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FIRST CLASS MAIL US POSTAGE PAID BOSTON, MA PERMIT NO. 216
March 2021 • Vol. 34 No. 3
The official publication of the Massachusetts State Automobile Dealers Association, Inc
Bouncing Back
Ma s s a c h u s e t t s
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S ta f f D i r e c t o r y Robert O’Koniewski, Esq. Executive Vice President rokoniewski@msada.org Jean Fabrizio Director of Administration jfabrizio@msada.org Peter Brennan, Esq. Staff Attorney pbrennan@msada.org Auto Dealer MAgazine Robert O’Koniewski, Esq. Executive Editor Tom Nash Editorial Coordinator nashtc@gmail.com Subscriptions provided annually to Massachusetts member dealers. All address changes should be submitted to MSADA by e-mail: jfabrizio@msada.org Postmaster: Send address change to: One McKinley Square, Sixth Floor Boston, MA 02109 Auto Dealer is published by the Massachusetts State Automobile Dealers Association, Inc. to provide information about the Bay State auto retail industry and news of MSADA and its membership.
Ad Directory CliftonLarsonAllen LLP, 19 DealerShop, 17 Ethos, 2 O’Connor & Drew, 28 ADVERTISING RATES Inquire for multiple-insertion discounts or full Media Kit. E-mail jfabrizio@msada.org Quarter Page: $450 Half Page: $700 Full Page: $1,400
Back Cover: $1,800 Inside Front: $1,700 Inside Back: $1,600
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The official publication of the Massachusetts State Automobile Dealers Association, Inc
Table of Contents
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From the President: Springing into Action ASSOCIATE MEMBERS DIRECTORY THE ROUNDUP: Strength Through Adversity TROUBLESHOOTING: Monitoring Your F&I Office Compliance AUTO OUTLOOK
14 Cover Story: Bouncing Back
18 20
NEWS From Around the Horn Information Security:
How Technology Will Strengthen and Grow Dealership Business
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LEGAL: COVID-19 Likely to Increase Wage-Hour Claims nada Market Beat ACCOUNTING: Where Are We Now? AIADA Brief: As D.C. Heats Up, Dealers Stay Focused TRUCK CORNER: ATD’s Strength is in Members and Dealer Leaders nada update: Dispelling Myths
Join us on Twitter at @MassAutoDealers
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Massachusetts Auto Dealer
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From the President
MSADA
Springing into Action A year after Coronavirus turned the world upside down, there is reason to be optimistic
By Chris Connolly, MSADA President
Msada Board Barnstable County
Another Winter has passed, and while it may not have been record setting for snow, I am sure many of you join me in feeling a greater sense of relief than I have ever felt at tearing these pages out of the calendar. As vaccines get distributed and rates go down, dealers continue to be ready to serve our communities as they return to a revised normal. If we are taking the right lessons from the past year, we will never simply return to “normal” as it was before the pandemic. We should learn from the mistakes in implementing “As vaccines get arbitrary decisions on business closures, and study distributed carefully whether a firmer, shorter shut down would have been more effective than half-meaand rates go sures that served only to hurt the economy and still allowed for massive community spread. down, dealers More importantly, we have learned that as communities across Massachusetts, we must first continue to be rely on each other to get us through. We hope the ready to serve government does its best. But the bottom line is the government is made up of people, and peoour communities ple make mistakes, have agendas, and often are things up as they go along just like the as they return making rest of us. When all is said and done, emerging from the to a revised pandemic will be a miracle of science delivered normal.” by our neighbors, whether they were nurses or doctors or essential workers. The safest way to get from point A to point B in the worst of this past year was in a personal vehicle. Our role was understood by those who needed us, but too often overlooked by policy makers. Your Association has fought every single day to ensure that dealers have the opportunity to serve those who need us. Coming away from March 2020 to March 2021, we have a thick folder of lessons learned that we will be prepared with should anything like this pandemic re-emerge. We continue to evaluate when we can most safely and sensibly gather as a group again, whether at the Annual Meeting or our New England International Auto Show. Stay tuned for updates from us in the coming weeks and months. In the meantime, I encourage you to remember those we have lost this past year, and celebrate that we are here to see better days ahead. t MARCH 2021
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Brad Tracy, Tracy Volkswagen
Berkshire County
Brian Bedard, Bedard Brothers Auto Sales
Bristol County
Richard Mastria, Mastria Auto Group
Essex County
William DeLuca III, Woodworth Motors Don Sudbay, Sudbay Motors
Franklin County
Jay Dillon, Dillon Chevrolet
Hampden County
Jeb Balise, Balise Auto Group
Hampshire County
Bryan Burke, Burke Chevrolet
Middlesex County
Chris Connolly, Jr., Herb Connolly Motors Frank Hanenberger, MetroWest Subaru
Norfolk County
Jack Madden, Jr., Jack Madden Ford Charles Tufankjian, Toyota Scion of Braintree
Plymouth County
Christine Alicandro, Marty’s Buick GMC Isuzu
Suffolk County
Robert Boch, Expressway Toyota
Worcester County
Steven Sewell, Westboro Chrysler Dodge Ram Jeep Steve Salvadore, Salvadore Auto
Medium/Heavy-Duty Truck Dealer Director-at-Large [Open]
Immediate Past President [Open]
NADA Director
Scott Dube, Bill Dube Hyundai
Officers
President, Chris Connolly, Jr. Vice President, Steve Sewell Treasurer, Jack Madden, Jr. Clerk, Charles Tufankjian
Associate Members
MSADA A ssociate M ember D irectory ACV Auctions Will Morris (860) 670-7867 ADESA Jack Neshe (508) 626-7000 Albin, Randall & Bennett Barton D. Haag (207) 772-1981 American Fidelity Assurance Co. Dan Clements (616) 450-1871 America’s Auto Auction Boston Jim Lamb (781) 596-8500 Armatus Dealer Uplift Joe Jankowski (410) 391-5701 Auto Auction of New England Steven DeLuca (603) 437-5700 Auto/Mate Dealership Systems Troy Potter (877) 340-2677 Automotive Search Group Howard Weisberg (508) 620-6300 Bank of America Merrill Lynch Dan Duda and Nancy Price (781) 534-8543 Bellavia Blatt Leonard Bellavia (516) 873-3000 Bernstein Shur PA Ned Sackman (603) 623-8700 Blum Shapiro Rick Parmelee (860) 982-9307 Boston Magazine Noreen Murray (617) 275-2012 Broadway Equipment Company Fred Bauer (860) 798-5869 Burns & Levinson LLP Paul Marshall Harris (617) 345-3854 Capital Automotive Real Estate Services Daniel Garces (703) 394-1313 CDK Global Chris Wong (847) 407-3187 Chase Auto Alex Khademi (404) 375-4504 Coastal Outsourced Solutions Andrea Vieira (508) 979-4733 Construction Management & Builders, Inc. Nicole Mitsakis (781) 246-9400 Cooperative Systems Scott Spatz (860) 250-4965 Cox Automotive Ernest Lattimer (516) 547-2242 CVR John Alviggi (267) 419-3261 Dave Cantin Group Woody Woodward (401) 465-7000 DealerShop Ken Grove (248) 444-6283 Brian Fleischman (716) 864-0379
