Massachusetts Auto Dealer October 2017 by Massachusetts State Automobile Dealers Association, Inc

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

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October 2017 • Vol. 29 No. 10

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

Making Charity Count

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

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S ta f f D i r e c t o r y Robert O’Koniewski, Esq. Executive Vice President rokoniewski@msada.org Jean Fabrizio Director of Administration jfabrizio@msada.org Peter Brennan, Esq. Staff Attorney pbrennan@msada.org Jean Harris Administrative Assistant/ Membership Coordinator jharris@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: jbernal@msada.org. Postmaster: Send address change to: One McKinley Square, Sixth Floor Boston, MA 02109 Auto Dealer is published by the Massachusetts State Automobile Dealers Association, Inc. to provide information about the Bay State auto retail industry and news of MSADA and its membership.

Ad Directory Blum Shapiro 22 Boston Herald 32 Ethos Group 2 Lynnway Auto Auction 23 O’Connor & Drew, P.C. 31 SouthernAuto Auction 21 ADVERTISING RATES Inquire for multiple-insertion discounts or full Media Kit. E-mail jfabrizio@msada.org Quarter Page: $450 Half Page: $700 Full Page: $1,400

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

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 5 6

From the President: Helping You Do Good ASSOCIATE MEMBER DIRECTORY THE ROUNDUP: New Inspection Program Rollout Fraught with Early Problems

10 legislative scorecard 11 TROUBLESHOOTNG: Communicating with the Factory 12 AUTO OUTLOOK 14 ACCOUNTING: What We Can Learn from the Equifax Breach 15 LEGAL: In What Ways Does the Law Protect Employee Speech? 16 Cover Story: Making Charity Count

20 25 26 28 29

NEWS From Around the Horn TRUCK CORNER: NADA/ATD to Give Input in Supreme Court Case nada Market Beat SOUND OFF: Retail Warranty Reimbursement nada update: Setting New Highs

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Massachusetts Auto Dealer OCTOBER 2017

From the President

MSADA

Helping You Do Good By Chris Connolly, MSADA President

Msada Board

This is the time of year when, beyond Halloween and elections, our communities focus a little more closely on their neighbors in need. With Thanksgiving and Christmas around the corner, it is, of course, an important chance to think about how lucky we are and focus on helping out those who have less than we do. Being a dealer is much more than a full-time job. Sometimes our best intentions collide with the day-to-day realities of how much work is expected of us. So why not let your Association help make it easier to give back to your community? As you will see in this month’s cover story, MSADA offers its members up to $1,000 in matching funds for a charitable contribution made in their hometown. This is an important point to remember: As businessmen and women who operate one of the most important economic engines in our communities across the Commonwealth, we all have a special opportunity to lend a helping hand. The contribution can be as small as sponsoring a Little League team or as large as funding entire programs. But whether we are donating hundreds, thousands, or millions to charity each year, or even giving our time and effort to good causes, our work has a ripple effect throughout our communities. And while we should applaud those among us such as Don Rodman, who continues to dedicate massive amounts of time and energy to his yearly Rodman Ride for Kids, we should not be afraid of simply giving a little to a cause we care about just to see where it might go. As Ray Ciccolo says in this month’s feature, “just do it” is really the name of the game. It can be as simple as picking up the phone, calling your favorite organization, and asking if there is some small need they have that you might be able to fill. When it comes down to it, dealers are part of the lifeblood of many communities across Massachusetts, whether that is through our daily operations and employee count or simply the ways we help improve lives. As we enter the holiday season, I encourage you to give charity a try if you have never done so. For more information about our program, call Executive Vice President Robert O’Koniewski at (617) 451-1051 or email him at rokoniewski@msada.org.

Keep an eye out for information about our next New England International Auto Show Dealer Summit and Charity Gala, to be held on Friday, January 12. As usual, the MSADA staff are planning a fantastic event, and I encourage all of our Associate Members to get in touch with Jean Fabrizio for information about sponsorship opportunities. She can be reached at (617) 451-1051, or by email at jfabrizio@msada.org. t

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Berkshire County

Brian Bedard, Bedard Brothers Auto Sales

Bristol County

Richard Mastria, Mastria Auto Group

Essex County

William DeLuca III, Woodworth Motors [Open]

Franklin County

Jay Dillon, Dillon Chevrolet

Hampden County

Jeb Balise, Balise Auto Group

Hampshire County

Bryan Burke, Burke Chevrolet

Middlesex County

Chris Connolly, Jr., Herb Connolly Motors Frank Hanenberger, MetroWest Subaru

Norfolk County

Jack Madden, Jr., Jack Madden Ford Charles Tufankjian, Toyota Scion of Braintree

Plymouth County

Christine Alicandro, Marty’s Buick GMC Isuzu

Suffolk County

Robert Boch, Expressway Toyota

Worcester County

Steven Sewell, Westboro Mitsubishi Steve Salvadore, Salvadore Auto

Medium/Heavy-Duty Truck Dealer Director-at-Large [Open]

Immediate Past President Scott Dube, Bill Dube Hyundai

NADA Director

Auto Show Preparations

OCTOBER 2017

Barnstable County

Brad Tracy, Tracy Volkswagen

Don Sudbay, Jr., Sudbay Motors

Officers

President, Chris Connolly, Jr. Vice President, Charles Tufankjian Treasurer, Jack Madden, Jr. Clerk, Steve Sewell

Associate Members

MSADA A ssociate M ember D irectory ACV Auctions Will Morris (860) 670-7867 ADESA Jack Neshe (508) 626-7000 Albin, Randall & Bennett Barton D. Haag (207) 772-1981 American Fidelity Assurance Co. Dan Clements (616) 450-1871 American Tire Distributors Pamela LaFleur (774) 307-0707 Armatus Dealer Uplift Joe Jankowski (410) 391-5701 AutoAlert Jessica Gates (816) 506-0515 Auto Auction of New England Steven DeLuca (603) 437-5700 Auto/Mate Dealership Systems Troy Potter (877) 340-2677 Bank of America Merrill Lynch Dan Duda and Nancy Price (781) 534-8543 Bellavia Blatt Andron & Crossett, PC Leonard A. Bellavia, Esq (516) 873-3000 Blum Shapiro John D. Spatcher (860) 561-4000 BMO Harris Bank Chris Peck (508) 314-1283 Boston Globe Mary Kelly and Tom Drislane (617) 929-8373 Broadway Equipment Company Fred Bauer (860) 798-5869 Burns & Levinson LLP Paul Marshall Harris (617) 345-3854 Capital Automotive Real Estate Services Willie Beck (703) 394-1323 Catalogs.com David Solar (954) 908-7122 CDK Global Chris Wong (847) 407-3187 Construction Management & Builders, Inc. Nicole Mitsakis (781) 246-9400 Cox Automotive Ernest Lattimer (516) 547-2242 CVR John Alviggi (267) 419-3261 Dealer Creative Mike Otis (315) 382-3675 Dealerdocx Brad Bass (978) 766-9000 Dealermine Inc. Jane Webb (800) 304-3341 DealerSocket Shelly Del Rosario (949) 900-0300 Downey & Company Paul McGovern (781) 849-3100

EasyCare New England Greg Gomer (617) 967-0303 Ethos Group, Inc. Drew Spring (617) 694-9761 F & I Resources Jason Bayko (508) 624-4344 Federated Insurance Matt Johnson (606) 923-6350 First Citizens Federal Credit Union Joe Ender (508) 979-4728 Fisher Phillips LLP John Donovan (404) 240-4236 Joe Ambash (617) 532-9320 Gatehouse Auto Jay Pelland (508) 626-4334 Gulf State Financial Services Bob Lowery (713) 302-5547 GW Marketing Services Gordon Wisbach (857) 404-0226 Harbor First Ron Scolamiero (617) 500-4080 Hireology Kevin Baumgart (773) 220-6035 Huntington National Bank John J. Marchand (781) 326-0823 Independent Power Systems Mariana Seabra/Ryan Ferrero (978) 998-4079 Todd Stratford, (617) 777-0365 JM&A Group Jose Ruiz (617) 259-0527 John W. Furrh Associates Inc. Kristin Perkins (508) 824-4939 Key Bank Mark Flibotte (617) 385-6232 KPA Tim Whelan (303) 802-3019 Leader Auto Resources, Inc. Curt Murray (978) 201-4797 Lynnway Auto Auction Jim Lamb (781) 596-8500 M & T Bank John Federici (508) 699-3576 Management Developers, Inc. Dale Boch (617) 312-2100 Micorp Dealer Services Frank Salkovitz (508) 832-9816 Mid-State Insurance Agency James Pietro (508) 791-5566 Mintz Levin Kurt Steinkrauss (617) 542-6000 Murtha Cullina Thomas Vangel (617) 457-4000 Nancy Phillips Associates, Inc. Nancy Phillips (603) 658-0004

