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October 2023 • Vol. 36 No. 8
The official publication of the Massachusetts State Automobile Dealers Association, Inc
2023 MSADA Annual Meeting NADA Washington D.C. Conference 2023
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 Auto Dealer MAgazine Robert O’Koniewski, Esq. Executive Editor MSADA One McKinley Square Sixth Floor Boston, MA 02109 Subscriptions provided annually to Massachusetts member dealers. All address changes should be submitted to MSADA by e-mail: jfabrizio@msada.org Auto Dealer is published by the Massachusetts State Automobile Dealers Association, Inc. to provide information about the Bay State auto retail industry and news of MSADA and its membership.
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The official publication of the Massachusetts State Automobile Dealers Association, Inc
Table of Contents
4 From the President: Camaraderie and Advocacy 5 ASSOCIATE MEMBERS DIRECTORY 6 THE ROUNDUP: Dealers Convene for Annual Meeting 11 LEGISLATIVE SCORECARD 12 AUTO OUTLOOK 16 Cover Story: MSADA Annual Meeting; NADA Washington Conference
24 NEWS from Around the Horn 28 Accounting: Post-COVID
Challenges to Dealership Profitability
29 Accounting: Profitability Through Expense Control 30 DEALER OPS: Despite UAW Strike, U.S. Auto Sales Pace in October Expected to Increase from September
32 LEGAL: Effective Estate and Succession Planning for Auto Dealers; NY Dealers Challenge Ford’s Model e Program
34 LEGAL: Labor Board Gears Up for Battle over Employer Handbooks 36 NADA Market Beat 38 AIADA: Thankful and Thinking Ahead 39 TRUCK CORNER: ATD Maintains Efforts for Truck Dealers 40 nada update: Washington Conference Concludes as Prep Continues for 2024 Show
Join us on X at @MassAutoDealers www.msada.org
Massachusetts Auto Dealer
OCTOBER 2023
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From the President
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Camaraderie and Advocacy By Jeb Balise, MSADA President Running a dealership is more than just one full-time job, requiring a team of dedicated people to make such an operation work every day. So, any time we can get involved with activities and events outside of our dealerships, it becomes a special commitment on our dealers and their staffs’ part. I, therefore, want to thank all of our dealers who took the time out of your busy schedules to attend this year’s MSADA Annual Meeting on October 13 at the Encore Hotel and Casino in Everett. And for those who brought along a GM or another key manager, thank you doubly for that commitment. I also extend my thanks on behalf of the Association to our Annual Meeting sponsors, who we have also recognized in this issue. From the feedback I have heard, you enjoyed a thought-provoking and engaging program with your fellow dealers with the support of our associate members as well. And as always, my sincere thanks to Executive Vice President Robert O’Koniewski and Jean Fabrizio on our Association team who put together another fantastic event. We heard a lot of important information, ideas, and opinions in one of the most luxurious spots in the area. Those moments when we are all in the same room are too few, and it is a crucial reminder that, while we compete with each other day in and day out, we need to present a united front. Each of us strive to succeed in the face of challenges well out of our control – a government pushing onerous regulations, economic policies designed to drive up businesses’ expenses, troubling world hostilities now in two regions. None of this is designed to help the business community and our customers. There are drastic changes coming down the pike for dealers across the Commonwealth and the entire country. Our continued education on these issues will ensure we are empowered to advocate for positions that make our line of business possible for future generations. To be able to confront such challenges, it is always important to engage our elected politicians and regulatory parties at all levels — state, federal, municipal. To that end, I want to thank the dealers who traveled with me in mid-September to attend NADA’s annual Washington Conference. Our dealer body owes its gratitude to MSADA Immediate Past President Chris Connolly of Herb Connolly Chevrolet, NADA Director Scott Dube of McGovern Hyundai Rt. 93, and Next Gen dealers Chad Bouchard of the Ron Bouchard Auto Stores and Ruddy Brito of the Mastria Auto Group. Whether meeting directly with members of our Congressional delegation or their staff, we need to continually provide the dealer side of every issue that can impact us. Without our input, politicians would be free to decide matters unaware of our perspective, which is never a good thing. If you want to be part of our team next year as we travel to D.C., keep the September Washington Conference in mind. We take all comers. This edition of Massachusetts Auto Dealer offers a glimpse at the two events, and I hope you will review it to ensure you are up to speed on where our industry is headed. I ask that you continue to stay up to date on what your Association is up to. If we team up on issues our industry faces as readily and ably as we compete with each other in the marketplace, our prospects remain strong. t OCTOBER 2023
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, Bill DeLuca Family of Dealerships Paul Bertoli, Priority ChryslerJeep Dodge Ram
Franklin County [Open]
Hampden County
Jeb Balise, Balise Auto Group
Hampshire County
Bryan Burke, Burke Chevrolet
Middlesex County
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
Chris Connolly, Jr., Herb Connolly Chevrolet
NADA Director
Scott Dube, McGovern Hyundai Rt.93
Officers
President, Jeb Balise Vice President, Steve Sewell Treasurer, Jack Madden, Jr. Clerk, Charles Tufankjian
Associate Members MSADA A ssociate M ember D irectory ACV Auctions Steve Sirko (856) 381-3914 ADESA Jack Neshe (508) 626-7000 Albin, Randall & Bennett Barton D. Haag (207) 772-1981 Ally Financial Maryanne Recupero (617) 997-9574 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 BCI Financial Corp. Timothy Rourke (203) 439-9400 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 Sarah Decatur Judge (617) 345-3211 CDK Global Rob Steele (508) 564-1346 Chase Auto Ken Miller (508) 902-8908 Clifton Larson Allen Rick Parmelee (860) 982-9307 ComplyNet Adam Crowell (614) 634-8843 Cooperative Systems Scott Spatz (860) 250-4965 Cox Automotive Ernest Lattimer (516) 547-2242 Creative Resources Group Charlie Rasak (508) 726-7544 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 Downey & Company Paul McGovern (781) 849-3100
DP Sales Distributors Andrew Prussack {631) 842-7549 Driving Dealer Performance Kimberly Guerin (978) 760-0322 Eastern Bank David Sawyer (617) 620-3484 EasyCare New England Greg Gomer (617) 967-0303 Electric Supply Center Jennifer Williams (781) 265-4272 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 Joe Ambash (617) 532-9320 Jeff Fritz (617) 532-9325 Josh Nadreau (617) 532-9323 GW Marketing Services Gordon Wisbach (857) 404-0226 Hilb Group James Pietro (508) 791-5566 Huntington National Bank Michael Ham (740) 815-5085 JMA Group Chris “KC” Hwang (954) 415-6961 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 LoJack by Spireon Ashvir Toor and Robin Dukes (800) 557-1449 LotLinx Giovanna Scognemiglio (310) 526-1463 M & T Credit Corp. John Federici (508) 699-3576 Management Developers, Inc. Dale Boch (617) 312-2100 McWalter Volunteer Benefits Group Shawn Allen (617) 483-0359 Merchant Advocate, LLC Dan Giordano (973) 897-2778 Mintz Levin Kurt Steinkrauss (617) 542-6000
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Murtha Cullina Thomas Vangel (617) 457-4000 Nancy Phillips Associates, Inc. Nancy Phillips (603) 658-0004 NEAD Insurance Trust Charles Muise (781) 706-6944 Northeast Dealer Services Johna Cutlip (401) 243-7331 OCD Tech Michael Hammond (844) 623-8324 O’Connor & Drew, P.C. + Withum 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 Pullman & Comley LLC James F. Martin, Esq. (413) 314-6160 Resources Management Group J. Gregory Hoffman (800) 761-4546 Reynolds & Reynolds Austin Ziske (802) 505-0016 Rinn Advisors John Corcoran (617) 480-6693 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 Shepherd & Goldstein CPA Ron Masiello (508) 757-3311 Southern Auto Auction Joe Derohanian (860) 292-7500 Sprague Energy Robert Savary (603) 430-7254 The Towne Law Firm P.C. James T. Towne, Jr. (518) 452-1800 TrueCar Pat Watson (803) 360-6094 Truist Andrew Carmer (401) 409-9467 US Bank Vincent Gaglia (716) 649-0581 Wallbox USA, Inc. Sean Ugrin (720) 220-1711 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
Dealers Convene for Annual Meeting By Robert O’Koniewski, Esq. MSADA Executive Vice President
rokoniewski@msada.org Follow us on X (formerly Twitter) • @MassAutoDealers Each year probably the most important event for your Association is our Annual Meeting of the Members. At that time, our member dealers and associate members convene as a group and set aside their competitive spirits for a few hours. We do this to listen to a roster of interesting speakers offering varied perspectives on our industry and the current political atmosphere. We also enjoy the camaraderie of our fellow businessmen and women facing the shared challenges today’s economic and political climates present to us. For this one event, we all can truly say we are united as a body to promote the franchised auto dealer system. On Friday, October 13, boldly setting aside any trace of friggatriskaidekaphobia, your Association convened its Annual Meeting at the Encore Boston Harbor Hotel and Casino in Everett – a fantastic venue that matches the quality and allure of its sister facility in Las Vegas. This year we had a successful turnout of members, and attendees heard from a diverse group of speakers, including: • Your MSADA President, Jeb Balise; • Incoming NADA Chairman Gary Gilchrist of Gilchrist Chevrolet Buick GMC in Washington state and Massachusetts NADA Director Scott Dube; • Glenn Mercer, our featured speaker, who spoke on “The Five Horsemen of the Carpocalypse”; • Mark Strand, Senior Director, Economic and Industry Insights, at Cox Automotive, provided an economic outlook for the short- and long-term situations; • The Registrar of Motor Vehicles, Colleen Ogilvie, provided an update on current happenings at the RMV and answered questions from dealer attendees regarding various matters; OCTOBER 2023
Massachusetts Auto Dealer www.msada.org
• Joel Levin, Executive Director, Plug In America, with whom MSADA has a newly executed endorsement agreement for EV sales training activities; • Don Giordano, Business Development, Merchant Advocate, with whom MSADA has a newly executed endorsement agreement for assisting dealers address credit card costs and fees; • Robbie Harriman, OCD Tech, presented on “Dealership Security: State of the Industry and Cybersecurity”; • Attorney Tom Vangel, a partner at Murtha Cullina, spoke on “Recent Franchise Law Developments Impacting Massachusetts Dealers”; and • I gave a government affairs report on several legislative and regulatory matters dealers should be aware of for the end of 2023 and heading into 2024. Following the meeting, attendees adjourned to our cocktail reception sponsored by Murtha Cullina to refresh and rejuvenate before hitting the Encore’s restaurants and gaming tables. We cannot have such successful events without the strong support of our sponsors. We owe a huge “thank you” to this year’s event sponsors: • ACV Auctions – Bronze Sponsor • Albin, Randall & Bennett – Bronze Sponsor • Armatus Dealer Uplift – Bronze Sponsor • Bank of America – Gold Sponsor • Burns & Levinson – Bronze Sponsor • Cooperative Systems – Bronze Sponsor • Cox Automotive – Gold Sponsor • CVR – Bronze Sponsor • Downey & Company – Welcome Reception Sponsor • GW Marketing Services – Welcome Gift Sponsor
MSADA • McWalter Volunteer Benefits Group – Break Station Sponsor • Murtha Cullina LLP – Cocktail Reception Sponsor • OCD Tech – Bronze Sponsor • Santander – Bronze Sponsor • TrueCar – Platinum Sponsor • Wells Fargo Auto – Bronze Sponsor • Withum/O’Connor & Drew – Gold Sponsor • Zurich – Gold Sponsor Check out more from our annual meeting on page 16.
