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FIRST CLASS MAIL US POSTAGE PAID BOSTON, MA PERMIT NO. 216
March 2014 • Vol. 27 No. 3
The official publication of the Massachusetts State Automobile Dealers Association, Inc
Up Frank Hanenberger
Stepping
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 Quarter Page: $450 Half Page: $700
Full Page: $1,400 Back Cover: $1,800
Auto Dealer is published by the Massachusetts State Automobile Dealers Association, Inc. to provide information about the Bay State auto retail industry and news of MSADA and its membership.
AD DIRECTORY Bellavia & Blatt, 2 BlumShapiro, 22 Boston Herald, 32 Lynnway Auto Auction, 23 Nancy Phillips Associates, Inc., 22 O’Connor & Drew, P.C., 31 Schlossberg, LLC, 20 Southern Auto Auction, 24 ADVERTISING RATES Inquire for multiple-insertion discounts or full Media Kit. E-mail jfabrizio@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: Seizing Our Power THE ROUNDUP: Business Uncertainty Continues TROUBLESHOOTNG: Dealer Data and Service Providers SOUND OFF: Tesla aka TSLA AUTO OUTLOOK ACCOUNTING: Will You Be Ready When Windows XP Ends? ACCOUNTING: Seek, Attract and Retain the Best Salespeople
16 COVER STORY: Frank Hanenberger is Stepping Up
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INSURANCE: OSHA Cracks Down on Lift Safety NEWS From Around the Horn FINANCIAL SERVICES: Navigating the Challenging Landscape of Health Care NADA UPDATE: The Franchise Dealer Network— An Economic Engine NADA MARKET BEAT
Join us on Twitter at @MassAutoDealers www.msada.org
Massachusetts Auto Dealer MARCH 2014
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from the PRESIDENT
by Scott Dube, MSADA President
Seizing Our Power Leadership roles bring their own unique rewards
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“ e’re never going to be perfect, but we’ve always got to As you’ve heard me say time and time again, we all can do strive to be perfect.” a few simple things to make a big difference when it comes to Sage advice from our newest Middlesex County Board Memour collective well-being. When was the last time you called up ber Frank Hanenberger. As dealers, we’re constantly in search your legislator? Was it when we were fighting Right to Repair or of better ways of doing business. Whether it’s working on our working for 93B reform? It’s time to call again. And while there’s relationships with our employees, strengthening the bond with always something on our agenda, it’s important to remember that our customers or something as simple as trimming the hedges, engaging on a relationship level is key. Your legislator should there’s always another checklist item. Our work is never finished. care about how your business is doing, not just the legislation in Given that pressure, it can be tempting to shut out external front of him. pressure. Why worry about the welfare of others when tendYou may not be a political junkie like Frank, but we’re all ing your own affairs is so difficult? in this together. As we finally enter At MSADA, we hope to do the vast “We need you to seize the power Spring, I encourage you to grow your majority of that collective worrying relationship with your legislators. It’s you have as an American, a for you. We’re on top of all manner a relationship that will always pay off taxpayer and a voter to make of regulatory and legislative issues when it counts, and it’s as simple as a so that you don’t have to be. few minutes here and there. your voice heard.” But sometimes we need to lift the I hope you will join me in showing curtain and show the world our numbers. We need you to seize Frank our appreciation for deciding to serve as a representative the power you have as an American, a taxpayer and a voter to of our way of life. Like all of us, he is self-made, and is engaged make your voice heard. For Frank, that moment came at our anwith the world around him. And while not all of us have the time nual Dealer Day on Beacon Hill, when we invite all of our dealer or ability to contribute at the director level, we can all be useful members to visit with their legislators and take part in the politiin helping to spread the word about the positive work that we do. cal process. Bob O’Koniewski Elected to ATAE Board As you’ll read in this month’s cover story about Frank, participating in Dealer Day opened his eyes to the realities we face Congratulations to our Association’s Executive Vice President on Beacon Hill. The gap in understanding is large, and we need Bob O’Koniewski for his election to the Automotive Trade Aspeople to represent who we are as a community. Frank decided sociation Executives (ATAE) Board of directors. to step up. Bob will represent Region 1, which includes auto trade asso“I think our business gets a bad rap,” Frank explains. “Not ciations in Connecticut, Delaware, Maine, Maryland, Massachuthat we’re perfect by any means, but the car dealer stereotype is setts, New Hampshire, New Jersey, New York, Pennsylvannia, particularly a negative one. I try to take every opportunity I can Rhode Island, Vermont and the District of Columbia. He will to promote a positive image of what dealers do, both on a local serve a two-year term until January 2016. t level as well as a statewide level.”
MARCH 2014
Massachusetts Auto Dealer www.msada.org
MSADA
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 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 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 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 MARCH 2014
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The Roundup
Business Uncertainty Continues by Robert O’Koniewski, Esq. MSADA Executive Vice President UI Rates and the Minimum Wage – No Quick Fix in Sight As March was drawing to a close, the Massachusetts Legislature had not resolved two outstanding issues that will affect your businesses’ bottom-line in 2014 and beyond: the minimum wage hike and unemployment insurance (UI) rates. The minimum wage, by far, is garnering the most attention, both here and nationally, as Democrats attempt to create a political narrative that does not have the word “Obamacare” in it heading into this year’s state and federal mid-term elections. Further, an additional political factor driving the General Court’s interest in minimum wage legislation which cannot be ignored is the proposed ballot initiative for the November election. (As you may recall from our “right to repair” saga, if the Legislature does not act on the initiative by the first week in May the proponents can take their proposal directly to the people for the November vote.) The proposed initiative petition would increase the state’s minimum wage to $9.25 per hour on January 1, 2015 and to $10.50 per hour on January 1, 2016. Beginning in 2017, the minimum wage would be annually adjusted based on the Consumer Price Index, rounded to the nearest five cents. The UI situation has become the proverbial bad penny of the state’s economic policy insiders. Although the business community is strongly interested in making long-term reforms to the outdated unemployment system, the immediate need MARCH 2014
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at the start of the year was for the Legislature to enact a rate freeze before the Department of Unemployment Assistance sends out first-quarter tax bills in April. By February in each of the last five years, the Legislature had passed a law to freeze the state’s UI rates charged to businesses, thereby saving businesses upwards of $2.2 billion in the aggregate over that time. Even with the freezes, the Unemployment Insurance Trust Fund used to pay jobless benefits in Massachusetts currently enjoys a healthy balance of approximately $800 million. This year the UI issue has become a political football between the House, Senate, and governor over the minimum wage issue and the pursuit of UI reforms. The Senate has passed legislation to address the two issues separately in their own bills. The House Speaker, Robert DeLeo (D-Winthrop), however, has insisted that any minimum wage hike include reforms to the UI system in order to reduce business costs and provide employers with certainty instead of annual angst regarding potential rate freezes. The governor has indicated he supports UI reforms over a pro forma rate freeze extension. Readers may recall that the Senate last November passed legislation to hike the minimum wage to $11 per hour by 2016 at increments of $1 per year: $9 per hour in 2014, $10 in 2015, and $11 in 2016. At that time, the Speaker stated that he would consider a minimum wage hike if it was part of a UI reform package. Then, on February 5, the Senate passed UI reform legislation that did not include any rate freeze for 2014. Senate leaders have said that their UI reform bill is designed to stabilize UI
MSADA tax rates for most employers and make those rates more dependent on the hiring and firing record of individual companies. Under the Senate bill: • The wage base upon which UI payments are calculated would rise from the current $14,000 per year to $21,000 per year in 2015, a change that by itself would escalate costs for employers; • An expanded rate table would take effect in 2015, and rates would be set at a new Schedule C for 2015, Schedule A for 2016 and back to Schedule C for 2017. The expanded rate table should offset the effects of the increased wage base for companies with stable employment histories while raising rates for some companies that add and terminate workers frequently. Under the new rates, the most stable employers would pay $153 per employee per year, while the worst-rated companies would pay $2,337 per employee annually; • Company UI taxes rates will be based upon the average of three years payroll instead of one, minimizing rate shock for expanding companies or those that encounter cyclical economic problems and find themselves having to lay people off. The Senate bill did not reduce the maximum duration of benefit weeks from 30 to 26 or increase the time people must work before collecting benefits. True to his word, the House Speaker, along with the House Chairman of Ways and Means Brian Dempsey (D-Haverhill), on March 26 unveiled legislation (House 3983) that would address both issues. First, regarding the minimum wage, the House’s legislation would increase the minimum wage in three steps over the next two years: to $9 per hour effective on July 1, 2014; $10 per hour effective on July 1, 2015; and $10.50 per hour effective on July 1, 2016. The House bill also contains a provision extending the statute of limitations for minimum wage and overtime claims to three years and requiring that wage records be retained for three years; both of these requirements are presently two
years under state law. The three-year statute of limitations already exists under federal law, as does the three-year records retention requirement. However, under state law, employers are subject to mandatory triple damages for these claims, so an additional year’s liability could be substantial. The House bill also would raise the requirement that in no case shall the Massachusetts minimum wage be less than 40 cents below the federal minimum wage. Under current law, this rate is set at no less than 10 cents below the federal minimum wage, which is currently $7.25 per hour. Finally, the House bill would create a five-member Minimum Wage Advisory Commission comprised of labor and business representatives, financial experts, and the secretary of the Executive Office of Labor and Workforce Development. The commission would study and report on, among other matters, the value of the Massachusetts minimum wage relative to the cost-of-living and other necessary expenses, including transportation, daycare, food, and health care. As for UI reforms, the House legislation would: • Freeze UI rates for 2014; • Expand the wage base upon which UI benefits are calculated from $14,000 to $15,000 in 2015; • Incorporate an expanded rate table previously passed by the Senate that would make rates more dependent on the hiring and firing record of individual companies. Rates for 2015, 2016 and 2017 would be frozen at Schedule C on the new table; • Retain the current one-year window for determining the experience rating of employers; • Prohibit self-employed “persons of influence” from laying themselves off on a seasonal basis and collecting unemployment benefits. Further, same as the Senate bill, the House measure would not reduce the maximum duration of benefit weeks from 30 to 26 nor increase the time people must
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work before collecting benefits. The House is scheduled to take up this comprehensive minimum wage-UI package the first week of April. Senate President Therese Murray (D-Plymouth), in response to the unveiling of the House package, immediately warned that a combined bill could jeopardize resolution of the issues during this session’s remaining four months, given that the House and Senate must pass a budget by July 1, the early May initiative petition deadline, and the July 31 end of formal sessions. Legislatively speaking, March this time is certainly not going out like a lamb.
