consumerfriendly laws in the country, and when a customer dispute arises, avoiding litigation is frequently the most cost effective strategy.

The Massachusetts Consumer Protection Act, M.G.L. c. 93A, specifically provides for legal actions by the Attorney General or by individuals against unfair or deceptive conduct in the marketplace. The statute allows the court to award treble (multiple) damages when a consumer is successful in litigation and the circumstances merit — when violations are found by the court to be “knowing” or “willful” — and, therefore, it is a favorite of many plaintiff’s attorneys.

Even if you feel that you are onehundred percent correct, and that the consumer’s complaint is not valid, it is many times cheaper to dispose of the complaint with a settlement before it advances to litigation. Early money spent to resolve a consumer complaint is usually the cheapest money that a dealer will spend, as a small settlement will generally pale in comparison to a jury verdict or the cost of successfully defending a lawsuit.

In addition to the cost of defending a lawsuit and the costs that may result if you lose, a lawsuit can financially harm a dealer’s business in another way: by distracting the dealer and the dealership team from their core mission of moving metal. Preparation for litigation will

Massachusetts Auto Dealer www.msada.org

require key staff members to take time away from their responsibilities in order to spend time with the legal team defending the action. Dealership managers and ownership will be similarly inconvenienced and may have to provide their counsel, as well as the plaintiff’s counsel, with many details of their business during the civil discovery process which they would prefer to keep private.

Negative publicity and customer reviews are another reason to handle customer complaints skillfully before they can escalate to litigation. If a customer is angry enough to litigate, then they are certainly angry enough to do whatever they can to tarnish your reputation in the community and on online forums and websites such as Yelp. If this unsatisfied customer is effective in swaying even one potential customer away from visiting your dealership, then the decision to litigate has already proven to be a poor one.

Another factor that must be considered when heading down the path to litigation is that lawsuits are generally a matter of public record, and any records and documents filed in connection with a lawsuit in Massachusetts can be inspected and copied by members of the public. The court may, in its discretion, impound certain documents, but this is rare. It is more likely that dirty laundry aired during the course of litigation could be discoverable to the public.

While litigation can be an effective tool in many aspects of business, it should always be considered a last resort when dealing with a customer.

If you require any additional information about avoiding consumer litigation 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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Accounting

MSADA

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IRS Says Facility Image Upgrade Program Payment = Taxable Income By

Mitchell S. Halpern Mitchell

is a principal in the tax depart-

ment and director of the firm’s

Estate Planning and Sports and Entertainment Accounting Services practice at O’Connor & Drew, P.C. Mitchell specializes in tax and financial advice specific to professional athletes, entertainers and high-net worth individuals, multi-state, estate and gift taxations.

In a recently issued General Legal Advice Memorandum (AM2014-004, dated April 7, 2014, released May 9, 2014), the IRS Office of Chief Counsel concluded that all payments received by automobile dealerships from automobile manufacturers under Facility Image Upgrade Programs are includable in the dealership’s gross income.

In reaching this conclusion, the Chief Counsel’s Office addressed three specific factual situations as explained below.

Background: Dealerships and their tax advisors have been struggling for some time now on the proper tax treatment of payments received by a dealership from a manufacturer under manufacturer programs designed to “encourage” dealers to upgrade their facilities to certain manufacturer specifications. In the absence of formal IRS guidance, the IRS Chief Counsels Office was asked to consider the following three factual situations:

Situation 1 Manufacturer has developed a brand standardization plan for its dealerships that includes a standardized, modernized look for dealership facilities. Not all dealerships are eligible to participate in the plan.

Under the program agreement, dealerships are eligible to receive payments equal to a percentage of the project’s construction costs, provided the work complies with the manufacturer’s standardization plan.

A dealership participant receives half of the total payments at the beginning of the project and the other half upon completion of the project. The manufacturer has the right to inspect the completed project to ensure compliance with the program’s requirements and if the participant does not satisfactorily complete the project, the participant will be required to repay some or all of the payments received.

Situation 2 Manufacturer has developed a brand standardization plan for its dealerships that includes several required elements: (1) improvements to the dealership’s facilities, (2) upgrades to the dealership’s software, internet capabilities and website enhancement, and (3) training for sales and service employees. All dealerships are eligible to participate in the program and participation requires a dealership to complete all the required elements of the plan. Payments under the program are made quarterly for the duration of the dealership’s participation and are only made if the dealership meets certain progress goals for each of the required elements during the preceding quarter. The amount of each payment is determined by a formula based on the number of vehicles purchased during the preceding quarter. A dealership may receive payments after the completion of construction or improvements to its facilities because not all required elements relate to improvement of the facilities and those required elements may extend beyond the construction or improvements of its facilities.

Situation 3 Manufacturer has developed a brand standardization plan for its dealerships www.msada.org

“Dealerships and their tax advisors have been struggling for some time now on the proper tax treatment of payments received by a dealership from a manufacturer” that includes a standardized, modernized look for dealership facilities. All dealerships are eligible to participate in the plan.

The program provides for two distinct types of payments. One type of payment is determined by a specific dollar amount for each vehicle sold during the dealership’s participation in the program. The second type of payment is determined using a formula based on the expected costs of the improvements.

