September 2013 MSADA magazine

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

auto M A S S A C H U S E T T S

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FIRST CLASS MAIL US POSTAGE PAID BOSTON, MA PERMIT NO. 216

September 2013 • Vol. 26 No. 9

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

Inside Washington

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S TA F F D I R E C T O R Y Robert O’Koniewski, Esq. Executive Vice President rokoniewski@msada.org Jean Fabrizio Director of Administration jfabrizio@msada.org Peter Brennan, Esq. Staff Attorney pbrennan@msada.org Paul Fellows Administrative Assistant/ Membership Coordinator pfellows@msada.org

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Subscriptions provided annually to Massachusetts member dealers. All address changes should be submitted to: MSADA by e-mail: pfellows@msada.org

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Quarter Page: $450 Half Page: $700 Full Page: $1,400

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Auto Dealer is published by the Massachusetts State Automobile Dealers Association, Inc. to provide information about the Bay State auto retail industry and news of MSADA and its membership.

AD DIRECTORY Bank of America, 2 BlumShapiro, 23 Boston Herald, 32 Leader Auto Resources, 25 Lynnway Auto Auction, 22 Nancy Phillips Associates Inc, 23 O’Connor & Drew, P.C., 31 Southern Auto Auction, 20 ADVERTISING RATES Inquire for multiple-insertion discounts or full Media Kit. E-mail tnash@msada.org

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Postmaster: Send address change to: One McKinley Square, Sixth Floor Boston, MA 02109

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

Robert O’Koniewski, Esq. Executive Editor Catherine MacDonald Editorial Coordinator macdonaldcs8@gmail.com

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FROM THE PRESIDENT: A Tale of Two Hills THE ROUNDUP: Around and Around They Go LEGISLATIVE SCORECARD TROUBLESHOOTNG: The Importance of a Record Retention Policy ACCOUNTING: Start Your 2013 Tax Planning Now AUTO OUTLOOK LEGAL: U.S. Department of Labor Continues to Investigate Massachusetts Dealerships ACCOUNTING: Are You Savvy About F&I Employee Fraud?

16 COVER STORY: Inside Washington

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TRUCK CORNER: Lobbying Legislators During the Washington Conference NEWS From Around the Horn NADA UPDATE NADA MARKET BEAT Join us on Twitter at @MassAutoDealers www.msada.org

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from the PRESIDENT

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by Scott Dube, MSADA President

A Tale of Two Hills Making sure our voices are heard

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t’s high season for making sure our lawmakers know our story.

That means most of MSADA’s activities come under the spotlight, and our signature issues are hopefully getting the ear of representatives both in Washington and on Beacon Hill.

Earlier this month, a delegation consisting of Executive Vice President Robert O’Koniewski, Vice President Chris Connolly, Clerk Charles Tufankjian, NADA Director Don Sudbay, and ATD Chair Dick Witcher journeyed to Capitol Hill as a part of NADA’s annual Washington Conference.

The Washington Conference is a chance to make sure our representatives understand that we continue to struggle under the weight of a down economy, and that the policies they pursue should be focused on making it easier to do business, not harder. We aren’t seeking any special favors or privileges, just a level playing field.

Each year the same general principle is under attack: free enterprise. Of course, the scope of that problem is well beyond any one industry. We keep our punch list short and stick with making sure our legislators understand that tax increases and regulatory changes may seem copacetic while dreaming them up in the halls of power, but back in Braintree or Northampton or Framingham the small businesses that make up the fabric of those communities are being tugged at the seams.

We’ll get into a little more detail about what these issues are in this month’s cover story and Bob’s column. As usual, unfortunately our delegation has its work cut out for it as Congress continues to back initiatives such as the Consumer Finance Protection Bureau and ridiculously unrealistic gas mileage initiatives. But we can never stop putting effort into making sure our

representatives know who we are, what we do, and how vital our contribution is to our districts.

We may not agree on every issue, but as folks like Ray Ciccolo have proven these past couple of years, when the chips are down the time put into establishing these relationships can really pay off.

All of this work is done for the benefit of our member dealers, who are working tirelessly day in and day out to make their businesses succeed. They’re putting food on the table for their families, and by extension are doing the same on average for 50 employees in their stores. They don’t have time to make a trip down to Washington, and that’s why we feel privileged to speak on your behalf.

Our October 2 Dealer Day on Beacon Hill is an occasion when we’re able to offer all member dealers the chance to interact with their State House legislators in the same way your Washington MSADA Delegation visits with legislators on Capitol Hill. It’s an important part of making sure the folks who vote on issues such as “Right to Repair” and 93B franchise law changes understand who they’re representing when they take these votes.

I’d like to thank all of you for your participation in this important event. It’s a big commitment to take even a few hours away from your businesses – as dealers ourselves we understand that.

I’d also like to thank our Washington Delegation for literally going the extra mile(s) to make sure our voice is heard. It can be a slog, especially given the nature of our Congress right now, but they remember who they’re putting in the time for and I hope you’ll join me in showing them our appreciation.

All of this work is done for the benefit of our member dealers, who are working tirelessly day in and day out to make their businesses succeed.

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A ssociate M ember D irectory Name

MSADA BOARD Barnstable County Gary Beard, Dick Beard Chevrolet

Berkshire County Brian Bedard, Bedard Brothers Auto Sales

Bristol County Richard Mastria, Mastria Auto Group

Essex County William DeLuca, Woodworth Motors John Hartman, Ira Motor Group

Franklin County Jay Dillon, Dillon Chevrolet

Hampden County Jack Sarat, Jr., Sarat Ford

Hampshire County Bryan Burke, Burke GMC

Middlesex County Chris Connolly Jr., Herb Connolly Motors Scott Dube, Bill Dube Hyundai

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

Plymouth County Christine Alicandro, Marty’s Buick GMC Isuzu

Suffolk County Robert Boch, Expressway Toyota

Worcester County Steven Sewell, Westboro Mitsubishi Steve Salvadore, Salvadore Auto

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

Immediate Past President James G. Boyle, Tuck’s Trucks

NADA Director Don Sudbay Jr., Sudbay Motors

OFFICERS President, Scott Dube Vice President, Chris Connolly, Jr. Treasurer, Jack Madden, Jr. Clerk, Charles Tufankjian

Contact Telephone

ADESA Boston Chris Carli (508) 270-5403 ADP Dealer Services Maria Trezza (973) 404-4466 Albin, Randall & Bennett Barton D. Haag (207) 772-1981 American Fidelity Assurance Co. Tom Trudell (413) 885-5477 AutoRaptor (RAL) Howard L. Leavitt (401) 421-6533 Bank of America Merrill Lynch Lawrence Corrente and Nancy Price (781) 534-8543 Bellavia Blatt Andron & Crossett, PC Leonard A. Bellavia, Esq (516) 873-3000 Blum Shapiro John D. Spatcher (860) 561-4000 Boston Globe Mary Kelly (617) 929-8373 The Boston Business Advisory Group Paul Cuomo (781) 681-1501 Vincent Saccone (781) 681-1519 Burns & Levinson LLP Paul Marshall Harris (617) 345-3854 Construction Management & Builders, Inc. Kate Sullivan (781) 246-9400 CVR Scott Herbers (714) 684-2614 DealerDOCX Merchon Brower (585) 451-3322 DealerTrack Ernest Lattimer (516) 547-2242 Downey & Company James Downey (781) 849-3100 EasyCare New England Inc. Mike Douglas (770) 246-9724 Ethos Group, Inc. Drew Spring (617) 694-9761 F & I Resources Jason Bayko (508) 624-4344 Federated Insurance Chris Welch (724) 766-6666 First Citizens Federal Credit Union Joe Ender (508) 979-4728 Fisher & Phillips LLP John Donovan (404) 240-4236 Joe Ambash (617) 532-9320 Grant Thornton LLP Alan Oslomowski (508) 926-2200 GW Marketing Services Gordon G. Wisbach Jr. (781) 899-8509 Huntington National Bank John J. Marchand (781) 326-0823 Key Bank James Q. Moretti (781) 558-5132 Leader Auto Resources, Inc. Brendan J. Murphy (518) 878-6341 Lynnway Auto Auction Jim Lamb (781) 596-8500 M & T Bank John Federici (508) 699-3576 MetroMedia Energy Timothy Teevens (800) 828-9427 Micorp LLC Ryan Kim (508) 832-9816 Mid-State Insurance Agency James Pietro (508) 791-5566 Mintz Levin Kurt Steinkrauss (617) 542-6000 Murtha Cullina Thomas Vangel (617) 457-4000 Nancy Phillips Associates, Inc. Nancy Phillips (603) 658-0004 O’Connor & Drew, P.C. Kevin Carnes (617) 471-1120 Performance Management Group, Inc. Mark Puccio (508) 393-1400 Ray-Jurgen Richard Thibadeau (860) 585-0111 R.L. Tennant Insurance Agency, Inc. Walter F. Tennant (617) 969-1300 Resource Management Group J. Gregory Hoffman (800) 761-4546 Reynolds & Reynolds Marc Appel (413) 537-1336 Robinson Donovan Madden & Barry, P.C. James F. Martin, Esq. (413) 732-2301 Samet & Company John J. Czyzewski (617) 731-1222 Schlossberg, LLC Michael O’Neil, Esq. (781) 848-5028 Sentry Insurance Company Eric Stiles (715) 346-7096 Shepherd & Goldstein Ron Masiello (508) 757-3311 Silverman Advisors, PC Scott Silverman (781) 591-2886 Southern Auto Auction Tom Munson (860) 292-7500 Sovereign Bank Richard Anderson (401) 432-0749 Target Dealer Services Andrew Boli (508) 564-5050 TD Auto Finance BethAnn Durepo (603) 490-9615 TD Bank Michael M. Lefebvre (413) 748-8272 Wells Fargo Dealer Services Christopher Peck (508-314-1283) Wicked Local Media Massachusetts Jay Pelland (617) 757-5571 Zurich American Insurance Company Steven Megee (800) 443-4513

