May 2015 MSADA Auto Dealer

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

auto M a s s a c h u s e t t s

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

2015 MSADA ANNUAL MEETING

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

May 2015 • Vol. 27 No. 5

Ma s s a c h u s e t t s

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St a f f D ir e ct o ry 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 Marta Argueta-Guerra Administrative Assistant/ Membership Coordinator mguerra@msada.org Aut o D e a l e r M A g a z i n e 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: mguerra@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 Blum Shapiro, 23 Boston Herald, 32 Ethos Group, 27 Ethos Group F&I Leadership Summit, 2 Lynnway Auto Auction, 21 Nancy Phillips, 23 O’Connor & Drew, 31 Southern Auto Auction, 22

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

Ta b l e o f C o n t e n t s

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From the President: Unbreakable Bonds THE ROUNDUP: Dealers Convene for 75th Annual Meeting TROUBLESHOOTNG: Protecting Pregnant Employees LEGAL: Why Side Agreements with Your Customers Are A Bad Idea AUTO OUTLOOK DEALER SERVICES: Lead Like Lombardi SECURITY SERVICES: Protect Your Dealership Against Cybercrimes

16 Cover Story: Pushing Forward

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NEWS From Around the Horn nada update: Congress Won’t Preserve Consumer Discounts Without Your Help NADA MARKET BEAT ACCOUNTING: Dealerships Maximize Profit with Annual Parts Reimbursement Rate Adjustment

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

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

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

Massachusetts Auto Dealer MAY 2015

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from the President

By Scott Dube, MSADA President

Unbreakable Bonds

Strengthening our Association by building relationships is important — and MSADA is stronger than ever.

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Our importance can certainirst, I would like to thank “Even as some continue to campaign ly be measured in the esteemed those of you who took the against our franchise model and way of company who came this year, time out of your busy schedfrom NADA Chairules to attend this year’s life, we do have allies in high places.” ranging man Bill Fox and Governor MSADA Annual Meeting and Charlie Baker. And it was a our Dealer Day on Beacon pleasure meeting interim RMV Registrar Erin Deveney, who Hill a few weeks later. From the feedback I’ve heard from both we expect to work closely with in the coming months. I hope events, many of you enjoyed a thought-provoking and engagyou will thank them for taking the time to meet with us, and I ing program with your fellow dealers with the support of our would encourage any of you who have follow up questions for associate members as well.

Ms. Deveney or the governor to reach out to them. I hope their Running dealerships is more than just one full-time job -presence helped reassure you that, even as some continue to which is of course why most of us need 50 people to make such campaign against our franchise model and way of life, we do an operation work every day. So those moments when we’re have allies in high places. all in the same room are too few, and it’s a crucial reminder The event provided valuable insight from several industry that, while we compete with each other day in and day out, we gurus as well, including a stirring presentation from Ethos need to present a united front. It seems every year, when we get Group’s Rob Sneed and other breakdowns on the legal and ecotogether for our Annual Meeting, there is some sort of industrynomic environment we currently find ourselves in. As always, changing issue afoot.

As I laid out to you there, if it’s not Tesla creeping around the we are looking to hear your feedback on our guest speakers and corners of our laws, we have lawmakers such as Sen. Elizabeth hear any ideas you may have for next year.

Warren out to change them completely. Protecting our industry As we move into a well-deserved and at one point almost inis never-ending work, and it rests mostly on visibility and comconceivable Summer, I ask that you continue to stay up to date munication. Our Annual Meeting, aside from being a time for on what your Association is up to. We need you to continue to camaraderie, is a time to invite lawmakers and regulatory ofbe ready with emails, phone calls, and other grassroots mesficials into our world to help them understand our issues. They saging as we continue to push our industry’s future forward. get to see first-hand how many of us there are, how much of While we have more friends than we did a year ago, ours will the state’s economy we represent, and how we are vital playcontinue to be an uphill battle for the foreseeable future. If we team up on issues our industry faces as readily and ably as we ers in any local community. These are the moments legislators compete with each other in the marketplace, our prospects reremember when we knock on their office doors, and they can main strong. make all the difference when our opposition has limitless mont ey to throw against us.

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Massachusetts Auto Dealer www.msada.org

MSADA

A ssociate M ember D irectory Name

Msada Board Barnstable County

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 John Hartman, Ira Motor Group

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 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

Contact Telephone

Albin, Randall & Bennett Barton D. Haag (207) 772-1981 American Fidelity Assurance Co. Lennox Cornwall (304) 702-7399 AutoAlert Don Corinna (505) 304-3040 Auto/Mate Dealership Systems Troy Potter (877) 340-2677 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, Tom Drislane (617) 929-8373 Burns & Levinson LLP Paul Marshall Harris (617) 345-3854 Cars.com Heidi Allen (312) 601-5376 CDK Global Chris Wong (847) 407-3187 Construction Management & Builders, Inc. Kate Sullivan (781) 246-9400 CVR John Alviggi (267) 419-3261 Dealerdocx Brad Bass (978) 766-9000 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 Gulf State Financial Services Cliff Lang (713) 580-3143 GW Marketing Services Gordon Wisbach (781) 899-8509 Huntington National Bank John J. Marchand (781) 326-0823 The Institute For Business Excellence Bill Napolitano (508) 643-2299 John W. Furrh Associates Inc. Kristin Perkins (508) 824-4939 KEEPS Corporation Darcy Silver (718) 309-6133 Key Bank James Q. Moretti (781) 558-5132, Mark Flibotte (617) 385-6232 KPA Mike Hurd (207) 400-6535 Leader Auto Resources, Inc. Chuck August (518) 364-8723 Lynnway Auto Auction Jim Lamb (781) 596-8500 M & T Bank John Federici (508) 699-3576 Management Developers, Inc. Dale Boch (617) 312-2100 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 Northeast Dealer Services, Jim Schaffer (781) 255-6399 O’Connor & Drew, P.C. Kevin Carnes (617) 471-1120 Performance Management Group, Inc. Mark Puccio (508) 393-1400 Quik Video Jack Gardner (617) 221-5502 R.L. Tennant Insurance Agency, Inc. Walter F. Tennant (617) 969-1300 Reflex Lighting Ping Weiner (617) 269-4510 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 Santander Richard Anderson (401) 432-0749 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 Solect Energy Development Kristen Brandt (781) 733-0223 Southern Auto Auction Tom Munson (860) 292-7500 Sprague Timothy Teevens (800) 828-9427 SunTrust Bank Michael Walsh (617) 345-6567 Taino Consulting Group Herby Duverné (617) 797-9316 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 Pat Watson (803) 360-6094 Wells Fargo Dealer Services Christopher Peck (508) 314-1283 Wicked Local Media Massachusetts Jay Pelland (508) 626-4334 Zurich American Insurance Company Steven Megee (774) 210-0092

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Massachusetts Auto Dealer MAY 2015

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The Roundup

Dealers Convene for 75th Annual Meeting

By Robert O’Koniewski, Esq. MSADA Executive Vice President Follow us on Twitter - @MassAutoDealers On Friday, May 1, your Association convened its 75th 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 Massachusetts Governor Charlie Baker, NADA Chairman Bill Fox, Tom Worobec of Automotive News, Rob Sneed of Ethos Group, RMV Registrar Erin Deveney, IHS Global Insight economist Chris Hopson, and auto dealer attorney Scott Silverman.

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 • DealerTrack – Silver Sponsor • Downey & Company – Break Station Sponsor • GW Marketing Services – Silver Sponsor • Murtha Cullina – Cocktail Reception Sponsor • Northeast Dealer Services – Welcome Gift Sponsor • O’Connor & Drew – Silver Sponsor • Silverman Advisors – Parting Gift Sponsor • TrueCar – Silver Sponsor AND Lunch Sponsor • Zurich – Bronze Sponsor You can read the details of our meeting as part of this month’s cover story.