The April 7, 2014 memorandum addresses each of the reporting positions set forth at the beginning of this article explaining why they are not proper. It states, “Under the facts of the situations and the contracts you provided, all Payments are includible in the dealerships’ gross income under §61 of the Code.” It goes on to state, “The dealerships, not the manufacturers, own the property that the dealerships construct or improve with Payments. Under these facts, the dealerships receive payments to defray their expense for construction of, or improvements, to their property. Therefore, the dealerships have an accession to wealth over which they have complete dominion and control. Accordingly, the dealerships must recognize gross income at the time they receive Payments or appropriately accrue the right to receive Payments under their methods of accounting.”

You should consult with your tax advisor as to the applicability of this recently issued guidance to your facts and circumstances.

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Massachusetts Auto Dealer JUNE 2014

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AUTO OUTLOOK

JUNE 2014

Massachusetts Auto Dealer www.msada.org

MSADA

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Massachusetts Auto Dealer JUNE 2014

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14

Legal

Aftermarket Products The CFPB’S Next Frontier

By Randy Henrick Associate

general

counsel

regulatory and compliance

and

Counsel

lead for

Dealertrack Technologies

As dealers begin to adopt the NADA Fair Credit Compliance Policy and Program, the federal Consumer Financial Protection Bureau (CFPB) appears to be expanding its analysis of automotive dealers to the sale of aftermarket products. This is not to say their efforts on disparate impact of dealer buy rate markups are going away.

The NADA program documents a legitimate business reason for any downward change from a uniform markup rate that you otherwise charge all customers and literally takes away the discretion of the dealer — either the consumer qualifies for a lower markup based on one of the seven identified legitimate business reasons or they don’t. Going to flats (the CFPB solution) does not accomplish this result, as the dealer still will have discretion among different flat fee offerings. I honestly believe the NADA program can be a game changer on the dealer disparate impact issue.

So the CFPB is looking closely at aftermarket products which they believe offer little value to consumers. The CFPB has wreaked havoc with add-on (aftermarket) products sold by credit card companies, entering into $200 million consent decrees with a number of card companies and an $800 million consent decree with a large national bank for allegedly decepJUNE 2014

tively marketing or not providing credit protection and identity theft protection services. Word has it that in analyzing lenders’ automotive finance portfolios, the CFPB is looking at the sale of aftermarket products for possible new causes of action.

The CFPB entered into a consent decree last year with an automotive finance lender and its service provider for deceptively marketing aftermarket products to military service members under a special subprime financing program.

The alleged violations against the bank consisted principally of Truth in Lending disclosure violations for failing to disclose monthly fees, the number of payments, and the APR in using a “military allotment” program where the payments were automatically deducted from service member paychecks. But the CFPB also focused on how the bank’s service provider marketed two optional add-on products that were sold to, and typically financed by, service members – an additional GAP insurance policy and a vehicle service contract.

According to the CFPB, the service provider told some customers that the GAP policy would cost only a few cents a day, when the true cost averaged 42 cents a day. Marketing materials for the vehicle service contract said it would add just “a few dollars” to the customer’s monthly payment when it actually added an average of $43 per month. The CFPB also alleged that marketing materials deceptively suggested that the vehicle service contract would protect service members from all expensive car repairs, when many basic parts were not covered. All of this was considered deceptive advertising by the CFPB. As a remedy, the CFPB ordered the service provider to pay $3.3 million to reimburse approximately 50,000 service

Massachusetts Auto Dealer www.msada.org

members who signed up for the products since 2010. The bank was ordered to repay $3.2 million to the service members for the disclosure violations. No action is required by the 50,000 service members to get their refunds.

Aftermarket products could also be the target of the CFPB’s next “disparate impact” claim if pricing differentials were deemed to be statistically significant to the disadvantage of protected persons under ECOA. The question would come down to whether or not the price of a product is part of the credit transaction.

I think I know how the CFPB would answer that one (yes, it is).

That being said, the CFPB could also refer to the Federal Trade Commission (FTC) or state Attorneys General claims against dealers for deceptive aftermarket sales as an unfair or deceptive trade practice.

So what’s a dealer to do? Probably the best series of aftermarket sales practices comes from earlier CFPB consent decrees slamming credit card companies.

It goes without saying that using an electronic menu is a best practice and it should show the base monthly payment so there is a starting point for the consumer’s understanding.

Here are some other guidelines: • You should have a written plan that indicates your dealership’s policy for the sale of aftermarket products and compliance with laws. This includes making it clear to the customer that the products are optional and are not required to obtain credit. It goes without saying that aftermarket products should not be payment packed into the price of the vehicle.

• Conduct some due diligence on third party providers of aftermarket products.

Are the companies and their products

MSADA reputable? Do they provide legitimate value to the customer at the established price? Is the company financially strong enough to be able to stand by their products and perform services for customers?

• Train your employees on your policies and do periodic quality assurance monitoring. Review scripts and menus and emphasize the importance of not making statements such as “it will only cost a few pennies a day” like the service provider in the CFPB case made.

• Implement a process for handling customer disputes relating to aftermarket products and consider giving the customer the benefit of the doubt in resolving disputes or allegations concerning the aftermarket product marketing. It is penny wise and pound foolish to let the customer file a complaint with the CFPB, the FTC, or your state Attorney General, which can turn into an expen-

sive and time-consuming regulatory investigation, or possibly a lawsuit. Better to resolve the matter at the dealership, even if you give the customer more than you believe they are legally entitled to receive. You don’t want to get on the regulatory radar screen.

