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FIRST CLASS MAIL US POSTAGE PAID BOSTON, MA PERMIT NO. 216
April 2013 • Vol. 26 No. 4
The official publication of the Massachusetts State Automobile Dealers Association, Inc
Above the Hype
Auto Tech Students Compete in NYC
Call Jean Fabrizio (617) 451-1051, ext. 229, or email jfabrizio@msada.org for your scholarship application, eligibility and details.
May 17, 2013
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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 Aut o D e a l e r M Ag a z i n e 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
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From the President: Hardly Shocking THE ROUNDUP: The Governor Proposes, The Legislature Disposes TRUCK CORNER: A Tale of Two Conventions AUTO OUTLOOK LEGAL: Be Careful What You Ask For LEGAL: Labor and Employment Law Forecast
14 Cover Story: Beyond the Hype
ADVERTISING RATES Inquire for multiple-insertion discounts or full Media Kit. E-mail tnash@msada.org
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SOUND OFF: Wave of the Future NEWS From Around the Horn NADA UPDATE: Auto Forum Update Economic Update: Average Auto Loan Amounts Are Up
BlumShapiro, 20 Boston Herald, 24 Lynnway Auto Auction, 18 Nancy Phillips Associates Inc, 20 O’Connor & Drew, P.C., 27 Southern Auto Auction, 21
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.
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Massachusetts Auto Dealer APRIL 2013
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from the President
by Scott Dube, MSADA President
Hardly Shocking, Actually I Am Shocked! The Tesla battle gets personal
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s I’ve said recently, Massachusetts is the canary in the coal mine for many initiatives that have a direct negative impact on auto dealers throughout the United States. And while Tesla Motor Company’s fight to roll back nearly 100 years of franchise law started here and a couple of other states, it now has spread to Texas. Their push in Texas involves the legislature. That means getting votes. Tesla Motor Company CEO Elon Musk sent the following note to his employees encouraging them to make calls to legislators. It read, in part: It is crazy that Texas, which prides itself on individual freedom, has the most restrictive laws in the country protecting the big auto dealer groups from competition. If the people of Texas knew how bad this was, they would be up in arms, because they are getting ripped off by the auto dealers as a result (not saying they are all bad – there a few good ones, but many are extremely heinous). We just need to get the word out before these guys are able to pull a fast one on us. For everyone in Texas that ever got screwed by an auto dealer, this is your opportunity for payback. We shouldn’t be surprised by this bile. If anything, it’s great that he’s put such laughably stupid thinking on paper. As our own case continues its appeal process, hopefully it should be more clear to people that we are on the right side of history here. What we have is a CEO (Elon Musk) who simply doesn’t want to play by the same rules as everyone else, and will cast aspersions on other businessmen and women if it appears that things aren’t going to go his way. He makes it dirty and personal; clearly he knows he’s losing in the court of public opinion. More importantly he understands the concept that if a lie is repeated often enough people will begin to believe it. Contrast this with Hyundai President John Krafcik’s comments about the franchise system made recently at NADA and in print: “You provide jobs, provide a stable tax base and contribute
APRIL 2013
Massachusetts Auto Dealer www.msada.org
to philanthropic causes in your local communities across the country. Yet it seems like every day someone is bashing the U.S. automotive retail system as being out of touch or inefficient. From our perspective at Hyundai, the franchised dealer system in the U.S. works because it’s the concentrated distillation of another system that we know works. One that’s been proven over the last couple of centuries -- the American free enterprise system.” Clearly the pressure from auto dealers needs to stay firm. Our voice needs to be able to always counter this kind of rhetoric, and no one does as good of a job as dealers defending the established law as the only way to ensure the market works and is safe for consumers. Remember, auto dealers in Massachusetts make up about 20% of the retail economy and we provide over 20,000 very good paying jobs. Most of us are strong supporters of community activities in ways Tesla never will be. It floors me that the Town of Natick would swoon the way they have over Tesla. While the dealers of Natick put blood sweat and tears into Natick, the town takes all of that for granted, even demeans it by unlawfully granting Tesla a license when it’s clear they don’t qualify for one. It begs the question do they dislike dealers (the economic engine of the state), are they playing games with peoples livelihoods, or do they just not understand what their actions portend? All of us have a part to play in making sure wanna-be bullies such as Musk aren’t able to eliminate the very free market principles he’s claiming to follow. Picture a world of dealers trying to compete with factory run stores. Think of the possible new entrants into the market from India to China -- there are smart people who would like to enter our market. Will they be forced to play by the rules or will government officials decide that they like the idea of scrapping the franchise system and allow not so clever ploys to be used to circumvent the franchise system?
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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. Tom Trudell (413) 885-5477 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 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 James Pietro (508) 791-5566 Mintz Levin Kurt Steinkrauss (617) 542-6000 Murtha Cullina Thomas Vangel (617) 457-4000 Nancy Phillips Associates, Inc. Nancy Phillips (603) 658-0004 O’Connor & Drew, P.C. Kevin Carnes (617) 471-1120 Performance Management Group, Inc. Mark Puccio (508) 393-1400 Ray-Jurgen Richard Thibadeau (860) 585-0111 R.L. Tennant Insurance Agency, Inc. Walter F. Tennant (617) 969-1300 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
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The Roundup
The Governor Proposes, the Legislature Disposes by Robert O’Koniewski, Esq. MSADA Executive Vice President Regardless of all Governor Patrick’s rhetoric and statewide campaigning for increased taxes and spending, the Legislature moved in a more restrained manner to limit tax hikes and, thus far in the House, to drastically limit spending increases for the FY2014 budget. Readers may recall that in February the governor proposed a $35 billion budget for FY2014, which represented a 7% hike over this year’s expenditures. To fund his aggressive expansion of government primarily in the areas of transportation, education, and social services, the governor put forth a tax plan that 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 potential tax savings by reducing the sales tax from 6.25% to 4.5%. In order to set the table for the FY2014 budget debates in the House and Senate, it was essential for the two chambers to resolve a tax plan to fund what they would seek to do for next year’s expenditures. Under the state constitution, tax bills must originate in the House, and act the House did. On April 8 the House approved, on a 97-55 vote, a limited tax package that would generate an estimated $500 million, earmarked primarily for transportation and mass transit programs, through a threecent increase in the gas tax, which also would be indexed to inflation; a $1 per pack increase in the cigarette tax; increases on cigar and smokeless tobacco products; and new sales taxes on computer design services and software modifications. The House action prompted the governor to immediately threaten a veto because the tax increase amounts were not high enough for him, nor did APRIL 2013
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they come close to meeting his expectations for revenues to fuel his visions for education and human services spending. The House vote, however, was 10 votes short of the two-thirds needed (107) in the House chamber to override a gubernatorial veto. Five days later, in a rare Saturday session, on April 13 the Senate passed a revenue bill that mirrored the House’s approved tax hikes but structured other matters to earmark a range of $500$800 million in transportation projects. The Senate’s 30-5 vote to pass the plan was well above the two-thirds needed (27) to override a potential gubernatorial veto in that body. On the important tax items, the House and Senate plans are the same; a conference committee, however, will be needed to resolve the differences on other policy and fee items contained in the bills. Bottom-line: The gas tax is going up, indexed to inflation, and more money will be earmarked for road and bridge projects, including increased subsidies for the Boston-area mass transit system (the MBTA) that is bleeding money annually, with no real reforms forthcoming. Once the tax questions were put to bed, the House took up its proposed FY2014 budget. After three-days and nights of debate, just before midnight on April 24 the House passed, 127-29, a $34 billion annual budget that is $1 billion less than the governor’s fiscal blueprint. The House plan, however, does represent a 4% increase over the current year’s spending levels. House leadership effectively held the line against proposed spending amendments from a bloc of liberal legislators who sought to carry the governor’s water on increased education and social services expenditures.
