MSADA, One McKinley Square, Sixth Floor, Boston, MA 02109
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FIRST CLASS MAIL US POSTAGE PAID BOSTON, MA PERMIT NO. 216
October 2021 • Vol. 34 No. 10
The official publication of the Massachusetts State Automobile Dealers Association, Inc
Spreading the Wealth
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 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: jfabrizio@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 Ethos, 2 Bellavia Blatt, 17 Nancy Phillips, 19 NEAD, 19 O’Connor & Drew, 28 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
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The official publication of the Massachusetts State Automobile Dealers Association, Inc
Table of Contents
4 5 6 8 9 10
From the President: We Bring Communities Together ASSOCIATE MEMBERS DIRECTORY THE ROUNDUP: Goin’ Round in Circles LEGISLATIVE SCORECARD TROUBLESHOOTING: Attorney General Puts Mass. Dealers On Notice AUTO OUTLOOK
14 Cover Story: Spreading the Wealth
18 20 21 22 23 24 25 26
NEWS From Around the Horn IT COMPLIANCE: Critically Important IT Policies and Procedures for Your Dealership LEGAL: Always Take Action on Harassment Claims ACCOUNTING: The Three ‘I’s: Investments, Inflation, Intel BANKING: Cash Remains King — Now What? AIADA Brief: Dealers Do Good, Even as Politicians Do Their Worst TRUCK CORNER: Have You Signed Up for the ATD Show? nada update: Making An Impact
Join us on Twitter at @MassAutoDealers www.msada.org
Massachusetts Auto Dealer
OCTOBER 2021
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From the President
MSADA
We Bring Communities Together Auto dealers have an important role to play in their hometowns
By Chris Connolly, MSADA President 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 $2,000 in matching funds for a charitable contribution made in their “We should all be hometown. This is an important point to remember. As thinking about businessmen and women who operate one of what we can the most important economic engines in our communities across the Commonwealth, we do at our own all have a special opportunity to lend a helping businesses to help hand. The contribution can be as small as sponsoring a Little League team or as large as fundour communities.” ing entire programs. 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. As Ray Ciccolo says of charitable work, “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 matching program, call Executive Vice President Robert O’Koniewski at (617) 451-1051 or email him at rokoniewski@msada.org.
Auto Show Preparations Keep an eye out for information about our next New England International Auto Show events in January. As usual, Jean Fabrizio and the rest of the MSADA staff are planning a fantastic event, and I encourage all of our Associate Members to get in touch with her for information about sponsorship opportunities. She can be reached at (617) 451-1051 or by email at jfabrizio@msada.org. t OCTOBER 2021
Massachusetts Auto Dealer www.msada.org
Msada Board Barnstable County
Brad Tracy, Tracy Volkswagen
Berkshire County
Brian Bedard, Bedard Brothers Auto Sales
Bristol County
Richard Mastria, Mastria Auto Group
Essex County
William DeLuca III, Woodworth Motors Don Sudbay, Sudbay Motors
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 Chrysler Dodge Ram Jeep Steve Salvadore, Salvadore Auto
Medium/Heavy-Duty Truck Dealer Director-at-Large [Open]
Immediate Past President [Open]
NADA Director
Scott Dube, Bill Dube Hyundai
Officers
President, Chris Connolly, Jr. Vice President, Steve Sewell Treasurer, Jack Madden, Jr. Clerk, Charles Tufankjian
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. Kathleen Weisenbach (402) 523-5945 America’s Auto Auction Boston Jim Lamb (781) 596-8500 Armatus Dealer Uplift Joe Jankowski (410) 391-5701 Auto Auction of New England Steven DeLuca (603) 437-5700 Automotive Search Group Howard Weisberg (508) 620-6300 Bank of America Merrill Lynch Dan Duda and Nancy Price (781) 534-8543 Bellavia Blatt Leonard Bellavia (516) 873-3000 Bernstein Shur PA Ned Sackman (603) 623-8700 Broadway Equipment Company Fred Bauer (860) 798-5869 Burns & Levinson LLP Paul Marshall Harris (617) 345-3854 CDK Global Rob Steele (508) 564-1346 Chase Auto Ken Miller (508) 902-8908 Clifton Larson Allen Rick Parmelee (860) 982-9307 Coastal Outsourced Solutions Andrea Vieira (508) 979-4733 ComplyNet Adam Crowell (614) 634-8843 Construction Management & Builders, Inc. Nicole Mitsakis (781) 246-9400 Cooperative Systems Scott Spatz (860) 250-4965 Cox Automotive Ernest Lattimer (516) 547-2242 CVR John Alviggi (267) 419-3261 Dave Cantin Group Woody Woodward (401) 465-7000 DealerSafeGuardSolutions Doug Fusco (972) 740-8638 DealerShop Ken Grove (248) 444-6283 Brian Fleischman (716) 864-0379 DealerSocket Marco Suarez (877) 340-2677
Downey & Company Paul McGovern (781) 849-3100 DP Sales Distributors Andrew Prussack {631) 842-7549 Eastern Bank David Sawyer (617) 620-3484 Eastern Insurance Group John Berksza (508) 620-3349 EasyCare New England Greg Gomer (617) 967-0303 Enterprise Rent-A-Car Timothy Allard (602) 818-3607 Ethos Group, Inc. Drew Spring (617) 694-9761 F&I Direct Sean Wiita (508) 414-0706 Michelle Salas (508) 599-0081 F & I Resources Jason Bayko (508) 624-4344 Federated Insurance Matt Johnson (606) 923-6350 Fisher Phillips LLP John Donovan (404) 240-4236 Joe Ambash (617) 532-9320 Gulf State Financial Services Mike Sims (817) 689-1735 GW Marketing Services Gordon Wisbach (857) 404-0226 John W. Furrh Associates Inc. Pamela Barr (508) 824-4939 Key Bank Mark Flibotte (617) 385-6232 KPA Abe Cohen (503) 902-6567 LocaliQ Automotive Jay Pelland (508) 626-4334 LotLinx Brad Bass (978) 766-9000 M & T Bank John Federici (508) 699-3576 Management Developers, Inc. Dale Boch (617) 312-2100 McWalter Volunteer Benefits Group Shawn Allen (617) 483-0359 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 NEAD Insurance Trust Charles Muise (781) 706-6944
www.msada.org
Northeast Dealer Services Jim Schaffer (781) 255-6399 O’Connor & Drew, P.C. Kevin Carnes (617) 471-1120 Performance Management Group, Inc. Dale Ducasse (508) 393-1400 Piper Consulting Jim Piper (207) 754-0789 Pro-Vigil Sasha Lam-Plattes (408) 569-2385 Resources Management Group J. Gregory Hoffman (800) 761-4546 Reynolds & Reynolds Austin Ziske (802) 505-0016 Rinn Advisors John Corcoran (617) 480-6693 Robinson Donovan Madden & Barry, P.C. James F. Martin, Esq. (413) 732-2301 Rockland Trust Co. Joseph Herzog (508)-830-3241 Samet & Company John J. Czyzewski (617) 731-1222 Santander Bank Richard Anderson (401) 432-0749 Chris Peck (508) 314-1283 Schlossberg, LLC Michael O’Neil, Esq. (781) 848-5028 Service Credit Union Dave Pasternak (603) 812-8967 Shepherd & Goldstein CPA Ron Masiello (508) 757-3311 Southern Auto Auction Joe Derohanian (860) 292-7500 Sprague Energy Robert Savary (603) 430-7254 SunTrust Bank Michael Walsh (617) 345-6567 The Towne Law Firm P.C. James T. Towne, Jr. (518) 452-1800 Truist Michael Walsh (617) 345-6567 TrueCar Pat Watson (803) 360-6094 US Bank Vincent Gaglia (716) 649-0581 Wells Fargo Dealer Services Josh Tobin (508) 951-8334 Windwalker Herby Duverne (617) 797-9316 Zurich American Insurance Company Steven Megee (774) 210-0092
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The Roundup
Goin’ Round in Circles By Robert O’Koniewski, Esq. MSADA Executive Vice President rokoniewski@msada.org Follow us on Twitter • @MassAutoDealers
The fiscal witching hour is upon us. As our state and federal solons attempt to meet various deadlines in the next few weeks, the secrecy of discussions and negotiations, bolstered by pandemic-induced Zoom voting in legislative sessions, simply augments our lack of confidence in which direction our state and country are heading. Here at home, the Massachusetts General Court has a holiday recess coming up in which formal sessions must end by November 17 while informal sessions, with no controversial matters, can proceed until the resumption of formal sessions the first week of January. The most pressing matter is what to do with the multi-billion dollar surplus from FY2021, which ended on June 30, and the over $5 billion in federal American Rescue Plan Act (ARPA) monies provided all states as COVID-19 relief money. While Gov. Charlie Baker urged quick action and filed legislation to dispose of most of the ARPA funds, the legislature decided to slow-walk the process and hold six public hearings, in which it received 1,200 pieces of written testimony making requests for upwards of $30 billion in new uses for the ARPA funds. Earlier this month the legislature closed out FY21 by paying off lingering bills and obligations and held on to the remaining surplus monies of $1.5 billion in escrow. Then, in late October, as we are going to press, the House finally unveiled a $3.65 billion spending package to use those surplus and ARPA monies while also placing $2.75 billion in reserves to be allocated later. According to legislative leaders, leaving those monies in reserve will give them the flexibility to address other needs once they see what Congress may accomplish on OCTOBER 2021