Dealers Visit Beacon Hill Almost every dealer has some sort of relationship with his or her legislators at the local level, whose roots can be found in the interaction of our businessmen and women and politicians in any number of different settings. Until four years ago, however, dealers had never collectively come together to communicate directly with legislators at their place of business, the State House.

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Massachusetts Auto Dealer www.msada.org

On May 13, your Association held its annual “Dealer Day on Beacon Hill” event designed to bring our member dealers right into the political arena where the legislative decisions are made affecting your businesses. Dealers and their key employees convened in the morning at the Parker House Hotel, just down the street from the State House.

We provided attendees an issues briefing on several key bills in which we have an interest (and on which I have written previously): our proposed amendments to the Chapter 93B dealer franchise law; licensure of inspection stations for franchise dealers; repeal of the used vehicle record book; increasing the insurance reimbursed labor rates for auto body repairers; and opposition to a special statutory carve out for Tesla allowing it to open a factory-owned store, without a dealer, in the Commonwealth.

More importantly, we reminded our dealers that it is important to tell your own stories regarding your role in the community, including your economic impact, the employees you manage, and the taxes they, your customers, and you pay. Legislators know dealers and dealerships exist; they just do not know the long and deep reach of your businesses’ tentacles into the state and local economy and throughout the community, especially through your charitable and other service-related activities.

All our dealers were well received, and the dealers’ presence throughout the building created quite a buzz.

In order to build on the successes of our “Dealer Day” events, it is vital that we continue to grow our attendance and participation amongst our members. It is extremely helpful to our lobbying

MSADA efforts for legislators to see their constituents face to face and receive a perspective they don’t have in the normal course of their activities. No one knows your business better than you. That knowledge needs to be conveyed to your legislators in an environment and manner they understand. As a result of our dealers’ input, this event was a success upon which we can build for the future.

AIADA Conference Earlier this month MSADA representatives traveled to Washington DC for the American International Automobile Dealers Association’s (AIADA) Ninth 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.

In making our Capitol Hill rounds, we visited legislative staff for Rep. Stephen Lynch (D-South Boston), Rep. Seth Moulton (D-Peabody), Rep. Niki Tsongas (D-Lowell), and Rep. Joseph Kennedy (D-Brookline).

During our meetings we discussed the Massachusetts auto market, Trade Promotion Authority (TPA) legislation (socalled fast-track negotiating authority), the Trans Pacific Partnership (TPP), the Transatlantic Trade and Investment Partnership (TTIP), the auto dealer exemption in the Dodd-Frank law, the CFPB and “disparate impact”, the death tax, and proposed changes to the LIFO accounting method.

During the conference, AIADA to-

gether 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 The Redefined 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://hereforamerica.com.

State Budget Moves Along As we prepare to go to press, the Massachusetts Senate has finished its deliberations on the FY2016 budget, which followed the House’s approval of its own budget version at the end of April. Each

the constitutionality of tax policy changes included in the Senate document.

The state constitution requires that “money bills”, where taxes can be raised, must originate in the House. As defined by the legislative drafting manual, “money bills” are those that affect state tax revenue for general purposes. A “money bill” may either reduce general state tax revenue or increase state tax revenue.

The Senate budget proposes to freeze the state income tax rate at 5.15 percent, thereby nullifying a 2002 law that calls for that tax rate to fall to 5 percent. The budget would also increase the personal exemption for income taxes and boost the state’s earned income tax credit. The Senate claims the House opened the door to tax policy in the budget by increasing the conservation land tax credit, thereby providing the Senate with the opportunity to proceed with its own changes to tax laws. The House disagrees – hence, the advisory opinion request to the SJC. The conference committee has its work cut out for it, as the FY16 fiscal year begins on July 1. The conference committee would need to get an agreement to both chambers for each’s review and approval so that the budget could be forwarded in time to Governor Baker for his review, issuance of any line-item vetoes, and signature by the July 1 deadline.

The race is afoot.

It is important to tell your own stories regarding your role in the community, including your economic impact, the employees you manage, and the taxes they, your customers, and you pay. chamber has a bottom-line of $38.1 billion, which is close to the total first proposed by the Baker Administration in March. However, there are scores of differences between the House and Senate documents, which must be resolved in a six-member conference committee, consisting of three Senators and three Representatives. Your legislative team worked throughout each chamber’s process to make sure there were no provisions adversely affecting auto dealers.

The intramural skirmishing we have reported on this year took no rest during the budget process. As soon as the Senate approved its FY16 budget plan, the House sent a request to the Supreme Judicial Court for an advisory opinion on www.msada.org

Earned Sick Time and Employer “Safe Harbor” The Earned Sick Time law, which the voters passed at last November’s election, takes effect on July 1, 2015. The Massachusetts Attorney General, who is charged with enforcement of the law, recently published proposed regulations to implement the law. The AG’s proposed regulations are not final, however, and they leave a numMassachusetts Auto Dealer MAY 2015

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The Roundup ber of questions unanswered.

Further, the AG announced that she would provide a temporary “safe harbor” provision for employers with existing paid time off policies. It is not yet clear when final regulations will be published, but it might not be until after the law goes into effect on July 1, 2015.

By way of background, on November 4, 2014, Massachusetts voters passed a ballot initiative requiring that, as of July 1, 2015, all employers with 11 or more employees must grant their employees up to 40 hours of Earned Sick Time in a calendar year. As we have previously advised you, the law is both complicated and ambiguous, since it will require employers to track hours in new and different ways.

The law required the Massachusetts Attorney General to “adopt rules and regulations necessary to carry out the purpose and provisions of this section.” On April 24, 2015, the Attorney General’s office published its proposed regulations implementing this law, subject to public comment.

These are the highlights of the regulations issued on April 24 as they pertain to dealers: • You must give this benefit to all employees, including full time, part-time, seasonal, and temporary employees.

• For purposes of the law, a “calendar year” is “any consecutive 12-month period of time as determined by the employer.” This could be a JanuaryDecember calendar year, the tax year, the fiscal year, a contract year, or a work anniversary year. Employers must inform employees of their choice of “calendar year” and must apply the “calendar year” consistently and uniformly to all employees.

• The regulations clarified how employees eligible for paid Earned Sick Time must be compensated: Employees paid on an hourly basis must earn their base rate wages and any other benefits paid or accrued on an hourly basis. Employees paid on commission must be paid the greater of their base wage or the

MAY 2015

effective minimum wage. Employees paid on a piece work, salary, fee or any other basis must be paid the average hourly rate from the previous pay period. Exempt employees are presumed to work 40 hours in a week.

• This year will be considered a “Transition Year”, and any paid sick time provided under the employer’s previous policy will be credited. So, for example, if an employee has already taken 16 hours of sick time in between January and July of 2015, then the employer need only allow that employee to earn and use up to 24 additional hours of paid Earned Sick Time during the remainder of the year.

• While employers cannot require any documentation concerning the need for leave unless the employee has missed more than 24 consecutively scheduled hours, the employer may require employees to submit written verification that they have used Earned Sick Time for allowable purposes after using any amount of sick time.

• Instead of tracking sick leave accrual based on 1 hour for every 30 hours worked, an employer can use alternative methods of complying with the law, such as giving employees a lump sum of 40 hours of earned sick time at the start of each calendar year.

In the latest development, on May 18, with just over six weeks until the law is set to go into effect on July 1, 2015, the Massachusetts Attorney General’s Office announced that it would be creating a “safe harbor” provision for employers with existing paid time off policies.

Under the safe harbor provision, an employer with a paid time off policy in existence as of May 1, 2015, will be deemed to be in compliance through December 31, 2015, provided that the paid time off policy meets certain requirements. Employers taking advantage of this safe harbor provision must be in full compliance with the law and the final regulations on January 1, 2016.