MSADA The House budget also includes several key provisions for employers, including one that would keep private the financial information of companies that use the Investment Tax Credit and the Research and Development Tax Credit. The bill removes two employer health-care contributions, the Fair Share Assessment and the Medical Security Assessment, while requiring that any increases to a new $50-per-worker Employer Responsibility Contribution for health care be approved by the Legislature. Business interests, including Associated Industries of Massachusetts and NFIB, supported moves to eliminate the Fair Share Assessment, created under the 2006 state health reform law, and the Medical Security Assessment because both will become unnecessary under federal health reform. The original proposal to replace those two assessments with the Employer Responsibility charge generated concern because it gave a board of three unelected people broad authority to raise the assessment by up to 5 percent annually. The House budget would require that panel to submit proposed increases to the Legislature. Fair Share mandates that employers with 11 or more full-time equivalent employees make a “fair and reasonable” contribution toward the health-care costs of employees or pay an assessment of up to $295 per employee per year. The Medical Security Program requires companies to contribute money to provide low-income unemployed people with health insurance. Employers’ groups also remain concerned about a section of the budget that impacts the tax audit procedures for entities such as partnerships and limited liability companies (LLCs). The section would allow the Department of Revenue to expand audits beyond the legal entity being audited and limit the taxpayer’s appeal options, potentially forcing companies into expensive litigation of issues at the Appellate Tax Board that should be resolved at a more cost-effective administrative level. The Senate will take up its version of the FY2014 budget in mid-May, with the differences between the chambers’ plans
to be resolved by a conference committee, ideally in time for the July 1 start of the new fiscal year.
Doc Prep Fee Alert While the House and Senate have been setting their sights on tax and spending, the standing committees are still getting themselves organized and prepared – albeit slowly – to review the over 6,000 bills that have been filed for the 20132014 session. Over the years one item that seems to receive considerable scrutiny from consumer advocates is your doc prep fee amounts. For example, you may recall last year Boston’s WCVB Channel 5 ran a news report, subsequently picked up by the print media across the state, which played up the “doc fee” survey the Massachusetts Office of Consumer Affairs conducted at 180 new and used car dealerships. (The Consumer Affairs survey results can be accessed at http:// www.thebostonchannel.com/download/2012/0216/30472228.pdf.) Further, on occasion various news outlets have been known to create “gotcha” moments by walking into a dealership and quizzing dealership salespeople about the doc fee amount and how the salesperson can justify that charge. (Hint: Telling a reporter that it is pure profit and can be as high as you want it to be is not a good idea.) On top of that, how often have your salespeople heard the following from a customer: “Why are you charging me a documentary preparation fee, and why is it $(fill in the blank)?” More importantly, what does your sales team tell your customers? That can be the really scary part of the story. With all this growing public scrutiny, it was only a matter of time before a legislator decided to take action. For this year’s legislative session, state Senator Jim Eldridge (D-Acton) has filed a bill, Senate 95, which would statutorily cap the doc fee at $75 – an amount that is most likely less than what you’ve calculated yours to be. Your Association will be opposing this www.msada.org
legislation and working with legislators to educate them on the components of the fee and why it exists. Dealers, however, can help themselves by reviewing their fee and making sure that it is in compliance with the “cost recovery” aspects of why you charge it. We have issued numerous bulletins and other writings on this topic and urge dealers to re-familiarize themselves with the doc fee parameters, such as: • Dealers need to practice restraint and discretion when setting the fee so as to avoid prosecution or lawsuits under the Massachusetts Consumer Protection Act (MGL Chapter 93A). The fee is allowed for cost recovery; it is not intended to be a “profit-making” component of the vehicle purchase. • The “Documentary Preparation Fee” can be passed on to the consumer but only if it is (1) part of the total purchase price advertised to the customer, and (2) a fee associated with legitimate costs that you incur. There is no maximum amount set in law that a dealer can charge for “doc fees.” However, you must make sure that any doc fee charged to a customer has some reasonable relationship to the actual costs you incur in preparing the necessary documents for the customers, except for titling and preparation of finance-related documents, as explained below. • Cost recovery consists of passing on to the customer the costs incurred in doing the following: for example, preparing a P&S, an appraisal document, odometer statements, insurance verifications, etc.; storing or archiving documents; and personnel and computer costs associated with these tasks. • Two items that may never be included in the doc prep fee: (1) preparation of the Retail Installment Sales Contract cannot be part of the fee’s calculation as you would then need to wrap it into the APR calculation; and (2) if you are on the EVR system, you cannot include the EVR fee in the doc prep fee. • Doc fees charged to customers should be uniform in amount. If you are aggregatcontinued on next page Massachusetts Auto Dealer APRIL 2013
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The Roundup from previous page ing your costs and apportioning these costs to each of your customers on a pro rata basis, excluding a customer will throw the formula off and strengthen a customer’s argument that the fee is arbitrary. Be sure you can justify the fee’s total amount that you are charging a customer on the P&S. (You are not, however, required to put an itemization on the P&S. It is sufficient to have an explanation available if you are asked by a customer to justify the doc fee.) • Dealers must also NEVER represent to customers that any portion of the doc prep fee is required by or remitted to the RMV or any other state agency. • Furthermore, dealers must note that the doc prep fee cannot have anything to do with the Title Preparation Fee. The Title Preparation Fee (which is on a separate line on the P&S) has been capped by the Legislature at $5. You cannot charge a titling fee higher than $5, nor can you roll your costs above the $5 into the doc prep fee. Any cost you incur in preparing or procuring title above the $5 amount cannot be passed on to the consumer other than through the gross profit earned on the vehicle. In short, if you are charging a doc fee, be sure you can justify the amount and charge every customer the same amount. Do NOT charge anyone a title preparation fee higher than $5. Finally, in order to assist you in explaining the need for the doc prep fee to your customers (and your salespeople), your Association has developed a brochure you can provide them. If you do not have the template for this brochure, contact me and we can assist you on this. Moving forward, work with your managers and salespeople to review the concept of the doc fee and what you need to tell your customers and anyone else who walks into your store asking about the fee.
Congratulations to Pathfinder Tech HS We extend our congratulations to Katie Letendre and Matthew Lloyd, seniors from Pathfinder Regional Vocational Technical
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MSADA High School, who represented MSADA at the National Automotive Technology Competition staged at the NY International Auto Show earlier this month. We also congratulate their Pathfinder Tech instructor, Paul Bouthiller, who took his second team in a row to the national competition. The Pathfinder Tech seniors were selected to attend the competition after they took first place in the MSADA’s repair competition this past December. Our sponsorship of the Massachusetts team each year demonstrates our commitment to grow our involvement with the next generation of technicians through events like this, our Foundation scholarship program, and working with MassBay Community College and other schools to help show students the potentially rewarding opportunities at our members’ dealerships. It is important for these tech savvy students to realize and embrace the career opportunities available in this field. We are proud of the efforts Miss Letendre and Misters Lloyd and Bouthiller brought to New York City this year, and wish them continued success in the years ahead. We couldn’t ask for classier representatives to be our standard bearer at the competition.
MSADCF Auto Tech Scholarships Available – May 17, 2013 Deadline 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. Four years ago the Foundation’s scholarship program expanded to include not just manufacturer-backed programs but also general automotive technology programs at a greater number of colleges in
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the Massachusetts area. This gives dealers an even greater chance to capitalize on a highly skilled base of potential employees. To obtain additional information on the scholarship program, contact Jean Fabrizio at MSADA at (617) 451-1051 or by e-mail at jfabrizio@msada.org. The 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.