Massachusetts Auto Dealer www.msada.org
infrastructure and social spending programs. The two items in this financial bundle that House and Senate leaders seem to have pre-approved is a $500 million commitment to the state’s unemployment insurance program and a $500 million program to send bonus pay to low-income workers who could not stay home during the pandemic. In the bonus pay program, $40 million would go to state workers and the rest to other qualifying workers. As we have written previously, business groups, such as your MSADA, have urged the legislature to use the state surplus and ARPA monies to replenish the UI system fund, which went into deep deficit as a result of 16.6% unemployment at the height of the pandemic in 2020, and cut the longterm financial surcharge employers will be paying for the next 20 years to cover the loan the state took from the federal government. As you very well recall, the business community did not create the unemployment problem; it was the heavy hand of government orders of forced closures and access restrictions that ultimately ended many small businesses permanently. Gov. Baker initially requested a $1 billion infusion of funds to address some of the deficit. Unfortunately, legislative leaders are committed to $500 million presently. Since we have the most generous UI payments in the country and a system in need of desperate reform, perhaps changes to the UI program, which the business community has long asked for and state leaders are discussing, could improve the quarterly bills employers must pay. Regardless, the commitment to deficit relief, albeit not at an ideal level, would decrease the 20-year loan obligation somewhat.
MSADA In addition to the agreed upon $1 billion commitment, the House bill would include $600 million for housing, $350M for the environment and climate change mitigation, $777M for economic development, $750M for workforce development, $765M for health and human services, $265M for education, $100M for home ownership assistance, $100M for water and sewer infrastructure, $100M for marine port development and offshore wind, $125M for cultural grants, $78M for food security, $100M for heating, air conditioning, and ventilation systems in public schools, $200M in tax relief for small business owners who paid personal income taxes on state and federal relief grants during the pandemic, and $12M for Afghan refugees resettling in our state after vacating their homeland during the Biden administration’s military withdrawal from that country. Eventually this will be sent to the Senate, where they can layer on their own priorities on top of the $1 billion that has been pre-approved for UI relief and worker bonus payments. There is no sense yet as to whether this will be done by the Turkey Day recess. Moving forward into the second half of FY2022 and beyond, it will be important to see how much of all this new spending will embed its way into the permanence that has become our state’s spending monstrosity, generating the need for additional taxes on the working men and women of this Commonwealth. At the federal level, we have been monitoring events as the Democrat infighting around the Biden $3.5 trillion tax-andspend proposal, which he calls Build Back Better – a somewhat wishful PR spin from the administration, teeters under its own fiscal heft and inanities. Within the almost 2,000-page bill, NADA is working on three priorities: (1) Creation of tax credits to incentivize the consumer purchase of electric vehicles; (2) Lessen tax threats as the bill works its way through Congress; and (3) Establish temporary and targeted LIFO relief for dealers with historically low levels of inventory.
The House Ways and Means proposal included a new electric vehicle incentive program in the $3.5 trillion bill. NADA supports tax credits to incentivize the consumer purchase of EVs. The tax credit would apply at $7,500 for the purchase of a non-union assembled vehicle and at $12,500 for a union assembled vehicle. The tax credit would be refundable and transferable, which would allow the consumer to obtain the credit at the point of sale or “cash on the hood”. Prompt IRS reimbursement to dealers, who would front load the credit, is essential to ensure the full value of the consumer incentive. NADA has urged Congress to ensure any EV incentive program provide the broadest application to achieve widespread EV consumer adoption with the incentive credited at the point of sale to work in the showroom. AIADA, which represents the international nameplate dealers, has been hammering Congress in opposition to the union differential bonus, since their members’ vehicles are exclusively assembled by non-union labor in the U.S. The international nameplate market share is over 70% in Massachusetts and 55% nationally. So you can see, the bulk of Massachusetts consumers could be treated inequitably under this proposal. As we have written previously, the threat of tax hikes in the Biden bill would strike at the very heart of the business tax code, thereby threatening dealers’ ability to maintain and grow their businesses. The Democrats continue to negotiate the level of various taxes, including personal income, corporate income, and estate, to name a few. One that is key to dealers and other businesses, however, is the Section 199A deduction. NADA is part of a broad coalition fighting the HWM punitive proposal on the 199A deduction. By significantly limiting the Section 199A deduction for pass throughs, increasing the top individual rate by 2.6%, and expanding the 3.8% new investment income tax (NIIT) to include all pass-through income, the overall tax rate on a pass through would increase from 29.6% to as high as 43.4%. www.msada.org
The 199A deduction allows dealerships to retain earnings in the business, encourages increased business investment, and preserves small business jobs. Congress needs to preserve the Section 199A deduction to protect our small businesses and their workers. Finally, instead of an amendment to the HWM package, the LIFO problem could be addressed at the administrative level. With historically low inventories and a semiconductor chip shortage caused by the pandemic, many dealers who use the LastIn, First-Out accounting method now face significant, unexpected tax liability due to LIFO recapture. Last November, NADA petitioned the Treasury Department to exercise its authority under the Internal Revenue Code to allow taxpayers to elect to replace their new-vehicle inventories over a three-year period. Amid depleted inventory, dealers are facing massive tax bills that could otherwise be utilized to invest in replenishing inventory, EV infrastructure, and employee training. The Treasury Department has not yet responded formally to the petition. NADA needs dealers to contact their Democrat Members of Congress to urge the Treasury Department to grant temporary LIFO relief for businesses facing difficulty replacing inventories due to government and other actions that created a major global interruption of vehicle production. To contact your Member of Congress, go to www.house.gov/representatives/ find-your-representative. For additional information, visit www.nada.org/legislativeaffairs. On Beacon Hill and Capitol Hill, these politicians can make or break a business or an industry and its employees. As I always ask, “First, do no harm.” As the days have grown shorter and we approach a dark Winter, your advocates at MSADA, NADA, and AIADA are working to make sure that some of these proposals do not survive the process or can be improved. If you want to help in that effort, please reach out to me. t
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MSADA L EGISLATIVE S CORECARD
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OCTOBER 2021
BILL#
SPONSOR
SUBJECT
S183 S239 H407
Sen Crighton Sen Pacheco Rep Hunt
Amendments to Ch. 93B, the auto dealer franchise law.
SUPPORT
Joint Committee on Consumer Protection held public hearing on July 19, 2021.