Annual Meeting – May 2, Mandarin Oriental Hotel, Boston Your Association will conduct this year’s Annual Meeting on Friday, May 2, at the Mandarin Oriental Hotel in Boston. We will commence with a buffet lunch at Noon, with our business meeting running from 1-5 p.m. We will conclude with a cocktail reception for attendees from 5-7 p.m. We have an exciting line-up of industry and political speakers including: • Jeremy Anspach, President and CEO, PureCars.com; • Jason Stein, publisher and editor of Automotive News; • George Magliano, IHS Global Insight; • Celia Blue, Massachusetts Registrar of Motor Vehicles; • Sen. Stan Rosenberg, Majority Leader, Massachusetts Senate; • Gubernatorial candidates State Treasurer Steve Grossman (D) and Charles Baker (R). Invitations and reminder e-mails have been sent out, so please do not delay… register today. If you have any questions, contact Jean Fabrizio in our office by phone at (617) 451-1051 or by e-mail at jfabrizion@msada.org.
Recalls and Dealer Obligations As you know, each year, millions of vehicles become subject to safety recalls.
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The Roundup A relatively small percentage of these recalls involve “stop operation” or “stop sale” notices. The following information illustrates potential steps for dealers to take based on the safety recall at issue and the vehicles involved: • For new vehicles in inventory or in transit: Once any notice of an outstanding safety recall is received, federal law prohibits the delivery of impacted new vehicles until the recall is remedied. • For used vehicles in for service, in inventory, or coming into inventory that are of the same make as the dealer sells new: Federal law neither imposes an obligation on dealerships to know the safety recall status of used vehicles, nor prohibits the resale of used vehicles with outstanding safety recalls. However, it is recommended that used vehicles of the same make a dealer sells new be checked for outstanding, unremedied recalls (safety or emissions) since the dealership is authorized to do service or repair work involved. Importantly, if and when a dealership receives a recall notice indicating that certain used vehicles should not be operated and/or resold, they should not be operated or resold until the recall is remedied. • For used vehicles in for service, in inventory, or coming into inventory that are not of a make the dealer sells new: Again, Federal law neither imposes an obligation on dealerships to know the safety recall status of used vehicles, nor prohibits the resale of used vehicles with outstanding safety recalls. Massachusetts law has no affirmative duty to check for open recalls on vehicles. However, in order to best protect themselves, dealers should always run a vehicle check report on a used vehicle taken in trade or purchased at auction in order to ascertain as much information about the vehicle as a consumer could. We have seen a number of situations in which a consumer, after the purchase, finds out things regarding the purchased car that a dealer could have, and should have, determined for him or herself prior MARCH 2014
to making the vehicle available for purchase. Further, our Massachusetts Attorney General has promulgated regulations under the Consumer Protection Act (MGL Chapter 93A) regarding disclosure of product information to a consumer. The Act is broadly written to make unlawful any unfair methods of competition and any unfair or deceptive acts or practices in the conduct of any trade or commerce. The disclosure issue is addressed in the regulations at 940 CMR 3.16(2), which states, “Without limiting the scope of any other rule, regulation or statute, an act or practice is a violation of [the Act] if: … (2) Any person or other legal entity subject to this act fails to disclose to a buyer or prospective buyer any fact, the disclosure of which may have influenced the buyer or prospective buyer not to enter into the transaction;…” [emphasis added] Thus, the failure to disclose any information (including repaired vehicle damage) – regardless of dollar amount – that would influence a buyer not to enter into the transaction is an unfair and deceptive practice. The law and the regulations make no exception for seemingly inconsequential damage, say, under $100. This obviously creates a sliding scale in terms of disclosure: The greater the problem with the vehicle, the stronger a consumer’s argument that it would have influenced his or her decision not to purchase the new or used vehicle. As such, dealers need to disclose any and all facts about a vehicle to a buyer or prospective buyer no matter how trivial the information may appear to be. In this manner, a dealership can protect itself and avoid the severe penalties (treble damages, attorneys’ fees) provided under the Consumer Protection Act. Further information on safety recalls is available from OEM policy and procedure documents and from http://www.nhtsa.gov/Vehicle+Safety/ Recalls+&+Defects.
Massachusetts Auto Dealer www.msada.org
ICYMI – NADA’s Welch Responds On March 16, NADA President Peter Welch authored the following response to a recent Washington Post op-ed piece regarding Tesla: “In his March 13 op-ed column, ‘Tesla vs. the Dealerships,’ Charles Lane claimed that dealers have a monopoly on selling new cars. That’s like saying doctors have a monopoly on the practice of medicine. There are 17,600 new-car dealerships in our country competing for customer business on price and service. Tesla fixes its car prices with no opportunity for consumers to benchmark or negotiate price. There are no other Tesla retailers to compete with, and that’s bad for consumers. “Cutting out dealers would not lower car prices; a factory-owned retail network requires the same investment in physical assets and the same operating expenses that dealers now shoulder. However, taking dealers out of the mix would have a negative effect. Automakers have an economic disincentive to issue recalls or incur warranty expenses. Dealers earn money by performing safety and warranty work and, therefore, are always on the customer’s side. Dealers also handle trade-ins, sell used vehicles and compete for service and financing business. “Each state has the right to determine which vehicle sales and service system works best for its residents. Some allow automakers to sell directly, while others require dealers as an additional layer of accountability. Most believe their residents are better served by multiple local retailers competing for their business.”
MSADCF Auto Tech Scholarships Available Applications for the Massachusetts State Auto Dealers Charitable Foundation’s 2014-2015 Auto Tech Scholarships are now available on our website at www.msada.org. The Foundation’s auto tech scholarship program awards scholarships to eligible applicants for use at
MSADA post-secondary educational institutions that offer auto tech training programs. Since its inception in 2003, the Foundation has awarded in excess of $900,000 to more than 200 students. A scholarship award is worth $6,000-$13,000 each over two years. Five years ago the Foundation’s scholarship program expanded to include not just manufacturer-backed programs but also general automotive technology programs at a greater number of colleges in the Massachusetts area. This gives dealers an even greater chance to capitalize on a highly skilled base of potential employees. To obtain additional information on the scholarship program, contact Jean Fabrizio at MSADA at (617) 451-1051 or by e-mail at jfabrizio@msada.org. The application deadline is Friday, May 23, 2014.