HR Compliance Seminar On April 25 in Worcester, MSADA hosted labor attorney Joe Ambash of Fisher & Phillips for an HR law compliance seminar that reviewed key issues and statutes dealers and their managers need to be familiar with, including: • 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 • How to terminate lawfully. If you were unable to attend this event, look for our future mailings and bulletins to register for upcoming compliance seminars.
Annual Meeting – June 21, Boston Your Association will conduct this year’s Annual Meeting on Friday, June 21, at the Marriott Long Wharf, in Boston. We will commence with a buffet lunch at Noon, with our business meeting running from 1:00 to 5:00 p.m. We have lined up a number of exciting industry speakers for the day. Be on the lookout for our invitation and registration materials we have sent you.
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A Tale of Two Conventions
by Dick Witcher
Dick Witcher of ATD and principal
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I have no facts to support my contention that all of us – at one time or another – had a “Mrs. Lily Literature” or “Sister Mary English” in high school. I willfully fought them all the way through every dissection of Dickens’ A Tale of Two Cities. Begrudgingly, I was reminded of them after reviewing the results and the survey responses about the NADA/ATD Convention held in Orlando in February. Car Dealers and Truck Dealers have significantly different reasons for attending the Convention. Before discussing our differences, some facts about the Convention: • The convention organizing committee is a standing committee of the NADA/ATD Board, and the chairman of the organizing committee sits on the NADA Executive Committee. Planning for the convention starts several years before the actual event. For example, some planning is taking place for the 2016 convention in Las Vegas. • The convention is a major fundraiser in support of the NADA/ATD; the convention success helps to keep dues low for all members. Other revenue generators for the Association are the “Used Car Guide,” NADART and Dealer Operations/NADA University. • 21,000 car registrants and 900 truck registrants attended the convention. Although the attendance was slightly less than Las Vegas, the number of attendees exceeded the planned budget and the NADA Board was very happy with the turnout. There is something about Orlando that reduces attendance – maybe people are afraid they will need to bring the kids for a Disney visit and they don’t want to spend the money. • All of our hotel rooms were sold out and the convention staff actually needed to find additional rooms before the convention began. The lesson is book early, especially in places like New Orleans and Las Vegas. After the Convention, the NADA/ATD sent four different surveys to measure satisfaction: one survey goes to the car exhibitors, another to the car attendee registrants, a third to the truck exhibitors and finally one to the truck attendee registrants. Of course, the responses are used to tailor the coming convention, but they illuminate the differences between car and truck. As you may know, 1,700 truck dealers make-up about 10% of the NADA/ATD membership. Since truck users are on the move regionally and nationally, truck dealers are continuously supporting one another’s customers – I think we know one another more than car dealers know one another. Each brand of truck has roughly 250 franchised dealers. And the 1,700
dealers support roughly 3.5 million trucks in operation throughout the country. So it seems to me we are more of a “village” than car dealers are a community. Make meetings are the motivation for roughly half of all truck dealers and managers to attend the convention. Networking with fellow dealers and managers is the second reason approximately 30 percent travel to the convention. Truck dealers choose workshops as the third most important reason to attend the convention. The exhibits and the general sessions are down in the single digits – this result particularly hurt my pride: I thought everyone showed up to hear my keynote speech! For the car attendees, the most important aspect of the convention is the exhibition; nearly 40 percent of the attendees identify the exposition as the most important reason for attending the convention. The workshops are the second most important reason for attending the convention with about 35 percent citing them as the motivator. Networking is in third place with only about 14 percent of the population expressing it as a priority. I feel a little better about my speech writing after seeing the car side: slightly more than two percent saw the general sessions as important – I am up above 3 percent. So there! One of the big surprises to me in the dealer surveys is how much more important it is to the car attendees to have advances in technology related to the convention: the apps, social media, the technology centers, etc. New technology items are being reviewed for next year. The exhibitors on the car side are very happy with the turnout and the activity while the truck exhibitors are less so. Overall both car and truck attendees have positive comments regarding the combined convention. Having the ATD and NADA conventions together is seen as a benefit. In general, truck people saw this year’s execution as better than last year but some improvements might include: • More work to minimize the overlap of make meetings, to avoid having medium-duty only make meetings at the same time as Class 8 make meetings. • Block enough rooms in one hotel to accommodate the truck attendees. Having truck attendees together (dealers, OEM’s, Allied Industry) promotes interaction. • The ATD Dealer lounge was a good idea, but it needs more awareness. Start planning early for New Orleans.
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AUTO OUTLOOK
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Legal
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Be Careful What You Ask For By Chip Phinney and Cynthia J. Larose, Mintz Levin
For a detailed discussion of this case and related issues, see Mintz Levin’s client advisories and blog posts at www.privacyandsecuritymatters.com.
A recent decision by the Massachusetts Supreme Judicial Court in Tyler v. Michaels Stores, Inc. spotlights the common practice of retailers of asking consumers for a zip code when processing a sale, holding that zip codes are “personal identification information” subject to the restrictions of a Massachusetts consumer privacy statute governing credit card transactions. While Massachusetts retailers, including auto dealers, may properly record customer zip codes when required by credit card issuers, for credit checks or for product delivery, retailers may be sued if they record and use that information for their own business purposes, such as sending customers unwanted marketing materials or selling the information for profit. The Tyler decision is significant because it sounds an important warning for Massachusetts auto dealers and contributes to the increasingly complex nationwide web of decisions and regulations governing the use of personal consumer information. In light of Tyler, merchants (whether in brick-and-mortar stores in Massachusetts or with online operations) should carefully review their sales practices to determine whether they involve the recording of customer zip codes and other personal identification information for uses other than to conclude the transaction, and, if so, whether the company’s practices need to be revised to avoid a potential consumer class action suit like Tyler. The Court in the Tyler decision held that a consumer’s zip code constitutes personal identification information under M.G.L Chapter 93, Section 105(a). The potentially costly part of the decision for merchants is that the SJC held that a plaintiff may bring an action for a violation of Section 105(a) without alleging a claim of identity fraud, considering that the statute protects consumer privacy as well as identity fraud. The SJC also held that the “credit card transaction form” referenced in Section 105(a) includes electronic as well as paper transaction forms. According to the Court, “[w]hen a merchant acquires personal identification information in violation of § 105(a) and uses the information for its own business purposes, whether by sending the customer unwanted marketing materials or by selling the information for a profit, the merchant has APRIL 2013
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caused the consumer an injury that is distinct from the statutory violation itself and cognizable under G.L. c. 93A, § 9.” The SJC also noted that, while the consumer’s damages in such a case might be difficult to quantify, the consumer would still be entitled to at least the minimum statutory damages award of $25 under Chapter 93A, Section 9(3). This is significant because, aggregated in a class action, even such nominal damages can lead to a substantial damages award against a retailer. In light of Tyler, Massachusetts auto dealers should review their data collection practices in credit card transactions, including where that information goes, to determine whether they are in compliance with Chapter 93, Section 105(a). The following key points should be considered: • First, Section 105(a) generally prohibits recording customers’ personal identification information, such as their address, telephone number, or zip code, on the credit card transaction form, unless that information is (a) required by the credit card issuer, or (b) necessary for shipping, delivery or installation of purchased merchandise or services or for a warranty and is provided voluntarily by the credit card holder online or offline. • Second, Section 105(a) does not prohibit auto dealers from requesting and recording customers’ personal identification information separately from the credit card transaction, where customers provide this information voluntarily. • Where the auto dealer records the customer’s personal identification information on the credit card transaction form in violation of Section 105(a), it has by definition engaged in an unfair and deceptive practice. While this practice alone, without more, may not expose the company to a consumer suit, it should be discontinued. • Where the auto dealer records the customer’s personal identification information on the credit card transaction form in violation of Section 105(a), and then uses that information for its own business purposes, such as sending customers unwanted marketing materials or by selling the information for a profit, the company may be subject to a consumer suit under Chapter 93A, Section 9. Like all areas of data privacy, regulation of consumer information such as zip codes in credit card transactions is a rapidly evolving field that requires constant monitoring. Indeed, the Massachusetts SJC’s opinion in Tyler is the latest of several recent and significant decisions in other states concerning the collection of consumer information during credit card transactions. Further, the determination of the SJC in this case leads to the question of whether this holding represents a possible judicial expansion of the definition of “personal information” in Mass. Gen. Laws c. 93H, a breach of which triggers the obligation to notify affected residents of the Commonwealth.