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The Roundup

Around and Around They Go

by Robert O’Koniewski, Esq. MSADA Executive Vice President What would our annual Washington Conference be without Democrats complaining about Republicans, Republicans complaining about Democrats, and everyone bemoaning the fact that a government shutdown is inevitable unless the other side blinks first?

This month your MSADA visited the marbled confines of Washington DC and witnessed the dysfunction (once again) that we proudly hail as our government. “Gridlock” and “hyper-partisanship” seem to be the two terms that have become permanently attached to descriptions of “the federal government,” and with them come the in-fighting, name calling, and pouty face countenances exhibited by our elected officials we’ve come to expect in our visits and the speeches we hear.

This time around, the one question that seemed to be on everyone’s mind was, “Will the government shutdown?” All parties were focused on the budget impasse and its looming government shutdown on October 1 if no budget resolution is approved, seemingly held up by how the rollout and funding of Obamacare will be treated going into the fiscal year starting that day.

Now mind you, sometimes getting nothing done can be a good thing. But when your audience is a group of small businessmen and women who have given up time from their dealerships and families to fly to Washington to discuss issues important to their stores and getting the economy going in a positive direction, the political fighting in the sandbox we see firsthand appears rather immature, unprofessional, and tiresome. At some point you just want to ask them, “Well, if you’re

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so miserable down here, why not go do something else?”

By the time one receives this publication, we may or may not know what happened to the FY2014 budget situation, the rollout of Obamacare, or even the upcoming debate on increasing the country’s debt ceiling. What we do know, however, is that each and every day the Administration seems to roll out more anti-business proposals that make it increasingly difficult for small businesses, just like your dealerships, to succeed in a challenging economy. Hence, the even greater 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.

Hence, to the ramparts we go.

This year saw a hardy Association contingent travel to Washington DC to participate in NADA’s 38th Annual Washington Conference. In our Massachusetts delegation we had MSADA Vice President Chris Connolly (Herb Connolly Motors); MSADA Clerk Charles Tufankjian (Toyota of Braintree); Massachusetts NADA Director Don Sudbay (Sudbay Auto Group); ATD Chair Dick Witcher (Minuteman Trucks); our Next Gen dealer representative, Emily Dube (Bill Dube Hyundai); MSADA legislative agent Jim Hurrell; MSADA attorney Peter Brennan; and me.

Dealers from across the country use the Washington Conference each year to meet with their Senators and Representatives to discuss various legislative and regulatory issues affecting their dealership operations. This is also a chance for

MSADA dealers to see their congressmen and women in the halls of power where they conduct their business, in contrast to the usual district functions like chamber of commerce rubber-chicken luncheons and ribbon cuttings.

NADA, as part of the festivities, schedules politicians and commentators to provide attendees with a flavor of the current situation in Washington and what may be in store for elected officials and special interests prospectively. This year’s crop of speakers included Sen. Ted Cruz (RTexas), who was just warming up for his upcoming semi-filibuster on Obamacare; Rep. Gary Peters (D-Michigan); Rep. Cathy McMorris Rodgers (R-Washington); first-term Rep. Eric Swalwell (D-California), who addressed the NextGen Reception; David Strickland, the Administrator for the National Highway Traffic Safety Administration; and political strategist and commentator Karl Rove, whom many will recall as the architect of two George W. Bush victories for the White House.

After all the speechifying, we taxied over to the Capitol to engage our Congressional members in dealer dialogue on such issues as the Consumer Financial Protection Bureau (CFPB), the proposed repeal of LIFO, the value of the dealer franchise system, and the proposed hike in the truck federal excise tax. On the House side, we met with Congressmen Steve Lynch (D-South Boston), Jim McGovern (D-Worcester), John Tierney (DSalem), William Keating (D-Bourne), and Michael Capuano (D-Somerville). We are familiar faces for them all, as we make the effort to sit down with them regularly back home in Massachusetts.

Our MSADA members need to be aware that each member of our House delegation, despite their Democrat party registration and mostly liberal voting record, has been very helpful to us over the years on dealer-related issues. They always have been open to our point of view on policies that directly impact operations at your dealerships. No, they are not going to be for eliminating the estate tax or

pushing for lower income taxes. But if a policy or law can be tweaked in a way that would hold dealers harmless and still achieve the desired result – each has exhibited an ability to work toward that end.

They each recognize the contributions that dealers make to the economic landscape and their communities here in Massachusetts – jobs, taxes, charitable giving, etc. And each realizes that as goes our industry, so goes our country’s economy.

Moving forward, we need to keep in mind that for two days we were only a handful of people going door to door to visit our elected representatives in Washington. Back home, however, we are an association of 412 members, whose dealerships employ on average 50 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 congressmen and local legislators, we ask that you not be shy and let others carry the load. All dealers - big and small, domestic makes and foreign - 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 such an issue arises.

In that vein, as we go to press, we are preparing for our annual Dealer Day on Beacon Hill, on October 2. This is a great opportunity for you to sit down at the State House with your legislators to discuss those issues in the automotive industry that dealers are presently confronting.

Just like we do in Washington, it is extremely helpful to our lobbying efforts for legislators to see their constituents face to face and receive a perspective they don’t have in the normal course of their activities. No one knows your business better than you. That knowledge needs to be conveyed to your legislators in an environment and manner they understand,

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hence our Dealer Day on Beacon Hill. If you cannot attend this year, please make the effort for next Spring.

Tech Tax - Gone When last we left you, the Legislature and the governor were pointing fingers at who was to blame for the passage of the software and computer services sales tax that created such an outcry from the business community, including the state’s growing high tech sector.

Well, in the time it takes to say “What tech tax?” the Legislature passed, and the governor signed, a bill repealing the tax.

The bigger issue the governor and Legislature will face is how to plug the $161 million gap in the $500 million tax hike package that the tech tax represented. But that’s a problem for another day.

Further down the line, another issue that will pop up leading into the 2014 election is a potential repeal of the automatic indexing of the gas tax increases to the inflation rate. As you may recall, when the Legislature increased the gas tax this year, they also attached an amendment to it that allows the tax to increase every year at the rate of inflation.

A group has sprung up that is attempting to have a ballot question filed for next year’s election that would strike the automatic indexing part of the tax hike. Members of the group presently are collecting signatures to begin the petition process.

The question to keep in mind: When revenue projections fall short, where will our elected officials go to fill the gap?

That is why we are ever vigilant.

Wage-Hour Guide We have published our 2013 Guide to Wage and Hour Compliance and Other Human Resources Topics, authored by attorney John Donovan of Fisher & Phillips LLP, an MSADA associate member. The Guide contains new material on statutory and regulatory changes as well as expanded explanatory text for all your wage-hour needs. A complimentary free copy was sent to each of our member dealer prin-

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The Roundup cipals. Members can access the Guide for free with a member log-in on our web site, www.msada.org, or purchase additional hard copies for $25 each; the non-member price is $50 each. Contact us at jfabrizio@msada.org if you wish to buy a hard copy or need assistance with your member log-in. For wage-hour questions, contact me at rokoniewski@ msada.org.

Obamacare: Employer Notices to Employees by October 1 No later than October 1, 2013, all employers with at least one employee and $500,000 of revenue must send their employees notices providing them information about the existence of health insurance exchanges. This applies to both for profit and non-profit entities, including institutions of higher education.