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Northeast Dealer Services Jim Schaffer (781) 255-6399 O’Connor & Drew, P.C. Kevin Carnes (617) 471-1120 Performance Management Group, Inc. Mark Puccio (508) 393-1400 PreOwned Auto Logistics Anthony Parente (877) 542-1955 R.L. Tennant Insurance Agency, Inc. Walter F. Tennant (617) 969-1300 Reflex Lighting Daryl Swanson (617) 269-4510 Resources Management Group J. Gregory Hoffman (800) 761-4546 Reynolds & Reynolds Mike O’Connor (860) 462-7958 Robinson Donovan Madden & Barry, P.C. James F. Martin, Esq. (413) 732-2301 Samet & Company John J. Czyzewski (617) 731-1222 Santander Bank Richard Anderson (401) 432-0749 Schlossberg & Associates, LLC Michael O’Neil, Esq. (781) 848-5028 Sentry Insurance Company Eric Stiles (715) 346-7096 Shepherd & Goldstein CPA Ron Masiello (508) 757-3311 Silverman Advisors, PC Scott Silverman (781) 591-2886 Southern Auto Auction Tom Munson (860) 292-7500 SPIFFIT Sean Ugrin (303) 862-8655 Sprague Energy Claude Peyrot (603) 430-7254 SunPower Christie McCarthy, (408) 457-2357 SunTrust Bank Michael Walsh (617) 345-6567 Target Dealer Services Andrew Boli (508) 564-5050 TD Auto Finance Marc Gerhart (781) 697-1525 TrueCar Pat Watson (803) 360-6094 US Bank Vincent Gaglia (716) 649-0581 Wells Fargo Dealer Services Stephen Janetz (215) 986-8498 Zurich American Insurance Company Steven Megee (774) 210-0092

Massachusetts Auto Dealer

OCTOBER 2017

The Roundup

New Inspection Program Rollout Fraught with Early Problems By Robert O’Koniewski, Esq. MSADA Executive Vice President rokoniewski@msada.org Follow us on Twitter - @MassAutoDealers

Inspection Rollout Stumbles Out of the Gate As of October 1, 2017, Applus Technologies has replaced Parsons Group as the administrator of the Massachusetts Vehicle Check Program. On that day, the state’s 1,700+ licensed inspection stations, including many of our member dealers, were supposedly ready to begin inspecting cars and trucks with new equipment purchased from the program’s new vendor. In reality, the program hit potholes right out of the gate. We heard from scores of dealers whose equipment did not work, could not be turned on, even some who still had not had their equipment delivered or even installed by Applus. The result – angry customers, as new purchases could not be delivered with a valid inspection sticker, and in some places new cars inexplicably received rejection stickers. To make it worse, the help hotline was overwhelmed and could not take calls, fueling the anxiety even more. There can be rollout issues with any new program, but to say there were problems with the vendor is a complete understatement. We have been working closely with the Registry of Motor Vehicles to help dealers get fully operational to accomplish the inspections. Ten days into the new program, the RMV and Applus seemed to have resolved most of the issues experienced by our member dealers. Kudos go out to Registrar Erin Deveney and her team, including Mary Jo Griffin, for being extremely responsive to our calls and committed to OCTOBER 2017

Massachusetts Auto Dealer www.msada.org

resolving dealer issues so that our members could move on and do their jobs. Moving forward, as these issues get resolved, do not be shy to contact your MSADA for assistance in working through the regulatory labyrinth of Applus and the RMV. Finally, please remember to use the following website for all Massachusetts Vehicle Check-related information: www.MassVehicleCheck2017. com.

Flood Vehicles Heads-Up As a result of Hurricane Harvey hitting Houston, Texas, and Hurricane Irma ravaging a big chunk of Florida this year, the motor vehicle market place has seen over a million vehicles destroyed or greatly damaged. Not since over a decade ago with Hurricanes Katrina and Rita has the industry been concerned about such a huge number of flood-damaged vehicles potentially being sold to unsuspecting consumers across the country. The best protection against purchasing a flood-damaged vehicle, which has not been title branded as a flood vehicle, is by physically checking the vehicle for flood damage. While there is no sure way to know if a vehicle has been damaged by a flood, the National Automobile Dealers Association (NADA) offers the following ten inspection tips to prospective buyers to spot flood-damaged vehicles: • Check a vehicle’s title history using the National Insurance Crime Bureau’s VinCheck, the National Motor Vehicle Title Information System

MSADA or a commercially available vehicle history report service, such as Experian or Carfax, etc. Reports may state whether a vehicle has been flood damaged. • Examine the interior and the engine compartment for evidence of water and grit from suspected submersion. • Check for recently shampooed carpeting. • Look under the carpeting for water residue or stain marks from evaporated water not related to air conditioning pan leaks. • Inspect for interior rust and under the carpeting, and inspect upholstery and door panels for evidence of fading. • Check under the dash for dried mud and residue, and note any mold or a musty odor in the upholstery, carpet or trunk. • Check for rust on screws in the console and in other areas water would normally not reach unless the vehicle was submerged. • Look for mud or grit in alternator crevices, behind wiring harnesses and around the small recesses of starter motors, power steering pumps, and relays. • Inspect electrical wiring for rusted components, water residue, or suspicious corrosion. • Inspect other components for rust or flaking metal not normally found in late model vehicles. These suggestions will not detect flood damage in every case, but they do offer dealers and consumers some protection against buying a vehicle that has been damaged in a flood.

Death of CFPB Arbitration Rule One Step Closer [The following is compiled from The Wall Street Journal and other sources.] On Tuesday, October 23, the U.S. Senate voted to overturn a rule by the Consumer Financial Protection Bureau, created as part of the Dodd-Frank Act during the Obama administration, which would have made it easier for consumers to sue banks in groups, with Vice Presi-

dent Mike Pence casting a tiebreaking vote in the Senate. The 51-50 vote handed the financial industry its most significant legislative victory since President Donald Trump took office and was a rebuke of CFPB Director Richard Cordray, who pressed ahead with his agenda in defiance of Republicans. The move is one of the final steps in killing a CFPB rule barring fine-print requirements for arbitration in contracts between consumers and banks. The House voted 231-190 in July to overturn the rule. The resolution now goes to President Trump, who is expected to sign it into law. The White House released a statement praising the Senate action and referring to a recent Treasury Department report that criticized the rule. Congress’s overturning of the arbitration rule foreshadows significant changes that the CFPB is expected to face over the coming months as the Trump administration appoints a new leader to the bureau, which has been mired in partisan controversy since it was created after the financial crisis. Mr. Cordray’s term runs through next July, but many think he might step down sooner to run for governor in Ohio. Another significant result of the congressional action disapproving the CFPB arbitration rule under the Congressional Review Act is that the resolution both invalidates the arbitration rule and prevents the agency from issuing another rule in “substantially the same form” as the disapproved rule unless authorized to do so in a subsequent law.

NCLC Report on Dealer Add-Ons On Tuesday, October 16, the National Consumer Law Center (NCLC) released a report entitled Auto Add-Ons Add Up: How Dealer Discretion Drives Excessive, Arbitrary, and Discriminatory Pricing. The 53-page report provides a series of charts and an analysis arguing that the way dealers price “add-ons” harms conwww.msada.org

sumers. NADA Regulatory Affairs is reviewing the report and coordinating appropriate responses with the Voluntary Protection Products Working Group, a coalition of 16 trade associations representing companies that provide, finance, and retail voluntary protection products (VPPs) that NADA formed in 2016 in anticipation of legislative, regulatory, media, and consumer group assaults on VPPs. NADA issued the following statement regarding the report: “Voluntary protection products are incredibly valuable for millions of consumers – just ask consumers who were made whole by gap insurance on the total loss of their vehicles due to Hurricanes Harvey and Irma. But the NCLC’s approach of limiting consumer discounts on these products would only make them more expensive and harder to obtain for many consumers. When six in 10 Americans don’t have enough savings to cover a $500 emergency expense, we should be working to make these voluntary products more accessible and affordable, not less.” There will be more to this issue as elected officials, regulators, and media outlets begin to review, digest, regurgitate, and spin the report’s text.