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By Joseph Ambash, Fisher and Phillips
Labor and Employment Law Forecast Here are some predictions about the future of labor and employment law during the next four years. While there are some pending legislative initiatives, the sweeping legislative reform in the labor and employment arena seen in prior years is politically unlikely. Instead, enforcement and rulemaking is expected to dominate the labor and employment landscape.
Developments at the EEOC The Equal Employment Opportunity Commission is focused on systemic investigations of employer practices. Last year, there were 99,412 charges of discrimination filed at the EEOC, and the agency itself filed 122 lawsuits against employers, obtaining a record-setting $365 million for alleged discriminates. Last year alone, the EEOC pursued 580 systemic investigations, and this focus is likely to increase. During a systemic investigation, the EEOC typically takes a single charge of discrimination and then expands it, looking at patterns and practices of discrimination by a particular employer. Systemic investigations are costly, and often involve exhaustive responses to subpoenas and information requests by the agency. These investigations can lead to class action lawsuits by the EEOC and negative publicity in the event of settlements. Massachusetts dealerships should be aware of the likelihood of aggressive investigations by the EEOC in the next four years.
Wage and Hour Enforcement The Wage and Hour Division of the U.S. Department of Labor enforces federal wage and hour laws. The Massachusetts Attorney General enforces Massachusetts wage and hour laws. Their activities are augmented by private lawyers eager to sue employers for wage violations because Massachusetts law awards triple damages and attorneys’ fees in wage and
hour lawsuits. Expect to see aggressive government enforcement on the state and federal level regarding the following critical issues: pay plans at dealerships; proper classification of employees as exempt or nonexempt; and the use of independent contractors. Particularly at the federal level, we expect to see moves to increase the minimum salary level needed to classify employees as exempt, plus efforts to raise the federal overtime pay from 1.5 times the regular rate to 2.0 times the regular rate.
OSHA Developments OSHA likely will continue to rely on its rulemaking authority to make changes. “I2P2,” an initiative currently in pre-rule status, would require employers to implement an injury and illness prevention program. Also expect increased enforcement of OSHA’s Whistleblower Protections Program and continued emphasis on enforcement over voluntary compliance.
The NLRB’s Agenda We have previously reported on the NLRB’s aggressive agenda to inject federal labor policy into the nonunion workplace. Once the issues are resolved regarding the legitimacy of the current NLRB, members of which are mostly “recess appointees” whose legal status is likely to be resolved by the Supreme Court, we can expect to see a lot of action. Expect more and more cases that reverse longstanding precedent and intrude into nonunion workplaces on such issues as handbook policies, “protected concerted activity,” the use of employer email systems and social media.
Immigration Reform The current political landscape makes comprehensive immigration reform more likely now than ever before. Most immediately, a new Form I-9 has been issued, and if you are not already using the E-Verify system, it could be in your future. Also www.msada.org
expect to see a continued increase in the number of I-9 audits. Employers might also see an increase in investigations for immigration compliance after being investigated by another federal agency for unrelated compliance issues. Employers should be using the new I-9 Form and ensure that your employee responsible for these forms is trained to accurately complete them.
Potential Legislative Initiatives While rulemaking by agencies and executive orders are expected to dominate the landscape, there are some legislative initiatives being considered. In January 2013, the Fair Pay Act was introduced in the Senate, which would require employers to disclose pay scales and rates for all job categories, arguably to allow employees access to information they would need to identify “discriminatory pay practices.” Also to be reintroduced is the Healthy Families Act, which would allow employees to earn one hour of paid sick time for every 30 hours worked, up to 56 hours (7 days) per year. A similar proposed statute is gaining traction in Massachusetts as well.
Your To-Do List Don’t be caught unaware. Review your policies and practices on hiring, wages, safety and health, immigration compliance and social media to make sure a surprise government audit won’t lead to fines and penalties.
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Joe Ambash is managing partner of the Boston office of Fisher & Phillips, a national law firm representing management in labor and employment law. He can be reached at jambash@ laborlawyers.com.
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MSADA Cover Story
Above the
Pathfinder Tech students compete in the Big Apple Solid, complementary teamwork, talents nurtured at a top notch program in their field, hours of intensive training – Matthew Lloyd and Katie Letendre brought a lot to the table at this year’s National Automotive Technology Competition. The annual competition pits 30 teams of high school students from across the country against one another to test their ability to perform tasks at work stations and to solve problems “planted” in the cars they are assigned to work on, within a time limit. The competition, held at the Jacob Javits Center in New York City, distributes prizes and scholarship offers, and is aimed at promoting careers in auto technology. The event took place alongside the New York International Auto Show, which featured hundreds of vehicles from every major manufacturer and several new model unveilings. The MSADA sponsored the two Pathfinder Regional Vocational Technical High School seniors to attend the competition after they took First Place in the Massachusetts Dealers Association’s repair competition this past December.
