MSADA, One McKinley Square, Sixth Floor, Boston, MA 02109
auto M a s s a c h u s e t t s
D
E
A
L
E
R
FIRST CLASS MAIL US POSTAGE PAID BOSTON, MA PERMIT NO. 216
March 2013 • Vol. 26 No. 3
The official publication of the Massachusetts State Automobile Dealers Association, Inc
Two Seats
at the Table
Call Jean Fabrizio (617) 451-1051, ext. 229, or email jfabrizio@msada.org for your scholarship application, eligibility and details.
May 17, 2013
Ma s s a c h u s e t t s
auto D
St a f f D i r e ct o r y Robert O’Koniewski, Esq. Executive Vice President rokoniewski@msada.org Jean Fabrizio Director of Administration jfabrizio@msada.org Paul Fellows Administrative Assistant/ Membership Coordinator pfellows@msada.org Auto Dealer MAgazine Robert O’Koniewski, Esq. Executive Editor Tom Nash Editorial Coordinator nashtc@gmail.com Subscriptions provided annually to Massachusetts member dealers. All address changes should be submitted to: MSADA by e-mail: pfellows@msada.org Postmaster: Send address change to: One McKinley Square, Sixth Floor Boston, MA 02109 ADVERTISING RATES Inquire for multiple-insertion discounts or full Media Kit. E-mail tnash@msada.org Quarter Page: $450 Half Page: $700 Full Page: $1,400
Back Cover: $1,800 Inside Front: $1,700 Inside Back: $1,600 Ad Directory
E
A
L
E
R
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
4 6 8 10 11 12
From the President: Attacks from all Corners THE ROUNDUP: Waiting for the House Shoe to Drop AUTO OUTLOOK Accounting: A Bucket List for 2013 LEGAL: Parts Counter Employees Entitled to Overtime Pay INSURANCE: Distracted Driving
14 Cover Story: Two Seats at the Table
18 23 25
NEWS From Around the Horn NADA UPDATE: Consumer Protection Agency Targets Dealer-Assisted Financing Economic Update: Much Ado About Very Modest Budget Cutting
BlumShapiro, 20 Boston Herald, 28 Lynnway Auto Auction, 21 Nancy Phillips Associates Inc, 20 O’Connor & Drew, P.C., 27 Southern Auto Auction, 18
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.
www.msada.org
Massachusetts Auto Dealer MARCH 2013
4
from the President
by Scott Dube, MSADA President
Attacks from all Corners
MSADA is pushing back against threats from abroad and closer to home
A
s dealers, you know that the business environment can be hostile even during the best of times. What we’ve seen repeatedly during the past few years, however, seems like a never-ending stream of attacks from all sides of the industry. It’s beyond daunting how many attack fronts we face as auto dealers. That’s why MSADA is here -- so you can worry less about looming industry threats and focus on your business. And we have strong representation at the national level, too, as our cover story about ATD Chairman Dick Witcher and NADA Director Don Sudbay shows. We’re seeing increasingly bold moves from companies such as Tesla Motors in California and manufacturers from India and China that risk eroding the very foundations of the franchised dealer system. And while Tesla attempts to make the dual argument that it is following our Massachusetts franchise laws and that those laws are old-fashioned, Mahindra trucks has also thumbed its nose at dealers who wanted to take a chance with the company by reneging on its end of the deal. There is also, of course, our own manufacturers who have attempted to stabilize their balance sheets on our backs. Whether they’re demanding new facilities that promise very little or even no return on investment or otherwise dipping their hands into our revenue streams, in many cases the manufacturer-franchise relationship is being tested in ways previous generations would have never imagined. As if that weren’t enough, we can always look to both Beacon Hill and Capitol Hill, where all manner of threats to our bottom line perhaps even our very existence, are constantly ready to emerge, whether it’s the Consumer Financial Protection Bureau (CFPB), the brain child of Massachusetts’ senior Senator Elizabeth Warren trying to control and cap finance income or the
MARCH 2013
Massachusetts Auto Dealer www.msada.org
President’s constant push for emissions standards that do nothing to reflect the will of the consumer. In the case of CFPB they seek to eliminate the concept of reserve in favor of flat fees saying that rate mark-up can be discriminatory. What they fail to realize is that chasing this profit is the very reason we work so hard to arrange some of these loans and that harm to the consumer, not protection of the consumer, is what will ultimately befall the consumer they seek to defend. In the case of CAFE and very high gas mileage ratings the government unwittingly will drive the cost of vehicles up so far that the average American won’t be able to afford a new car. We’re all for continuing to improve and to protect the planet but there must be some balance for the consumer’s sake! As Dick Witcher said in his speech at the NADA/ATD convention recently,“Those who legislate need to understand the commercial trucking business before they can regulate it. Far too many good intentions have essentially backfired and hurt those that the regulation was originally designed to help.” Massachusetts dealers are frequently ground zero for many of the assaults on dealers nationwide. Whether it’s Tesla trying to open up an illegal “dealership” in Natick or the RTR battle, Massachusetts will likely always have a unique role. It’s crucial that both MSADA remain, and NADA/ATD continue the return to, being at their core grassroots-centered organizations. That’s one of the reasons you should join us at the MSADA Annual Meeting, which will take place June 21 at the Marriott Long Wharf in Boston. It promises to be a day not just of educating ourselves about the current landscape we face but a day of camaraderie among our fellow dealers. After all, given the challenges that our being thrown our way, we need to remember that we truly are in this together.