FTC Action Against Mass. Dealer’s Ads A Massachusetts franchise dealership recently agreed to resolve Federal Trade Commission charges that the dealership violated the FTC Act by deceptively advertising that consumers could lease a vehicle for $0 down and specific monthly payments when, in fact, the advertised amounts excluded substantial fees. The ads also violated the Consumer Leasing Act (CLA) and Regulation M, by failing to disclose or clearly and conspicuously disclose certain lease related terms. The proposed consent order prohibits the dealership from engaging in similar deceptive advertising practices in the future. It prohibits the dealership from misrepresenting in any advertisement for the purchase, financing, or leasing of motor vehicles the cost of leasing a vehicle, the cost of purchasing a vehicle with financing, or any other material fact about the price, sale, financing, or leasing of a vehicle. The dealership is further prohibited from stating the amount of any payment, or that any or no payment is required at lease inception, without clearly and con-
spicuously disclosing the terms required by the CLA. This case was brought as part of Operation Steer Clear, the agency’s nationwide sweep against 10 auto dealers announced in January. The FTC also announced final consents with two additional dealers in February. These cases are all a part of the FTC’s continued efforts to combat deceptive motor vehicle dealer practices, and protect consumers in the auto marketplace. (We discussed these FTC actions in our Bulletin #4 (1/9/14) and Bulletin #5 (1/10/14).) The Commission vote to accept the consent order for public comment was 4-0. The agreement is subject to public comment for 30 days, through April 21, 2014, after which the Commission will decide whether to make the proposed consent order final.
Doc Fee, Title Prep Fee & Sales Tax Update Since our previous writing on this subject matter, your Association and our tax consultant, O’Connor & Drew, have had several conversations with the Massachusetts Department of Revenue (DOR) to discuss the sales tax treatment of dealers’ documentary preparation fees and the statutorily allowed title prep fee. As a result of those conversations, on March 20 DOR issued Directive 14-1, which answers the following question: Are separately stated documentary preparation fees and the title preparation fee charged by a motor vehicle dealer in connection with the sale of a motor vehicle subject to sales tax? The answer: Yes. The DOR’s directive explains that, under Massachusetts sales tax law, the taxable sales price includes services that are part of the sale and that both the documentary preparation fee and the title preparation fee are services that are part of the sale. The directive is available at this link: http://www.mass.gov/dor/businesses/ help-and-resources/legal-library/direcwww.msada.org
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tives/directives-by-years/2014-directives/dd-14-1.html. Therefore, if you have not yet done so since our January 23 guidance (Bulletin #9), during a vehicle sale you need to include the “doc prep fee” and the “title prep fee” (if you charge either or both fees) as part of the Total Sale Price and the Taxable Sales Price listed in section 56A of the RMV-1. Dealers also need to be sure that when your employees are completing the Motor Vehicle Purchase Contract (the “P&S”, so called) the “doc prep fee” and the “title prep fee” are calculated with the full vehicle purchase price for sales tax purposes. Finally, you may recall we sell various forms to our dealers as part of our forms program with our endorsed partner, Reynolds & Reynolds. (Association members can take advantage of a member discount when purchasing through this program.) Reynolds & Reynolds has available for sale to dealers a Motor Vehicle Purchase Contract that complies with this DOR directive – the line for each the doc prep fee, as set by the dealer, and the title prep fee, as set by state law at $5, are located above the sales tax calculation line. The Reynolds & Reynolds Forms Program can be reached at (800) 896-2886.
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Happy 5-0, Mustang Ford’s iconic Mustang celebrated its 50th birthday this month. The first Ford Mustang – a Wimbledon white convertible with a blue top – rolled off the assembly line on March 9, 1964. Congratulations on a great run that is still going strong.
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Troubleshooting
MSADA
Dealer Data and Service Providers By Peter Brennan, Esq.
Staff Attorney, MSADA Last month, this column addressed some of the basic elements of dealer data protection, including regulatory requirements such as the “Safeguards Rule” and the “Privacy Rule” implemented by the passage of the Gramm-Leach-Bliley Act (GLBA). In that column, it was noted that the Federal Trade Commission considers the mere ability of a third party to access a customer’s nonpublic personal information (NPI) held by the dealer to be an offense on par with if the third party were to actually access the data. While complying with the various federal and state regulations designed to protect your customer’s NPI from getting into the wrong hands is tricky enough, an even more complicated situation may occur when the dealer wants to intentionally share the customer’s NPI with a third party. Even if a dealer is being vigilant in its protection of a customer’s NPI, actions by third parties can put both the dealer and the customer at risk. In order to comply with the abovelisted regulations, many dealers simply provide customers with a notice stating that the customer’s NPI will not be shared. This is an effective way to comply with the Privacy Rule, but may limit the dealer if they need to share the NPI in the future for legitimate reasons. One common situation that the dealer may encounter is that a customer’s NPI is required by a third party in order to service the customer’s account. GLBA MARCH 2014
takes this situation into account, and differentiates between an “affiliate”, which is controlled by, controls, or is under common control with your business, and a non-affiliated third party, which is any person or entity other than your business, employee, or an affiliate. A non-affiliated third party that assists your business in administering, processing or servicing a customer’s account is known as a “service provider”. The Safeguards Rule further defines “service provider” as “any person or entity that receives, maintains, processes, or otherwise is permitted access to customer information through its provision of services directly to a financial institution that is subject to this [regulation].” Therefore, any organization that you do business with that can come in contact with protected information, such as an outsourced information technology department, a customer relations management firm or lead provider, your DMS provider, potentially even your manufacturer, will be subject to oversight and compliance with the Act and the regulations. Depending on the nature of the service provider’s role, they may require access to the customer’s NPI, which creates a potentially dangerous situation for dealers. If a dealer gives a customer a notice pursuant to the Privacy Rule that states that the customer’s NPI will not be shared with a third party then it cannot be shared, period. This prohibition on sharing customer NPI extends to all nonaffiliate third parties, including a manufacturer. If the dealer plans to share the data with any non-affiliate third party, then this must be clearly stated in a notice to the customer and the notice must include what information will be collected and what will be disclosed. A full list of notice disclosure requirements under GLBA is too extensive for inclusion here, but can be found through the Massachusetts Secretary of State’s web-
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site at: www.sec.state.ma.us/sct/sctgbla/ gblaidx.htm. Importantly, there is an exception contained in the regulations that pertains to the sharing of NPI with service providers. Whereas a dealer would generally need the customer to “opt-in” to an agreement in order to share their data with an unaffiliated third party, if that unaffiliated third party is a service provider, as defined under the Safeguards Rule, then the only requirement is proper notice that the customer’s NPI may be shared. If sharing customer NPI with a service provider, the dealer must, in addition to giving proper notice to the customer, take reasonable steps to select service providers that are capable of maintaining appropriate safeguards for the customer’s NPI. The dealer should also execute an agreement with the service provider that contains clear provisions relating to the treatment of customer NPI. Recently, NADA published a sample Service Provider Dealer Data Access Addendum. The guide is available through the NADA website (www.nada. org/dealerdata), and it provides dealers with excellent template language for inclusion in any future contract with a service provider. As noted in the NADA Dealer Data Guidance, the provisions of the Addendum are not one-size-fits-all, and dealers should use the language as a starting point towards crafting a contract that fits their unique needs given the expectations and goals in the dealer’s relationship with the service provider. If you require any additional information on dealer data security regulations, service provider agreements, 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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Sound Off
MSADA
Tesla aka TSLA
Making plans for a new and different future may be the smart thing to do! By Nancy Phillips This month’s interesting headline, “New Jersey to Tesla: You’re Outta Here” (Forbes.com), delivered a message from auto dealers everywhere. With it, the stock plunged nearly 10 percent – but not for very long. What is going on out there? Is the conventional auto dealership model under siege? Nikola Tesla was a Serbian-American inventor, engineer, physicist and futurist best known for the design of modern alternating current electric supply. He was a genius who invented many other things for which he received no credit and he appears to be a postmortem mentor of Tesla CEO, Elon Musk. I admit to being skeptical about Tesla, believing that our current system would throw over the upstart Musk before he got his sea legs. Between the idiosyncrasies of the vehicle itself and the difficulties inherent in the plan to push aside the traditional dealership network – my money did not go toward acquiring his stock. But I wish it did, at least up until now. For $500,000 invested in Tesla only 30 months ago would have delivered about 6 million today. Such a monumental return speaks volumes about the future of our industry and how the real world views us. I truly hate to say it, but the image of an auto dealer has not been elevated commensurate with the culture of today. Most people still don’t really love their dealer but merely tolerate a system that has been in place for a very long time. Tesla’s stock price tells me there are a lot of people out there rooting for a very big change to dealership practices, the type of product offered and to the franchise system itself. The franchisors know this; you can see it in their long-term planning, the positioning of their respective dealer body and the increasing control they have gleaned through supporting acquisitions by dealership groups and incentivizing the weak to depart. Dealers, on the other hand, believe they are protected by their new state franchise laws and seem stuck in time, making moves that individually may be divisive to their long-term health and well-being. While the share price of other automotive competitors re-
flects their actual perceived value in the market place, the price of Tesla tells us just how much investors are willing to pour into a company that has yet to make a profit and most likely won’t for some time. It is an investment of hope and anticipation for a future automobile industry that differs radically from the one we have today. Perhaps the writing is already on the wall. It is possible that 10 years from now the number of individual dealers will be insignificant compared to the number of multi-franchised groups. It may be that Tesla will have multiple outlets in every state and that other new entries to the market will have followed the same path. It could even be that a failing fran-
chisor may throw in the towel on the dealer network in favor of the same type of market representation at a fraction of the cost. Can car dealers successfully face off against Google, Amazon, Tesla and others? Our industry needs to acknowledge that the car buying public has already begun to answer that question by their strong support of Tesla and take heed. Making plans now for a new and different future is the smart thing to do. If you are staying in, you need to grow in different ways. If you are not, determining the right time to exit is the most significant decision you will ever make in your automotive career.