H365 H400
Rep Finn Rep Howitt
RTR Law amendments to fix Model Year start date and consumer notice.
SUPPORT
In the Joint Committee on Consumer Protection; no hearing scheduled yet.
H336 H361 S234
Rep Chan Rep Finn Sen O’Connor
Creates process to appeal improperly issued Class 1 license.
SUPPORT
Joint Committee on Consumer Protection held public hearing on July 19, 2021.
S180 H421
Sen Crighton Rep Lewis
Modernize on-line purchase process.
SUPPORT
Joint Committee on Consumer Protection held public hearing on July 19, 2021.
H345
Rep Cusack
Clarifies licensure to finance small loan contracts with negative equity.
SUPPORT
Joint Committee on Consumer Protection held public hearing on July 12, 2021.
S226
Sen Moore
Amends definition of heavy-duty trucks under RTR law.
SUPPORT
Joint Committee on Consumer Protection held public hearing on July 19, 2021.
S245 H470
Sen Velis Rep Walsh
Open safety recalls notifications.
OPPOSE
Joint Committee on Consumer Protection held public hearing on July 19, 2021.
H423
Rep Linsky
Allows an OEM to open a factoryowned store, without a dealer, if there is no same line-make dealer in the state. (The so-called “Tesla Exemption.”)
OPPOSE
Joint Committee on Consumer Protection held public hearing on July 19, 2021.
H1152 H1178 S711
Rep McMurtry Rep Phillips Sen Moore
Creates process to increase the insurance reimbursed labor rate paid to auto body
SUPPORT
Joint Committee on Financial Services held public hearing on September 15, 2021.
H1183 S657
Rep Puppolo Sen DiZoglio
Protects dealers from OEMs’ restrictions on selling non-OEM service contracts.
SUPPORT
Joint Committee on Financial Services held public hearing on September 15, 2021.
H1070 S719
Rep Driscoll Sen O’Connor
Creates administrative appeal process for vehicle owners to seek diminished value of damaged vehicle returned to vehicle owner.
SUPPORT
Joint Committee on Financial Services held public hearing on September 15, 2021.
H3477 H3494 S2372
Rep Golden Rep Howitt Sen Rush
Creates statutory process for allowing temp tags for out-of-state sales.
SUPPORT
In the Joint Committee on Transportation; no hearing scheduled yet.
H2004
Rep Jones
Sleepy’s-related affirmative defense.
SUPPORT
In the Joint Committee on Labor and Workforce Development; hearing scheduled for November 9, 2021.
H3321 H3368
Rep Hill Rep Roy
Promote sale of EVs.
SUPPORT
Joint Committee on Telecommunications, Utilities, and Energy held public hearing on July 28, 2021.
OCTOBER 2021
STATUS
Massachusetts Auto Dealer www.msada.org
Troubleshooting
MSADA
Attorney General Puts Mass. Dealers On Notice By Peter Brennan, Esq. MSADA Staff Attorney
The Massachusetts Attorney General’s Office (AGO) recently issued an Advisory on Automobile Advertising, Pricing and Lease Buyouts. The advisory was issued in response to what the AGO has alleged are unscrupulous practices by Massachusetts franchised and used motor vehicle dealers which have been brought to the attention of the AGO through an increased number of consumer complaints. With customers competing over a limited number of cars on dealer lots, some people are naturally going to wind up disappointed. As we have previously warned – do not let inventory problems influence your compliance. The advisory states, in relevant part: “The Office of the Attorney General (AGO) issues this Advisory to alert consumers and automobile dealerships about their respective rights and obligations relating to automobile advertising, pricing, and lease buyouts. This advisory relates to the AGO’s enforcement of the Massachusetts Consumer Protection Act, G. L. c. 93A, § 2, and the regulations promulgated thereunder in 940 Code Mass. Regs. 3.00 et. seq. and 940 Code Mass. Regs. 5.00 et. seq. In issuing this Advisory, the AGO is placing all automobile dealerships in the Commonwealth on notice that these practices violate the law and must cease immediately.” Obviously, the laws and regulations cited by the AGO in the advisory are not new, and your MSADA regularly advises our members on how to maintain compliance with these laws and regulations in
Legal Bulletins, articles in Massachusetts Auto Dealer magazine, and through the MSADA Member Counsel service. That is not to say that the advisory should be ignored. Dealers must be aware that the AGO is likely to step up its enforcement of these laws and regulations due to the current vehicle shortage and related consumer complaints and should review their compliance with these laws and regulations accordingly. As we have previously advised, the first step in any advertising campaign should be a careful review of the Massachusetts Motor Vehicle Advertising regulations at 940 CMR 5.00 and NADA’s Dealer Guide to Federal Advertising Requirements. Do not hesitate to contact the MSADA legal office or your legal counsel with questions on how best to comply with the multitude of state and federal laws and regulations pertaining to the marketing and sale of vehicles. In the wake of the publication of the AGO’s advisory, your Association received various questions regarding the finer points of maintaining compliance with the law. Several dealers have inquired about charging a documentary preparation fee on a lease buyout. Charging a doc fee on a lease buyout should only be done if the customer was previously notified of the fee in the original lease contract. Under no circumstances should a dealer charge a doc prep fee in a dealer-lessee purchase transaction unless: (i) the original lease disclosed the amount of the documentary fee charged in the dealer-lessee purchase transaction as a separate purchase option fee; or (ii) the sum of the documentary fee and the price charged the lessee for the vehicle (excluding official fees and the price of any voluntary protection products sold to the lessee in connection with the dealer lessee purchase transaction) is equal to the lease purchase option price. If these conditions are not satisfied, charging a doc prep fee risks a claim against the dealer, lease www.msada.org
holder, and potentially the original lessor and other lease holders, that the practice breached the contract and/or violated the federal Consumer Leasing Act (15 USC 1667 et seq.). In addition to the potential breach of contract and Truth in Lending Act (TILA) violations, if the dealer attempts to charge a doc fee not included in the full buyout price of the lease previously disclosed to the consumer, it could represent a violation of the Attorney General’s advertising regulations and MGL 93A. All charges should be detailed in the lease fee agreement, finance charge, and buyout amount stated in the original lease contract. If a dealer wants to charge the customer for something that is not listed in the initial paperwork, then the customer must have the option to decline the charge and/ or service. For example, if a dealer wants to offer a lease buyout customer an additional vehicle certification for a fee, and it is not included in the original lease paperwork, then the dealer cannot make the certification a condition of the lease buyout. The dealer should explicitly disclose all optional services and the related charges to the customer and affirm that the services are optional in order to eliminate exposure to a state or federal action. In summary, while the AGO advisory was a reminder of laws and regulations that dealers should already be complying with, it can also be taken as a clear message that dealer advertisements, pricing, and leasing practices are officially under the microscope. As stated in the advisory, dealers in the Commonwealth should consider themselves “on notice”. t If you have any questions regarding this column, please contact Robert O’Koniewski, MSADA Executive Vice President, at rokoniewski@msada.org or Peter Brennan, MSADA Staff Attorney, at pbrennan@msada.org or by phone at (617) 451-1051.
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AUTO OUTLOOK
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RACE TO THE FINISH COVER STORY
Spreading the Massachusetts auto dealers offer examples of the dividends of charity
By Stephanie Power
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here seems to be more to selling cars than just selling cars. Whether they call it “good corporate citizenry,” philanthropy, or just “doing the right thing,” Massachusetts auto dealers are giants when it comes to supporting their local, state, and even global communities. Many dealers recognize the essential role their respective communities play in the successes of their careers, families, and everyday lives. Many dealers know it makes good business and personal sense to be involved in the community they call home.