t
MSADA
A ssociate M ember D irectory Name
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, 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 GMC
Middlesex County Chris Connolly Jr., Herb Connolly Motors Scott Dube, Bill Dube Hyundai
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
ADESA Boston Chris Carli (508) 270-5403 Admirals Bank John Saviano, Jr. (401) 248-7229 ADP Dealer Services Maria Trezza (973) 974-4020 Albin, Randall & Bennett Barton D. Haag (207) 772-1981 American Fidelity Assurance Co. Dan Clements (800) 450-3506 ext.6515 AutoRaptor (RAL) Howard L. Leavitt (401) 421-6533 Bank of America Maryanne Recupero (800) 991-1770 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 Burns & Levinson LLP Paul Marshall Harris (617) 345-3854 Construction Management & Builders, Inc. Kate Sullivan (781) 246-9400 Curran EasyCare Inc. Mike Douglas (770) 246-9724 CVR Scott Herbers (800) 668-2332 DealerTrack Ernest Lattimer (516) 547-2242 Downey & Company James Downey (781) 849-3100 Ethos Group, Inc. Drew Spring (617) 694-9761 F & I Resources Jason Bayko (508) 624-4344 Federated Insurance Chris Welch (724) 766-6666 First Citizens Federal Credit Union Joe Ender (508) 979-4728 Fisher & Phillips LLP John Donovan (404) 240-4236 Grant Thornton LLP Alan Oslomowski (508) 926-2200 Greenwood Distributors James Viara (508) 336-5040 Huntington National Bank Jennifer M. Weekes (781) 329-0413 Improved Illumination James Feeney (508) 801-9205 Jewett Construction Alison Jewett (603) 895-2412 Key Bank James Q. Moretti (781) 558-5132 Leader Auto Resources, Inc. John Ackermann (518) 857-8853 Lynnway Auto Auction Bob Brest (781) 596-8500 M & T Bank John Federici (508) 699-3576 MetroMedia Energy Timothy Teevens (800) 828-9427 Micorp LLC Ryan Kim (508) 832-9816 Mid-State Insurance Agency John 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 Paine Auto Auction Kyle Paine (781) 595-2900 Performance Management Group, Inc. Mark Puccio (508) 393-1400 Ray-Jurgen Richard Thibadeau (860) 585-0111 R.L. Tennant Insurance Agency, Inc. Walter F. Tennant (617) 969-1300 Resource 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 Wells Fargo Dealer Services Christopher Peck (508-314-1283) Wicked Local Media Massachusetts Jay Pelland (508) 626-4334 Zurich American Insurance Company Steven Megee (800) 443-4513
www.msada.org
Massachusetts Auto Dealer FEBRUARY 2013
5
6
The Roundup
Waiting for the House Shoe to Drop by Robert O’Koniewski, Esq. MSADA Executive Vice President As we go to press, taxpayers, businesses, government services clients, and political observers are anxiously awaiting what the House intends to offer up as a tax package in response to the governor’s call for a $2 billion net increase in various taxes for the upcoming fiscal year that starts July 1. Speaker Robert DeLeo (D-Winthrop) recently announced that the House Ways and Means Committee, chaired by Rep. Brian Dempsey (DHaverhill), will issue its FY2014 budget blueprint on April 10, to be taken up by the full House for debate beginning on April 22. The Speaker has not tipped his hand yet as to what he intends to have the House consider as new tax policies in response to what the governor threw on the table in January. The Speaker has indicated also that the House shortly will be taking up a transportation bond package that will address various road, highway, bridges, and public transit needs. The Speaker, however, has not disclosed to what extent there will be new funding sources for the transportation projects, such as a hike in the state’s gas tax. As you may recall, on January 23 the governor unveiled a proposed $35 billion state budget for fiscal year 2014 that included a 7% increase in spending and a net increase of approximately $2 billion in new tax revenues. To ensure that the expansive budget plan is in balance, the governor included using $400 million from the state’s “rainy day” fund. In addition to other numerous proposed tax changes, the governor sought to increase the gas tax annually by pegging it to the Consumer Price Index, increasing the cigarette tax by $1 to $3.51 per pack, repealing the sales tax exemption for certain food items such as candy and soda, and including all bottle items in the nickel deposit law. MARCH 2013
Massachusetts Auto Dealer www.msada.org
The governor’s revenue proposal sought to achieve $1.9 billion in new net revenues by offsetting $3 billion in new income and corporate taxes with $1.1 billion in tax savings by reducing the sales tax from 6.25% to 4.5%. His proposal stacked up as follows: • Increasing the personal tax rate from 5.25% to 6.25%, a 19% hike, getting $2.57 billion in new revenue; • Eliminating 45 tax exemptions, deriving $1.33 billion in new revenue; • Doubling the personal exemption, thereby reducing revenues by $1.09 billion; • Corporate tax policy changes, leading to $194 million in new revenue; and • Lowering the sales tax from 6.25% to 4.5%, but including certain new items, leading to a $1.1 billion revenue reduction. Overall, the governor’s FY2014 budget plan engaged in no cutting, as evidenced by a 7% spending hike, while asking workers and companies to dig deeper into their pockets to fund this bold expansion of government spending. This proposal was measured against the back drop of the $500 million deficit we are experiencing thus far in the current fiscal year and the projected $1.2 billion deficit for FY2014 that was diagnosed prior to the release of the governor’s plan. Since the governor’s issuance of the plan, he and his cabinet members travelled throughout the state attempting to engender political support for his tax hikes. Thus far, those efforts have not appeared to have achieved their desired results, at least as evidenced by the tepid response we have seen from the Speaker, the Senate President, and numerous key legislators.
MSADA Business groups, led by Associated Industries of Massachusetts, NFIB, and chambers of commerce, have expressed opposition to various pieces of the governor’s tax plan, especially those that will either increase business taxes or eliminate certain business tax credits deemed important to several industries in Massachusetts. Once the House shoe drops, the budget will then move over to the Senate, where it is likely to be taken up in mid-May. Differences between the two budgets will need to be resolved by conference committee by the July 1 start of FY 2014.
U.S. Senate Special Election When John Kerry resigned his Senate seat on February 1 to become our country’s Secretary of State, his action set in motion quite a scramble to replace him. On April 30, voters will go to the polls to select the Republican and Democrat nominees for the general election, to be held on June 25. On the Democrat side, two experienced congressmen are duking it out: South Boston’s Rep. Stephen Lynch and Rep. Ed Markey from Malden. The GOP primary features former state representative and former U.S. Attorney Michael Sullivan from Holbrook; State Rep. Dan Winslow from Norfolk; and South Shore businessman and former Navy SEAL Gabriel Gomez. If the Democrat grabs this seat, keep an eye on the various electoral dominoes that will fall, for example, as legislators seek to fill the congressional seat that opens up.
Cyber Security Webinar The number one threat to small businesses isn’t Obamacare or excessive taxation and regulation, although those can be debilitating in their own right. The number one actual threat to small businesses here and across the country is cyber-crime. Did you know that almost 70% of small businesses that suffer a cyber-attack will close operations within one year after suffering that criminal breach? Do you think your dealership and your
IT operations are immune from the daily threat cyber criminals pose to your commercial viability? If you do, you are whistling past the grave yard. To help our member dealers get a handle on this growing problem in today’s computer-driven, wireless economy, MSADA with our accounting partner O’Connor & Drew will be hosting a legal webinar on Wednesday, April 10, from Noon to 1:00 p.m. Michael Hammond, Director of IT Audit Services for O’Connor & Drew, will discuss current observations and trends of IT security from the dealerships he has visited and advised over the last six months, what this means to your business, and ways to increase your IT security posture to protect you and your business investment from increasing cyber threats. Look for our e-mail bulletins to obtain the information to log on to this webinar on April 10. Do not miss this opportunity to learn what your IT security system may be missing. Protect yourself before you become one of the 70% of small business cyber victims who will not survive to next year. There is no charge for MSADA members.
HR Compliance Seminar On the morning of Thursday, April 25, in Worcester, MSADA will host labor attorney Joe Ambash of Fisher & Phillips for an HR law compliance seminar to review key issues and statutes dealers and their managers need to be familiar with. The topics will include: • Social media issues for dealerships, including National Labor Relations Act issues; • How to train your managers and supervisors about critical employment compliance topics; • Understanding lawful hiring practices; • Understanding the leave laws: ADA, FMLA, Workers Compensation; • The new laws and requirements for criminal background checks; • The importance of documenting your employment decisions; and www.msada.org
7
• How to terminate lawfully. The seminar will be interactive and will include round-table discussions of issues raised by the participants. Look for our future mailings and bulletins to register for this seminar.
MSADCF Auto Tech Scholarships Available Applications for the Massachusetts State Auto Dealers Charitable Foundation’s 2013-2014 Auto Tech Scholarships are now available on our website at www.msada.org. The Foundation’s auto tech scholarship program awards scholarships to eligible applicants for use at post-secondary educational institutions that offer auto tech training programs. Since its inception in 2003, the Foundation has awarded in excess of $700,000 to more than 200 students. A scholarship award is worth $6,000-$13,000 each over two years. To obtain additional information on the scholarship program, contact Jean Fabrizio at MSADA at (617) 451-1051 or by e-mail at jfabrizio@msada.org. The scholarship application deadline is Friday, May 17. If you know a worthy student who may be eligible for financial assistance, please relay this information to him or her.