Downey & Company Paul McGovern (781) 849-3100 DP Sales Distributors Andrew Prussack {631) 842-7549 Eastern Bank David Sawyer (617) 620-3484 Eastern Insurance Group John Berksza (508) 620-3349 EasyCare New England Greg Gomer (617) 967-0303 Enterprise Rent-A-Car Timothy Allard (602) 818-3607 Ethos Group, Inc. Drew Spring (617) 694-9761 F&I Direct Sean Wiita (508) 414-0706 Michelle Salas (508) 599-0081 F & I Resources Jason Bayko (508) 624-4344 Federated Insurance Matt Johnson (606) 923-6350 Fisher Phillips LLP John Donovan (404) 240-4236 Joe Ambash (617) 532-9320 Gulf State Financial Services Mike Sims (817) 689-1735 GW Marketing Services Gordon Wisbach (857) 404-0226 John W. Furrh Associates Inc. Kristin Perkins (508) 824-4939 Key Bank Mark Flibotte (617) 385-6232 KPA Abe Cohen (503) 902-6567 LocaliQ Automotive Jay Pelland (508) 626-4334 LotLinx Brad Bass (978) 766-9000 M & T Bank John Federici (508) 699-3576 Management Developers, Inc. Dale Boch (617) 312-2100 McWalter Volunteer Benefits Group Shawn Allen (617) 483-0359 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 NEAD Insurance Trust Charles Muise (781) 706-6944
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Northeast Dealer Services Jim Schaffer (781) 255-6399 O’Connor & Drew, P.C. Kevin Carnes (617) 471-1120 Performance Management Group, Inc. Dale Ducasse (508) 393-1400 Piper Consulting Jim Piper (207) 754-0789 Pro-Vigil Sasha Lam-Plattes (408) 569-2385 Resources Management Group J. Gregory Hoffman (800) 761-4546 Reynolds & Reynolds Mike O’Connor (860) 462-7958 Robinson Donovan Madden & Barry, P.C. James F. Martin, Esq. (413) 732-2301 Rockland Trust Co. Joseph Herzog (508)-830-3241 Samet & Company John J. Czyzewski (617) 731-1222 Santander Bank Richard Anderson (401) 432-0749 Chris Peck (508) 314-1283 Schlossberg & Associates, LLC Michael O’Neil, Esq. (781) 848-5028 Service Credit Union Dave Pasternak (603) 812-8967 Shepherd & Goldstein CPA Ron Masiello (508) 757-3311 Southern Auto Auction Joe Derohanian (860) 292-7500 Sprague Energy Robert Savary (603) 430-7254 SunPower Christie McCarthy (408) 457-2357 Kristin Hodges (707) 694-7759 SunTrust Bank Michael Walsh (617) 345-6567 Towne Law Firm P.C. Kate Gagnon (518) 213-0707 TradeRev Dennis Finkel (508) 397-2702 TrueCar Pat Watson (803) 360-6094 US Bank Vincent Gaglia (716) 649-0581 Wells Fargo Dealer Services Josh Tobin (508) 951-8334 Windwalker Herby Duverne (617) 797-9316 Zurich American Insurance Company Steven Megee (774) 210-0092
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The Roundup
One Year – Strength Through Adversity By Robert O’Koniewski, Esq. MSADA Executive Vice President rokoniewski@msada.org Follow us on Twitter • @MassAutoDealers
A year ago this month – March 10, 2020, to be exact – Governor Charlie Baker issued an order declaring a public health emergency, “to prepare for, respond to, and mitigate the spread of COVID-19 to protect the health and welfare of the people of the Commonwealth.” At that time, there were 91 presumptive positives for COVID-19, but no deaths. (Compare that to 600 confirmed cases of COVID-19 in the U.S. and 25 deaths.) Gov. Baker augmented this order, on March 23, with the issuance of COVID-19 Order #13 that allowed essential businesses to remain open under restricted operation and closed non-essential businesses. (On that date, Massachusetts was up to 646 positive cases, including 5 deaths.) This arrogant designation of “essential” versus “non-essential” could be laid at the feet of the Federal Cybersecurity and Infrastructure Security Agency. This agency created the list as guidance to assist the states in picking winners and losers as the “14 critical infrastructure sectors whose workers provide services and functions that are essential to maintain in order to support a strong response to the COVID-19 pandemic.” It serves only to rub salt in the wound that thousands of the businesses deemed non-essential have closed permanently, taking with them tens of thousands of jobs – a government-created black hole in what was a vibrant economy. As far as the federal list went, in Massachusetts, as in other states, dealership service operations were deemed essential while showrooms were not. The Commonwealth never ceased dealership sales; it just would not allow showrooms to be open. In fact, the RMV, to its credit, maintained registration and title operations throughout this period of time in order to process dealership sales and lease transactions. At a minimum, if the feds actually put MARCH 2021
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any thought to it, one would expect that so-called essential personnel (e.g., doctors, nurses, first responders, etc.) may have the need at some point to buy or lease a new vehicle in order to perform their essential functions to battle COVID-19 in the Commonwealth. The governor eventually issued, in late May, a re-opening plan that included the unshuttering of showrooms in early June, which kicked off a year of sales that many dealers said was their best in years. Regardless of the business shutdowns, personal restrictions, and travel bans, the virus spread continued unabated. Fast forward a year and here at home we are at just south of 600,000 infections and just over 16,700 deaths. (Compare this to 30 million confirmed cases across the country, including almost 550,000 deaths.) As we head into the sixteenth month of this pandemic, with the advent of Spring and the better weather heading our way, there is a group giddiness that is manifesting itself with an explosion of enthusiasm anticipating an expanded re-opening of our economy and our personal lives. I cannot tell you what is around the corner, but I can see in the media that for every story of people excited for a re-opening, there seems to be two or more stories talking of a virus resurgence and the spread of stronger strains of new COVID variants. These purveyors of continued doom seem content to keep the thumb of government on our personal and economic scales. I will say this, as one who has received the first of the two Moderna shots, most everyone seems to be extolling, “Just get me to the vaccine ASAP.” Especially as harmful, inconsistent economic policies were imposed by government, our dealers
MSADA certainly had to deal with more than the health impacts of the Coronavirus, which have been devastating for many families. It has become cliché to characterize our dealers as “resilient”, “flexible”, and “optimistic”. But in truth comes cliché. Once again, dealers proved to be resilient in succeeding amidst adverse government actions and public health impacts. They have shown once again to have the flexibility to create new and improved business techniques to adapt to a changing marketplace that included an emphasis on online and remote transactions. And they have the optimism to get out of bed each day, get their feet on the floor, and attack the day with a renewed vigor. If world wars, depressions, recessions, social turmoil, terrorist acts, or horrendous economic policies coming out of D.C. are not going to defeat this industry, the Coronavirus certainly does not have a chance.