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Nancy Phillips Associates specializes in sales, acquisitions and evaluations of franchised automobile dealerships. Contact Nancy Phillips at (603) 658-0004 or email auto@nancyphillips.com.
Do you have an opinion you want to share? Send submissions to tnash@msada.org.
www.msada.org
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AUTO OUTLOOK
MARCH 2014
Massachusetts Auto Dealer www.msada.org
MSADA
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Accounting
MSADA
Will You Be Ready When Windows XP Ends? By Michael Hammond
CISA, CRISC, CISSP, CEH Director, IT A udit Practice, O’Connor & Drew, P.C.
According to NetMarketShare, a company tracking market share for Internet technologies, Microsoft Windows XP is still in use by more than 30 percent of the desktops connected to the Internet. Unfortunately, Microsoft has announced that April 8, 2014 will mark the official end of life (EOL) for Windows XP. This type of end of life statement for a computer operation system can put your business in a dangerous position. Do you upgrade with all of its headaches, or risk being vulnerable if the worst should happen? There are three very good reasons to upgrade:
Security Even though XP is more than 12 years old, vulnerabilities and stability issues are still being discovered. As a currently maintained product, Microsoft routinely creates patches and publishes these updates in an effort to fix these vulnerabilities. After April 8, 2014, your installation of Windows XP will probably continue to run normally. For those who can remember Y2K, this is not that type of situation. The computer will boot, programs will run, and nothing will appear differ-
MARCH 2014
ent. Behind the scenes, however, you will not receive any new updates or hotfixes, including the famed Service Packs. It has been proven that connecting to the Internet a brand new installation of Microsoft Windows XP with no service packs or updates installed can be exploited in less than four minutes. Microsoft has done a great job over the last 12 years fixing vulnerabilities quickly after being made aware of the issue, but once Microsoft Windows XP goes end of life, exploits will continue to be discovered, and unfortunately will not be fixed. Attackers will post these discovered vulnerabilities in public forums and, even worse, post them for sale in the underground market. These vulnerabilities can disrupt business operations and threaten confidentiality, integrity, and availability (better known as the CIA Triad).
Usability From Microsoft’s standpoint, XP will no longer be an officially supported operating system. Many hardware and software developers will also stop supporting Windows XP in their future products. Even current software that runs on Windows XP may stop running without vendor product updates. The contracts you have with your dealer management systems may force you to upgrade to continue using their Internet based products. When launching your DMS software, in the background, the vendor is checking your computer for certain patches before letting the software run. Your vendor may stop allowing you to use your DMS without a vendor supported operating system.
Compliance
After April 8, 2014, dealerships running Windows XP may not be in compliance with Massachusetts regulations. Under section 6 of 201 CMR 17.00, personal identifiable information (PII) on
Massachusetts Auto Dealer www.msada.org
a workstation connected to the Internet “must be reasonably up-to-date… [with] operating system patches.” Companies that are not compliant can expect heavy fines, and other legal and civil recourse. In addition, there may be compliance issues for those who fall under other regulatory or industry requirements such as PCI DSS 2.0 and 3.0. The best practices published under the SANS 20 Critical Security Controls, recommends installing security patches within 24-48 hours of the patch release (a quick win) and using automated update tools (another quick win). In order to meet these industry best practices, organizations will need to remove all XP systems and migrate users to a newer operating system such as Windows 7 or 8. Upgrading to a supported operating system is not trivial, nor cheap. Your business applications need to be tested to ensure that they work on the new operating system. You may find applications that do not work on Windows 7 or 8, and you will have to consider solutions to work around these challenges. The monetary cost to upgrade can extend past the actual cost of the operating system license. Newer operating systems, which include new features, require more horsepower, so you may also have to upgrade memory or disk space in your computers (or in some cases, you may need to purchase new computers). Even with all of these hurdles to overcome, it is important to the security, usability, and compliance of your computers, and more importantly, to the security of your company, to upgrade to a vendor supported operating system. For more information or if you have any questions, please feel free to contact Michael Hammond, Director of IT Audit Practice, O’Connor & Drew, P.C. at 617-471-1120 or email at mhammond@ ocd.com.
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Accounting
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Seek, Attract and Retain the Best Salespeople By Paul McGovern Paul McGovern, a partner at Downey & Company, has specialized in auto dealership accounting and management for 30 years.
To be a successful and profitable dealer today, you have to create a positive shopping experience for your customer. The most important factor contributing to a customer’s positive experience with a dealer is his or her interaction with the salesperson. Dealers need to focus on seeking, attracting and retaining the best salespeople to create a positive shopping experience for their customers, which will undoubtedly lead to increased profits. If you are seeking new candidates, ask the dealership’s most talented salespeople: How did they find you? Why did they want to work for you? Change the avenues you usually look for candidates, if needed, based on their answers. If you are finding candidates that have worked at several dealerships in recent years, this should be a red flag that they will not succeed or last very long at your store. Maybe you should consider hiring someone from outside the industry, with no dealership experience, but a lot of enthusiasm for the business. One of our clients had success in hiring several salespeople that had been working at Best Buy. These candidates were proficient in explaining the “gadgets” and technology available on various models. The dealer was able to offer these candidates a pay package that would double their current income. Keep in mind it may take a year or so for that individual to develop his or her skills, but it may be worth the gamble in the long run. Also, make sure that your sales staff reflects your customer base. Make sure women, minorities and younger adults are adequately represented in your sales force. You want your customers to walk in to your store to a welcoming face. To attract the right candidates: 1. Make sure that you maintain a clean, neat and inviting workplace for all employees.
2. A team atmosphere that has clear policies that apply to everyone is paramount. 3. Make sure that there is adequate training, and consistent ongoing training, as well as a mentor or coach that new hires can rely on. 4. As always, competitive pay plans, opportunities for career advancement, reasonable sales goals, fair benefits, and predictable work schedules will help attract the best candidates. 5. Consider supporting or sponsoring community events, scholarship programs, and/or internship programs to generate positive impressions of your store in the community and attract people who want to work for you. In order to retain the successful sales staff you have, consistently review and evaluate your employees and gather feedback from your employees. Make changes, if needed, based on this feedback. Remember the cost of replacing and training new salespeople far out ways taking the time to listen to your key salespeople. Financial incentives are a must, but consider other options such as flexible work hours and small perks. Long-term employees become the face of the dealership to customers who appreciate doing business with the same people each time they come to the store. However, don’t be afraid to replace someone if you feel he or she could be doing a better job. Although this article is geared toward seeking, attracting and retaining salespeople, it can also be applied to managers. It is worthwhile to note that our most profitable clients have familiar faces in key manager positions. The key here is to find competent managers and retain them. Combat the issue of high employee turnover by focusing on seeking, attracting and retaining the right salespeople for your store. The best sales staff will create a positive shopping experience for your customers. Utilizing these suggestions should increase your customer base, reduce absenteeism, reduce costs, improve employee morale and, most importantly, positively impact your bottom line. If you have any dealership management questions, please contact Paul McGovern at pmcgovern@downeycocpa.com.