Regional Dealer Meetings Throughout the year we continue to conduct regional meetings across the state at which we provide an update on various legislative and legal issues your Association is addressing, as well as receive input from our member dealers on issues of interest. We also invite area legislators to attend the events to encourage active dialogue between the elected officials and local dealers. On Friday, April 26, at 9:00 a.m., we will conduct a dealer legislative meeting at the Hampton Inn in Haverhill for our members and legislators from the eastern end of the Merrimack Valley in the communities of Methuen, Haverhill, North Andover, Merrimac, Amesbury, Salisbury, and Newburyport.
t Massachusetts Auto Dealer MARCH 2013
8
AUTO OUTLOOK
MARCH 2013
Massachusetts Auto Dealer www.msada.org
MSADA
www.msada.org
Massachusetts Auto Dealer MARCH 2013
9
10
Accounting
MSADA
A Bucket List for 2013 by Michael McKean
Michael McKean, President of OCD Consulting, LLC, a life-long automotive professional, is the founder and moderator of HRAuto.org.
Human (living beings capable of emotion and motivation) Resources (assets from which benefits can be produced) I have the privilege of being the moderator of HRAuto.org, a “twenty group” for human resource professionals from large privately-held dealer groups. I have worked in the automobile industry my entire life, but for me, each and every meeting with this group is one of my more enlightening experiences. I would like to share with you the group’s bucket list for 2013.
The Issue – Affordable Health Care Act The details for compliance and the cost of the changes in our health care system are way beyond the scope of this article, but if you aren’t already preparing for Obamacare, the time to start is now. The Strategy: The greatest impact on rising premiums will come from putting the formerly uninsurable into the insurance pool. In Massachusetts, for example, premiums doubled when people with pre-existing condition were put onto their employers policies. One way of avoiding some of this pain is to consider being self-insured or going with what is known as a “captive” company. Annual health risk assessments, wellness programs, and tiered premium plans are also becoming popular options for containing health care costs.
Staffing In spite of our weak economy, the unanimous opinion of the HRAuto group is their organizations will grow in 2013 and finding good talent will be a challenge. The Strategy: Branding your company as a real career choice and a “best place to work”. The group recently invited six students, who were soon to graduate from the University of Tampa, to visit about their search for employment. Not one student on this panel had ever considered retail automotive as a career choice. This is a communications problem. A recent study pubMARCH 2013
Massachusetts Auto Dealer www.msada.org
lished by the NADA University found that the average annual earnings in automobile retailing are $5,000 higher than the average worker in the US. Among the top 5% of earners, automotive executives average annual earnings were $231,000 versus $160,000 for the US overall. Dealers are very adept at marketing to their customers. Now it is time to apply these skills to attracting new talent.
Retention
If good new talent is in short supply, then retaining your present talent becomes a priority. In a survey conducted last year, for the period of January through August, the members of HRAuto hired 795 new sales representatives. At the end of this period, only 43% were still employed by the dealerships. For all positions, the eight month retention rate was just 59%. This, in my view, is an indictment of our industry. The Strategy: First, review your recruitment and on-boarding processes. The number one reason new hires leave is they don’t feel appreciated. Next, we’ve all heard of exit interviews, how about conducting staying interviews instead. Finally, make retention/turn-over rates an element of your managements’ compensation plans and an essential part of their performance reviews.
Personnel Officer of Talent Manager As large dealership groups struggle to contain personnel costs, the role of HR in automotive retailing is rapidly changing. Albeit with some reluctance, operational managers are getting clued-in as to the value of having full service support of their HR departments. At the same time, in most dealership operations, HR departments are understaffed, under resourced, and underappreciated. The Strategy: First, get your HR department out of the record keeping business. There are numerous software firms, such as Compli and ADP, who provide on-line applications for a wide variety of record keeping and compliance needs. Invest in these and put the talents of your HR professionals to use where they are most needed: increasing employee productivity. Next, reposition your HR professionals by transitioning them away from administrative duties and moving them into more strategic and tactical roles. Include your HR professionals in your sales and operational meetings so they can better understand the personnel needs of your business. Your HR professionals should be focused on recruiting, branding, on-boarding, training, building engagement, and managing performance because this is where you will find the highest returns on your HR investment.
t
Legal
MSADA
11
By Michael T. O’Neil, Esq.
Parts Counter Employees Entitled to Overtime Pay Misclassification could cost you
It is typical that dealerships have employees that work in the dealership’s parts department. Usually, these employees are paid a weekly salary, plus a “commission” or “bonus” based upon the efficiency with which they handle their responsibilities (e.g., just-in-time inventory, obsolescence management, leakage, etc.). Given the nature of the industry, it is common for these parts department employees to work in excess of 40 hours per week. Any non-exempt employee in Massachusetts that works in excess of 40 hours per week is entitled to 1.5x their pay rate for each hour worked in excess of 40 hours. This rule applies to hourly as well as salaried employees. A typical parts counter employee at an auto dealership is considered by the Massachusetts Department of Revenue to be a non-exempt employee in Massachusetts, which means that they are legally entitled to overtime pay. Most dealers are surprised when I tell them that their parts counter employee is entitled to 1.5x pay for each hour worked in excess of 40 hours per week. Some common dealer responses are: “But they are not hourly, they get a weekly salary. So they don’t get overtime.” “If I had to pay overtime, then the bonuses I have paid in the past would have been smaller.” “We have a written agreement that waives overtime pay.” Unfortunately, irrespective of any arrangement between the employer and the employee, the parts counter employee is going to be entitled to overtime pay for each hour worked in excess of 40 hours
in any given week. Additionally, in Massachusetts, any employee that is successful in bringing an overtime claim against his employer is automatically entitled to treble damages (i.e., three times (3x) the amount of their actual overtime claim), plus their attorneys fees. This rule applies even if
“The cherry
on top of this sundae is that an overtime claim may trigger an audit of employee records.” the employer had a good faith belief, or reasonable position, that the employee was not in fact entitled to overtime pay. These damage provisions could turn a $10,000 overtime claim into a $50,000 liability very quickly.
Classification Issues The cherry on top of this sundae is that an overtime claim may trigger an audit of employee records. Such an audit may not be restricted to overtime pay. The U.S. Department of Labor and the Massachusetts Department of Revenue are actively auditing how businesses are classifying employees, e.g., are employees that should be classified as W-2 employees being misclassified as 1099 independent
www.msada.org
contracts. The standard for being classified as a 1099 independent contractor in Massachusetts is very stringent. Without getting into the language of the statue, if a dealer has a worker showing up to the dealership on a regular basis participating in the day-to-day operations of the dealership, then it is almost certain that Massachusetts will consider that worker a W-2 employee and not a 1099 independent contractor. Obviously, if you are a Massachusetts auto dealer and you are not paying your parts counter employees overtime, you should take steps to implement a proper pay plan. Admittedly, it is difficult to implement a new pay plan without drawing attention to the deficiencies of the previous plan. However, there are techniques to accomplish this kind of implementation while minimizing risk to the dealer and it is always better to address and fix a known issue, than to let the issue linger until its inevitable blossoming. There may also be ways to characterize your parts counter employees so that they are exempt from overtime pay. In addition to consulting with your team of professionals, the “Massachusetts State Auto Dealers Association Wage/Hour Compliance Guide - August 2012” is a good resource for all auto dealers.
t
Michael O’Neil is a Partner at Schlossberg, LLC and can be reached at moneil@ sabusinesslaw.com.