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“It is not that I am just a business-person in Framingham, I actually live here,” said Chris Connolly, President of MSADA and co-owner of Herb Connolly Auto Group. “We did youth sports with our kids growing up, we went to the YMCA. When people see us get involved and give back, it is easier for them to want to do business with us because they see we are part of the community, as well.” Connolly said in addition to funding local schools and families coping with a tough cancer diagnosis, he and his brothers tend to focus on supporting the Metro West YMCA because he noted a rise in food insecurity in Framingham. “They (the YMCA) affect so many different people, they’re much more than just a gym. They work with the elderly, those in food insecure situations, they offer childcare and after school care regardless of your income status. They even opened their facilities for first responders needing childcare last year.” Connolly paraphrased a Bible verse when describing his reasons for giving to his community. “Of much that is given, much is required,” he said. “Our success is because of the community around us. Most of our business is really local, and when there’s a need in the community, we owe it to the community to help out.” TommyCar Auto’s Carla Cosenzi spotted one such need in her community and immediately responded. Earlier this year,
Massachusetts Auto Dealer www.msada.org
MSADA
Wealth
a friend shared with Cosenzi an online story of a Southwick man battling stage IV glioblastoma, the same brain cancer that claimed the life of Cosenzi’s father. “I immediately was so touched and knew the situation he and his family were up against,” said Cosenzi. Cosenzi reached out to the family on their GoFundMe.org fundraising page and made a $2,000 donation. But Cosenzi felt connected to their story and wanted to do more. She invited Stefan Gadecki to this year’s Tom Cosenzi Driving for the Cure Golf Tournament, an annual event celebrating the life of her father that has raised over $1 million for the Dana-Farber Center for Neuro-Oncolo“Community means being part of something and making gy in Boston in its 13 years. a difference. I know not everyone is in the position we “When my dad got sick was the are, so by being a power of example we can inspire people first time I really needed help and support, and I found so much comfort to give back and be of service.” in the Dana-Farber Cancer Institute,” Gary Rome Cosenzi said. “It was so non-traditional and I felt so much compassion 7-year-old daughter who raised over $300 making bracelets and from every single person there and that is why I feel so strongly lemonade for the cause. about giving back there.” “Seeing the effect on Stefan and his family really connected At this year’s tournament, Cosenzi said she made a spur of the the dots for her,” Cosenzi said. “I really try to set an example for moment decision to donate the proceeds of the auction directly to my kids. I think I am really fortunate in life and believe in staying Gadecki, who is unable to work due to his diagnosis and partial grounded and I want that for my kids as well.” loss of vision. Cosenzi said there were few dry eyes in the room as she handed A market grows in Holyoke over a $12,600 Less than a mile from Gary Rome’s southern Holyoke Hyuncheck to Gadecdai dealership, a 30-acre farm on the Connecticut River is growki, who attended ing calabaza squash, hot peppers, tomatillos, and thyme. The with his parents farm, La Finca, is operated by the Spanish-language organization and sister. The Nuestras Raíces and is at the heart of their mission to support experience was community food sovereignty and to celebrate “agri-culture” by meaningful not growing and selling culturally appropriate Hispanic and Caribonly for Cosenbean foods. zi but for her www.msada.org
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RACE TO THE FINISH SPREADING THE WEALTH and a fiscal conservative,” Ciccolo said. “I grew up dirt poor myEvery Thursday afternoon at Rome’s Hyundai lot, people line self so I know what it is like and believe in reallocating some of up to buy the locally grown veggies and Puerto Rican pastries. your resources. When one person is not free, none of us are free.” “As a Puerto Rican woman, it makes me super proud to know Ciccolo and his wife also support orphanages in China and the farm was made by Hispanics and supports our farmers,” said Haiti. Stephanie Rivera, a receptionist at Rome’s Hyundai dealership. ‘I am the one benefitting’ “Our roots, our families are one of the biggest things as Puerto Rican people, and it is a similar culture here working for Gary.” Association Executive Vice President Robert O’Koniewski Rome’s approach to community outreach and philanthropy encourages dealers to be open-minded with their approach to means getting his 108 employees, who he sees more as family, giving. on board with a culture of giving. With about 40 percent of his “Philanthropy is a way of spreading the wealth, but you do not Holyoke staff coming from the LatinX community, supporting have to be wealthy to contribute to your community,” he said. Nuestras Raíces is a great fit. Ciccolo has hiring practices that offer people a second chance, “It is a really cool concept,” Rome said. “Ask your staff, take a sometimes after a troubled past that can include homelessness or survey and ask what is important to them. Then everyone will be incarceration. more passionate about giving back and on the same page.” “I find that people who you give a second chance to tend to Rome is passionate about the culture he and his staff cultivate, make terrific employees because they feel a sense of responsibiland putting money ity and purpose,” Cicback into the commucolo said. nity. Ciccolo described “Community one such troubled means being part of youth that he hired in something and makhis service department ing a difference,” he for a summer. The said. “I know not evrelationship was so eryone is in the porewarding for Ciccosition we are, so by lo, he decided to pay being a power of exfor the young man’s ample we can inspire schooling to become a people to give back police officer. and be of service.” “We watched him When tragedy struck grow in maturity and “Philanthropy is a way of spreading the wealth, the firefighting comself-confidence,” Cicbut you do not have to be wealthy to contribute munity in Holyoke in colo said. “How do to your community,” July, Rome was there. you put a price on anyRay Ciccolo A 30-year-old firething like that? Really, fighter, Jonathan “Jono” Roberts died suddenly of a heart attack, I am the one benefitting, I am the recipient.” leaving behind a wife and three children. In order to support community charitable giving, O’Koniewski “My father started as a used car salesman, and the way to conreminds dealers that MSADA offers an outreach program that nect with him was to go to work with him,” Rome said. “So I can could double a dealer’s contributions. For a single-store dealer only imagine what it would be like to lose a father so young.” donation MSADA will support back $1,500 and up to $2,000 for For two weeks in August Rome set aside $100 from every car contributions from a dealer group. sold to help support Roberts’s family. The total donation was “Dealers are very giving and supportive people,” O’Koniewski over $10,000. said. “They are always the first people to be called and to donate Veteran auto dealer and former NADA director Ray Ciccolo when an emergency need arises. They want to give back some of said he considers factors like income inequality, race, and gender the success they have earned as business women and men.” discrimination when it comes to his family’s philanthropic founConnolly called Massachusetts dealers altruistic. dation, the Ciccolo Family Foundation. “If you think about it, there is a car dealer in almost every comA few of the organizations the CFF has supported since 1985 munity in the Commonwealth,” said Connolly. “If the communiare the NAACP Boston Branch, Rosie’s Place, the first women’s ty’s been there for you, if we have benefitted from the community shelter in the United States, and the Greater Boston PFLAG, the as a business, which we have, we have a responsibility to turn nation’s largest LGBTQ family and ally nonprofit. around and give back to that community.” “I am a bleeding heart liberal when it comes to social issues t OCTOBER 2021
Massachusetts Auto Dealer www.msada.org
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BELAVIA AD
www.msada.org
Massachusetts Auto Dealer
AUGUST 2021
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NEWS NEWS the NEWSfrom from Around from Around Around the Horn Horn NEWS
NEWS the Horn NEEDHAM
O’Connor & Drew Hosts Annual Dealer Symposium Association members, managers, and other dealership personnel gathered at the Needham Sheraton for O’Connor & Drew’s fifth annual Auto Dealer Symposium. Serving the automotive dealership industry for more than 70 years, O’Connor & Drew firm partners and industry experts shared their knowledge, tips, and advice on operational, tax, IT audit, buy/sell, fixed operations, and legislative information. Michael Hammond (left), principal at OCD Tech, spoke with dealerships on the status of cybersecurity within the industry and how to protect their dealerships from a data breach. Ryan J. McDonell (right) provided a preliminary tax update pertaining to what dealers can expect this upcoming tax season and beyond. Alan Haig (below), president of Haig Partners, discussed the current status of the dealership Buy/Sell Market as well as online tools consumers are now using in the car buying process. John Sheriff, owner of Sheriff 5-Star, provided some real-life examples and advice for fixed operations improvements.