Compliance Reminder: Vehicle Damage – What Must Be Disclosed to a Customer? We receive calls fairly regularly from dealers regarding the state’s damage disclosure rules. Dealers often run into a situation where seemingly minor details about a vehicle were not told to a buyer prior to a sale, or sometimes the kernel of information runs to the major, such as repaired accident damage. In each type of situation and those in between, the buyer could make a claim against the dealer under the Massachusetts Consumer Protection Act, MGL Chapter 93A. The Act is broadly written to make unlawful any unfair methods of competition and any unfair or deceptive acts or

Massachusetts Auto Dealer OCTOBER 2017

The Roundup practices in the conduct of any trade or commerce. The Massachusetts Attorney General has promulgated regulations to implement the statute. The disclosure issue is addressed in the regulations at 940 CMR 3.16(2), which states, “Without limiting the scope of any other rule, regulation or statute, an act or practice is a violation of [the Act] if: … (2) Any person or other legal entity subject to this act fails to disclose to a buyer or prospective buyer any fact, the disclosure of which may have influenced the buyer or prospective buyer not to enter into the transaction;…” [emphasis added]. Thus, the failure to disclose any damage – regardless of dollar amount – that would influence a buyer not to enter into the transaction is an unfair and deceptive practice. The law and the regulations make no exception for seemingly inconsequential damage, say, under $100. This obviously creates a sliding scale in terms of disclosure: The greater the problem with the vehicle, the stronger a consumer’s argument that it would have influenced his or her decision not to purchase the new or used vehicle. As such, a dealer needs to disclose any and all facts it knows, or reasonably could have known, about a vehicle to a buyer or prospective buyer no matter how trivial the information may appear to be. In this manner, a dealership can protect itself and avoid the severe penalties (treble damages, attorneys’ fees) provided under the Consumer Protection Act. We have recommended previously that a dealer, upon taking a vehicle in trade that he or she will later retail, conduct a Carfax or similar vehicle history search in order to determine what the vehicle has been through. These services are not 100% accurate. However, it is far better that the dealer have the report in hand before a sale rather than a customer postsale and he or she is in your showroom demanding a refund and stating more odious epithets. Once you print out the report, always have the customer sign it, put the original OCTOBER 2017

in the deal jacket, and give the customer a copy. This is your proof that the information was provided to the buyer.

New FTC Fuel Economy Advertising Guide Issued The Federal Trade Commission (FTC) has revised its Guide Concerning Fuel Economy Advertising for New Automobiles. The Guide, which took effect on October 19, 2017, governs fuel economy advertising for new light-duty automobiles required to have fuel economy labels. The new Guide is available at: https:// www.ftc.gov/news-events/press-releases/2017/09/ftc-revises-fuel-economy-guide. The revised Guide reflects changes made in 2011 by EPA and NHTSA to their labelling mandates and guidance once provided in a separate FTC Alternate Fuel Labelling Guide that was withdrawn in 2013. The revised Guide states that it is deceptive to misrepresent, directly or by implication, the fuel economy or driving range of an automobile, and it makes suggestions as to how to advertise fuel economy information without being deceptive. NADA will soon issue an updated version of its Driven guide on fuel economy advertising. Until then, you can direct questions to NADA Regulatory Affairs at regulatoryaffairs@nada.org or (703) 8217040.

Veterans’ Day Work Rules The Veterans’ Day holiday, celebrated on Saturday, November 11, is considered a restricted holiday and has certain permit and premium pay rules. First, a dealership that operates on Veterans’ Day is required to pay most employees at least time and one-half their regular rate, so long as work is actually performed on the holiday. Second, under Massachusetts law, certain retail businesses are required to obtain a permit in order to be open for business on certain holidays. If your dealership is going to open prior to 1:00 p.m. on Veterans’ Day, you will need a permit issued by

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the local authorities. If you will be opening at a time after that stated above, no permit is needed. Special note to keep in mind for Veterans’ Day this year: In 2017 the Veterans’ Day holiday falls on a Saturday. Under state law, a holiday falling on a Saturday is recognized on that Saturday. A holiday that falls on a Sunday is recognized for work purposes on the following Monday. Finally, Massachusetts law does not recognize “paid holidays.” In other words, if an employee does not work on a legal holiday, there is no requirement that he or she be paid for the holiday. If, however, an employee does work on certain legal holidays, Massachusetts law requires that the employee be paid at least time and onehalf his or her regular rate. In addition to complying with the Massachusetts holiday laws, a dealer must also comply with his or her own policies. If your Employee Handbook or past practice says that the day is a “paid holiday,” then you are required to pay employees for that day even if it is not a regularly scheduled workday. Further, if an employee works on one of these days, the employee would be entitled to holiday pay for the day plus the additional premium pay for the hours worked on the holiday, or another day off with pay, if the handbook so provides. As a result, dealers are urged to review their holiday pay policies carefully to ensure that they accurately reflect their actual practices.

Franchise Law Webinar by Bellavia Blatt – Nov. 9, 11 a.m. On Thursday, November 9, at 11:00 a.m., dealer law firm Bellavia Blatt & Crossett will conduct a one-hour webinar for MSADA members. Registration is complimentary for our members. Topics will include recent developments in auto franchise law that can impact your business: • Update on Enhancing Profits by Getting Warranty Parts and Labor to Retail Levels – Bellavia Blatt & Crossett will share key strategies for how dealers could add

MSADA hundreds of thousands of dollars each year in profit by preparing, submitting, and defending warranty reimbursement submissions. The firm has advised thousands of dealerships across 40 states over the past twenty years on maximizing their warranty reimbursement. The webinar will provide updates to manufacturer positions and detailed examples of navigating policies for more than twenty-plus manufacturers to achieve parts and labor increases for warranty repairs. • Responding to Sales Deficiency Letters – Manufacturers are sending out deficiency letters with increasing frequency. Bellavia Blatt & Crossett will prepare dealers to respond to those letters, from knowing what to say to understanding how Massachusetts law, recent court decisions, and legislative changes in other states support a dealer’s position. If your dealership has recently received a letter, you will also learn why it is critical to maintain written dialogue with your franchisor. Use this link to register: https:// a t t e n d e e . g o t o w e b i n a r. c o m / r e g i s ter/2362650763218537475.

DealerPro Workshop On October 20 at the Marriott Hotel in Peabody, your Association hosted dealer principals, general managers, service managers, and other dealership personnel for a full-day workshop presented by Ken Barnes of DealerPro Training Solutions. In his presentation “Six Simple Changes for Record Profits in Fixed Ops”, Ken covered: • Always put your customer first • Recruit service advisors • Compensate to motivate • Build your own profit improvement plan • Learn four essentials to 100% absorption • Identify opportunities for fixed ops improvement. Judging by attendees’ comments, Ken hit a home run for the day. Be on the alert for materials when we host DealerPro again here in Massachusetts on December

14.

O’Connor & Drew Cybersecurity Seminar

Each week seems to bring news of a breach of a business’s data system and its customers’ data, thereby thrusting that business into a legal and financial quagmire. Most small businesses likely are as ill-prepared to repel a data security breach as the major corporations have proven to be. Federal and state laws and regulations presently govern the manner in which all employers engaged in commerce maintain the privacy of personal information for Massachusetts residents. The regulations, for example, focus on protecting personal information of employees and customers by mandating that any entity storing or transmitting personal information (a combination of a name along with Social Security number, bank account number, or credit card number) ensure the information be encrypted when stored on portable devices or when transmitted over the Internet. Each business must develop a written information security plan that is approved by its board of directors or designated committee that takes into account the entity’s size, nature of business, the kinds of records it maintains, and the risk of identity theft. On October 19, at the Hotel 1620 in Plymouth, your Association hosted Mike Hammond from O’Connor & Drew for a morning seminar on how to best prepare your dealership for an incident affecting your store and/or customers. Look for our materials for future seminars on this subject around the state.