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Letendre learned her first automotive repair lessons from her father and then really got into the work in the shop classes at Pathfinder. The 18-year old was one of only three female competitors out of the 60 students at the Javits Center. Come competition time, Letendre was focused. She wasn’t nervous, and remained unfazed by the big city. Of her first time in New York, Letendre said, “It’s not what it’s hyped up to be.” While Letendre was equipped with a steel resolve, Lloyd brought competition experience. He took part in the 2012 Ford AAA competition with last year’s New York team member Nick Jones, also a Pathfinder student. “Going through Ford AAA there were things I know we needed to focus on,” said 18-yearold Lloyd, who has been working on
Hype cars since he was 13. The June competition used to be the biggest-scale competitive event Pathfinder students had been part of, until Jones and his teammate Seth Ciejka made it to the Javits Center last year. Lloyd credits the comprehensive education he and Letendre receive at Pathfinder for garnering its students a spot at the New York competition two years in a row. Both he and Letendre have taken the automotive course in each of their four years at the school. “We get taught a real basic set of skills,” Lloyd said. “There’s not a lot we miss.” Instructor Paul Bouthiller, who accompanied the students, says the program is fully equipped. “We have a pretty good infrastructure,” Bouthiller said. “We have
MSADA
every tool we need. As far as technology, we have everything.” Pathfinder takes a team approach to preparing its students for competitions — choosing not to focus on an elite group but instead make the resources available to everyone. Students learn theory in a classroom setting and then do hands-on work in the automotive shop. “We have more classroom time than other schools. Hopefully, that doesn’t change,” Bouthiller said. Outside the classroom, the students took advantage of support at a dealership that volunteered time and manpower to work with the team. After being assigned the 2013 Nissan Ultima for the competition, Lloyd and Letendre spent several hours during a series of days at Curry Nissan to prepare. There they worked on parts ranging from door panels to trunk lights, Bouthiller said. “[Curry Nissan] went above and beyond. Flat-out amazing,” Bouthiller said. continued on next page
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Above the Hype
MSADA
MSADA Scholarships Help Meet Demand for Technicians In 2003, the Massachusetts State Auto Dealers Charitable Foundation began its Automotive Technician Scholarship Program. The Foundation is the charitable arm of the Massachusetts State Automobile Dealers Association. More than 200 students have benefited from over $700,000 in scholarships. Massachusetts Bay Community College has been a long-time partner and has the most extensive partnership (scholarships) with the Foundation in the state. Students from colleges, including Benjamin Franklin Institute of Technology, Springfield Technical Community College and Massasoit Community College, have also received scholarships from the Foundation. The Scholarship Program is competitive. A two-year scholarship ranges from $6,000 to $13,000 per year. Less than 10
percent of the students who apply are accepted. Students must maintain a 3.0 average in their tech courses, and they must have secured a co-op appointment in a Massachusetts new car dealer repair shop (dealership). A co-op is technically an internship and students are paid, offsetting the cost of tuition of the program at MassBay. The tuition for the automotive technician program is $16,000. The field of auto mechanics is changing dramatically. Today’s mechanic needs to know how to operate a keyboard as well as a stick shift. As cars with sophisticated onboard computers become the rule rather than the exception, the profession is becoming more white collar, and technicians now need to be computer- as well as mechanically-savvy. Auto mechanics are now called technicians, and for good reason. While they may still sometimes get their hands dirty, more often than not, they turn to computers to
from previous page Regional Audi representatives also came to the school to help the students, whose work on an Audi had earned them their statewide win and snagged them a spot in the national competition. The morning of the competition, each team assembled before their assigned car. With scan tools set up and judges assigned, the teams worked for three hours to get their vehicles running. While every manufacturer and most major brands were represented, the same bugs appear in each. The competition comes down to knowing the nuances of the car. Ultimately, when the buzzer sounded Letendre and Lloyd’s car had not started, and the team missed a top-10 finish. Meanwhile, MSADA Executive Vice President Robert O’Koniewski said the team’s overall academic success is just one way the Association supports its next generation of auto techs. “We are very proud of these students,” O’Koniewski said. “They represent the best of what our young Massachusetts technicians have to offer. We need to continue to grow our involvement with the next generation through sponsoring this competition, our Foundation scholarship program, and working with MassBay and other schools to help show students the opportunities at our dealerships. APRIL 2013
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help them diagnose a problem and perhaps even give them the repair instructions. MassBay, part of the state’s community college system, is training this new breed of automotive technicians at its state-ofthe-art automotive center in Ashland, a suburb outside of Boston. MassBay’s Automotive Center is known for having one of the best programs in the Northeast. Its strong partnerships with area dealers ensures that its students get to work and train on the latest models. “Led by Howie Ferris, MassBay is a solid partner for us, committed to training the techs of the future,” said MSADA Executive Vice President Robert O’Koniewski. Job prospects for automotive technicians are very optimistic. The pay is excellent, and there is a shortage of up-and-coming technicians. According to the U.S. Department of Labor, the demand for auto technicians will have increased by almost 20 percent by 2014.
“Plus, this is a great indicator of the high level of education and commitment Paul and his students bring to the table each year. We couldn’t ask for classier competitors to carry the Massachusetts label.”
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Sound Off
MSADA
Wave of the Future? By Nancy Phillips
No one rides a crest forever, but for the time being the waters under that big wave are far from calm. As a result of the historical crises in our industry, the surprising number of dealers that began contemplating selling are just now emerging from hibernation to act on their desire to divest. Dealers don’t sell in a comatose market unless forced, because they don’t get enough money to make the sale worthwhile. A little upturn goes a long way to invigorate shelf sitters who are further incentivized by the prospect of all of this good automotive news coming to an abrupt halt at some unforeseen time in the future. Yes, there is an overall acceleration in dealers planning to exit before taking the plunge of facility upgrades, but this is to be expected. Part of this is age related. When you are 65, additional real estate investment may make less sense than a sale. At the same time, a great number of dealers are working through upgrades and coming out whole on the other side. Some plan on staying or passing their businesses down to family; others believe, rightly so, that upgrades will enhance the salability of their dealerships when they are ready to go. Still for others, sadly, it may be the upgrade itself that forces the sale. The really big factor in auto dealership ownership today, however, is the looking glass – do we foresee the continuation of consolidation or could that trend reverse itself in a most unexpected manner. It is apparent now that groups continue to grow and that smaller regional groups are scrambling to maintain a piece of the pie. At the same time individuals who want to buy their first or second store are nearly desperate to make a bid before there is nothing at all left to suit their budget. While this may bode well for sellers today, tomorrow may be different. Our illustration is meant to depict an impetus for
selling that is looming on the horizon. The momentum we are talking about is fear – the fear of being washed away by the wave of the future. Individual dealers have concerns today they never had before. Faced with problems like stair step programs, neighboring dealer groups with massive budgets and pressure from franchisors over performance short falls is enough to give anyone a very heavy dose of stress. Living with fear of failure, panic, insecurity and worry over one’s continued ability to compete and preserve wealth isn’t a lot of fun. We can thank the Wal-Mart’s of the auto industry for this. And some, but not all, of the franchisors are also thanking them and supporting their efforts to grow and expand. Without having to do all the heavy lifting, in the span of five
years our dealer network has gone from a unique mix of all shapes and sizes to a polished one size fits all approach. Under this wave of continuing consolidation is a current of strong emotion linked to the heart and soul of those hard working self-made entrepreneurs who chose to become car dealers. In the coming months you will hear more about our perspective on current industry trends, franchise values and the state of dealership sales and acquisitions. Please join me here!
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Nancy Phillips Associates specializes in sales, acquisitions and evaluations of franchised automobile dealerships. Contact Nancy Phillips at (603) 658-0004 or email auto@nancyphillips.com.
Do you have an opinion you want to share? Send submissions to tnash@msada.org.
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NEWS
from Around the Horn
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HINGHAM
BMW/Mini-Cooper Dealer Planned for Hingham/ Rockland Border A BMW and Mini-Cooper dealership is being planned for 16 acres near Route 3 on the Hingham and Rockland town line. Gallery Automotive would be located behind several office buildings on Hingham Street, across the street from Home Depot. The development, slated to begin this summer, is expected to generate an additional 1,289 vehicle trips per day. However, development officials with A.W. Perry said the dealership would not significantly affect traffic. The dealership proposal has not yet officially gone to either Hingham or Rockland officials, and specific plans have not yet been drawn up. Gallery Automotive will need a variety of permissions, including Conservation Commission and Planning Board approval. For wetlands issues, the project is currently going through the state channels for approval from the Massachusetts Environmental Protection Agency. Developers will also need the
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go-ahead from the Department of Transportation to access land that adjoins a state highway. Regardless of all the permits the project will need, development officials are hoping to begin construction this Summer.