Closing out the program, Association Executive Vice President Robert O’Koniewski (left) provided insight on current legislation on the state and federal levels and how it could impact dealerships. Symposium presentations, slide decks, and videos are available online at www.ocd.com/ads.
OCTOBER 2021
Massachusetts Auto Dealer www.msada.org
MSADA
NEWS from Around the Horn
HAVERHILL
DeLuca Chrysler Kicks-Off Remodel Effort Bill DeLuca Chrysler Dodge Jeep Ram launched a massive renovation project in October.
The $2 million upgrade, undertaken as part of the Jeep Wagoneer and Grand Wagoneer launch, will feature updates to both the exterior and a buildout of the showroom. The project is expected to be complete in 2022. HOLYOKE
Rome Donates to Jono Roberts’s Children Fund The city of Holyoke continues to grieve the loss of fallen firefighter Johnathan “Jono” Roberts. Gary Rome Hyundai presented a $10,200 check to the Jono Roberts’s Children Fund in early October. They were joined by members of Roberts’s family and his firefighter squad. Jono Roberts was a husband, father, brother, and a local firefighter, who passed away in July, at just 30 years old. The fund has been set up for the three kids he left behind. Gary Rome explained how he is remembered throughout the community. “Jono was the life of every party, his charm, his wit, his humor, he brought smiles to everybody that he encountered, he had an infectious love for life and a smile that lit up every room,” said Rome. More about Rome’s charitable efforts can be found in this month’s cover story on page 14. t www.msada.org
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IT COMPLIANCE
Critically Important IT Policies and Procedures for Your Dealership By Scott Spatz Cooperative Systems Have you ever asked the question, “Does my auto dealership have the best IT policies and procedures in place?” Have you ever thought, “Is our staff and technology infrastructure prepared with the right plan and strategy in order to grow and scale?” We promise not to get too technical in talking about policies and procedures. So, before we dive in, let’s break down a few really important points so you can be the hero of ensuring your IT policies are properly set for your success. IT policies and procedures may not be exciting, but they are essential. Policies and procedures refer to the documentation that describes how your auto retail business is run. They are a set of rules or guidelines for your organization and employees to follow so that you are compliant. No one likes being busted by industry regulators for being noncompliant. Even the auto industry has IT standards that you must follow. The bottom line: Policies and procedures help your dealership comply with federal, state, and local laws while bringing clarity to your processes so that your employees are safe and provide value to your customers.
How and why policy and procedure management is important Like we mentioned earlier, every industry has its own set of laws, standards, and best practices. The auto retail indusOCTOBER 2021
“As your business becomes more dependent upon the internet and your DMS computer operations, you need to make sure your auto dealership has the best IT policies and procedures in place.” try is no different. Here are some interesting stats to help drive a sense of urgency around the significance of the policy and procedure process: • 63% of auto dealerships are adding technology tools to help get, and remain, compliant. • 76% of dealerships plan on long-term changes to their IT environment because of implementing policy and procedure processes. • 25% decrease in mishandled sales and service requests because of proper intent-based call/routing permissions. • 31% of auto retailers experienced an increase in car buyer experience because communication policies are properly established. Policy and procedure management for auto dealers is important because of four main reasons. The first reason is because auto dealerships must have a Written Information Security Policy (WISP). This is an overarching documented policy that summarizes all security controls to protect customer and company data. It is shared with any regulatory body, key vendor partners, or service providers that have interest in how you operate your dealership. These policies are things like password policies, encryption policies, document retention policies, and system lockdown processes. The second reason policy management is important is because of the value of incident response planning. Dealerships must have a documented Incident Re-
Massachusetts Auto Dealer www.msada.org
sponse Plan that outlines what to do and how to react when some sort of incident occurs. An incident can be something like a data breach, lost device, or cybersecurity attack. An Incident Response Plan outlines who is responsible for owning this process and helps protect your dealership from further reputation damage, data loss, and identifies how to navigate through it. Backup and continuity planning is the third piece of policy and procedure management that is important to your dealership’s success. Backup and continuity planning helps guide you when your systems go offline in the event of some sort of incident, how to recover from data loss, and how to determine your recovery time. The final part of why policy and procedure management is important is having an annual review process in place for all your policies and procedures. This annual process reviews all policies with your response team, updates them as necessary based on trends, engages a professional services organization to run a penetration test of your network, and distributes updated policies to your employees for them to acknowledge and sign. As your business becomes more dependent upon the internet and your DMS computer operations, you need to make sure your auto dealership has the best IT policies and procedures in place. t Scott Spatz is president of Cooperative Systems. Reach Scott at sspatz@coopsys.
MSADA
LEGAL
Always Take Action on Harassment Claims By Joseph W. Ambash, Jeffrey A. Fritz, and Joshua Nadreau of Fisher Phillips, LLC
New York Governor Andrew Cuomo’s recent resignation has put the issue of sexual harassment back in the spotlight. As disapprovingly as an employer may view sexual (or other illegal) harassment generally, if an employer fails to investigate and take prompt, appropriate remedial action where warranted, such employer faces significant exposure. Indeed, whether—and how—an employer investigates harassment reports sometimes can make or break the case, in the event of an administrative charge or lawsuit. An employer’s action plan has to begin well before it receives a report of any type of employee complaint. It begins with the employer’s policies and procedures. Employers should have a plan, establish protocols, and reduce them to writing. Employers should ensure their handbooks contain clear guidance to all employees as to what their rights and obligations are, and how they can go about addressing issues. And employers should train their employees— and especially their managers—on illegal harassment in the workplace, and how to address it. Your employees need to know (1) your dealership prohibits illegal harassment, (2) what generally constitutes illegal harassment, (3) specific examples of illegal harassment, to provide context, (4) the importance of reporting illegal harassment, (5) how to report it, and (6) your dealership has zero tolerance for retaliation for raising such issues. Your managers additionally need to know how to recognize illegal harassment and the importance of reporting it to the appropriate person in your dealership to investigate. It is imperative that your managers understand they cannot disregard or downplay harassment allegations, regardless of their own beliefs, conclusions, and/or relationships with the parties involved. All harassment claims must be investigated. Indeed, investigating harassment claims can eliminate inappropriate conduct
in the workplace, and reduce the risk of an unfavorable outcome in a lawsuit. Moreover, if the harasser is a non-supervisory employee, a thorough investigation, followed by an appropriate remedy, can be a strong defense to a claim. When an employee comes forward with a claim of harassment, the supervisor or manager to whom the employee shared the information should thank him or her for doing so, and then refer the matter immediately to the human resources professional in the dealership, who should conduct the investigation. If you permit an inexperienced supervisor or the employee’s own supervisor to conduct the investigation, you risk errors, mistakes, and the inconsistent application of your policies and procedures. Employees who report harassment may ask the company not to investigate their claims, saying they only raised them to make management aware, but did not want to get anyone in trouble. Dealers should always tell such employees they will keep their complaints as confidential as the circumstances allow, but that, as employers, they have a duty to investigate, and cannot guarantee confidentiality. No one-size-fits-all investigation exists to address all claims. But almost all investigations have the same starting point: the initial complaint itself, which will best inform next steps. The investigator, a second member of management, and the reporting employee should meet quickly after the initial report. The investigator should ask the reporting employee what happened. Who? What? Where? When? Why? How? The investigator also should ask for the identity of any individuals who witnessed the events in question. Finally, the investigator should document the employee’s answers and version of events in detailed notes which include the date of any meetings and the individuals present. Immediately after that initial meeting, the investigator should consider whether any emergency interim steps are necessary www.msada.org
or warranted. Did the employee complain about threats of physical violence? Does a potentially-imminent danger to anyone’s health, safety, or property exist? If so, placing the alleged harasser on suspension or administrative leave—paid or unpaid— pending the employer’s investigation may be appropriate. Document these steps as well. Next, the investigator should consider what further investigation is appropriate and develop a plan. Do documents exist that are relevant to the employee’s claim? Did the employee identify any witnesses? The investigator should interview them, and assure them, as well, that the company does not tolerate retaliation for their participation. The investigation reasonably should follow the evidence it uncovers. And the investigator should document each step. The investigation should include a meeting with the accused, where the company can present the facts gathered to date and ask the accused to explain her or himself. Once the investigator has developed enough evidence reasonably necessary to make a determination as to what happened, the investigator and senior dealership decision-makers should review it, make credibility determinations as necessary, consider the previous behavior of the individuals involved, and make logical conclusions about their behavior based on the totality of the circumstances. Ultimately, you need to determine whether, in your reasonable judgment, the claim has merit. If so, you must next determine an appropriate remedy, which should be commensurate with the nature of the misconduct and consistent with prior comparable situations. Documentation here is key. Make sure you document each step of your investigation (including your rationale for taking, or not taking, disciplinary action. Make sure each step of your investigation complies with your policies, procedures, and protocols. t
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ACCOUNTING
The Three ‘I’s: Investments, Inflation, Intel Mark Dow
O’Connor & Drew, P.C
If I only had excess, after-tax profits I would make certain investments in my business that would pay big dividends down the road. Guess what? As we near the end of 2021, most dealers have earned those excess profits! Where should these investments be made?
