May 2014 MSADA magazine by Massachusetts State Automobile Dealers Association, Inc

MSADA, One McKinley Square, Sixth Floor, Boston, MA 02109

auto M A S S A C H U S E T T S

FIRST CLASS MAIL US POSTAGE PAID BOSTON, MA PERMIT NO. 216

May 2014 • Vol. 27 No. 5

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

2014

MSADA

ANNUAL MEETING

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

auto D

S TA F F D I R E C T O R Y Robert O’Koniewski, Esq. Executive Vice President rokoniewski@msada.org Jean Fabrizio Director of Administration jfabrizio@msada.org Peter Brennan, Esq. Staff Attorney pbrennan@msada.org Paul Fellows Administrative Assistant/ Membership Coordinator pfellows@msada.org AUTO DEALER MAGAZINE Robert O’Koniewski, Esq. Executive Editor Catherine MacDonald Editorial Coordinator macdonaldcs8@gmail.com Subscriptions provided annually to Massachusetts member dealers. All address changes should be submitted to: MSADA by e-mail: pfellows@msada.org Postmaster: Send address change to: One McKinley Square, Sixth Floor Boston, MA 02109 Auto Dealer is published by the Massachusetts State Automobile Dealers Association, Inc. to provide information about the Bay State auto retail industry and news of MSADA and its membership.

AD DIRECTORY BlumShapiro, 25 Boston Herald, 32 Lynnway Auto Auction, 24 M&T, 26 Nancy Phillips Associates, Inc., 25 O’Connor & Drew, P.C., 31 Reynolds & Reynolds, 2 Schlossberg, LLC, 22 Southern Auto Auction, 23

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: Keeping Connected THE ROUNDUP: Dealers Convene for 74th Annual Meeting FINANCIAL SERVICES: The Benefits of a Roth Option in Your Retirement Plan TROUBLESHOOTNG: Navigating the Dealer-Factory Relationship LEGAL: Thorough and Well-Documented Investigations Into Employee Harassment Claims Help Minimize Risk AUTO OUTLOOK ACCOUNTING: Increase ‘Back End’ Profitability NADA UPDATE: Employment at New-Car Dealerships Rising

16 COVER STORY: MSADA Annual Meeting 2014

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NEWS From Around the Horn INSURANCE: FMLA: How and When You Can Use It NADA MARKET BEAT

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

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Massachusetts Auto Dealer MAY 2014

from the PRESIDENT

by Scott Dube, MSADA President

Keeping Connected

Building relationships with lawmakers and regulatory officials is key to our success

would like to thank all of you for taking the time out of your busy schedules to attend this year’s MSADA Annual Meeting. From the feedback I’ve heard, attendees enjoyed a thought-provoking and fun afternoon with their fellow dealers. Those moments when we’re all in the same room are few and far between, and it’s a crucial reminder that while we compete with each other day in and day out, we need to present a united front. It seems every year, when we get together for our Annual Meeting, there is some sort of industry-changing issue afoot. This year, our Tesla battle found its way back into the courtroom just days after we met. While we don’t yet know the Supreme Judicial Court’s decision, we are not waiting around for an answer. We will continue to fight their anticonsumer, anti-competition attempt at getting around laws we’ve had on the books since the beginnings of our industry. And while we’ve faced an uphill battle, legislation could hopefully sort out what the court rooms might not. Protecting our industry is a full-time job, and it rests mostly on visibility and communication. Our Annual Meeting, aside from being a time for camaraderie, is a time to invite lawmakers and regulatory officials into our world to help them understand our issues. They get to see first-hand how many of us there are, how much of the state’s economy we represent, and how we are vital players in any local community. These are the moments legislators remember when we knock on their office doors, and they can make all the difference when our opposition has limit-

less money to throw against us. Our importance can certainly be measured in the esteemed company who came this year. Aside from gubernatorial candidates Charlie Baker and Steve Grossman, we had two especially important officials there for the first time. For those of you out west, I hope you will take the time to thank State Senate Majority Leader Stan Rosenberg (D-Amherst) for taking the time to meet with us. And it was a pleasure meeting new RMV Registrar Celia Blue, who we expect to work closely with in the coming months. The event provided valuable insight from several industry gurus as well. Jason Stein, Publisher and Editor of Automotive News, provided valuable comments and a welcome perspective from our industry’s leading new source. George Magliano, as always, detailed a forecast that thankfully continues to improve with each passing year. We are looking to hear your feedback on our guest speakers and hear any ideas you may have for next year. The next few weeks promise to be especially busy for your Association -- between the continuing fight with Tesla and a host of other legislative issues you can read about in Executive Vice President Bob O’Koniewski’s Roundup. As we move into Summer, I ask that you continue to be ready with emails, phone calls and other grassroots messaging as we continue to push our industry’s future forward.

“Our Annual Meeting, aside from being a time for camaraderie, is a time to invite lawmakers and regulatory officials into our world to help them understand our issues.”

MAY 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 AutoAlert Don Corinna (949) 398-7008 AutoRaptor (RAL) Howard L. Leavitt (401) 421-6533 Bank of America Merrill Lynch Dan Duda and Nancy Price (781) 534-8543 Bellavia Blatt Andron & Crossett, PC Leonard A. Bellavia, Esq (516) 873-3000 Blum Shapiro John D. Spatcher (860) 561-4000 Boston Globe Mary Kelly (617) 929-8373 The Boston Business Advisory Group Paul Cuomo (781) 681-1501 Vincent Saccone (781) 681-1519 Burns & Levinson LLP Paul Marshall Harris (617) 345-3854 Cars.com Heidi Allen (312) 601-5376 CitNOW Jack Gardner (617) 221-8008 CloudDOCX Michael DeCarlo (585) 704-6826 Construction Management & Builders, Inc. Kate Sullivan (781) 246-9400 CVR John Alviggi (267) 419-3261 Dealermine Inc. Karen Parmenter (800) 304-3341 x5179 DealerTrack Ernest Lattimer (516) 547-2242 Downey & Company Paul McGovern (781) 849-3100 EasyCare New England Inc. Mike Douglas (770) 246-9724 Ethos Group, Inc. Drew Spring (617) 694-9761 F & I Resources Jason Bayko (508) 624-4344 Federated Insurance John Ballard (859) 312-9896 First Citizens Federal Credit Union Joe Ender (508) 979-4728 Fisher & Phillips LLP John Donovan (404) 240-4236 Joe Ambash (617) 532-9320 Grant Thornton LLP Alan Oslomowski (508) 926-2200 GW Marketing Services Gordon G. Wisbach Jr. (781) 899-8509 Huntington National Bank John J. Marchand (781) 326-0823 Key Bank James Q. Moretti (781) 558-5132 Leader Auto Resources, Inc. Brendan J. Murphy (518) 878-6341 Lynnway Auto Auction Jim Lamb (781) 596-8500 M & T Bank John Federici (508) 699-3576 Management Developers, Inc. Dale Boch (617) 312-2100 MetroMedia Energy Timothy Teevens (800) 828-9427 Micorp Dealer Services Frank Salkovitz (508) 832-9816 Mid-State Insurance Agency James Pietro (508) 791-5566 Mintz Levin Kurt Steinkrauss (617) 542-6000 Murtha Cullina Thomas Vangel (617) 457-4000 Nancy Phillips Associates, Inc. Nancy Phillips (603) 658-0004 O’Connor & Drew, P.C. Kevin Carnes (617) 471-1120 Performance Management Group, Inc. Mark Puccio (508) 393-1400 R.L. Tennant Insurance Agency, Inc. Walter F. Tennant (617) 969-1300 Resources Management Group J. Gregory Hoffman (800) 761-4546 Reynolds & Reynolds Marc Appel (413) 537-1336 Robinson Donovan Madden & Barry, P.C. James F. Martin, Esq. (413) 732-2301 Samet & Company John J. Czyzewski (617) 731-1222 Schlossberg, LLC Michael O’Neil, Esq. (781) 848-5028 Sentry Insurance Company Eric Stiles (715) 346-7096 Shepherd & Goldstein Ron Masiello (508) 757-3311 Silverman Advisors, PC Scott Silverman (781) 591-2886 Southern Auto Auction Tom Munson (860) 292-7500 Sovereign Bank Richard Anderson (401) 432-0749 Target Dealer Services Andrew Boli (508) 564-5050 TD Auto Finance BethAnn Durepo (603) 490-9615 TD Bank Michael M. Lefebvre (413) 748-8272 TrueCar Steve White (774) 392-2904 Wells Fargo Dealer Services Christopher Peck (508) 314-1283 Wicked Local Media Massachusetts Jay Pelland (508) 626-4334 Windstream Rick Caruth (978) 296-0313; (413) 977-6111 Zurich American Insurance Company Steven Megee (774) 210-0092

www.msada.org

2014 MAY MSADA.indd 5

Massachusetts Auto Dealer MAY 2014

6/2/14 11:43 PM

The Roundup

Dealers Convene for 74th Annual Meeting by Robert O’Koniewski, Esq. MSADA Executive Vice President