Long-term employees become the face of the dealership to customers who appreciate doing business with the same people each time they come to the store.
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Massachusetts Auto Dealer MARCH 2014
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COVER STORY
Up Frank Hanenberger
Stepping
by Catherine MacDonald MARCH 2014
Massachusetts Auto Dealer www.msada.org
The MSADA Board’s newest member is ready to represent his industry
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n many ways, Frank Hanenberger’s path to becoming MSADA’s newest director is a familiar story. His father, a 46-year GM lifer, had worked his way up from apprentice to auto group vice president. Cars and the auto industry dominated conversation around the dinner table.
MSADA “I think our business gets a bad rap. Not that we’re perfect by any means, but the car dealer stereotype is particularly a negative one. I try to take every opportunity I can to promote a positive image of what dealers do, both on a local level as well as a statewide level.”
“I grew up in the business,” Hanenberger said. “It’s always been in my blood.” That’s where many of the similarities end. Hanenberger’s childhood dinner table was in Wiesbaden, Germany, a small city near Frankfurt. During high school he decided to attend GMI Engineering and Management Institute (his father’s alma mater) in Flint, Michigan. “I fell in love with living in the U.S. and decided to stay,” he said. The next decade saw Hanenberger earn degrees from Stanford University and Harvard Business School. His work had him bouncing from coast to coast before he settled in Massachusetts in 2004. After trying his hand at engineering, marketing and an Internet startup, Hanenberger said the retail bug got a hold of him. When the opportunity came to own a Subaru dealership, he couldn’t resist. “I had to take the gamble.” Today Hanenberger is dealer principal and owner of MetroWest Subaru in Natick and Brattleboro Ford Subaru in Vermont. This year, both dealerships won the Subaru Stellar Care Award for customer care and satisfaction -- the highest honor a Subaru dealer can achieve, according to Subaru.
“Usually dealers grow up in the retail business. I took a slightly different route,” Hanenberger said. MSADA Board Treasurer Jack Madden Jr., owner of Jack Madden Ford in Norwood, recommended Hanenberger join the board. He says Hanenberger’s lack of automotive background is a good thing. “He was an engineer,” Madden said. “He’ll certainly bring a different perspective than those who have been influenced by our parents to enter the industry.” The path he took might be less common, but his passion resonates with anyone committed to dealerships. His love for the industry, coupled with his nature as a self-identified political junkie, cemented his decision to join the MSADA board. “If I turn on the TV, I’m either watch-
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Stepping Up
MSADA ing the Red Sox, college basketball or politics. The chance to represent our business and our industry on a statewide level is where the real excitement came for me.”
Dealer Day on Beacon Hill On Dealer Day last year, dozens of member dealers took to the State House, where they met with more than 100 legislators to make their views heard. Dealer Day gives dealers a chance to build and strengthen relationships with their legislators. Every year legislators are presented with significant decisions to make on dealer issues, and the event gives the lawmakers a real life glimpse of the people affected. This particular Dealer Day occurred at a time when three key pieces of dealer-related legislation faced potential activity in the Senate and the House. Crucial Right to Repair legislation, changes to the state’s franchise law, and legislation related to Tesla were the main issues brought to the table by dealer industry representatives. For each issue, the stakes are high. Taking in both the lingering Tesla battle or the effects of Right to Repair first-hand, Hanenberger says participating in Dealer Day last year ramped up his excitement and helped solidify his decision to take on a leadership role. “I really enjoyed being able to talk about our business to our state representatives and senators. It was really neat to be able to do that,” he said. As a representative of the industry, part of Hanenberger’s goal is to show dealers in a more positive light and help dispel negative stereotypes. “I think our business gets a bad rap,” he said. “Not that we’re perfect by any means, but the car dealer stereotype is particularly a negative one. I try to take every opportunity I can to promote a positive image of what dealers do, both on a local level as well as a statewide level.” Many aspects of the industry make dealers quite easy to defend. Hanenberger emphasizes that dealers provide almost 20 percent of all retail sales activity in Massachusetts and employ more than 20,000 people. “The economic impact that our business has is substantial,” Hanenberger said. “For us to continue to have this kind of tarnished image, I kind of take offense to that.” MARCH 2014
Massachusetts Auto Dealer www.msada.org
Leadership Role After going from four cross-country relocations in five years during the first part of his career to crossing state lines several times a week in order to serve both dealerships in New England, Hanenberger is settled but busy. Despite a full plate, he says he was not worried about making the commitment to take on this new role. He says he’s always appreciated the efforts of the association’s executive committee and its staff. “I think the executive committee and our MSADA staff members have a good handle on the heavy lifting,” Hanenberger says. Thanks to them, he does not expect his new leadership role to interfere with running his dealerships and striving to meet his standards for himself. Hanenberger teaches his children his personal motto on perfection, and says it applies to his industry as well. “We’re never going to be perfect, but we’ve always got to strive to be perfect,” he says. “Perfection is really a fantasy but that doesn’t mean you should ever give up.”
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Insurance
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OSHA Cracks Down on Lift Safety by Rob Stansbury
Would you be surprised if an OSHA inspector showed up at your shop and asked to take a look at your lifts? OSHA is using the General Duty Clause, which is a catchall for unsafe working conditions, as an enforcement tool for lift safety. Since 2007, three-fourths of all General Duty Clause citations issued to dealerships and service centers, have been for safety issues around automotive lifts. All of these citations have been “serious violations,” which means that the workplace hazard could cause an accident that would most likely result in death or serious physical harm. Most of the citations are also “willful violations,” meaning that the employer either knowingly failed to comply with a legal requirement (purposeful disregard) or acted with plain indifference to employee safety. A single incident can warrant both kinds of violations and result in much higher fines. OSHA has recently implemented local emphasis programs (state by state) that highlight the importance of lift safety in the automotive industry. KPA is aware of these inspections occurring in Massachusetts, and we expect to see a significant increase in the state as part of the local emphasis program moving forward. Not only is lift safety important for worker protection, but regular maintenance is easy and contributes significantly to your dealership’s bottom line. Productivity studies have found that adding a single vehicle lift to the shop can add another $100,000 or more to the bottom line in terms of annual profits or reduction in labor overhead. However, if the lift goes down for repair, those contributions vanish. Start by following the manufacturer’s specific maintenance, adjustment and lu-
brication recommendations in the owner’s manual for each lift. Maintenance procedures and frequencies vary for different styles and brands of vehicle lifts, so keep your owner’s manual handy and use it as a reference if you are servicing your own lifts. Alternatively, most dealerships find it cost effective to outsource lift inspec-
tions and maintenance to service providers. You’ll still need to keep your owner’s manuals handy as well as documentation from these visits. Records of automotive lift maintenance need to be available upon request from the state/federal agencies. According to the guidelines that OSHA follows, each of your employees is required to be trained on the operation of your lifts prior to use, and each of your lifts must be inspected on an annual basis by a qualified lift inspector. The recent surge in inspections falls in line with a trend that KPA has seen develop over the past three years. Nationwide, but specifically in the Northeast, dealers are www.msada.org
facing enforcement visits at a significantly higher rate than they ever have in the past. State and Federal agencies alike have been funded and staffed, which has led to a very proactive climate for enforcement compared to the typical reactive climate (for example – responding to whistle blowers). Regulation updates and new classifications of violators have been established. New car and truck dealers have become targets in the revenue generation for the government agencies. Fines in excess of $50,000 are not uncommon, with the average citation falling into the $20,000+ range Lift Safety Training and Inspections are only one area that the government is cracking down on recently. Above and beyond the safety regulations, dealers have seen enforcement on the bureaucratic aspects of their businesses (written programs/ employee training/chemical inventories), as well as the environmental aspects (permits, registration, and inspections of tanks). With the attention being paid to these areas of the business, it makes sense for dealers to ask themselves how they’d fare if the Massachusetts DEP or the U.S. Department of Labor showed up at their dealership unannounced today. For questions/concerns regarding your compliance with Lift Safety requirements, or any Environmental or Safety related issue, please contact Rob Stansbury with KPA @ (484)326-9765 or rstansbury@ kpaonline.com.
t Rob Stansbury has worked with KPA for 9 years. His primary role is meeting with dealers to assess their level of liability associated with government enforcement, and to establish a plan to correct deficiencies for both the present, as well as moving forward.