NEWS from Around the Horn BOSTON
Massachusetts Honda Dealers Win President’s Awards Village Honda of Newton, Honda North of Danvers, and Bernardi Honda of Brockton and Natick have been named as 2012 winners of the Honda President’s Award. All are multiple year winners. The award is presented to Honda’s topranking dealerships nationwide that achieved excellence in all areas of operation, including customer service and sales satisfaction, sales, training and facility. During 2012, more than 1,000 Honda dealerships from across the country competed for the President’s Award, and 115 dealerships earned the title. Each year the objectives for the program are evaluated to ensure compliance with Honda’s standards. Honda provides each winning dealership a distinguished trophy and other showroom embellishments to herald their accomplishments. “We are honored to have earned such a prestigious award from Honda, and could not have done so without the hard working staff that we have at our dealership,” said Carl Pasquarosa, Honda Village General Manager. “At Honda Village, we pride ourselves on our commitment to excellence and customer satisfaction.” PEABODY
New MINI Paceman Arrives at Dealerships After finding success by offering ALL4 all-wheel drive to its customers for the first time in its four-door Countryman compact crossover, MINI is now delivering a sportier, two-door version called the 2013 MINI Paceman. Currently on sale at dealerships, the MINI Paceman further differentiates itself with a lowered sport suspension, a sloping roofline, an integrated rear spoiler and MINI’s first application of horizontal rear lights. Like the MINI Countryman, the Paceman uses a 1.6-liter fourcylinder engine to generate 121 horsepower in standard form, while a turbocharged variant boosts output to 181 horsepower in the Cooper S Paceman and Cooper S Paceman ALL4. The highperformance MINI John Cooper Works Paceman will also arrive at dealers shortly, packed with 208 horsepower and a 0 - 60 mph time of 6.5 seconds. “The new MINI Paceman is perfect for Massachusetts drivers who want a sporty coupe but need something that they can drive year-round in New England’s crazy weather,” said Gary King, general manager of MINI of Peabody. “The available all-wheel drive can get you through winter’s worst, but the Paceman rewards you in every season with its sleek exterior and responsive handling.”
MSADA
In Memoriam SWAMPSCOTT
Bob Brest Lynnway Auto Auction owner and longtime MSADA supporter Robert Brest died on March 30 at the age of 87. A graduate of the University of Washington, Bob spent more than 50 years in the auto business, most recently as partner with Jim Lamb of Lynnway Auto Auction, where he had worked since 1997. He previously owned several dealerships for many years in the larger Lynn area. Brest previously served as president of the Lynn Chamber of Commerce and a lifetime board member of Jewish Federation of the North Shore. He is survived by wife Naomi Alexandroff-Brest and sister Charlotte Siegal. Father and father-in-law to Jennifer, Lisa and Peter and grandfather to Charlie, Brest is also survived by Naomi’s children: Liane and David, Melissa and Rick, and their children, Joshua, Daniel, Jersey, Alex and Jack. Services were held April 2 at Temple Emanu-El in Danvers. Donations in Bob’s memory were requested to be made to the Boston Anti-Defamation League.
Pocassett
Norman Wagner Norman Wagner, 57, died on March 26 at his Pocasset home surrounded by his family. Wagner was owner and general manager of Norm Wagner Toyota/Scion Dealership in Lancaster and worked in the automotive industry for the 25 years. He was a graduate of Westfield State College. Wagner is survived by his wife, the former Katherine Pasquale; his daughter, Jessica Ann, and son, Jake Thomas, both of Boston; his 95 year old mother, Margaret Ellen (Brennan) Wagner, and three sisters. He was preceded in death by his father, Harry N. Wagner. Norm grew-up in Upton. A memorial service was held April 5 at Our Lady of Fatima in Sudbury. Donations in Wagner’s memory may be made to the Oakmont Regional High School Athletic Department.
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NEWS from Around the Horn HYANNIS
AAA: Ford Fusion and Flex Are Top Vehicles for Commuting AAA Auto Buying experts have determined that the 2013 Ford Fusion and Ford Flex are top contenders for commuters in the Sedans and Crossovers categories, respectively. Evaluators base their decisions on interior comfort, overall performance and fuel efficiency. The Flex was honored this year because of its quiet ride, spaciousness and available fuel-efficient EcoBoost V6 engine, while the Fusion was praised for its sleek exterior, updated interior and its two four-cylinder EcoBoost options that still offer impressive performance. “When drivers have to commute nearly half an hour or more to work and back every day, it’s essential to be comfortable, but as gas prices remain unstable across the country, motorists are also demanding more miles per gallon out of their daily drivers,” said Mark Caliri, general manager of Balise Ford of Cape Cod. “Fuel economy has become one of the most important factors for car buyers, and Ford’s EcoBoost engines provide impressive efficiency without taking away the performance that makes driving fun.” Car buyers appear to be embracing the 2013 Ford Fusion, as the sedan posted its best-ever monthly sales in March, moving more than 30,000 units in a month for the first time ever. That strong performance also helped the Fusion earn a record in quarterly sales, with 80,558 models sold during the first three months of the year.
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MSADA HYANNIS
Nissan Pathfinder Hybrid Makes Electric Debut in New York Families put plenty of miles on their vehicles, whether it is from commuting to work, running errands or heading to the kids’ events on weekends, and all that driving can quickly add up at the gas pump. Nissan is working to help make daily driving a little easier on the pocketbook with its all-new 2014 Nissan Pathfinder Hybrid, which debuted at the New York International Auto Show late last month. Arriving at dealerships late this summer, the Pathfinder Hybrid will be powered by a supercharged 2.5-liter gas engine and an electric motor paired with a lithium-ion battery pack. The first-ever hybrid Pathfinder will offer similar performance to its gasonly brother, producing a combined 250 horsepower and 243 pound-feet of torque. Despite that impressive output, fuel economy will increase by 24 percent over the conventional model, with the Pathfinder Hybrid earning a manufacturer-estimated 26 mpg in combined driving. “Families need to squeeze every dollar they can out of a gallon of gas, and the Pathfinder Hybrid allows them to do that without
getting squeezed for space,” said Michael Ferraro, general manager of Balise Nissan of Cape Cod. “Buyers won’t be penny-wise and pound-foolish with the Pathfinder Hybrid because they still get great capability and performance without the inflated gas bill.”
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NEWS from Around the Horn WATERTOWN
RAYNHAM
Vehicle Shoppers on KBB.com Choose Ford as Best Car Styling Brand
Redesigned Mazda3 to Reportedly Launch This Fall
While auto journalists and other industry experts are often the deciders of car-of-the-year awards and the like, it is ultimately the car shopper who determines the long-term success of an automaker’s lineup. To that effect, Kelley Blue Book’s KBB.com recently released its 2013 Brand Image Awards, which were decided by thousands of prospective buyers who visited the auto researcher’s site. After opinions were analyzed, Ford emerged as the Best Car Styling Brand among non-luxury contenders, marking the third straight year that KBB.com has recognized the marque for its exterior designs. Determined by the feedback of more than 12,000 KBB.com visitors, the Brand Image Awards measure an auto brand’s ability to maintain certain attributes that create enthusiasm among buyers. KBB.com editors cited Ford’s attractive new design language when dishing out its Best Car Styling Brand award,
Mazda currently has two models on the market that feature its full suite of new efficiency-focused SKYACTIV technologies, and now it appears that its best-selling vehicle, the Mazda3 compact car, is slated to receive the same treatment. Already offered with a SKYACTIV-G engine and the choice of an automatic or manual six-speed SKYACTIV transmission, the Mazda3 will
including its application on the Ford Fusion midsize sedan and Ford Escape compact SUV, both of which received redesigns for the 2013 model year. “Since the middle of the last decade, Ford has invested a lot into its lineup to create models that manage to be edgy and exciting, but also extremely fuel efficient,” said Peter King, general manager of Watertown Ford. “The redesigned Ford Fusion is the latest and perhaps best example because it has the boldest design in the midsize segment, yet it is available with a variety of efficient-yet-responsive drivetrains.”