Dealers Hit DC for NADA Washington Conference The National Automobile Dealers Association rang the bell once again for 2023 and asked its member dealers to hit our Nation’s capital in mid-September for its 48th version of its annual Washington Conference. For those who attended, there was no lack of issues, seemingly endless speeches, or attendee camaraderie. Every time we travel to our Nation’s capital for our annual NADA confab, it never ceases to amaze just how insular their world is in the (202) area code. There is surely no place on Earth like it. That is why our visits with our elected officials are so important. They need to hear from their local businessmen and women – our member dealers – on a continual basis to fully grasp our importance to the local, state, and national economies. Putting aside the cynicism and skepticism about the ability of getting anything done positively for our nation, when in DC it is always important for dealers to remember why they are there and to stay in their own lane regarding those issues important to our industry. We have been successful over the years by avoiding the very fights everyone else seems to want to jump into, regardless of the relevancy to their own industries. When in DC, we step gingerly into the sandbox others use as a WWF smack down pit. Dealers from across the country use the annual Washington Conference to meet with their Senators and Representatives to
discuss various legislative and regulatory issues affecting dealership operations. This is also a chance for dealers to see their legislators in the halls of power where they conduct their business, in contrast to the usual district functions like chamber of commerce rubber-chicken luncheons, holiday parades, and ribbon cuttings. NADA, as part of the festivities, in addition to policy briefings and other NADA related materials, schedules politicians and commentators to provide attendees with a flavor of the current situation in Washington and what may be in store for us prospectively. Although we are in the off-year, 2024 surely will provide plenty of fireworks amidst a presidential election in tandem with House and Senate elections that will determine who will control those chambers. This year’s crop of speakers included: • Sen. Katie Britt (R-Alabama); • Rep. Roger Williams (R-Texas); • Rep. Lisa Blunt (D-Delaware); • Rep. Kat Cammack (R-Florida), who spoke at a separate reception for Next Gen attendees; • Anna Palmer and Jake Sherman, founders of Punchbowl News, which covers the doings on Capitol Hill; and • David Wasserman, senior election analyst, the Cook Political Report. Your MSADA delegation consisted of MSADA President Jeb Balise of Balise Auto Group; MSADA Immediate Past President Chris Connolly of Herb Connolly Chevrolet; NADA Director Scott Dube of McGovern Hyundai Rt. 93; Next Gen attendees Chad Bouchard of Ron Bouchard’s Auto Stores and Ruddy Brito of the Mastria Auto Group; and yours truly. Once on Capitol Hill, we engaged in dealer dialogue on such issues as LIFO relief, catalytic converter theft, right to repair, onerous proposed EPA rules on fuel economy standards and EV mandates, and the Federal Trade Commission’s anti-dealer rule that was issued in June 2022. During our two days of meetings in D.C., we conferred with Rep. Jake Auchincloss (D-Newton) and staff memwww.msada.org
bers for Reps. Lori Trahan (D-Westford), Jim McGovern (D-Worcester), Stephen Lynch (D-South Boston), William Keating (D-Bourne), Katherine Clark (D-Melrose), Seth Moulton (D-Salem), and Richard Neal (D-Springfield). Moving forward, we need to keep in mind that for two days we collectively were a group of small businessmen and women who, on behalf of their fellow dealers back home, gave up time from their dealerships and families to fly to Washington to discuss issues important to their stores and making sure the economy remains progressing in a positive direction. Back home in the Commonwealth, however, we are an association of 427 members, whose dealerships employ on average 60 men and women, and who are responsible for almost 20 percent of the Commonwealth’s retail economy. As we ask dealers to get more engaged in contacting their Congresspeople and local legislators, we ask that you not be shy and let others carry the load. All dealers – big and small, domestic makes and international – are in the same boat. If we give the Members of Congress a free ride and do not engage them on the issues, they will think we have no problems. The same is true when we are fighting for or against certain laws on Beacon Hill. In the future, please heed the call from your Association to contact your elected officials when issues arise. There always exists a great need to go before our elected officials and inform them of our concerns and desires. Without our input, our esteemed Members of Congress, if left to their own devices, could find a way to pour more gasoline on the fire. After all, the easiest vote they can take is one in which no one talks to them.
2024 TIME Dealer of the Year – Tom Murphy, Falmouth Toyota Your MSADA Executive Committee has named Tom Murphy of Falmouth Toyota our 2024 TIME Dealer of the Year. As a result of our selection, Tom will stand in nomination as the Massachusetts representative for the TIME and Ally dealer of
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THE ROUNDUP the year award which will be announced at the National Automobile Dealers Association Show on February 3, in Las Vegas. Tom is one of a select group of 49 dealer nominees from across the country who will be honored at the 107th annual NADA Show. This will be TIME’s 55th annual award. Readers may recall that Gary Rome of Gary Rome Hyundai in Holyoke was not only our 2023 Massachusetts Dealer of the Year but won the national award at NADA’s convention in January in Dallas. Congratulations to Tom, and best of luck in the national competition in Vegas next year.
Gov. Healey Signs $1 Billion Tax Relief Package On October 4, Democrat Governor Maura Healey signed tax relief legislation, valued at roughly $1 billion, that was first proposed by former Republican Governor Charlie Baker in early 2022. With both the House and Senate on board with pushing through some level of relief as part of last year’s FY23 budget deliberations, the package was ultimately derailed last Fall as legislators realized the Commonwealth would be paying out $3 billion in tax rebates based on the Chapter 62F law approved by voters at the 1986 ballot. Soon after she was inaugurated to replace the retiring Baker, Gov. Healey filed her own tax relief package, arguing that certain pieces were needed to keep Massachusetts competitive economically and to discourage higher income earners from leaving the state for lower taxed jurisdictions such as Florida, Tennessee, and Texas. The House and Senate each subsequently passed their own versions this Spring, prompting the creation of a conference committee to resolve their differences. The conference committee continued its deliberations throughout the FY24 budget process and through the July 1 start of FY24, with each chamber leaving cushions in their FY24 budgets to accommodate potential tax relief. Although Healey ultimately signed the FY24 budget in early August, it was not until October 4 that the 22-month-long tax OCTOBER 2023
relief package finally became law, after the Legislature approved and sent her its agreed upon package in late September. Many taxpayers will not get much relief under the new law, which features a laundry list of changes that will benefit specific groups of people. The biggest single piece of the bill is an overhauled child and dependent tax credit, which will provide parents and caregivers with $310 per dependent this year and $440 per dependent next year and beyond. Changes to the senior circuit breaker tax credit could save some taxpayers up to $1,200 per year, while renters are in line for an extra $50 annually thanks to an increase to the maximum rent deduction. The law’s other reforms to the shortterm capital gains tax rate, the estate tax threshold, and the process for calculating taxes owed by multistate companies had long been championed by business groups, who have argued Massachusetts needs to update those levies to better compete with other states. The package also takes aim at one of the most pressing problems facing Bay Staters – out-of-reach home prices and rents – through a more indirect route. It expands tax credits and incentives available to housing developers, seeking to spur additional development that could address a shortage of affordable units. According to media reports, the bill won praise from many business groups, while the Massachusetts High Technology Council gave it a mixed review, arguing that it will “only marginally change how Massachusetts compares with other states.” Voices on the political left were also less enthused about the final product. Progressive groups contrasted the $1 billion in relief with the roughly similar amount of revenue the state expects to generate this year from a new 4% surtax on high earners, the so-called millionaires’ tax, revenue from which will be earmarked for education and transportation investments. As we have detailed in numerous bulletins since last year, revenues are up substantially as is government spending. Even as the state sent back $3 billion in
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Chapter 62F refunds to taxpayers, the state was still running substantial surpluses. However, at some point, the chickens will come home to roost, as the state has built in so much new spending since the Covid pandemic that legislators will need to rein in programs or inflict new increases on income and sales taxes, or both; it is just a matter of time. Here is the summary of what the governor signed into law: • Estate Tax Threshold: Increases the tax threshold for the estate tax from the current $1 million to $2 million and removes the provision in the current law that levies the tax back on the first dollar once the estate tax threshold is met. The tax will now be imposed on revenue above the $2 million threshold. This change is effective retroactive to January 1, 2023. • Short Term Capital Gain Tax Rate: Reduces the current 12 percent tax rate on short term capital gains to 8.5 percent. The Senate did not include a reduction of this tax in their tax proposal while the House proposed reducing the tax to 8 percent for Fiscal Year 2023 with a permanent reduction to 5 percent thereafter. This new tax rate of 8.5 percent represents a compromise between the two branches. This change is effective retroactive to January 1, 2023. • Single Sales Factor Apportionment: This bill establishes a single sales factor apportionment formula for Massachusetts companies that is based solely on their sales receipts as opposed to the current tax law that subjects businesses to a three-factor apportionment based on location, payroll, and receipts. This change is designed to make Massachusetts more attractive to multi-state companies and matches the taxing systems in place in 39 other states. This change shall take effect on January 1, 2025. • Millionaires’ Tax Changes: This requires married couples that file a joint federal tax return to also file a joint return for their Massachusetts state taxes. Supporters of the millionaires’ tax warned that couples that would be subject to the new 4 percent tax sur-
MSADA charge would choose to file separate individual returns in Massachusetts in order to avoid paying all or part of the additional surcharge. They claimed the state would have lost between $200 and $600 million in annual revenues without this change. • Return of Surplus Revenue: Massachusetts law requires the state to return revenue to the taxpayers once the receipts exceed a predetermined cap. This law became operative in 2022 when the Department of Revenue returned $3 billion to taxpayers using a proportional formula that calculated rebates on the amount of state taxes paid by each individual. This bill will change the proportional formula with a system that will provide each taxpayer with one equal payment. Opponents of this change have promised to challenge this new rebate system in the state courts. • Child Dependent Tax Credit: Combines the Child Care Expense Credit with the Dependent Member of Household Credit. Increases the new combined child and dependent tax credit from $180 to $310 per dependent for the current fiscal year and to $440 in fiscal year 2024 and beyond. 565,000 Massachusetts families qualify for the credit. • Earned Income Tax Credit: Increases the Earned Income Tax Credit from 30 to 40 percent of the federal credit. This is expected to impact 396,000 taxpayers with incomes under $57,000.00. • Senior Circuit Breaker Tax Credit: Doubles this tax credit from $1,200 to $2,400 and indexes future credits to the rate of inflation. This change is expected to apply to over 100,000 taxpayers who own or rent residential property in Massachusetts. • Rental Deduction Cap: Increases the cap on the rental deduction for state taxes from $3,000 to $4,000. This rental deduction benefits over 880,000 residents of Massachusetts. • Housing Development Incentive Program Tax Credits: Increases the annual tax credit for the construction of market rate housing units in gateway cities
from the current $10 million per year to $57 million for the next year and then establishes a $30 million annual tax credit funding level for each thereafter. • Low Income Housing Tax Credit: Increases the annual tax credit funding for the construction of low-income housing from $40 million to $60 million per year. • Local Option Affordable Housing Rental Tax Exemption: Allows municipalities to adopt local property tax exemptions for the owners of Class One housing units that are rented at an affordable housing rate on a year-round basis to a person whose household income does not exceed more than 200 percent of the area medium income. The exemption may not be more than the tax otherwise due on the parcel based on the assessed value. • Tax Credits for Repair of Septic Systems: Triples the tax credit for the repair of septic systems from $6,000 to $18,000 for each project and increases the amount of the annual tax credit allowed from $1,500 to $4,000 per year. This change is effective retroactive to January 1, 2023.
Changes to Mass. Paid Family and Medical Leave The Healey-Driscoll administration’s Department of Family and Medical Leave (DFML) recently announced major changes to the Paid Family and Medical Leave (PFML) Act’s rules, including changes allowing employees to “top off” PFML benefits with accrued paid time off and a sizeable increase in contribution rates. Changes to the “topping off” rules are effective November 1, 2023 (for applications filed that date or thereafter), and the new contributions rates will start on January 1, 2024. What does your dealership need to know about these changes? Check out MSADA Bulletin #86/2023 (10/27/23) for all the details.