On Friday, May 2, your Association convened its 74th Annual Meeting of the Members at the Mandarin Oriental Hotel in Boston. We had a successful turnout of members, and attendees heard from a diverse group of speakers, including Jason Stein, Publisher and Editor of Automotive News; Jeremy Anspach, President and CEO of PureCars; State Senate Majority Leader Stan Rosenberg (DAmherst); gubernatorial candidate Charlie Baker (R-Swampscott); State Treasurer Steve Grossman (D-Newton), who is a Democrat gubernatorial candidate; RMV Registrar Celia Blue; and IHS Global Insight economist George Magliano. You can read the details of our meeting as part of this month’s cover story. We owe a “thank you” to our sponsors for the day, without whose assistance we could not put on such fine events: • Blum Shapiro – Bronze Sponsor • The Boston Globe – Cocktail Reception • DealerDOCX – Bronze Sponsor • DealerTrack – Bronze Sponsor • Downey & Company – Welcome Gift • Ethos Group – Parting Gift • Leader Auto Resources – Gold Sponsor • Murtha Cullina – Lunch Sponsor • TrueCar – Silver Sponsor • Wicked Local Media – Break Station

Tesla SJC Hearing On Tuesday, May 6, the Supreme Judicial Court heard oral arguments in the case brought by the MSADA and several member dealers against Tesla Motors. The issue before the Court was whether unaffiliated dealers have legal standing to challenge a factory-owned dealership, where the manufacturer has no existing dealers, as is the case with Tesla. There was a live webcast of the proceedings, and archived footage of the arguments can now be viewed MAY 2014

Massachusetts Auto Dealer www.msada.org

on the SJC website. Please use this link to view the proceedings on the SJC website: http://www2.suffolk.edu/sjc/archive/2014/SJC_11545.html. MSADA had appealed the initial decision of the Superior Court that ruled we and the dealers did not have “standing” to sue. The SJC took the appeal directly from the Massachusetts Appeals Court to hear it on it’s own. The SJC has 130 days from the date of the hearing to issue a decision.

Action on Minimum Wage & UI Reforms In order to commence resolution of two major legislative items lingering in procedural no man’s land – a minimum wage increase and reforms to the unemployment insurance system – the House and Senate have each re-passed their previously approved plans addressing those two matters. This time, however, since the House rejected the Senate plan and then amended the same vehicle with its own proposal, the parties can create a conference committee to resolve their differences. Previously, the chambers passed multiple bills, which, under the rules, had no way of being resolved procedurally. This should not be confused with the UI rate freeze that the Legislature passed and the governor signed back in mid-April, which we previously reported on in our April issue of Massachusetts Auto Dealer. Regardless of how and why we arrived at this juncture, here are the key details of the House and Senate proposals. The House and Senate minimum wage bills differ greatly in wage levels, effective dates, and CPI adjustments. The Senate bill would increase the state’s minimum wage by $3 over the next three years to $11 an hour: $9 in 2014, $10 in 2015 and $11 in 2016. The bill would also tie future increases in the minimum

MSADA wage to inflation and require that it always be at least 50 cents higher than the federal minimum wage (currently $7.25/hr.). Under current law, this rate is set at no less than 10 cents above the federal minimum wage. The House bill 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. Other provisions would: • Extend the statute of limitations for minimum wage and overtime claims to three years and require 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.) • Increase the requirement that in no case shall the Massachusetts minimum wage be less than 40 cents above the federal minimum wage. • 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, to study and report on, among other matters, the value of the Massachusetts minimum wage relative to the cost-ofliving and other necessary expenses, including transportation, daycare, food, and health care. Similar to the minimum wage issue, the two chambers have passed UI reform bills that diverge quite a bit. 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. • 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 House legislation would: • 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; The conference committee created to resolve these matters comprises Senate Ways and Means Chairman Stephen Brewer (DBarre); Sen. Dan Wolf (D-Harwich), who is the Senate chairman of the Joint Committee on Labor and Workforce Development; Sen. Don Humason (R-Westfield); House Ways and Means Chairman Brian Dempsey (D-Haverhill); Rep. Tom Conroy (D-Wayland), who is the House chairman of the Joint Committee on Labor and Workforce Development; and Rep. George Peterson (R-Grafton). The Legislature’s formal sessions end on July 31, so conferees have their work cut out for them. Additionally, another set of legislative conferees, also led by Chairmen Brewer and Dempsey, will be resolving differences in the House and Senate’s FY2015 budget proposals to deliver the document to the governor for his review and signature in order to meet the July 1 www.msada.org

start of the next fiscal year. Readers must keep in mind that driving all this legislative action on the minimum wage is the existence of a proposed initiative petition for the November 2014 ballot. Similar to what we saw with the “right to repair” issue, proponents of the initiative petition are attempting to pressure legislators into hiking the minimum wage, which the Legislature last increased in 2006 to its current level of $8 an hour, phased in over two years. 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 – and this is the key component hike proponents really want with any new law – the minimum wage would be annually adjusted based on the Consumer Price Index, rounded to the nearest five cents.

AIADA Conference Earlier this month MSADA representatives traveled to Washington DC for the American International Automobile Dealers Association’s (AIADA) 8th Annual International Auto Industry Summit. AIADA annually gathers international nameplate franchised dealers in DC to hear from auto industry and political speakers and to meet with members of the dealers’ congressional delegations on Capitol Hill to discuss legislative and business issues facing the international nameplate community, especially pending global trade related legislation. This year’s speakers included former vice presidential candidate Rep. Paul Ryan (R-Wisconsin), Cook Political Report Editor Charlie Cook, former White House Budget Director and Iowa Congressman Jim Nussle, and viral ideas expert and bestselling author Jonah Berger. Jeff Morrill of Planet Subaru, Emily Dube of Bill Dube Hyundai and I met with Rep. Katherine Clark (D-Melrose), Rep. Niki Tsongas (D-Lowell), Rep. William Keating (D-Quincy), and legislative staff for Rep. John Tierney (D-Salem). During our meetings we discussed the Massachusetts auto market, Trade Promotion Authority (TPA) legislation (so-called fast-track negotiating authority), the Trans Massachusetts Auto Dealer MAY 2014

The Roundup Pacific Partnership (TPP), the Transatlantic Trade and Investment Partnership (TTIP), the CFPB and “disparate impact”, the death tax, and proposed changes to the LIFO accounting method. During the conference, AIADA together with the Association of Global Automakers released an economic impact report showcasing the growing impact of the international automakers on the U.S. economy. The report, entitled Redefining the American Auto Industry, is designed to educate policy makers and the public that the U.S. auto industry is comprised of a global array of companies, each of which is deeply invested in growing and thriving in America. One can access the report at http://aiada.org/EconomicImpactReport/.