These notices, as required under Obamacare, must inform employees as to: • The existence of health insurance exchanges; • A description of services provided by the exchange; • How to contact the exchange to request assistance; • The employee’s potential eligibility for subsidized coverage on the exchange if the employer’s plan does not provide “minimum value”; and • The fact that the employee may lose the employer contribution toward health insurance coverage if he/she purchases coverage on the exchange.

If applicable, you should contact your health insurance provider to inquire as to what they are doing to make sure you are in compliance with these notice requirements. Otherwise, you should issue the required notices to all current employees, no later than October 1, 2013.

The Department of Labor (“DOL”) has issued model notices that are designed to meet the necessary requirements. For the DOL model notice to be used by employers that offer a health plan, go to: http:// www.dol.gov/ebsa/pdf/FLSAwithplans. pdf. For the DOL model notice to be used SEPTEMBER 2013

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by employers that do not offer a health plan, go to: http://www.dol.gov/ebsa/ pdf/FLSAwithoutplans.pdf.

For any employees that are hired on or after October 1, 2013, notice must be provided within 14 days.

The notice may either be mailed or provided electronically provided that the employer follows the DOL’s electronic safe harbor (either employees must have access to a work computer that is integral to their work duties or affirmatively consent to electronic disclosures).

For the DOL’s technical guidance on these requirements, go to: http://www. dol.gov/ebsa/newsroom/tr13-02.html.

Obamacare: Small Business Community Lobbies to Prevent Increases to Health Insurance Costs [The following information is provided courtesy of Associated Industries of Massachusetts.]

In the next few months, employers will receive health insurance rate quotes from their health insurance carriers. Imbedded in these rates are increases due to Obamacare. A study recently released by the state’s health plans projects that changes brought about by Obamacare could increase rates for Massachusetts employers by up to 57 percent. Associated Industries of Massachusetts and the business community are advocating for a federal waiver to avoid some of these increases.

The federal health care law requires several changes to the state’s health insurance market rules that are projected to increase health insurance premiums above and beyond the annual base rate increases. AIM and the business community have been working with the state and federal government to obtain a waiver from certain provisions of the federal law in order to avoid some of the expected increases. The Legislature recently directed the governor to formally request this waiver.

The waiver will allow the state to maintain the nine rating factors currently

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being used to set health insurance rates for small employers and to maintain its practice of filing rates quarterly rather than annually. Obamacare permits only four factors – age, tobacco use, family size and geographic location.

A study recently conducted by several of the state’s health insurance companies predicts that changes brought about by federal health care reform, independent of the rating factor changes, will raise premiums for Massachusetts employers by an average of 3.7 percent on top of typical base-rate increases. The study found that the rating changes from which the governor is seeking a waiver could raise or lower rates for companies by up to 57 percent.

Reducing the nine factors to four will be very disruptive to our health insurance market with the potential for wild rate changes and considerable unpredictability in a relatively stable market especially if you are at the wrong end of these ranges.

Our PACs - DEAC & NCDPAC We appreciate the contributions thus far received from our member dealers who have answered our calls for donations to our PACs. Each year MSADA expresses itself politically through NADA’s federal PAC, Dealers Election Action Committee (DEAC), 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.

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Troubleshooting

MSADA

The Importance of a Record Retention Policy

By Peter Brennan, Esq.

Staff Attorney, MSADA Maintaining business records and protecting the personal information contained therein are issues that Association members encounter on a daily basis in the usual course of business. While admittedly not the most exhilarating topic, having a good record retention and destruction policy in place can prevent fines and liability should a problem arise.

Over 100 federal regulations directly impact automobile dealers. On top of that, a myriad of state and federal laws, as well as relevant case law, governs the amount of time that certain records must be retained. In the coming weeks, your Association will be providing members with a detailed record retention chart, prepared with assistance from O’Connor and Drew, which lists the most frequently retained records and the period of time that these records must be retained for.

Knowing record retention schedules and maintaining records in compliance with the law is important in order to prevent exposure to liability in lawsuits and audits. The prompt destruction of records after their “destruction date” is important for the same reasons, as well as to safeguard personal information that might be contained in the records.

Destroying a document before its proper destruction date, however, even if done with no ill will, can lead to a claim of spoliation of evidence if the document is sought through discovery in litigation.

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Spoliation can allow a judge to infer that the mistakenly destroyed record would have been unfavorable to the party that destroyed the document.

In Massachusetts, litigation frequently involves the proper maintenance and handling of “personnel records”, defined

by M.G.L. c. 149, § 52C as “any record kept by an employer that identifies an employee, to the extent that the record is used or has been used, or may effect or be used relative to that employee’s qualification for employment, promotion, transfer, additional compensation, or disciplinary action.” Personnel records must be maintained for 3 years after termination of employment (employers with 20 or more employees must retain this record without deletions or expungements). If an employee brings a cause of action against the employer, the employer must retain the record relevant to such action until final disposition of the case.

Failure to comply with this statute can incur a fine of up to $2,500. The greater danger, however, is being found liable in baseless litigation because your supporting documentation was not properly retained under the law, and the judge allowed a negative inference due to spoliation of the evidence.

Despite these onerous record retention requirements, there is no longer a need to waste space on file rooms in order to comply with the regulations, as many records can now be adequately maintained electronically. However, that is not to say that an electronic filing system is without risk, and proper retention and destruction protocols must be developed for electronic documents as well as paper.

Employers must develop a consistent record retention policy and destruction schedule that complies with all state and federal laws. Courts have found against litigants that defended the destruction of potentially relevant documents by claiming that they were doing so pursuant to the policy in place at the time.

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Employees must be adequately trained on the record retention policy and record destruction schedule, and the employer must establish clear accountability for enforcement of the policy. If the policy states that certain unnecessary records will be purged at regular intervals – whether electronic or paper – be sure that the policy is being consistently followed. While a sound record retention policy will help ensure that your company complies with its legal duty to maintain records and reduce the unnecessary burden and expense of retaining those records for too long, these benefits are lost if compliance is intermittent or nonexistent.

While a record retention policy as described above must be in place, a company should also be ready to suspend the policy in light of litigation. When litigation or a legal document request is imminent, be prepared to retain all records associated with the litigation, even if they are scheduled to be destroyed.

If challenged, a company’s record retention policy will likely be held to the reasonableness standard set forth in Wm. T. Thompson Co. v. General Nutrition Corp, Inc. (“While a litigant is under no duty to keep or retain every document in its possession once a complaint is filed, it is under a duty to preserve what it knows, or reasonable should know, is relevant to the action, is reasonably calculated to lead to the discovery of admissible evidence, is reasonable likely to be requested during discovery, and/or is the subject of a pending discovery request.”)

If you require guidance or additional information regarding record retention and destruction policies, please contact Robert O’Koniewski, MSADA Executive Vice President, rokoniewski@msada.org or Peter Brennan, MSADA Staff Attorney, pbrennan@msada.org , or by phone at (617) 451-1051.

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Start Your 2013 Tax Planning Now

By Ed Buiser Ed Buiser is a manager at O’Connor and Drew.

He is currently responsible for managing accounting, auditing, and tax services for awide range of clients.

Recent months have indicated that dealerships are recognizing more profitable months than they have in the past few years. As we enter the fourth quarter of 2013, many dealers and business owners are beginning to wonder how they can minimize their tax liabilities.

The American Taxpayer Relief Act of 2012 (the “Act”) provides businesses with certain provisions and tax breaks, some old, some new:

Advantages of Purchasing Property and Equipment Now Does your dealership have needs for equipment or capital improvements? The Act reinstates Section 179 accelerated depreciation, which allows your dealership to expense (rather than depreciate over a period of years) the cost of qualified new and used property and equipment placed in service during 2013, up to the limit of $500,000, but phased out dollar-for-dollar above capital expenditures of $2,000,000. Additionally, the Act extends the ability to use up to $250,000 of the $500,000 limit to expense the cost of qualified real property.

The Act also extends 50% bonus depreciation through 2013 (2014 for certain property). It can be claimed for qualified new property, such as computers and IT equipment, lifts, special tools and other equipment. This means that 50% of the cost of qualified capitalized purchases can expensed for tax purposes.

Property placed in service prior to Jan-

uary 1, 2014, such as qualified leasehold and retail/showroom improvements including floorings, ceilings, certain walls or security systems are typically depreciated over periods up to 39 years for tax purposes. The Act allows these items to be depreciated over a much accelerated period of 15 years.