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NEWS
from Around the Horn
BOSTON
NORWOOD
Mass. State Auto Dealers Association Receives 2013 Boston Award
Ernie Boch Jr. Will Raise Hourly Wages
The Massachusetts State Auto Dealers Association has been selected for the 2013 Boston Award in the Non-Profit Organization category by the Boston Award Program. According to its press release, each year the Boston Award Program identifies companies that it believes have achieved exceptional marketing success in their local community and business category. These are local companies that enhance the positive image of small business through service to their customers and our community. These exceptional companies help make the Boston area a great place to live, work and play. “Various sources of information were gathered and analyzed to choose the winners in each category. The 2013 Boston Award Program focuses on quality, not quantity. Winners are determined based on the information gathered both internally by the Boston Award Program and data provided by third parties.”
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Massachusetts Auto Dealer www.msada.org
Ernie Boch Jr.’s full-page ad in the The Boston Globe coincided with Present Barack Obama’s recent Boston visit and delivered a clear message: Boch isn’t waiting for the government to raise the minimum wage. “President Obama: I did it!” he wrote in the signed ad. Boch, a Republican who has supported political candidates from both parties, said he will raise the pay of his minimum wage workers to $10.10 on April 1. The change will affect more than 80 of Boch’s 819 employees, most of whom are sales people who earn a minimum wage hourly rate and an additional commission for every car they sell. He said about 30 of his workers are strictly paid minimum wage. The president is promoting a Democratic proposal to increase the federal minimum wage from $7.25 to $10.10 per hour by 2016. Massachusetts legislators are also discussing a possible increase in the state minimum wage, currently $8 per hour.
NEWS from Around the Horn The Boch newspaper ad appeared as Obama was scheduled to make fund-raising visits to Cambridge and Boston. In the ad, Boch said he wanted to “strongly encourage” other New England businesses to join him and support “this new living wage.” He said his decision on the minimum wage wasn’t purposely timed with the arrival of Air Force One in Ernie Boch Jr. Massachusetts. The Norwood resident said he saw Obama on television as he made made his morning coffee and mistakenly believed the president was in Boston that day. The image triggered thoughts of a minimum wage increase Boch had been mulling over for months, and he decided to act.
WELLESLY
BMW Tosses Salesmen for ‘Geniuses’ Luxury car maker BMW AG wants to bring its dealerships into the digital age and recommends several showroom overhaul ideas in a Wall Street Journal MarketWatch article. BMW’s new program could mean, among other things, fewer sales people and fewer cars on showroom floors, and more information delivered through video displays and by employees who are “definitely, definitely not salesmen,” sales and marketing chief Ian Robertson told MarketWatch. BMW’s plan reflects a broader anxiety among auto company executives and independent dealers that consumers accustomed to online shopping and the ultraclean look of Apple stores are unimpressed with the ambience of most auto dealerships. Joe Shaker, owner of Shaker Automotive Group, was among the dealers outlining a new sales future. “People are coming from full electronics at home, and they get to a dealership and it is a hard stop,” said Shaker, who led development of an iPad app now used by Mazda’s U.S. dealerships. He described the coming dealership as being more hands-on and experiential with retailers using interactive displays and virtual demonstrations—akin to what BMW is building. More newcar inventory will be kept off site, rather than in lots out front, as dealers, especially those in urban areas, seek to save on real estate costs, he said.
MSADA
Awar ds S e ason
The season for manufacturers recognizing the achievements of their franchise dealers is in full-swing. Here is a list of some of our Massachusetts dealers who have received recognition recently. NISSAN 2014 AWARD OF EXCELLENCE WINNERS Marlboro Nissan, Marlborough Nisson 24, Brockton FORD 2014 PRESIDENT’S AWARD Herb Chambers Ford Imperial Ford Lamoureux Ford Metro Ford Owen Motors Quirk Ford MERCEDES BENZ 2013 BEST OF THE BEST DEALER RECOGNITION AWARD Herb Chambers HONDA 2013 COMMAND OF EXCELLENCE AWARD WINNERS Balise Honda, West Springfield Hyannis Honda, Hyannis Weymouth Honda, Weymouth ACURA 2013 COMMAND OF EXCELLENCE AWARD WINNERS First Acura, Seekonk TOP DEALER GROUPS ANNOUNCED Automotive News released their annual list of the top 125 dealer groups based on total 2013 new-vehicle retail sales units. Four Massachusetts-based dealer groups made the list: Herb Chambers Companies (No. 16), Balise Motor Sales (No. 69), Colonial Automotive Group (No. 102), and Kelly Automotive Group (No. 111). Additionally, three groups based outside Massachusetts with dealerships located here achieved recognition: Group 1 Automotive (No. 3), Lia Automotive Group (No. 55), and AutoFair Automotive Group (No. 113).
Congratulations to all!
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NEWS from Around the Horn NATICK
New 2014 Ram 1500 EcoDiesel Rolls Out to Dealers in High Demand Diesel engines may have fallen off in popularity in the United States in the past two decades, but the tide may be turning if the responses to Ram’s latest effort are any indication. The 2014 Ram 1500 EcoDiesel is just now heading to dealerships, but the pickup truck has already sold nearly twice the Chrysler Group’s corporate average for special orders from buyers. Meanwhile, more than 8,000 units have been requested by Ram dealerships overall, fulfilling the initial production allotment for the new diesel-powered Ram 1500. The 2014 Ram 1500 is the first half-ton pickup truck since the mid-1990s to offer a diesel engine in the United States, and a little more than half of the recent orders for the vehicle have specified the oil-burning powerplant. Housing a 3.0-liter EcoDiesel V6, the new dieselpowered Ram 1500 is far more advanced than the diesel
trucks of the past, returning the best fuel economy of any full-size pickup with its 28-mpg highway rating. Despite those fuel savings, the 2014 Ram 1500 EcoDiesel produces 240 horsepower and 420 pound-feet of torque while towing up to 9,200 pounds. “The early demand for the Ram 1500 EcoDiesel is resounding proof that America is ready for the return of the diesel engine to the half-ton pickup segment,” said Richard Gill, owner of Brigham-Gill Chrysler Jeep Dodge Ram. “It also doesn’t hurt that the recently redesigned Ram 1500 is the first in its class to reintroduce diesel technology, because the entire truck was developed to create an unmatched balance of fuel efficiency and performance.” MARCH 2014
Massachusetts Auto Dealer www.msada.org
MSADA BOSTON
DealerRater names 18 Massachusetts Dealerships Among Top-Rated in America DealerRater’s Dealer of the Year Award Program recognizes a select number of car dealerships throughout the United States and Canada for outstanding customer satisfaction as expressed through customers’ online reviews posted on DealerRater. According to the site, Massachusetts has 18 top-rated dealerships among their respective brand peers. All dealers here must score a minimum average of 4.0 during the calendar year based on price, quality of work, customer service, friendliness and the overall experience. Only dealers with at least 25 reviews are counted. • Audi Burlington • BMW of Peabody
• Colonial Chevrolet in Acton • Colonial Chrysler Jeep Dodge in Hudson • Jannell Ford in Hanover • Herb Chambers Honda of Seekonk • Route 2 Hyundai in Leominster • Kelly Infiniti in Danvers • Fathers & Sons Kia of West Springfield • Herb Chambers Lexus of Sharon • Lannan Mazda in Lowell • Mercedes-Benz of Boston • Michaud Mitsubishi in Danvers • Milford Nissan • Father & Sons Audi Porsche Volvo in West Springfield • Toyota Scion of Braintree • Steve Lewis Subaru in Hadley • Colonial Volkswagen of Westborough
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NEWS from Around the Horn
MSADA
BROCKTON
ACTON
Reality Check: Snow Slows US Auto Sales Comeback in February
2014 Toyota Highlander Receives 5-Star Safety Rating from the NHTSA
A tough winter continued to take a toll on U.S. new-vehicle sales in February, as snow and arctic temperatures doused showroom traffic, according to dealers around the country. Auto salespeople in the East and Midwest said weather foiled sales momentum again in February, as it did in January. But they said underlying demand remains on an uptrend, as drivers continue to trade in their recession-worn rides. Some dealers reported slight improvement in consumer spending per vehicle. Others said the economy remains the top concern for most customers. “Despite the weather challenges, we’re having a terrific month,” Pat Browne, chief operating officer of Colonial Automotive Group, told MNI Market Watch. His new vehicle sales are up about 8 percent compared to last February, even though he lost two selling days this month to snow. Browne also lost a couple of selling days in January, another snowy month in Boston, but he’s optimistic sales will continue to ratchet higher through the summer.