Bill Sent to Baker to Freeze UI Rates, Create Paid COVID Leave On March 25 the Massachusetts Legislature gave final approval to House 95, which would temporarily freeze Unemployment Insurance rates for employers and would create a statewide COVID-19 paid leave program requiring Massachusetts employers to provide emergency paid leave to employees who are absent from and unable to work as a result of circumstances related to the virus. The legislation would also reset the state’s personal income tax filing deadline for 2021 at May 17, 2021; this change would match the federal filing deadline recently set by the IRS at May 17, 2021. Governor Baker is expected to sign the legislation into law; it will take effect ten days after the governor affixes his signature. As you may recall, prior versions of the legislation, as it wended its way through the House and Senate legislative processes, contained a distinction between employer sizes. Employers of 500 employees or more would be able to tap into the state COVID leave fund to subsidize
employee leave under the new mandated program. Employers of fewer than 500 employees, although required to provide the state mandated leave to employees, could not partake in the largesse of the state subsidy but, instead, could apply for the federal tax credit provided in the federal RESCUE Act that extended the federal paid leave program on a voluntary basis to employers. House 95 would remove the employee-number distinction. However, there now would be a state-funded subsidy for large employers to tap into to cover paid leave for their employees while smaller employers (500 and below employees) will be essentially limited to the federal tax credits, as the federal leave program is not available to the large employers. In case you were interested, this new state subsidy for large employers will include such titans of their industries as Mass. General Brigham (74,000 employees), Stop & Shop (20,153), Harvard University (19,500), Demoulas Super Markets (16,000), Raytheon (14,500), Dell Technologies (7,400), Fidelity Investments (5,700), and Verizon (5,600), just to name a few. For those employers of 500 and fewer, although the federal program was made voluntary in recent law changes, they will need to comply with the mandatory leave program set by the state in House 95. Further, whereas the federal program runs until September 30, 2021, the state paid leave program would be available until the $75 million subsidy runs out or we hit September 30, 2021, whichever comes first. Finally, the state would have the opportunity to assess, with 60-days’ notice to the Legislature, an excise on top of the frozen UI rates to require employers to pay the interest the Commonwealth will have to pay to the federal government for the loan the state took to cover the deficit in the state’s UI fund. I do not need to remind an employer that any employment caused, especially in the early stages of the pandemic, was a direct result of mandatory economic www.msada.org
shutdowns by the government. In effect, employers now can pay the state for the privilege of having been forced to lay off or furlough their workers during the pandemic. (In February 2020, state unemployment was just under 3%; it reached almost 18% by April 2020.) Some key components of the paid COVID leave law awaiting the governor’s signature: • New Paid Leave Mandate. Under House 95, employers must provide COVID-19 related paid leave to employees for various reasons, including: self-isolation on the advice of a health professional; to care for one-self or receive medical treatment; to receive an immunization; to recover from a disability due to COVID-19; to comply with a quarantine order; to care for a family member including a domestic partner; or the inability to telework due to COVID-19. • How Much Leave Must Employers Provide? Under the legislation, employers must provide the amount of leave for an employee who takes COVID-19 emergency paid sick leave consistent with the amount of hours worked in a week, up to 40. • Employee Eligibility. Under this new state leave law, employees can utilize the state-mandated leave on an intermittent basis and in hourly increments. Employers will be prohibited from forcing an employee to use other paid leave provided by the employer before the employee uses the COVID-19 emergency paid sick leave, and from retaliating against an employee for utilizing said leave. Under federal law, however, emergency paid COVD-19 leave cannot be taken intermittently in most situations. The only such leave that a non-teleworking employee may take is to care for a child whose school or place of care is closed, or whose childcare provider is unavailable, because of COVID-19 related reasons. Additionally, paid sick leave for qualifying reasons related to COVID-19 must be taken in full-day increments under the federal Massachusetts Auto Dealer
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THE ROUNDUP rules, unless the employee is teleworking, creating a discrepancy with the state legislation. • How Are Employers Reimbursed? House 95 would establish the Massachusetts COVID-19 Emergency Paid Sick Leave Fund to reimburse eligible employers for providing the required COVID-19 emergency paid sick leave, until the $75 million in the fund is depleted. However, employers with fewer than 500 employees are not eligible to be reimbursed by the state fund for providing emergency paid leave unless said paid leave does not qualify for reimbursement under the federal rules. The maximum reimbursement amount allowed under the state fund for the costs of said leave is $850 a week, and employers will need to follow the procedures set by the bill to be reimbursed, including applying to the Fund for reimbursement. Employers with fewer than 500 employees should apply to the federal government for reimbursement in the form of payroll tax credits for all leave provided under the bill. As you may recall, the emergency paid leave mandate contained in the FFCRA was extended to September 30, 2021, and made optional, by the RESCUE Act. Eligible employers that are newly required to offer paid leave under state legislation should apply for a federal payroll tax credit to reimburse the costs of providing the state mandated leave. The federal payroll tax credit is limited to $511 per day and $5,110 in the aggregate (up to 80 hours). If an employer provides paid leave to an eligible employee that is not eligible for federal reimbursement, the employer can apply to the state Fund for reimbursement. An example of such a situation would be if an employee took incremental leave that was prohibited by the federal rules.
Compliance, Community Outreach Subsidy Reminder Please accept this as our repeated reminder to our member dealers to take adMARCH 2021
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vantage of our compliance assistance subsidy program as well as our community outreach assistance program. Under our compliance assistance program, we will support your compliance efforts, from $500 up to $1,000, for your participation in OSHA/environmental workplace compliance services offered by Furrh Associates, KPA, Ethos, or Piper Consulting; employment law services offered by Fisher Phillips; and tax compliance and cybersecurity protection services offered by O’Connor & Drew. Additionally, under our community outreach program, we will support your community giving up to $1,500 in the year as a single point store and up to $2,000 total with $250 per two affiliate stores. Do not miss out on these programs, which your Association’s Board of Directors renewed for 2021. If you need information or the application for these programs, please do not hesitate to contact me.
metrics related to compensation, retention and turnover. Additionally, participants receive an electronic copy of the 2021 NADA & ATD Dealership report. Participants also will receive the Compensation & Retention Report. This report provides a national and regional analysis of dealership workforce compensation and retention data in 2020. Lastly, participants will receive access for one year to the Database Search Tool; an online based customized search tool with archived compensation and tenure data for 60+ positions from all Dealership Workforce Studies! Enroll now at nadaworkforcestudy. com to participate in the 2021 Dealership Workforce Study! The study will CLOSE on April 15, 2021. Any questions or issues, please contact workforcestudy@nada.org. To enroll you will need your store or group NADA Member ID number. Contact the NADA customer service team at (800) 557-6232 to request your ID.
2021 NADA/ATD Dealership Workforce Study Now Open
“Coffee with Coopsys”: IT Compliance and Best Practices Webinars
The Dealership Workforce Study provides valuable compensation and retention data on over 60 dealership positions. All data submitted is confidential and no identifiable information is shared. This annual study is unique as it will provide insight into the pandemic’s effect on our industry’s workforce across the country. Previously, this study included a questionnaire. NADA/ATD will release this as a separate report in the second quarter of 2021. How to Participate: 1. Enroll at nadaworkforcestudy.com; 2. Read the instructions emailed to you upon enrollment; 3. Complete the payroll template provided; 4. Upload the file. (Upload link provided in the instructions email.) For Your Participation: Participants will receive an electronic copy of a Custom Comparison report for their store. This exclusive report provides a Workforce Management Scorecard that compares and ranks your dealership against a peer group of participating dealerships based on key
Massachusetts Auto Dealer www.msada.org
Beginning on February 9, our new associate member Cooperative Systems, rolled out a series of six, 15-minute webinars regarding IT compliance issues and dealership best practices. “Coffee with Coopsys” will be held on the second Tuesday of each month, 10:00 a.m.–10:15 a.m. Registration is complimentary for all MSADA members. The schedule of remaining topics is as follows: • Tuesday, April 13: How To Manage A Proper PCI Compliance Program Within Your Dealership • Tuesday, May 11: How Cloud-Based Telephone Systems Can Provide More Value To Your Dealership Than Traditional Premise-Based Systems • Tuesday, June 8: Why You Should Be Using Multi-Factor Authentication (MFA) Across All Of Your Dealership’s Technology System • Tuesday, July 13: Controlling Your IT – Should You Outsource IT, Hire Internally, Or Have a Hybrid? t
Troubleshooting
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Monitoring Your F&I Office Compliance By Peter Brennan, Esq. MSADA Staff Attorney
Spring has arrived in New England, bringing the usual wild temperature fluctuations and high winds, but also, this year particularly, a sense of renewed optimism. By the time you read this column it is likely that you will be eligible for, or will have already received, a COVID-19 vaccine; you will be able to cross the border into New Hampshire for some tax-free shopping at your leisure without being ordered to quarantine by Massachusetts authorities; and, if you have the funds, time, and inclination, you might have attended the Red Sox home opener at Fenway Park on April Fools’ Day (an appropriate date given the status of the starting rotation). While hope may be in the air, it is important to remember that other changes are happening that may not bode well for unprepared dealers. As we have discussed previously in this magazine and legal bulletins, major changes are coming to federal agencies that directly and indirectly regulate automobile dealers, such as the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB). Closer to home, after filing or joining over one hundred lawsuits against the previous presidential administration, Massachusetts Attorney General Maura Healey is unlikely to continue her office’s torrid litigation pace against the new administration and could look for local targets to fill the void. For these reasons and others, now is a good time to kick the tires on your dealership’s finance and insurance office to