Consider your property and equipment needs now and make sure you purchase and place them in service before December 31, 2013. If you have major purchases or improvements to make, talk to your tax advisor to determine if your purchase would qualify. This could be a good year to renovate your showroom and take advantage of these tax advantages, especially if they are not renewed in 2014.

Cost Segregation Studies If you’ve recently purchased or built a building or are remodeling existing space, consider a cost segregation study.

It identifies property components and related costs that can be depreciated much faster, perhaps dramatically increasing your current deductions. Typical assets that qualify include decorative fixtures, security equipment, parking lots and landscaping. The benefit of a cost segregation study may be limited in certain circumstances — for example, if the business is subject to the AMT or is located in a state that doesn’t follow federal depreciation rules.

Is Your Dealership Understaffed?

The Work Opportunity Tax Credit (WOTC) is available to your dealership if you hire someone from one of several target groups that have consistently faced several barriers to employment during the 2013 year. There is no limit to the number of new hires who can qualify the employer for the tax savings, but individuals must be identified as members of one of these targeted groups before a job offer is made. Go to www.doleta.gov/business/ incentives/opptax/eligible.cfm for a list of www.msada.org

targeted groups.

Also, other credits are available for hiring certain veterans.

Estate Tax Planning Do you have heirs that are actively involved in the dealership and may someday own the business? 2013 might be a good year to consider gifting your dealership.

As the economy recovers, your dealership value may increase, especially if the profitability of the dealership increases.

For 2013, you can gift up to $14,000 per individual without incurring federal gift taxes. This limit is “a use it or lose it” exemption. Unused annual gift tax exclusions can’t be carried forward to future years. However, the American Taxpayer Relief Act of 2012 allows for a $5.25 million “Lifetime” gift tax exemption.

The percentage ownership of your dealership that can be gifted is dependent on its fair value. Any gift value exceeding your available annual exclusion and lifetime exemption is taxed at federal gift tax rates, which are currently at 40%.

Is Your Dealership “Going Green”?

The Act has extended several provisions for businesses that are undergoing energy-saving improvements to their facilities. The energy project should implement, increase or re-equip its operations to produce a variety of energy-saving technologies. The Internal Revenue Service typically requires that these projects be certified in advance. A few energy tax incentives include: Production of energy from wind facilities, credits for alternative fuel, credits for biodiesel, amongst others.

If any of these apply to you, and you require guidance or additional information, discuss them with your accountant or contact Edward S. Buiser, C.P.A., O’Connor & Drew, P.C., at ebuiser@ocd.com, or by phone at (617) 471-1120.

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AUTO OUTLOOK

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Legal

MSADA

By Joseph W. Ambash and John Donovan, Fisher & Phillips LLP

U.S. Department of Labor Continues to Investigate Massachusetts Dealerships During the last few months, a number of Massachusetts dealerships have been investigated by the U. S. Department of Labor (DOL) concerning their compliance with the federal wage-hour law. This follows a previous round of dealership audits in August 2012.

Normally, U.S. DOL investigations are triggered only by an employee complaint.

However, we now understand that these investigations are not the result of complaints, but rather are part of an “initiative” focused specifically on dealerships. The U.S. DOL has found violations at most dealerships and therefore it is likely that the number of dealerships selected for an investigation will continue to grow in the months ahead.

Generally speaking, the Massachusetts wage-hour laws are more stringent than the federal law. As a result, many Massachusetts dealerships assume that because they are complying with the Massachusetts laws, they are in compliance with federal law. Unfortunately that is not always the case. The biggest difference between the two laws is that under Massachusetts law, a dealership does not have to pay overtime on bonuses and commissions to nonexempt employees, while under the federal law, it must pay overtime on bonuses and commissions for employees who are otherwise not exempt under the overtime laws. These opposite approaches are counter-intuitive and can be very confusing.

While the amount of overtime due a non-exempt employee on his or her bonuses or commissions may be relatively small, when you total all of the overtime due on all bonuses and commissions going back two full years (the time period for which the DOL typically seeks back pay), the amount due can be significant.

We know from experience that the following positions are among those most SEPTEMBER 2013

likely to draw the U.S. DOL investigator’s attention.

1. Non–exempt employees who are paid a bonus or commission: Under federal law, if an employee is not exempt from overtime (office employees, porters, call center employees, lube techs, etc.), you must pay overtime on all bonuses and commissions.

2. Finance Managers: Under federal law, these employees are exempt from overtime only if they are paid a majority of their compensation in the form of commissions.

3. Detailers/Lot Attendants/Quick Lube employees: Under federal law, these employees are not considered “mechanics” and therefore are not exempt from overtime. They must be paid overtime on all of their compensation, including bonuses.

4. Minors under 18: Investigators will generally inquire about employees who are under 18 and interview them to see if they ever drive cars or trucks off the dealership lots. That can be a serious violation under federal law.

5. “Independent Contractors”: Investigators generally ask to see records on anyone who receives a Form 1099 and is treated as an “independent contractor.” These are typically dealer trade/auction drivers and part-time sales people who are used on an occasional basis. Under the law, these individuals are employees and must be treated as such for pay and tax purposes.

If the dealership uses an outside company to provide these services, the investigators have insisted on interviewing the owners of those companies as well as their employees.

In this round of investigations, the investigators have focused on the use of an outside company to perform detail services for the dealership. Even though the detailers work for a separate company, the investigators are taking the position that

Massachusetts Auto Dealer www.msada.org

the dealership is a “joint employer” of the detailers. Therefore, if the detail company has not paid these employees correctly, the DOL claims the dealership is responsible for any unpaid minimum wage or overtime.

What You Should Do Even if your dealership has not yet been notified of an investigation, you may well be on their list for the next round. Therefore, we recommend that every dealership make a quick audit of its payroll to check its compliance in each of the above areas. If you are not in compliance, you should consider making the necessary changes. This is relatively easy to do by simply making minor adjustments to pay plans. Once you get into compliance, the statute of limitations begins to run and your back wage liability will decrease with each passing day.

If you receive a notification of an investigation, we recommend that you immediately contact an employment attorney familiar with the federal wage hour law who can help you measure your compliance and advise you how to respond in a way that will minimize your liability. You can also find useful guidance in the MSADA’s comprehensive Guide to Wage-Hour Compliance, which is available to members on the MSADA website. This is an excellent place to start your compliance efforts.

Should you have questions about your compliance, please feel free to contact Joe Ambash, at (617) 532-9320.

t

Joe Ambash is managing partner of the Boston office, and John Donovan is a partner in the Atlanta office, of Fisher & Phillips, a national law firm representing management in labor and employment law and advising hundreds of dealerships.

They can be reached at and jdonovan@

jambash@laborlawyers.com laborlawyers.com.

Accounting

MSADA

Are You Savvy About F&I Employee Fraud?

By Bart D. Haag CPA

B arton D. H aag is a principal at A lbin , R andall & B ennett , where

he

specializes

in automobile and mo torcycle

He

can

dealerships .

be

reached

bhaag @ arbcpa . com .

A few years ago, several employees from the same dealership were convicted of defrauding their customers, lending institutions and warranty companies, and some received stiff prison sentences.

Their crimes – many originating in the finance and insurance (F&I) department – could repeat themselves in your dealership if you aren’t aware of the possible F&I schemes.

Are Employees Padding Costs?

In this fraud, an F&I department employee includes items in the vehicle price that the customer didn’t agree to, such as destination fees and, most frequently, warranty costs. The salesperson quotes a price that doesn’t include the warranty fee, and then gives the customer the monthly payment amount that does include it – without getting the customer’s consent.

If the customer questions the warranty, the salesperson may say it’s required in order to lock in a certain interest rate.

This is false; the interest rate depends on only the customer’s credit history.

To help prevent schemes such as this one, have customers fill out and sign a checklist acknowledging that they’ve approved or rejected your dealership’s various products (gap insurance, extended service contracts, rustproofing and so

on). Then have accounting personnel compare the checklist against individual sales and finance contracts to verify that the information is accurate.

Is Financing Approval Legitimate?

This scheme involves telling the customer that he or she has been approved for financing, delivering the vehicle and letting the customer drive it for a few weeks. But then the other shoe drops: A financing department employee calls back to say that the loan fell through and, to keep the vehicle, the customer must pay a premium and a higher monthly payment.

Crooked employees usually practice this rip-off on customers with poor credit, who they assume feel shaky about their creditworthiness. The employee knows the real payment amount and the interest rate offered by the financing institution before delivering the car. But he or she assumes that, after driving the vehicle for a time, the customer will develop a certain comfort level and agree to pay more to keep it.