Revised I-9 Form Required Beginning Nov. 1 The United States Citizenship and Imwww.msada.org
migration Services (USCIS) recently released a revised Form I-9, Employment Eligibility Verification, which employers are required to complete for each new employee within three days of beginning employment. The revised Form I-9, as well as guidance on completing the form, can be found at www.uscis.gov/i-9. Starting November 1, 2023, all employers must use the new Form I-9 (edition date 08/01/23). Employers can use the new form or the current Form I-9 (edition date 10/21/19) through Oct. 31, 2023. The new form has several revisions to streamline employment verification and reduce the burden on employers and employees. The basic Form I-9 reporting, data input, and retention rules remain unchanged. As a reminder, upon completion of Form I-9, the dealership must also retain copies of the Form I-9 documents for three years after the date of hire or one year after the date employment ends, whichever is later.
Federal EV Tax Credits Update On October 6, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) released guidance regarding the EV tax credits created within the Inflation Reduction Act for new and previously owned clean vehicles and using those credits at a dealership as part of a point-of-sale process to reduce the sale price. Subsequently, on November 1, the Internal Revenue Service (IRS) launched IRS Energy Credits Online, which can be found at www.irs.gov/credits-deductions/ credits-for-new-clean-vehicles-purchasedin-2023-or-after, a registration portal for sellers of new and previously owned clean vehicles eligible for federal tax credits. Dealers can also access IRS Clean Vehicle Credit FAQs on the irs.gov site. Registering on IRS Energy Credits Online will enable sellers to create electronic clean vehicle sales reports beginning next month. Sales reports must be provided in writing to eligible clean vehicle purchasers. Registering on IRS Energy Credits Online also will facilitate the advance
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THE ROUNDUP payment of tax credits for eligible clean vehicle sales that occur after December 31, 2023. By transferring federal tax credits to the point of sale, buyer-taxpayers will be able to realize the value of those credits “up front” as reductions in the price of their eligible clean vehicle purchases. Readers may recall that the Inflation Reduction Act of 2022 established two sets of tax credits, totaling $7,500, for the purchase or lease of qualifying new or used electric, hybrid, plug-in hybrid, or other clean vehicles based on where the battery minerals are sourced and the batteries are manufactured. Under the law, consumers can file for the credits on their tax returns after the purchase or lease of a qualifying vehicle. The law also allows consumers to choose to transfer their new clean vehicle credit of up to $7,500 and their previously owned clean vehicle credit of up to $4,000 to a car dealer starting January 1, 2024. This will effectively lower the vehicle’s purchase price by providing consumers with an upfront down payment on their clean vehicle at the point of sale, rather than having to wait to claim their credit on their tax return the next year. Only vehicles purchased under the consumer clean vehicle credits are eligible for this benefit. According to the Treasury Department’s press release, starting in January, registered dealers will be able to submit clean vehicle sales information to the IRS and promptly (Ed. Note: IRS’ word usage; let’s see.) receive payment for transferred credits. According to the Treasury Department, Energy Credits Online demonstrates the IRS’ commitment to delivering a world-class customer service experience and helping taxpayers receive the credits and deductions for which they are eligible. Dealers will also use Energy Credits Online to submit “time of sale” reports, which will confirm vehicles’ eligibility for a credit, whether or not the buyer chooses to transfer the credit to the dealer. When a buyer chooses to transfer the credit, registered dealers will reduce the purchase price of the vehicle or provide cash to the buyer. The amount provided OCTOBER 2023
must equal the full amount of the credit available for the eligible vehicle. When completing the sale, the dealer will electronically submit information regarding the transfer, including a time of sale report, to receive an advance payment for the value of the credit. The IRS expects to issue advance payments within 72 hours. To provide clarity and certainty, the dealer will provide buyers with required disclosures as part of the credit transfer and electronic time-of-sale submission process and with written confirmation that the vehicle they’re buying is eligible for a credit and the credit amount. The IRS guidance proposes rules regarding who is eligible to elect to transfer the credit to the dealer and under what circumstances these taxpayers may have to pay back some of the transferred credit. Consumers may transfer the credit if they attest that they believe they are eligible, including that they fell below the applicable income thresholds in the prior year or expect to be below these thresholds in the year the vehicle is placed in service. Consumers will need to directly repay the full value of a transferred tax credit to the IRS when filing their taxes if they exceed the applicable modified adjusted gross income limitation. The guidance also would include important safeguards to help prevent fraud or abuse. These measures would help ensure only verified, tax-compliant dealers will get the benefit of advance payments from the IRS and only eligible vehicles will get the benefit of the credit. These measures would collect and verify information received from the dealer during the IRS Energy Credits Online dealer registration process. A registration ID is provided to the dealer only once the IRS is confident in validity of the registration. Fact sheets, FAQs, checklists and other materials for consumers and dealers will be made available before the end of the year. The guidance would provide clarity regarding the federal income tax treatment of the transferred credit and advance payment for the buyer and the dealer. Under the proposed rules, credit transfers and
Massachusetts Auto Dealer www.msada.org
MSADA advance payments would generally not affect dealers’ tax liability. Payment of the value of the transferred credit by the dealer to the consumer would be treated as repaid by the consumer to the dealer as part of the purchase price of the vehicle, and therefore be treated as an amount realized by the dealer. Advance payments received by the dealer would not be treated as a tax credit to the dealer and may exceed the dealer’s regular tax liability. Advance payments received by the dealer would not be includible in the gross income of the dealer. The payment made by the dealer to the consumer in exchange for the transferred credit would not be deductible by the dealer. The payment made by the dealer to the consumer (in the form of a cash payment, down payment, or partial down payment) would not be includible in the gross income of the consumer. Treasury and the IRS have affirmed they will carefully consider public comments and feedback before issuing final rules.
Our PACs - NADAPAC & NCDPAC We greatly appreciate the contributions we receive from our member dealers who answer our calls for donations to our PACs. Each year MSADA expresses itself politically through NADA’s federal PAC, NADAPAC, and through our state PAC, the New Car Dealers Political Action Committee (NCDPAC). We depend on contributions from our dealers to keep these PACs strong, as we need to have an active voice in Washington and on Beacon Hill. Contributions to our PACs are an inexpensive insurance policy. Since by law we cannot use our membership dues or other association revenues for political contributions, the PACs help us to remain strong politically as we advocate for our dealers’ interests in the political process. If you have not yet given to the PACs this year, please contact me at rokoniewski@msada.org and we can make sure your contributions happen. Thank you. t
MSADA
L EGISLATIVE S CORECARD OCTOBER 2023
BILL#
SPONSOR
SUBJECT
STATUS
S151 H331
Sen Crighton Rep Hunt
Amendments to Ch. 93B, the auto dealer franchise law.
SUPPORT
Joint Committee on Consumer Protection held public hearing on July 17, 2023.
H290 H329
Rep Finn Rep Howitt
RTR law amendments to fix Model Year start date and consumer notice.
SUPPORT
Joint Committee on Consumer Protection held public hearing on July 17, 2023.
S204 H270 H289
Sen O’Connor Rep Chan Rep Finn
Creates process to appeal improperly issued Class 1 license.
SUPPORT
Joint Committee on Consumer Protection held public hearing on July 17, 2023.
S150 H351
Sen Crighton Rep Lewis
Modernize on-line vehicle purchase process.
SUPPORT
Joint Committee on Consumer Protection held public hearing on July 17, 2023.
S199
Sen Moore
Amends definition of heavy-duty trucks in RTR law.
SUPPORT
Joint Committee on Consumer Protection held public hearing on July 17, 2023.
S220 H400
Sen Velis Rep Walsh
Open safety recalls notifications.
OPPOSE
Joint Committee on Consumer Protection held public hearing on July 17, 2023.
H354
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 17, 2023.
S688 H1095 H1118
Sen Moore Rep McMurtry Rep Philips
Creates process to increase the insurance reimbursed labor rate paid to auto body repairers.
SUPPORT
Joint Committee on Financial Services held public hearing on October 3, 2023.
S639 H1121
Sen Feeney Rep Puppolo
Protects consumer choice in vehicle service contracts.
SUPPORT
Joint Committee on Financial Services held public hearing on October 3, 2023.
S2219 H3255
Sen Cronin Rep Arciero
Eliminates initial state inspection for new vehicle.
SUPPORT
In Joint Committee on Transportation; no hearing scheduled yet.
H3348
Rep Howitt
Limit doc prep fee amounts.
OPPOSE
In Joint Committee on Transportation; no hearing scheduled yet.
S2210
Sen Crighton
Safety shutoff for keyless ignition technology.
OPPOSE
Joint Committee on Financial Services held public hearing on October 17, 2023.
S25 H60
Sen Creem Rep Carey
Personal data privacy and security.
OPPOSE
Joint Committee on Advanced Information Technology, the Internet and Cybersecurity held public hearing on October 19, 2023.
S227
Sen Finegold
Mass. Info Privacy & Security Act.
OPPOSE
Joint Committee on Economic Development and Emerging Technologies held public hearing on October 19, 2023.
www.msada.org
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AUTO OUTLOOK
OCTOBER 2023 Auto Dealer FEBRUARY 2022Massachusetts Massachusetts Auto Dealerwww.msada.org www.msada.org
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www.msada.org Massachusetts MassachusettsAuto AutoDealer Dealer FEBRUARY OCTOBER 2022 2023 www.msada.org
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AUTO OUTLOOK
OCTOBER 2023
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COVER STORY
MSADA Annual Meeting On Friday, October 13, your MSADA convened its dealer members and associates for a successful Annual Meeting at the Encore Boston Hotel and Casino in Everett, its 83rd anniversary as an association.
OCTOBER 2023
MSADA President Jeb Balise and MSADA Executive Vice President Robert O’Koniewski kicked off the afternoon with a slate of speakers representing all facets of the auto industry, including the keynote address from Glenn Mercer.
2023
Massachusetts Auto Dealer www.msada.org
MSADA “Vehicle Market Update and Outlook”
Jeb Balise MSADA President
Mark Strand
Cox Automotive Senior Director, Economic and Industry Insights
“The Silent Equity Partner You Never Knew You Had”
NADA UPDATE
Gary Gilchrist
Gilchrist Chevrolet Buick GMC, NADA Vice Chairman And
Scott Dube
Don Giordano
McGovern Hyundai Rt. 93, Massachusetts NADA Director
Business Development, Merchant Advocate
www.msada.org
Massachusetts Auto Dealer
OCTOBER 2023
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2023 ANNUAL MEETING “Dealership Security: State of the Industry and Cybersecurity”
“The Five Horsemen of the Carpocalypse”
Glenn Mercer Robbie Harriman OCD Tech
“Reining in Your Health Insurance Costs”
Shawn Allen
McWalter Volunteer Benefits Group OCTOBER 2023
Massachusetts Auto Dealer www.msada.org
MSADA
19
RMV Updates
Colleen Ogilvie
Registrar, Massachusetts Registry of Motor Vehicles
National EV Sales Joel Levin “PlugStar: Certification” Executive Director, Plug In America
“Legislative and Regulatory Update”
“Recent Franchise Law Developments Impacting Mass.”