Zero Emission Vehicle Commission As we reported previously, eight states (California, Connecticut, Maryland, Massachusetts, New York, Oregon, Rhode Island, and Vermont) are coming together to create a plan to promote the sale of over three million zero emission vehicles by 2025 through a combination of consumer incentives and regulatory actions. (Presently there are only 200,000 nationwide.) The project aims to install recharging stations at workplaces, expand cash/non-cash incentives for buying electric cars, and push dealers to promote electric vehicles. In an effort to study the economic and environmental benefits and costs of increased use of electric and other zero emission vehicles in Massachusetts, the Massachusetts House and Senate each included within its own final FY2015 budget proposal a special commission on such matters. The House electric vehicle commission would consist of 23 members, while the Senate zero emission vehicle commission would have 27 members including 2 of whom would be Class 1 franchised dealers who sell electric vehicles as a segment of their vehicle inventory. Your legislative team worked closely with Sen. Marc Pacheco (D-Taunton) and Senate leadership to ensure inclusion of franchised dealers on the commission. The MAY 2014

MSADA budget conference committee referenced in this column earlier will need to resolve these differences. In both versions, the commission would study and make recommendations for policies to further expand access to electric and fuel cell vehicle infrastructure, encourage the purchase and lease of electric and fuel cell vehicles, and identify strategies for removing barriers to electric and fuel cell vehicle deployment. An action plan would be created by September 2014 and draft legislation filed with the legislative clerks by April 2015.

RTR & Heavy-Duty Trucks The right to repair issue, unfortunately, is beginning to become the cliché “the gift that keeps on giving.” During the Senate’s debate of its FY2015 $36.4 billion spending plan this month, heavy-duty truck repair and aftermarket interests attempted to amend the budget to establish a special commission to study the availability of heavy-duty vehicle repair information for independent repair shops throughout the state. Apparently these aftermarket and repair interests are not happy with the compromise law that we worked to have re-passed last November. These interests also sought an amendment that would gut the manner in which heavy-duty vehicles are treated in the current law and expand the responsibilities of truck manufacturers in providing information, tools, and equipment to repairers. After considerable back and forth that included input from your Association on behalf of our heavy-duty truck dealer members, the Truck Engine Manufacturers Association, and several truck OEMs, the amendments were ultimately withdrawn, with no action having been taken. We worked closely with the amendments’ sponsor, Sen. Tom Kennedy (DBrockton) to address our concerns with the substantive amendment changing the law and to make sure there was a franchised dealer on the special commission. The Senate chose a path, we feel a prudent one, to avoid any RTR controversy at this time. We probably can expect additional skir-

Massachusetts Auto Dealer www.msada.org

mishing on the RTR law as various parties seek to address problems, perceived or actual, especially going into the beginning of next year’s session when new bills can be filed.

DealersEdge Webinars Schedule for June Are you taking full advantage of our weekly educational and training seminars provided to you through our partnership with DealersEdge Management Training? Are you receiving our weekly e-mails announcing upcoming webinars and registration information? If not, you are missing out on an incredible bargain that will add value to your employees knowledge and skills, and ultimately to the success of your stores. The live courses, and more than 100 pre-recorded webinars (and growing), are available to MSADA members in two ways. Members can elect to register for a live webinar or purchase a pre-recorded course on an a la carte basis with MSADA’s member discount OR you can sign up for the MSADA VIP Season Ticket. A dealership can use the VIP Season Ticket to register up to 10 team members to access all programming, both live and recorded. If you aren’t already, we hope you will consider this extremely cost-effective and time-saving method of training your management staff on the latest information in their area of expertise. If you have any questions, please don’t hesitate to contact DealersEdge at 800-321-5312 or me at rokoniewski@msada.org. All MSADArelated DealersEdge information can be found at https://msada.dealersedge.com. The upcoming schedule of webinars for the next several weeks is as follows: • June 5, 1pm EST – “Gateway to Data ‘Insecurity Hell’…Dealership’s ThirdParty Vendors”; •June 12, 1pm EST – “Fixed Operations Pay Plans – The Five Reasons Some Work While Others Fail”; • June 19, 1pm EST – “Driving Dealership profit – Five Key Factors Holding You Back and How to Fix Them Now!”

Financial Services

MSADA

The Benefits of a Roth Option in Your Retirement Plan by Meghan Michalak M eghan M ichalak is a member of the B os ton B usiness A dvisory G roup

As a business owner you may want to consider your option to contribute to a Roth IRA (Individual Retirement Accounts) as part of your overall retirement strategy. Although Roth IRAs have been around for years, they initially were not available to many higher-income individuals due to restrictions imposed by Congress, which limited those of high net worth from contributing to these accounts. Under the Tax Increase Prevention and Reconciliation Act, Roth IRA conversions became available for everyone starting in 2010. This change in the law created a significant planning opportunity for many high-income retirees. To take advantage of this opportunity, some individuals may now wish to consolidate their Traditional IRAs into one. Depending on the taxpayer’s Adjusted Gross Income (AGI), it also may be possible to begin making annual contributions to a Roth IRA or non-deductible contributions to a Traditional IRA. Such contributions can accelerate the tax benefits of assets that will later be converted from a Traditional to a Roth IRA. Because Roth contributions and conversions effectively pre-pay income taxes, they may make sense for individuals who believe tax rates will increase during their retirement. Some people think it is a mistake to pre-pay taxes because they will lose the “time value of money” on the taxes paid. However, this is not the case. A pre-tax dollar in a tax-deferred investment will have

exactly the same after-tax future value as a post-tax dollar in a tax-free investment, if you assume that tax rates stay constant. The Roth option is often overlooked by auto dealerships, but can be very attractive and beneficial to your employees. When it comes to choosing investments, most retirement plan participants worry about whether to choose a stock, bond, or fixed income investment option. Since 2006, sponsors of 401(k), 403(b) and effective in 2011 governmental 457 retirement plans have had the ability to offer their plan participants an investment option that enables them to make contributions to their account on an after-tax basis through the use of this option. Although all retirement plans do not offer this option, it is becoming more popular as auto dealers seek low-cost ways to enhance their employee benefit offerings. The Roth investment option offers retirement savers many of the same benefits as a Roth IRA – along with key additional advantages. What are the benefits of the Roth investment option? • The plan participant pays taxes on Roth contributions before they are made. The money contributed to the Roth option then grows tax free. • Withdrawals from your Roth investment option will be tax free – as long as you are at least 59½ years old when you withdraw your money and your Roth investment option has been in effect for at least five years. • From an employee eligibility perspective, the Roth investment option has no income limit. As long as you offer this type of investment option, employees are eligible to make Roth contributions. This makes the Roth option ideal for high-income individuals who may not be able to contribute to a Roth IRA due to their AGI being too high. Who should consider the Roth investment option? www.msada.org

Many financial professionals advise that the Roth investment option may be best for those individuals who feel that income tax rates will rise in the future, or whose tax bracket may be higher in retirement. Many of those same professionals, however, also tell their clients that a Roth investment option can be yet one more way to diversify the investments in their retirement plan account. Is the Roth option right for your dealership as part of your overall benefits package? Only you can answer that question. But you don’t have to do it alone. For guidance on retirement planning, be sure to contact your financial professional.

Prepared by The Guardian Life Insurance Company of America, New York, N.Y. The information contained in this article is for general, informational purposes only. This publication is for the purpose of education and information only and is not intended to constitute tax or legal advice.

For information

on your specific situation, please consult your personal legal or tax advisor.

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 services

are offered through

PAS,

a registered broker-

dealer and investment advisor.

Financial RepreThe 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 sentatives,

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.

Massachusetts Auto Dealer MAY 2014

Troubleshooting

MSADA

Navigating the Dealer-Factory Relationship By Peter Brennan, Esq.