To catch employees doing this, watch your contract-in-transit schedule to see if any deals are taking too long to be funded. You also can send out customer satisfaction surveys and read any responses received carefully. If you notice several buyers – or even one – complaining that monthly payments went up unexpectedly, investigate further.

Another internal control: Almost all lenders provide some type of approval process for customer loans. Create a document for customers that acknowledges they’re aware of the lender’s financing terms. Make sure that the document contains the bank’s approval code for the loan.

Then have your accounting department compare the customer’s acknowledgwww.msada.org

ment of the loan terms with the bank’s approval. Accounting also should compare the acknowledgment document with other documents in the deal – sales contract, financing agreement, bank approval of loan and so on – to ensure that everything is spot-on.

Are Credit Scores Accurate?

In this fraud, a financing department employee lies to the customer about his or her credit score, saying it’s lower than it really is. The employee then charges the customer a higher interest rate, increasing the dealership’s income from the sale.

Crooked employees try this on customers who won’t be too surprised to hear they’re having financing problems.

Most consumers with strong credit ratings would know they were being duped.

One way to prevent this scheme – and, indeed, most financing-related schemes – is for an F&I manager to review all customer agreements. If a customer’s credit score doesn’t mesh with the interest rate being charged, foul play could be to blame. Just be sure to rotate reviewing duties among several F&I managers. If you don’t have more than one, randomly review customer agreements yourself on occasion.

The After Effects If you detect F&I fraud in action, the end result might be a conviction of your crooked employee. But think of the inestimable damage to your business’s reputation as word is passed from the unhappy customers around your community.

The best defense is a strong offense, they say, so safeguard against F&I fraud in all feasible ways. As a dealership owner, your customers’ loyalty is the trump in your hand of cards.

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Massachusetts Auto Dealer SEPTEMBER 2013

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COVER STORY

Inside Washington

SEPTEMBER 2013

Massachusetts Auto Dealer www.msada.org

“We need to let everybody who represents us know what concerns us, what our thoughts are. They have a lot of things to be mindful of, so if we’re not down there to bring things to their attention, they may go unnoticed by their office.”

– MSADA Vice President Chris Connolly

by Catherine MacDonald

MSADA

MSADA Members Joined Dealers from Across the Country to Make Their Case to Legislators on Capitol Hill.

O

n September 18 and 19, Massachusetts dealers joined 400 of their industry peers from across the country to represent their business before a gridlocked Washington, D.C. The annual trek ensures Massachusetts legislators are aware of the most important issues facing dealers, so they can lend their support at the federal level.

NADA Director Don Sudbay joined ATD Chairman Dick Witcher, MSADA Executive Vice President Robert O’Koniewski, MSADA Vice President Chris Connolly, MSADA Clerk Charles Tufankjian, Next Gen dealer Emily Dube, MSADA legislative agent Jim Hurrell, and MSADA staff attorney Peter Brennan at the NADA Washington Conference, where they had the opportunity to hear prominent speakers, reconnect with fellow dealers, and – most importantly – make their case to legislators.

O’Koniewski, who has made the trip every year since 2001, said the NADA does an excellent job of organizing the event. “They provide dealers and dealer association executives with all the background information that we need to make compelling cases before our congressmen on the issues of the day that are affecting dealerships across the country.”

This background knowledge gives dealers the ability to get in front of their congressmen and make the case for business-friendly policies.

“It’s a good way of developing at the federal level the grass roots input that dealers need to have with the people who write laws,” O’Koniewski said.

The most significant issue brought to the table was concern about the Consumer Financial Protection Bureau policies that would make it difficult for dealers to provide competitive products for consumers.

“I thought we made a great case to each congressman’s office about checking in on the CFPB,” Connolly said. “That we thought our consumers would be hurt if all the things they wanted our lenders to do fell into place. It would take away flexibility in setting rates low for them.”

Connolly said most of the legislators he spoke to were “very much in support” of helping dealers on the issue.

Other areas of concern included possibilities of raising the excise tax on heavy duty trucks and of eliminating the accounting method known as “last-in, first-out accounting,” or LIFO. “When governments are looking for taxes they’re looking everywhere,” Sudbay said. “LIFO is certainly an area they’ve used to gain revenue. We need to put out there what www.msada.org

Massachusetts Auto Dealerr SEPTEMBER 2013

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Inside Washington our concern is.”

Sudbay said all the legislators they spoke to assured them that regarding LIFO, “We don’t need to be concerned. And that’s great, but we want it out there what position we are on and this could hurt a lot of dealers.”

He said dealers need to remain vigilant.

“Sometimes things people thought weren’t going to be a problem suddenly are. That’s why NADA is very vigilant on these issues.”

Sudbay said a frustration of the trip was “the fact that our government doesn’t seem to be working right now. I think everybody that was there took that back, and that’s not a good thing. Everything seems to be at a standstill.”

Partisan bickering should hold no relevance to auto dealer issues, says O’Koniewski.

“No one has ever said to us, ‘As a Democrat I can’t support that; as a Republican I can’t support that.’ Our issues and who we are as small businessmen and women transcend party lines.”

Frustration with the current climate in Washington still came up often throughout the trip. Connolly said the representatives he met with were “pretty despondent about how Washington wasn’t working together.”

Conference attendees heard from Karl Rove, Sen. Ted Cruz (RTexas), and David Strickland, Administrator of the National Highway Traffic Safety Administration.

“You get a different flavor of Republican and Democratic legislators and regulators and their perspective on what’s going on

MSADA MSADA in the industry, what their perspective is politically,” O’Koniewski said.

The conference also included a presentation on how to handle media, a reception at the Air and Space Museum, and a chance to reconnect with industry colleagues.

“It gives dealers a chance to rekindle long distance relationships with other dealers,” O’Koniewski said. “It’s good to get everyone collectively there to achieve critical mass

for our visits on Capitol Hill.”

It’s a big commitment on a dealer’s part to travel down to Washington for two or three days and be away from their stores, and O’Koniewski says he is very appreciative of the time dealers set aside to make the effort.

“It comes down to our contingent of dealers who are carrying the Massachusetts flag down to Washington every year on behalf of the Massachusetts dealers up here.”

Connolly, who has been down to Washington for this event four times, said it’s always a good idea to meet with representatives both at federal and state level.

“We need to let everybody who represents us know what concerns us, what our thoughts are,” he said. “They have a lot of things to be mindful of, so if we’re not down there to bring things to their attention, they may go unnoticed by their office.”

Another way dealers can be involved with their congressmen locally is to schedule a dealership visit. For example, Sen. Scott Brown, when he was in office, visited Minuteman Trucks in Walpole, and Rep. Mike Capuano has visited Ray Ciccolo’s dealership in Brighton. Dealers can use the walkthrough as an opportunity to show legislators how they service the community.

“I always encourage dealers to be open to the concept of hosting a legislator,” O’Koniewski said. “It’s a great way of making an onsite connection without having to get on a plane.”

These connections truly benefit auto dealers, he says.

“Every member of the House that we deal with has been helpful to us on several different issues through the years in a pro-dealer way.

We’ve been very lucky in that the delegation members have been very helpful to us on issues as they’ve come up over the years. It’s a true testament to the connections our dealers have made with their legislators through our Washington and dealership visits.”

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SEPTEMBER 2013

Massachusetts Auto Dealer www.msada.org

MSADA

TRUCK CORNER Lobbying Regulators During the Hoping for Stability Washington Conference

by Dick Witcher Dick Witcher of ATD and principal

at

Trucks, Inc.

is

Chairman

the dealer

Minuteman

I hate the winter but, I am looking forward to Feb- industry and the process by which transactions take ruary! My term as leader of the ATD will close at place. the Convention in New Orleans. During the last five • The assembled group of regulators admitted the years I have either been vice chair or chair, and those first three steps of implementing emissions controls responsibilities have occupied a major portion of my for commercial trucks in Phase One were rushed. time. The time spent was highly rewarding, and the The intervals did not allow the engine manufacturers experiences I gained were unlike anything I could appropriate time to amortize their investments. And have achieved as an entrepreneur operating my busi- further the steps rushed the development of technology not yet invented by the industry making it more ness.