• Many dealers videotape aftermarket sales presentations. There are arguments pro and con to doing this. A good videotape can stop a plaintiff’s lawyer and perhaps a regulator dead in their tracks. But you will need to keep all the videotapes for a minimum of 25 months (possibly longer under state law), and a regulator or plaintiff’s lawyer will have the right to look at all of them, some of which may include arguably deceptive statements or conduct. Personally, I am not a fan of videotaping because of the downside risk. Training, following scripts, and having managers present in random sessions to evaluate can be

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15

equally effective and not leave a video trail of problems. But other lawyers do feel differently about videotaping.

Aftermarket products may be the next frontier for the CFPB and other regulators. Take a look at how you market them to customers, and implement a consistent, compliant process for doing so. The time you spend doing so may avoid intensive audits, pretrial discovery, or fines and damage payments down the road.

This article is intended for information purposes only and does not constitute the giving of legal or compliance advice to any person or entity. Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon by any person or entity without specific legal advice based on particular situations.

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Massachusetts Auto Dealer JUNE 2014

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COVER STORY

Green

Smaller Footprint Dealers across the Commonwealth are making serious commitments to energy efficiency

“Everything in there is as efficient as possible.

There are a million things you can do.”

– Brian Heney, Director of Operations for Kelly Auto Group

By Catherine MacDonald As the season heats up and nature’s blooms are in full swing, environmental friendliness is on many minds – including business and government. Massachusetts and seven other states on the East and West coasts last year released a plan for working together to put 3.3 million zero-emission vehicles on the nation’s roads by 2025. The “action plan” follows last year’s memorandum of understanding announced by the governors of the eight states.

In their own dealerships, industry leaders across the Commonwealth are making serious commitments to energy efficiency. From massive solar panel installations to smaller tweaks like hands-free faucets, here’s what several dealers are doing to set the “green” tone.

JUNE 2014

Massachusetts Auto Dealer www.msada.org

MSADA

Thumbprint Potential for solar

Herb Connolly Auto Group partnered with Hopkinton-based Solect Energy Development to install new solar photovoltaic (PV) renewable energy systems on the roofs of its Framinghambased dealerships.

Solect installed a 200 kilowatt solar photovoltaic (PV) renewable energy system on the roof of its Framingham-based Acura and Hyundai, and a 185 kilowatt system on the roof ifs Chevrolet dealership. The projects are expected to help the company trim its electric bills by more than 50 percent. This installation, which could power the equivalent of 38 homes, will offset 333 tons of CO2 annually.

Herb Connolly worked the solar project into its plans to renovate the building that houses its Acura dealership, but “going solar” has long been in the works for the company, said Adam Connolly, co-owner at Herb Connolly Auto Group.

“We’d been thinking about solar for quite some time, and with the renovations to the Acura building, the time was right to look at it more seriously,” Connolly said. “This project helps us demonstrate our total commitment to renewable energy and the environment.”

Herb Connolly was able to take advantage of state and federal tax incentives that help make renewable energy projects affordable for building owners. These include SRECs (Solar Renewable Energy Certificates), which are earned by solar system owners based on the amount of energy they generate via solar. SRECs are ultimately purchased by electrical utility providers in Massachusetts to help meet their state-mandated goals of a percentage of power coming from renewable energy sources. This is a good revenue stream for those property owners who choose solar solutions. The company’s savings generated via the solar PV solution, along with the revenue generated through SRECs, made deploying solar a win-win situation.

Herb Connolly is already planning to expand its solar commitment and is going through the permitting processes with the town to install a 40 kilowatt solar system on a 16-space carport located at its Chevrolet dealership that will house charging stations for fast-selling Chevy Volt electric vehicles.

“Herb Connolly is known for its commitment to the community and the environment, and they are very proactive in looking at how renewable energy solutions like solar can impact their business and www.msada.org

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16 18

Green Thumbprint, Smaller Footprint

their bottom line,” said Alex Keally, business development partner at Solect.

Keally said dealers might face logistical hurdles when attempting such a project, but their businesses provide an excellent canvas.

“Car dealers have great potential for solar. They generally use a lot of power and have big roofs,” Keally said.

The group also recycles water in the Volkswagen store. “Everything in there is as efficient as possible. There are a million things you can do.”

Basic steps, thoughtful changes

‘A million things you can do’ Kelly Auto Group has made many big commitments to energy efficiency and is working on even more. The group’s new Kelly Volkswagen dealership is the home of the first electric-producing wind turbine in Danvers.

The 38-foot-tall turbine rises 12 feet above the building, and it is used to power lighting at the dealership. It also generates enough power to charge 160 EV batteries.

Though the turbine won’t be used to supply energy back into the power grid, it will allow Kelly Automotive President Brian Kelly to work with the town to help with new zoning bylaws for wind turbines in the future.

Other changes include making the switch from flouresent lighting to all LED bulbs – a switch that can cost between $45,000 and $75,000, according to Brian Heney, director of operations for Kelly Auto. The group is also in the process of going paperless, he says, which presents unexpected challenges.

“You’d think you could be 100 percent paper free, but it doesn’t happen,” Heney said.

JUNE 2014

“Herb Connolly is known for its commitment to the community and the environment and they are very proactive in looking at how renewable energy solutions like solar can impact their business and their bottom line.”

– Alex Keally, business development partner at Solect.

Massachusetts Auto Dealer www.msada.org

Going green is always at the forefront of Village Auto Group’s design decisions. The group sees two major benefits to energy efficient features: reducing the impact on the environment and saving on the cost of energy.

With those goals in mind, each Village Auto location has taken basic steps to be environmentally friendly. This includes switching to energy efficient bulbs and recycling tires, motor oil, and scrap metal from their shops.