Staff Attorney, MSADA The dealer-factory relationship is unique in the American business landscape. Most people assume that, because the factory produces the vehicles that dealers sell and dealers move the manufacturers’ product, a friendly, symbiotic relationship must result. As you know, this is all-too-rarely the case. Managing the factory relationship is an integral part of every dealer’s business. Effectively navigating this potentially perilous partnership can mean the difference between success and failure in the automotive market. Your Association understands the issues that dealers face and has worked diligently to ensure that state law provides a level playing field for dealer-factory relations. The appearance of a dealer’s facility has been a strong point of contention between the dealer and factory in recent years, with the implementation of factory programs like Mercedes’ Autohaus, Ford’s Trust Mark and GM’s Essential Brand Elements, as well as others. Many dealers are understandably wary about supporting a manufacturer’s facility improvement plan, especially if they have recently spent millions of dollars on a renovation. Unfortunately for many dealers, when factory incentives are tied to facility improvements, they can’t afford not to participate. If approached by a manufacturer about a facility expansion, reply to the manufacturer by asking for the justification behind the request, including units-inMAY 2014

operation numbers and any other relevant calculations. If the proposed facility upgrade is image based, ask for the manufacturer’s calculations for the expected increases in sales and service revenue. In both cases it may be helpful to provide alternative solutions, such as a reduction in the scope of the project or an exception from certain requirements. This reply should be in the form of a certified letter to establish a record of correspondence, should it be needed later in litigation. If the manufacturer has tied the proposed facility upgrade to per car incentives for the dealer and the dealer disagrees with the factory’s projections, the dealer should illustrate in the letter why the incentives would not be practically available under the dealer’s applicable circumstances. Additionally, if the dealer’s analysis shows that they would be at a competitive disadvantage without the per car incentives, this point should be explored thoroughly in the correspondence. If the manufacture is unwilling to work with the dealer and insists on an unreasonable adherence to their facility criteria, the dealer may need to cite the relevant provision in the franchise law. Currently, the Massachusetts auto dealer franchise law (M.G.L. 93B) contains a reasonableness standard that manufacturers must abide by when requesting facility improvements. Senate Bill 129, which was drafted by your Association and is currently before the Legislature, would place the burden on the manufacturer to justify the financial benefits of a facility upgrade and prevent manufacturers from seeking an upgrade if a facility was constructed or underwent a substantial alteration within seven years. Another occasional point of contention between dealers and manufacturers in Massachusetts is the warranty reimbursement rate paid by the factory on parts and labor. For many years, all franchise dealers in Massachusetts have been entitled to warranty reimbursement for parts and labor at retail rates. Despite

Massachusetts Auto Dealer www.msada.org

this law, confusion persisted on how the retail rate was calculated, and occasionally manufacturers would reject dealer’s reimbursement submissions and attempt to use their own calculations. In 2012, in order to eliminate the mystery in determining the retail rate for each individual dealer, the Legislature enacted a formula that dealers and manufacturers can use to make sure each is on the same page in determining that dealer’s retail rate. Many manufacturers have willingly complied with the law and embraced the reimbursement formula. However, problems persist, with some manufacturers ignoring the reimbursement formula unless it is specifically requested by the dealer, and/or charging dealers a per vehicle “assessment” on each vehicle purchased by the dealer. If a dealer does not believe he or she is receiving proper warranty reimbursement rates under the law or is charged improper assessments, the advised course of action is to put these concerns in a letter to the factory. Enlisting the help of a trained accountant or attorney to oversee the application of the reimbursement formula is a strategy that has proved successful for members in the past. Boiled down, the best advice for dealers when engaging in the dealer-manufacturer relationship is this: document everything. All comments and requests from the manufacturer should be answered with a letter in order to establish a good record of the relationship. If the factory makes a comment regarding sales performance, facility appearance, or the color of the sky, draft a reply and save it in the correspondence file. If you require any additional information about these or any other issues that impact your dealer-factory relationship, 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.

Legal

MSADA

By Joseph W. Ambash and Jeffrey A. Fritz

Thorough and Well-Documented Investigations Into Employee Harassment Claims Help Minimize Risk An employee complaining to his or her manager, or to a human resources representative, that another employee is harassing him or her is an all-too-common occurrence in the workplace. In many instances, the employee claims that the harassment is discriminatory or retaliatory. Claims of sexual harassment may be the most common. Whether—and how—an employer investigates such complaints can sometimes make or break the case, in the event of an administrative charge or lawsuit. One cannot overstate the importance of appropriately thorough, well-documented investigations. Investigations, of course, start with complaints. And dealers should encourage employees promptly to raise to the company any complaints they have about harassment, and should describe in their policy and procedure manuals the various avenues available to them to do so. Once an employee raises a claim of harassment, the first question an employer faces is the easiest to answer. Should an employer conduct an investigation? The answer, invariably, is “Yes.” Investigating claims of harassment can reduce the risk of an unfavorable outcome in a lawsuit. Moreover, if the harasser is a non-supervisory employee, a thorough investigation, followed by an appropriate remedy, can be a strong defense to a claim. Sometimes an employee will ask the company not to investigate his or her claims, indicating that he or she only raised them to make the company aware of them, that he or she did not want to get anyone in trouble, and that he or she would prefer to keep them confidential. Dealers should always tell such employees that they will keep their complaints as confidential as the circumstances allow, but that, as employers, they have a duty to investigate, and cannot guarantee confidentiality.

The second question may be slightly more complicated. How should a dealer conduct an investigation? The answer, invariably, will depend on the nature of the complaint. No one-size-fits-all investigation exists to address all claims. But almost all investigations have the same starting point: the initial complaint itself, which will best inform next steps. When an employee comes forward with a claim of harassment, the supervisor or manager to whom the employee shared the information should thank him or her for doing so, and then refer the matter immediately to the human resources professional in the dealership, who should conduct the investigation. If you permit an inexperienced supervisor, or the employee’s own supervisor, to conduct the investigation, you risk errors and mistakes. Only skilled personnel should conduct investigations. The investigator should ask the employee what happened. The investigator should not be dismissive of his or her claims, but instead, should probe them. Who? What? Where? When? Why? How? The investigator also should ask for the identity of any individuals who witnessed the events in question. Finally, the investigator should document the employee’s answers and version of events. At the close of this initial meeting, the investigator should tell the employee that the company takes such complaints very seriously, assure the employee that it will appropriately investigate his or her claim, and remind the employee that the company does not retaliate against employees for raising such issues. Immediately after that initial meeting, the investigator should consider whether any emergency interim steps are necessary or warranted. Did the employee complain about threats of physical violence? Does a potentially-imminent danger to anyone’s

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health, safety, or property exist? If so, placing the alleged harasser on suspension or administrative leave—paid or unpaid— pending the employer’s investigation may be appropriate. Next, the investigator should consider what further investigation is appropriate and develop a plan. Do documents exist that are relevant to the employee’s claim? Did the employee identify any witnesses? The investigator should interview them, and assure them, as well, that the company does not tolerate retaliation for their participation. The investigation reasonably should follow the evidence it uncovers. And the investigator should document each step. Once the investigator has developed enough evidence reasonably necessary to make a determination as to what happened, the investigator and senior dealership decision-makers should review that evidence, make credibility determinations as necessary, consider the previous behavior of the individuals involved, and make logical conclusions about their behavior based on the totality of the circumstances. Ultimately, you need to determine whether, in your reasonable judgment, the claim has merit. If so, you must next determine an appropriate remedy, which should be commensurate with the nature of the misconduct, and consistent with prior comparable situations. A common thread through many of our articles is the importance of training. That is no less true when it comes to investigations. Investigations typically are only as good as those who conduct them.

Joe Ambash is the Managing Partner and Jeff Fritz is counsel at Fisher & Phillips, LLP, a national labor and employment firm representing

hundreds

dealerships

Massachusetts and nationally. They reached at (617) 722-0044

may be

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AUTO OUTLOOK

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MSADA

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Accounting

MSADA

Increase ‘Back End’ Profitability By Barton Haag Barton D. Haag is a principal at Albin, Randall & Bennet, where he specializes in automobile and motorcycle dealerships. He can be reached bhaag@arbcpa.com.

Undoubtedly, your dealership is aware of the challenges it faces on the front-end of the business. Competition in the marketplace is stiff. That is why the focus is increasingly being shifted to the back-end. Ask this question: Is your dealership doing everything it can to maximize profitability in your service department? For many dealers, the answer is “No.” Significantly, you can begin to rely on

your service department to pick up some of the slack. In other words, it can absorb some of the overhead from the new and used vehicle departments. How can you stimulate profits in this area? Essentially, it means increasing fixed operation gross, decreasing total dealership expense, or possibly a combination of the two. Here is a quick checklist of ten suggestions: 1. Monitor the performance (productivity and efficiency) of technicians. 2. Keep an eye on the dollar sales of your parts counter personnel. 3. Track the sales of service advisers. Make sure they have received proper training. 4. Check on the number of one-item repair orders written monthly by service advisers. 5. Review your effective labor rate in relation to retail rate. 6. If you don’t already do so, begin to offer full parts and service on Saturdays. 7. Call customers to confirm or remind them of service appointments.