Who Qualifies for the Safe Harbor?

In order to be eligible for the safe harbor

Massachusetts Auto Dealer www.msada.org

MSADA provision, an employer must meet these conditions: • It must have, as of May 1, 2015, a policy that provides employees the right to use at least 30 hours of paid time off during the calendar year 2015. Employers who have such a policy will be in compliance with respect to those employees who are already eligible for paid time off under the existing policy. A dealership that already provides at least 30 hours of paid time off would satisfy the law through the end of 2015 with respect to those employees.

• For employees not now covered by at least 30 hours of paid time off, dealers can be in compliance so long as they grant the other employees the right to use up to 30 hours of paid time off in 2015 under the terms and conditions of the policy that applies to the employees who are already covered.

• The safe harbor provision further states that to be in compliance, all paid time off taken under the existing policy must be job protected and subject to the earned sick time law’s non-retaliation and non-interference provisions.

Unanswered Questions Remain. While this safe harbor provision does provideemployers some much-needed breathing room to comply with the law and the notyet finalized regulations, it raises almost as many questions as it answers.

First, the safe harbor language refers to a “paid time off” policy. The language does not indicate whether this means a “PTO” policy, a vacation policy, a sick leave policy, or any of them. We assume it refers to any policy which permits employees to use the paid time for sick leave purposes, but we are seeking clarification from the Attorney General about this.

Second, employers who want to take advantage of the safe harbor will have to make sure that all employees, including part-time, temporary and seasonal, can take at least 30 hours of paid time off this year, which may mean increasing paid time off allotments to some employees who have less than 30 hours under the existing policy. This provision is poorly

MSADA worded, and we are seeking clarification of its meaning.

Third, the safe harbor provision, which appears to contemplate a January to December calendar year for 2015, does not give any guidance on how employers who choose different 12-month calendar years should comply. We are also seeking clarification of this provision.

What Should Dealers Do? • You must first determine if you are eligible for the safe harbor. If you had a policy in place as of May 1, 2015 permitting any employees 30 hours of paid time off this year, you are covered for those employees.

• You must then decide if you want to grant the 30-hour opportunity for the remaining employees or if you want to follow the accrual rules under the new law for those employees, which may be less expensive.

• If you take advantage of the safe harbor this year, you will still have to decide what your policy will be for next year.

• If you cannot, or choose not to, take advantage of the safe harbor this year, you must draft a policy that will be effective as of July 1, 2015.

On May 27, our legal partner Fisher & Phillips conducted a webinar, entitled Earned Sick Time in Massachusetts: Understanding the Proposed Regulations and Safe Harbor Provision, to explain these complex developments. Members can view the recorded webinar at: https:// attendee.gotowebinar.com/recording/1965331221942777602.

NADA Dealership Workforce Study We are down to the last month of the 2015 Dealership Workforce Study (DWS). Your chance as a NADA/ATD member to participate ends on June 30.

You know this to be true – Employees are a dealership’s single largest expense and its single biggest advantage over the competition.

With the Dealership Workforce Study, NADA and ATD members have the opportunity to find out if they have the best

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Employees are a dealership’s single largest expense and its single biggest advantage over the competition. tools to attract and retain the best employees in their markets. Whether it’s compensation, benefits, work schedules, or even the company culture, dealers need to fine-tune these to get it right.

This is the fourth annual DWS NADA has conducted. The DWS collects data on compensation, employee benefits, retention and turnover, as well as work schedules, and hours of operation, and reports these as well as demographic issues such as the gender and generational gaps in the dealership workforce.

Only NADA and ATD members can participate in the DWS. It is free to participate, and participation involves enrolling, completing a survey, and uploading payroll data.

Just for participating, members receive two valuable complimentary reports: (1) the Basic Report, which is anything but basic, as it is customized to the individual participating dealership, comparing that store’s numbers to the aggregate numbers of peers in the individual dealer’s own region and the entire country; and (2) the Industry Report, which provides overall analysis and trends, and statistics for every region of the U.S. Participants are also eligible to purchase the Enhanced Report, which compares the individual dealership’s numbers to peers who sell the same brand in the same state. By “numbers,” we are talking compensation for 60 job positions; retention, turnover, and tenure; benefits; work schedules; and hours of operation.

The NADA Dealership Workforce Study is the most comprehensive study available of the retail workforce. With the data dealer-participants receive, you can adjust your pay plans, work policies,

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employment practices, etc., so that you are in position to attract and retain the finest workforce in your marketplace.

Deadline to participate is June 30. To enroll in the free survey, go to www.nadaworkforcestudy.com. Participants will need their member (company) ID. Call (800) 557-6232 or email WorkforceStudy@nada.org with any questions.

Save the Date – Next Level Leadership and F&I Summit, June 24 On June 24, at the Verve Hotel in Natick, your Association is sponsoring an intensive, one-day F&I and Leadership workshop that will be hosted by our endorsed partner, Ethos Group. This complimentary event is open to all of our valued dealer members and is intended for Dealer Principals, General Managers, Finance Managers, and General Sales Managers. Be on the lookout for registration materials in the coming days, or go to nextlevelleadership2015.com to register.

Congratulations, Peter Tolchinsky Peter Tolchinsky is the President of Tolchinsky Consulting, which provides IT services for your Association. As a refugee of the old Soviet Union, Peter came to this country when he was 11. As a graduate of Brookline High School, he started his business at age 18. On April 2 at Boston’s Faneuil Hall, Peter was sworn in as one of our newest U.S. citizens. Congratulations to Peter and all his other colleagues who swore the oath to the greatest Nation in the history of mankind. t

Massachusetts Auto Dealer MAY 2015

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Troubleshooting

MSADA

Protecting Pregnant Employees

By Peter Brennan, Esq.

MSADA Staff Attorney If an employee’s job description requires her to be on her feet for several hours a day and she breaks her leg skiing Tuckerman Ravine, the dealership is generally not required to pay the employee if she cannot work. Alternately, an injury that occurs on the job triggers several legal requirements for the employer.

What if, however, an employee cannot perform the functions of her job because she is pregnant?

Under Massachusetts law, when a work injury prevents an employee from performing the essential functions of his or her job, but is not so serious that the employee cannot perform any job, the employee is eligible for partial disability worker’s compensation benefits. In these situations, the employer will often offer the employee a chance to return to work in a “light-duty” capacity while the employee recovers from his or her injury. A common dealership example of this is a technician that is injured on the job and is given the opportunity to return to work as an order taker for the parts department while still recovering from the injury.

Off-the-job injuries that do not result in a disability under the Americans with Disabilities Act can be complex to deal with, especially if the dealership’s employee handbook does not contain a specific policy. Many times, employees are required to take unpaid leave while recovering, or can even be terminated

MAY 2015

for failure to perform their roles.

Should an employee that can no longer lift heavy objects as a result of her pregnancy be treated like a salesman with an off-the-job skiing injury or a technician that was injured on the job?

A recent Supreme Court case has shed some light on this issue.

In Young v. United Parcel Service, Inc., the plaintiff, Peggy Young, was employed as a UPS delivery driver – a job that required her to be able to lift seventy pounds. Ms. Young requested and received a leave of absence to pursue fertilization treatments which were successful, but her doctor ordered her not to lift more than twenty pounds during her pregnancy. Unable to perform her job duties and having expended all of her FMLA leave, UPS forced Ms. Young to take an extended, unpaid leave of absence rather than temporarily transitioning her to a position that required no heavy lifting, which she had requested. Ms. Young’s medical coverage expired during her unpaid leave of absence, causing her to incur hefty medical bills, and she was only allowed to return to work after she had given birth.

Ms. Young sued UPS under the Pregnancy Discrimination Act (PDA) of 1987, which amended Title VII of the Civil Rights Act to include a prohibition of discrimination on the basis of pregnancy, childbirth, and related medical conditions. The PDA states that pregnant women have the right to be treated the same as others who are not pregnant but are “similar in their ability or inability to work.”