Processes
Throwing more people at a flawed business process does not solve the underlying problem. The first step is to analyze the key processes in your dealership, fix any design flaws, then train your people and determine how to enforce “respecting” the process. Key processes to consider: • Lead generation, customer contact, tracking of leads and follow-through. • Management of your sales force. • Vehicle service assessment and review with customer. • Service discounting. • Parts matrix pricing. • Shared responsibility by business office/department managers for collection of receivables. • Periodic analysis and review of expenses.
People
Having the right people in the right seats on the bus goes a long way toward being successful. The competition for people is fierce and will remain that way well into the future. Labor costs are on the rise and current wage increases will stick. The investment through competitive compensation, continuous training, and mentoring of your best employees is more important than ever. OCTOBER 2021
Technology Every day the percentage of business transacted electronically increases. Do you have the right technology in place to capture the consumer’s attention and satisfy their shopping experience? How mobile-friendly is your website? Having a strong internet presence and mastering search engine optimization (SEO) are not a choice in today’s retail environment.
Inflation
Rising prices can be a sign of a healthy growing economy -- it means there is demand. An economy’s strongest growth generally comes during times of moderate inflation. Nevertheless, year over year price gains can be harmful and are often tempered by tinkering from the Federal Reserve. Currently, all participants in the economy have cash to burn, from private industry and public conglomerates to the average consumer, government entities, and non-profits. All on the heels of an economic disaster! This largesse will likely continue, as the current political agenda will add purchasing power to most people and consumption rates for the wealthy are not impacted dramatically by changes in tax obligations. Due to the current shortage of labor and goods, the temporary mismatch of supply and demand is crossing into the long-term. Recently, Social Security announced the largest annual increase in benefits, 5.9%, in forty years. Inflation “inertia” is factoring into negotiations on longer-term contracts, which in itself locks in inflation for near term periods. Central bankers try to “talk it down” in order to temper future inflation expectations. (Maybe that is why the official statistics on inflation always seem low to the average consumer.) The danger is that “more money” simply pushes up prices. The “Economy” is worth a lot more, but for the same number of goods.
Massachusetts Auto Dealer www.msada.org
Inflation was so bad in Germany that money became worthless. Money was used as wallpaper and to make kites. Towards the end of 1923, so much money was needed, people had to carry it about in wheelbarrows. There were stories of people stealing the wheelbarrow, but leaving the money. It will not come to that. However, if the current combination of “easy money” and “greater demand than supply” continue, inflation will remain above average and an increase in interest rates will be part of the cure.
‘INTEL’
Intel is one of the few semi-conductor companies that actually makes their own chips. They have committed $20 billion to building two new chip plants in Arizona. It seems it cannot happen fast enough. The truth is that the shortage of “chips” and other sourced material is not abating anytime soon. We are all learning how complicated large-scale manufacturing and distribution can be. What we once took for granted is now parked out at sea. The struggle started when the “production” wheel essentially stopped 18 months ago. The restart is uneven, as companies need labor to source the goods, make the goods, package the goods, and distribute the goods. Once the goods are at their destination, they need to be offloaded, stocked in, and delivered to the end-user. The bottom line is that the current state of the supply chain is unlikely to change until well into 2022. The auto dealership business is primed to finish 2021 on a strong note, and 2022 looks promising. Now seems like a oncein-a-lifetime opportunity to take advantage of your hard work and good fortune. t Mark Dow works extensively with auto dealer entities and is primarily focused on commercial for-profit and highnet-worth clients. He can be reached at mdow@ocd.com.
MSADA
BANKING
Cash Remains King - Now What? Christopher Peck Santander Bank, N.A.
Never have we witnessed a time when the typical franchised automotive dealership has been this profitable, this well capitalized, and this liquid. Thinking back to when COVID-19 was taking hold, it seems nobody predicted these current market conditions and end results. We bankers were concerned about this industry’s immediate future and how much it could impact the average dealership’s bottom line. Obviously that narrative was turned on its head. Previously, we have written about some lessons to be taken from this historic chapter, but we are now regularly being asked for ideas on how to deploy excess liquidity. Based on our 25+ years in this industry, we would recommend that you first determine the dollar amount of your company’s excess liquidity. Then have it confirmed by your CPA just to be certain. That dollar amount will drive your choices and scope, and there is nothing wrong with adopting multiple strategies. Here are some possible choices: • Invest in your staff. Today’s conditions have also led to high job vacancies and significant employee retention challenges. Perhaps take some cues from “Best Place to Work” employers that are readily found on any internet search and invest in some of these ideas. Mentioned frequently is coaching, education, charitable missions, improving healthcare, employee empowerment, and flexibility. • Invest in your overall dealership operations to improve/expand your business. This would follow a full review of your current operations that identifies your strengths and challenges – and invest accordingly. • Invest in your dealership facility (if needed). This may improve the client experience and it could augment your staff’s perception of your dealership, increase
the property value and potentially provide some tax benefits (depending on how it is paid for). • Set up a corporate investment account, after consulting with a registered/licensed investment advisor. Beyond setting up a “rainy day” fund, these investments could ultimately improve your bottom line and the dealership’s overall value while providing a better return than (typical) deposit accounts. • Invest in technology, particularly the development and implementation of tools to streamline the buying process and allow for online purchasing – if you have not already. This is the way of the future. This strategy should include a review of your company’s mobile presence. • Invest in your succession plan. Now may be a great time to sit down with your experts and strategize your formal exit plan and/or how to pass the company to the next generation. “Key person” life insurance may also be costly (depending on the assets covered) but can provide coverage the next generation can use to carry to the business forward. • Review the interest rates of your company’s long-term debt and pre-pay the most expensive debt (assuming there would be no penalties for pre-payment). Improving your company’s capital ratio can be beneficial on several fronts. Some more long-term and perhaps “riskier” choices: • Expand/Invest specifically in the dealership’s fixed operations as this sales climate is likely to change and a dealership’s service operation will become paramount (again). Facility upgrades come to mind first (as already mentioned), but now may be a good time to review the size of the dealership’s service/loaner fleet or determine if a shuttle service could add value to your clients’ experience, or even adding an “at-home” pick-up and dropoff option for “major” service work. By example, we know of a New England dealership that sends drivers to clients’ www.msada.org
homes to retrieve cars to be serviced (leaving a loaner behind). They then return the car once the service is complete (and retrieve the loaner). This dealership routinely scores among the best in client satisfaction. • Invest in a new business/revenue stream that complements what you already do and know. Perhaps an in-house detailing center, a car wash, an automotive insurance agency, or a “quick lane” type service. Again, these opportunities may come up during your review of your current operations and should follow the advice of your advisors on these opportunities. Obviously, any investment should be weighed against its eventual effect on your operating expense structure. Thus, we absolutely recommend talking with your trusted independent experts for major investments, so you fully understand the immediate and long-term benefits and costs related to major investments. Admittedly, we are not experts on how to run a dealership, and there are likely more (and better) ideas than these. But with decades of observing dealership operations, we have excellent, first-hand experience of practices from some phenomenal performers. NONE stand still – ever. If liquidity is a smaller concern, what is your next step? Looking at this from a different angle, a few large public dealership groups recently agreed to purchase smaller groups for handsome multiples. And some of the astounding sale prices do not account for any other non-monetary concessions the public groups may have agreed upon to win the respective bidding. What is typical of selling dealerships is their investment in current technology and image-compliant dealership facilities – and perhaps these transactions are a good, current measuring stick for this industry. t Christopher Peck is director of Business Development, Dealer Commercial Services at Santander Bank, N.A. He can be reached at christopher.peck@santander.us.