make sure that your F&I managers are focused on legal compliance as well as closing deals. Regular audits of the F&I office can help a dealership uncover bad practices, and problem employees, before notice comes in the form of a lawsuit or regulatory action. Frequently, it is a lender that does business with the dealership that uncovers malfeasance in the dealership’s F&I office before it can be uncovered by a regulator or the dealer. Lenders frequently will review the retail installment sales contracts (RISC) that they acquire from dealerships for irregularities. One practice that lenders (as well as regulators) look for is “powerbooking” – when the features and equipment of a vehicle are overstated to increase the loan-to-value ratio on a contract in order to trick a lender into financing the agreement. Both new and used vehicle transactions can be vulnerable to powerbooking. Simply put, powerbooking is fraud – fraudulently misrepresenting the details of a transaction to get a loan financed. Based on evidence from dealerships around the country, it is an extremely prevalent form of fraud. From the point of view of a dealership employee engaging in this practice, it may seem like a harmless “white lie” in which no one is harmed so long as the buyer does not breach the agreement. However, powerbooking carries the risk of criminal and civil liability for both the employee that engages in the fraud and the dealer that should be monitoring the employee. It is up to the dealership to educate its F&I department about the potential exposure to civil and criminal liability that comes with powerbooking, which could include significant jail time for individual employees. As previously mentioned, it is increasingly common that the lender that is assigned a powerbooked RISC is the one that uncovers the fraud. This is because lenders in Massachusetts have been targeted by the Attorney General for unfair and www.msada.org
deceptive lending practices in their automobile loan portfolios. In recent years, several lenders have agreed to consent decrees and paid out multi-million-dollar settlements for facilitating loans that the AG alleged the lender knew or should have known were unfair and in violation of the Massachusetts Consumer Protection Law, M.G.L. Chapter 93A. Consequently, lenders have been looking at RISCs under a microscope, even if the loan is active and the borrower has been making payments as required under the contract. If a lender uncovers something suspicious in a dealership-originated RISC, they will request more information on the loan from the dealership and, if fraud is uncovered, the lender can take legal action against the dealership. The penalties for fraud are specified in the agreement between the lender and the dealership, but, generally, the lender can report the fraud to the relevant authorities for a criminal investigation, undertake a civil action against the dealer, demand payment for damages incurred, or all of the above. When such fraud is uncovered, any profit that the dealer made on the fraudulent transaction will be a distant memory. The unfortunate reality is that if one deal was powerbooked, then so were others. A dealer that receives evidence of fraud, from an outside source or an internal audit, must root out the problem and eliminate the bad actors in the F&I office immediately. Failure to do so could result in increased liability for the dealer. As Spring approaches, remember that sunlight is the best disinfectant. t If you have any questions regarding this column, please contact Robert O’Koniewski, MSADA Executive Vice President, at rokoniewski@msada.org, or Peter Brennan, MSADA Staff Attorney, at pbrennan@msada.org, or by phone at (617) 451-1051. Massachusetts Auto Dealer
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Bouncing Back As dealers reflect on lessons learned from COVID-19, they look ahead to a changing business landscape By Mariya Manzhos From workers sidelined with COVID-19 to inventory shortages and economic disruptions to a dramatic decline in commuting, franchised motor vehicle dealers have been up against a slew of challenges brought on by the pandemic. The staggering losses of the first months of last year left the industry reeling, with a long road toward recovery ahead. “It was a reminder how fragile we are,” said Ray Ciccolo, owner of the Village Automotive Group. Amid the constraints, dealers have learned to adapt, making adjustments to run their operations safely and efficiently, and learning important lessons along the way. “We learned to be more efficient and to trim down fat, not waste, and be much more careful with our spending,” said MSADA President Chris Connolly. “All those things are always very positive and important, and if we can carry these things forward as business starts to come back, maybe there are a lot of dealerships that can be very profitable in 2021, because of the efficiencies they have created.”
“We are finding our customers want the personal interaction, somebody who is knowledgeable coaching them or giving them information about their different options.” –Carla Cosenzi, TommyCar Auto Group
Tough Calls With fewer customers coming in, Connolly’s sales team got better at evaluating and buying used cars, creating options to best serve the customers’ needs. “We had to make sure we had the right inventory to be more attractive to the customers that were out there,” he said. After tough calls to cut and furlough workers, some dealers have had to shift job responsibilities and even completely reMARCH 2021
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MSADA taken on more of a salesmanship role over the phone. The role of the salesman is no longer the same either, Ciccolo explained. The managers, who would previously move the sales process along over the phone before the customer came in, are now closing deals. “The sales managers became all salesmen, who are trying to get the selection and commitment from the customer,” said Ciccolo. The salesmen, in turn, have become presenters,
vamped some roles. “That has been a useful change,” Ciccolo said. “We realized that we could run the place with a lot less people.” For example, the role of the business development center, previously responsible primarily for making appointments, has now changed. Some staff members became presenters, others have
who now deliver the car and finish up the paperwork with the customer. And the changes are working; since the re-opening, profitability of the dealership has soared, Ciccolo said. But perhaps the most unprecedented challenge the dealers have faced has been the supply shortage. “We have dealt with supplier issues in the past, whether it is transportation issues, strikes, or recession. But we have never dealt with not having sufficient product to fill our customer needs,” said Christine Alicandro-Karnolt, owner of Marty’s Buick GMC in Kingston and Marty’s Chevrolet in Bourne. To mitigate customers’ expectations, she says, the need to be transparent and proactive about communicating these challenges has never been greater. “You can never over communicate,” she said. And that is even the case when most of the communication happens online. The dealers have had to sharpen their technology platforms to allow customers to complete a car purchase entirely online. For Carla Cosenzi, co-owner of TommyCar Auto Group’s five car dealerships in Western Massachusetts, the digital infrastructure was already in place when the pandemic hit. The employees, the website, the advertisement -- everything was running in sync. “We have just gotten better at it,” she explained. The customers can do everything from selection to digitally signing the paperwork online (with the exception of several state forms). The delivery specialists can bring a car home for a test drive or customers can have a consultation over FaceTime or via video tutorials, she said. And while a small percentage of customers do purchase a car online from beginning to end, most prefer the in-person aspects. “We are finding the customers want the personal interaction, somebody who is knowledgeable coaching them or giving them www.msada.org
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information about their different options,” Cosenzi said. “There are few customers that actually want to go through the entire process online.”
Changing Habits “Apart from convenience, the digitization of the car buying process also improved the relationship between dealers and customers,” Ciccolo said. “The customers understand the pricing better and come more prepared.” “I think this industry has treated a customer like they are just in here shopping, getting the best price, which a lot of them were. Now we are treating everybody like they are ready to buy. And it is a significantly higher gross profit and happier customers,” Ciccolo said. “The change from having sales being confrontational to sales being helpful -- that has been a wonderful thing for us and the customers.” As the auto industry bounces back, the dealers are gearing up for the rapid shift toward electric vehicles. “It is probably the most dramatic and drastic thing that has ever going to happen to the auto industry,” said Alicandro-Karnolt. The GM facilities are being examined to install necessary infrastructure for EV vehicles, she said. But the big move also means that manufacturers will be doing more direct sales, reducing the need for elaborate showrooms, and leaving dealers with significantly less inventory, Ciccolo said. Consezi is getting the glimpse of this hype. She just got the ID.4 Volkswagen EV and there is already a waiting list, she noted. Looking ahead, the dealers share optimism about the future. Individual mobility -- using individual vehicles as opposed to ride sharing services like Uber and Lyft -- will continue to be important for customers. “I think the stimulus checks, combined with record low interest rates, and the vaccination rollout will help,” Cosenzi said. MSADA Executive Vice President Robert O’Koniewski said the common theme he hears across the dealer membership body is the same with every challenging time. “When one thinks about this pandemic heading into its sixteenth month, dealers have had to deal with more than the health aspects of the Coronavirus, which have been devastating for MARCH 2021
Massachusetts Auto Dealer www.msada.org
many families. Our dealers also have had to endure the government’s response, whose actions with long-term personal lockdowns and business shutdowns probably did more harm
than good. “The fundamental characteristics of every dealer emerge during challenging times. Once again, dealers proved to be resilient in succeeding amidst adverse government actions and public health impacts. They have demonstrated the flexibility to
create new and improved business processes to adapt to a different marketplace that included an emphasis on online, remote transactions. “And they have the optimism to get out of bed each day, get both feet on the floor, and attack the day with renewed vigor. If world wars, depressions, rescessions, social upheaval, and terrorist acts are not going to defeat this industry, the Coronavirus does not have a chance.” t
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Massachusetts Auto Dealer
MARCH 2021
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NEWS NEWS the NEWSfrom from Around from Around Around the Horn Horn NEWS
NEWS the Horn
HYANNIS, ORLEANS
BOSTON
Group 1 Automotive Acquires Two Toyota Dealerships
GM Announces New Battery Partnership, Woburn Prototyping Line
Group 1 Automotive announced this month the expansion of its business presence in the Massachusetts market with the acquisition of two Toyota dealerships. The dealerships are located in Hyannis and Orleans on Cape Cod. These stores are expected to generate approximately $120 million in annualized revenues. “We are excited to grow our scale in New England with two additional stores and expand our long-standing partnership with Toyota,” said Earl J. Hesterberg, Group 1’s president and chief executive officer. The acquisition of these stores brings Group 1’s total U.S. Toyota dealership count to fifteen and increases the total representation in New England to ten dealerships, which includes the Audi, BMW, Lexus, Subaru, and Toyota brands.