2018 Auto Show, Dealer Summit & Charity Gala Circle the dates now – MSADA’s 61st edition of the New England International Auto Show will run January 11-15, 2018, at the Boston Convention and Exposition Center in South Boston. In order to celebrate our Auto Show, dealers, their families, and key employees are invited to attend on Friday, January

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12, our Twenty-First Annual Auto Show Charity Gala at the BCEC, from 5:00 p.m. to 10:00 p.m. The Gala benefits our Charitable Foundation’s Automotive Technician Scholarship Program. Prior to the Charity Gala we will conduct the Dealer Summit at the BCEC from 1:00 p.m. to 5:00 p.m., at which we will have several speakers discuss on-going events in our industry.

MSADA Dealer Support Programs Re-Approved for 2017 – Are You Using Them? Since 2014 your association has administered a program in which we subsidize the cost of certain compliance efforts dealers go through at their stores. Through this program, we have supported dealers’ use of Fisher Phillips for employment law services, such as pay plans, employee handbooks, etc.; KPA and Furrh Associates for OSHA and environmental compliance; and O’Connor & Drew for tax compliance and cybersecurity protections. Your Board of Directors voted at its December board meeting to continue these programs for 2017. In addition to the compliance assistance, your Board voted to reauthorize the community outreach program for 2017, in which we assist dealers’ efforts for up to $1,000 annually. Do not hesitate to contact us regarding these programs so you do not lose out on these services supported by your association.

ZEV Commission to Re-Start Meetings On November 7, at 10:00 a.m., the state’s Zero Emission Vehicle Commission will recommence meeting to discuss key issues with this sector of the industry. Your Association has two members on the commission: Scott Dube of Bill Dube Hyundai and Robert Boch of Expressway Toyota. If there are issues you wish to see addressed, please feel free to contact Scott, Robert, or me.

Massachusetts Auto Dealer OCTOBER 2017

MSADA

OCTOBER 2017

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MSADA

Troubleshooting

Communicating with the Factory By Peter Brennan, Esq.

MSADA Staff Attorney Many times, when your Association staff meets with a freshman legislator, the lawmaker will assume that, because the factory produces the vehicles that dealers sell and dealers move and service the manufacturers’ product, a friendly, symbiotic relationship must result. As you know, this is all too rarely the case. Effectively navigating the potentially perilous dealer-manufacturer partnership can mean the difference between success and failure in the automotive market. A recent cause for concern in the factory/dealer relationship is the profligate deployment by factories of “deficiency letters” to dealers. As you may have experienced, these letters, which generally allege that the dealer is failing to meet arbitrary sales metrics, have become more common as a tool of harassment by the factory in recent years. Alarmingly, the factory will commonly allege that the dealer’s sales represent a “material breach” of the sales and service agreement (SSA) between the factory and the dealer. This is a serious charge, and it cannot be ignored. If you are on the receiving end of such a deficiency letter, a response is necessitated. The dealer should push back on the metrics used by the factory in deducing a “material breach”, and should illustrate why they are, in fact, not in breach of the SSA. It is recommended that the dealer retain an attorney well-versed in their state’s franchise law to, at a minimum, assist with the drafting of this letter.

The appearance of a dealer’s facility has been a strong point of contention between the dealer and factory in recent years, with the implementation of newer and more aggressive image programs every year. Many dealers are understandably wary about supporting a manufacturer’s facility improvement plan, especially if they have recently spent millions of dollars on a renovation. Unfortunately for many dealers, when factory incentives are tied to facility improvements, they cannot afford not to participate. If approached by a manufacturer about a facility expansion, reply to the manufacturer by asking for the justification behind the request, including units-in-operation numbers and any other relevant calculations. If the proposed facility upgrade is image based, ask for the manufacturer’s calculations for the expected increases in sales and service revenue. In both cases it may be helpful to provide alternative solutions, such as a reduction in the scope of the project or an exception from certain requirements. This reply should be in the form of a certified letter to establish a record of correspondence, should it be needed later in litigation. If the manufacturer has tied the proposed facility upgrade to per car incentives for the dealer, and the dealer disagrees with the factory’s projections, the dealer should illustrate in the letter why the incentives would not be practically available under the dealer’s applicable circumstances. Additionally, if the dealer’s analysis shows that they would be at a competitive disadvantage without the per car incentives, this point should be explored thoroughly in the correspondence. If the manufacture is unwilling to work with the dealer and insists on an unreasonable adherence to their facility criteria, the dealer may need to cite the relevant franchise law in their state. Currently, in Massachusetts, MGL Chapter 93B contains a reasonableness standard that manufacturers must abide by when requesting facility improvements. www.msada.org

Another occasional point of contention between dealers and manufacturers in Massachusetts is the warranty reimbursement rate paid by the factory on parts and labor. In 2012, in order to eliminate the mystery in determining the retail rate for each individual dealer, the Legislature enacted a formula that dealers and manufacturers must use to determine the dealer’s retail rate. Many manufacturers have willingly complied with the law and embraced the reimbursement formula. However, problems persist, with some manufacturers ignoring the reimbursement formula unless it is specifically requested by the dealer, and/or charging dealers a per vehicle “assessment” on each vehicle purchased by the dealer. If a dealer does not believe they are receiving proper warranty reimbursement rates under the law or are being charged improper assessments, the advised course of action is to put these concerns in a letter to the factory. Enlisting the help of a trained accountant or attorney to oversee the application of the reimbursement formula is a strategy that has proved successful for members in the past. Boiled down, the best advice for dealers when engaging in the dealer-manufacturer relationship is this: Document everything. All comments and requests from the manufacturer should be answered with a letter in order to establish a good record of the relationship. It is often helpful to retain a seasoned attorney or accountant to assist in your correspondence. If the factory makes a comment regarding sales performance, facility appearance, or the color of the sky, draft a reply and save it in the correspondence file. t If you require any additional information on this or any other legal topic, please contact Robert O’Koniewski, MSADA Executive Vice President, rokoniewski@ msada.org, or Peter Brennan, MSADA Staff Attorney, pbrennan@msada.org, or by phone at (617) 451-1051.

Massachusetts Auto Dealer OCTOBER 2017

AUTO OUTLOOK

OCTOBER 2017

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Massachusetts Auto Dealer OCTOBER 2017

MSADA

ACCOUNTING What We Can Learn from the Equifax Breach By Nick DeLena O’Connor & Drew, P.C.

Over 143 million Americans were affected by the recent Equifax data breach. That number represents nearly every single American old enough to have credit. Information that was stolen includes social security numbers, birthdates, addresses, credit card numbers, and documentation pertaining to credit disputes. How could something so damaging have happened? It was entirely preventable. In March, Apache, a maker of web server software, discovered a bug in their code that could give an attacker control of the machine running its software. It immediately released a patch and advised customers to update their software as soon as possible. In his testimony to Congress, former Equifax CEO Richard Smith said the notification of the vulnerability was distributed to the IT department, but no one took action. “We now know that the vulnerable version… was not identified or patched in response to the internal March 9 notification,” Smith said. Those of us in the information security community were not surprised when the root cause of the breach was revealed. Poor patch management is consistently one of the top findings we have when we perform security assessments. When pressed

further, Smith blamed one individual for the failure. “The human error was that the individual who is responsible for communicating in the organization to apply the patch, did not.” Rep. Greg Walden asked a clarifying question: “So does that mean that the individual knew the software was there and it needed to be patched, and did not communicate that to the team that did the patching?” To which Smith answered, “That is my understanding.” That is a problem – for several reasons. No company, let alone a multi-billion-dollar Fortune 1000 organization, should ever have a single point of failure

• Responsibility must be shared. Do not introduce a single point of failure, be it a technical or personnel one. Even if you have only one person responsible for IT, that person has to be managed in a way that you can be confident he or she is doing their job. Keeping your systems safe is a critical aspect of their role. • Patch, patch, patch. As we have seen with Equifax and the numerous breaches that have come before, the consequences of not keeping your systems up to date are dire – and possibly fatal to your business. A patch management program must include your laptops, desktops, servers, network equipment, and other connected devices we have come to call the “Internet of Things” like cameras and smart thermostats, among others. We should learn from the fallout of this breach. This is a good opportunity to review your policies and practices. Are you protected from the type of attack that happened to Equifax? If in doubt, consult an IT security professional.