In her argument, Ms. Young cited that UPS commonly granted accommodations including light-duty to (1) drivers injured on the job; (2) drivers who qualified as disabled under the ADA; and (3) drivers who lost their Department of Transportation commercial driver’s license, for reasons ranging from illness and injury to drunk driving and traffic

Massachusetts Auto Dealer www.msada.org

offences. Ms. Young argued that, since UPS routinely granted accommodations and light-duty for others that could not perform their job responsibilities for various reasons similar to hers, it was discriminatory in violation of the PDA not to offer the same accommodations to her.

UPS argued that its policy was pregnancy-neutral and, therefore, could not be discriminatory. UPS was victorious in the federal district and appellate courts before the Supreme Court sided with Ms. Young. Despite ruling for Ms. Young, however, the Court actually rejected both arguments and established a new standard for employer policies.

The Court rejected Ms. Young’s argument that she should have been entitled to an accommodation if it was offered to any other employee as an overly broad interpretation of the PDA. Instead, the Court ruled that a pregnant employee can bring a case by showing that she sought and was denied an accommodation that was granted to others similar to her in their ability or inability to work.

The employer then has the burden to prove that its policy is based on legitimate and nondiscriminatory reasons.

In light of this decision, all dealer members are encouraged to review their accommodation, leave, and light-duty policies to ensure that pregnant employees are not being discriminated against.

If job modification are being offered to one group of employees, but not another group, make sure that a reason exists for this policy beyond the bottom line. . t If you require any additional information regarding employee complaints or any other issue, please contact Robert O’Koniewski, MSADA Executive Vice President, rokoniewski@msada.org or Peter Brennan, MSADA Staff Attorney, pbrennan@msada.org or by phone at (617) 451-1051

Legal

MSADA

Sara Decatur Judge, Burns & Levinson LLP

Why Side Agreements With Your Customers Are A Bad Idea Your Sales and F&I teams are probably willing to go the “extra mile” to close a sale with a customer, but when that extra mile includes making a “side agreement” to lend the customer money, it’s time to re-evaluate the transaction.

You might be surprised to learn that Sales and F&I employees will sometimes cut a side agreement with the customer, in which the dealership will lend the customer a small amount of money as necessary to assign the loan and close the deal. Your initial reaction might be, “But that doesn’t happen in my dealership,” and while we hope that is true, it is happening more often than it should.

As attorneys who represent many dealers, we have seen a variety of situations where the dealership’s employees have extended credit to customers in an effort close the deal. This often occurs when the customer just needs a few more dollars down in cash to get financing.

For example, we recently had a situation where a Sales Manager had a customer sign an “I Owe You” form documenting a loan from the dealership in the amount of $1,000.

The customer then used the loan money towards his cash down payment. We have also seen F&I employees drafting promissory notes where the dealership lends the customer money for insurance premiums on new vehicles sold.

Not surprising, side agreements are a bad idea all the way around. Typically, the employees making these deals think that the loans are low risk, but they are not. The employees will often try to document the side agreements in writing, but these agreements might not be in compliance with federal “Truth in Lending” requirements. Regardless, your dealership certainly does not want to be in the position of playing the role of debt collector when one of these customers fails to pay their loan back. More often than not, these customers disappear and dodge

“Educate your employees about the dangers of this practice.” all efforts for collection. The dealer loses the money.

There is a bigger liability associated with this practice that your employees probably do not know about. If your employees are making side agreements with your customers, your dealership is likely in violation of its indirect lending agreements with its lenders. For example, the M&T Massachusetts Dealer Agreement (“M&T Agreement”) contains language that forbids these side agreements. Under the M&T Agreement, a dealership assigning its contracts to M&T makes an affirmative representation that the contract being assigned is the only agreement between the customer and the dealership concerning the transaction. The dealer also represents that the amount identified as the down payment in the purchase agreement is correct and was actually received by the dealer in the form of a check or cash from the customer. A side agreement between the dealer and the customer violates these provisions and could jeopardize your lending relationship.

In addition, these side agreements could violate the representations made by the customer when he or she signs the purchase and sale agreement. For example, the Reynolds and Reynolds Massachusetts standard form motor vehicle purchase agreement (“P&S”) states, “Purchaser represents and warrants that no credit other than that stated above has been extended to him by dealer.” When your employees enter into a side agreement with the customer, your dealership is extending credit to the customer in violation of the P&S. As soon as you make a “side agreement” regarding the extension of cred-

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it, that representation by the customer in the P&S is no longer accurate.

Your lenders rely upon the accuracy of the documents that your dealership prepares during the financing process. When misrepresentations are made, the lender could try to hold your dealership responsible for any losses if the customer defaults on the loan.

The risk is simply not worth it.

We recommend that you educate your employees about the dangers of this practice. A transaction that might appear to be low risk to a Sales or F&I employee could come back to haunt the dealership if the lender discovers the side agreement with the customer. t

Attorneys Sara Decatur Judge and Paul Marshall Harris are partners in the Automotive Group at Burns & Levinson LLP in Boston, Massachusetts. For over 20 years the experienced attorneys in the Automotive Group have been dedicated to advising and assisting motor vehicle dealers in all aspects of their business.

We

assist with strategic planning for dealer-

ships, employment advice, pay plan compliance, consumer disputes, buy/sell agreements, family business and estate planning, as well as intellectual property and trademark matters for dealerships.

If

you have questions about

dealership compliance issues, please contact us. Sara Decatur Judge: sjudge@burnslev.com; (617) 345-3211; Paul Marshall Harris: pharris@ burnslev.com; (617) 345-3854.

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AUTO OUTLOOK

MAY 2015

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MSADA

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Dealer Services

MSADA

Lead Like Lombardi By Rob Sneed

Connect the Success

Vince Lombardi’s expectations are every bit as applicable to the automotive dealership as they were to his football team. By insisting that your people are fully-invested in their personal lives, whatever that means to them, you can insist that they are fully invested in their professional lives.

Most often this means that you have to

colades, etc. – and commit to making the difference happen with them.

2. Help them define what success means to them. People have different visions of what success looks like. Help them to define that picture in high-definition and then begin working through what needs to be done in order to experience it.

3. Commit to their development. The

Rob Sneed is a development rep and motivator for Ethos Group Consulting Services and the author of various articles in the automotive industry.

Ethos Group

provides franchised

United States with an integrated program of resultsdriven income-development services, comprehensive training, robust recruiting and industry-leading products. automotive dealerships across the

Vince Lombardi, arguably the greatest football coach of all time, became famous for his unyielding dedication, unwavering determination, and tenacious spirit. He believed in the daily, dedicated practice of one’s assigned role and one’s alignment within the team. He demanded attention to detail and understood the power that comes from a well-trained, unified, and focused team. He expected nothing less than excellence from his players and coaches alike.

Lombardi’s approach to football was modeled on the fundamentals of his faith, to which he was dedicated even more deeply than the game of football. Regardless of the circumstances surrounding the day’s training, he would remind his team of his expectation that their priorities be properly aligned: “Your religion, your family, and the Green Bay Packers will be your priorities as long as you are here! And in that order!”

Lombardi realized that the focus he demanded from his team necessitated a certain balance that could only be attained with intentionality. He needed his team to eliminate the distractions off-the-field so that they could devote themselves wholeheartedly when on-the-field.

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The best leaders are committed to their people as much as their cause. “connect the success.” When a person comes to the realization that achievements in one area of life translate to progress in another area of life, a cycle of satisfaction is created.

Your employees begin to embrace the ageold principle of “work hard, play hard” with a totally new enthusiasm. It is every bit as empowering as it is intoxicating!