General Motors wants to sell electric vehicles that can travel 500 to 600 miles on a full charge in the near future. The company has partnered with Singapore-based lithium metal battery developer SolidEnergy Systems, which operates in the U.S. from Boston. GM President Mark Reuss announced the new partnership this month at a virtual conference. As part of its joint venture with SolidEnergy, GM will build a
PITTSFIELD
Flynn VW Audi BMW Sold To McGee Family Dealerships McGee Family Dealerships, based in Hanover, announced its expansion into the Berkshire market with the acquisition of Flynn Audi BMW Volkswagen in Pittsfield. These stores are the McGee Family Dealerships’ first luxury automotive dealerships, but the organization is no stranger to delivering high-end services at their existing dealerships throughout Massachusetts and New Hampshire. “We are pleased to broaden our dealership footprint into the Berkshires, where we feel we can expand our long-standing commitment to superior customer service,” said owner Rob McGee. The addition of these stores increases McGee’s total representation in New England to seven OEMs across 10 locations.
MARCH 2021
Massachusetts Auto Dealer www.msada.org
manufacturing prototyping line in Woburn, for a high-capacity, pre-production battery by 2023, Reuss said. GM Ventures invested in SolidEnergy six years ago to research, develop, and manufacture Li-Metal technology and AI-powered battery management software. Reuss said this new joint development agreement is the next progression of that ongoing collaboration. The lithium metal battery GM develops with SolidEnergy will offer affordability and high performance, Reuss said. The prototype battery GM is developing with SolidEnergy is intended to apply to the next generation of Ultium, which GM is targeting for mid-decade. This is separate from the battery chemistry that will launch GM’s initial Ultium-based products, such as the GMC Hummer EV and Cadillac Lyriq SUV. “Affordability and range are two major barriers to mass EV adoption,” said Reuss. “With this next-generation Ultium chemistry, we believe we are on the cusp of a once-in-a-generation improvement in energy density and cost. There is even more room to improve in both categories, and we intend to innovate faster than any other company in this space.”
MSADA
NEWS from Around the Horn
BOSTON
Ford and Lincoln Dealers Earn Top Manufacturer Honors The following dealers earned the President’s Award distinction for Customer Sales and Service Satisfaction for 2020 from the Ford Motor Company: - Jack Madden Ford - Lamoureaux Ford - Muzi Ford - Herb Chambers Lincoln The President’s Award was established in 1998. Dealers became eligible through customer survey responses. BOSTON
Aptiv-Hyundai Joint Venture Announces Boston Hiring Spree The Boston-based joint venture between self-driving vehicle company Aptiv and Hyundai Motor Group is ramping up hiring in Boston, saying that the pandemic spurs a renovated interest in autonomous means of transportation. Hyundai-Aptiv Autonomous Driving Joint Venture, which has approximately 150 employees in Boston and an office at 100 Northern Ave. in the Seaport, announced it is rebranding as Motional, a combination of the words “motion” and “emotional.” It is also planning on hiring over 200 employees across its Boston and Pittsburgh locations. The company said it will begin testing fully driverless systems this year, making its “driverless systems and supporting technology” available for robotaxi providers and fleet operators in 2022. Motional represents a 50/50 investment between Hyundai Motor Group and Aptiv PLC (NYSE: APTV). The two companies
BOSTON
Honda, Acura Announce Green Dealer Award Recipients Honda and Acura’s Green Dealer programs help Honda and Acura automobile dealers measurably reduce the environmental impact of their operations. Dealers who implement the manufacturers’ Green Dealer program are eligible to receive the Honda/Acura Environmental Leadership Award, the winners of which were announced in March. Massachusetts’ Honda/Acura recipients included: - Herb Connolly Acura of Framingham (Platinum) - Prime Acura of Westwood (Platinum) - Acura of Peabody (Silver) - Honda Cars of Boston (Platinum) - Silko Honda of Raynham (Gold)
announced a partnership last year with the goal of working together to advance the design, development, and commercialization of autonomous technologies. The terms of the joint venture are staying the same after the rebranding, Motional confirmed. t www.msada.org
Massachusetts Auto Dealer
MARCH 2021
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INFORMATION SECURITY
MSADA
How Technology Will Strengthen and Grow Dealership Business By Scott Spatz Cooperative Systems
Over the past year, I am sure you have dealt with the demand of enabling your staff to be able to work remotely, which introduces questions and challenges of how to successfully do it. You have probably asked questions like: • How do I set up all my programs and applications for remote access? • How do I manage, secure, and control my data and devices? • Which devices need access to my lineof-business applications, and which do not? We want to answer these questions, and here is what we know based on experience and wisdom in working with dealerships: • 87% of workers use some form of remote access with 75% saying that remote working has had a positive effect on retention. • Productivity of remote workers has increased by 30%. • Remote employees have taken 20% fewer sick days. • 153 viruses and 84 malicious emails are blocked by security measures daily, but not so for remote workers who use their own equipment. That said, I want to show you why you should not be allowing your staff to access your systems and data from their personal devices. Home PCs are often accessed by multiple people who visit various websites and execute different pieces of software. Automotive News recently reported “the biggest risk to a dealership is allowing MARCH 2021
employees to use their home computers for work.” Some other common remote access pitfalls of dealership employees working remote are: 1. Lack of a data storage strategy, with applications in various places. Every dealership runs different applications with departments using their own programs and applications. You need to have a strategy around data storage for your data and your customers’ data, which is bound by privacy and regulatory requirements. 2. When your staff does not have the proper company-owned devices or VPN/ MFA. You do not control or secure the personal devices of your employees, so why would you allow them to access your data, or your customers’ data from a device that is not secured? You need to have a system in place which controls and inventories your devices, ensuring they are patched and updated, with proper cyber security protections installed. They should be encrypted with VPN (Virtual Private Network) and MFA (Multi-Factor Authentication) 3. Lack of Hosted Desktop model at your dealership (think Citrix or Microsoft Remote Desktop). Hosted desktop technologies allow for a seamless user experience whether you are in the dealership or remote. Addressing this will make you safe, secure, and productive. 4. Unreliable and slow internet. Most applications use some form of internet connectivity. Having reliable, fast, and redundant internet is no longer a “nice to have.” It is critically important, because your customers have come to expect that you are going to provide them with free, ultra-fast Wi-Fi internet access while at your dealership. Here is how to gain access to your line of business applications, securely: 1. Provide staff with company-owned devices using VPN, secured with MFA. You cannot allow your staff to access your
Massachusetts Auto Dealer www.msada.org
systems and your data from their personal devices because it is way too risky. 2. Implement a Hosted Desktop model via Citrix or Microsoft Remote Desktop; understand the considerations of this technology and a proper design. 3. Ensure you have reliable and fast internet, both download and upload. Internet bandwidth is cheap. Put in the fastest you can get and implement a system that can automatically fail over to another internet connection if the primary goes down. 4. Fortify remote staff with redundant internet to gain access to your line-ofbusiness applications. Make sure all remote employees have backup that is fast and reliable. 5. Use device encryption on all mobile devices. Setup encryption on company-owned laptops you deploy to your staff. You do not want to be in a situation where a laptop was stolen out of an employee’s car and that laptop contained sensitive information. 6. Subscribe to a secure password vault system. Give your staff a tool in which they can participate in good password management that are complex and changed frequently. 7. Managing and pushing software updates, per your vendors. Keeping your devices and applications updated regularly is paramount, and ties into the asset management system mentioned earlier. 8. Make sure all your applications are regularly backed-up, both on-site and offsite. Ask yourself, “Do I have a proven technology process for securely accessing my dealerships applications?” t Scott Spatz is president of Cooperative Systems, which has helped businesses and automotive retailers through an outsourced, Managed IT Services model since 1993. Reach Scott at sspatz@coopsys.com or www.coopsys.com.