The Toyota Highlander was redesigned with a sleeker exterior for the 2014 model year, but its more stylish body is also proving to be safer. Recently receiving a 5-Star Safety Rating from the National Highway Traffic Safety Administration (NHTSA) in its New Car Assessment Program, Highlander bested the four-star performance of its predecessor in the organization’s stringent crash tests. To earn the NHTSA’s highest overall rating, the 2014 Toyota Highlander took home five stars in side-crash testing while achieving four-star scores in frontal-crash and rollover tests. “After the tough crash testing from the NHTSA, it’s clear that the Highlander’s redesign was much more than just a facelift because the SUV is more crashworthy at its core than past models,” said Shahzad Shahab, general sales manager of Copeland Toyota, a Greater Boston Toyota dealer. “Buyers can also get more peace of mind with the optional active-safety technologies that can make accidents less likely to happen in the first place.”
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Massachusetts Auto Dealer www.msada.org
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Financial Sevices
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Navigating the Challenging Landscape of Health Care by Jed Davidson Director of Partn e rs h i p S a l e s , P a r t n e rs B e n e f i t G r o u p
Is your dealership finding it difficult to navigate the changing landscape of the health care industry? If you answered “yes,” you are not alone. Many business owners are overwhelmed with what seems like daily changes to consider. For most companies, employee benefits are the second largest budget item behind payroll. And as health care costs continue to rise with no end in sight, it’s now more important than ever to implement efficient and cost effective employee benefits plans. The role of the insurance broker has also changed recently. Now, you have to be working with an expert in the field to avoid overpaying and to ensure the best selection. As consumers, we’re beginning to see innovations emerge in the healthcare market notably, defined contribution plans and needs based purchasing models. These plans have been increasing in popularity with the advent of exchanges and a return to the old “Cafeteria Plan Model.” Traditionally, employers bear the burden of offering one or two plans from which the entire employee population must choose. The difficulty in that approach is that individual employees have different health care needs. Defined contribution plans and needs based purchasing models offer choice to employees based on their requirements. These strategies allow employers to create a predictable budget, while at the same time
saving employees’ money. The defined contribution model is being expanded in both public and private health insurance exchanges. As part of ObamaCare, each state is tasked with setting up their own health insurance exchange. Currently, the public exchanges are only available to “Small Groups” -employers with less than 50 eligible employees, however there is speculation that by 2017 public exchanges may be available to large employers. Public exchanges offer employees with incomes between 100 percent and 400 percent of the federal poverty level the opportunity to have a portion of their care subsidized to make their health care plan more affordable. However, you must keep in mind that this does not include the employer’s portion of the cost of the health care plan. In 2016, all employer groups under 100 employees will be considered “Small Group”. This means that if you are an employer group with 50 to 99 employees you are potentially at risk of receiving an increase to your cost in the 20-30% range in 2016. When the markets merge, employers in the 50-99 employee range could see massive increases. We’re seeing a resurgence of the “Partial Self-Funded” plan as a result. These plans include features of fully insured plans, but carry with them the ability to be refunded if claims exceed expectations. ObamaCare has resulted in health insurance companies beginning to innovate and create new products and strategies. BCBS, Tufts, and Harvard Pilgrim have all created their own private exchanges to compete with public exchanges. The private exchange model is the same “Cafeteria Plan” approach that allows employees to pick and choose their health plan and also add on dental or other ancillary benefits. The newest versions of these private exchange plans www.msada.org
have decision-making tools built in to educate the employee on the best option for them and their family’s specific health care needs. The bottom line is this: Numerous changes to the healthcare model are here to stay and it is now as important as ever to investigate all of your options and to make sure you are working with an expert in the field of employee benefits. Employers have several options in the market to review and consider. Make sure you see and understand all of them.
t Saccone & Cuomo, Registered Representatives and Saccone, Financial Advisor of Park Avenue Securities LLC (PAS), 160 Gould Street, Needham, MA 02494, (781) 449-4402. Securities
products/services and advisory ser-
vices 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. 2014 3264 PAS is a member of FINRA, SIPC.
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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NADA Update by Don Sudbay
The Franchise Dealer Network— An Economic Engine 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). This month’s cover story is about our new MSADA Director for Middlesex County, Frank Hanenberger. I want to personally thank Frank for stepping forward and agreeing to serve. Our state association is very fortunate to have dealers like Frank take the time out of their busy schedules to help all dealers in matters regarding government and manufacturer issues. These issues, if not vigilantly watched by our association, can have very detrimental effects on us all. Please, when you are asked to make a call or visit one of our elected government officials, follow through and help us to spread our message. If we all do our part, it will greatly benefit the association and its members in the future.
A Special Note from NADA Chairman Forrest McConnell: “Next month, attention shifts to the New York International Auto Show—the host of the fifth annual NADA/J.D. Power Automotive Forum. Whether you’re a new-car dealer, automaker, supplier or journalist, the full-day forum will provide you with unique and relevant perspectives about the opportunities and challenges facing key players in the industry. “The forum is an ideal venue to talk about what makes auto retailing a true economic engine—the franchised dealer network. Last year, the industry rebounded to sell 15.6 million new cars and light trucks in the U.S, and we’re expecting sales to increase this year. New-car dealers employ one million people across the country. “The franchised dealer network, which as you know has been the topic of much recent debate, is the most efficient and cost-effective way of selling and servicing vehicles anywhere. From sales and financing to performing repairs, warranty and recall work, we provide our customers with unparalleled service. “It’s a message NADA and its members are promoting this year, and one that I will reinforce during my opening remarks at the Automotive Forum in New York City on April 15. “The featured industry speakers are Mary Barra, CEO of MARCH 2014
General Motors Co., and Joe Hinrichs, executive vice president and president of the Americas for Ford Motor Co. “A panel session on the luxury market includes an all-star lineup: Michael Bartsch, vice president of Infiniti Americas; Steve Cannon, president and CEO of Mercedes-Benz USA; Uwe Ellinghaus, Cadillac’s global marketing chief; Scott Keogh, president of Audi of America; and David Zuchowski, president and CEO of Hyundai Motor of America. “IHS chief economist Nariman Behravesh will provide a macro-economic overview, and John Humphrey, J.D. Power senior vice president of Global Automotive Practice, will provide an industry briefing on the North American market. “A panel session on Wall Street’s perspective of the auto industry will feature Adam Jonas, managing director of Morgan Stanley; Itay Michaeli, Citi auto analyst; and John Murphy, managing director of Bank of America Merrill Lynch. Registration for the Automotive Forum includes access to all networking events and the auto show’s press preview on April 16-17. “We hope to see you there.”
During Congressional Recesses Try to Meet with Lawmakers in Their Home Districts New-car and -truck dealers are effectively positioned to build long-term grassroots relationships with members of Congress. During this election year, most representatives and senators would welcome the opportunity to visit dealerships in their districts and interact with those whose livelihoods depend on the continued success of franchised dealers. NADA has been encouraging dealers around the country to meet with their senators and representatives during Congressional Dealership Days to discuss ongoing concerns with the Consumer Financial Protection Bureau and other federal legislative and regulatory issues impacting franchised dealers. There are two upcoming Congressional recesses for both the House and Senate: March 17-21 and April 14-25. If you are interested in hosting a Congress member and would like assistance with setting up a visit, contact Patrick Calpin, NADA Director of Grassroots Advocacy, at pcalpin@nada.org or (202) 547-5500.