Massachusetts Auto Dealer MARCH 2013
12
Insurance
MSADA
The Costs of Distracted Driving While there’s no cure for stupidity, prevention is key
By Steven Megee
Steven Megee is regional sales manager at the Framingham Regional Office for Z u r i c h N o r t h A m e r i c a C o mm e r c i a l ’ s Programs & Direct Markets’ business unit. He can be reached at steve.megee@zurichna.com.
A recent letter to the Dear Abby® advice column complained of a car “swerving and weaving in and out of the next lane.” The car would erratically slow down and speed up, leading the writer of the letter to conclude that the driver was drunk. After pulling along side, the writer discovered to her dismay that the driver was speaking to a passenger in sign language – signing with both hands while watching the passenger rather than the road. Conversing in sign language may not be the most common distraction for drivers, but the effect is much the same as more frequently encountered distractions such as talking on the phone or texting – drivers lose their concentration and sometimes they lose control of their vehicles. According to the National Highway Traffic Safety Administration (NHTSA), almost 20 percent of all crashes in 2008 involved some type of distraction, resulting in 6,000 deaths and more than half a million people injured. Employers that require employees to drive as a part of their job should be vigilant about curbing distracted driving. The safety of employees and others is the principal concern, but employers also should be aware of the liability exposures distracted driving can produce. Lawsuits involving employees distracted by cell phones and other devices while driving have resulted in multi-million dollar settlements. Liability issues can be especially troublesome for employers that provide employees with, or require employees to use, cell phones or other MARCH 2013
portable communication or information devices.
Driving Distractions Distracted driving has become a highprofile issue since the advent of mobile phones, but the problem is not restricted to newer technologies. Eating and drinking, grooming, changing radio stations, and reading maps have long been causes of distractions that lead to accidents. But with the now nearly universal use of mobile phones, and especially with the growth of “smart phones” that simplify texting and enable Internet access almost anywhere, distracted driving has become an epidemic. Distracted driving falls into three categories: • Visual, when the driver takes his or her eyes off the road; • Manual, when the driver takes his or her hands off the wheel; and • Cognitive, when the driver’s mind is engaged in another activity and is no longer paying sufficient attention to what is happening on the road. Using a mobile phone while driving
Massachusetts Auto Dealer www.msada.org
often involves all three types of distractions: the driver looks at the phone to make a call or read a text message, handles the phone to make a call or to type a message, and becomes mentally absorbed in the conversation or text message exchange. Numerous studies have shown that using a cell phone impairs driving ability. A University of Utah study found that using a cell phone while driving, whether handheld or hands-free, delays a driver’s reactions as much as having a blood alcohol concentration at the legal limit of .08 percent. While talking on a mobile phone while driving is a serious problem, for obvious reasons texting, instant messaging and emailing can be far worse. A Virginia Tech Transportation Institute study concluded that texters are 23 times more likely to be involved in accidents or near-accidents than other drivers. A study by CareerBuilder found that 54 percent of employees who use smart phones – including 66 percent of sales employees, 59 percent of professional and business services employees, and 50
MSADA percent of healthcare workers – admit to checking them while driving. Mobile phones are near-ubiquitous, but they are not the only type of technology that causes distractions. A GPS device, for example, can be enormously distracting if a driver attempts to program it while the vehicle is in motion. Laptop computers and DVD players also can be sources of distraction: an Ohio truck driver pleaded guilty to causing a fatal accident on a New York highway in December 2009 while viewing a pornographic video on his laptop.
Liability Issues Employers can he held liable for injuries caused by employees using cell phones and other devices while driving, especially if the employer provides the cell phones, or if cell phone use is a necessary or encouraged part of their job. Third-party liability can be incurred based on the legal principle of vicarious liability. This legal principle provides that an employer is responsible for the harm caused by an employee if the employee was acting within the course and scope of his or her employment at the time the accident occurred. Additionally, an employer may be considered directly negligent for its own conduct if it encourages or permits employees to use cell phones for business without adequate training or consideration of safety issues, or if it hires an employee whose driving record should have been a red flag. Employers have long been liable for vehicle accidents involving employees who are acting “within the scope of their employment” or even operating a company vehicle for personal use, but mobile phones dramatically expand employers’ potential liability. Mobile phones enable people whose job may be at a desk to work from a car, even when driving is not part of their job.
Risk Management To avoid the risk that a call or text message may be blamed for accidents, employers have implemented policies con-
13
“Employers can be held liable for injuries caused by employees using cell phones and other devices while driving.” cerning mobile phones and other devices, some of which are described below: • Prohibit the use of cell phones and other handheld devices for business purposes while operating a motor vehicle, including “hands-free” phones; • Institute a “total ban” on all mobile communication devices while driving; • As a condition of receipt, require employees to sign an acknowledgement that company phones are not to be used while operating automobiles or other equipment; • For employers who reimburse employees for business calls made from their private cell phones, require employees to certify that they did not use the phone in any way that violates company policy; • Limit the scope of certain employees’ job descriptions so that it is clear that their positions do not include using cell phones while driving; and • Discipline employees for violations of the policy. Employers also need to encourage internal practices that support policies prohibiting mobile phone use in vehicles. Employers that emphasize the need for employees to regularly “check in” or to “stay in touch” while away from the office must be clear about their priorities. Employers also should discourage scheduling calls or sending text messages at times when they know an employee likely will be driving. Employers need to stay abreast of the technologies used in their businesses and www.msada.org
the potential liability issues they raise. Limousine services, for example, often manage reservations and dispatch cars through laptop computers, and need to assure that proper controls are in place so that the computers do not create distractions. GPS devices are now nearly essential for commercial drivers of all types, and policies should be implemented concerning their safe use. While there may be no cure for stupidity, companies nonetheless should make it clear that watching videos, playing video games, or engaging in other similar activities while driving on company business will result in immediate and severe disciplinary action. So far, the law and standards of acceptable behavior lag the safety issues created by distracted driving, making it all the more imperative that companies address the issue with diligently enforced rules for safe technology usage. Driving while talking on the phone does not have the social stigma of driving while drinking, even though the result can be much the same, and state laws vary on the legality of cell phone distracted driving use in the car. While laws specifically addressing technology use while driving are still developing, good old-fashioned common law torts have proved quite adequate for holding companies liable for damage caused by their employees who are distracted while driving.
t
Massachusetts Auto Dealer MARCH 2013
14
MSADA Cover Story
Two Seats at the Table Massachusetts dealers face more than their share of national industry challenges. Dick Witcher and Don Sudbay are here to help. by Tom Nash Massachusetts has a unique role navigating industry challenges faced by auto dealers. Commonwealth dealers are frequently the first to face the assaults made on dealers nationwide. Whether it’s Tesla trying to open an illegal dealership or the “Right to Repair” proponents digging in on Beacon Hill, these dealers often need a heavyweight champion in their corner – on a national scale. Luckily, they have two: Dick Witcher and Don Sudbay. Witcher, owner of Minuteman Trucks in Walpole, has served as chairman of the national Association of Truck Dealers for a year. Sudbay, owner of Sudbay Automotive in Gloucester, is the Massachusetts Director for the National Auto Dealers Association. Both are making their presence known nationally, from visiting legislators to grappling with manufacturers.