Attorney Tom Vangel Robert O’Koniewski Partner, Murtha Cullina LLP
www.msada.org
MSADA
Massachusetts Auto Dealer
OCTOBER 2023
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2023 ANNUAL MEETING
Thank You PLATINUM SPONSOR TrueCar
GOLD SPONSORS Bank of America Cox Automotive Withum Zurich
BRONZE SPONSORS ACV Auctions Albin, Randall & Bennett Armatus Dealer Uplift Burns & Levinson LLP Cooperative Systems CVR OCD Tech Santander Wells Fargo Auto
WELCOME RECEPTION SPONSOR Downey & Company
WELCOME GIFT SPONSOR GW Marketing
BREAK STATION SPONSOR McWalter Benefits Group
COCKTAIL RECEPTION SPONSOR Murtha Cullina LLP OCTOBER 2023
Massachusetts Auto Dealer www.msada.org
MSADA
NADA Washington D.C. Conference 2023 Whenever there is something to talk about that affects the entire nation, people find the best place to gather is in a place where their voice is best heard. Typically, that place is close to the seat of the federal government. For a few days in September, it was auto dealers that came to gather in Washington, D.C., to discuss the state of the industry and chart a path forward at NADA’s 48th annual Washington Conference and Congressional fly-in.
More than 400 NADA members and state dealer associations’ staff gathered at the Capital Hilton for the conference on September 12 and 13. The event also included Capitol Hill visits and a welcome reception at the Renwick Gallery across from the White House. This year the Commonwealth was represented on Capitol Hill by MSADA President Jeb Balise, MSADA www.msada.org
Immediate Past President Chris Connolly, NADA Director Scott Dube, Next Gen dealers Chad Bouchard and Ruddy Brito, and MSADA Executive Vice President and General Counsel Robert F. O’Koniewski. “I was there as part of NADA’s Next Gen program which is specifically for aspiring dealers under 40,” said Bouchard of the Ron Bouchard Auto Stores, who was attending his third conference. “It is a great experience, and you get to meet a lot of good car dealers. We learned about the politics that are going on that impact our industry. It is always good to be in the know and to be able to support the whole dealer body.” “I always value our time meeting with our elected officials at all levels as a way to keep our issues and contributions in front of state and federal policymakers,” said Balise. “If we are not taking care of this for ourselves, surely others who are not our allies will be filling that void.” NADA kicked off the conference with the sole focus on Next Gen dealers, beginning with an evening reception on Monday, September 11, followed by a full slate of speakers and policy briefings on Tuesday morning, which focused on getting young, new attendees up-to-speed on NADA’s legislative priorities. After NADA’s legislative affairs team instructed the group of Next Gen attendees on how to be successful advocates for the retail auto and truck industry, attendees put their new skills to the test by holding mock Congressional meetings. Rep. Kat Cammack, a Florida Republican, was the keynote speaker for the Next Gen luncheon. NADA, as part of the festivities, always
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NADA WASHINGTON DC CONFERENCE does an excellent job bringing in speakers to provide a full flavor of what is going on in the extremely insular world of D.C. politics. This year’s roster of speakers included Sen. Katie Britt (R-Alabama); Rep. Roger Williams (R-Texas); Rep. Lisa Blunt (D-Delaware); Anna Palmer and Jake Sherman, founders of Punchbowl News, which covers the doings on Capitol Hill; and David Wasserman, senior election analyst, the Cook Political Report. Once the speeches were over, dealers were ready to spread the message on Capitol Hill. During MSADA’s two days of meetings in D.C., they conferred with Rep. Jake Auchincloss (D-Newton), and staff members for Reps. Lori Trahan (D-Westford), Jim McGovern (D-Worcester), Stephen Lynch (D-South Boston), William
and sell and finance new and used vehicles and voluntary protection products. Changes that franchised dealers would have to make under the proposed rule would inject massive amounts of time, cost, inefficiency, and complexity into the vehicle sales process at a time when the entire auto industry is united behind an effort to simplify and streamline vehicle sales, shorten transaction times, and improve the customer experience. NADA is urging Congress to use its authority – including oversight and potentially budgetary authority – to highlight how fundamentally flawed the Vehicle Shopping Rule is. The FTC needs to go back to the drawing board before forcing implementation of a series of unstudied and untested mandates that will have significant negative impacts on customers. There is bipartisan concern in both the House and Senate over the rule’s lack of evidence, questionable justification, and absence of consumer testing – as well as the FTC’s rush to judgment and failure to conduct any regulatory due diligence. NADA is using all available resources to broadcast these concerns and amplify the message that the FTC needs to scrap this proposed rule and start over.
EPA Emissions Rulemakings
Keating (D-Bourne), Katherine Clark (D-Melrose), Seth Moulton (D-Salem), and Richard Neal (D-Springfield). “As a first-time attendee, I was excited to see all that our industry goes through down in D.C. to make sure government does not put more road blocks in our way,” said Ruddy Brito of the Mastria Auto Group. “Once we got through all the speeches, I was anxious to get in front of our Members of Congress to advocate for our folks in our industry back home and around the country.” Nine months into a new Congress split between a Republican House and a Democrat Senate, with the Biden administration working through the next two years toward a potential re-election campaign, the issues NADA and franchised dealers face are piling up.
FTC Vehicle Shopping Rule
The FTC’s proposed Vehicle Shopping Rule, unveiled in June 2022, would drastically alter the entire process by which franchised dealers advertise and communicate with their customers OCTOBER 2023
Massachusetts Auto Dealer www.msada.org
NADA’s entire advocacy staff has been very active in response to the Biden Administration’s new and very aggressive emissions proposed rulemakings for new light-, medium- and heavy-duty vehicles, which were announced this year in April. Dealers are essential to the broad, mass-market adoption of the EVs that are now beginning to arrive in showrooms. NADA continues to support the auto industry’s efforts to raise critical questions about the feasibility and impacts of such aggressive targets for EV adoption, remind stakeholders that dealers are ready and essential for any meaningful growth in EV adoption, and emphasize the need for others – beyond auto manufacturers and dealers – to step up and do much more themselves. NADA points out that any meaningful growth in EV adoption will depend on a broad, unified strategy that considers the vital importance of consumer incentives, charging infrastructure, utility capacity, resources for battery manufacturing and the availability
MSADA to consumers across the country of these newly-produced EVs themselves – just to name a few key factors.
LIFO Relief
NADA is still working to see that Congress passes retroactive LIFO relief legislation. The “Supply Chain Disruptions Relief Act,” which provides identical relief to last year’s bill, has now garnered 60 cosponsors in the Senate, demonstrating that this legislation is not just overwhelmingly bipartisan but also filibuster-proof. Work is continuing to grow the number of House bill cosponsors, which stood at 50 by the time of the conference, including Massachusetts Rep. Trahan. Challenges remain with passing this legislation. However, many dealers – particularly smaller dealers – are still having difficulty replenishing vehicle inventories. In our meetings, we reminded our Members of Congress that this bipartisan bill is technical, noncontroversial legislation that would merely provide relief to these dealers whose inventories disappeared due to an unprecedented interruption of global supply chains.
Right to Repair
Right to repair remains that “sleeper” issue for the current session of Congress – it keeps lingering out there with no real sense of what is going to happen. One thing is for sure: MSADA and NADA continue to oppose the federal right to repair bill that now is gaining considerable support amongst Republican House members. The lead sponsor is Rep. Neal Dunn, a Florida Republican who sits on the House Energy and Commerce Committee, which has jurisdiction of the matter. Dealers from across the country have strongly urged their Members of Congress to oppose the legislation. With everything else challenging Congress’s attention presently, especially as overall government funding always seems to grab the spotlight and world conflicts grow, it is 50/50 right now if this issue gains any traction in the current Congress. NADA Director Scott Dube points out all the time auto dealers have their work cut out for them as Congress continues to back measures that put businesses at risk. “We can never stop putting effort into making sure our represen-
tatives know who we are, what we do, and how vital our contribution is to their districts and our communities,” Dube said. “We may not agree on every issue, but as we have seen proven during the past decade or so, when the chips are down the time put into establishing these relationships can really pay off. It is important to make our presence felt in Washington and through visits. More often than not, seeing is believing.” “A substantial part of what MSADA does for our members is to stay in touch with our U.S. senators and representatives so that they know that what they are doing, or not doing, has an impact back home at our members’ dealerships,” said MSADA Executive Vice President Robert O’Koniewski. “Our engagement cannot be sporadic. Building relationships through constant communications can help to move policies in certain directions at times.” “I am always honored and excited to get the call from Bob to join the team at NADA’s Washington conference each September as part of the NADA Next Gen program,” stated Bouchard, reflecting on his experiences in D.C. “It’s extremely beneficial for me to get a better understanding of the political headwinds we face in our industry, and what we are collectively as dealers doing to ensure the industry is in a healthy place for the dealer body and our consumers. Joining other dealers that have many years of experience in this field has also helped me personally understand the importance of this annual trip and how it impacts the future health for the industry and everyone involved.” Truer words have never been spoken. www.msada.org
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NEWS
from Around the Horn
MSADA
Holyoke
Jack Rome 5K Raises $38K for Animal Control & Adoption Center Local canine celebrity Jack Rome, official greeter of Gary Rome Auto Group who peacefully passed away on Monday, October 10, 2022, was memorialized on Saturday, October 7, at Forest Park at the First Annual Jack Rome Memorial 5K, presented by Gary Rome Hyundai and Western Mass News. The family- and dog-friendly event had over 200 registered runners and walkers and over 50 dogs registered. A total of $38,447.16 was raised for the shelter. Springfield Mayor Domenic Sarno attended for opening remarks as well as Patrick Sullivan, Director of Forest Park. Winners in three categories were recognized: Jeffery Anderson-Burgos (male 1st place), Amanda Sbriscia (female 1st place), and Bruce Christensen and his dog Brodie (1st place dog). All funds raised will be donated directly to the Foundation for TJO Animals and will be used specifically for medical and veterinary care, emergency surgery, and rehabilitation services to help the animals find new loving homes. “Jack, lived a very full and happy life for 13 years.” said Gary Rome, President of Gary Rome Auto Group. “When I was at work, Jack was at work. He brought a million smiles to customers and employees, and I am so thankful his memory will live on and benefit the animals at TJO.” “Western Mass News is excited to sponsor the inaugural Jack Rome Memorial 5K to benefit TJO. Our employees voted to make the Thomas J. O’Connor Animal Control and Adoption Center our station charity for 2023 because of the positive impact they have on the Western Mass community,” said Hugh Zeitlin, News Director of Western Mass News. Jack Rome was a Vizsla breed, a Hungarian hunting dog. He embodied the common Vizsla traits of affectionate, loyal, and energetic, yet quiet and gentle. He appeared in all Gary Rome Hyundai Kia advertisements and filmed many commercials alongside Gary and 2-year-old “sister” Daisy, also a Vizsla. The Thomas J. O’Connor Animal Control and Adoption Center provides comprehensive animal control services and programs to OCTOBER 2023
the Western Mass community for the protection of animals, public health, safety, and the environment. TJO responsibly places unclaimed animals and those relinquished into care and new adoptive homes. Their animal control officers respond to routine service calls daily. The TJO Adoption Center provides a second chance for adoptable dogs, cats, and occasionally other types of critters. Northampton
TommyCar Auto Group Partners with Hampshire County Sheriff for No Shave November TommyCar Auto, which operates five dealerships in Western Massachusetts, is once again sharing an inspiring collaboration that extends a warm invitation to the community to participate in a significant No Shave November campaign. TommyCar Auto Group is teaming up with the Hampshire County Sheriff’s Office and Sheriff Patrick Cahillane to make a significant impact in raising awareness about cancer and supporting vital initiatives in cancer prevention, research, and education.