So how do you do it? Here are three keys to unlocking the potential of your business by unlocking the potential of those that drive it.

1. Discover what truly motivates your people. Different people are motivated differently! It is not always about money. In fact, it rarely is. Find what the differencemaker is – time, responsibility, respect, ac-

Massachusetts Auto Dealer www.msada.org

best leaders are committed to their people as much as their cause. By investing yourself in the growth of the individual, you will reap the return as a company!

Leaders Lead People Your responsibility as leaders in the dealership goes beyond sales quotas, gross profit percentages, and expense management. Ultimately you have a greater responsibility to people – both your employees and the customers they serve. It is difficult to be truly committed to one and not the other. After all, nothing so dramatically changes the profitability of a business like the people that make business happen. t

MSADA

Security Services

Protect Your Dealership Against Cybercrimes

Herby Duverné Principal & CEO of Taino Consulting Group Hduverne@TainoCG.com

Matthew Riley

Operations Manager at Taino Consulting Group MRiley@TainoCG.com

When it comes to maximizing the security of any automobile dealership, implementing the proper policies and procedures is the initial step to not only securing the data stored in critical systems, but also the physical security of the dealership’s most valuable assets. By taking proactive steps, dealerships are able to significantly reduce any vulnerability to both insider and external threats..

To ensure that adequate security measures are put into place, it is essential that dealerships enforce proper policies and procedures to enhance employee awareness of organizational standards, including physical security, access control, incident detection, and overall employee diligence. If the proper steps are taken, dealerships are able to apply best practices to all operations and significantly reduce security risk.

Some basic first lines of defense to enhance the protection of critical data and physical assets include prevention, detection, containment, and response plans to possible security threats. In addition, it is imperative that dealerships take into consideration factors such as restricting access to on-site systems and servers to authorized personnel, regularly backing up data on a scheduled routine basis, ensur-

ing backup media is stored in a safe offsite location, and enforcing a clean-desk policy to eliminate the exposure of critical data: These factors are all formalized in security documentation.

With a rapid increase in the use of mobile computing devices, the risks of perpetrators accessing confidential information in dealership management systems has increased. To help reduce end-user security risks, simple measures can be taken, including enforcing a strong password policy for desktops and systems, requiring that all employees log off or lock workstations when stepping away, and restricting login or password-sharing. In addition, updating desktop PC software on a regular basis, implementing a system that allows data from a mobile device to be wiped out remotely, and ensuring that all mobile device users secure access to devices with a password, are all basic, yet necessary steps in maximizing information security.

Access control can be ameliorated by enforcing the use of passwords, granting limited, least privilege access to software, systems, and networks, terminating user sessions after trigger events, and establishing restrictions for remote access. The organization should ensure that all employees are aware of organizational policy and procedures and the consequences for committing any violations. Through these actions, dealership management is able to start to mitigate risks of any unauthorized activity.

The development of Employee Security Awareness Training programs is crucial. Training courses can be conducted in person or through an online course. Implementing introductory and role-based training courses in information security it is important to ensure all employees of the dealership are fully aware of company policies, including the proper handling and protection of customer data, proper email use, compliancy to all standard policies and procedures, and the proper implementation of password requirements. Employees should also be made aware of key compliance factors relevant to the organiwww.msada.org

zation such as PCI DDS (Payment Card Industry Data Security Standard).

Another security control dealerships must implement is incident response. Incident response plans lay out a formal roadmap for implementing a response to a cyber-incident, and can go into effect when organizationally defined triggers such as intrusion, flagged or disruptive behavior is detected. Having an incident response capability is important in order to respond to potentially damaging scenarios in facilitation of maintaining essential functions.

Incident response plans should be fully validated by senior management, properly disseminated to key response personnel, and be incorporated in a new employee’s training.

In an industry that often hires contracted employees and services, dealerships must implement effective management and be sure that third-party expectations are properly documented. With third-party applications posing a significant risk to valuable data and daily operational functions, it is important that the necessary processes are in effect to enable management to accurately track and maintain adequate software protection. Also, it is important that management take the necessary steps to lessen the risks of file sharing by encrypting all shared files, ensuring that all contracts with third-parties are made clear, and implementing the proper policies and procedures.

To ensure the dealership’s network security, it is imperative that all third-party software be updated regularly, necessary patches are applied as per license agreements, all platforms remain compatible to evolving platforms, all code vulnerabilities are reviewed, and application penetration testing is conducted regularly based on the organizational or regulatory standard. To help reduce risks to unauthorized third-party data access, management must carefully manage all credentials and issue all third-parties unique identifications to authenticate to the system before any access to confidential information is granted. t Massachusetts Auto Dealer MAY 2015

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Cover Story

Pushing Forward Dealers and allies gather to discuss victories, coming challenges

More than 200 gathered for the Massachusetts State Automobile Dealers Association 2015 Annual Meeting, held at the Mandarin Oriental in Boston this month. The event saw newly installed Governor, regulators, and other industry experts present their vision of how to further the interests of Massachusetts’ franchised automotive retail economy.

“

The event highlighted the need for continued participation from dealers in the political process, including dialogue with the Commonwealth’s regulatory bodies. The following are some of the highlights from the day’s agenda.

Gov. Charlie Baker After a promise in 2014 to return to the MSADA Annual Meeting should he succeed in his campaign for governor, Charlie Baker arrived ready to review his new administration’s first 100 days and outline the road ahead. He didn’t shy away from making a new promise as well.

“I do not believe I will be a success as governor if we don’t get to a point where the RMV has a better reputation,” Baker said. “I say that knowing that statement is rife with risk, but 3.3 million people use the registry every year. We have to figure out a way to enhance the performance of the Registry.”

Baker added that he himself would join Registrar Erin Deveney on a dealership visit to get a better sense of the realities dealers face when interacting with the RMV. Before taking questions, he also offered that his approach would be business-minded going forward.

“Time matters a lot in business,” Baker said. “We have to come up with simpler, faster ways of conducting business with those who need us to do their jobs so they can get their stuff done.”

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“We have to come up with simpler, faster ways of conducting business with those who need us to do their jobs.”

MSADA “When we get past the PT Barnum quotes that Elon Musk throws out there, legislators see through it.”

Government Affairs Report The MSADA legislative team of Executive Vice President Robert O’Koniewski, Staff Attorney Peter Brennan and legislative agents Jim Hurrell, Marty Corry and Patrick Huntington laid out the stakes facing dealers on Beacon Hill during this legislative session.

Among the continuing issues is Tesla Motors, which has continued to operate outside of the Commonwealth’s dealer franchise laws.

O’Koniewski says education is key -- and that dealers are the best at telling their own stories’ to legislators.

“For them to think they’re outside the dealer laws, they’re arrogant,” O’Koniewski said.

“When we get past the PT Barnum quotes that Elon Musk throws out there, legislators see through it.”

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Pushing Forward Scott Dube

MSADA President MSADA President Scott Dube opened with a call for action from his fellow dealers. Pulling out some of Sen. Elizabeth Warren’s polemic on auto financing, he highlighted the need for dealers to counter the mischaracterizations she makes in her speeches.

“There’s no end to their desire to cap your profits.”

RMV Registrar Erin Deveney

“You make things better for Massachusetts, and we as a state agency need to support you.”

RMV Registrar Erin Deveney came to the Annual Meeting prepared to answer questions on the never-ending frustrations with the slowness of the Registry’s transition into the Digital Age. Deveney says she’s ready to jump in.

“My door is always open,” Deveney said. “I’m more than happy to talk to you about issues. We may not always come to the same endpoint, but we’ll know where you stand on the issues.

You make things better for Massachusetts, and we as a state agency need to support you.”

“They’re frustrated they didn’t get us under the regulatory umbrella of the Consumer Finance Protection Bureau,” Dube said. “The bank isn’t the target here folks.