A more restrictive environment Witcher, who previously served a tenure as Vice Chairman of ATD, has come to the position with an optimistic outlook but a realist’s sense of the day-to-day in Washington. He has his finger on the pulse of the many significant challenges that interfere with the industry landscape in Massachusetts. MARCH 2013
Massachusetts Auto Dealer www.msada.org
“All dealers need to have a heightened awareness of what’s going on and what might happen.” – Don Sudbay, NADA Director
MSADA
“This environment is much more restric“What NADA is about is fairness, fairness tive than my compatriots experience around for all dealers. Whether they’re large, small; the country,” he said. “Other dealers can start rural, urban, suburban – it’s about having a a business in six months and not go through level playing field for all dealers,” he said. all of that regulatory stuff, that hard handed“We need to continue to work for that. It’s ness we experience here.” not going to happen overnight, but we need Witcher said operating costs – from emto keep advocating for that.” ployee compensation to cost of land – are Sudbay is an industry legacy: His grandhigher than in other parts of the country. father was General Manager at a Buick deal“These challenges make it difficult for ership in the 1930s. And even though much manufacturers to treat everyone fairly,” has changed since Sudbay’s father founded Witcher said. “OEMs, for example, develop his dealership in 1965, Sudbay’s industry a universal picture of a dealer that often ends knowledge has made him a formidable opup being inaccurate in a state like Massachuponent against the hurdles faced by Massasetts. – Dick Witcher, ATD Chairman chusetts dealers. “Mercedes will say, ‘Jeez if they can do “In the position I’m in, I’m exposed to a lot more and I see what’s out there on the it in California they should be able to do it horizon. There are threats. All dealers need to have a heightened in Boston.’ The OEMs need to recognize the conditions of the awareness of what’s going on and what might happen. Being market here.” involved makes a huge difference.” Working toward fairness “Whenever I meet my dealer friends, I let ‘em know what the issues are. I let them know what’s out there and I try to keep Sudbay said his biggest challenge will be working with the them abreast as to what’s happening. Everybody’s running their manufacturers to try and make sure they have programs that treat business. Their main thing is day-to-day running their automoall the dealers fairly. He’s meeting with GM in April to discuss bile dealerships and a lot of times they don’t see the big picture. its facilities program, which has been widely criticized for not I understand that totally.” allocating enough funds for Massachusetts dealers’ facilities.
“This environment is much more restrictive than my compatriots experience around the country.”
www.msada.org
Massachusetts Auto Dealer MARCH 2013
15
16
Two Seats at the Table
Ways to Get Involved - Contact your legislators about bills that would affect your business; - Donate to the Dealer Election Action Committee and our state political action committee, NCDPAC; - Schedule a visit from your representative to your dealership. For advice on starting or maintaining a relationship with your representative, contact MSADA Executive Vice President Robert O’Koniewski at (617) 451-1051.
Understanding the impacts Also an enthusiastic advocate for his cause, Witcher said he is “interested, willing and able to go any place to speak to people about issues regarding trucks from a dealer’s perspective.” “I’m going to Brazil in August. I’ve been asked to speak at other dealers associations. It’s about letting people understand the impacts and that we’re such a huge part of the economy that they need to understand what they’re doing to us, because it will affect the economy overall.” Witcher said there is a dedicated core group of dealers in Massachusetts, and those dealers care and participate in various ways that impact their businesses. “What I’ve been trying to do with trucks for the past year is get them involved at the local level. They need to understand our business before they’re out there making laws. Witcher noted that might seem more unappealing than ever MARCH 2013
Massachusetts Auto Dealer www.msada.org
given the upcoming post-Scott Brown Senate election, where it’s likely one of the two Democrats vying for the seat once occupied by now Secretary of State John Kerry will win easily. But he says that makes it all the more important to be paying close attention, and that the focus shouldn’t be on party lines. “You’re not just giving (support) to one side or the other side, you’re picking out pro-business candidates,” he added. “We need to pick probusiness candidates and U.S. Senator Scott Brown visiting work with them to get Minuteman Trucks. them in place. If you get extremists or philosophical purists, you’re going to lose the ability to go in and talk.” Sudbay is optimistic about the unusual and often challenging role Massachusetts plays on the industry’s national stage. “We got thrown into this Tesla thing and also ‘Right to Repair.’ Years ago California was always the target and now they’ve thrown the dot at us for whatever reason. But we have the resources and we have the determination. We have dealers who care about the franchise system. It’s the future of our business – that’s what’s on the line here.”
t
19
www.msada.org
Massachusetts Auto Dealer FEBRUARY 2013
18
NEWS
from Around the Horn
MSADA
PALMER
MSADA Sponsors Pathfinder Students at New York Competition After they took first place in the MSADA’s repair competition this past December, two Pathfinder Regional Vocational Technical High School seniors will head to New York for the National Automotive Technology Competition in April. This is the school’s second appearance at the NY competition in as many years. Matthew Lloyd and Katie Letendre will compete against hundreds of high school automotive mechanics from throughout the United States and Canada. . In the MSADA competition, each school team was assigned a particular car for the December event in Ashland. Lloyd and Letendre worked on an Audi. The work involved such things as diagnosing electrical faults and taking accurate measures of brake components. Letendre and Lloyd are 18-year-old high seniors who have taken the automotive course in each of their four years at Pathfinder. As with other shop courses, they learn theory in a classroom setting and then do hands-on work in the automotive shop.
MARCH 2013
Massachusetts Auto Dealer www.msada.org
Lloyd has been working on cars since he was 13 and spent many weekends at a garage run by a family friend. When he graduates from Pathfinder next spring, Lloyd plans to take business courses at Springfield Technical Community College with a goal of someday running his own automotive business. Letendre learned her first automotive repair lessons from her father and then really got into the work in the shop classes as Pathfinder. She also intends to earn a business degree at STCC.
NEWS from Around the Horn
MSADA
FRAMINGHAM
Herb Connolly Acura Hosts Grand Re-Opening Herb Connolly Acura wrapped up a more than year-long construction project on a new facility with a Grand Re-Opening in March. The event boasted live music, catered food from Davios Restaurant and a preview of the 2014 Acura RLX, with an estimated 125 people in attendance. The project involved a complete demolition of the original building, which dated back to the ‘60s, MSADA Vice President Chris Connolly said. The dealership had been operating in trailers between September 2011 and December 2012, Connolly said, adding that seeing the project through to the March event “feels great.”