“No company, let alone a multibillion-dollar Fortune 1000 organization, should ever have a single point of failure for something like this.”

OCTOBER 2017

for something like this. In a best-case scenario, if the person responsible for communicating the vulnerability failed to do so, it would have been identified by the next internal scan of the network by a vulnerability scanner. There should also be more than one person involved receiving, analyzing, and consuming news and updates on installed products. Alas, here we are. We cannot change the past, but we can learn from this event. My major takeaways for dealers after this are: • Ignorance is not bliss. Owners must focus on IT issues as part of day to day activities. Most of the breaches lately have resulted in massive fines, resignations, and business closures. Do not let it be you.

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t Nick DeLena, CISA, CRISC, MBA, works in concert with internal senior management to scope and budget engagements. He provides oversight and training to existing staff. Nick’s prior engagements include SOX compliance, SAS70, and FFIEC compliance. In addition to Nick’s five years audit and advisory experience, he also has 12 years in various IT operations, analyst, and compliance positions. He can be reached at ndelena@ocd.com.

MSADA

Legal

By Joseph W. Ambash and Jeffrey A. Fritz

In What Ways Does the Law Protect Employee Speech? On September 1, 2016, San Francisco 49er Colin Kaepernick took his first knee during the National Anthem, in expression of his view concerning the treatment of people of color in the United States. Since that time, we have seen many other players follow his lead, for various reasons; numerous tweets and statements by politicians and talking heads both in support of, and in opposition to, such activity; and a fierce public debate about the legal rights and obligations of all involved. A similar debate is ongoing with respect to ESPN journalist Jemele Hill and her tweets about President Trump and a boycott of the Dallas Cowboys’ advertisers. These examples raise questions about an employer’s rights and obligations when it comes to employees’ speech. As a preliminary matter, the First Amendment of the United States Constitution says Congress “shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances.” While it certainly limits what Congress can do, it does not in any way limit what an employer can do, with respect to the speech of its employees. In short, while the First Amendment guarantees individuals the right to free expression, it does not guarantee them a job regardless of what they choose to express. But that, of course, is not the end of the inquiry for employers. While the First Amendment may not prohibit an employer from disciplining or terminating employees for engaging in certain speech, other laws may. Notably, while Massachusetts does not afford any specific free speech rights to employees, some other states do. For example, Connecticut law prohibits an employer from disciplining or terminat-

ing employees for engaging in speech on a matter of “public concern,” unless the employer can show such speech substantially or materially interfered with the employee’s bona fide job performance or the working relationship between the employee and the employer. If you have any dealerships in Connecticut, you should be aware of that protection. However, regardless of whether or not a state affords specific free speech rights to employees, an employer’s right to discipline an employee for the things he or she says is not absolute. For example, virtually every anti-discrimination law also includes an anti-retaliation provision that prohibits employers from disciplining employees for certain protected activity, which usually includes speech. If an employee complains about what he or she claims to perceive as discrimination, for example, that speech if protected, and an employer cannot take adverse employment action against them based on it. Moreover, a number of whistleblower laws exist that protect an employee in reporting, for example, safety violations, or certain criminal or unlawful activity by an employer. An employer who terminates an employee for engaging in such speech, even if just internally, may be called to account (and pay) for retaliation. Similarly, the National Labor Relations Act (NLRA), which generally governs the relationship between employers and their unionized workers, also applies, in certain respects, to non-union employment as well, including your dealership. Indeed, the NLRA grants the right to all employees, whether or not they are in a union, to engage in what the law calls “concerted activity,” which means the right to join together “for the purpose of collective bargaining or other mutual aid or protection.” This can, and almost always does, include employee speech. This is a very nuanced (and, in some ways, arbitrary) area of www.msada.org

the law, as the National Labor Relations Board has held the NLRA protects some pretty outrageous speech by employees, when made in the context of concerted protected activity. Accordingly, an employer should be very careful in determining whether to discipline an employee for concerted speech about the workplace or terms and conditions of employment. But even if certain employee speech is not protected, and you can discipline or terminate for it, employers are always well-served to ask the follow-up question: “Should you?” Could the decision, if made public, negatively impact your business in any way? (It seems the NFL and ESPN cannot win, as any decision is bound to alienate a large segment of the population and, accordingly, advertisers.) Does the speech really negatively impact your workplace? If so, how? Have you been consistent with discipline for other employees who engaged in similar speech? You will want to have good answers to these questions before terminating an employee, because the absence of good answers gives the employee room to argue the stated reason was just a ruse to mask an illegal reason, such as discrimination or retaliation t

Joe Ambash is the Managing Partner and Jeff Fritz is a partner at Fisher Phillips, LLP, a national labor and employment firm representing hundreds of dealerships in Massachusetts and nationally. They can be reached at (617) 722-0044.

Massachusetts Auto Dealer OCTOBER 2017

COVER STORY

Making Want to give to charity in your community, but not sure how? MSADA is here to help. By Tom Nash

A You have to just look around, and you will see a need every place you look. – Ray Ciccolo, Village Automotive Group

OCTOBER 2017

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dealership owner’s work life can be all-consuming. Take any objective, and a dealer is thinking about today, tomorrow, the next quarter, the next year. The Massachusetts State Automobile Dealers Association is here to relieve the burden when it comes to fighting against the Commonwealth’s ever-increasing regulatory environment. Most of that action, of course, takes place in Boston in windowless committee rooms and towering office buildings, far from the day-to-day realities of a dealer’s everyday business. MSADA wants to help in your backyard as well. While dealers are part of the overall economic lifeblood of Massachusetts, every store is an integral part of its “Main Street” community. Whether it is a baseball field, storm relief effort, golf outing, or concert on the town green, dealerships have opportunities to help support the activities that make their places of business a larger part of the town fabric. “For several years now, MSADA has offered up to $1,000 in matching funds for any dealer who donates to a charitable cause,” Executive Vice President Robert O’Koniewski says. “As we roll into the holiday season -- obviously prime time for giving -- we hope to encourage more of our members to take

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Charity Count

and you will see a need every place you look,” he says. “When the hurricane hit down in Houston, we asked customers -- just like they do at the supermarket -- if they would like to make

advantage of this benefit.” In an effort to help generate ideas and offer tips to dealers wanting to get started, here are five key points that came up in speaking with a few of MSADA’s most active charitable dealers.

‘Just Do It’ Village Automotive Group owner Ray Ciccolo has made national headlines for his philanthropy. His life story -- from breaking bottles in barrels at a hotel as a teenager, to buying a failing Volvo dealership and becoming a backbone of the brand -- is marked by his compassion for the less fortunate. For decades, the Ciccolo Family Foundation has participated in charity work as localized as Brighton and as far-flung as orphanages in China. Asked how a dealer might go about contributing if he or she is not sure about where or how, Ciccolo recalled Nike’s slogan: “Just do it.” The recent hurricanes in Houston, Florida, and Puerto Rico are just a few of those chances. “You have to just look around,

a contribution to the relief fund. When the Puerto Rican hurricane hit, we let customers know when they made appointments that they could bring in anything -- clothes, nonperishable household items -- and we would send it.”

Keep it in the Family Another common entry point to charity work: A dealer experiences need within their own family that forms a bond with others. Carla and Tommy Cosenzi were looking for ways to honor their father, western Massachusetts dealer Tom Cosenzi, after he passed away from brain cancer in 2009. That same year, the siblings took on their father’s business and held their first charity golf tournament in his memory. After nine tournaments, the Cosenzis and their participants

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Massachusetts Auto Dealer OCTOBER 2017

MAKING CHARITY COUNT “It is nice to get new employees to understand who my Dad was, and what he stood for.” – Carla Cosenzi, TommyCar Auto Group

For MSADA President Chris Connolly, a similar inspiration drives the Herb Connolly Classic, which raises money for the Hoffman Breast Center at Mount Auburn Hospital in Cambridge in memory of his mother, Kathy Connolly. Over the years, this event raised more than $200,000 for the center. “She received great treatment there and got two really wonderful years of good health from Hoffman Center before she succumbed to it at the end of 2008,” Connolly says. ”It is an honor for us to do this for the hospital.”