Some stores have reduced their energy consumption by installing high-speed garage doors and adding reflective elements to exterior windows, to improve insulation.

Village Auto is also on top of the trend that automation equals conservation. They have replaced light switches with auto on/off sensors, added hands-free faucets and hand dryers, and more could be on the way.

The group’s Director of Marketing, Phil Jackson, said, “We have explored solar in the past and even though we didn’t proceed at the time, we are entertaining solar again, especially as the install costs lessen and as solar becomes more mainstream. Solar makes a lot of sense, especially with our flat roofs and urban locations, and because our energy needs are high.”

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NEWS

from Around the Horn

19

PITTSFIELD

Berkshire County Dealers Meeting 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 June 20 we met in Pittsfield with our Berkshire County dealers, led by MSADA Berkshire County Director Brian Bedard.

Rep. Gailanne Cariddi (D-North Adams) represented the area’s legislative delegation. Thank you to Brian for setting the meeting up.

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Massachusetts Auto Dealer JUNE 2014

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NEWS from Around the Horn NORTHAMPTON

Massachusetts Car Owner Awarded Top 10 Businesswomen of the Pioneer Valley Carla Cosenzi, President of TommyCar Auto Group, which consists of Country Nissan in Hadley, Country Hyundai and Northampton Volkswagen in Northampton, and Patriot Buick GMC in Charlton, was recently awarded Top 10 Businesswomen of the Pioneer Valley by Women Business Owners Alliance (WBOA).

This award is given to local businesswomen outside of WBOA who have shown success in their businesses, have contributed to the community in some way, or have shown themselves as successful role models for other women business owners and executives.

WBOA provides education and inspiration to Western Massachusetts businesswomen in every stage of their business development. Led by a 17-member Board of Directors, WBOA offers a variety of monthly business and professional development opportunities geared towards helping women grow their businesses and reach their goals.

Carla remains on the UMASS Nursing Advisory Board and is actively involved in the community, continuing the Thomas E. Cosenzi Driving for the Cure Charity Golf Tournament, which has raised more than $400,000 in support of brain-cancer research for Dana-Farber Cancer Institute.

TommyCar Auto Group re-opened Northampton Volkswagen and Country Hyundai at a new site in 2014. The $13 million state-of-the-art Volkswagen and Hyundai dealerships are located on King Street in Northampton. Both dealerships are under 18,000 square feet and consist of

PEABODY

Lyon-Waugh Auto Group Launches Jaguar Peabody Dealership Now in its third decade of providing luxury cars to New England drivers, the Lyon-Waugh Auto Group is continuing to diversify its high-quality offerings, adding the iconic Jaguar brand to its selection with the opening of Jaguar Peabody this month. There are many reasons why this acquisition is a natural fit for the burgeoning business; even the coincidental fact that Lyon-Waugh was co-founded by Bud Lyon and the British luxury auto brand was co-founded by Sir William Lyons 71 years earlier.

Located at the same facility as Land Rover Peabody at 247

JUNE 2014

Massachusetts Auto Dealer www.msada.org

modern, spacious, and comfortable showrooms.

As a team, Carla and her brother, Tommy, work together through respect and communication to grow their father’s legacy. She credits their success to the employees who helped grow the business into the successful one it is today.

Newbury St. in Peabody, Jaguar Peabody currently holds the inventory of Woburn Jaguar following its acquisition by LyonWaugh earlier this year. Discerning buyers will already find a broad selection of Jaguar models, from the all-new Jaguar FType two-seat sports car to all-wheel-drive models of the Jaguar XF luxury sedan. The top-of-the-line cars join the highly capable SUVs from sister brand Land Rover at the dealership, with both marques owned by Tata Motors since 2008.

“Lyon-Waugh’s goal has always been to provide the very best in luxury motoring to our customers, and the addition of the legendary Jaguar brand to our quiver will give us another outlet for satisfying our customers’ refined tastes,” said Dave Edwards, general manager of Jaguar Peabody. “We’ve already seen the impeccable quality that consistently comes from Tata Motors with Land Rover, and we expect a seamless transition in selling the automaker’s sportier Jaguar models.”

MSADA PEABODY

Refreshed 2015 MINI Countryman and Paceman to Arrive This Summer Since its debut in 2010 as a larger, more capable MINI vehicle, the MINI Countryman has become one of the brand’s most popular models, currently leading the lineup in sales through April of this year. In 2012, driving enthusiasts received the option of a sportier, two-door version of the Countryman in the form of the MINI Paceman. For the 2015 model year, both compact crossovers have been refreshed with upgrades in style, comfort and technology inside and out.

When they go on sale this summer, the 2015 MINI Countryman and Paceman will sport modified versions of their hexagonal radiator grilles, with unique touches dif-

ferentiating the base Cooper, Cooper S and John Cooper Works trims. Enhancing those sleeker front ends will be optional LED fog lights and daytime running lights, while lighter 17-inch alloy wheels in a new 5-Star Triangle Spoke Design will adorn the Cooper and Cooper S trims on both vehicles. The 2015 Countryman and Paceman will also be available with a new Piano Black finish on select exterior surfaces and new body colors, including Jungle Green and Midnight Grey metallic, as well as the new-tothe-Countryman Starlight Blue metallic.

“The new MINI Countryman and Paceman will be just as capable and engaging as before with their versatile interiors and available ALL4 all-wheel drive, but owners will have even more bold options for standing out stylistically on the road,” said Gary King, general manager of MINI of Peabody. “Also, buyers of both the 2015 Countryman and Paceman will find a cabin that is more sporty and sophisticated across all trim levels.”