You’re the target. They’re coming after your F&I products. There’s no end to their desire to cap your profits.”

“Ladies and gentleman, we need your help on this thing,” Dube added. “We need you to talk to your congressman, your senators, to let them know how you feel.”

Tom Worobec Automotive News

Helming the magazine’s digital television network, Worobec shared insights into the world of automotive retail from a journalist’s lens.

His 20 years in the business has led him from moments such as being part of the throng chasing GM’s CEO at the New York Auto Show to capturing mishaps in self-driving vehicles. But the most inspiring part of the job, he says, is getting to visit dealerships across the country where he sees entrepreneurial spirit in action.

“Dealers are passionate, stay humble, and stay hungry,” he concluded. “It’s a total team effort.”

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“You can’t just wish for it, yo to work for it.”

MSADA “We have a responsibility to preserve this model for the future generation of dealers.”

ou have

Bill Fox

NADA Chairman NADA Chairman Bill Fox’s appearance at the Annual Meeting marked the first time in 15 years a sitting Chairman had appeared. He shared his journey from attorney to dealer, lauding both NADA Director Don Sudbay and MSADA Executive Vice President Robert O’Koniewski for keeping Massachusetts dealers at the cutting edge of the industry.

“Those guys reflect all of your attitudes,” Fox said. “Those are hard-working, committed guys who are doing the absolute best they can for all of you. They’re hard nosed, and that has served them and you very well.”

Fox joined MSADA President Scott Dube in stressing that dealers face a crossroads, where the entire franchise system is under attack. “The focus on the franchise system is not for any of us,” he added. “The lot is cast for almost all of us. It’s been a great ride. I think we have a responsibility to preserve this model for the future generation of dealers.”

Rob Sneed Ethos Group

Rob Sneed offered insight into the changing workplace culture that’s being driven by the millennial generation.

Dealership owners need to understand better how leadership can be tailored to maintain better employees. Sneed says it begins by understanding the generational divide.

“Challenges have been lessened,” he said. “Everyone gets a trophy -- they’ve been raised with that mindset. But (they learn) you can’t just wish for it, you have to work for it.”

Scott Silverman Silverman Advisors

Attorney Scott Silverman offered an overview of the rapidly changing regulatory climate dealers will continue to encounter and ways to avoid making crucial mistakes.

“We’re in a different world now,” Silverman said.

“We’re looking at enforcement regardless of whether someone is complaining.”

Among the pratfalls Silverman outlined were offering warranties contingent on a customer continuing to bring a vehicle to a specific dealership, and any offer that promises something for “free.” www.msada.org

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MSADA

Pushing Forward Chris Hopson IHS Automotive

IHS analyst Chris Hopson presented an economic outlook for 2015 and beyond that overall pointed toward positive change in both the automotive retail industry and the economy as a whole. But the power remains in “This consecutive the hands of the consumers. growth is something “If you look at the real strength of the economy right now, it lies with the we haven’t seen in consumers,” Hopson said. “The cyclirecent history.” cal nature of autos is kicking in, with the growth rate slowing now as pent-up demand has now declined and want-based demand replaces need-based demand.”

Hopson added that he expects to see as many as 17.7 million units sold in 2017 before the number dips slightly. Overall, he said the industry can expect “the longest growth period in recent memory. This consecutive growth is something we haven’t seen in recent history.”

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NEWS from Around the Horn from Around

NEWS the Horn

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DANVERS

Honda North Donates $5,000 to Red Cross Honda North and The ICL Used Car Center, both International Car Companies, donated $5,000 to the Disaster Action Team of the American Red Cross of Northeast Massachusetts.

Commemorating March as “First Responders and American Red Cross Appreciation Month,” ICL dealerships donated $100, up to $5,000, from every vehicle sold, to support the volunteers and services of the Disaster Action Team.

International Cars, Ltd. dealerships also offered employee pricing to all first responders and emergency personnel throughout March and allocated an additional $3,000 to the American Red Cross University of New Hampshire Club.

“Our dealerships and staff are sincerely grateful to all local police, firefighters and EMS teams for their dedicated service,” said Richard Collins, CEO of International Cars, Ltd. “With a shortage in blood donations during this challenging winter, we couldn’t be more proud to partner with American Red Cross of Massachusetts and the American Red Cross University of New Hampshire Club, and we would also like to thank our neighbors who helped support this cause by visiting our dealerships and donation centers during the month of March.”

CEO of International Cars Ltd, Richard Collins, left, and Dealer Principle of International Cars Ltd, Marshal Jespersen, right, present the proceeds from the “First Responders” sales promotion during the month of March to Executive Director Frederica Doeringer, center, of the American Red Cross of Northeast Massachusetts.

The American Red Cross of Northeast Massachusetts serves a population of more than 762,000 people in Essex County, with a Disaster Action Team on call 24 hours a day, 7 days a week.

“We are so grateful for ICL’s understanding of the importance of the Red Cross in our community and their ongoing commitment and financial support,” said Frederica Doeringer, executive director of the American Red Cross of Northeast Massachusetts.

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NEWS from Around the Horn HADLEY

TommyCar Auto Group Receives National, Local Recognition TommyCar Auto Group -- consisting of Country Nissan, Country Hyundai and Northampton Volkswagen -- has received two high profile awards so far in 2015.

The Auto Group has received the 2015 Best New Car Dealer for the Valley Advocate “Best of Valley” Readers’ Poll. For over thirty years, the people of Western Massachusetts have been making their voice heard by voting in the Valley Advocate’s “Best of Valley” Readers’ Poll. From favorite automotive dealership to art museum and pizza place, to hair salon and dentist.

“Best of” voters have been showing their support for those businesses that are an integral part of the fabric of their lives in the Pioneer Valley.

“We are incredibly honored to be recognized for Best New Car Dealer,” said Carla Cosenzi, President of TommyCar Auto. “It

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is such a great feeling to know we have been embraced by this community and we are humbled by this experience.”

Country Nissan also was recently awarded a 2015 DealerRater Consumer Satisfaction Award, a recognition auto dealerships can earn by delivering outstanding customer service as rated by online consumer reviews. DealerRater, the car dealer review site for consumers, created the Consumer Satisfaction Awards to enable online car shoppers to instantly spot car dealerships that provide high-quality customer service.

Country Nissan has achieved consistently high marks on the DealerRater website, placing it among the top dealerships nationwide. Online shoppers visiting Country Nissan’s dealer review page on DealerRater.com will find a “2015 Consumer Satisfaction Award winner” designation.

NEWS from Around the Horn

MSADA

DANVERS

Brian Kelly Profiled on Boston.com Earlier this month Boston.com profiled longtime dealer Brian Kelly and his rise from selling cars in his spare time during high school through today as a fixture of the Danvers community.

“This is my life; I love it,” he told the site. “If I have a morning off, that’s all I need. Plus, I can’t go anywhere without driving past one of my dealerships and then I just have to stop in and say hello.”

The profile also highlighted Kelly as the winner of the 2014 Massachusetts Auto Dealer of the Year award and his completion of the largest VW dealership in North America. The full article is available at Boston. com.

SEEKONK

Acura Dealership Earns Designation through Motor Trend Certified Vehicles Program Motor Trend Certified Vehicles, the industry-leading Certified Pre-Owned program for a franchised dealer’s “other makes and model” vehicles, announced that First Acura has become the exclusive Motor Trend Certified Dealer in Seekonk, Massachusetts.

Motor Trend Certified Dealers are carefully selected and appointed based on their focus on quality and a positive customer experience. They must have a history of excellent customer reviews and outstanding service.

Motor Trend Certification allows First Acura to offer Motor Trend Certified Pre-Owned vehicles and Motor Trend Certified Service from their service department, on an exclusive basis in their designated territory.