Repetition is Key have raised more than $830,700 to support the Center for Neuro-Oncology at Dana-Farber Cancer Institute. More than $130,000 came in for the 2017 event, held in September. “This is a cause near and dear to our heart, and also a way to keep my Dad’s name alive in this business,” Carla Cosenzi says. “It is nice to get new employees to understand who my dad was and what he stood for. He was so conscious of giving back to the community.”

Doing any charitable work once makes an impact. Repeating the effort, dealers say, increases the benefits exponentially. A notable example: The Rodman Ride for Kids, founded by Rodman Ford owner Don Rodman, has grown to become the No. 1 single-day fundraiser for at-risk children in the country. For Connolly’s tournament, now working on its 18th year, the repeated effort has yielded more partners and more growth. This year’s tournament featured sponsorship from Jack Madden Ford, Sudbay Chevrolet Buick, and Toyota of Braintree, in addition to contributions from Acura of Peabody, Acura of Bridgewater, New Jersey, and Sunnyside Acura of Nashua, New Hampshire. Beyond franchise owners banding together for a common cause, Cosenzi adds that repetition is important for dealership staff as well. “Our employee morale has definitely improved,” Cosenzi says, “and we see less turnover because we come together to support a cause and it makes us feel better as a team.”

Think of Your Legacy Cosenzi has moved into spaces beyond the golf tournament, putting funds behind women’s shelters and an annual Tommy

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Massachusetts Auto Dealer

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MSADA

MSADA Cosenzi scholarship for western Massachusetts high school students. A website, carlacares.org, uses the tagline: “When you do business with us, your business does good.” “It is important that customers see their money being recycled back into the community,” she adds. “That level of social awareness has branded us in our market and our community, and has really distinguished us among our competition.” Ciccolo notes that making a dealership’s brand synonymous with giving can help when it comes to that day-to-day business owners face. “When we looked to build a new 76,000 squarefoot building in Brighton, the community absolutely cooperated with us,” he says. “Charitable work has very concrete financial rewards besides all the good you are doing.” More importantly for Ciccolo, the foundation he started is an opportunity to help his family continue his work after he retires. “One of the things I am looking to do is turn this over to my daughters when I am gone,” he says. “I want them to know participation is important. It certainly cannot do anything but help you.”

Start Today Want to learn more about MSADA’s program? Email or call Executive Vice President Robert O’Koniewski at (617) 4511051, rokoniewski@msada.org. t

www.msada.org Massachusetts Auto Dealer OCTOBER 2017

NEWS from the NEWS from Around Around the Horn Horn from Around

NEWS the Horn

CHICOPEE

BOSTON

Mercedes-Benz Dealership Holds Grand Opening

State Inspection Changes Cause Headaches for Customers, Dealers

Mercedes-Benz of Springfield opened in October with a ribbon cutting ceremony, following more than a year of planning and construction on a long-derelict hotel site. Dealership owner Michelle Wirth, along with her husband and co-owner Peter Wirth, told 22News that it was an exciting first day at the dealership.

“We couldn’t have asked for a better opening day,” Michelle Wirth said. “The service drive is busy, and there are people coming in to test-drive cars. We just want that buzz and euphoria to continue.” The Wirth’s Mercedes-Benz dealership is the first in Western Massachusetts in more than a decade. In an interview with

“We couldn’t have asked for a better opening day.......... We just want that buzz and euphoria to continue.” – Michelle Wirth

MassLive, Peter Wirth said the dealership’s prominent location along the Massachusetts Turnpike will help spread the word. “The building is its own billboard,” Peter Wirth explained. “The dealership is a jewelry box and the cars are the jewels.”

OCTOBER 2017

The new equipment and regulations required for auto inspection stickers that took effect October 1 left both customers and dealers frustrated by inexplicable rejections, delays, and confusion. Last Fall, the Massachusetts Department of Transportation awarded a five-year contract to Applus Technologies to upgrade and run inspection systems statewide. Inspection stations were required to buy about $8,000 in equipment and send employees to a free training program. In a September report, the Commonwealth listed 1,762 licensed inspection stations. As of October 6, the MassDOT website updating residents on the status of the inspection services listed a little more than 1,300 with functioning systems, leaving a 400-station gap. Applus had one year to implement the system, which was supposed to be fully functioning by October 1. The contract with the prior system terminated September 30.

WORCESTER

Herb Chambers and 200 Foundation Donate Backpacks to Local Children The 200 Foundation, whose mission is to raise money for various charities in the Worcester and Metro West areas, worked with Provision Ministry to provide 175 backpacks filled with $27 of school supplies to low-income families through the “Yes We Care” program in September. The initiative was made possible in part through Herb Chambers of Auburn and the Herb Chambers Companies, a major sponsor for The 200 Foundation’s annual golf outing and dinner for the past 23 years. With the help of Herb Chambers and other major contributors, The 200 Foundation is able to provide 25 grants a year totaling $200,000. “We are blessed with the means to be able to give to those in most challenging times, and the passion to act so that those less fortunate are able to receive the help they desperately need,” said executive director Dan Bortolussi. “With the support, we are able to fund grassroots and populating impact social service agencies which provide services to those who could not otherwise afford them.”

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MSADA BOSTON

Mass. Advocacy Group Slams CarMax for Selling Recalled Vehicles CarMax, the nation’s largest retailer of used vehicles, is selling recalled vehicles that contain dangerous safety defects, according to a study completed by the MASSPIRG Education Fund. In a survey of nearly 1,700 vehicles for sale at eight CarMax locations — all four CarMax locations in Massachusetts (Danvers, North Attleboro, Norwood, and Westborough), two locations in California (Oxnard and Sacramento), and two in Connecticut (East Haven and Hartford) — more than one in four vehicles (27 percent) were found to contain unrepaired safety recalls. Out of 1,699 vehicles surveyed, 461 contained unrepaired safety recalls. At every single location, at least 20 percent of vehicles for sale contained at least one unrepaired safety recall. At North Attleboro, Westborough, and East Haven, more than 30 percent of vehicles for sale contained at least one unrepaired safety recall.

The percentage of vehicles with unrepaired safety recalls for sale has more than doubled on average since 2015 at the five locations surveyed in both years. In 2015, 10 percent of vehicles sold at the Hartford CarMax location contained open recalls. In this survey, 28 percent of vehicles at the same location contained recalls, an increase of 180 percent. In North Attleboro, the percentage of vehicles with unrepaired safety recalls rose from 17 to 31 percent.

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Massachusetts Auto Dealer OCTOBER 2017

Around the Horn NEWS fromSERVICES DEALER

MSADA

BOSTON

Self-Driving Cars Could Ease Boston Traffic

RAYNHAM

Mastria Hosts 200 to Celebrate Renovated Mazda Dealershp In yet another sign of our dealers’ commitment to their communities, on October 12 MSADA director Rick Mastria hosted almost 200 locals at his newly re-constructed Mastria Mazda store in Raynham. Included in the festivities, Rick also hosted his local state senator, Marc Pacheco, a long-time advocate on Beacon Hill for our industry and our state franchise law. Attendees partied into the early evening, awe struck at the vibrant construction of the multi-million dollar investment Rick has made to the dealership, the brand, and his town.