WEBSTER
Long Subaru Opens New Showroom Long Subaru has an expanded inventory to go with its newly renovated and upgraded showroom. Scott Barry, the general manager, is a member of the Long family and represents the fourth generation of the family to work in the car dealership business. The Long family purchased the former Tri-State Subaru in October 2005. It also operates Long Cadillac in Framingham. Barry, who was previously the manager of Long Buick-Pontiac-
GMC in Framingham, which has since closed, came to the Subaru dealership in 2005 and has been there ever since. After seven years, Barry said it was time to update the dealership. “We have modernized everything,” he said. Built by Jewett Automotive Design & Construction, the new showroom is 5,000 square feet larger than the old one. The area includes Wi-Fi and has private workstations for customers who want to be productive while waiting for their vehicles to be serviced. Barry said the dealership recently added three salespeople, bringing the employee count to 45. www.msada.org
Massachusetts Auto Dealer MARCH 2013
19
20
NEWS from Around the Horn BOSTON
Massachusetts Dealer Groups Named on Top 125 List Five companies with Massachusetts dealerships were named to the annual Automotive News Top 125 Dealership Groups list, the magazine announced this month. The dealership groups include Herb Chambers Companies at No. 14, whose president is Herb Chambers; Lia Auto Group at No. 45, whose president is William Lia Sr.; Balise Motor Sales Co. at No. 57, whose president is James Balise Jr.; Metro Motor Group at No. 91, whose president is Michael Grieco Sr.; and Colonial Automotive Group at No. 93, whose president is Lawrence Gordon. The list is determined by unit sales of new vehicles. DANVERS
Kelly Talks Expansion with Boston Globe Brian Kelly had several new projects to talk about with The Boston Globe this month, including what he says will be the largest VW dealership on the East Coast. That dealership will include a 53,000-square-foot showroom with a wind turbine sitting on top, placed on one of several vacant properties he has purchased in the North Shore area. While that project is set to be finished next summer, Kelly also said the company’s Fiat and Alfa Romeo combined store is set to open in April on a former Lincoln-Mercury site. A Maserati dealership will be put in the old VW location, with Kelly adding that the combined activity has added at least 100 new jobs in the last year. MARLBORO
Nissan Dealership Gets Makeover Marlboro Nissan has launched a five-month renovation of its dealership on Boston Post Road. The renovations include the demolition of the existing showroom building and construction of an open, two-story showroom with a second-floor office mezzanine. Jewett Automotive Design & Construction, a division of Raymond, N.H.-based Jewett Construction Co. Inc., has been hired to conduct the renovations. MARCH 2013
Massachusetts Auto Dealer www.msada.org
MSADA READING
HYANNIS
Honda Gallery Wins Dealer of the Year Award for Second Year in a Row
Hyundai Sets Second Straight February Sales Record
DealerRater, a worldwide car dealer review website, has named Honda Gallery as Honda Dealer of the Year for the state of Massachusetts for the second year in a row. DealerRater’s Dealer of the Year Award Program recognizes select dealerships throughout the United States and Canada for outstanding customer satisfaction. To qualify, dealers must have at least 25 new reviews written on the site in the last calendar year and have an average rating that is higher than 4.0 out of 5.0. Combined, those two criteria form an algorithm to determine the winning dealerships. Honda Gallery currently carries a score of 4.9 out of 5.0. “Our top goal is to always provide a great customer experience for the car buyers who visit our showroom, and we’re always pleased when a customer is impressed enough to take to DealerRater and let others know about it,” said Frank McLaughlin, general manager of Honda Gallery. “Winning this award is a great validation of the way we do business, by putting the customer first, and we’re very happy that people see the value in that higher level of customer service.”
Boosted by strong gains from its Santa Fe crossover, Hyundai recorded its best-ever February sales last month. The automaker moved 52,311 units in the United States, outselling last year’s record-breaking February by 2 percent. A strong Presidents Day weekend and healthy inventory levels at dealerships helped Hyundai reach that impressive tally. Redesigned for the 2013 model year, the Hyundai Santa Fe nameplate sold 6,339 units last month, a 64 percent increase over February 2012. The 2013 Santa Fe Sport launched last year as a five-passenger crossover with Hyundai’s new “fluidic sculpture” design and the option of either a standard 2.4-liter or turbocharged 2.0-liter engine. Meanwhile, the longer-wheelbase, seven-passenger 2013 Santa Fe will be arriving at showrooms later this month sporting a 290-horsepower 3.3-liter V6 engine. “The new Santa Fe and Santa Fe Sport manage to mix style, function and features better than any other crossovers in the same price range, as well as some that cost thousands of dollars more,” said JJ Hoyt, general manager of Balise Hyundai of Cape Cod, a Hyannis. “Either option offers plenty of cargo capacity and seating for the whole family when it’s time to hit the road.”
www.msada.org
Massachusetts Auto Dealer MARCH 2013
21
22
NEWS from Around the Horn RAYNHAM
Buick Enclave Earns NHTSA Five-Star Safety Rating The National Highway Traffic Safety Administration recently gave the 2013 Buick Enclave its top five-star Overall Vehicle Score in its New Car Assessment Program. Featuring a new industry-first front-center airbag that deploys between the front seats, the latest Enclave offers greater protection during far-side impacts. To earn a five-star rating from NHTSA, a vehicle must score well in a range of tests, including a frontal crash test, a sidebarrier crash test and a new side-pole crash test. The Buick Enclave’s top score indicates that the risk of injury in a crash is much lower for its occupants than the industry average, but the vehicle’s airbags and reinforced chassis only make up a portion of its comprehensive safety design. Buick engineers also outfitted the Enclave with active safety equipment to help drivers avoid accidents in the first place, including the available Side Blind Zone Alert and Rear Cross Traffic Alert systems. “Buick vehicles are more than luxurious, they’re also incredibly safe thanks to their advanced chassis designs and innovative technology, including the front-center airbag in the Enclave,” said Gary Carter, general sales manager of Mastria Buick GMC Cadillac. “Our customers want to feel safe out on the road, whether they’re alone or with the whole family and then some, and the Enclave lets them drive with confidence.” NORWOOD
BMW X3 xDrive28i Wins Car and Driver’s Luxury SUV Comparison Car and Driver recently put three compact luxury SUVs to the test to see which one provides the best combination of performance, comfort and style. Though each model is powered by a turbocharged 2.0-liter four-cylinder engine, the Audi Q5 2.0T, Range Rover Evoque and BMW X3 xDrive28i offered up varying results during testing. In the end, the automotive publication chose BMW’s offering, which didn’t disappoint in any of the overall categories.
Car and Driver editors put the three upscale utilities through their paces on the publication’s 10Best evaluation loop, as well as on the streets of Birmingham, Mich. The BMW X3 earned high marks for its responsive steering and smooth suspension, quiet cabin and comfortable overall ride. Testers also commended the X3 for its quick acceleration and attractive styling. “The compact luxury SUV segment is crowded with competitors, but Car and Driver’s latest comparison shows how the BMW X3 stands out from the rest,” said Phil Driscoll, general manager of BMW Gallery of Norwood. “From its elegant exterior to its functional cabin that doesn’t skimp on comfort and amenities, the X3 offers the perfect balance for discerning families who demand the best.” PEABODY
Acura Gets Sales Boost from New Models, and More Are on the Way Last spring, Acura launched a redesigned 2013 RDX crossover and a new 2013 ILX compact sedan, and both models are still boosting the luxury auto brand’s sales after nearly a year on the market. February marked the 10th consecutive monthly sales record for the Acura RDX, which moved 2,795 units, a 178 percent increase compared to the same month last year. Meanwhile, the Acura ILX continued its steady month-to-month growth, with 1,997 models sold. According to Bloomberg, Acura is hoping to greatly accelerate that sales momentum with a $1 billion investment into a range of new models. First up is the brand’s new flagship sedan, the 2014 Acura RLX, which goes on sale later this month. More spacious, powerful and fuel efficient than the outgoing Acura RL, the RLX favors comfort and sophistication over flashiness, donning new Jewel Eye LED headlights, sharp horizontal design lines on its sides and the latest AcuraLink infotainment system in the cabin. “With their focus on refinement and ride, the latest RDX and new RLX are out to prove that Acura offers more than just a high-value, high-tech lineup,” said Joel Avery, general manager of Acura of Peabody. “In addition to their streamlined styles, both vehicles feature increased interior space and forgiving suspensions, so drivers and passengers don’t just see the difference, they can feel it in many ways.” PEPPERELL
Conway Chevy Buick Sells Franchises Back to GM After 33 years in business, Conway Chevrolet Buick has sold the franchises back to GM, the dealership announced recently. The former dealership is now operating as Conway Service and Sales Center. MARCH 2013
Massachusetts Auto Dealer www.msada.org
NADA Update
MSADA
Consumer Protection Agency Reportedly Targets Dealer-Assisted Financing 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). As you will see when you read the following message from our NADA Chairman, David Westcott, the newly formed Consumer Financial Protection Bureau poses a significant threat to all dealers. The elimination or “flat-rating” of our finance reserve income will make it even more difficult for our new and used vehicle departments to be profitable. NADA will do everything in it’s power to preserve this legitimate source of income for our dealers. Over the years we have saved our customers a collective huge amount in interest costs over what they may have received dealing directly with finance sources. We also have been able to arrange financing for some of our customers who would have been turned down by other sources. We should all be proud of how we have helped our customers in the purchase of new vehicles and be prepared to defend our position. Message from NADA Chairman Dave Westcott: Several media outlets have reported that the Consumer Financial Protection Bureau is considering enforcement action against several large commercial banks for compensating dealers in a manner that allegedly may have resulted in violations of the Equal Credit Opportunity Act. The law was enacted in 1974 to bar discrimination in lending. The actions focus on whether consumers from certain demographic groups pay more dealer participation than similarly situated consumers from other demographic groups. The rumored allegations do not involve intentional discrimination in auto finance, but instead are based on unintentional and unproven conduct under the disputed “disparate impact” theory of liability. This theory is based on an afterthe-fact statistical analysis of whether one group paid more for credit than another group. It is essential that this analysis be conducted in a statistically reliable manner. Otherwise, it can produce flawed findings that could serve as a springboard for disrupting the “optional” dealer-assisted financing system, which has served consumers at all credit tiers extremely well.