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reportedly complete the fuel-saving set with a lightweight SKYACTIV body and chassis when the next-generation model goes on sale this fall. According to Automotive News, the autumn launch of the new Mazda3 will come as the Japanese automaker looks to eclipse 300,000 units in overall U.S. sales this year for the first time since the mid-1990s. Even with the next generation on the way, the current Mazda3 has been attracting new customers, moving a record 123,361 units in 2012, a 20 percent jump compared to the year prior. “The existing 2013 Mazda3 already returns up to 40 mpg on the highway with its SKYACTIV drivetrain, but a new body, chassis and design language would likely mean even greater fuel efficiency and more record sales,” said Barry Chew, sales manager of Mastria Mazda. “We’ve already seen the impact of the full SKYACTIV suite in the new CX-5 crossover and the recently launched 2014 Mazda6, and we can’t wait to see how it comes together for Mazda’s most popular model.”
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NADA Update
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CFPB Issue, Support for Franchised Dealer Network among Topics Discussed at Auto Forum 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). Last month I attended my first J.D. Power Auto Forum in New York. This is a daylong symposium sponsored by NADA and J. D. Power & Associates. We heard from economists and industry leaders, including dealers and manufacturers. One thing that really hit home to me was the fact that our franchise system is truly the most efficient and most consumer-friendly method of distributing cars and trucks in our country. Maryann Keller, whom I have not heard speak since an MSADA annual meeting at least 10 years ago, was spot on defending the franchise system. Please note in the following staement from NADA Chairman Dave Westcott Maryann’s reference to Tesla: Industry leaders and analysts were upbeat about the economy in their presentations to the 2013 Automotive Forum, held last month in New York City. They all agreed that auto sales are rising and economic momentum is growing. Nearly 400 dealers, OEM and supplier executives, analysts and media convened to look at global issues shaping the auto industry, the state of the economy and the challenges facing new-car dealers and their customers. The forum was hosted by the New York International Auto Show. Participants were upbeat about the recovering economy, expanding credit and a growing demand for newer inventory to replace aging fleets. The consensus among top analysts was that new-vehicle sales will exceed 16 million units by 2015. The forum—presented by the National Automobile Dealers Association, J.D. Power & Associates and the Greater New York Auto Dealers Association—included keynote speaker Bob Carter, vice president of automotive operations for Toyota Motor Sales, U.S.A.; Finbarr O’Neill, president of J.D. Power and Associates; and Nariman Behravesh, IHS chief economist. All three were optimistic about the sales outlook for 2013 and beyond. With historically low rates on auto loans and automakers “bringing out damn good cars,” Carter said that Toyota predicts
15.3 million new vehicles will be sold in the U.S. this year. Maryann Keller, a long-time industry consultant, also delivered a presentation in support of the current franchised dealership model, and argued against Telsa Motors’ approach to selling its electric vehicles directly to the public through factory-owned stores. “Factories have learned that they cannot do a better job than independent business men and women at the retail level,” Keller said. “And new startups – many who come and go – with new systems of selling and servicing retail automobiles will all reach the same conclusion: the dealer network is the best way.” The forum gave NADA an opportunity to directly address another issue of major concern: Recent “guidance” from the Consumer Financial Protection Bureau (CFPB) threatens dealer-assisted financing as we know it. In March, the CFPB released a bulletin that claims indirect lending through dealerships may result in minorities paying more for auto loans. Dealers are exempt from CFPB oversight, but auto lenders are not. So the Bureau’s guidance could drastically change how auto finance sources compensate dealers for arranging auto loans. Keep in mind, no one is accusing anyone of intentional discrimination. The Bureau issued its guidance based on a theory called disparate impact. If the auto finance system can potentially result in minorities paying more for credit than non-minorities in the same credit tier, then it is considered unintentional discrimination. And the system needs to be addressed. But we have no idea how the CFPB concluded disparate impact exists in today’s marketplace. Disparate impact can only be proven through a statistical analysis of past transactions, but the CFPB has not revealed how it is conducting its analysis or what data it’s relying upon. There is also no indication that the Bureau has studied how moving to a “flat fee” compensation method would impact the marketplace. Eliminating a dealer’s ability to discount the credit rates would ultimately affect the amount consumers pay for credit. Dealer-assisted financing, which is optional, increases access to and reduces the cost of credit for millions of Americans. Our customers overwhelmingly choose dealer-assisted financing because it’s convenient and competitive. Before this consumer-friendly model is disrupted, the www.msada.org
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NADA Update CFPB should explain how it is conducting its analysis. The Bureau also should demonstrate the effect flat fees would have on today’s intensely competitive auto financing market. It also needs to coordinate its actions with the federal agencies that directly regulate dealers. And it should provide the public an opportunity to comment on its assumptions and proposed actions. The need for transparency, reliable data analysis, interagency coordination and public comment are clearly warranted when there are attempts to change the compensation method of a $783 billion market. This is an issue that’s likely to be at the forefront for some time, so stay tuned. Dave Westcott NADA Chairman
NADA University Now Accepting Workshop Proposals for the 2014 NADA and ATD Conventions NADA University is now accepting proposals for workshops on car and truck industry topics for the 2014 NADA and ATD conventions, which will be held January 24-27 in New Orleans. Each workshop proposal should include a title, synopsis, learning objectives, presentation format and a 60-second video clip. The deadline to submit a workshop proposal is 5 p.m. EDT, Friday, May 11. The selections panel will meet in June to select the workshops they determine will be of the most interest to the membership. Those who submitted proposals will be notified by July 22 whether they were selected.
FTC Staff Revises Online Advertising Disclosure Guidelines The Federal Trade Commission has released new guidance for mobile and other online advertisers that explains how to make disclosures clear and conspicuous to avoid deception. Updating the FTC’s 2000 guidance document, Dot Com Disclosures, the new FTC staff guidance, .com Disclosures: How to Make Effective Disclosures in Digital Advertising, takes into account the expanding use of smartphones with small screens and the rise of social media marketing. It also contains mock ads that illustrate the updated principles. Like the original, the updated guidance emphasizes that consumer protection laws apply equally to marketers across all mediums, whether delivered on a desktop computer, a mobile device, or more traditional media such as television, radio or print.
Connecticut Body Shop Faces More Than $50,000 in OSHA Fines Hoffman Auto Body Shop has been cited by the U.S. Department of Labor’s Occupational Safety and Health AdAPRIL 2013
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MSADA ministration for nine alleged violations of workplace safety standards at its Connecticut Avenue facility in East Hartford. The auto body repair shop faces proposed fines of $54,300. OSHA’s Hartford Area Office began their inspection on December 6, 2012, to verify correction of hazards cited during a 2011 inspection. In the 2012 inspection, OSHA identified hazards similar to those cited during the 2011 inspection. Specifically, equipment and materials, some of it flammable, were stored near paint spray booths and electric panels. The stored materials limited access to extinguish potential fires, presented fire and shock hazards and impeded cleaning around the booths, which allows potentially combustible materials to accumulate.
Used Vehicle Prices Up 1.2% in March Spring is officially here and wholesale price movement over the final weeks of March continued to accelerate as the average price for vehicles up to eight years in age ticked up by 1.2% compared to February. In terms of growth, the compact car segment led the pack with prices increasing by an average of 2.1% compared to the prior month. Nearly all remaining segments experienced growth as well with average prices for compact utilities, large pickups, mid-size cars and mid-size vans increasing by a collective average of 1.1%. Luxury cars increased by 0.5%, while the large SUV and mid-size utility segments increased by barely perceptible 0.1% and 0.2%, respectively. Luxury utilities proved to be the only segment seeing no price movement in March as prices remained level with February. NADA expects that wholesale prices peaked in March. Moving forward into April, there should be slight decline in the market average. On a year-over-year basis per NADA’s Used Price Index, used-vehicle prices for vehicles fell by 0.5% in March compared to the same period last year. The index is a seasonally adjusted measurement of the change in price for used vehicles up to 8 years in age.