OCTOBER 2017

A new study inspired by Boston’s early experiments with self-driving cars finds that the technology could ease congestion, but might also lead to more cars on the road and further encourage urban sprawl. The report, released in October by the Boston Consulting Group and the World Economic Forum, is a mostly optimistic take on how autonomous vehicles could change cities. Three companies are now testing self-driving cars in Boston’s Seaport District. One of them, NuTonomy, has also partnered with ride-hailing service Lyft to research how passengers book and route a self-driving car. The consulting group’s study included a computer simulation of how downtown Boston traffic would change with the advent of self-driving taxis, buses, or private cars. It would likely add vehicles to roads while simultaneously reducing traffic time and cutting pollution because of smoother driving patterns, such as steadier speeds and more gradual braking. At the same time, the efficiency and convenience of autonomous technology could encourage more people to live in the suburbs. “Urban sprawl is definitely one of the biggest challenges,” said Nikolaus Lang, a co-author of the study. “If people don’t really see commutes as a painful exercise, they might tend to live further away.” The research adds to another study published this month by research-

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MSADA ers at the University of California-Davis, who found users of ride-hailing services such as Uber and Lyft are less likely to use public transit. The Davis study, which looked at Boston and six other metropolitan regions, says that the trend away from public transit could have broader implications once autonomous vehicle technology becomes commercially viable and a feature of ride-hailing apps. “All of this raises questions for city planners,” said Nigel Jacob, co-chair of Boston’s Office of New Urban Mechanics, which has partnered with the consulting group and autonomous car developers as part of a long-term plan to improve to transportation safety and equity. “All these companies are going to make money off the public infrastructure without actually paying back into it,” Jacob said. In the meantime, Jacob said the city is working to help companies as they try to understand the future market for self-driving vehicles, as well as the technical challenges of navigating the city’s “old, bizarre roadway system that is con-

stantly subject to freezing and thawing.” “If you can pass the Boston test, you can drive anywhere,” Jacob said. “That has basically been the idea.” t

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Massachusetts Auto Dealer OCTOBER 2017

MSADA

MSADA AUTO OUTLOOK

MSADA TRUCK CORNER

NADA/ATD to Give Input in Supreme Court Case By Steve Parker

Baltimore Potomac Truck Centers ATD Chairman

Perhaps it is irony that a term of the Supreme Court begins, by statute, on the first Monday in October, and this October an important issue for our industry is about to get its day in court, again. The outstanding case that will be heard by the Supreme Court this month is: Do dealership service advisors fall within the federal “salesmen, partsmen, and mechanics” overtime pay exemption under the Fair Labor Standards Act? Recently, the Supreme Court granted certiorari in the case Encino Motorcars, LLC vs. Navarro. This is the second time that the Supreme Court has accepted an appeal involving Encino, a very rare occurrence. As we know, the Fair Labor Standards Act exempts “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles” from an employer’s general obligation to pay overtime to employees who work more than 40 hours per week. The court will review a January 2017 decision by the Ninth Circuit Court of Appeals finding that the exemption did not apply to dealership service advisors. The ruling was in direct conflict with several other federal and state decisions. As with many significant issues involving our business, NADA/ATD is providing support to the dealers litigating Encino. The hope is that the Supreme Court will resolve this issue in favor of the dealer defendants and for all those dealers who have applied the overtime exemption to their service advisors for decades. Our Association is also working directly with the state dealer associations in the Ninth Circuit to file a “friend of the court” brief on behalf of all dealers. Briefing in the case will begin later this year, with oral argument set for some time in 2018. In addition to the courts, NADA/ATD has also devoted much of its efforts to working with federal regulatory agencies. These agencies — the U.S. Department of Transportation, the U.S. Department of Labor, and the Internal Revenue Service to name a few — refine, implement, and enforce the laws that Congress passes. The regulations that they adopt can have lasting repercussions for both auto and truck retailers — just like the case today. There will also be a decision coming out of the

U.S. Department of Transportation and its Electronic Logging Device (ELD) ruling. As we know, the Federal Motor Carrier Safety Administration (FMCSA) issued new rules in 2015 that required the use of electronic logging devices in commercial motor vehicles. The FMCSA has mandated that by the end of this year, non-exempt motor carriers and drivers must begin to use ELDs. Moreover, only compliant ELD devices/applications may be used to record Hours-of-Service by December 2019. This will be an important change affecting our customers. ATD will soon be circulating a detailed fact sheet to help all our truck dealer members prepare for this new ruling and transition. Without a doubt, the rulemakings coming out of Washington, D.C., deeply affect our consumers and the very fabric of how truck dealerships operate, employ staff, and sell products. On behalf of ATD, I encourage all our members to stay vigilant and informed on all the latest issues. ATD is informing federal regulators about the marketplace where truck dealers compete. Our goal is to help them better understand the potential impacts of their mandates so that their rules, in turn, improve our industry for the future. By the end of this month, we anticipate celebrating two things -- Halloween and the start of what we hope will be favorable litigation before the Supreme Court. The former event is cloaked in its veil of mystery and the unknown, as is the latter. ATD is working hard to make sure that the events of October yield a sweet surprise for everyone in the future. t

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Steve Parker is chairman of ATD, a division of NADA, which represents 1,800 heavy- and medium-duty truck dealerships. He is president of Baltimore Potomac Truck Centers in Linthicum, Maryland, which operates five full-service commercial truck dealership locations with Mack, Volvo, and Hino Trucks franchises in Maryland and Virginia. Massachusetts Auto Dealer OCTOBER 2017

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26 AUGUST 2017

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MSADA

NADA MARKET BEAT

JANUARY 2016

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Massachusetts Auto Dealer OCTOBER 2017

MSADA MSADA

Sound Off

Retail Warranty Reimbursement Joseph Jankowski Armatus Dealer Uplift

The factory-dealer relationship is anything but a level playing field, and unfortunately the behaviors of some manufacturers have necessitated state laws to protect dealers. These laws cover a myriad of issues, but one that is critical to your bottom line exists in 40 states, with more on the way. For years most dealers have submitted for annual increases to their warranty labor rate, but have been stuck with an artificially low parts mark-up stipulated in their dealer agreements. This mark-up is typically 40 percent over cost, although some manufacturers will pay you list or MSRP. By the way, do not be fooled by the “list” claim you may hear. You are not collecting 67 percent, which is anecdotally thrown around by your factory rep, or by your managers. You are most likely being paid a mark-up in the low-to-mid 50s. Based on state laws, you are entitled to collect “retail” from your manufacturer for parts used in a warranty claim. No, retail is not list price or MSRP; in most cases it is clearly defined in the law. Basically, retail is what your customers pay you for a warranty-like repair. In a store with typical pricing and discounting practices, the mark-up normally falls in the 75 percent to 85 percent range. For dealers utilizing a list pricing model, you should expect something in the 60 percent range. So, even in a conservative pricing environment a dealer should expect to improve his warranty gross profit by 50 percent. However, something on the order of doubling the gross is very realistic. This is a onetime process, and does not need to be repeated, unless you materially change your parts pricing strategy. This is not to say that the manufacturer will simply lie down and grant you a 100 percent improvement in your gross. First of all, the laws mandate a submission and detail what is required of the dealer, but that is just the beginning. Several things need to be considered in order to ensure the best possible result: Thorough understanding of the law – Rest assured, certain manufacturers will read the statute differently from you. Sometimes the positions they take are rather shocking, including those that will simply refuse to follow the law, or others that will attempt to include non-warranty-like repairs in a deliberate attempt to lower your mark-up.

Following the manufacturer’s protocol – It is critical to understand the factory’s guidelines for the inclusion or exclusion of various aspects of the submission. Each of them have different rules, and they typically won’t disclose all of them to you. If you can determine what they are, you should follow them within reason; do not be combative or send up “legal signals” out of the gate. Optimization – Absolutely key to this process is achieving the best possible result, and that can only be done through the proper selection of your submission sample. This is something that should not be left to chance or inferior technologies. Missing your mark-up by even a few points can cost you thousands every year, perpetually. Do yourself a favor, and explore this aspect with some attention to detail. It will be worth it to you in the long run. Warranty Auditors – Beyond technology, however, is the need for a thorough audit process. Your declaration will be scrutinized by factory auditors that know every nook and cranny of countering retail warranty submissions. You should have someone familiar with their techniques, in order to preempt or refute their sometimes-questionable positions. Here again, it is better to get along with these folks, and in many cases, this is not a problem. However, without naming any specific manufacturers, some are extremely difficult. Factory Responses – In many cases your approval will not be smooth, and the manufacturer may rebut your calculations, or in some instances, summarily reject your submission. Responding in the proper manner is critically important, since it could be the difference between achieving a substantial increase in your warranty parts gross, or obtaining nothing at all. There are many dealers that have resubmitted two, three, or four times over the course of a year or two, costing themselves multiple six figures in lost profit. The bottom line is that you have an extraordinary opportunity to receive a fair reimbursement for the parts utilized in the warranty work you perform. If this process is approached in a judicious and professional manner, you can quite possibly double your warranty parts gross profit. There are many pitfalls for the uninformed, but tremendous upside for those that perform the submission process properly. t For more information, Contact Armatus Dealer Uplift at (888) 477-2228 or info@dealeruplift.com. Armatus has performed over 3,000 successful retail warranty parts submissions to 24 manufacturers in 40 states.