8. Make follow-up calls to those customers who haven’t made their appointments. 9. Follow up on customers who obtained repair estimates. 10. Make sure departments communicate with each other. Foster relationships between the parts, service, and sales departments to increase profitability. For example, let’s say a customer visiting the service department decides the estimate for repairing an old car is too high. Consider rewarding the employee who refers the customer to the sales department if a new vehicle is purchased. Bottom line: There is plenty of room for improvement at most dealerships. There may be computer programs that can help you monitor the performance of your service department. By examining specific categories, you may find areas that are ripe for growth. Your accountant can perform a review of your operations and help take steps to maximize profitability on the back end.

Detect, Then Collect, Warranty Receivables Unfortunately, many auto dealerships aren’t as profitable as they could be because they don’t collect all the money owed to them. Example: Does your dealership collect all warranty receivables owed by the factory? Some dealerships allow warranty receivables to “gather dust” or they give up on them instead of proactively collecting. Most warranty receivables should be collected within 30 days of the invoice date -- or sooner. Problems often occur when all or part of the warranty is rejected by the factory. The dealership’s responsible party (for example, a warranty clerk) should immediately determine the reason for the rejected claim. If necessary, corrected information can be re-submitted. This might require discussions with service technicians in the shop. Prompt

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attention can help resolve these matters to your satisfaction. To ensure these receivables are being timely collected, review the monthly warranty schedule in your computer system. Target those over the 30-day mark for review and explore the possibilities for correcting the situation. If your dealership has many outstanding warranty receivables, it generally indicates an on-going problem. You may have to review the procedures in place and revise them to facilitate faster collection. Finally, ask your office manager to perform a doublecheck on the dealership receivables. Follow up with the service manager and warranty clerk to avoid problems. Your due diligence in this area, as well as close attention to detail, can reap rewards.

MSADA NADA Update by Don Sudbay

Employment at New-Car Dealerships Rising Don Sudbay, President of Sudbay Automotive Group, represents MSADA members on the NADA Board of Directors. He welcomes your

questions

and

concerns

(donsudbayjr@sudbay.com). It was great to see so many dealers at the Annual Meeting held at the Mandarin last month. Thanks to Bob O’Koniewski and his staff for putting on a truly first class event. The speakers were excellent and had timely messages for us all. Those of you who participated please spread the word so that next year’s meeting will be even better attended. We need a strong association to deal with the challenges that are facing us. Thanks again to everyone that attended.

A Special Note from NADA Chairman Forrest McConnell: “Selling cars is not the only thing franchised new-car dealers contribute to the nation’s economy. Rising auto sales are having a positive impact on the economy, and dealers across the country are hiring. Next to stocking their showrooms and lots with vehicle inventory, auto dealers create many jobs in their communities. Between the need for quality sales consultants and expert service technicians, America’s new-car dealers employ 1,008,800 people nationwide. This year marked the first time reaching this milestone since falling during the recession in 2009. “New-car dealers employed an average of 57 people with an average payroll of $3 million last year, up 3 percent. Total payroll for all new-car dealerships in the U.S. was $53.7 billion last year. “Franchised new-car dealerships are an economic engine on Main Street, U.S.A, and these good paying jobs cannot be outsourced or sent overseas.”

Bill to Cut Auto Dealership Red Tape Headed to White House H.R. 724, a bill that repeals an unnecessary paperwork burden on small business auto dealerships, is headed to the president’s desk. The NADA-backed measure, which passed the U.S. Senate on May 22 by unanimous consent, eliminates a 1977 federal mandate requiring auto dealers to verify that new vehicles are compliant with the Clean Air Act. “All new cars and light trucks delivered to dealerships from the factory already come with documentation that the vehicles conform to federal emission laws,” said Forrest

McConnell, NADA chairman and a Honda/Acura in Montgomery, Alabama. “Requiring dealerships to fill out a form to recertify that a new vehicle complies with the Clean Air Act is redundant and unnecessary.”

Deadline to Participate in Dealership Workforce Study is June 30 Attracting and keeping talented employees is a major challenge for new car and truck dealers. To assist with this task, NADA and ATD members can participate in the 2014 Dealership Workforce Study. The enrollment period ends June 30. There is no cost to participate, and dealers will receive two complimentary reports, which include: • 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 as individual dealerships or dealer groups using a secure, webbased process that includes completing a survey and uploading payroll data. For more information, send an email to WorkforceStudy@nada.org or call (800) 557-6232.

NADA Foundation Seeks to Increase Charitable Giving through Ambassadors Program The Ambassadors Program of the National Automobile Dealers Charitable Foundation will provide more than $250,000 in grants to hundreds of local organizations across the country this year. To become an Ambassador, an individual, association or a company makes a tax-deductible contribution of $10,000 in their name or in recognition of someone living or deceased. They are then eligible to provide a $1,500 grant to an organization of their choice every three years in perpetuity. Today, there are 670 Ambassadors, which includes 54 state and metro dealer associations. Thirteen of the 54 dealer groups have three or more ambassadorships and are designated Ambassadors of Distinction. They can provide $2,000 grants each year. For more information or to become an Ambassador, contact the NADA Foundation at (703) 821-7102 or foundation@nada.org.

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Massachusetts Auto Dealer MAY 2014

COVER STORY

2014

ANNUAL by Stephanie R. Oteri

With the traditional bang of the gavel, MSADA President Scott Dube and Executive Vice President Robert O’Koniewski commenced the 74th Annual Meeting of the Members at the ornate confines of the Mandarin Oriental Hotel in Boston on May 2 before 150 dealer and associate member attendees. Completing his first year as president, Dube, in his opening remarks, assessed the progress the Association made at the State House and within its own organization. “Our 2014 Auto Show was very successful. Working with our show managers at Paragon Group, we grew it over 2012 and 2013 in terms of size, vehicle displays and attendance,” Dube said. “Legislatively, Bob and the lobbying team worked all year to fix the right to repair problem created by the passage of the November 2012 initiative petition so that the vehicle sales prohibition starting in January of this year could be avoided. We also thus far have been able to sidetrack harmful legislation like the proposed cap on doc fees, thereby protecting dealers’ operational activities.” Dube also speculated that by summer this year we will have a decision from the Massachusetts Supreme Judicial Court in our Tesla appeal, which will signify whether our original challenge to the factory store in Natick will move forward or not. Highlighted by Treasurer Jack Madden’s annual report on the Association’s finances, Dube emphasized that the MSADA team has worked hard over the last several years MAY 2014

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MSADA

MEETING to stabilize and grow the financial situation. “As a result of our sound fiscal condition under Jack’s financial leadership, we created a Dealer Services Committee, chaired by past president Jim Boyle, to explore ways we can better enhance the value of your membership,” Dube reported to attendees. Boyle described the work of the committee and its initial programs created for member dealers. “Our directors have approved a continued commitment to compliance and education activities,” Boyle said. “It is important to make sure everyone is in compliance with HR, workplace, and environmental rules in order to keep state and federal investigators at bay.” To help dealers engage certain vendors for compliance activities, Dube and Boyle described how the Association will help subsidize dealer costs so that the legal and workplace services will be available at a reduced rate for all members for all their stores. They noted more details will be sent to dealers over the next couple of weeks. “Bottom line: We need to avoid investigators spotting a problem at one store leading to further snooping at other stores. We need to stop the regulatory snowball from rolling before it starts,” Boyle said. Massachusetts NADA Director Don Sudbay, starting his third year in that role, outlined the various functions NADA undertakes on a daily basis on behalf of dealers at the federal level.

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2014 ANNUAL MEETING “With this activist Obama administration getting into all our businesses, we need a strong NADA pushing against the overzealous regulators,” Sudbay said. “All kinds of agencies like the FTC, the NLRB, and, most frighteningly, the CFPB have dealers in their sights as they try to inflict a more anti-business bent to their regulatory framework.” Sudbay described how the NADA not only has been effectively lobbying the agencies to tone down or cease their efforts against dealers but also how NADA has been using House and Senate legislators to try to exert Congressional pressure on the agencies. “Further, NADA has put tremendous investment into such education and compliance training tools as the NADA University web offerings,” Sudbay said. “But dealers also need to take a look at what NADA has done with the fair lending compliance program they put out during the New Orleans convention in January so that we all can avoid potential lending pitfalls down the road.”