MSADA
LEGAL By Joseph W. Ambash and Jeffrey A. Fritz
COVID-19 Likely to Increase Wage-Hour Claims Perhaps it is inevitable. The more employees impacted in some way by COVID-19—be it in terms of exposure, time out of work, or termination—the more employees are out there possibly contacting plaintiffs’ lawyers about their rights (and potential legal claims). While the employee may be focused on the more immediate issues (i.e., those directly related to COVID-19), the plaintiffs’ lawyer very well may want to explore a broader view: How were you paid? How were others paid? Did you punch a clock? Did anyone at work treat you unfairly? Plaintiffs’ lawyers invariably ask these sorts of questions during initial consultations, and the answers to these questions almost certainly impact what claims the employee (or former employee) ultimately brings. In short, the more aggrieved employees are out there speaking with plaintiffs’ lawyers about their jobs, the more employment-related litigation employers are likely to see. And while COVID-19 may be the cause of this increased litigation, the legal claims may go well beyond. Accordingly, it is as important now as ever to ensure rigorous compliance in all aspects of labor and employment law. Wage-and-hour claims are perhaps the most likely claims to be brought alongside (or even in lieu of) COVID-19-related claims. Plaintiffs’ lawyers love these sorts of claims for any number of reasons. First, wage-and-hour compliance, while seemingly straightforward, can be very complex and counterintuitive, and employer missteps are easy to make and not uncommon. Second, there is really no defense to wage-and-hour missteps under Massachusetts law, employer intentions are immaterial, and violations result in automatic treble damages. Third, as many employers who have had to defend against Sleepy’s claims know, wage-and-hour claims are frequently brought on a class or collective basis. That is because employers commonly pay employees of the same or comparable job category in a similar manner.
Plaintiffs’ lawyers love claims because they get the most bang for their buck in terms of attorneys’ fees, as they typically pocket a third of the take. In Sleepy’s cases, for example, judges have approved plaintiffs’ attorneys’ fees amounting to well over $2,000 per hour. Misclassifications, explicit or implicit, are a common subject of these sorts of claims. Some employers, for example, (still) believe that if an employee supervises employees and/or has “manager” in his or her job title, they do not have to pay that employee overtime pay. Similarly, some employers (still) believe that so long as they pay an employee a “salary,” they do not have to pay that employee an overtime premium. Neither of these propositions, standing alone, are true. Each of these issues requires a nuanced review of the employee’s job duties and method of compensation to determine whether they are, in fact, exempt from overtime pay. Calculating overtime is another thing that should be easier than it is. But different rules apply depending on whether one considers federal or state law—and employers need to ensure they are complying with both at the same time. For example, while the federal Fair Labor Standards Act (“FLSA”) includes incentive pay (i.e., commissions and bonuses) in the “regular rate” used for calculating overtime, the Massachusetts Wage Act and overtime law excludes it. Some employers scrupulously calculate overtime pay for nonexempt employees on weekly wages but do not think (or know they need) to calculate it for monthly compensation (such as monthly commissions or bonuses) under federal law. This is low-hanging fruit for those plaintiffs’ lawyers looking to bring an FLSA collective claim. Plaintiffs’ lawyers are always interested in whether and how employees were required to record their worktime. Massachusetts law technically requires that employers keep accurate records of all such time. Employers who fail to take steps to www.msada.org
maintain such records increase the risk of a negative result should any employee sue. Employers who try to take shortcuts in timekeeping also face significant risk. For example, some employers automatically deduct a set amount per day (usually an hour, sometimes a half hour) to account for employees’ meal breaks. If you do this, you should cease the practice immediately. If you want to account for your employees’ lunch breaks as unpaid time, you should require them to punch out when taking them and then punch back in when returning to work, and police this policy as carefully as possible. Of course, there may be wage-and-hour litigation directly related to COVID-19. For example, we have seen some cases where an employee was on furlough yet performing some work but not getting paid (or paid appropriately). We have also seen some litigation concerning the interruption of remote worker meal breaks (and claims for unpaid wages during the same). Ensuring your dealership is wage-andhour compliant can go a long way toward minimizing risk and cost in the event you are served with one of these COVID-19 wage-and-hour complaints. If you have not conducted a pay plan review in some time, perhaps it is a good time to consider doing so. t
Joe Ambash is the Managing Partner and Jeff Fritz is a partner at Fisher Phillips, LLP, a national labor and employment firm representing hundreds of dealerships in Massachusetts and nationally. They can be reached at (617) 722-0044.
Massachusetts Auto Dealer
MARCH 2021
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22 FEBRUARY 2021
Patrick Manzi
NADA Senior Economist
Boyi Xu
Economist
Following a strong start to 2021 in January, new light-vehicle sales fell slightly in February to a SAAR of 15.7 million units. Sales were hampered by severe weather throughout much of the country that caused prolonged power outages, temporary production stoppages at auto plants, and some dealership closures. Tight
MARCH 2021
Massachusetts Auto Dealer www.msada.org
inventory levels caused by strong retail demand in recent months, coupled with impacts from the current global microchip shortage, also impacted sales in February as raw sales volume in February totaled 1.18 million units—down 12.6% fromB February 2020. t
MSADA
ACCOUNTING
Where Are We Now?
2016 A yearJANUARY into COVID-19, dealerships should take a hard look at their finances
By Michael Cosgrove O’Connor & Drew, P.C.
We are now one full year into the pandemic, which has changed us as individuals, employees, and business owners. Looking across the dealership landscape, there are some key areas to consider, given the current state we are in. Here are a few key items to consider:
Excess Cash Between the Paycheck Protection Program (PPP) loans and the overall environment, most dealerships are operating at cash levels higher than what is typical. While this is a good problem to have, it still may present a problem. There are many dealers who will take the excess cash out of the dealerships, so that they ensure they are in charge of where that money is spent. This will allow dealers greater opportunities when looking to grow the business and potentially acquire other stores. Other dealers will pay down floorplan in order to reduce interest costs, even if interest rates remain low. While paying down floorplan helps reduce interest costs, it does also impact the amount banks allow to be in their cash management account, so there are other factors to bear in mind. One of the primary concerns about excess cash is that it can disincentivize employees from “chasing” the cash. Employees know that there are sufficient funds in the checking account, so they are not worried as much about vendor pricing, how quickly contracts can get funded, used inventory prices, etc. All of these issues are troubling for dealers, which began with a good prob-
lem to have. The most common issue we see is that stores with excess cash have some of the worst aging receivables. Again, this comes from the same good problem, but it results with stores not performing to their peak performance. Employees are not chasing receivables as aggressively as they would be in a store that is strapped for cash or has an appropriate level of cash.
Stimulus Round 3
At the time of this writing, it appears clear that there will be a third round of stimulus checks headed to customers. Based on 2020, it looks like these funds are being invested almost immediately back into the economy. This is good news for business, as customers should
“One of the primary concerns about excess cash is that it can disincentivize employees from ‘chasing’ the cash.” continue to have sufficient funds for a down payment. While mortgage rates are rising slightly, they still remain low enough to attract many refinances, which will lead to more free cash flow for the dealership’s customer base. It will be important to watch for chargebacks and identify when those start to increase and harm the dealership’s operations.