Have an opinion you want to share? Email rokoniewski@msada.org. OCTOBER 2017

Massachusetts Auto Dealer www.msada.org

NADA Update

By Don Sudbay

Setting New Highs Don Sudbay, President of Sudbay Automotive Group, represents MSADA members on the NADA Board of Directors. He welcomes your

questions

and

concerns

secretary. Bob Shuman, president of Shuman Chrysler-Dodge-JeepRam in Walled Lake, Michigan, was elected treasurer. The officers’ new term officially begins at the 2018 NADA Show in Las Vegas next March.

Good Intentions vs. Unintended Consequences By Mark Scarpelli, NADA Chairman

(donsudbayjr@sudbay.com). As we head into a much quieter conclusion to our election season, I encourage you to remember that our elected officials need to hear from us dealers during these moments in addition to when they need our vote or we need theirs. I encourage you to get in touch with your local representative and invite him or her to your dealership sooner rather than later. Both MSADA Executive Vice President Robert O’Koniewski and I are always ready to help with these visits. Do not be shy about reaching out. NADA has lots of great news to share this month: Growth in our industry, a great NADA Show coming in March, and more. Should you have any questions about the logistics of the NADA Show, please let me know.

Michigan Auto Dealer Wes Lutz Elected 2018 NADA Chairman

NADA’s 63-member board of directors recently elected Wes Lutz as chairman for the 2018 term at its October board meeting, held in Dana Point, California. “I am honored to serve as NADA chairman as we begin the next century following NADA’s 100 years of existence,” said Lutz, who represents Michigan’s new-car dealers on NADA’s board. Lutz, president of Extreme Dodge-Chrysler-Jeep-Ram in Jackson, Michigan, added that he will continue to advocate new-car dealer concerns in the industry, legislative and regulatory affairs arenas, as well as encourage dealers to adapt to the retailing challenges ahead. “From start to finish, the nation’s franchised new-car dealership network has to benefit consumers in newer ways than ever before,” said Lutz, who has been a dealer since 1976. He is currently serving as NADA vice chairman, and previously served on NADA’s board from 2001 to 2004. Charlie Gilchrist, who represents Northern Texas’ newcar dealers on NADA’s board, was elected vice chairman. Gilchrist is president of Southwest Ford in Weatherford, Texas, and is also a Buick-GMC, Nissan, and Mitsubishi dealer. Bill Willis, president of Willis Automotive Group (Chevrolet-Buick-Ford) in Smyrna, Delaware, was re-elected as

Earlier this month I had the privilege of addressing the Automotive Press Association in Detroit. I told the journalists there that American auto dealers share the same passion: To serve the needs of the car-buying public as efficiently as we can. And to do that, dealers want to preserve the symbiotic relationship with those who impact our industry, whether it is the federal government or our manufacturers. New-car dealers are projected to sell 17.1 million new cars and light trucks in 2017. With an improving economy and lower gas prices, consumers are opting for bigger vehicles, such as light trucks and SUVs. The overall consumer demand for new vehicles is healthy. So let us make the process of purchasing a car as streamlined and transparent as possible for our consumers. Throughout the year NADA has strongly advocated for limiting complicated and unfair OEM market strategies—those that produce huge discrepancies in

“Throughout the year NADA has strongly advocated for limiting complicated and unfair OEM market strategies.” prices and kill trust and loyalty in our brands. I am confident that when dealers and manufacturers engage in open and constructive discussions—and when both sides are mindful of one another—we will make the best choices that benefit our consumers. I told the Detroit auto press that, when it comes to the auto industry, there is a seesaw effect between good intentions and unintended consequences. For the past few years, NADA has worked hard to mitigate these effects, especially in Washington, D.C. Every so often, we saw various policy proposals crop up—like the Consumer Financial Protection Bureau’s overreach into vehicle financing—that started out as well-intentioned, but held negative consequences to the

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NADA Update business of selling and servicing vehicles to our millions of customers. I am proud of the hard work that we have put in. Our efforts have resulted in more enlightened and effective policy outcomes for both our customers and our businesses. This is the work we will continue to do so that our sales forecasts can reach 17 million or more for years to come. The retail auto industry has stood the test of time for the last 100 years. 2017 in particular is proof-positive that the need and desire for reliable and affordable personal transportation is alive and well. We, at NADA, are confident that sales of new vehicles will continue to be a cornerstone of the industry—and broader economic health—for years to come. The nation’s auto dealers are ready to take on the next 100 years of selling and servicing cars. And if we do it together—with OEMs, dealers, and regulators taking each other into account—then our good intentions will be met with positive results.

Dealership Employment Continues Trend Toward Record

Employment and payroll at U.S. new-car dealerships continued to rise through the first six months of 2017, according to a new mid-year report released in October by NADA. New-car dealerships directly employed 1,134,200 workers through the second quarter of 2017, up from a record

“Payroll at new-car dealerships reached nearly $33 billion in June 2017 yearto-date, up more than 11 percent compared to the same six months in 2016.” 1,131,900 in 2016, according to “NADA Data 2017: Midyear Report”, which provides a biannual financial profile of new-car dealerships, as well as data on employment, payroll, and more. “We expect to see employment at new-car dealerships reach an all-time high at the end of 2017,” said Patrick Manzi, NADA senior economist. “In addition to the direct employment provided by dealerships, more than another million other jobs in local communities are dependent on dealerships.” Payroll at new-car dealerships reached nearly $33 billion in June 2017 year-to-date, up more than 11 percent compared to the same six months in 2016. The average annual compensation for employees at newcar dealerships in 2016 was $69,784. OCTOBER 2017

“For the past several years, dealership employees have seen steady increases in their incomes as well as in their total compensation,” Manzi added. “Dealership jobs offer significantly higher compensation than other retail sectors.”

Dealership Families Need Support Following Year of Record Natural Disasters

This year, thousands of dealership employees and their families from Texas, Florida, Puerto Rico, California, and surrounding areas have suffered devastating losses caused by a record number of hurricanes, flooding, and wildfires. “There are occurrences that can happen virtually in any state,” said NADA board member Mike Alford, president of Marine Chevrolet Cadillac in Jacksonville, North Carolina. “As a collective dealer body, we need to pay attention and make certain that we are there for our fellow dealers in terms of helping them, either their store or their inventory or more importantly, if one of their employees has a significant loss.” NADA is calling on dealers, dealership employees, and others across the country to support the NADA Foundation’s Emergency Relief Fund by making a contribution today. One-hundred percent of funds go directly to dealership employees who sustained personal property damage from natural disasters. “We can be there quickly. We can help,” added Alford, the 2013 Time Dealer of the Year recipient. Visit NADA.org to make a donation online. Personal or corporate checks can be made payable to Emergency Relief Fund, c/o NADA Foundation, 8400 Westpark Drive, Tysons, VA 22102. For more information, call (703) 821-7102. (Donations to the NADA Foundation are generally tax-deductible; contributors should consult their tax advisors for details.)

NADA Show: Early-Bird $100 Registration Discount Ends November 17

Online registration and hotel selection for NADA Show 2018 in Las Vegas is now open. NADA member dealers and their managers who register by November 17 will receive an early-bird discount of $100 from the onsite registration rate. The NADA Show runs from Thursday, March 22, to Sunday, March 25. Keynote speakers are Mark Scarpelli, 2017 NADA chairman, and Nick Saban, head football coach at the University of Alabama (Friday’s general session); Wes Lutz, 2018 chairman-elect, and John Krafcik, CEO of Waymo Inc. (Saturday’s general session); and Robert O’Neill, former SEAL Team Six Leader (Sunday’s inspirational session). The show also includes educational programs, dealer-franchise meetings, an expo, and numerous networking opportunities. For more information and to register, visit www.nadashow.org. t

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