Celia Blue, Massachusetts Registrar of Motor Vehicles When introducing Celia Blue, the Registrar of the Massachusetts Registry of Motor Vehicles, O’Koniewski joked that we would take it easy and ask only multiple choice questions since she has been in her position for only about eight weeks, having been appointed on January 30. Registrar Blue, however, made it clear she has hit the ground running, taking full advantage of her training and experience in the private sector business world and her previous leadership roles at the RMV and in other state agencies. “I recognize the important role the dealers play in the RMV’s operations, and I am committed to ensuring that we work together as effectively as possible to provide your customers – our fee paying clients – with a great, efficient experience,” Blue said. Blue outlined her plans for continuing with, and building upon, the modernization of RMV programs that started with her predecessor Rachel Kaprielian, who had served as Registrar since 2008. More importantly, Blue committed to re-starting the RMVdealer advisory working group that gives both parties an opportunity to talk about what is working and what needs to be fixed. “The working group has been dormant for some time as we MAY 2014

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worked through several internal issues at the RMV,” Blue said. “Moving forward, I need your input on our issues like inspection station licensing, electronic titles, police book, and temp tags so that we can make the Registry work for the taxpayers and you who do a great chunk of the work for us.”

Charlie Baker, Gubernatorial Candidate (R-Swampscott) Now in his second trip down the path for the governor’s office, having lost in his previous bid in 2010, Republican Charlie Baker outlined the economic challenges Massachusetts faces and gave insight on the road to recovery that the Commonwealth is headed towards over the next four years under a potential Baker administration. “I think Massachusetts is a great state. I grew up here, went to school here, got married here, raised my family here, but I’m worried that were losing a bit of our fast ball with our ability to compete and create jobs and economic opportunity,” he said. Baker served as the Secretary of Administration and Finance under Governors William Weld and Paul Cellucci, and he is the former CEO of Harvard Pilgrim Health Care. He has spent the past three years as an Entrepreneur in Residence at the venture capital firm General Catalyst Partners. Baker spoke on the issue of unemployment rates in Massachusetts being at an all-time high for the past 14 years and the inability to create new jobs, which Baker said should no longer be a concern with Massachusetts’ strong capabilities.

MSADA Sen. Stanley Rosenberg, Massachusetts Senate Majority Leader (D-Amherst) In his introduction, O’Koniewski noted that State Senator Stan Rosenberg is more than a long-time legislator who is now the Senate Majority Leader. “Senator Rosenberg has led the last two rounds of redistricting efforts for the Senate and is a past chairman of the influential Senate Ways and Means Committee. More importantly, however, he is probably one of the most respected members in the General Court because of his integrity and intelligence.” Senator Rosenberg came to the Annual Meeting with a sense that the Legislature’s focus over the next three months will be the state budget and certain economic issues like unemployment insurance reform and the minimum wage.

“There are very few places that have the kind of resources, the kind of capabilities, the sort of intellectual capital and institutions that we have that we are so unable to create economic growth over that period of time,” Baker said. When asked what he will do differently this time around, Baker said he is going to surround himself with the people that know him best who have worked with him over the years that can speak with tremendous authenticity and authority. Baker indicated that it is time for Massachusetts to stop talking about our complexity and start doing something about it, which will enable us to create more jobs, better schools, and stronger communities. “We will never be the great state we should be if we continue to finish 48th or 49th in all these surveys and only talk about the things that are great and don’t do so much on the things that need work,” Baker said.

“We are bouncing back and forth between the House and the Senate on the minimum wage bill and unemployment insurance, and we want to get that done in the Legislature so as to give some certainty to the business community moving forward,” he said. “A resolution of the minimum wage issue is important right now, because there will be an initiative petition on the November ballot if legislators do not act soon” Rosenberg noted. “However, up until now, this issue has been tied together with the UI reforms discussion, and that has slowed the process down. Although we have frozen UI rates for now, which is important to you all, there are these other big picture items we need to get done, also.” Rosenberg also discussed the Legislature’s efforts to address transportation issues like road and bridge problems in order to improve the system that “enables us all to get from here to there.” “We just completed a transportation bond bill in time for construction season, which is important to the dealership industry,” Rosenberg said. “Without safe roads and bridges, the cars you sell cannot go anywhere.” www.msada.org

Massachusetts Auto Dealer MAY 2014

2014 ANNUAL MEETING Steve Grossman, Massachusetts State Treasurer and Receiver General

George Magliano, IHS Automotive George Magliano, senior principal economist at IHS Automotive, predicts that the economy is moving forward out of its sluggish recovery period and is set to accelerate in economic growth. “Monetary policy and fiscal policy are two major drivers in the economy that largely shaped the recovery coming out of the recession and now moving into the expansion,” said Magliano. Magliano has been an annual fixture at the Association’s annual meetings, where dealers look forward to his analysis and predictions. He has directed studies involving customer segmentation, price elasticity, and the outlook under alternative forecast scenarios. “On the plus side, monetary policy has been aggressive and the Federal Reserve is winding down bond buying this year and will raise interest rates next,” said Magliano. “Towards the end of the year we will see interest rates go up in response to an economy that is strengthening, but it is not going to move until we start seeing better job growth.” Magliano attributes recent economic sluggishness to the bad winter, which has led to tepid employment conditions. “We look for better weather to bring the job market back to life,” he said. “The economy hasn’t done as much for light vehicle sales as it could,” he said. “We are at a point where we are going to start to see this pick up – we are shifting gears – and we will see more job growth that will help support sales to advance to a higher level.”

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O’Koniewski introduced Massachusetts State Treasurer Steven Grossman as a long-time small business owner who understands the challenges entrepreneurs face and as someone who “gets it.” But Grossman in his remarks stressed there is more to life than just running a business. “My grandfather gave me great advice. He came to Boston as an immigrant and valued family, career, and community,” Grossman said. “He told me, ‘I want to have a healthy family, educate my kids, own my own business, and give back to the community.’ Those are the values I try to live by.” Grossman, who is running for the Democratic gubernatorial nomination this year, said he is committed to using the full potential of the Treasurer’s office to protect the public’s money, help create jobs, boost small businesses, and bring new standards of transparency and disclosure to state government. He spoke on the vision for the Commonwealth for the future and focused on where taxpayer’s money should be going in order to see economic growth. “Loan the money to small businesses and try to focus on businesses owned by women, people of color, immigrants, and veterans, because let’s face it, those are the businesses that often have had a harder time getting access to capital,” said Grossman. He concluded by saying that the future lies within the younger generations, and that is where our money should be going. “We need to invest in the talent pipeline, in K-12 education, in tech education, in higher education, in internships, we need to invest in transportation and clean tech and all the things we know are going to make this state of Massachusetts a leader of the 21st century.”

MSADA

Jason Stein Editor and Publisher, Automotive News An astute journalist, Jason Stein, Editor and Publisher of Automotive News, spoke on where the industry is, where it’s going, and where he thinks it’s headed. Having last appeared at the MSADA Annual Meeting in 2009, Stein noted the differences in the industry between then and now. Stein said the industry, as it stands presently, is on fire with a hiring spree throughout the auto sector, recovery is everywhere, and the dealership profits are record breaking – big build up, big production, big boom. “When you look at where we’ve come since October 2009 to October of this past year, retail sales are leading the charts,” he said. Stein emphasized remembering the past downturn and using it as a motivator to help avoid excess now and in the future. Further, with new technology and communications coming in hot, Stein said it is an area that dealers are working on to speed up sales. “This is a crazy time with the swell of social media where your buyers know more now than they ever have before. They’ve already researched the products, know the vehicle they want, know the price, and it still takes an average of four hours to make a transaction.”