Dealers provide a valuable service that increases access to and reduces the cost of financing to car buyers. A dealership’s ability to discount the interest rate it offers to consumers— which is made possible by the customer’s ability to negotiate rates at the dealership—would be eliminated if CFPB action leads to an arbitrary flat fee compensation system. Removing the dealer’s ability to “meet-or-beat” the best interest rate available to a customer from competing finance sources would significantly weaken rate competition and result in more expensive financing for consumers. We’re committed to ensuring that all categories of consumers are protected and treated fairly. As NADA demonstrated during the Federal Trade Commission roundtable sessions, dealer-assisted financing provides overwhelming consumer benefits in the marketplace today, including access to affordable credit for millions of Americans who do not have traditional relationships with banks.
Bipartisan Bill to Repeal Obsolete Paperwork Requirement at Auto Dealerships Introduced Legislation (H.R. 724) was introduced in the U.S. House of Representatives that would eliminate a mandate that requires dealers to certify if a new vehicle has an emissions system. Under the Clean Air Act, dealers are required to present written confirmation to the buyer that a visual inspection has been completed of a new-vehicle’s emissions system. The bill, introduced by Reps. Bob Latta, (R-Ohio), and Gary Peters, (D-Michigan), eliminates the obsolete and unnecessary requirement. “There are already enough documents for car and truck buyers to read at the sale of a new vehicle. Eliminating this redundant form makes sense,” said NADA Chairman David Westcott.
NADA’s Westcott: Industry and Regulatory Issues Top List of Dealer Concerns Despite the industry and regulatory challenges of the moment and an uncertain future, NADA Chairman David Westcott said he remains confident about the future of auto retailing. He said one of the biggest challenges facing dealers is their relationship with manufacturers. “The issues posed by stair-step incentive programs and by mandatory facility upgrades are just two of the most recent examples of manufacturers intruding into dealers’ businesses,” said Westcott, in remarks at the NADA Convention and Expo on Feb. 11. Westcott, a Buick, GMC and Suzuki dealer in Burlington, N.C., said the development of stair-step incentives are an understandable response to the need for higher sales by the www.msada.org
Massachusetts Auto Dealer MARCH 2013
23
24
NADA Update manufacturer, but “many stair-step incentive programs raise fundamental questions of fairness,” he said.
FTC Warns Small Businesses: Don’t Open Email Falsely Claiming to be from FTC The Federal Trade Commission is warning small businesses about an email that pretends to be from the FTC with “NOTIFICATION OF CONSUMER COMPLAINT” in the subject line. The email was not sent by the FTC. The email falsely states that a complaint has been filed against their company. It contains a link to consumer complaints, a link to contact the FTC and an FTC telephone number—but the email is fake. The FTC’s advice: Do not open the email. If you have opened it, do not click any links or attachments because they may install a virus or other spyware on your computer; and delete the email. To learn more about malicious software (malware), visit OnGuardOnline.gov.
NADA Launches New Energy Ally Program to Help Dealerships Reduce Energy Use NADA and the Environmental Protection Agency have partnered to help new-car dealers reduce their energy consumption through the Energy Star program. As part of this effort, NADA and EPA are encouraging dealerships to complete a brief survey that will give the agency a benchmark to better compare the energy usage of dealerships across the country and allow certification of those dealerships that perform well. To encourage participation, NADA has launched a new program called Energy Ally. Businesses, such as accounting, consulting and energy management firms, that assist at least five dealerships to complete the survey will be awarded an NADA Energy Ally designation. These contractors can use the recognition to market their services to other dealerships. Information on how to apply to become an Energy Ally is available at www.nada.org/energystar. The survey (www.nada.org/energystar) asks dealers to share their yearly utility bills, square footage—inside and out—and different types of equipment used at the dealership. Before the Energy Star certification process can begin, the energy usage of at least 500 dealerships has to be benchmarked. Dealers that participate in the survey and reduce their power usage will be recognized by Energy Star for their efforts to reduce the dealership’s impact on the environment.
Deadline to Participate in 2013 Dealership Workforce Study Extended to April 30 The deadline to participate in the 2013 Dealership Workforce Study has been extended to April 30. It’s the only NADA-ATD study that compares an individual dealership’s compensation and benefits, retention and turnover, work schedules and hours of operation to aggregated peer data. With the results, dealers will be empowered to make databased decisions when recruiting, hiring and motivating emMARCH 2013
Massachusetts Auto Dealer www.msada.org
MSADA ployees. Only NADA and ATD members are eligible; there is no charge to participate. To participate, go to www.nadaworkforcestudy.com, and follow the step-by-step directions to complete the survey and upload your payroll data file. There are separate processes for single dealership enrollments and multidealer group enrollments. Each participating dealership will receive a complimentary individualized Basic Report comparing its data against data aggregated on a regional and national basis. Participants will also receive a complimentary Dealership Workforce Study Industry Report. Participants may purchase an individualized Enhanced Report, which compares the individual dealership’s data against data for the franchise and state. NADA University has once again teamed up with DeltaTrends and Northwood University. DeltaTrends is handling data collection and analysis. Northwood University will prepare the Industry Report. The first annual Dealership Workforce Study was completed in 2012.
2013 NADA and ATD Convention Workshops Now Online at NADA University The workshops held at the 2013 NADA and ATD convention in Orlando are now available online. Included in the best-value Learning Hub Premium Subscription or available as packages or individually in multiple formats, the workshops are led by top industry trainers covering all areas of the dealership business. The workshops encompass seven tracks for car dealers and three for truck dealers, with a total of 58 recorded sessions. The workshops are designed for anyone working in a dealership. Dealers are encouraged to share them with their managers and staff through NADA University’s Learning Management System. Members can log onto www.NADAuniversity.com and go to the NADA U Store to purchase the Learning Hub Subscription or 2013 Workshops, or can be ordered through NADA University Customer Service at (800) 557-6232.