For example, during the last Washington confer- expensive. ence, I and two other truck dealers had a very unusual • In addition, they recognize the cost of adding the experience matched by very few others: we simulta- emissions systems to commercial trucks was signifineously lobbied fifteen representatives of the EPA and cantly more expense then they anticipated. the National Highway Traffic Safety Administration. • They believe Phase One implementation was much We could see each other during the 90-minute meet- less successful than originally projected not only because of the untried and ing and the regulators unreliable technology were in three different “Taking our seats and ready but the exorbitant cost cities. The video conferof acquisition. ence was pretty cool! for a combative exchange, • They also recognize But, what was really Phase One had a negacool was having the opour expectations were tive impact on the econportunity to lobby in turned upside down!” omy. regard to the next round A homerun for this of emissions regulations announced by President Obama just a couple of new group of regulators would be getting broad acweeks ago. In advance of the meeting we did a ton ceptance not only of new but current regulations at of preparation, including fact searching, presentation a very low cost. Personally believing price is a repreparation and rehearsing our roles for the meeting. ally big issue, during our conversations we advised Some of the research was fortunately also used in them the easiest way to reduce the price of commerpreparation of the House Concurrent Resolution 52 cial Class 8 trucks is eliminating the federal excise limiting further increases in the federal excise tax on tax (FET) incurred at the time of purchase. FET adds the sale of new trucks and trailers sponsored by Con- 12 percent to the sales price the truck. It is not unusual for a Class 8 tractor to cost $150,000. This high gressmen Riddle and Walz.

Of course when we arrived at the old Post Office cost hurdle prevents owner-operators from starting Building – the home of the EPA – we went through the new businesses and requires established companies ever present security checks by armed guards. Getting to receive larger profits to achieve traditional rates of through security to the House and Senate Office build- return on their investments. Further, we demonstrated to the regulators that adopting natural gas as a comings is a bunch easier than getting into the EPA. I have participated in lobbying regulators in the past mercial fuel is delayed by the same FET. The time needed to prepare the next set of emisincluding the IRS, NHTSA, DOT, etc. So, un-phased by the process, which took three weeks of prepara- sions regulations is unknown to me but, I was greatly tion, we marched up to the office of the Administrator encouraged by their asking for additional meetings, of Transportation Air Quality. Taking our seats and the opportunity to visit our dealerships and their reready for a combative exchange, our expectations quest of us to review the regulations while in draft. At some point we will likely butt heads but in the meanwere turned upside down!

Instead of a FORMAL presentation: we had a con- time we have a dialogue. versation and they truly asked questions about our t www.msada.org

Massachusetts Auto Dealer SEPTEMBER 2013

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NEWS

from Around the Horn

HANOVER

Goats and Sheep Handled Landscaping at Hanover Car Dealership Planet Subaru tried out a new group of landscapers last month: eight farm animals.

The four goats and four sheep, rented from Goatscaping Co. in Plymouth, tended to the lawns on the 11-acre dealership. They were kept in a movable pen at the dealership, Jeff Morrill, the dealership’s president told The Patriot Ledger.

The pen was moved to the shaggier lawns of the dealership as needed.

Morrill said the animals are part of an ongoing effort to make the dealership more environmentally friendly.

Past efforts to green the facility include the installation of 374 solar panels on the building’s roof.

In addition to being environmentally friendly, the animals are better-suited to certain landscaping activities that human workers have struggled with.

“It’s a very effective way to take out brush, which I hadn’t re-

SEPTEMBER 2013

ally found any other way to do without our people getting poison ivy,” Morrill told The Ledger.

The livestock did come with a downside: the mess they made.

“When we walk them across the parking lot, we have to sweep up after them,” said Morrill.

Massachusetts Auto Dealer www.msada.org

NEWS from Around the Horn

MSADA

BRAINTREE

Lightning Topples 100-foot Flagpole at Toyota of Braintree

WEST SPRINGFIELD

Lightning struck the top of the iconic 100-foot flagpole at Toyota of Braintree last month.

A witness told The Patriot Ledger the flagpole rose up in the air, exploded in flames and then toppled to the ground with its large American flag.

No one was injured in the event.

The flagpole has been easily visible to thousands of travelers every day along Route 3.

“We were always a little nervous when we have the big flag up there and it’s windy, but we never thought it would get hit by lightning,” David Tufankjian of Duxbury told The Ledger. His family owns the dealership. “I was amazed to see the sleeve is open at the end,” Tufankjian said. “Part of the pole shot out like a cannon and went through one of our doors.”

The pole has been in place for five years and made it through other windier storms, but the force of the lightning strike proved too much.

Tufankjian told The Ledger the pole will be replaced. He said the pole and flag cost “thousands and thousands of dollars.”

Trees bordering the property parking area probably blocked the flagpole from landing out on Route 3, he said. The flagpole lay on the ground among the trees.

AMESBURY

Local Chevy Dealers Boost Youth Soccer Programs In the spirit of promoting youth fitness, four Merrimack Valley auto dealerships are contributing cash and equipment to local soccer leagues throughout the 2013 season.

Amesbury Chevrolet is supporting the Amesbury Soccer Asso-

In Memoriam Aldo Bertera Aldo M. Bertera of West Springfield died Friday, September 20. He got his start at his family’s gas station at 13 and went on to build the company up to nine dealerships with numerous brands.

Bertera, born Oct. 8, 1937, was 75. Sons Steven and Michael Bertera are partners in the business along with Rezmik Ghazarian.

Active in the local community, Bertera was a 43-year member of the Elks Club, a 45-year member of the West Springfield Chamber of Commerce, a longtime Rotarian, a member of the West Springfield planning board and conservation commission.

He graduated from West Springfield High School in 1955 and the General Motors Institute in Flint, Michigan, in 1957.

Aldo M. Bertera and his brother Robert helped run the gas station and used car operation rented by their father before bringing the then-new Subaru brand to West Springfield in 1973. It was the family’s first new car brand and the first showroom was grafted onto the Texaco station.

Today, Bertera dealerships are located in West Springfield, Westfield, Palmer, Chicopee, Auburn and in Connecticut representing Chevrolet, Chrysler, Dodge, Fiat, Jeep, Ram Truck, Mitsubishi, Nissan and Subaru.

ciation. Bill DeLuca Chevrolet Buick GMC of Haverhill is behind Haverhill Youth Soccer. Located in Andover, Bill DeLuca’s Woodworth Chevrolet-Cadillac backs the Andover Soccer Association. In Lawrence, Commonwealth Motors sponsors Lawrence Youth Soccer.

Donations include soccer balls, ball bags and pumps, field cones, coach’s kits, corner flags, scrimmage vests, practice goals and first aid kits. In addition, the sponsored soccer leagues get Chevrolet service coupons to distribute as incentives to boost community support.

They are also eligible to raise funds by participating in the 2013 Chevrolet Youth Soccer Breakaway Sweepstakes, with a grand prize of a 2014 Chevrolet Traverse, along with additional prizes of high-definition televisions provided by the local dealerships.

Sponsorship by Amesbury Chevrolet, Bill DeLuca Chevrolet, Woodworth Chevrolet and Commonwealth Motors entitles players to attend skill clinics conducted by local professional soccer coaches.

The dealerships are participating in the Chevrolet Youth Soccer Program, a nationwide initiative conducted by the Chevrolet unit of General Motors.

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Massachusetts Auto Dealer SEPTEMBER 2013

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NEWS from Around the Horn FITCHBURG

Bouchard Raffles Car for Cancer Center A Rhode Island woman won a new 2012 Honda Accord, donated by Ron Bouchard’s Auto Stores in Fitchburg, as part of a raffle to support the “Exceptional Care...Here” Campaign for HealthAlliance Hospital’s Simonds-Sinon Regional Cancer Center.

The raffle was won by Marcia Zielinski of Woonsocket, R.I. Proceeds from the raffle totaled more than $26,000.

“Everyone is affected by cancer,” Lorna Tocci, co-chair of the HealthAlliance Employee Campaign Committee said in a press release. “‘The Exceptional Care...Here’ Campaign is about our overall well-being, a way of giving back and getting the employees and community engaged. This would not have been possible without Ron Bouchard’s generosity.

He made it a successful and exciting event.”

“It was an honor for the Ron Bouchard Auto Stores to be able to help the Fitchburg Cancer Center, and we are extremely proud of the amount of money HealthAlliance Hospital was able to raise,” said Ron Bouchard. “It was truly the community coming together to help people!”

SEPTEMBER 2013

Massachusetts Auto Dealer www.msada.org

MSADA HANOVER

Prime Motor Group Hosts South Shore Pet Adoption Event New England-based Prime Motor Group hosted a pet adoption event September 8 at Prime Infiniti in Hanover.

Participants included Newton-based Last Hope K9 Rescue, Scituate Animal Shelter of Massachusetts and the South Shore Humane Society of Braintree. Each participating shelter has a no-kill policy, provides its community with pet adoption services and educates the public on humane animal population control measures.

“Partnering with these shelters is just one way that we’re showing our dedication to the community,” said David Hazlett, general manager of Prime Infiniti. “We’re really looking forward to being part of this event and to meeting so many wonderful animals up for adoption. This is a cause that is important to the whole team here at Prime, and we’re hoping that it will result in some of these animals finding fantastic homes in our community on the South Shore.”