Jeremy Anspach PureCars Jeremy Anspach, President and CEO of PureCars, a venturebacked company that has raised $10 million in growth funding, gave insightful tips on how to improve and optimize marketing techniques for dealers in the present. His presentation, “Winning the Click,” focused on urging dealers to act like it’s the 21st century and how to turn Internet website clicks into actual sales. “What matters most is showroom opportunities – in my opinion that is absolutely what your digital strategy should be based to do for you in 2014 and beyond,” he said. “Consumers today are in the digital age. The stimulus drives people to do online learning; what the consumers learn is what makes the impact to drive them into the showroom.” Anspach has a strong passion for providing more relevant information to improve the car buying and ownership experience, which, he stressed, was one of the most important techniques to use in the 21st century. “Consumers gravitate towards pictures first and then price,” he said. “But dealers also need to get the consumer to focus on value. A higher priced car may not have the best price but its package may be the best value the consumer is looking for and needs. It is all about relevant information. If you can master this, you can win this click.”

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NEWS

from Around the Horn

EAST BROOKFIELD

Lamoureux Ford Earns One Ford Elite Recognition When Lamoureux Ford was ranked first among an elite group of Ford Dealerships to be recognized with the 2013 President’s Award by Ford Motor Company, the dealership also earned the honor of One Ford Elite recognition. Lamoureux Ford is one of three dealers in New England with One Ford Elite recognition. The dealership was the only Massachusetts dealer to earn the President’s Award with One Ford Elite recognition. The prestigious award honors dealerships that have excelled in automotive retailing in 2013 by providing exceptional customer sales and service satisfaction. “Earning this award is a reflection of our entire staff’s commitment to delivering the best customer experience possible,” said Lamoureux Ford owners Marc and Lionel Lamoureux. “We couldn’t be more proud to receive this recognition, especially since it comes from the people we value most — our customers. They’re the reason we were able to achieve this award.”

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The President’s Award was established in 1998. Dealers become eligible through survey responses from the customers related to their sales and service satisfaction. Lamoureux Ford has won the Ford President’s Award for the 17th time in a row and 20th overall.

NEWS from Around the Horn

MSADA

DANVERS

BOSTON

Rosenbergs to be Honored by College

Toyota Names Presidentâ&#x20AC;&#x2122;s Award

Prime Auto Group President Ira Rosenberg and his wife Judy received honorary degrees from Salem State University in Massachusetts in recognition of several decades of extensive philanthropic contributions in New England. Joining the Rosenbergs in receiving an honorary degree was Joe Andruzzi, former offensive guard for the New England Patriots and now president of the Joe Andruzzi Foundation, which has a mission of pediatric cancer research and patient support. Judy and Ira Rosenberg are well known for their community involvement, particularly in support of health care and children. Ira Rosenberg is president of the Prime Motor Group, which has 24 dealer locations throughout Massachusetts, New Hampshire and Maine. It employs more than 1,400 people in the tri-state area and stocks more than 5,000 new and used vehicles.

Recently Toyota Motor Sales announced the winners of its prestigious Presidentâ&#x20AC;&#x2122;s Award, honoring outstanding achievement in sales, service, consumer satisfaction, and business management. Massachusetts dealerships honored by Toyota include the following: Acton Toyota of Littleton Bernardi Toyota (Framingham) Boch Toyota (Norwood) Boch Toyota South (North Attleboro) Copeland Toyota (Brockton) Expressway Toyota (Boston)

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Falmouth Toyota (Bourne) Haddad Toyota (Pittsfield) Harr Toyota (Worcester) Herb Chambers Toyota of Auburn Hyannis Toyota Ira Toyota (Danvers) McGee Toyota (Hanover) Prime Toyota of Boston Route 44 Toyota (Raynham) Toyota of Watertown Tufankjian Toyota of Braintree

Massachusetts Auto Dealer MAY 2014

NEWS from Around the Horn SEEKONK

Drag Racing Dealer Featured in Auto Publication When he’s not focusing on fixed operations as a vice president at Tasca Automotive Group, thirdgeneration dealer Bob Tasca III is a professional drag racer in the National Hot Rod Association. This extracurricular activity caught the attention

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of Ward Auto, which recently published an article about Tasca’s drag racing. Tasca drives a Ford Mustang Shelby Funny Car sponsored by Ford’s Motorcraft autoparts division and QuickLane, the automaker’s franchise of automotive service centers. His late grandfather, Bob Tasca, a longtime Ford dealer and one-time drag racer, started the family business. In 1943, at age 16, he began working at a Ford dealership in Cranston, RI. Ten years later, he opened Tasca Ford in Seekonk. In 1962, he found Tasca Racing, now based in Concord, NC. The elder Tasca’s Ford dealership became one of the largest in the country. He became an influential goto guy for the automaker’s top executives, including the late Henry Ford II. Tasca Automotive now represents several brands in Massachusetts, Connecticut and its home state of Rhode Island. In the Q&A with Ward Auto, Bob Tasca III, 38, discusses the differences and similarities between dealership work and racing, lessons his grandfather taught him, growing up in a no-nonsense dealership family and whether he wants his sons to follow in his footsteps. Read the article here: http://wardsauto.com/dealerships/dealerreally-does-race-sunday-sell-monday

MSADA METHUEN

Arrival of 2015 Chrysler 200 Is Greeted with High Demand In March, the Chrysler Group announced that it had added 800 jobs at its Sterling Heights Assembly Plant (SHAP) in Michigan to support production of the redesigned 2015 Chrysler 200. Now that the model is arriving at dealerships, it appears those new workers will be kept busy for the foreseeable future. More than 10,000 first-day vehicle orders were placed for the new Chrysler 200 on May 8, and more than 20,000 orders have been received in total, allowing Chrysler to keep SHAP at full-

capacity production through mid-July. Up front, the 2015 Chrysler 200 sports a winged brand badge in the middle of a black-mesh upper grille that flows into large, swept-back headlamps, while the midsize sedan’s coupe-like silhouette offers class-leading aerodynamics. That drag-resistant exterior combines with a segment-first standard nine-speed automatic transmission and a base 184-horsepower 2.4-liter MultiAir2 Tigershark four-cylinder engine to enable the new Chrysler 200 to return up to 36 mpg on the highway. Meanwhile, buyers can opt for added performance and capability with a 3.6-liter Pentastar V6 that produces a best-in-class 295 horsepower and an advanced all-wheeldrive system that can fully disconnect from the rear axle to reduce fuel consumption when power is not required for all four wheels. “The 2015 Chrysler 200 was developed as a sign of what’s to come from Chrysler’s lineup going forward, and if this initial demand is any indication, the brand appears to be hitting all the right notes to attract modern buyers,” said Tom Barenboim, owner of Clark Chrysler Jeep Dodge Ram, a Methuen, Massachusetts Chrysler dealer. “That’s not only great news for the automaker’s employees in Michigan, but also for anyone who wants a midsize sedan that looks and feels a world apart from the bland, beige offerings in its class.” www.msada.org

Massachusetts Auto Dealer MAY 2014

NEWS from Around the Horn HAVERHILL

Mercedes-Benz Responds to BMW’s X6 with Concept Coupe SUV According to IHS Automotive, global sales of premium SUVs are expected to rise 32 percent by 2020, and to attract a larger share of those purchases, Mercedes-Benz will be launching a new crossover SUV next year that will take direct aim at the BMW X6. Previewed through the Mercedes-Benz Concept Coupe SUV that debuted late last month in Beijing, the new production model will be positioned as a sleeker, coupe-like version of the MercedesBenz M-Class and is intended to provide similar on-road driving dynamics to a sports sedan but in a more versatile package. Borrowing style elements from the luxury automaker’s S-Class Coupe concept, the Mercedes-Benz Concept Coupe SUV sports a large upright grille with a prominent three-pointed-star logo, while

MAY 2014

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a broad air intake spans the width of the lower front fascia. A pair of design lines along the sides help to emphasize the model’s high beltline, while a raked roofline smoothly flows into the fastback rear window. At night, the Concept Coupe SUV can make a clear statement with all-LED Multibeam front headlights and a wraparound tail lamp that stretches from one rear fender to the other. Meanwhile, all four of the vehicle’s bold 22-inch wheels are put in motion by 4MATIC all-wheel drive. “The luxury-SUV market is expanding to meet the needs and desires of a wider range of buyers, and the real appeal of the Concept Coupe SUV is that it completely blurs the line between a crossover and the four-door coupe style that MercedesBenz has made popular,” said James Buckley, general manager of Smith Motor Sales, a Haverhill, Massachusetts Mercedes-Benz dealer. “The eventual production version will allow drivers to make a grander style statement than they could with a sports sedan while still gripping each turn tightly on the road.”