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Massachusetts Auto Dealer JUNE 2014

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NEWS from Around the Horn NORTHAMPTON

Lia Donated Portion of Sales from Massachusetts Dealerships Lia Auto Group is giving back to our nation’s veterans.

Company President William Lia recently presented a check for $11,350 to the VA Central Western Massachusetts Healthcare System.

Since March, Lia Group has been setting aside a portion of all Massachusetts dealership sales to donate to the VA. The funds will be used to help care for hospitalized veterans at the facility.

RAYNHAM

Parents Magazine and Edmunds.com Laud the Family-Friendly Nissan Rogue The Nissan Rogue compact crossover was completely redesigned for the 2014 model year with a sleeker exterior, a more sophisticated cabin and improved fuel efficiency, and according to Parents magazine and Edmunds.com, those changes should resonate with modern families. Recently listing the 2014 Nissan Rogue on their 10 Best Family Cars for 2014 list, the publications honored the new model as the Best Crossover.

Editors of Parents and Edmunds.com praised the allnew Rogue for its high-quality interior materials that buck the crossover’s affordable pricing and its impressive in-car technology, including its standard Bluetooth connectivity and RearView Monitor, as well as its available active-safety features like Forward Collision Warning, Blind Spot Warning, Lane Departure Warning and Moving Object Detection. They also noted the Rogue’s familyfriendly fuel economy, which includes a 33-mpg highway rating. When it comes to versatility, the 2014 Rogue was recognized for its 70 cubic feet of cargo space with the rear seats folded, as well as its clever storage solutions like the Divide-N-Hide Cargo System that features 18 different cargo configurations in two-row models.

“The 2014 Nissan Rogue provides all the things that families have traditionally wanted in a vehicle, whether it’s fuel efficiency, safety or spaciousness, but the crossover also offers the features that modern parents are seeking, like intuitive connectivity and style,” said JUNE 2014

Massachusetts Auto Dealer www.msada.org

MSADA

23

TEWKSBURY

2014 Nissan Altima Dubbed Most Affordable Midsize Sedan

by Cars.com With so much discrepancy between each vehicle’s list of standard equipment, it can be deceiving to compare cars based on their starting prices. That’s why Cars.com only evaluated models that offer several popular features when determining the most affordable midsize sedan for 2014.

The auto-research site found that the 2014 Nissan Altima 2.5 S with the Display Audio Package leads the popular midsize segment in real-world affordability, besting similarly equipped models of the 2014 Hyundai Sonata and 2014 Toyota Camry.

To qualify for the Cars.com evaluation, midsize-sedan models were required to have an automatic transmission, cruise control, Bluetooth connectivity, a USB outlet, a backup camera, a power driver’s seat and power windows.

After its purchase price and five years of fuel expenses were

Bruce Garcia, general sales manager of Mastria Nissan in Raynham. “That formula is attracting much more than just accolades from critics; it’s driving increased traffic to our dealership from customers wanting to check out the new Rogue.”

RAYNHAM

Preorders for Mazda MX-5 Miata 25th Anniversary Edition Open The Mazda MX-5 Miata roadster is currently at a crossroads in its illustrious history, celebrating a quarter-century on the market as a new fourth generation of the model waits in the wings. To mark that mix of achievement and anticipation, Mazda unleashed 100 units of a 2015 MX-5 Miata 25th Anniversary Edition to U.S. buyers in the Spring, helping the third generation of the iconic sports car go out with a bang. Starting on May 20 at 1:25 p.m. EDT, customers were able to place their name in a queue to purchase the MX-5 Miata 25th Anniversary Edition by visiting a preorder microsite and specifying their preferred Mazda dealership.

factored in, the Nissan Altima 2.5 S with the Display Audio Package was estimated to run its owners a total of $32,820, costing $2,384 less than the segment average. Regardless of model, each 2014 Altima is equipped with a Bluetooth Hands-free Phone System, an auxiliary audio input, Push Button Ignition, NASA-inspired zero-gravity seats and a Tire Pressure Monitoring System with Easy-Fill Tire Alert.

“Midsize-car buyers don’t want the cheapest model on the market; they want the most affordable model after all the useful, modern features are included, and that’s the Nissan Altima,” said Gabe Despres, general manager of AutoFair Nissan Tewksbury. “Also, the Altima continues to provide excellent value long after it leaves the dealership thanks to its efficient-yet-responsive powertrains.”

Outside, the 2015 Mazda MX-5 Miata 25th Anniversary Edition will come only in a Soul Red Metallic paintjob contrasted

by Brilliant Black on the A-pillars, windshield surround, outside mirrors and the power-retractable hardtop. Seventeen-inch Dark Gunmetal 10-spoke aluminum-alloy wheels and a numbered 25th Anniversary badge on the driver’s-side front fender will also contribute to the limited-edition roadster’s unique exterior styling. Inside the cabin, buyers will find Almond-leather seats and door trim, liquid-metal-like satin chrome finish on dashboard elements and the inner door handles, and 25th Anniversary badging on the headrests and stainless-steel door scuff plates. To match the color theme of the exterior, there are also several black accents and red stitching on soft-touch surfaces.

“The 25th Anniversary Edition not only gives fans of the MX-5 Miata an excellent opportunity to own a model that stands out stylistically, but it also features engine parts that were hand-selected

by Mazda engineers to be the lightest, most balanced and of the highest quality,” said Barry Chew, sales manager of Mastria Mazda. “We hope that we can help a few lucky customers take one home so that they can turn heads all over the South Shore this summer.”