Enroll Today in NADA’s Dealership Workforce Study A major challenge facing new-car and -truck dealers is attracting and keeping talented employees. To assist dealers with this task, NADA offers the Dealership Workforce Study, now open for enrollment to NADA and ATD members. There
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MSADA MSADA is no cost to participate. Participating dealers will receive a complimentary 2014 Dealership Workforce Study Basic Report, a custom report that compares the individual dealership’s compensation for 60 job positions, employee benefits programs, hours of operation, work schedules, and retention and turnover to the aggregated data of other participating dealerships, both regionally and nationally; and 2014 Dealership Workforce Study Industry Report, which provides an overall industry-wide analysis of the aggregated DWS data, including hiring and retention trends, demographics such as generational differences and the gender gap, compensation, tenure, employee benefits statistics, plus hours of operation and work schedules for all U.S. regions, as well as an economic overview of 2013 and forecast for the future. Dealers can enroll at www.nadaworkforcestudy.com. For more information, send an email to WorkforceStudy@nada. org or call (800) 557-6232.
munications efforts to the next level, and hiring Jonathan Collegio to run our public affairs division is a great step forward,” said Welch. “Collegio is one of the sharpest, most well-regarded and well-connected public affairs and communications executives in the country, and we are excited to have him join our team.” Collegio, who was named Public Affairs Executive of the Year by PR News in 2009, has extensive experience in public affairs spanning both political and corporate work. “America’s new-car and -truck dealers are the most entrepreneurial and hard-working business owners in the country,” said Collegio. “Their products keep America moving; their good-paying jobs propel local economies, and it is an honor to advocate on their behalf.” Since 2010, Collegio has served as communications director for American Crossroads in Washington, D.C.
Company Responsible for Telemarketing Violations; List Purchased from Lead Generator
Extremely cold weather during the first two weeks of February and more moderate temperatures over the second half of the month correlated exactly with used price movement, according to the NADA Used Car Guide in the March edition of Guidelines, a monthly report on new and used vehicle sales trends and price movement. “Used prices grew by 0.7% over the first half of the month, but more favorable weather over the second half of the month allowed prices to grow 2.2% by month’s end, which is in line with NADA’s forecast of 2.1%,” said Jonathan Banks, executive automotive analyst of NADA Used Car Guide. NADA expects the seasonal uptick in used auto demand to continue for another month before dissipating in the second quarter of the year. NADA’s forecast has prices rising by an additional 1% in March and then falling by an average range of 2.5% to 3% per month from April through June. Prices are forecast to be 0.5% to 1% lower than 2013 levels by the end of year.
The Federal Trade Commission on March 12 reached a $3.4 million settlement with a company for violations of the Do-Not-Call (DNC) restrictions under the FTC’s Telemarketing Sales Rule based on phone calls the company made to consumers on lists purchased from “lead generators” who had represented they had consent from the consumers for those calls. However, they did not have consent, and many of the phone numbers were on the national and company-specific DNC lists. This is a valuable reminder that dealers—not the vendor—are likely to be held liable for any DNC or similar violations related to leads purchased from a third party vendor. “Companies that use lead generators must exercise due diligence when they buy lists of phone numbers,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection, “or else they can be on the hook for illegal telemarketing.” Editor’s note: NADA encourages dealers to not only conduct due diligence with all their vendors based on the services that vendor is providing, but also to clarify compliance obligations via contract and ensure that the dealership is protected in the event that the vendor has misrepresented its compliance efforts. For one example of this type of contractual protection, visit www.nada.org/dealerdata.
NADA Names Jonathan Collegio as New Head of Public Affairs Jonathan Collegio was named NADA vice president of public affairs. He reports to NADA President Peter Welch, and he is responsible for the organization’s communications and marketing efforts. “NADA is working to take our com-
NADA: Used Vehicle Values to Peak in March
NADART Has Banner Year in 2013 with Nine State Dealer Groups Joining NADART, the retirement plan and benefits division of NADA, had a banner year in 2013. The Georgia Automobile Dealers Association and the South Carolina Automobile Dealers Association were the eighth and ninth state dealer groups, respectively, to select NADART last year to provide customized retirement plans for their member dealers and dealership employees. In addition to Georgia and South Carolina, the state dealer associations in New York, Louisiana, North Carolina, Oregon, Pennsylvania, California and Ohio selected NADART in 2013, joining the previous partner Colorado.
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NADA Market Beat
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Produced by NADA’s Industry Analysis Group • Angela Lisulo, Economist
Review of New Light Vehicle Sales Overall
Nationally there were 1.2 million light-vehicle sales in February 2014. This marked an increase of 17.9 percent from January 2014 and a decline of 0.1 percent over last February. The abnormally cold weather and heavy snow continued to dampen sales in February. Barring a few brands, namely Fiat Chrysler’s Jeep brand,
most automakers saw sales decline. February 2014 YTD figures bring total light-vehicle sales to 2.2 million, down 1.5 percent from a year ago. The February 2014 Seasonally Adjusted Annual Rate (SAAR) for light-vehicle sales is 15.3 million. In February 2014 YTD figures, car sales held a market share of 47.4 percent, with sales down 7.3 percent from a year ago, while corresponding figures for light trucks put the light-truck share at 52.6 percent with sales up 4.4 percent from a year ago. See Figure 1.
Companies/Brands
Companies with a geographic base in North America (Detroit 3 and Tesla Motors) held the largest market share of lightvehicle sales for February 2014: 46.9 percent of the market. This was followed by
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companies based in the Asia/Pacific region at 44.7 percent and then companies based in Europe at 8.4 percent. In February 2014 YTD figures, companies based in North America also held the largest share of light-vehicle sales in the U.S. at 45.8 percent; this was a decline from a share of 46.3 percent a year ago. The corresponding share held by the Asia/Pacific-
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based companies was 45.4 percent, which was up from 44.7 percent a year ago, and that for the Europe-based companies was 8.7 percent, which was down from 9.0 percent a year ago. The North America and Europe company categories both experienced a contraction in sales in February 2014 YTD figures from February 2013 YTD. Of the Detroit 3, Ford experienced the greatest contraction for February 2014 YTD with sales down 7.0 percent from a year ago, followed by General Motors with sales down 6.1 percent from a year ago. Fiat Chrysler experienced growth in sales of 9.8 percent over this period. From the group of Asia/Pacific-based companies (excluding Suzuki which had no sales for February 2014 YTD), Mazda experienced the most contraction for February 2014 YTD with sales down 6.7 percent from last February followed by Toyota with sales down 5.7 percent. Isuzu experienced the most growth in sales over the period. From the group of Europebased companies, Volvo experienced the most contraction for February 2014 YTD with sales down 20.1 percent. Jaguar Land Rover experienced the most growth for February 2014 YTD with sales up 12.6 percent from a year ago. See Figures 2, 3 and 4.
Segments
In February 2014 YTD terms, there were segments which experienced a contraction in sales compared to last year: the small car segment, middle car segment, the sport utility vehicle (SUV) segment and the pickup segment. This marked a continuation from January 2014 when these same segments experienced a contraction in sales compared to January 2013. For February 2014 YTD, the greatest contraction in sales was evident in the middle car segment with sales down 15.4 percent from last year. The cross utility vehicle (CUV) segment has continued to hold the largest share in sales in
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NADA Market Beat YTD terms: 27.9 percent. This was followed by the middle car segment at 18.9 percent and then the small car segment at 18.7 percent. Within the CUV segment, the middle CUV sub-segment has been the largest sub-segment, holding 64.9 percent of February 2014 YTD CUV sales. See Figures 5 and 6.
Power Source
Gasoline-powered light vehicles held a market share of 94.0 percent of February 2014 YTD light-vehicle sales which was up from its corresponding share of 93.6 percent a year ago. The market share held by the diesel category rose slightly to 2.7 percent, in YTD terms, from its value of 2.5 percent last year. The market shares held by electrics and plug-in hybrids, in YTD terms, have each grown since last year. In February 2014, for the alternative power category, the U.S. automobile industry sold the following light vehicles: 3,798 electrics, 0 units powered by fuel cells, 29,784 hybrids, 37 units powered by natural gas and 3,721 plug-in hybrids amounting to 37,340 light-vehicle sales. See Figure 7.
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Models
There were three pickup trucks and two cars occupying the Top Five ranks of the best-selling light vehicles for February 2014 YTD. The three pickup trucks were models from the Detroit 3: Ford FSeries, Chevrolet Silverado and the Ram pickup. The two leading cars were models from companies based in the Asia/Pacific region: Nissan Altima and Toyota Camry. From the list of the 15 best-selling light vehicles for February 2014 YTD, 7 out of 15 light vehicles were Detroit 3 models while the rest were from companies based in the Asia/Pacific region. See Figure 8.
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