First Acura has an outstanding reputation as one of the most trusted car dealerships in the East Providence area. “We are ecstatic to add First Acura to the Motor Trend Certified Vehicles program,” said Eric Prins, National Business Development Manager, Motor Trend Certified Vehicles. “First Acura delivers service which is unparalleled in its Massachusetts community. Dealerships that really hone in on providing a better shopping, buying, and ownership experience for their customers are the heart of the Motor Trend Certified program.” www.msada.org

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MSADA

CHICOPEE

In Memoriam: Howard Sackaroff Howard Sackaroff, executive manager of Chicopee-based Curry Honda and Nissan, died May 4 according to company spokesmen.

Sackaroff, a New York City native who grew up in the Canarsie section of Brooklyn, was not only a savvy car salesman and manager but also the public face of the Curry brand in Western Massachusetts, where he regularly starred in spoof commercials that made both Sackaroff, with his undeniable New York accent, and the brand he was promoting instantly recognizable.

“We are so proud to have called Howard a friend as well as a trusted and respected colleague,” the Curry company said on Facebook.

“We have learned much from Howard, and we navigated many challenges and successes together.”

RAYNHAM

Sportier 2016 Nissan Maxima Rolls Off Assembly Line Full-size sedans are much more likely to be known for their subdued highway cruising than their engaging acceleration or responsive handling, but the 2016 Nissan Maxima will be a clear exception to that rule when it goes on sale this June. Nissan kicked off production of the redesigned 2016 Maxima at its Smyrna Vehicle Assembly Plant in Tennessee last month, welcoming a bolder generation of its “4-door sports car.”

It is clear from first glance that the 2016 Maxima is not a typical full-size sedan. Crisp design lines complement the car’s V-Motion front end, boomerang-shaped headlights, kick-up Cpillars and floating-roof motif to create a look that is sure to stand out in the company parking lot. Overall, the new Maxima is lower, longer and lighter than the previous generation, and its handling is further enhanced by new monotube rear dampers and a 25 percent boost in torsional rigidity. Under the hood, more than 60 percent of the revamped 3.5-liter V6 engine is comprised of new parts, leading to a 15 percent improvement in highway fuel efficiency and a 10-horsepower increase that brings total output to 300 horsepower.

“While other full-size sedans tend to go unnoticed on the road, the 2016 Maxima will make its presence fully known, both with its style and with its performance,” said Bruce Garcia, general sales manager of Mastria Nissan in Raynham. “If you’re a driv-

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ing enthusiast who has always loved sports cars but now you need more space, comfort and safety for your family, then the new Maxima was designed with you in mind.”

NORWOOD

NLRB Rules Against Boch in Labor Dispute The National Labor Relations Board ruled that Boch Enterprises had unfairly regulated employee dress and regulated social media activity, Automotive News reported this month.

The company was found by the NLRB to have unlawfully instituted policies that violated employee rights to comment on social media and wear union pins on the job. Specifically, the store declared that it would not prohibit employees from providing information about one another, interfere with social media postings, require employees to get management permission before talking to the media or prohibit employees with public contact from wearing pins and insignias.

Many of those changes were codified in store handbook revisions in 2013 but not to the satisfaction of two of the three NLRB members who heard the case, documents from the case show.

The magazine notes that while Boch lost the dispute, the effort to unionize 25 technicians at Boch Honda back in 2010 never went forward. t

NADA Update

By Don Sudbay

Congress Won’t Preserve Consumer Discounts Without Your Help 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 of you at our Annual Meeting in Boston earlier this month. I know our NADA Chairman, Bill Fox, was very impressed with our association and the great program that was presented that day. Bill works very hard for us all and we were very fortunate to have him with us for the day. Thanks again to Bob and our great staff for their tireless work in organizing an event that we can all be proud of.

A Special Note from NADA Chairman Bill Fox “The effort to preserve dealer-assisted financing continues with NADA and its valued partners. With the introduction of H.R. 1737, Congress is continuing its bipartisan efforts to rescind the Consumer Financial Protection Bureau’s flawed 2013 auto finance guidance.

“The House bill, ‘Reforming CFPB Indirect Auto Financing Guidance Act of 2015,’ was introduced by Reps. Frank Guinta (R-NH) and Ed Perlmutter (D-Colorado).

“Lawmakers on both sides of the aisle recognize that the CFPB’s overreach into our industry would not only harm the intensely competitive indirect auto lending market but, most importantly, would harm consumers by limiting their ability to obtain discounted auto financing from their local dealers.

“How? “The auto finance market is extremely competitive, with thousands of banks, credit unions and other lenders competing to provide loans—and that competition drives interest rates down. Not only do dealers help customers tap into that market and find great financing options, but dealers can then discount those great rates even further. The financing market may be complicated, but the reality is not: Dealers help consumers save money on auto loans. That’s why 80 percent of new-car buyers chose to finance through their dealership.

“But the CFPB wants to eliminate this competitive marketplace and rate discounting. It has proposed an inflexible system of price fixing and flat fees that will destroy compe-

tition and lead to higher interest rates for everyone.

“Instead of protecting consumers, the CFPB’s policy to eliminate discounts in the showroom would prevent consumers from saving millions of dollars each year through dealer-assisted financing.

“H.R. 1737 would establish important consumer safeguards. First, it would require the CFPB to study the true impact on consumers before a new guidance is issued. The bill also includes provisions for a public comment period; consulting with the agencies that share jurisdiction over the indirect auto financing market; and disclosing its testing methodologies prior to issuing any future guidance related to indirect auto credit.

“These are all steps every other federal agency must take before issuing market-altering rules or regulations. There’s no reason the CFPB shouldn’t be held to the same standard.

“The National Automobile Dealers Association—and its 16,000 dealer members—applaud Congressional efforts to protect consumer interests. We applaud the leadership of Reps. Guinta and Perlmutter. And we stand behind our financing model and will work hard to make sure it is available for the benefit of customers nationwide.

“Be sure to urge your members of Congress, especially your Democratic representatives, to cosponsor H.R. 1737.

“To view the bill text and issue brief, visit www.nada.org/ cfpb. For more information, contact NADA’s legislative affairs office at legislative@nada.org.”

Pacific Lutheran University Receives NADA Foundation Grants Pacific Lutheran University, located in Tacoma, Washington, received two $7,000 grants from the National Automobile Dealers Charitable Foundation.

The donations were made through the NADA Foundation’s Joseph J. Sanchez Memorial Fund, which supports the emergency needs of students, and John P. Winston, Sr. Memorial Fund, which is dedicated to the study of ethics.

The NADA Foundation established the fund to honor Sanchez, former vice president and general manager of General Motors’ Oldsmobile division and the first president of Saturn Corporation. Since 1985, the Sanchez Fund has provided $550,000 in grants to private and independent colleges across the country.

Winston, a past NADA corporate secretary, was an accomplished attorney dedicated to ethical practices. The Winston Fund, which was established in 1990, has provided $518,000 in grants. www.msada.org

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NADA Update The grants were presented last month by Bob Mallon, NADA Foundation chairman; Gary Gilchrist, president, and Vicki Fabre, executive vice president, of the Washington State Auto Dealers Association; and Marlene Hollenback, an NADA board member representing Washington.

NADA Issues Call for Convention Workshop Proposals The workshops are one of the main attractions at the annual NADA Convention and Expo. More than 17,200 participants, which included new-car dealers, dealership managers, and industry professionals, attended the workshop sessions at the past convention.

Workshop proposals for the 2016 NADA convention, which will be held in Las Vegas, can be submitted online until June 26, 2015.

The workshops typically cover many aspects of the dealership business through several educational tracks that are specific to key operational areas, which include: • Dealer/Executive; • Digital and Traditional Marketing; • Legal and Regulatory; • Employee Recruiting, Hiring and Retention; • Fixed Ops (Parts, Service and Body Shop); and • Variable Ops (Sales, Business Office and F&I.) Each workshop proposal should be new content - not previously presented - on a relevant topic of interest to new-car dealers and their managers. Each proposal should include a title, synopsis, learning objectives, presentation format, and 90-second video clip covering the workshop’s main focus.