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Massachusetts Auto Dealer JUNE 2014

SAVE THE DATE

MSADA

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Internet Sales 20 Group - Boston Not Just Another Workshop SEPTEMBER 22-24, MARRIOTT NEWTON HOTEL

By Sean Bradley DealerSynergy With so many workshops, trainings, and educational events to pick from, it’s vital that you choose a workshop that will bring a strong return complete with applicable, relevant, and proven content.

The Internet Sales 20 Group introduced itself to the Automotive Industry in 2010 on a mission to be different from everything else out there. The Internet Sales 20 Group has been so effective in its design it has literally changed the expectations dealers have when attending other workshops.

The Difference Other workshops highlight the fact that they have expert presenters and top-level speakers with fresh, relevant content – and we, of course, have that, too. But our goal is not simply to deliver you superior information. We strive to provide you with everything necessary to steer you toward a full transformation of your store and yourself as a professional.

The Workshop Instructional Design We have an instructional design with one clear curriculum that has a strong beginning, middle, and end. Each day of the workshop ends with a full recap of the information and a challenge: take what you’ve learned that day and create an implementation plan. Moderators work closely with every member to develop an action plan specific to their needs, their store, and their desired outcomes. Members are advised to take their action plan home and begin to implement it immediately. On the last day of the workshop, non-competing dealerships pair off with other members to become “Accountability Partners.” This partnership ensures that everyone follows through with his or her action plan and stays motivated when the workshop is over.

Dealer Interaction Inviting experts to talk hypothetically about strategies and processes isn’t going to motivate you to succeed. That’s why we incorporate Dealer Panels and Success Stories, where real-life dealers discuss their stories of successes, failures, trials and tribulations. Nearly 50% of our audience members are GMs and Dealer Principals, while Sales Managers, Internet Sales Managers, BDC Managers, Marketing Directors, Internet Coordinators, and Sales Reps fill the rest of the seats.

Maximum Exposure The workshop takes place in one general assembly space. Therefore, as a member, you will be exposed to every single speaker, presentation, and discussion. You will never miss out on a seswww.msada.org

sion that may be of importance to you or your store. Additionally, all sponsors are situated around the perimeter of the main room, which allows for the greatest level of interaction with the vendors.

Other valuable features include the Bench Mark Composite ($3,500 value), panels of strategically chosen experts, and a 90-page workbook.

The Follow Up With expert presenters and panelists, unparalleled curriculum, irreplaceable workbook, and invaluable dealer experience, IS20G puts all the tools you need to succeed in your hands. But the most important and elusive undertaking is implementation. That’s why we developed an exceptional follow-up process to ensure you don’t just toss the workbook and your ideas on a shelf when you get home.

In addition to your Accountability Partner, IS20G provides further resources all year round for members to reference, including all PowerPoint presentations, supplemental content, videos, forums, and articles in a private group on AutomotiveInternetSales.com.

MSADA & IS20G With the partnership of MSADA, the momentum of the last 5 events, and invaluable resources, the Internet Sales 20 Boston will provide you with everything you need to move your dealership’s needle in the right direction. Learn more than just the information. Learn how to evaluate, strategize, and execute a solid action plan to rise above the competition.

Be a part of the #1 workshop in the Automotive Industry. Register today at www. internetsales20group.com.

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Massachusetts Auto Dealer JUNE 2014

MSADA NADA Update by Don Sudbay

26

A Good Deal for Everyone New NADA Study: The Dealer Franchise System Works Best for Manufacturers 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).

In the following paragraph we hear from Forrest McConnell, our NADA Chairman, speak about the true benefits of the franchise system to the consumer. It is important that each of us take the time to go to the NADA.org website and understand the talking points that should really hit home to customers and the press when we are asked about the value of the dealer franchise system.

Maryanne Keller, who has spoken to our association in the past, has authored a white paper on the franchise system which is available on the nada.org site. Make no doubt about it, our distribution system is under attack by people and the press who are totally misinformed, and it is up to all of us to set the record straight.

A Special Note from NADA Chairman Forrest McConnell: “Price Competition. Public Safety. Greater Convenience for American Consumers. We’ve said this before but now we’re showing everyone why new-car dealers are vital to the economy and to their local communities.

“NADA has launched a major ‘Get The Facts’ initiative.

Aimed at the media, opinion leaders, and policymakers, the campaign promotes the benefits of franchised auto dealers and provides key facts about our businesses. NADA has rolled out a variety of multimedia resources and an informative new webpage, www.nada.org/GetTheFacts.

“The centerpiece is a must-see animated video, ‘A Good Deal for Everyone,’ that details the value of franchised dealers in the car buying process—including the significance of performing warranty and safety recall work.

“We’re also highlighting the economic engine that is the dealer franchise network. There are 17,700 new-car dealerships with nearly 32,000 domestic and international franchises across every state in the country that employ more than 1 million people.

“There have been many misconceptions about the dealer business. NADA’s ‘Get The Facts’ initiative sets the record straight about who we are and what we do.

We’re making sure that the car-buying public—along with everyone else—understands that what we do is ‘A Good Deal for Everyone.’ ” JUNE 2014

Massachusetts Auto Dealer www.msada.org

A new study released today by the NADA highlights why the dealer franchise system is the most efficient and effective way for auto manufacturers to distribute and sell automobiles nationwide.