NADA University Online Launches ‘My Career Path’ to Facilitate Training NADA University’s new “My Career Path” for dealership employees features job-specific training recommendations, links to relevant content from NADA University and tracking capabilities for a growing list of job positions. Career paths are organized into six areas of training, which includes core courses, dealership basics, marketing and operations, legal and regulatory, customer relations and employee relations. Career paths are now available for the general manager, new- and used-vehicle sales consultant, service advisor, F&I manager, service manager, sales manager and parts manager, with more on the way. Sign into www.NADAuniversity.com to begin.
t
Economic Update By Paul Taylor, NADA Chief Economist
Much Ado About Very Modest Budget Cutting As we saw earlier this month, Washington elected officials appeared poised to take the easy road by letting the automatic spending cuts, called sequestration, take effect after March 1st. Several factors are likely to mitigate the overall outcome, but as the Congress struggles with an alternative to mindless spending cuts during March and April, several other facts of life are obvious: The spending cuts contained in the sequester are roughly a modest 2 percent cut in federal spending, and are especially modest in relation to the very large run-up in federal spending over the last several years. If not reduced more dramatically, that multi-year binge of federal spending will still leave us with a federal government that is much larger when expressed as a share of the Gross Domestic Product (GDP). The propaganda on the impact of the spending cuts from the Administration points to pain from late planes and trains, food shortages resulting from furloughed inspectors and other horrors. When the Administration and the majority in the Senate figure out that they will be tagged with part of the blame for all of this, we may see the magic of compromise emerge from the political system. Elected politicians are under immense pressure to administer the budget sequester in a more enlightened way, and
voters are already struggling with the tax increases the Administration insisted upon that raised the payroll tax back to 6.2 percent of middle-class wages from 4.2 percent.
For the long term, current actions have serious consequences. In the last 40 years, the share of GDP taken by federal taxes has averaged less than 18 percent, and exceeded 20 percent only in 2000. The current trend in federal spending will take us over a peak of 34 percent of GDP, opening a deficit gap equal to at least 14 percent of GDP, even if taxation were allowed to occur at a rate of 20 percent of GDP. The current range of argument has gone well beyond the usual “tax at 19 percent and spend at 21 or 22 percent” that characterized the deficit debate for the past 30 years. The President’s recently exiting Treasury Secretary called this spending trend “unsustainable.” The new Treasury Secwww.msada.org
retary, Jack Lew, is perhaps the deftest of available Democrats on budget issues. But it will be difficult to convince anybody on either side of the aisle that spending at 24 percent and later at 34 percent of real GDP is not dangerous to future civil order in the U.S. Critics are correct to compare the current situation in the U.S. to the patterns that have put Greece, Spain and Italy into extreme fiscal difficulty. Why is spending escalating so rapidly? Current administration policy calls for guns, butter and enhanced medical care. In the Clinton years, medical spending went up while defense spending moved down in share of total output. So Jack Lew will have to be a deft speaker in the coming months to sell what remains an unsustainable fiscal policy. And tax increases to cover these gaping deficits are not likely given the size and the history of taxation to GDP in this country.
What Is Currently Happening in the U.S. Economy and Automotive Retail? Data from Experian and the American Bankers Association on auto loans shows stability of repayment in recent quarters. The Federal Reserve data on household assets shows the recovery the recovery of the net assets position for the household sector. The line chart shows luxury vehicle sales following that recovery of net financial assets of households with a one-year lag. Currently, most of the economy looks Massachusetts Auto Dealer MARCH 2013
25
26
Economic Update much as it did before the recession. Homes priced below the $1 million level are making a modest but steady 4 percent overall gain on a yearly basis. The rising stock market indexes are driving up the Federal Reserve household sector asset data found in the Z1 statement, which does not include home equity. Values of stocks owned outside of retirement programs are driving up net assets for many households that purchase the majority of new luxury cars in the U.S. economy. The recovery of luxury vehicle sales has followed the recovery of net financial assets for the household sector in Federal Reserve data. Home equity recovery helps to drive the will of consumers to replace non-luxury vehicles, now 11.4 years of age according to R.L. Polk data. And the progress of the broad stock market indexes push up net financial assets for many households, and drives up luxury vehicle sales as it enhances net assets positions for many wealthier households. (“Luxury car sales” includes sales of new luxury cars, luxury SUVs, luxury pickup trucks and luxury CUVs.) None of this is surprising, and CUVs are still the biggest overall light vehicle sales category, despite success of new small and mid-sized car designs now at the nation’s auto shows. Households continue to make sensible decisions based on available facts about long-term expected gasoline prices and other costs of owning particular car models. Households continue to buy vehicles that meet their needs for room for passengers and for life style activities, including vacations for the family. NADA Industry Analysis believes it will take gasoline above $4.50 per gallon before there is a sales surge on small cars that causes their market share to eclipse the share of each of the other two popular classes: CUVs and mid-sized cars that household believe meet their expectations fully for the range of household activity. There is not really a “new new” here except that Washington’s ability to interrupt economic improvement and impact the cost of owning and operating a light vehicle has grown. If our elected officials move decisively MARCH 2013
“As an act of self-preservation, elected federal officials will be busy over the coming days, weeks and months mitigating the impact of spending cuts.” on the deficit and debt issues over the coming days, one concern of households will fade into the background. Then the issue becomes fuel economy mandates that threaten to put U.S. households on public transportation. “Sell us a car or crossover we can all fit into comfortably, and one that obtains reasonable mileage in the process” seems to remain the obvious theme of new car sales as we continue through the Spring. Recently, gasoline is getting more expensive while energy in general is not. That relationship will not be expected to last while Europe remains in recession, as it will during 2013. So there is no new paradigm for automotive retailing as the next several years unfold, except that we think there will be more vehicles running on cheap and abundant natural gas. Industry Analysis has captured the reality of the typical middle-class household (start of recovery of the household nest egg in home equity) and typical upper middle class household when we add in data on net household assets that is driven in the short run by the value of stock shares owned outside of household retirement programs. These factors added to population growth, growth of licensed drivers, low interest
Massachusetts Auto Dealer www.msada.org
rates and income growth provide key predictors of the future of light vehicles sales. Used cars will continue to hold value until demand for used cars stops growing in relation to the increase in trade-ins that comes from strong new car sales. That will not happen in the next 10 months. Prices for used cars will remain solid while drifting back toward the relative relationships to new car prices experienced in past years. The volume of used cars and trucks available for sale remains somewhat tight and incentives do not lower effective new vehicle prices as much as in the past. As the economy continues to grow, used car demand should strengthen as the job market improves along with economic growth. As an act of self-preservation, elected federal officials will be busy over the coming days, weeks and months mitigating the impact of spending cuts. If they are looking as much as two years ahead, they will also be looking to reduce the take of the federal government spending by lowering the growth rate of federal spending to below the growth rate of the overall economy and federal tax revenues.
t
Paul C. Taylor, Ph.D., is Chief Economist of the National Automobile Dealers Association’s Industry Analysis, where he oversees NADA’s industry analysis activities, which include research on a wide range of factors impacting the retail automotive industry and publishing NADA’s annual compilation of facts and figures, titled NADA DATA.
25 Braintree Hill Office Park Suite 102 • Braintree MA 02184 • Tel. 617.471.1120 • Fax 617.472.7560