The workshops, which are presented each year by the nation’s top industry experts, are typically offered three times daily over the four-day convention.

The deadline to submit a proposal is 5 p.m. ET on June 26. Candidates will be notified in October if their workshop proposal has been accepted.

For detailed instructions on how to submit a workshop proposal, visit www.nadaconvention.org .

NADA: April Auto Sales Continue to Lead Economic Growth Falling gasoline prices and continued pent-up demand have spurred spending on new cars and light trucks, with average retail transaction prices rising more than 3 percent in the first quarter compared to the same period a year ago, says the National Automobile Dealers Association.

The average retail transaction price for a new vehicle was $33,189 through the first quarter.

“Consumers clearly feel confident enough in the economic recovery to make big-ticket purchases,” said NADA Chief Economist Steven Szakaly. “While we’ve seen a pullback in investments in other industries, particularly in oil-related MAY 2015

Massachusetts Auto Dealer www.msada.org

MSADA industries, automotive retailing remains a growth industry.”

NADA has forecasted sales of 16.94 million new-light vehicles for 2015.

“The automotive-retailing sector is continuing to outpace growth in the overall U.S. economy,” Szakaly added. “Economic and employment growth were slower than expected in the first quarter but vehicle sales remain strong.”

The strong summer selling season and the allure of newvehicle models will likely keep sales humming, despite an expected gradual rise in gasoline prices by about 11 percent over the next eight months of the year, NADA predicts.

This year, the light-truck segment, which includes SUVs, CUVs, minivans and pickup trucks, is expected to outsell cars by 56 percent to 44 percent, respectively, Szakaly added.

The Fed is expected to delay an interest rate increase and any increase is likely to be small, he said. NADA now forecasts the Fed to raise rates by just 25 basis points in the fall and 35 basis points by the end of 2015.

“The historically strong spring and summer selling seasons will be driven by new and redesigned vehicles as well as competitive financing rates, which bode well for auto sales over the next several months,” Szakaly added.

Szakaly added that strong consumer demand in the usedvehicle market is keeping trade-in values high, which is another value for car buyers.

“Just like the new-vehicle market, we continue to see healthy demand for used cars,” he said. “Those same factors in the new-vehicle market, which include low financing rates, extra spending money and improving employment opportunities, are driving car buyers to the used-vehicle market as well.”

NADA Applauds Auto Alliance for Launching New Data-Driven Study on Recalls The Alliance of Automobile Manufacturers recently announced a major research initiative to study consumer attitudes about vehicle recalls and reasons why free repairs are sought or not sought. The research is the first collective effort to understand what motivates consumers to get their recalled vehicles repaired.

NADA President Peter Welch released the following statement in response: “NADA is a strong supporter of data-driven efforts to improve recall completion rates, and the Alliance of Automobile Manufacturers continues to be a leader in using consumer data to identify the most effective, most efficient and most consumer-friendly ways to increase recall repair rates. The Alliance’s new initiative should provide important insights, and we hope policymakers closely examine the results in order to make fully informed decisions about such an important policy matter.” t

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Produced by Steven Szakaly, NADA Chief Economist Another month, another gain. Light-truck sales in April continued to sizzle, increasing to 54.8 percent of market share year-to-date (just shy of NADA’s forecast of 56 percent). As expected, small and midsize cars lost the most market share, with their inventories rising, their incentives climbing, and some factories starting to re-

MAY 2015

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duce production. Low gasoline prices aren’t helping move hybrids, electric cars or small cars, either. We expect low gasoline prices to continue, rising just 11 percent through the rest of 2015. Auto sales remain a leading indicator. While the rest of the economy has hit a soft patch, we expect a rebound during summer.

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Accounting

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Dealerships Maximize Profit with Annual Parts Reimbursement Rate Adjustment by Frank O’Brian C PA , CIA , CFE at O’Connor & Drew, P.C.

S ince joining the firm in 1998, Frank O’Brien has worked both with closely held businesses and non - profits , specializing in the automotive industry . F or the past sev en years , F rank has managed the internal audit and fraud division at the firm . P lease contact F rank O’B rien , CPA, CIA, CFE at (617) 471-1120 or fobrien@ ocd. com.

One of the most overlooked aspects of the warranty parts law is the dealer’s right to request a parts reimbursement rate increase once a year. Specifically, the law states that “a dealer shall not declare an average markup percentage or average labor rate more than once in a calendar year.” In order words, a dealer can submit for a warranty parts rate increase each year. However, very few dealers have submitted more than once. Yet, they will submit for labor rate increases annually.

Why not parts? There are a couple reasons that initially come to mind. The most obvious reason is the belief that there is no real cost benefit in subsequent submissions. Most dealers generated an additional $5,000 to $10,000 a month from their initial warranty parts rate increase, and they do not believe that there is enough additional profit to be attained by subsequent increases.

However, there may be more profit than you think. We recently prepared a second submission for a dealer, which increased the warranty parts mark-up from 73% to 82%. Based on the current volume of warranty sales, it projects to increase gross profit by $4,000 a month. It should be noted that results will vary based on MAY 2015

the additional increase in the rate and the volume of warranty parts; however, it is important to perform an analysis to determine the cost benefit.

Another reason that dealers do not submit multiple times is that most dealerships do not increase their parts matrix on an annual basis like they do for their labor rate. Over the past several years, O’Connor & Drew has assisted hundreds of dealerships in various states obtain retail rates for warranty parts based on the 100 repair order analysis stipulated in the state laws. During this time, the most striking observation has been the wide variance in the average mark-up charged by dealerships to their retail customers.

Some dealers have been approved at over a 100% mark up while other dealers have been approved below 55%.

The main reasons for such discrepancies directly relate to the parts matrix in place and discounts. Oftentimes, parts departments do not implement an aggressive enough parts matrix to maximize their profitability. Other times, the matrix is effective; however, discounts are utilized too liberally, reducing the rate and profitability. Below is a list of the average approved mark-up rates in Massachusetts by franchise: General Motors

79%

Chrysler

77%

Ford

Honda

Nissan

Hyundai

70% 79% 68% 75%

Subaru

76%

Other Franchises

76%

Luxury Franchises

87%

As you can see, the average approved rate for most franchises is in the mid to upper 70’s, with Ford and Nissan falling

Massachusetts Auto Dealer www.msada.org

a little short of this mark and the luxury brands much higher. It behooves every dealership that was approved at or below the average to analyze both its parts matrix and the amount of discounts. We can assist you with this process, especially those dealers that utilized our warranty parts services. We retain all the data used in the original submission so that we can advise you on the proper steps to take to maximize the additional profit from a second submission.

Warranty Labor It is important to remember that dealers should submit for a warranty labor rate increase each year. During our recent work with service departments, we have noted some dealerships that have not submitted for a labor rate increase in two to three years. This may result from the transition of manufacturers’ requirements to align with the Amended 93B of 2012, which requires a 100 repair order analysis. This is most notably true for General Motors dealers, who in years past received an automatic annual labor rate increase. However, once General Motors approves a dealer for retail reimbursement for parts, the dealer is automatically put on the same program for labor.

The downside of this development is that the 100 repair order analysis is very time consuming and difficult to do inhouse. On the other hand, the benefit is that most dealers will achieve higher retail rates with the 100 repair order analysis. We recently prepared a labor rate increase submission for a Massachusetts Chevrolet dealer, which resulted in a labor rate increase of $14 per hour.

If you have any questions regarding these issues or any other issues pertaining to the warranty reimbursement process, please contact Frank O’Brien, CPA, CIA, CFE at (617) 471-1120 or fobrien@ocd.com. t