Massachusetts Auto Dealer www.msada.org
NEWS from Around the Horn Throughout November, the deputies and staff of the Hampshire County Sheriff’s Office have the unique opportunity to opt out of their usual dress code and grow out their facial hair in exchange for a $20 donation. All proceeds go the Tom Cosenzi Driving for the Cure Charity Golf Tournament, which directly supports Dana-Farber Cancer Institute. TommyCar Auto Group is committed to matching the total amount raised by the Hampshire County Sheriff’s Office, doubling the impact of the contributions. Every donation, no matter how small, makes a significant difference. “My brother and I have seen firsthand what these families have to go through,” said Carla Cosenzi, President of TommyCar Auto. “That is why this organization is so close to our hearts, and we are grateful they were there for us when we needed them. We are so thankful for the Hampshire County Sheriff’s Office for helping us raise funds to one day find a cure.” No Shave November, focuses on growing cancer awareness and generating funds to support various aspects of cancer prevention, research, education, and assisting those bravely battling cancer. It is a month-long journey during which participants refrain from shaving and grooming to encourage conversations and raise cancer awareness. The community is invited to be a part of the No Shave November movement by submitting your donation. To submit your donation and be a part of the No Shave November movement, please visit PutDownYourRazor.com.
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West Springfield
Bertera Subaru Honored for 50 Years of Service
Michael Bertera and Razmik Ghazarian, owners of Bertera Subaru of West Springfield, recently received a 50-year award from Subaru of New England. Present from SNE were Ernie Boch Jr., CEO; Bryan Dumais, vice president; and Jeff Ruble, COO. Congratulations, Michael and Razmik.
www.msada.org
Massachusetts Auto Dealer
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NEWS from Around the Horn
MSADA
Danvers
Group 1 Opens New Ira Subaru Store On October 11, Group 1 Auto Group conducted a ribbon cutting for its newly designed Ira Subaru dealership. Ira Subaru of Danvers, located at 97B Andover Street, Danvers, MA, boasts 23,000 square feet of space, has a capacity for 230 guests, and is staffed by a team of 72 dedicated team members. “We are excited to welcome Subaru customers to our new state-of-the-art facility, where they can experience firsthand our unwavering commitment to providing the best experiences,” said Roscoe Robinson, Ira Subaru General Manager. “Subaru’s customers are loyal, and our team looks forward to serving them with excellence.” At the grand opening event, executives from Group 1 Automotive and Subaru of New England, including CEO Ernie Boch, Jr. and Executive Vice President and General Manager Jeff Rubel, spoke at the ribbon cutting ceremony, highlighting
the dealership’s bright future and Group 1’s presence in the area. The dealership also presented a $10,000 check to Cape Ann Animal Aid, the dealership’s charitable partner, as part of its ongoing community efforts, the Subaru Love Promise and Subaru Loves Pets Month. The grand opening event, themed “The History of Subaru,” featured an array of entertainment for guests, including a performance by the local cover band Fortune, who performed hits from the 1970s, 1980s, and 1990s. Attendees also had the opportunity to admire a classic car show, including Subaru’s first car to arrive in the US, the 1969 Subaru 360. Filled with nostalgia, attendees enjoyed a trip down memory lane with Subaru commercials spanning from 1968 to 2023 and enjoyed a retro candy bar, while pets took part in a pet treat bar donated by Wellness Pets of Burlington, Mass.
Boston
BBJ Highlights Herb Chambers, Military Service Leading to Success The Boston Business Journal, in its November 3 edition, highlighted the successful career of Herb Chambers, who attributed his military experience as teaching him a craft that led to a foundation for his future business success. The Journal noted that The Herb Chambers Companies is the largest veteran-owned business in Massachusetts with 2,082 employees in the state and total 2022 revenue of almost $2.8 billion. Chambers, 81, was not in line for a career owning and operating a successful collection of automotive dealerships when he dropped out of Boston English during his senior year in high school. He was bored by school, he says. He joined the Navy, becoming an aviation electrician. While he joined hoping to travel, he ended up stationed at the Naval Air Station South Weymouth. However, his Navy experience proved to be pivotal. He learned a craft, and gained an appreciation for education as a differentiator when it came to getting ahead. After the Navy, he declined an offer to stay with the military and returned home to Boston where he got a job repairing copier machines. With $1,000 — split evenly between his savings and a contribution from his mother — he started his own copier repair company called A-Copy America that he grew to 1,700 employees. OCTOBER 2023
Massachusetts Auto Dealer www.msada.org
He sold it to the national company, Alco Standard, for a big payday in 1983. “Timing has been the story of my life,” he said. “I’m the most fortunate person I’ve ever known.” Chambers had a similarly unlikely turn toward building an automotive dealership empire. He was in Connecticut intending to buy a car — his passion for automobiles was already well-developed — but instead bought a dealership. “At that time, I did not know exactly what I was going to do for my next career,” he said. “And I go in to buy a car and I’m in a crappy-looking dealership in New London.” Today, his company spans dozens of locations. For a high school dropout, Chambers said his drive to make his family proud was critical to his success has been. He calls himself a great salesperson — a common thread between the copier and car businesses — who has always emphasized customer service. The company’s billboards highlight experiences and customer service, never prices. “People don’t like to be sold things. They do like to buy them,” he said, drawing a distinction between the two points. What’s next for Herb Chambers Companies? Chambers intends to keep working — he would retire if he didn’t love it, he said. The company has already fended off acquisition attempts, and Chambers said it is likely to remain in the family, with a son and a niece both involved in the business. Chambers already passed CEO duties to Nicolas Gennetti last year. t
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ACCOUNTING
MSADA
Post-COVID Challenges to Dealership Profitability By Jeff Caruso
CPA, Partner at Withum
It’s not if, but when. As profits level off from the end of 2020 through 2021 during the COVID “Boom” and begin to decline back to the mean, it is important to revisit the many ways automobile dealers can be impacted by rapidly changing market conditions. Automobile dealers face a variety of risks that are, for the most part, out of their hands. These issues can impact their business operations, profitability, and long-term sustainability. Some of the risks include, but are not limited to, the potential for an overall economic downturn coupled with rising interest rates, the continued pressure of the coming wave of electric vehicles, and competition from virtual sales. An overall economic downturn can lead to reduced consumer confidence and discretionary spending, resulting in a delay or a complete cancellation of plans to purchase a new or used vehicle. Consumer decisions like these impact overall car sales and dealership revenue on a monthly and annual basis. Inventories are creeping up, and the recent days of most vehicles being sold before they are even on the lot are going away. Practice selectivity when deciding what to have in stock and what you are ordering, buying, and trading. The used car market can experience wide fluctuations, oftentimes from week to week. Do not hesitate to dump something that has changed in value. Free up the cash and find something more in line with the current market. Utilize data analytics and historical sales trends to optimize your inventory management. Regularly evaluate which models are popular and adjust your inventory accordOCTOBER 2023
ingly. Diversify your product offerings for both new and used vehicles across various price ranges. What is the average cost of the used vehicles you are selling? Is the mix appropriate for the changing environment as discretionary spending for consumers tightens? Remind and retrain your sales force on how to sell a car. It has been very easy in the past few years for the sales force to sell, but that was not sustainable. Constantly remind your teams about the importance of customer service. Consumers will have more and more options, so store loyalty is paramount. While focusing on the front end is important as the days of selling above sticker wanes, it is equally important to focus on fixed operations. Customer satisfaction on the back end will be ever more important as consumers begin to hold their vehicles a little longer. The recent dramatic rise in interest rates impacts both the automobile dealer as well as the consumer. To reiterate this point, tighter control over inventory levels is key. The cost of holding inventory is on the rise. Floorplan interest expense is coming back as a real cost to dealers. Revisit the terms of all your financing arrangements, not just your floorplan agreements, to understand what and when balloon payments are coming due and or when you may have an interest rate adjustment. Start to plan for that potential increased cost today. On the consumer side, changing economic conditions can affect your customers’ ability to secure favorable financing terms, leading to smaller gross profits or a complete loss of a sale. Revisit relationships with multiple financing partners to provide a range of options for customers with varying credit profiles. Ensure finance managers can educate customers about their financing options and properly assist them in finding suitable solutions. Also, revisit your dealership’s procedures for assessing the creditworthiness of customers to mitigate the risk of defaults and repossessions.
Massachusetts Auto Dealer www.msada.org
Electric vehicles and their overall impact on the auto industry have been in the news for many years now, although the pace has been picking up significantly with all manufacturers rolling out their own versions of EVs and comprehensive plans to get to market. Advances in automotive technology related to electric vehicles and autonomous driving require dealerships to adapt and invest in new training and equipment. Stay informed about emerging technologies and provide the appropriate training to your sales and service teams to ensure they can effectively communicate the benefits of new features to customers. The threat of online competition on the traditional car sales model is certainly not a new challenge for dealers; however, it remains quite relevant. The ease of car shopping from a handheld device enhances the lure of online car-buying platforms and third-party websites that can divert customers away from traditional dealerships. The younger generation of car buyers can do everything else from their smartphones so why should purchasing a vehicle be any different? Work with marketers and website designers to enhance your online presence and be search engine optimized. If you are not on the first page of a search, the likelihood of traffic coming to your website is reduced significantly. Ensure your website is user-friendly with detailed vehicle information and easy-to-use search tools. Consider offering online sales options and providing transparent pricing information. When was the last time your website was refreshed? How does your website look on a handheld device, and is it easy to navigate? When is the best time to fix a leaky roof? Certainly not when the hurricane hits. Be proactive now so there is a softer landing as things begin to turn. t With over 25 years of experience, Jeff Caruso has experience in audit and tax services to auto dealerships, closely held businesses and their shareholders, and not-for-profit organizations.