Insurance

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FMLA: How and When You Can Use It that employers should request certification of illness at the time of FMLA request or within five business days. Once you have Rob Stansbury has worked with requested certification, the employee has 15 KPA for nine years. His primary role is meeting with dealers days to obtain proof. Employers may also to assess their level of liabilcontact health care providers for verificaity associated with government tion. It is important to carefully and accuenforcement, and to establish rately document the conditions of the leave a plan to correct deficiencies for both the present, as well as moving forward. He can be including how long, any additional required reached at rstansbury@kpaonline.com. documentation, and when the employee is expected to return. Most often, when your employees are Keep in mind that while a job is guaransick or life takes its toll, taking paid time off teed upon return, it may not necessarily be is adequate; however, there are times when the same job the employee had prior to takemployees need to take extensive time off ing FMLA. According to the Department for more serious issues. This is when the of Labor website, “An employee must be Family Medical Leave Act (FMLA) comes restored to the employee’s original job, or into play. to an equivalent job with equivalent pay, FMLA took effect in 1993, in an effort to benefits, and other terms and conditions of balance work and life with medical needs. employment.” FMLA includes many regulations and proFMLA administration can be very comvisions, which can make it difficult to unplicated. There are overlapping laws at derstand. The following simboth the state and federal levple information can help you The information provided “It is important to carefully and accurately els. begin to understand FMLA. here is not intended to be a document the conditions of the leave Employees are entitled to complete guideline on FMLA take up to 12 weeks off of unincluding how long, any additional required administration. To learn more paid leave during a 12-month about FMLA, use the link bedocumentation, and when the employee is period if they have been worklow to view the KPA webinar expected to return.” ing for the company for at and PowerPoint presentation. least 12 months prior to reThe Family Medical Leave questing the leave and if they have worked partner and wants to bond with that child. Act (FMLA) webinar: http://www.dealerat least 1,250 hours over that period. Not only must the employee be eligible webinars.com/fmlakc2.html. Employees may take this leave for their for FMLA, but your company must be reThe Family Medical Leave Act (FMLA) own serious medical condition or to take quired to offer it as well. Your company PowerPoint link: http://www.dealerwebicare of an immediate family member who must have at least 50 employees who work nars.com/slides/FMLA Final.pdf. has a serious health condition. According to within 75 miles of the physical location to Please contact HRM@kpaonline.com for federal law, immediate family members are fall under the federal FMLA requirements. questions and more information. parents, spouses, and children. Some states Many states have similar laws and regulaAbout KPA offer additional coverage for domestic part- tions that overlap with the federal FMLA KPA is a dealer services provider for over ners, parent-in-laws, siblings, and grandpar- requirements. Therefore, prior to providing 5,200 automotive, truck, and equipment ents. Additionally, FMLA may also be used leave to employees, it is important to find dealerships and service companies. KPA for “birth and bonding”: extended parental out what laws your state has. leave for the birth or adoption, or bonding If your company is required to provide provides consulting services and software with a new foster child. FMLA and an employee requests leave, for HR Management, and Environmental When deciding if FMLA is the appro- have them provide proof of the serious med- Health and Safety. KPA was recognized priate leave, employers should consider ical condition. Employers are not required on the Inc. 500/5000 list of fastest growing the interpretation of “son” or “daughter” by law to request proof, but they are enti- companies in 2012 and in 2013. t issued by the Department of Labor under tled to ask. The Department of Labor states

by Rob Stansbury

the FMLA. The Administrator’s interpretation gives employees, who care for a child, parental rights to family leave regardless of the legal or biological relationship. The “son” or “daughter” being defined is under Section 101(12) of the FMLA as it applies to an employee standing in loco parentis to a child. The Administrator’s interpretation was issued by Nancy J. Leppink, deputy administrator of the department’s Wage and Hour Division (WHD). The following examples of in loco parentis were provided in the interpretation: • An uncle or aunt caring for a young niece or nephew whose parent is on active military duty; • A grandparent who assumes responsibility for an ill grandchild when his or her own child is debilitated; • An employee who intends to share in the parenting of a child with his or her same sex

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Massachusetts Auto Dealer MAY 2014

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NADA Market Beat

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

Review of New Light Vehicle Sales Overall

There were 1.4 million light-vehicle sales in April 2014. This figure marked a decline in sales by 9.6 percent from March 2014 and an increase by 8.0 percent over April 2013.

April 2014 YTD figures bring total light-vehicle sales to 5.1 million, up 3.1 percent from a year ago. The April 2014 Seasonally Adjusted Annual Rate (SAAR) for light-vehicle sales was 16.0 million. In April 2014 YTD figures, car sales held a market share of 47.7 percent and were down 2.4 percent from a year ago, while corresponding figures for light trucks put the light-truck share at 52.3 percent with sales up 8.6 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 light-vehicle sales for April 2014: 46.1 percent of the market. This was followed by companies based in the Asia/Pacific region at 45.2 percent and then companies based in Europe at 8.6 percent. In April 2014 YTD figures, companies with bases in North America also held the largest share of lightvehicle sales in the U.S. at 45.7 percent; this was a decline from a share of 46.1 percent a year ago. The corresponding share held by companies based in the MAY 2014

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Asia/Pacific region was 45.6 percent and that for the Europebased companies was 8.7 percent. All company categories by geographic bases – North America, Asia/Pacific and Europe – experienced growth in light-vehicle

MSADA sales in April 2014 YTD figures from last year. Of the Detroit 3 companies, Fiat Chrysler experienced the most growth in April 2014 YTD sales, from a year ago, at 11.7 percent followed by General Motors at 0.1 percent; Ford sales declined by 2.4 percent over this period. From the group of Asia/ Pacific-based companies, Isuzu experienced the most growth in April 2014 YTD sales from last April at 130.1 percent. From the group of Europebased companies, Jaguar Land Rover experienced the most growth in April 2014 YTD sales from a year ago at 12.9 percent. See Figures 2, 3 and 4.

Segments

The cross utility vehicle (CUV) segment held the largest share in light-vehicle sales in April 2014 YTD terms at 26.9 percent, with sales up 11.9 percent from last year. This segment held the largest proportion of light-truck sales at 51.6 percent in April 2014 YTD terms. Within the CUV segment, the middle CUV sub-segment held 64.1 percent of April 2014 YTD CUV sales, which is an increase in market share from the 63.0 percent share it held a year ago. The middle car segment and the small car segment followed the CUV segment, respectively, in terms of the YTD market share, albeit with declining market shares compared to last year. The remaining segments â&#x20AC;&#x201C; large car, luxury car, sport

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NADA Market Beat

utility vehicle (SUV), van and pickup â&#x20AC;&#x201C; each experienced growth in their respective shares of light-vehicle sales compared to last year in YTD terms. See Figures 5 and 6.

Power Source

As a power source, gasoline held a market share of 93.7 percent of April 2014 YTD light-vehicle sales, which was up slightly from its corresponding share of 93.6 percent a year ago. The market share held by the diesel category increased to 2.9 percent, in YTD terms, from its value of 2.6 percent last year. The market shares held by electrics and plug-in hybrids have each grown since last year, in YTD terms. In April 2014, for the alternative power category, the following light vehicles were sold: 4,600 electrics, one unit powered by fuel cells, 39,593 hybrids, 160 units powered by natural gas and 4,718 plug-in hybrids, amounting to 49,072 light-vehicle sales. The first

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recorded sale of light vehicles operated by fuel cell technology in the U.S. for 2014 was reported this month. See Figure 7.

Models

From the list of the 15 best-selling light vehicles for April 2014 YTD, seven light vehicles were Detroit 3 models while the rest were from companies based in the Asia/Pacific region. There were two cars and three pickup trucks occupying the leading five ranks of the 15 best-selling light vehicles for April 2014 YTD. The two leading cars were models from companies based in the Asia/Pacific region: Toyota Camry and Nissan Altima. The three leading pickup trucks were models from the Detroit three companies: Ford F-Series, Chevrolet Silverado and the Ram pickup. See Figure 8.