Key findings of the NADA study, “Auto Retailing: Why the Franchise System Works Best,” include: • The average dealership today requires an investment of $11.3 million, including physical facilities, land, inventory and working capital.

• Nationwide, dealers have invested nearly $200 billion in dealership facilities.

• Annual operating costs totaled $81.5 billion in 2013, an average of $4.6 million per dealership. These costs include personnel, utilities, advertising, and regulatory compliance.

• The vast majority—95.6 percent—of the 17,663 individual franchised retail automotive outlets are locally and privately owned. They generate billions in state and local taxes annually and provide significant employment opportunities that help build goodwill in the community.

• Manufacturers benefit from the high return on capital invested in manufacturing vehicles, as opposed to the low margin of retailing them.

• Dealers bear the cost and risks of these investments—at virtually no cost to the manufacturers—and provide a vast distribution channel that benefits the consumer.

The study is part of a new “Get The Facts” initiative from NADA to promote the benefits of America’s franchised new-car dealership network. The initiative includes a Web site and variety of multimedia resources available at www. nada.org/GetTheFacts.

The centerpiece of the project is a two and a half minute animated video detailing the benefits of the dealer franchise system. Other resources include a 30-second video, a fact sheet on the consumer benefits of dealers, a longer informative FAQ, a document explaining the reasons for state franchise laws, an infographic, and other materials.

There are nearly 17,700 new-car dealerships with about 32,000 domestic and international franchises that employ more than 1 million people in the U.S.

NADA Hires New Academy Instructor Thomas O. Carney, Jr., has joined the National Automobile Dealers Association and American Truck Dealers as an Academy instructor.

“I’m excited to be part of the team that supports the dealer franchise system,” said Carney. “NADA has been a key source of automotive intelligence throughout my 30 years

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in the business.”

NADA and ATD Academy programs prepare current and future dealership leaders and managers to improve the operations and financial results of each department within the dealership. For more information call (800) 557-6232 or email academy@nada.org.

New Law Eliminates Federal Red Tape from New Car Sale Auto dealers no longer have to fill out a form certifying that a new vehicle complies with the Clean Air Act prior to the sale.

H.R. 724, which was supported by the NADA, was signed into law recently by the president. The bill eliminates an obsolete federal mandate passed in 1977.

“All new vehicles delivered to dealerships from the factory are already compliant with federal emissions regulations,” said NADA Chairman Forrest McConnell, III. “The form was unnecessary, and we’re glad it’s gone.”

McConnell added that the certification information is printed on a sticker under the vehicle’s hood and provided in the owner’s manual and automaker websites, making the additional dealer form redundant.

Passage of the new law is part of a larger NADA effort to reduce outdated and unnecessary federal regulations on auto retailers. In 2013, at NADA’s urging, Congress eliminated the requirement that dealers to provide their customers with a booklet on the estimated insurance costs for new vehicles.

Consumers can find more accurate insurance information online or by phone.

Last month, the Center for Automotive Research (CAR) released an NADA-commissioned report, which found that new-car dealers spent $3.2 billion in 2012, or $182,754 per dealership, to comply with 61 major federal rules—resulting in higher prices for dealership customers and the loss of an estimated 10,500 dealership jobs.

NADA’s chairman commended the leadership of U.S. House sponsors Reps. Bob Latta (R-Ohio) and Gary Peters (D-Michigan), as well as Sens. Debbie Stabenow (D-Michigan) and Deb Fischer (R-Nebraska), who helped guide passage of H.R. 724 through the U.S. Senate.

NADA Convention & Expo Recognized as Top Trade Show Trade Show Executive, an industry magazine, ranked the 2013 NADA and ATD Convention & Expo as one of the fastest growing trade shows in the country.

In the category of exhibit space (net square feet), the NADA and ATD conventions received Trade Show Executive’s Fastest 50 award for 2014—ranking No. 33 out of 50

trade shows.

The Fastest 50 rankings were determined from information supplied and certified by senior association executives or private show organizers.

The top 50 performers in the categories of exhibit space, exhibitors, and attendance were selected based on the percentage of growth from 2012 to 2013.

Federal Rules Cost New-Car Dealerships More Than $3 Billion Each Year U.S. new light-duty vehicle dealers spent $3.2 billion in 2012 to comply with 61 major federal rules, resulting in higher prices for dealership customers and the loss of an estimated 10,500 dealership jobs, according to a new report released by the Center for Automotive Research (CAR), based in Ann Arbor, Michigan.

According to the report, The Impact of Federal Regulations on Franchised Automobile Dealerships, the average dealership incurred $182,754 in costs to comply with federal mandates governing employment, business operations, vehicle financing, sales, marketing, and vehicle repair and maintenance. These regulatory costs equated to 21.7 percent of the average dealership’s pretax, net profits – or about $2,400 per dealership employee.

“The additional cost for new-car dealerships to comply with federal regulations are passed along to our customers in the form of higher prices, which results in lower vehicle sales and reduced employment at dealerships,” said NADA Chairman Forrest McConnell, III. The overall impact of these costs on the 2012 U.S. economy was estimated at $10.5 billion in lost economic output and more than 75,000 fewer jobs, says CAR. Every $1 increase in a dealership’s regulatory compliance costs results in $3.28 in lost output in the U.S economy and a net loss of 44 cents to the U.S. Department of the Treasury, according to the report.