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Profitability Through Expense Control By Barton D. Haag CPA, Albin Randall & Bennett Although not as strong as they have been the past couple of years, dealer profits have generally been strong again in 2023 and are still better than average. Our clients are making 3.7% net to sales according to our Auto Dealer Business Intelligence (ADBI) analysis; still very good but much less than the 5.3% they earned in 2022. One thing that is clear is gross profit is lower than last year at this time (13.1% in 2023 vs 15.0% in 2022) and expenses as a percent of sales are starting to creep higher (11.2% in 2023 vs 11.0% in 2022). Depending on whom you listen to there are some serious head winds over the next year or so worth considering and for which dealers should start planning. As you prepare business plans and budgets for next year, now is a good time to review your biggest expense categories and make sure you can make quick adjustments for a potential downturn. For example, one area of expense that is especially showing an increase is personnel expense. Often times in periods following strong profit years dealers experience “bloat” in their headcount or payroll. On average, in 2023 our clients are selling approximately $102,000 per employee per month versus $105,000 in 2022. Now is a good time to review each position and ensure you identify any non-essential employees and have a plan in place. It is also a good time to review pay plans both to ensure they are appropriate for the times and reward your goal of increased profitability. Our AutoCPA Group recently met with Strategic Sources’ Doug Austin, founder and CEO, and Chris Austin, EVP – Marketing and Sales. Strategic Source is more
than an expense management company; their team also assists with sourcing expertise, supplier compliance, and implementation management. During our meeting we discussed the top 10 best spending management practices. These were an excellent reminder of how a dealership should approach expense management and is a timely exercise as dealers prepare for next year. 1. Purchasing structure and personnel training: Having a structure that you follow every time you buy something from a vendor is critical to expense management. Perhaps as important as having structure is training your team regarding that process. 2. Implementation of purchasing policies: These policies establish limits for various team members on the amount to which they are able to commit the dealership. Among other critical steps, a purchase order policy is part of this system. Using purchase orders helps to ensure you receive only what you ordered, in the quantity you ordered and for the agreed upon price. This in conjunction with a quoting policy is a very powerful internal and expense control. 3. Setting spend management objectives: Utilizing these objectives, you establish measurable cost and supplier base reductions. Reducing the number of suppliers you work with gives you more negotiating power and better internal control over your suppliers. 4. Developing a spend map/plan: A spending map is a plan for each expense line item. A spending plan helps to avoid last-minute firefights when you do not achieve your desired outcome. It also ensures you achieve your desired results. 5. Contract management: Managing contracts is rarely done correctly. Properly managing contracts means storing all contracts in a centralized location and outlining the important terms of each contract on a summary sheet. The benefits of contract management are minimizing auto-renewals, price increases, and potential litigation. 6. Implement a sourcing process: There www.msada.org
are multiple steps to a proper sourcing process. With a sourcing process you will have consistency in your approach to managing expense categories. A sourcing process is also critical to realizing your spending management objectives. 7. Implement a supplier management process: Without a properly managed supplier process, dealers run the risk of having larger than necessary supply bases, inefficiencies, and unplanned price increases. This process is especially important in today’s environment. It will enable the Dealer to have even more negotiating power. 8. Implement a commitment process: A commitment process generally includes a 3-way match process: A purchase order is generated; an invoice is received from the supplier; and a packing slip is matched up with a purchase order and invoice. This process will help dealers reduce fraud in their dealerships and help them to manage/ reduce costs. 9. Conduct supplier compliance audits: This process is designed to help you manage the relationships you have with suppliers to ensure pricing and service levels are what was agreed upon. A supplier compliance audit will help to reduce over-charges and help you with developing better supplier partnerships. 10. Establish an expense management process: An expense management process will help you and your team keep your finger on the pulse of expenses, even some of the more mundane expenses of the dealership. It will help develop a good internal control system, help you to improve profitability, and ensure overachievers are properly recognized and rewarded for their effort. Expenses over the next year will be a much bigger part of the profitability equation. Making certain your process is complete and your people are well trained will ensure you are successful in managing these important relationships. Please contact an ARB Auto Dealer Services team member if you would like more information. t
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Despite Ongoing UAW Strike, U.S. Auto Sales Pace in October Expected to Increase from September • Cox Automotive forecasts annual vehicle sales pace in October to finish near 15.8 million, up 1.1 million from last October’s 14.7 million pace and up slightly from September’s 15.7 million level. • October’s sales volume is expected to rise 3.8% from one year ago and reach 1.23 million units; volume is forecast to decrease 7.7% from September due to one less selling day in October. • The expanding United Auto Workers (UAW) strike has yet to materially impact overall new-vehicle sales. Despite economic and political uncertainty throughout October, new-vehicle sales remain remarkably stable, according to a forecast by Cox Automotive released on October 25. New-vehicle sales volume in the U.S. is expected to rise nearly 4% over October 2022, a market that was in the early stages of recovery from severe product shortages. The October seasonally adjusted annual rate (SAAR), or sales pace, is expected to finish near 15.8 million, up 1.1 million
A key driver of new-vehicle sales strength has been growing inventory levels across the industry. Despite the ongoing UAW strike slowing production
the estimate of 1.5 million for mid-October 2022. Days’ supply in mid-October reached 62, the highest point since the spring of 2021. A year ago, days’ supply was at 48. Toyota and Honda continue to have the lowest measure of days’ supply, at under 23 days. Of the Detroit brands, where production is being negatively impacted by the UAW strike, Chevrolet and Cadillac had the tightest supply in mid-October, both below the industry average of 62. Ford had 90 days’ supply in the same timeframe, while Lincoln and the core Stellantis brands had inventory levels well above 100 days’ supply. Added Chesbrough, “While the UAW strike is certainly slowing down production at select assembly plants across the U.S., the impact has not yet fully materialized for consumers in the showroom. Compared to this point last year, industry inventory levels are much higher, which is helping support—to this point at least— relatively healthy new-vehicle sales.”
from last year’s pace and a slight gain over last month’s 15.7 million level. The sales strength continues to be remarkable, given the current economic climate and the fact that average new-vehicle auto loans are flirting with 10%. However,
across the major Detroit-based automakers, estimates from vAuto in mid-October suggest industry-wide, new-vehicle inventory in the U.S. was at 2.3 million units, up from 2.1 million in mid-September, when the strike began, and well above
All percentages in the chart are based on raw volume, not daily selling rate. There were 25 selling days in October 2023, one less than September and one less than October 2022. t
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some of these sales gains and good news can be attributed to seasonal adjustments, as October has one less selling day than both October 2022 and last month. According to Charlie Chesbrough, senior economist at Cox Automotive: “Though there are many headwinds in the market today, new-vehicle sales continue to show gains over last year’s supply-constrained market. Concerns about high interest rates, a potential economic recession, and the ongoing UAW strike are all likely holding back some potential vehicle buyers. However, there are still enough individuals and businesses with the need and ability to buy vehicles, which has helped sustain the sales recovery.”
New-Vehicle Inventory Levels Continue to Grow
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Legal Updates: Effective Estate and Succession Planning for Auto Dealers; NY Dealers Challenge Ford’s Model e Program By Thomas S. Vangel, Esq., Jamie Radke, Esq., and William Morgan, Esq., Murtha Cullina LLP Auto dealership owners have invested blood, sweat, and tears into building and growing their businesses. Having a comprehensive estate plan in place can help preserve that investment into the future for the owners, their families, and for those dependent on the dealership operations. Failing to plan will have the unfortunate effect of shortchanging the family, the employees, and the owner’s legacy. The combined federal and state estate tax rates for many car dealers can exceed fifty per cent (50%). Absent planning, over one half (1/2) of a dealer’s hard-earned assets would go to pay estate taxes, leaving far less for family. Often, the dealership and related real estate comprise a significant portion of the estate being taxed. In instances where proper planning has not occurred, heirs are frequently forced to sell the dealership and/or the real estate, often at distressed sale prices, in order to pay the estate taxes. Since dealership owners know the livelihoods of their employees, in addition to the owner’s family, are dependent on the dealership’s operations, creating a plan is complex, particularly when considering the family’s wishes after an owner’s retirement or death and the associated tax issues. In addition to the tax questions, there are additional questions to address, such as who will carry the company into the future? How would a dealership owner treat children who are not involved in the dealership’s day-to-day operations? How can transitions be structured so that family members are treated fairly, and the dealership does not falter after a dealership owner’s death? In addition to the questions above, dealers have unique challenges when it comes to estate planning. Some of these challenges involve having multiple businesses for leasing or warranties, floor plan loans, OCTOBER 2023
business decision-making in the event of significant illness, and the limitations OEMs place on dealers. A good estate plan will account for these factors while addressing the tax issues. There are many techniques to address a dealer’s estate and succession planning concerns. Let’s take a brief look at some available techniques often used. One way to create estate tax savings is to utilize annual gift exclusions. Individuals with sufficient assets can use the federal gift exclusion to give up to $17,000 ($34,000 together with a spouse) to an unlimited number of family members or other recipients. Used consistently, this can save considerable estate tax. For example, a $34,000 gift can be viewed as reducing estate tax by $13,600, based on the 40% federal estate tax rate. This savings increases for states that have an estate tax as well, such as Massachusetts. Over time this reduces the estate tax significantly. Trusts are also frequently utilized. There are different types of trusts for different circumstances, and often one trust can combine trusts for nearly every estate out there including; revocable, irrevocable, and charitable trusts. These are some of the most frequently used trust vehicles. Often, dealership owners utilize more than one type of trust in their planning. A common type of trust is a revocable trust, sometimes referred to as a revocable “living” trust. This is a flexible trust where the owner transfers property to a trust while retaining the ability to amend or revoke the trust. This allows them to control, add, and remove property during life. Because it is amendable, the trust can be changed due to life circumstances such as the death or birth of an heir or a change in one’s marital status. Irrevocable trusts are also used, often to make gifts to remove property from the
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owner’s taxable estate. As the name implies, these trusts are not amendable by the grantor, but once property is transferred to them, if correctly implemented, the property is removed from the owner’s taxable estate, and the subsequent growth of the assets benefits the trust beneficiaries, not the owner’s taxable estate. An additional planning tool is a buysell agreement. A buy-sell agreement is an arrangement that eliminates some of the pitfalls associated with succession, including having heirs demand a sale of the business at distressed prices. Generally, there are two types of buy-sell agreements: cross purchase agreements and stock redemption agreements. In a cross-purchase agreement, each owner of the corporation purchases an insurance policy on the other owners. The buyer is both owner and beneficiary of the policies. Upon the death of a co-owner, the other owners can use the insurance proceeds to buy the deceased owner’s interests. In a stock redemption agreement, the business owns policies on the lives of the owners. When an owner dies, the business buys the deceased shareholder’s interest in the company with the insurance proceeds. Estate and succession planning is a fantastic opportunity to provide not just peace of mind for one’s family today, but it provides options for what tomorrow looks like, whether that means additional growth, a new business venture, or charity.
NY, Illinois Dealers Challenge Ford’s Model e Program
Recently a group of Ford dealers in New York obtained a favorable legal decision that granted a stay over Ford Motor Company’s implementation of its Model e Electric Vehicle Program (“Program”) in the state until the dealers’ challenge to the Program is decided. As we discussed in our Novem-
MSADA ber 2022 article, Ford shocked many in the automotive industry last Autumn when it announced the Program and gave its dealers less than two months to opt in. The Program, which is currently being implemented nationally, requires dealers to make significant financial investments of between $500,000 and $1.2 million in charging stations and other infrastructure or be prevented from selling or servicing Ford and Lincoln-branded electric vehicles until at least 2025. The Program also requires dealers to accept trade-in values unilaterally determined by Ford, greatly reducing competition among Ford dealers to the detriment of both consumers and dealers. In response to these drastic changes, several dealers and dealership groups across the country brought legal challenges to the Program under their respective state dealership laws. Late last year, four New York Ford and Lincoln dealers sued Ford in the NY state courts under the state’s Franchised Motor Vehicle Dealer Act, arguing that the Program constitutes an unlawful modification to the dealers’ franchise agreements. The dealers argue that they will lose the ability to sell and service EVs and will eventually be run out of business given Ford’s shift towards the sale of EVs if they decline to participate in the costly Program. The dealers also allege that the Program requires an unlawful allocation of their resources, and that Ford is attempting to impose unfair pricing requirements and profit margin reductions on their businesses. Ultimately, these dealers, like dealers across the country, allege that the Program is an attempt by Ford to bypass the dealer network altogether and sell its vehicles directly to consumers. The New York Franchised Motor Vehicle Dealer Act, similar to our Massachusetts franchise law at MGLA Chapter 93B, protects dealers from unilateral modifications to their dealer agreements that result in negative consequences for the dealer. The legal protections are not limited to modifications in the franchise agreements, but also cover “any change or replacement of any franchise if such change or replacement may substantially and adversely affect the new
motor vehicle dealer’s rights, obligations, investment or return on investment.” The New York dealers moved for an automatic stay of the Program requirements and restrictions until the Court issues a final judgment in the litigation. New York law provides for an automatic stay in cases in which a dealer challenges a modification to its franchise. In response to the motion, Ford argued that the dealers do not qualify for an automatic stay because the Program terms are not modifications to the dealers’ franchises, but rather are reasonable requirements of a voluntary program. In addressing these arguments, the Court stated that the relevant question for purposes of the dealers’ request for a stay was not whether the Program terms are voluntary or reasonable, but whether the effect of the Program arguably modifies the franchise relationship. After analyzing the Program provisions, the Court agreed with dealers that the Program could be interpreted as modifying their franchises. The Court noted that, prior to the implementation of the Program, Ford dealers had sold and serviced Mustang “E” electric SUVs and certain hybrid vehicles, such as the Ford Fusion Hybrid sedan. Given this prior course of performance, as well as the required financial investments, pricing structure changes, and penalties for declining to participate, the Court found that the Program terms could be characterized as “a significant change in the current business model”. Thus, Ford’s Model e Electric Vehicle Program has now been stayed in the state of New York until a final judgment is issued in the case. Ford has appealed the Order. Although the outcome of the New York litigation is still pending, the recent order granting a stay is an encouraging sign for Ford dealers in other states, showing that at least one Court has found merit to dealers’ argument that the Program constitutes an unlawful, unilateral modification to their franchise agreements. Notably, however, the South Dakota Office of Hearing Examiners reached the opposite conclusion in a decision issued last Spring, finding that the Program did not constitute a change to the franchises of South Dakota Ford dealers. Also this year, 26 Ford dealers brought www.msada.org
a similar legal challenge in Illinois, arguing that the Model e Program violates the Illinois Motor Vehicle Franchise Act. In a major victory for dealers, the Illinois Motor Vehicle Review Board determined that Ford violated the Act when it terminated the dealers’ Next-Gen Agreements and prohibited them from selling and servicing Ford EVs after December 31, 2023, unless they enrolled in the Model e Program. The Board disagreed with Ford’s argument that the Program was voluntary, finding that participation was mandatory for dealers to maintain their current status. Having previously made EVs available to dealers to sell, the Board held that Ford cannot take those products away without terminating or substantially modifying their franchise agreements. The Board further determined that Ford violated the Illinois dealer franchise law by requiring dealers to purchase and install EV chargers and offer chargers to the public, which is akin to requiring dealers to offer a secondary product in the form of electricity. Finally, the Board agreed with dealers’ arguments that the Program unfairly burdens dealerships located in rural areas by requiring the same number of expensive fast chargers as dealers in major urban areas. The decision of the Illinois Motor Vehicle Review Board is a significant victory for Illinois Ford dealers that will serve as additional persuasive authority to other courts and governing bodies that are considering these issues around the country. The saga of Ford’s Model e Program serves as an important reminder that dealers need to vigorously assert their rights, as manufacturers make drastic changes and implement programs that often cause harm to dealers and marginalize their role in the sale and servicing of motor vehicles. We will continue to monitor these developments as they play out in legal challenges pending in various states. t Tom Vangel and Jamie Radke are partners at, and Bill Morgan is counsel with, the law firm Murtha Cullina LLP in Boston who specialize in automotive law. They can be reached at 617-457-4072. Massachusetts Auto Dealer
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Labor Board Gears Up for Battle over Employer Handbooks By Joseph Ambash, Jeff Fritz, and Joshua Nadreau, Partners, Fisher Phillips LLP Last month the National Labor Relations Board (NLRB) changed the law again on employee handbooks, rejecting a commonsense approach endorsed during the Trump administration in favor of a muddled, afterthe-fact assessment of workplace rules and policies. What does your dealership need to know about these changes?