Re-Evaluate Departments
Businesses often struggle with whether they should focus on their strengths or weaknesses. I believe it is best to play to your strengths but focus on your weaknesses. In the grand scheme of things, you cannot allow a weakness to be an www.msada.org
“F.” If you were able to bring that F up to a C, for instance, then you would be in a better position. However, if you have the potential to be an A in an area, then you would be incorrect for allowing it to be a B. In this scenario, you need to take that B area and turn it into an A. Why would a natural third baseman focus on developing his skills as a right fielder? Dealerships need to identify what their natural position is and play to that strength. Some dealers are better at frontend sales, while others reap the benefits of a very well-run fixed operations. Obviously, it would be ideal if both are working in sync and the dealership is reaping all of those benefits. Just because it is ideal does not mean it is likely, however. Now is the time for dealers to re-evaluate those departments and make changes where necessary. A key aspect to evaluating the departments is to ensure the appropriate personnel are in place and that the dealers are monitoring their performance through not just the monthly factory financial but also dealership policies. For example, dealerships should all be e-contracting where available and should ensure that F&I personnel are processing paperwork appropriately. In addition, dealers should ensure that managers are managing and running the day-to-day of the business in a manner that aligns with the dealer’s philosophy. Managers should feel entitled to make decisions, but also must understand that they still need to follow policies and procedures. Monitoring is not only an internal control element but also a necessary duty of a dealer. t Michael joined O’Connor & Drew, P.C. in 2007 and became a principal in 2017, advising a wide range of clients on tax and assurance components of their businesses. He can be reached at mcosgrove@ocd.com. Massachusetts Auto Dealer MARCH 2021
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AIADA Brief
MSADA MSADA
As D.C. Heats Up, Dealers Stay Focused By Cody Lusk AIADA President & CEO
Just over 50 days into his Presidency, Joe Biden, with the support of a Democratic House of Representatives and a 50-50 split in the Senate, is already making big changes in Washington, D.C. Empowered by a pandemic-weary nation and emboldened by the progressive left wing of his party, President Biden appears intent on moving forward with an agenda that could, in many respects, fundamentally alter the way Americans live, work, and do business. While dealers have their hands more than full at home, AIADA is keeping a close eye on the action In Washington, D.C., and working to ensure that international nameplate dealers’ concerns are being heard and considered throughout the halls of power. The legislation garnering the most headlines at the moment, of course, is the $1.9 trillion Coronavirus relief bill. Passed into law on March 11 without a single Republican vote, the bill contains a number of provisions, including unemployment aid, $1,400 direct payments, tax credits, and $7 billion for the Paycheck Protection Program. Economists warned that such a massive spending vehicle could trigger inflation and would significantly increase publicly-held federal debt, which, at $21.9 trillion, is currently the size of the country’s entire economic output. In addition to COVID relief, Congress has also been focused on labor issues. On March 9, the House of Representative passed the most sweeping pro-union legislation seen in decades. The PRO Act would drastically alter labor laws, smoothing the way for organized labor by, among other things, making it legal MARCH 2021
to require employees to join a union and pay dues. If the act is signed into law, American workers could soon see another deduction from their paychecks, whether they like it or not. While the PRO Act will face strong opposition in the Senate, its passage in the House is a clear sign that the balance of power in Washington, D.C., has fundamentally changed, and that businesses of
“Political advantages come and go, but the ingenuity and passion of dealers will always remain.” all sizes will face significant hurdles in 2021 and in the years to come. The greatest danger out of Washington, D.C., to dealers in the months and years ahead may not come from legislation at all. Instead, it could come from the regulatory entities that govern small businesses, the environment, and financial transactions. AIADA expects to face a number of challenges from these agencies in the
Massachusetts Auto Dealer www.msada.org
near future, including changes to tax policy, an emboldened CFPB, and new arbitration rules. Leading this policy charge will be a cadre of Biden administration officials. So far, the White House has sent 56 nominations to the Senate, including 23 Cabinet members, 16 of which have been confirmed. These include Department of Transportation Secretary Pete Buttigieg and U.S. Trade Representative Katherine Tai. In order to get a better sense of AIADA’s approach to the political challenges ahead, and the dynamic Board of Dealer Directors that leads us, I encourage you to check out our series of Annual Meeting videos at AIADA.org/VirtualMeeting. There you will see our determination and enthusiasm for engaging with Congress and the Biden administration on all levels and at every opportunity. I look at it this way: AIADA has been training for this moment in history for 51 years. There is no policy issue impacting our retailers that we do not know forward and backward. No official we will not talk to. No legislation we cannot touch, and no amount of advocacy that is too much for us. We are ready, willing, and able to do whatever it takes to protect and advance your interests in 2021 and beyond. Truthfully, I believe that dealers may have a bumpy political road ahead. Even so, I remain confident in our ability, as a united force, to stand up for our stores, our employees, and our customers. Political advantages come and go, but the ingenuity and passion of dealers will always remain. AIADA will ensure that no matter what lies ahead, your voice is heard in Washington, D.C. t Cody Lusk is President and CEO of the American International Automobile Dealers Association (AIADA). Founded in 1970, AIADA represents all of the American automobile dealerships that sell and service international nameplate brands.
MSADA
TRUCK CORNER
ATD’s Strength is in Members and Dealer Leaders By Steve Bassett Chairman, American Truck Dealers Steve
is
the
dealer
General Truck Sales in Muncie, Indiana. He also has locations in Indianapolis, I ndiana , and T oledo , O hio . H e sells V olvo , Isuzu, H ino, and M ack trucks. principal
of
For more than 50 years, the American Truck Dealers has represented thousands of franchised medium- and heavy-duty truck dealers. While initiatives may change with time, ATD’s core mission stays the same: To serve and represent the needs of truck dealer members through advocacy, industry relations, education, and premier member services. Fulfilling the ATD mission falls on the shoulders of the dedicated men and women of the ATD board, and I would like to acknowledge some of the leaders who will be fighting for you through the year. I am pleased to congratulate the newly elected line representatives on the ATD board: Jon Pritchett, CEO of Nextran Truck Centers, is in his third term as the Mack line rep; Scott Pearson, president of Peterbilt of Atlanta, became the Peterbilt line rep; Kim Mesfin, general manager of Affinity Truck Center, began her second term as the Volvo line rep; and Mark Parker of Baltimore Potomac Truck Center serves as the new ATD NextGen representative. Last but not least, Scott McCandless, president of McCandless Truck Center, has been elected as 2021 ATD vice chairman. The other members of the ATD Board are as follows: • Ford line rep: Jeff Speno, Mission Valley Ford Truck Center, San Jose, California; • Freightliner rep: Kevin Holmes, Advantage Truck Group, Shrewsbury, Massachusetts; • Isuzu rep: Keith Rutherford, Eagle Truck Center, Shreveport, Louisiana; and • Kenworth rep: Jodie Teuton, Kenworth of Louisiana, Gray, Louisiana. These are more than just names. My fellow board members are some of the most knowledgeable and efficient leaders with whom I have had the privilege of working. They are the first line of defense for your business and are staunch advocates for you with our OEMs, our suppliers, and the federal government. Your elected board members will continue to work through the challenges of 2021, so that our truck dealer landscape remains strong despite industry disruptions and a continuing pandemic. I encourage you to get to know the faces on the ATD board and build relationships with your fellow dealers. Communication is a two-way street, and now, more than ever, ATD needs you to weigh in on
the issues we are facing today. We will continue to see industry disruptions thanks to new government regulations, evolving technology, and new entrants into the business. Truck dealerships are still coping with a workforce shortage due to a lack of diesel technicians. And we are still working hard to repeal the outdated and harmful federal excise tax. These complexities (and more) are the reason you must stay up to date on dealer issues through our publications, including ATD Insider, ATD Truck Beat, and the ATD website. After seeing how a pandemic can ravage American businesses, I have learned it is never too late to invest in your legacy. Consider enrolling in one of our renowned ATD Academy classes; the next session starts March 9. This is a five-star program that prepares dealership leaders to understand and improve each department’s profitability, while highlighting how new technology and innovations are reshaping the industry. There are classes for you no matter your level of experience. Take advantage of ATD’s educational resources at every turn, whether online or in-person. And remember: ATD depends on your responses to the OEM and supplier dealer attitude surveys to further our relationships with OEMs. ATD’s 2021 Dealership Workforce Study is now open for enrollment. This is your opportunity to tell us what is affecting your business during these critical times, including demographic trends, employee compensation, and retention numbers—remember, all data is confidential. In return, you will receive results of this industry survey allowing you to compare your numbers to other ATD members nationally and in your region. The deadline to complete and submit the survey is April 15, 2021. Finally, ATD looks forward to seeing all of you at the 2022 ATD Show in Las Vegas. We have worked tirelessly to build a show for you, created by you. The outlook for our industry is good. The U.S. economy, along with trucking, is poised for a strong second half of the year. But our greatest strength lies with our members. You do not have to be on the ATD board to realize we all have a stake in this collective mission. Let us continue to learn, communicate, and advocate so our truck dealer landscape continues to thrive into the future! t
www.msada.org
Massachusetts Auto Dealer
MARCH 2021
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NADA Update
By Scott Dube
Dispelling Myths Scott Dube, President of Bill Dube Hyundai and MSADA Immediate Past President, represents NADA’s Massachusetts members on the NADA Board of Directors. He can be reached at scott@dubecars.com. A year into the COVID-19 pandemic finds us in reach of a fully vaccinated population by Summer. It feels good to look ahead to a post-pandemic world, even as we keep nearby the lessons we learned. One of the key issues you will continue seeing emerge in our industry is the push for electric vehicles. We must be vigilant against the perception that dealers are somehow standing in the way of progress. As you will see below, we can rely on NADA to help steer the conversation away from this harmful narrative into the truth, which is that we dealers are passionate about what we sell and the communities we serve. We will adapt just as we have for the last 100-plus years. We will sell EVs, AVs, or whatever product the public wants to use for mobility solutions.