The CAR report examined the costs incurred by new-car dealerships to comply with 61 federal regulations – a mere subset of all federal regulations with which new-car dealerships must comply. The study did not analyze the costs of upstream mandates imposed on vehicle manufacturers, such as fuel economy and safety rules. State and local regulatory mandates also were not analyzed. Thus, the study significantly underestimates the total regulatory burden imposed on dealerships.

NADA commissioned the CAR report. Cost estimates are for 2012 and are based on interviews in 2013 and 2014.

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Produced by NADA’s Industry Analysis Group • Angela Lisulo, Economist

Review of New Light Vehicle Sales Overall

There were 1.6 million light-vehicle sales in May 2014 – an increase of 15.8 percent from April 2014 and an increase of 11.2 percent over May 2013. May 2014 holds the record for the highest

sales month, so far, in 2014.

May 2014 YTD light-vehicle sales amounted to 6.7 million, up 4.8 percent from a year ago. The May 2014 Seasonally Adjusted Annual Rate (SAAR) for light-vehicle sales was 16.7 million. The last time the monthly SAAR value reached 16.7 million was February 2007.

In YTD terms, cars held a share of 47.9 percent of light-vehicle sales, with sales up 10 basis points from last year. Light trucks held a share of 52.1 percent, with sales up 9.6 percent from a year ago.

See Figure 1.

Companies/Brands

For May 2014, the companies with a geographic base in the Asia/Pacific region held the largest market share of light-vehicle sales at 46.5 percent followed by companies based in North America (Detroit 3 and Tesla Motors) at 45.4 percent, and then companies based in Europe at 8.1 percent.

For May 2014 YTD, the companies with a geographic base in Asia/Pacific also held the largest share of light-vehicle sales in the U.S. at 45.9 percent, followed by companies based in North America at JUNE 2014

Massachusetts Auto Dealer www.msada.org

45.6 percent, and then companies based in Europe at 8.6 percent.

All company categories by geographic bases – North America, Asia/Pacific and Europe – experienced growth in light-vehicle sales in May 2014 YTD figures from last year.

MSADA General Motors held the largest share of May 2014 YTD light-vehicle sales at 17.7 percent. In terms of sales growth, for the Detroit 3, Fiat Chrysler experienced the most growth in May 2014 YTD sales, from a year ago, at 12.9 percent, followed by General Motors at 2.8 percent. Ford experienced a contraction of 1.4 percent in May 2014 YTD sales from last year.

For the group of Asia/Pacific-based companies, Toyota held the largest share of May 2014 YTD lightvehicle sales at 14.4 percent. Isuzu experienced the most growth in May 2014 YTD sales from last May at 100.4 percent.

For the group of Europe-based companies, BMW and Volkswagen each held the largest share of May 2014 YTD light-vehicle sales at 2.2 percent. Jaguar Land Rover experienced the most growth in May 2014 YTD sales from a year ago at 13.7 percent.

See Figures 2, 3 and 4.

Segments

Of all the segments, the cross utility vehicle (CUV) segment held the largest share of May 2014 YTD light-vehicle sales at 26.7 percent; the share of this segment increased from its corresponding share of 24.8 percent last year.

Other segments that also experienced a rise in their respective market shares in YTD terms, since last year, included the large car segment, sport utility vehicle (SUV) segment and the van segment.

In terms of market share of May 2014 YTD sales, the CUV segment was followed by the middle car segment at 19.7 percent and then the small car segment at 19.1 percent. Both the middle car and small car segments, however, experienced a decline in YTD market share from last year.

All the segments, except for the middle car segment experienced growth in May 2014 YTD sales from last year; the large car segment experienced the most growth in YTD sales, since last year, at 22.3 percent.

Within the CUV segment, the middle CUV subsegment was the largest sub-segment, holding 64.2 percent of May 2014 YTD CUV sales, while the small CUV sub-segment experienced the most growth out of all the CUV sub-segments in YTD sales at 27.8 percent.

See Figures 5 and 6. www.msada.org

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NADA Market Beat

Power source

Gasoline-powered light vehicles held a share of 93.6 percent of May 2014 YTD light-vehicle sales, which was an increase from its corresponding share, a year ago, of 93.5 percent. For every month this year, thus far, the share of gasoline-powered light vehicles has been higher than its corresponding share last year, in YTD terms.

The share held by diesel-powered light vehicles was 2.8 percent of May 2014 YTD light-vehicle sales, which was up from its corresponding value of 2.6 percent last year.

The market shares held by electrics and plug-hybrids have each grown since last year, in YTD terms, while those for hybrids and light vehicles powered by fuel cell technology and natural gas have each declined.

In May 2014, the following light vehicles were sold under the alternative power category in the U.S.: 5,934 electrics, 0 units powered by fuel cell technology, 53,141 hybrids, 78 units powered by natural gas, and 6,651 plug-in hybrids, amounting to 65,804

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Massachusetts Auto Dealer www.msada.org

light vehicles. May 2014 holds the highest monthly sales of light vehicles under the alternative power category, so far, this year.

See Figure 7.

Models

For May 2014 YTD, eight of the 15 best-selling light vehicles were models from the Asia/Pacific-based companies, while the rest were models from the Detroit 3 companies.

The Asia/Pacific-based companies that contributed the most models to this list include Toyota and Honda with three models each, while, for the Detroit 3 companies, General Motors and Ford contributed the most models each with three models.

This list is slightly dominated by cars – there are eight cars and seven light trucks. The best-selling light truck ranked first on the list, and this is the Ford F Series with 281,695 units sold; the best-selling car ranked third on the list is the Toyota Camry with 181,876 units sold.

See Figure 8.