Labor Law 101
Section 7 of the National Labor Relations Act (NLRA) protects employees’ right to “engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” Section 8 of the Act makes it an unfair labor practice for an employer “to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in Section 7.” These legal protections apply to all employees, not just employees in unions. Historically, the NLRB was relatively hands-off in the non-union space. However, in recent years, Democratic members of the NLRB have sought to regulate non-union employers, particularly through burdensome rules relating to employer handbooks.
What Changed?
Under the new standard, the Board analyzes whether an employee “would reasonably construe” the applicable rule or policy as chilling protected conduct under Section 7 of the NLRA. To avoid a violation, employers must now show workplace conduct rules are narrowly tailored to special circumstances justifying any infringement on employee rights. The NLRB now returns to a test similar to the one first adopted during the Obama administration. The new standard subjectively examines whether a workplace rule or policy has a reasonable tendency to interfere with employees’ exercise of Section 7 rights. In other words, if an employee could reasonably interpret the rule to be coercive (even if a noncoercive interpretation is also reasonable), then the burden shifts to the employOCTOBER 2023
er to justify it. Employers may rebut this presumption only by proving the rule advances a legitimate and substantial business interest, and they are unable to advance that interest with a more tailored iteration. Any ambiguous rules will be construed against the employer. The new standard applies retroactively. While the new standard does not necessarily invalidate an entire handbook, it means certain provisions could now be deemed unlawful. Enforcement of those policies for disciplinary or related purposes may subject employers to unfair labor practice charges, along with the potential for back pay and other damages. Many employers add a disclaimer to their handbook to note the policies are not intended to interfere with employees’ Section 7 rights, but this alone may not be sufficient to avoid violating the new standard, particularly with respect to policies that are otherwise deemed to be coercive or overly broad.
What Does This Mean for Us?
The following three policies are now likely to be deemed unlawful: workplace civility rules, restrictions on video and/or cell phone recording, and loitering rules. 1. Workplace civility rules: Such rules requiring employees to positively engage with co-workers or avoid being insubordinate are likely to be deemed unlawful under the new standard. If the past is any indication, such examples may include the following policies: • “False, vicious, profane or malicious statements toward or concerning the … employer or any of its employees” are prohibited. • Expecting “employees to behave in a professional manner that promotes efficiency, productivity, and cooperation … to maintain a positive work environment by communicating in a manner that is conducive to effective working relationships with internal and external
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customers, clients, co-workers, and management.” The NLRB has previously found employees could reasonably construe each of these rules to coercively interfere with the exercise of Section 7 rights in violation of the NLRA during the Obama administration. 2. Restrictions on video and/or cell phone recording: You should expect such policies may no longer be lawful and should therefore evaluate similar restrictions to determine whether revisions need to be made. A policy that states “However, use of these devices to capture images or video is prohibited without a valid business need and an approved Camera Permit that has been reviewed and approved by Security” is likely to be held overbroad, and thus unlawful, as it could be “reasonably” interpreted to prevent recording activities protected by Section 7. 3. Loitering rules: A policy stating “At no time are you to loiter around the premises off duty” was previously deemed unlawful. The NLRB specifically held “an employer’s rule denying access to all off-duty employees to all areas of its premises violates the Act unless there are legitimate business concerns to justify the rule or policy.” Employers maintaining such rules will need to evaluate whether they can continue to be enforced given the circumstances and particular working conditions.
How Should You Respond to this New Ruling?
This decision is only the beginning of the Board’s efforts to turn back the clock to similar rulings regarding social media, confidentiality policies, employee communications, and workplace conduct. Employers are encouraged to continue working with their legal counsel to stay up to speed on the latest developments in this rapidly evolving regulatory environment. t
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Patrick Manzi
NADA Senior Economist
Boyi Xu
Economist
New light-vehicle sales in October 2023 totaled a SAAR of 15.5 million units, up 5.6% from October 2022’s 14.7 million. Sales cooled at the end of October, finishing below expectations, but still marked the 14th straight month of yearover-year SAAR increases. According to Wards Intelligence, preliminary estimates of sales losses resulting from the UAW strikes totaled 35,000 units. Still, lost sales from strike-affected OEMs do not appear to have been made up by other OEMs, Wards Intelligence adds. New light-vehicle sales continue to head toward a mix of 80% light trucks versus 20% cars, with light-truck sales accounting for 79.6% of total sales year to date through October 2023. The crossover segment continues to be the most popular, accounting for 47.2% of new vehicles sold so far this year. Sales of alternative-fuel vehicles—hybrids, plug-in hybrids, and battery electric vehicles (BEVs)—represented 16.4% of all new vehicles sold year to date. BEVs sales alone accounted for 7.2% of alternative-fuel vehicle sales. Total annual BEV
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sales should top 1 million units for the first time, as 916,047 BEVs have been sold so far in 2023. Although the strike’s impact on production was significant, totaling roughly 200,000 units, total industry inventory was not significantly affected. New light-vehicle inventory on the ground and in transit at the beginning of October totaled 2.06 million units and October’s month-end inventory totaled 2.15 million units, an increase of 4.4%. We believe that inventory levels will continue to build throughout the remaining two months of the year, yet financial impacts of production stoppages at the strike-affected OEMs will be significant. Now that all three strike-affected OEMs have tentative agreements in place, vehicle production should resume over coming days as union members learn about the new agreements and vote to ratify them. Even so, there remains a risk that union members at one or more of those OEMs will vote down the proposed agreements and resume striking. t
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AIADA Brief
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Thankful and Thinking Ahead By Cody Lusk President & CEO, American International Auto Dealers Association
As I write this, Congress not only is deeply divided along party lines, it is also beset by GOP intra-party conflict, making any attempt at negotiation or compromise nearly impossible on a number of matters. Having dodged one potential government shutdown in September, Congress is pushing the limit again as a result of a recent speakership fight in the House that did not resolve itself for three weeks. The United States is also caught up assisting two countries in on-going martial conflict – Ukraine and Israel – the funding for which is not settled amid the ongoing Congressional chaos. There is significant pessimism on both sides of the aisle that any type of spending agreement will be reached in time on anything. For most Americans it is difficult to imagine how Congress has reached this low point and how it can possibly redeem itself as a functional institution. For car dealers, who have dedicated their lives to building a business that serves their communities and employs dozens, if not hundreds of Americans, Congress’ behavior is especially head scratching. As troubling as the current state of affairs is on Capitol Hill, it is worth remembering that, on the individual level, most members of Congress are striving to represent their constituents fairly and vigorously. Regardless of this ever-present political strife, every year around this time, Americans look forward to gathering with their loved ones to give thanks. As auto dealers, you have more than most for which to be thankful in 2023, including high quality products, healthy consumer demand, and a OCTOBER 2023
skilled workforce. Of course, like anyone with a lot to be thankful for, you also have a lot to protect and defend. For dealers who want their stores to continue to thrive in the coming months and years, it will pay dividends to be forward thinking on some of the hot button political issues we face today. They range from new environmental policy, technology and financial regulation, tax reform, and global trade. Unfortunately, businesses like yours are in the crosshairs of policy makers from both the progressive left and the populist right. There is a growing consensus, in D.C. and around the country, that global
EVs are already piling up, and the manufacturers and dealers who express any support for a more gradual transition are facing serious blow back in the media and from Washington, D.C. trade is no longer an important factor in the health of our economy. Just as worryingly, we are also seeing a developing movement away from healthy market fundamentalism and toward an American economy where businesses, large and small, are highly regulated by government entities. That is, simply put, bad news for both dealers and for American consumers. More regulation will not make vehicles more affordable, and it will not speed innovation. In fact, as with the EPA’s most recent efforts to force Americans to buy electric vehicles, it could have the opposite effect. In April, the EPA proposed its strictest ever tailpipe emission standards which would require that two-thirds of all light vehicles sold in the U.S. be electric by 2032. Currently, that number hovers around seven percent. The EPA’s goal is beyond ambitious and verging on fantastical. Which
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is not to say that dealers are not committed to a green transition, only that dealers are realists who want to that transition to be achievable and sustainable. After all, the consequences if we get this wrong are serious, and the biggest beneficiary could be China. What the EPA is doing is industrial policy at its worst. Government bureaucrats are throwing out a goal that sounds nice and disregarding entirely the necessary building blocks needed to support it. Building blocks that include expanded domestic production capabilities, a vastly improved electric grid, and a functional national charging infrastructure. Who’s going to pay for this impracticality from our government? Well, manufacturers can ultimately build the required electric vehicles. And they can push them to their dealer bodies. But will dealers be able to convince skeptical Americans that these vehicles actually work for their commutes and their budgets? It is worth nothing that in 2022 the average vehicle transaction price for an EV was 20 percent higher than that of an internal combustion engine (ICE) vehicle. On this issue, the rubber will meet the road on your sales floors. On many dealer lots, EVs are already piling up, and the manufacturers and dealers who express any support for a more gradual transition are facing serious blow back in the media and from Washington, D.C. Luckily, AIADA is ready to fight this battle on Capitol Hill and beyond. The ability to engage directly with your lawmakers is more important today than ever before. All we need is your support and a commitment to remain politically attentive and engaged. You need to make your voices heard on the issues that are shaping our industry. By thinking ahead and working with organizations like AIADA, you can impact future policy and protect your business. The alternative, unfortunately, is having a little less to be thankful for with each coming year. t
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ATD Maintains Efforts for Truck Dealers
By Scott McCandless Chairman, American Truck Dealers Scott McCandless is president of McCandless Truck Center in Aurora, Colorado, and a truck industry veteran with 40-plus years of experience.