In addition to a dog and cat meet-and-greet, the event featured a cook out and a raffle to benefit the participating shelters. The raffle prizes included free auto service from Prime Infiniti, such as oil changes and reconditioning packages, a family photo shoot and a trip to Boston Bowl Hanover. All attendees received gift bags, and adoption forms were available.

“We’re hoping to make this an annual event,” said Stefani Lydon-Tremouliaris, director of business development for Prime Motor Group. “The participating shelters are excellent resources for our community, and we’re proud to be able to support them.”

RAYNHAM

2013 Nissan Altima Lands AutoPacific Ideal Vehicle Award Redesigned for the 2013 model year to be more stylish, fuel efficient and tech friendly, the Nissan Altima has seemingly succeeded at living up to buyers’ high expectations in the competitive midsize segment, recently earning an AutoPacific Ideal Vehicle Award. The 2013 Altima topped the Mid-Size Car category in the auto researcher’s awards, which recognize the new models that best meet the needs and desires of their owners.

Retrieving the feedback of more than 52,000 owners of 2013-model-year vehicles after they had been with continued on next page www.msada.org

Massachusetts Auto Dealer SEPTEMBER 2013

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NEWS from Around the Horn from previous page their ride for at least 90 days, AutoPacific uncovered the changes that each driver would like to make to their vehicle across 15 attributes, ranging from styling and performance to technology and comfort. The 2013 Nissan Altima earned its Ideal Vehicle Award after its owners suggested the fewest changes of any model in the Mid-Size Car segment.

MSADA

“From the class-leading fuel economy to the bevy of useful tech features, Nissan’s engineers thought of everything while redesigning the Altima, so it’s not surprising that its owners struggled to find much room for improvement in the Ideal Vehicle Awards,” said Bruce Garcia, general sales manager of Mastria Nissan.

“Drivers of the Altima get an upscale, refined ride that handles just as well as it saves them at the gas pump.”

BOSTON

Andy Warhol BMW Coming to Art Event Beginning October 5, a 1979 M1 BMW painted by Andy Warhol will be on display at the Park Plaza Castle as part of ARTcetera 2013, a local artist gathering that raises money for HIV/AIDS research and prevention. Massachusetts BMW dealers are sponsoring ARTcetera for the first time this year.

Warhol had gained fame through his images of Marilyn Monroe and Campbell’s soup cans by the time BMW asked him to paint over its mid-engine M1 race car, which finished second-in-class during that year’s 24 Hours of Le

SEPTEMBER 2013

Mans. After creating a scale mockup, Warhol took a brush and painted the entire car in 23 minutes.

ARTcetera was last held in 2011. The nonprofit group says it will auction 300 pieces of modern art worth up to a half-million dollars. The M1, which is being borrowed from a six-month stint at the Saratoga Auto Museum in Saratoga Springs, N.Y., isn’t for sale.

BMW has 16 other official “art cars” in its collection, the latest being a streaked M3 GT2 penned by Jeff Koons in 2010.

Massachusetts Auto Dealer www.msada.org

www.msada.org

Massachusetts Auto Dealer AUGUST 2013

26

NADA Update by Don Sudbay

MSADA

NADA Meets with GM Board of Directors Don Sudbay, President of Sudbay Automotive Group, represents MSADA members on the NADA Board of Directors. He welcomes your

questions

and

concerns

(donsudbayjr@sudbay.com).

Many thanks to the MSADA delegation who traveled to Washington for our annual NADA Washington Conference.

We all got the opportunity to educate our legislators on the important issues that affect us all. Be assured that NADA is working relentlessly to insure that the CFPB does not impede our ability to help our customers receive financing for their vehicle purchases.

Below you will see words from our Chairman Dave Westcott regarding the truly historic meeting between NADA and the GM Board of Directors. It is refreshing to see that the Board of one of our manufacturers values the role of the franchise system in the success of their business.

A Special Note from NADA Chairman David Westcott: “NADA’s leadership recently received an unprecedented invitation to meet with the board of directors from General Motors Company in Detroit. GM was founded in 1908 and NADA in 1917. But last month marks the first time our leadership and the GM board have met face to face.

“On August 19, NADA President Peter Welch, NADA GM line group chairman Mark Scarpelli and I addressed the automaker’s 14-member board and management staff. This included GM Chairman and CEO Daniel Akerson. As car and truck dealers, we work hard every day not only to establish good relationships with our customers but our manufacturers as well. This meeting was an opportune moment to share our current successes, challenges and goals, and we were met by a very receptive group.

“Peter outlined NADA’s mission and purpose—to serve and represent franchised new-car and truck dealers. NADA has been the “voice of the dealer” since 1917. He discussed what we’ve been doing to fulfill our goals of protecting and enhancing the franchise system and communicating dealers’ views to all branches of the federal government, to the SEPTEMBER 2013

public and to manufacturers.

“Mark Scarpelli offered his perspective as a Chevrolet dealer and described the challenges dealers encounter on the showroom floor. He also presented the results of NADA’s most recent GM Dealer Attitude Survey, giving the board an understanding of how dealers view their relationships with manufacturers.

“I briefed the board on our most pressing industry issues.

At the top of NADA’s list is the guidance issued by the Consumer Financial Protection Bureau and its potentially harmful effects on dealer-assisted financing. I also discussed the impact of fuel economy rules on vehicle affordability, intellectual property and data security, and manufacturer mandates such as image programs and stair-step incentives.

“Following our presentations, we had the opportunity to field some questions from several board members and engage with them on some of the issues on their mind. It was not surprising that we came away from the meeting with a better understanding of our common interests.

“NADA represents nearly 16,000 new-car and truck dealerships with more than 32,000 franchises, domestic and international. This year, dealers will retail more than 15 million new cars and trucks, and that includes natural gas, hybrid, electric and other alternative-technology vehicles.

“The more manufacturers work with their dealers on a cooperative basis, the more successful we will be at doing what we do best—selling cars.

“GM’s unprecedented invitation for NADA’s leadership to meet with its board is a positive sign. For us to be successful, manufacturers need to view dealers as their partners in a relationship based on mutual respect. But the need to maintain open communications between dealer and manufacturer has never been greater. In this regard, the meeting with GM’s board is a step in the right direction.”

FTC Announces Advertising Enforcement Actions Against Dealers The FTC issued a press release September 3 stating that it has entered into proposed consent orders with a Cleveland dealership and a Baltimore area dealership for alleged advertising violations that appeared on their respective websites. In the former case, the FTC alleged that the dealer advertised that particular Ford models are available at a specific dealer discount when “in fact, once consumers reach the dealership, they find out that [the dealership] has failed to

Massachusetts Auto Dealer www.msada.org

MSADA disclose that the specific discounts are available for some, but not all, of the Ford models advertised.”

In the latter case, the FTC alleged that the dealer advertised specific dealer discounts and prices as being generally available to consumers when “in fact, once consumers reach the dealership, they find out that there are significant restrictions on obtaining the advertised discounts or that the advertised discounts are not available in full.” In particular, the FTC alleged: “In numerous instances, the advertised discount and price are subject to various qualifications and restrictions … for example, being a member of the military, being a recent college graduate, possessing a bank account at a particular bank, or owning a vehicle that has a lien on it. In numerous instances, even if consumers meet all of these qualifications or restrictions, they cannot obtain the advertised discount and price.”

The FTC alleged that these are deceptive practices which violate Section 5 of the FTC Act. In the proposed consent orders, the dealerships (which neither admit nor deny the alleged violations) agree to several provisions such as avoiding certain advertising representations, retaining their ads and promotional material for 5 years, and filing compliance reports with the FTC. The FTC’s press release, which contains links to its complaints, the proposed consent orders and the ads that gave rise to these actions, is available at www.ftc.gov/opa/2013/09/autoads.shtm.

DOT Relaxes Some Hazmat Shipping Requirements A new U.S. Department of Transportation rule relaxes the hazardous material (hazmat) shipping requirements for air bags and seat belt pretensioners. Dealership parts and service departments and body shops receive and/or ship a variety of hazmat, including chemicals, batteries, solvents, oils, and wastes in addition to air bags and seat belt pretensioners. Effective August 29, 2013, the new federal rule eliminates the need to obtain explosive (EX) numbers for use on shipping papers accompanying air bag modules, inflators and seat-belt pretensioners. It does not, however, modify the mandate that dealerships properly package and mark these items prior to shipment. It also does not modify the need for dealership employees who receive, ship, or transport hazardous materials to be trained every three years on the DOT’s hazmat packaging, labeling, and shipping rules. NADA’s A Dealer Guide to the Federal Hazmat Transportation Regulations (publication L37) is currently being revised to reflect these and other recent changes. For more information, contact NADA Regulatory Affairs at (703) 821-7040 or regulatoryaffairs@ nada.org.