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AIADA Brief
MSADA MSADA
Dealers Do Good, Even as Politicians Do Their Worst Our industry makes difference that even legislators cannot ignore.
By Cody Lusk AIADA President & CEO
This month, a federal budget provision that would offer consumers additional tax credits on electric vehicles assembled in union-represented plants continues to wind its way through Congress. Even as AIADA and our manufacturer partners in Washington, D.C., push back against this fundamentally un-American policy, it has many people asking: What jobs matter in America today? The answer, from the White House and Democrats in Congress, has been pretty clear. Union jobs matter. Union workers deserve protection and government support. And every other working American can kick rocks. Instead of kicking rocks, AIADA and our thousands of dealer members have kicked our campaign to kill this provision into overdrive. Using digital ads, opeds, and dealer outreach, we are putting the pressure on legislators to acknowledge the positive impact our industry has in their districts. We know that 131,000 international nameplate manufacturing jobs in America matter. We know that 542,000 international nameplate dealership jobs matter. Our combined payrolls – worth $46.9 billion – matter a great deal. Negotiations on this provision are happening now, behind closed doors. Friends
OCTOBER 2021
of the UAW are anxious to include this language in the budget reconciliation bill. They feel confident it will be overshadowed by more contentious issues and that they can quietly slip it through both the House and Senate. It is worth noting, that when this legislation moves, it will move fast. Nancy Pelosi and Chuck Schumer know better than to let bills hang around for debate and scrutiny. By the time we see the final budget reconciliation bill containing this union handout, it will be too late. It is absolutely crucial that dealers act now to kill this policy, before it can be added to final budget language. None of us want to look back a year from now
setts’ own Gary Rome Hyundai. Like so many dealerships, they quietly and continually give back to their community, supporting everything from schools, to hospitals, to animal shelters. This fall, Gary Rome Hyundai raised money for a local fallen firefighter’s family. It was a poignant and significant moment of goodness that didn’t get much notice in a 24 hour new cycle that typically focuses on big and bad headlines. At AIADA we want to break that cycle and focus on the all good happening in our industry today. You can share your dealerships’ good news by emailing us directly at PublicAndIndustryRelations@aiada.org. We want to amplify
“Using digital ads, op-eds, and dealer outreach, we are putting the pressure on legislators to acknowledge the positive impact our industry has in their districts.” and realize that we missed a critical opportunity to be competitive in the growing EV market. Now is the time to raise your voice and fight back. Visit AIADA. org/EV for all the tools you need to take action and join the growing drumbeat against union tax credits. Part of that effort includes refocusing lawmakers onto what REALLY matters. With that in mind, AIADA has continued to promote our Dealers Do Good campaign. The campaign highlights the charitable efforts of our members. One of those recent members was Massachu-
Massachusetts Auto Dealer www.msada.org
your stories, and make sure they’re heard on Capitol Hill. Lawmakers need to hear from dealers like you. They need to know that your business matters and your employees matter. They also need to know that you are watching how they vote. Otherwise, they will continue to use your tax dollars to undermine your bottom line. Until then, dealers will continue to do good. Because your employees, your customers, and your scruples would not allow anything less. t
MSADA
TRUCK CORNER
Have You Signed Up for the ATD Show? By Steve Bassett
Do not miss the most important industry event of 2022
The ATD Show has been on my calendar since early spring. I would be remiss if I did not remind dealers to register soon, because 2022 will be here Chairman, American before you know it. In fact, early-bird registration Truck Dealers ends November 12, just less than a month away! Steve is the dealer Our signature event takes place Thursday, March principal of General 10, through Sunday, March 13, with a restructured Truck Sales in Muncie, Indiana. He also has loschedule that is tailored to our truck dealer memcations in Indianapolis, bers. All events will be conveniently located at the I ndiana , and T oledo , Encore Las Vegas. O hio . H e sells V olvo , Isuzu, H ino, and M ack ATD is excited to unveil its new program in just trucks. five months. Our schedule has been streamlined so that everyone can take full advantage of the Show’s resources from the first day to the last. You have told us what you care about. We have listened to what affected your truck dealerships through a global pandemic. So, our program will highlight three specific “After a tumultuous areas based on your needs: two years, we are industry, government, and technology. If you want to eager to host a be stronger and better prefor the road ahead, celebratory event pared you cannot miss a single that provides the day of our program. After a tumultuous two most anticipated years, we are eager to host reunion for the a celebratory event that provides the most anticicommercial truck pated reunion for the commercial truck industry. I am industry.” personally inviting you to the welcome reception at the new ATD Connection Hub on Thursday, March 10, from 5pm to 7pm. The Connection Hub is exclusive, catering to our attendees in a relaxed setting so you have a chance to network with industry leaders and engage with sponsor partners. The Connection Hub will also serve as the backdrop for ATD’s daily events and happy hours. Following the reception, attendees are also invited to
attend the NADA Show Welcome Kickoff Reception at the brand-new Allegiant Stadium, featuring the Grammy Award-winning band Train. ATD is also excited to bring you a lineup of noteworthy guests who will speak to the unique challenges of the commercial truck industry. I am pleased to announce that Mathias Carlbaum, Navistar’s recently appointed CEO and president, will speak at our ATD General Session on Friday, March 11. We will also hear from the voice of the customer and technology speakers at our Saturday sessions on March 12. And I will be pleased to pass the torch to Scott McCandless, our Incoming ATD Chairman from McCandless Truck Center with locations in Colorado, Wyoming, and Nevada. The keynote speakers for the NADA Show have also been announced. Do not miss seeing these high-profile names live and in-person, including former White House Press Secretary Dana Perino; pro football Hall of Famer and prime time host Michael Strahan; and retired U.S. army staff sergeant and inspirational speaker Travis Mills. And of course, the ATD Show will offer the fivestar programs you have come to love and expect, including comprehensive education, tailored networking opportunities, and franchise meetings with OEM executives. The theme of our 2022 educational workshops is “Future Driven.” But the future is already here, so I urge you to sign up for a session by November when the full workshop schedule is released. ATD experts along with the brightest educators in our industry will teach us how to hire the best personnel, grow existing talent, and meet consumer demands in a rapidly changing business world. This will be our latest and greatest Show experience which you have never seen before, set against the backdrop of the Entertainment Capital of the World. So set your reminders and register today for ATD Show 2022. t
www.msada.org
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NADA Update
By Scott Dube
Making An Impact Scott Dube, President of Bill Dube Hyundai and MSADA Immediate Past President, represents NADA’s Massachusetts members on the NADA Board of Directors. He can be reached at scott@dubecars.com. NADA Show 2022, taking place in Las Vegas from March 10 to March 13, will open with an exciting Welcome Kickoff Reception at the brand-new Allegiant Stadium, home of the NFL’s Las Vegas Raiders. The Welcome Kickoff Reception on Thursday, March 10, will feature plenty of entertainment, highlighted by the Grammy Award-winning band Train. This exclusive event—designed to celebrate the return of the in-person NADA Show— is for NADA and ATD members, international affiliates and guests. Attendees will enjoy a bevy of gourmet food and topshelf beverages and have the opportunity to re-connect and network with their peers. Tickets for the Welcome Kickoff Reception are included as part of registration for NADA dealers, managers, and their registered guests. Shuttle buses will be provided to and from Allegiant Stadium and NADA’s official hotels. Online registration and hotel selection for NADA Show 2022 is open now! NADA members who register by Friday, November 12, will receive a $100 discount. Hotel availability is on a first-come, first-served basis. The best hotel selections fill up quickly, so register today to secure your top hotel selection. Please note that you must be registered for NADA Show to reserve a hotel room. Mark your calendars to join the biggest and most exciting NADA Show yet. See you there! For more information or to register for NADA Show, visit nadashow.org.