The Big Lie About EV Sales By Mike Stanton, NADA President and CEO
As someone who has dedicated his career to advocating on behalf of America’s franchised auto dealers, I have embraced the reality that one of my chief roles is to serve as Myth Buster In Chief. For years, one of the great myths that has persisted about the auto industry has been that franchised dealers do not want to sell electric vehicles. It is long past time to put this myth out to pasture. And it is time to call it out for what it is: A lie about franchised dealers, propagated by the handful of companies that want to destroy the franchise system. Before we get into why this myth persists, and why it has morphed into such a blatant lie, let us acknowledge something right at the outset. More than a decade ago, there was indeed some dealer uneasiness about battery-electric vehicles. The EVs of the early and mid-2000s were – let us face it – by and large compliance cars. They had inadequate range, took forever and were a pain to recharge, did not perform well, had terrible resale value, and were extremely expensive. But it was not that dealers did not want to sell them to willing customers. It was that dealers do not want to be force fed vehicles that OEMs were manufacturing largely in response to regulatory pressures as opposed to actual market demand. Given the imbalance in the OEM-dealer relationship, which MARCH 2021
gives dealers little capacity to avoid any such OEM force feeding, you can hardly blame dealers for this early trepidation. But that was a long, long time ago. The world has changed considerably. These vehicles have changed considerably. These are hardly compliance cars any longer. The level of investment and commitment that traditional automakers have made in battery electric technology is night-and-day different than it was even five years ago, and it shows in the product. A number of other things have also changed. Across the country, more charging stations with faster charging capability are popping up almost every day, and it is entirely possible that the federal government will appropriate billions of dollars to grow the nation’s recharging infrastructure significantly. On top of this, we are rapidly approaching price parity. Owning an EV for the long haul is now a vastly different proposition than it used to be. These are hugely positive developments. One other major thing that has changed dramatically over the years? Dealer attitudes toward selling and servicing EVs. Franchised dealers are not at all EV-reluctant and have not been for years. And they certainly are not anti-EV. Anyone that tells you differently just is not telling the truth. How do we know this? Cadillac. Last fall, after Cadillac announced plans to abandon internal combustion engines altogether and move entirely to battery electric drivetrains, the nation’s 880 Cadillac dealers faced a choice. If they bought into Cadillac’s vision for an all-electric future, they could pony up a minimum of $200,000 of their own capital for the in-store charging infrastructure, tooling and training that Cadillac was mandating. Conversely, if they either did not want to be part of that all-electric future, or they simply did not want to make the required investment, they would accept a buy-out from the automaker, and wind down their franchises. What happened next was not surprising to anyone who really understands dealers and how their thinking has evolved. More than 80% of Cadillac dealers said they were all in – not just to sell EVs, but to sell exclusively EVs, and they backed up that commitment with significant capital investments that will take time to mature. Most of the 20% that opted out were small stores in markets where Cadillac has not performed well, and most of these dealers accepted the buyout because of economic conditions on the ground, not out of concern about the brand’s future product plans. And certainly not because they were anti-electric. For example, one Cadillac dealership in northern Minnesota took the buyout because it sells fewer than 50 new cars per year, and the required $200,000 investment was simply too steep given the small size of its market.
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MSADA And so, in one fell swoop, America’s Cadillac dealers completely debunked the myth that franchised dealers do not want to sell and service electric vehicles. Because if this myth were even remotely true, virtually every Cadillac dealer out there would have gladly taken the buyout, and done so in a heartbeat. The enthusiasm toward EVs among the franchised dealer body is hardly unique to Cadillac. In fact, franchised dealers of other brands with EVs in their lineups have been making these same commitments and investments for years – and not reluctantly. They have done so because they do not want to lose sales to other brands as more and better EVs – and more EV customers – come to the market. So why does this myth persist? I think it is simple. EVs still do not yet sell in the numbers that environmentalists want, and many groups feel as though they need a boogeyman to blame for fledgling sales. They cannot blame consumers for thus far being cool to zero-emission vehicles, because it is not exactly a winning public relations strategy to blame your customers for the fact that your preferred product is not flying off the shelf. They cannot blame the automakers, because without them there would be precisely zero zero-emissions vehicles available for sale to begin with. Dealers became an easy and convenient scapegoat. And the myth lingered. Now, however, it has taken a new and more dangerous life as a lie designed to take down the franchise system. In fact, Rivian, Lucid, and Lordstown Motors seem to have hung their entire pitch for direct sales on this lie about franchised dealers and their supposed reluctance and inability to sell EVs. We know that nothing could be further from the truth, but it is not hard to unpack why this is their line of attack. Direct sales have never once benefited consumers with lower prices, more convenience, or better service and maintenance, despite the marketing. And they never will, because direct sales are ultimately only about creating a vertical channel for manufacturing, sales and service that allows a single entity to control everything, including prices and margins, to the obvious detriment of consumers. In fact, if direct sales were adopted for EVs, then EV buyers – and only EV buyers – would be denied the service network and price competition that ICE-vehicle buyers have enjoyed for decades. Direct sales are not needed for EVs. In fact, over time, direct sales could cripple EV adoption as more and more EV owners are forced to deal with higher prices and the headache of longer and longer wait times for even basic service. But do you know what is needed for sustainable EV sales to consumers up and down the price point chain? A large, expansive network of retailers and service providers who are experts at marketing locally, and who are invested in the future sales and service opportunities that these products promise. Fortunately for automakers, consumers and policymakers
alike, that network already exists. Dismantle the big lie about EV sales, and what you are left with is the clear truth: Franchised dealers are not an obstacle to EV sales; they are essential to them. (Mr. Stanton’s comments ran as an advertorial in the March 22, 2021, issue of Automotive News.)
NADA Chairman Paul Walser: 2021 Brings New Opportunities for Auto Dealers Nationwide By Paul Walser, 2021 NADA Chairman
While we are nearing the end of the first quarter of 2021, this year brings a host of new opportunities for America’s automobile dealers. NADA and its dealers have continuously rallied together despite the pressing challenges brought on by the global health crisis. I commend all dealers for ensuring the safety and security of your customers and employees through a remarkable time—all while keeping the doors of your showrooms and service departments open for business. I must also commend my predecessor, NADA 2020 chairman Rhett Ricart, for leading our entire industry through a time of uncertainty. Rhett deserves a hearty “thank you” from all dealers and dealership employees for his steady and strong presence as he and NADA guided us through a tumultuous time. This year, I challenge fellow dealers to look at all aspects of our business through the lens of the customer and be open to a mindset of doing things a different way. Recovering from a pandemic and regaining momentum in the retail sector is our initial challenge. But strengthening our franchise system—and a willingness to do things a different way—is our long-term goal. Every dealer has a responsibility to make the franchise system stronger. In my incoming remarks as NADA chairman, I identified three areas that—if improved—can make us stronger: Diversity and inclusion; dealer-OEM relationships; and dealer involvement. Fostering diversity in the automotive industry is not only the right thing to do, but also good for our business. I am proud that NADA will work to advance its own diversity initiatives throughout the year, so we can attract a more diverse workforce, create opportunities for women and other underrepresented groups, and help more minority dealers succeed. We will look at many avenues to new pathways, including more tools and resources, business training, coaching and mentoring, access to capital, and, ultimately, creating partnerships. As you can see, we have a lot of work ahead, but also a lot of opportunity. The beauty of our industry is that anyone can thrive—even through market turmoil and a global pandemic. I commend fellow dealers for your hard work through these unprecedented times. This year, the nation’s automobile dealers will continue to show what they’re made of! t
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