OSHA Withdraws Proposal to Change Consultation Program In deference to the objections of small business groups, including NADA, OSHA has withdrawn a proposal to modify rules governing its time-honored On-Site Consultation Program. The proposal could have weakened the “wall” between onsite consultations and OSHA enforcement, thus acting as a disincentive for dealerships to access the program. NADA has long suggested that OSHA OnSite Consultations are one way for dealerships to review their federal or state OSHA compliance and to enhance workplace health and safety. For more information on this program, contact NADA Regulatory Affairs at regulatoryaffairs@nada.com or (703) 821-7040.

EPA/DOE Issue Voluntary Used Car Fuel Economy Label The U.S. Energy Department (DOE) and the Environmental Protection Agency (EPA) have released a fuel economy label for optional, voluntary use by used-vehicle sellers. Labels can be printed or downloaded from www. fueleconomy.gov for light-duty vehicles dating to 1984.

Dealers or private sellers interested in using the label to help with marketing are free to put it on or in vehicles or to hand it to prospective customers.

Legislation Puts Congress on Record Against Raising Federal Truck Tax In response to legislation introduced in Congress by Reps. Reid Ribble (R-Wis.) and Tim Walz (D-Minn.) regarding the federal excise tax on heavy-duty trucks, Dick Witcher, chairman of the American Truck Dealers (ATD) and a Massachusetts’ International and Ford truck dealer, issued the following statement: “The existing 12 percent levy on heavy duty trucks is already the highest excise tax imposed by Congress on a percentage basis. The FET adds thousands of dollars to a commercial truck that already costs well over $100,000. With a highway bill and comprehensive tax reform on the agenda in Washington, House Conference Resolution 52 sends a clear message to Congress that hiking the FET on commercial trucks should not be on the table. Since all the heavy-duty trucks sold in the U.S. in 2012 were manufactured in North America, increasing the FET would hurt the 3.65 million Americans employed in the selling, servicing, manufacturing and operating of these vehicles. ATD applauds the leadership of Representatives Ribble and Walz to fight against increasing this tax.”

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Produced by NADA’s Industry Analysis Group • Angela Lisulo, Economist

Review of New Light Vehicle Sales Overall

There were 1.5 million light vehicle sales in the U.S. in August 2013 – this marked an increase of 14.3 percent from July 2013 and an increase of 17.0 percent over last August. Thus far, August is on record for the highest monthly sales volume for light vehicles for 2013.

August 2013 YTD figures bring total light vehicle sales to 10.6 million up 9.6 percent from a year ago. The August 2013 Seasonally Adjusted Annual Rate (SAAR) for light vehicle sales is 16.0 million.

The SAAR has been on an upward trend in recent years and this month marks the first time for its value to reach 16.0 million since November 2007.

In August 2013 YTD figures, car sales held a market share of 49.7 percent with these sales up 6.6 percent from a year ago while corresponding figures for light trucks put the light truck share at 50.3 percent with sales up 12.7 percent from a year ago.

See Figure 1.

Companies/Brands

Companies with a geographic base in the Asia/Pacific region held the largest market share of light vehicle sales for August 2013: 47.5 percent of the market. This was followed by companies based in North America (Detroit 3 and Tesla Motors) at 44.0 percent and then companies based in Europe at 8.5 percent. All company categories by geographic bases – North America, Asia/Pacific and Europe – experienced growth in light vehicle sales in August 2013 YTD figures from last August.

In August 2013 YTD figures, companies with bases in Asia/Pacific also held the largest share of light vehicle sales in the U.S. at 45.6 percent; this was a decline from a share of 46.0 percent a year ago. The corresponding share held by the North American-based companies was 45.5 percent and that for the Europebased companies was 8.9 percent.

Of the Detroit 3, Ford has experienced the most growth in August 2013 YTD sales from a year ago, at 12.3 percent followed by General Motors (9.8 percent) and then Chrysler (9.6 percent). For every month of 2013, so far, Ford has led the Detroit 3 in terms of YTD growth in light vehicle sales relative to the previous year.

From the group of Asia/Pacific-based companies, Subaru has experienced the most growth in August 2013 YTD sales from last SEPTEMBER 2013

August at 29.3 percent followed by Isuzu at 28.6 percent.

From the group of Europe-based companies, Porsche has experienced the most growth in August 2013 YTD sales from a year ago, at 27.7 percent, followed by Jaguar Land Rover at 17.8 percent.

See Figures 2, 3 and 4.

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Segments

Of all the segments, the cross utility vehicle (CUV) segment continues to hold the largest share in sales in YTD figures; in August 2013 YTD terms, the CUV share was 25.2 percent. This was followed by the middle car segment (20.7 percent) and the small car segment (19.7 percent), respectively.

The greatest change in August 2013 YTD light vehicle sales since last year has been in the CUV segment (18.2 percent) followed by the pickup segment (15.8 percent). Although the YTD percentage change in sales in the CUV segment has exceeded that of the pickup segment for every month of this year, thus far, the gap between these indicators has narrowed over recent months as the indicator value for pickups has been rising since March 2013.

Within the CUV segment, the middle CUV subsegment has been the largest sub-segment holding 63.4 percent of August 2013 YTD CUV sales. Within the pickup segment, the large pickup sub-segment has been the largest sub-segment holding 88.1 percent of August 2013 YTD pickup sales.

Focus: The large car segment. For 1982-2012, the annual share of large cars of light vehicle sales has been on a general decline. During this period, the highest recorded annual market share for the large car segment was 9.7 percent in 1984, while the lowest value for the segment was 1.6 percent in 2012.

For August 2013 YTD, the large car segment has held 1.6 percent of total light vehicle sales with 169,115 units sold up 3.0 percent from last August.

For Q2 2013, the leading light vehicle in the large car segment in terms of sales was the Dodge Charger with 25,883 sales followed by the Ford Taurus with 23,148 sales which is a reverse from Q2 2012 when the Ford Taurus was in the lead in this segment followed closely by sales of the Dodge Charger. See Figures 5 and 6.

Power source

The gasoline category held a share of 93.3 percent of August 2013 YTD light vehicle sales, which was down from its corresponding share of 94.0 percent a year ago.

The market share held by the diesel category rose slightly to 2.8 percent, in YTD terms, from its value of 2.7 percent last year. The market shares held by elecwww.msada.org

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trics, fuel cell light vehicles, hybrids, natural gas light vehicles and plug-in hybrids have each grown since last year, in YTD terms.

In August 2013, for the alternative power category, the U.S. automobile industry sold the following light vehicles: 5,024 electrics, 4 units powered by fuel cells, 51,770 hybrids, 201 units powered by natural gas and 6,407 plug-in hybrids amounting to 63,406 light vehicle sales. Thus far, August has recorded the highest number of monthly sales for fuel cell light vehicles this year; the only other

record of sales under this power source this year was in April (2 units sold).

Focus: Hybrid light vehicles. For 2008-2012, the annual share of this category has fluctuated between 2.1 and 3.0 percent of all light vehicle sales in the U.S. Hybrid light vehicles held 3.3 percent share of all light vehicle sales for August 2013 YTD. This type of light vehicle currently has the largest number of brands (19 brands) in the alternative power category, collectively holding 85.4 percent of August 2013 YTD sales in the alternative power bracket. However, August 2013 YTD hybrid sales have increased by 23.4 percent since last year placing it in the last rank within the alternative power bracket, by this measure.

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The Toyota Prius is the best-selling hybrid light vehicle with 134,194 units sold in August 2013 YTD which is down 1.0 percent from last year; this vehicle held a share of 38.1 percent of hybrid light vehicle sales for August 2013 YTD. For the period 2008-2012, the Toyota Prius has been the best-selling hybrid light vehicle holding annual shares that have fluctuated between 44.0 and 50.4 percent of hybrid light vehicle sales.

See Figure 7.

Models

There were 3 cars and 2 pickup trucks occupying the top 5 ranks of the best-selling light vehicles for the month. The 3 leading cars were models from companies based in the Asia/Pacific region: Toyota Camry, Honda Civic and Honda Accord. The 2 leading pickup trucks were models from the Detroit 3: Ford F-Series and Chevrolet Silverado.

From the list of the 15 best-selling vehicles for August 2013, 7 out of 15 light vehicles were Detroit 3 models while the rest where from companies based in the Asia/Pacific region. See Figure 8.

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