NADA Issues Third Quarter Analysis NADA issued its analysis of U.S. auto sales and the economy for the third quarter of 2021 and provided insights into auto sales for the remainder of the year. “The biggest story this year in the auto industry has been the semiconductor microchip shortage, which has severely impacted vehicle production throughout the globe,” said NADA chief economist Patrick Manzi. “Supply chain disruptions have limited new vehicle production which has translated into less vehicle inventory on dealer lots and restricted new vehicle sales.” OCTOBER 2021
At the end of the third quarter, new vehicle inventory in the U.S. was just under a million units or approximately 24 days of supply—a 65% decrease from the start of 2021. In contrast, at the end of the third quarter in 2020, inventory was at 2.7 million units or a 50-day supply. Suppressed inventory levels are unlikely to change significantly before the end of the year and will continue into 2022. Reduced inventory, while not a limiting factor earlier in the year, has slowed new vehicle sales in recent months. The September SAAR fell to 12.2 million units, only 100,000 units above the SAAR observed in May of 2020 when the U.S. remained under COVID lockdowns. In the third quarter, the seasonally adjusted annual rate (SAAR) of sales declined to 13.3 million units, down significantly from the second quarter 2021 SAAR of 17.0 million units. After sales peaked in April 2021 at a SAAR of 18.3 million units, one of the highest monthly SAAR rates this century, new vehicle sales declined each month in the third quarter as the microchip shortage continued to impact new vehicle production and inventory levels. While sales were down for new vehicles as a whole due to inventory, battery electric vehicle (BEV) sales totaled 300,635 through the first nine months of the year, an increase of 91.3% compared to the same time in 2020. BEVs still represent a small number of the vehicles sold at franchised dealers and represent 2.6% of all new vehicles sold year to date in 2021, up from 1.5% compared to same time period in 2020. Franchised auto dealers hit a milestone related to BEV sales: from 2012 to the end of the third quarter 2021, franchised dealerships have sold 501,507 new BEVs. NADA anticipates franchised dealers will capture a greater share of BEV sales as new electric vehicle products come to market. Given supply limitations in the auto industry, NADA has reduced its new light-vehicle sales forecast from 16.5 million to 15.2 million units. From a pricing standpoint, the average new vehicle transaction price reached $42,921 at the end of the third quarter, according to J.D. Power, while the average monthly payment for a new vehicle finance contract reached $655. Manufacturers have had to discount new vehicles less given this tight market. Average incentive spending per unit fell to $1,793 at the end of September, a record low. Tight new vehicle supplies coupled with lower discounts have been the major drivers of increasing new vehicle transaction prices. However, high trade-in values and low interest rates have helped consumers mitigate these increasing vehicle prices. With limited new vehicle inventory available, many consumers have turned to the used market for their vehicle needs, which has pushed wholesale auction and retail prices to records in the summer. According to the Manheim Used Ve-
Massachusetts Auto Dealer www.msada.org
MSADA defray costs before insurance payouts. hicle Index, used vehicle wholesale prices hit a new record Funds were presented to employees from the NADA high at the end of the third quarter 2021, up 27% compared to Foundation Emergency Relief Fund, which provides auto the same period in 2020. At the end of September 2021, averand truck dealership employees who have been impacted by age used vehicle transaction prices at franchised dealerships natural disasters with grants of up to $1,500. were up 20.1% compared to September 2020, according to Walser and Stanton, along with former ATD Chairwoman J.D. Power. Used vehicle wholesale and retail prices will reJodie Teuton and Louisiana Auto Dealers Association Presimain elevated until new vehicle inventory levels increase and dent Will Green, visited Lamarque Motors in Kenner, Loumove closer to pre-pandemic levels. isiana, where they presented checks totaling $28,500 to 34 At the macro level, Real GDP in 2021 is expected to grow dealership employees. Later in the afternoon, they presented by 5 to 6% on an annualized basis, and approximately 5% in checks to 12 employees at Supreme Chevrolet in Gonzales, 2022. Louisiana, part of the Supreme Automotive Group. In total, In the labor market, 194,000 jobs were added to the econ23 Supreme Automotive Group employees received Emeromy in September 2021; well below expectations, but estigency Relief Fund grants. mates for previous months were adjusted, indicating more “This storm has devastated the Bayou region more than jobs were added than initially estimated. The number of unmany realize,” said Teuton. “South Louisiana needs help, and employed persons per job opening has fallen from 5.0 at the I know that dealer families truly appreciate support from the height of the pandemic in April 2020 to 0.8 unemployed perNADA Foundation and the sons per job opening at the humanity it represents.” end of July 2021. As of the “It was amazing to see end of July 2021, there were “Since the Emergency Relief the resiliency of dealership a series high of 10.9 million Fund began in 1992, it has employees who are workjob openings across the U.S.; ing to pick up the pieces however, the U.S. labor marprovided 12,000 dealership and rebuild their communiket still employs 5.0 million employees with grants ties,” said Walser. “I am so fewer people than before the thankful that the Emergency COVID pandemic. totaling nearly $9 million.” Relief Fund is able to offer At franchised new-car assistance to every employdealerships, employment has ee who qualifies. Without our help, dealership families may remained steady at 1.08 million workers. Like many other not get the help they need.” industries, some dealerships have struggled to find workers As a result of Hurricane Ida, the Emergency Relief Fund to fill roles due to strong labor demand nationwide. has distributed $170,000 to 190 dealership families in LouisiRelated to interest rates, NADA sees no move by the Fedana and is working to process an additional 400 applications eral Reserve in 2021 through 2023 as the economy continues for assistance. to recover from the coronavirus pandemic; however, inflation “For more than a decade, the Emergency Relief Fund has remains a point of conversation for economists. The Federal helped dealership employees and their families weather all Reserve has signaled that they will tolerate periods of above kinds of natural disasters and tragedies, from Hurricane Katarget inflation, slightly above 2%, as the economy recovers trina and Harvey, to wildfires, tornadoes and floods,” said from the global health crisis. NADA anticipates that inflation NADA Foundation Chairwoman Annette Sykora, who is a will top 4% for all of 2021. Ford dealer in West Texas and a former NADA chairwom“While COVID is still in the driver’s seat, the U.S. econan. “Since the Emergency Relief Fund began in 1992, it has omy continues to show signs of recovery,” said Manzi. “The provided 12,000 dealership employees with grants totaling biggest obstacle for the auto industry moving into the fourth nearly $9 million.” quarter and for 2022 will be rectifying supply chain disrupThanks to the generous support of dealers and industry tions to restore new vehicle production and sales.” partners, the Emergency Relief Fund is able to provide fiNADA Offers Ida Relief Funds to Dealership nancial assistance to dealership employees affected by natural disasters. Please consider making a donation to the Employees Emergency Relief Fund to help our dealership families. The NADA Chairman Paul Walser and NADA President and NADA Foundation is a 501(c)3 nonprofit, and donations to CEO Mike Stanton were recently on the ground in Louisithe Emergency Relief Fund are tax deductible. Go to www. ana visiting two dealerships with employees impacted by nadafoundation.org to donate. Hurricane Ida. During their visit, NADA’s leaders presented t dealership employees with checks to help with damages and www.msada.org
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