As ATD prepares for the upcoming February 2024 Show in Las Vegas, the wheels of government keep churning along. Congress and the federal regulatory agencies have plenty of initiatives before them – some that are helpful and others quite adverse to our industry. Your ATD Board and Laura Perrotta, our ATD president, have been working tirelessly on behalf of our member truck dealers to stymie the more harmful policies of the Biden administration while seeking relief within Congress.
ATD Opposes “Right to Repair” Legislation (H.R. 906) On October 30, the Truck and Engine Manufacturers (EMA) sent a letter to House Energy and Commerce Committee leadership opposing H.R. 906, the so-called “Right to Repair” bill. EMA expands on the ATD Board of Line Representatives letter that was sent to House Energy and Commerce Committee leadership on June 16, and requests amending the bill to exclude commercial vehicles with a GVWR greater than 10,000 pounds. Additionally, an industry stakeholder letter signed by NADA opposing the bill was sent on October 31.
EPA Delays Finalizing GHG Phase 3 On September 29, ATD leadership met with Joe Goffman, Principal Deputy Assistant Administrator, Office of Air and Radiation; Sarah Dunham, Director, Office of Transportation and Air Quality; and Bill Charmley, Director, Assessment and Standards Division, Office of Transportation and Air Quality, US Environmental Protection Agency (EPA), to continue to raise our concerns on the EPA Greenhouse gas (GHG) Phase 3 proposal. Mr. Goffman is one of the key decision-makers finalizing this overly aggressive rule. ATD raised concerns on the timeline, stringency, cost, and lack of electric vehicle infrastructure to achieve the rule proposed this past Spring. Subsequently, on October 20, ATD received a call from the EPA that they would postpone finalizing their GHG Phase 3/EV mandate rule until March 2024 rather than finalizing the rule this December as planned. This delay can be attributed to the increasing evidence ATD and other trucking stakeholders have provided EPA showing that EPA is moving too far, too fast. ATD leadership has been telling the EPA how our members are making a significant invest-
ment to sell and service electric trucks (to the tune of roughly $1 billion), while at the same time the agency is needlessly attempting to finalize a rule of this magnitude just nine months after it was proposed. On November 2, NADA/ATD sent a letter to the House leadership in support of H.R. 4821, the House Interior – Environment Appropriations bill. The bill would pause for one year the light and heavy-duty GHG/EV mandate rulemakings. Due to the Democratically held Senate and the Biden Administration’s climate change agenda, this language will likely pass the House but will have a difficult path to be signed into law. We will continue to ensure that policymakers understand how the EPA’s ZEV proposal sets targets that are unachievable and will cause major problems for the truck market and our economy.
Announcing the ATD Show 2024 Education Lineup Before heading to Vegas, you can sign up for workshops focused on “Driving the Future” of your truck dealership and our industry. ATD Show 2024 will support the dealerships of tomorrow by teaching dealers how to hire the best personnel, grow existing talent, stay on top of what consumers need and want, and how to stay ahead of trends that affect their businesses. Do not delay: Access the complete ATD education lineup now and join us February 1–3 at the Wynn Las Vegas. Registration and workshop info is available at www.nada.org/atd-show/atd-attendee-registration.
ATD Line Representative Election Results for International, Mack and Volvo ATD is pleased to announce that Korey Neal, CEO of K. Neal Truck and Bus Center in Hyattsville, Maryland, has been elected as the new International Line Representative on the ATD Board. Jon Pritchett, president of Nextran in Lake Butler, Florida, has been re-elected as the Mack Line Representative, and Kim Mesfin, president of Affinity Truck Center in Fresno, California, has been re-elected as the Volvo Line Representative. The new terms start on the last day of the 2024 ATD Show in Las Vegas and end on the last day of the 2027 ATD Show. t
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NADA Update
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Washington Conference Concludes as Prep Continues for 2024 Show Scott Dube, Partner at McGovern Hyundai Rt. 93, represents NADA’s Massachusetts members on the NADA Board of Directors. He can be reached at sdube@ mcgovernauto.com. We had another successful Washington Conference where your MSADA representatives and your fellow dealers’ footsteps echoed in the halls of our Nation’s Capital. You can find more details of our trip in this month’s magazine, including NADA’s key legislative issues for this year. I want to give a heartfelt “thank you” to our hardworking MSADA and NADA staffs and all the dealers from across the country who took the time to make the trip to D.C. Our collective voice is that much stronger when we band together. Finally, our NADA Show 2024 in Las Vegas is coming up on February 1-4. It is not too late to register. The exhibition floor space is sold out, and hotel rooms are going fast. You can find all the necessary registration information on www. nada.org.
Women Driving Auto Retail – Amplifying Female Employment in Dealerships Women Driving Auto Retail is an NADA initiative empowering women in the retail automotive industry. It aims to amplify the voices of women working in our industry as well as increase female employment in dealerships by providing dealers tools and expertise. Periodically NADA shares the stories of individual women who have found a career in the auto retail realm. My Career in Auto Retail: Lessons from the Service Department The dealership service department has often been considered a “man’s world”, but women have been breaking that stereotype in increasing numbers. Two women from the McGovern Auto Group, which has locations in Massachusetts, New York, and New Hampshire, shared what drew them to their careers in the service department. Stephanie Hanlon wanted a job that matched her personality, so when she applied for a dealership position, she knew she wanted to be working with the vehicles. Customer-facing positions do not interest Hanlon. OCTOBER 2023
“I’m not very good with people one-on-one, so cars were more of my thing,” she says. “They don’t’ talk back.” Hanlon started with her sister as express technicians (responsible for changing oil, rotating tires, routine maintenance, etc.). Now 10 years later, she is a partial manager at Toyota of Nashua, helping to oversee the express department and supporting the senior manager. Soon she hopes to be in management full-time. “We are the man behind the curtain. [People in sales] always have to have a smile on their face while we’re in the back screaming our heads off because a nut won’t come off,” she said. “I’m by myself. I can put my music on. I can get my jobs done and have no issues.” Hanlon works four days a week, which is full-time in her department and provides her with an income that more than supports her lifestyle. She said it is common for technicians at her store to work even three days a week. She busts the myth that the job has physical requirements: “I’m five-foot-nothing and weigh 120 pounds. If I can do it, other women can, too.” If you are self-motivated with tough skin, Hanlon says anyone can find a place and grow a career in the service department. No Experience Necessary Ten years ago, Shannon Gallant applied for a job as a porter at Toyota of Nashua. She could drive manual and had a little interest in cars, but no experience in automotive retail or working on vehicles. Instead, the dealership offered to train her to become a technician. “I thought they were crazy,” Gallant says. “I didn’t even know what an oil filter was. I was game for it, and it was really fun.” Gallant learned from scratch, everything from putting the cars on lifts to performing oil changes. Management sent her to school to get certified in general maintenance, then offered her the opportunity to get more certifications to take on more complex repairs. Instead, Gallant pivoted to a position as a service advisor. By this time, Gallant had been a technician for six years, and she was ready to work in a more customer-facing role. In her current role, Gallant also spends time in the recruiting and community efforts of McGovern Auto Group. She especially enjoys helping educate young women and girls about the automotive industry. “I didn’t think of automotive when I was growing up,” Gallant says. “Obviously I’m a girl, and I think that’s why. I loved how easy it was for me because school wasn’t easy for me.”
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MSADA Now Gallant helps share that with the next generation. “Just because there are a lot of men in these jobs doesn’t mean you can’t do it,” she tells them.
Can My Dealership Be ENERGY STAR Certified? The short answer is yes! Through NADA’s partnership with the Environmental Protection Agency’s (EPA), dealers are now eligible to apply for ENERGY STAR certification. ENERGY STAR helps building owners and managers determine the most cost-effective approach to managing their energy use—enabling dealerships to save energy and money and boost competitiveness. For buildings, eligibility for ENERGY STAR certification means a dealership performs more efficiently than 75% of similar buildings nationwide. NADA and the EPA have been able to create an ENERGY STAR certification baseline for franchised dealerships. Now dealers can apply to receive certification and earn recognition for their efforts to save energy, save money, and help protect the environment. Starting on Tuesday, November 14, dealerships can apply for certification using the ENERGY STAR Portfolio Manager tool, which provides dealers with a 1 to 100 score on their energy use. Dealerships with energy performance scores of 75 and higher will be eligible to earn the ENERGY STAR designation and will receive a certificate of achievement. On Friday, November 17, the EPA and NADA will host a webinar at 1pm ET for dealers to learn more about the score and how to get started. Go to www.nada.org to register for the webinar.
NADA Academy Students Warm Hearts and Feet with Sock Donations to Local Shelters October is a month known for falling leaves, pumpkin spice lattes, and cool autumn breezes. However, it is also a time when the spirit of giving takes center stage. Students from the NADA Academy recently demonstrated the power of community and compassion as they participated in the annual Sock-tober: donating socks to local homeless shelters. This act of generosity was a testament to their commitment to service and a reminder of the simple ways we can make a difference. When it comes to donating to homeless shelters, we often think of food, clothing, and blankets. Yet, one essential item is often overlooked but is in high demand—socks. They play a crucial role in preserving warmth and health. The impact of the sock drive was felt across the community. Local homeless shelters, which often struggle to meet the demands of their clients, received a much-needed boost. Moreover, the initiative reinforced the importance of social responsibility, empathy, and the positive influence a united
community can have. The NADA Academy had 12 classes on-site in Sock-tober, who competed each week to donate the most socks. By driving each other on, they were able to donate a total of 21,158 pairs of socks.
Detroit and Korea’s $28 Billion Battery Bets Risk Going Sideways (Bloomberg News) Weeks of tense bargaining around Detroit are making battery manufacturers some 6,600 miles away nervous. LG Energy Solution Ltd., SK On Co., and Samsung SDI Co. have planned about $28 billion of investment along with General Motors Co., Ford Motor Co., and Stellantis NV in US electric-vehicle battery factories they will run as joint ventures. Those plants are major sticking points in contract negotiations between the three automakers and the United Auto Workers, which wants to unionize the 19,600 people the companies plan to hire. While South Korea’s three biggest battery suppliers have kept a low profile during a more than month-long strikes at GM, Ford, and Stellantis facilities, they are anxious about the union pressing for substantial wage increases, according to Kim Kwang-ju, chief executive officer of SNE Research. Some companies, including component makers that have announced significant investment in the US, are reconsidering their plans, he said. “The cost of running plants in the US is already about twice the cost of other regions,” Kim said. “The atmosphere of the industry is not good these days — battery prices are falling, and inventory is rising due to weaker-than-expected demand for EVs.” The UAW’s push to organize the battery factories — all but one of which has not opened yet — is sapping some of the enthusiasm from projects the companies have billed as transformative. While higher labor costs risk being a longterm issue, copious amounts of government funding will be coming their way. The Inflation Reduction Act will award companies billions of dollars’ worth of tax credits toward cell and pack manufacturing, and the Department of Energy has offered to loan Ford and GM’s ventures a combined $11.7 billion. With GM and Ford putting off some EV investments, South Korea’s battery manufacturers may want to rethink whether they need to build so many plants in the US, said Park Chul-Wan, an automotive professor at Seojeong University. “We were too optimistic about the IRA, just thinking about the credits only,” Park said. “They should consider slowing down the pace of aggressive investments in the U.S.” t
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