Virginia Auto Dealer Honors Family and Employees through NADA Foundation H. Carter Myers, III, a third generation new-car dealer in Virginia, has chosen to honor family members and dealership employees by naming them Ambassadors of the National Automobile Dealers Charitable Foundation. “The Ambassadors program allows benefactors to basically set up a personal foundation that will contribute funds to a cause in perpetuity,” said Myers, who served as NADA chairman in 2002. “Dealers want to contribute to the communities where they work and operate their businesses, and the Ambassadors program allows us to do that. It’s a great program.”
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Economic Update By Paul Taylor, NADA Chief Economist
Average Loan Amount on a New or Used Car is Up Consumers Replace Aging Fleet at Low Interest Rates
The magic formula continues to deliver strong new car sales. Old cars and low interest rates combine to help franchised new car dealers outperform the slow growing U.S. economy as the first quarter of 2013 draws to a close. NADA Industry Analysis expects to see continued strong sales results from March to be announced next week, and March sales continue to support our outlook for at least 15.4 million units in U.S. light vehicle sales in 2013. This performance follows sales of 14.44 million units of sales during 2012, an increase of 1.7 million new unit sales over 2011. Stronger sales last year were replete with higher average expenditures by customers buying new cars, but also featured an aging of the vehicles in operation to 11.4 years of age. For full-year 2012, the average new car and light truck transaction price was $30,910, up 0.8 percent over full year 2011. However, Polk has announced that as of the beginning of 2013, the average new light vehicle on the road is 11.4 years of age, up from 10.8 for all light vehicles and 11.1 for cars a little more than one year ago. This aging occurred in a year when new light vehicle sales increased by more than one million units. The average light vehicle on the road aged to 10.4 years of age, and that suggests at least 170,000 miles on the
average vehicle on the road. Auto credit availability continues to improve for consumers in part because the loan payment performance has been very good in recent years. Auto loan performance improved in the most recent years of recovery, and auto loan performance had deteriorated much more modestly than
housing or consumer credit loans during the recession. As a result, many banks, thrifts, credit unions, and other financial organizations are looking to make more auto loans going forward even as they may choose to decrease their relative lending exposure in home mortgage origination. Used car sales at dealerships and elsewhere lower the overall data on auto loan amounts. There are a lot of transactions on used cars and trucks at new car dealerships on the back rows of lots, at independent used car lots and for casual sales that take place at less than $10,000 and are associated with an average loan balance in a range www.msada.org
of the $10,000 to $12,000. The states with big used car sales, relative to new car sales, for new car dealers tend to be in the mid-section of the country. North Dakota used to be a key state for modest sales of used cars, but has fallen off this list because of the shale gas boom in progress there now. Flush with high wages in the gas exploration and production areas, some consumers are buying more new cars and more expensive used cars there. However, you notice many states that border shale-gas producing states are in the low average car loan list below. One reason for this is that family farmers typically buy used cars and trucks if they do not have a large operation. Relatively more used car sales in rural areas contribute to lower average loan balances for combined new and used car sales in the Midwest and West, where farming and ranching tend to be a larger share of total economic activity. Still, new car and truck sales are a rewarding business in the mid-section of the country as it is on both coasts. And if there is energy or other resource mining, business can be very strong in relatively rural states. Business cycles may differ from the date pattern of economic cycles in farming and in resources such as oil and gas production and minerals mining. Less speculation Massachusetts Auto Dealer APRIL 2013
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Economic Update “For full-year 2012, the average new car and light truck transaction price was $30,910, up 0.8 percent over full year 2011.” in the residential real estate market in most rural areas made the recession somewhat less abrupt in the Midwest.
Auto Loans Continue to Perform Well, Despite Weak Economic Growth According to the American Bankers Association’s Consumer Credit Delinquency Bulletin for the third quarter of 2012, bank card delinquencies dropped to their lowest levels since 1994. The ABA reported that personal loan delinquencies fell from 2.15 percent to 2.14 percent. Direct auto loan delinquencies, made at banks, rose slightly from 0.92 percent to 0.95 percent. Indirect auto loan delinquencies, for loans made at new car dealerships, fell from 2.23 percent to 2.08 percent in the third quarter. This data was released January 5, 2013. Data on 60-day auto loan delinquencies from Experian for the fourth quarter edged up very slightly, increasing from 0.72 in fourth quarter 2011 to 0.74 in fourth quarter 2012. There was a fall in fourth quarter 60day auto loan delinquencies from 2.79 in 2011 to 2.72 for 2012. Given the increase in lending over the last year, the fourth quarter performance is solid, as more borrowers are brought into the loan pool. According to Experian, the average auto loan per person with an auto loan for new or used cars during 2012 was $12,355. In 2011, that average was $11,819. The increase of $536 in loan amount was slightly less than the increase in the average new car expenditure of $251 and also less than the average increase in expenditure on used cars at new car dealers of $280 according to the NADA Industry Analysis Dealership Financial Profile. Experian ranked the ten states with the APRIL 2013
lowest average vehicle loan debt per consumer auto loan. Those ten states were: 10. Idaho at $10,832 9. Ohio at $10,752 8. Indiana at $10,693 7. Minnesota at $10,686 6. Rhode Island at $10,618 5. Nebraska at $10,603 4. New Hampshire at $10,520 3. Michigan at $10,471 2. Wisconsin at $10,371 1. Maine at $10,218 Oregon, at $10,841, barely missed the list above. The ranking of states and one territory (having ambitions) with the highest average car loans per person for new and used vehicles in the fourth quarter at 2012 was: 1. Texas, at $13,499 2. Alaska, at $13,396 3. Louisiana, at $13,266 4. Wyoming, at $13,196 5. Maryland, at $12,659 6. Alabama, at $12,633 7. Washington, DC, at $12,627 8. Arkansas, at $12,605 9. Oklahoma, at $12,596 10. Nevada, at $12,565 The data suggests a stronger economy and vehicle buying atmosphere in the energy producing areas of the country, and lower average loan rates in many areas
Massachusetts Auto Dealer www.msada.org
where manufacturing activity struggled through the recession. Washington, DC also appeared to be a growth industry for public spending that is driven by huge federal deficits in recent years. That shows up in spending for new cars and light trucks in the Washington area. The federal territory of Washington has just one new car dealership within its borders, so most purchases by Washingtonians appear in the Maryland and Virginia sales data. Maryland also benefited from the stout growth of government spending. That surge in spending may be looking at a significant haircut in the near future, as the U.S. House of Representatives seeks to cut back the enormous rate of growth of federal government spending. Overall in the United States, auto lending has been one the fastest sectors for growth in lending by banks. The average age of cars continued to age last year despite the 1.7 million unit increase in new light vehicle sales, so there is plenty of room to expand sales while low ending rates dominate the new car market. As the Economic Update has pointed to in the past, a strong performance of home prices tend to support new car sales, with luxury sales getting a boost from gains in the broad stock market indexes. Last year was a year of improvement in both of these important measures, and 2013 has started out with strong performance in the housing prices and stock prices. The NADA Chief Economist believes both these measures can continue to make progress during 2013, but expect a few bumps of modest correction along the way with stock prices currently at record levels.
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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.
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