Massachusetts Auto Dealer Magazine March 2013

Two Seats

at the Table

March 2013 • Vol. 26 No. 3

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BOSTON, MAPERMIT NO. 216

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autoD E A L E R

M A s s A c h u s E t t s

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

Call Jean Fabrizio (617) 451-1051, ext. 229, or email [email protected] for your scholarship application, eligibility and details.

May 17, 2013

Ta b l e o f C o n T e n T s

4 From the President: attacks from all Corners

6 the roUndUP: Waiting for the House shoe to Drop

8 AUto oUtLooK

10 AccoUnting: a bucket list for 2013

11 LegAL: Parts Counter employees entitled to overtime Pay

12 insUrAnce: Distracted Driving

14 Cover Story:

Two seats at the Table

18 neWs From Around the

horn

23 nAdA UPdAte: Consumer

Protection agency Targets

Dealer-assisted financing

25 economic UPdAte: Much ado about Very Modest

budget Cutting

www.msada.org Massachusetts auto Dealer MARCH 2013

The official publication of the Massachusetts State Automobile Dealers Association, Incs Ta f f D i r e C T o r y

Robert O’Koniewski, Esq.executive Vice [email protected]

Jean Fabrizio Director of administration

[email protected] Fellows

administrative assistant/ Membership Coordinator

[email protected]

a u T o D e a l e r M a g a z i n e

Robert O’Koniewski, Esq.executive editor

Tom Nasheditorial Coordinator

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aD DireCTory

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lynnway auto auction, 21nancy Phillips associates inc, 20

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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.

from the President4

MARCH 2013 Massachusetts auto Dealer www.msada.org

by Scott Dube, MSADA President

A

Attacks from all CornersMSADA is pushing back against threats from abroad and closer to home

s dealers, you know that the business environment can be hostile even during the best of times. What we’ve seen repeatedly during the past few years, however, seems like a never-ending stream of attacks from all sides of the industry.

It’s beyond daunting how many attack fronts we face as auto dealers. That’s why MSADA is here -- so you can worry less about looming industry threats and focus on your business. And we have strong representation at the national level, too, as our cover story about ATD Chairman Dick Witcher and NADA Di-rector Don Sudbay shows.

We’re seeing increasingly bold moves from companies such as Tesla Motors in California and manufacturers from India and China that risk eroding the very foundations of the franchised dealer system. And while Tesla attempts to make the dual argu-ment that it is following our Massachusetts franchise laws and that those laws are old-fashioned, Mahindra trucks has also thumbed its nose at dealers who wanted to take a chance with the company by reneging on its end of the deal.

There is also, of course, our own manufacturers who have at-tempted to stabilize their balance sheets on our backs. Whether they’re demanding new facilities that promise very little or even no return on investment or otherwise dipping their hands into our revenue streams, in many cases the manufacturer-franchise relationship is being tested in ways previous generations would have never imagined.

As if that weren’t enough, we can always look to both Bea-con Hill and Capitol Hill, where all manner of threats to our bot-tom line perhaps even our very existence, are constantly ready to emerge, whether it’s the Consumer Financial Protection Bu-reau (CFPB), the brain child of Massachusetts’ senior Senator Elizabeth Warren trying to control and cap finance income or the

President’s constant push for emissions standards that do nothing to reflect the will of the consumer. In the case of CFPB they seek to eliminate the concept of reserve in favor of flat fees saying that rate mark-up can be discriminatory. What they fail to realize is that chasing this profit is the very reason we work so hard to arrange some of these loans and that harm to the consumer, not protection of the consumer, is what will ultimately befall the con-sumer they seek to defend. In the case of CAFE and very high gas mileage ratings the government unwittingly will drive the cost of vehicles up so far that the average American won’t be able to af-ford a new car. We’re all for continuing to improve and to protect the planet but there must be some balance for the consumer’s sake! As Dick Witcher said in his speech at the NADA/ATD convention recently,“Those who legislate need to understand the commercial trucking business before they can regulate it. Far too many good intentions have essentially backfired and hurt those that the regulation was originally designed to help.”

Massachusetts dealers are frequently ground zero for many of the assaults on dealers nationwide. Whether it’s Tesla trying to open up an illegal “dealership” in Natick or the RTR battle, Mas-sachusetts will likely always have a unique role.

It’s crucial that both MSADA remain, and NADA/ATD con-tinue the return to, being at their core grassroots-centered or-ganizations. That’s one of the reasons you should join us at the MSADA Annual Meeting, which will take place June 21 at the Marriott Long Wharf in Boston. It promises to be a day not just of educating ourselves about the current landscape we face but a day of camaraderie among our fellow dealers. After all, given the challenges that our being thrown our way, we need to remember that we truly are in this together.

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MSADA

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www.msada.org Massachusetts auto Dealer FEBRUARY 2013

Name Contact TelephoneADESA Boston Chris Carli (508) 270-5403Admirals Bank John Saviano, Jr. (401) 248-7229ADP Dealer Services Maria Trezza (973) 974-4020Albin, Randall & Bennett Barton D. Haag (207) 772-1981American Fidelity Assurance Co. Dan Clements (800) 450-3506 ext.6515AutoRaptor (RAL) Howard L. Leavitt (401) 421-6533Bank of America Maryanne Recupero (800) 991-1770 Bellavia Blatt Andron & Crossett, PC Leonard A. Bellavia, Esq (516) 873-3000 Blum Shapiro John D. Spatcher (860) 561-4000Boston Globe Mary Kelly (617) 929-8373Burns & Levinson LLP Paul Marshall Harris (617) 345-3854Construction Management & Builders, Inc. Kate Sullivan (781) 246-9400Curran EasyCare Inc. Mike Douglas (770) 246-9724CVR Scott Herbers (800) 668-2332DealerTrack Ernest Lattimer (516) 547-2242Downey & Company James Downey (781) 849-3100Ethos Group, Inc. Drew Spring (617) 694-9761F & I Resources Jason Bayko (508) 624-4344Federated Insurance Chris Welch (724) 766-6666First Citizens Federal Credit Union Joe Ender (508) 979-4728 Fisher & Phillips LLP John Donovan (404) 240-4236Grant Thornton LLP Alan Oslomowski (508) 926-2200Greenwood Distributors James Viara (508) 336-5040Huntington National Bank Jennifer M. Weekes (781) 329-0413Improved Illumination James Feeney (508) 801-9205Jewett Construction Alison Jewett (603) 895-2412 Key Bank James Q. Moretti (781) 558-5132Leader Auto Resources, Inc. John Ackermann (518) 857-8853Lynnway Auto Auction Bob Brest (781) 596-8500M & T Bank John Federici (508) 699-3576MetroMedia Energy Timothy Teevens (800) 828-9427Micorp LLC Ryan Kim (508) 832-9816Mid-State Insurance Agency John Pietro (508) 791-5566Mintz Levin Kurt Steinkrauss (617) 542-6000Murtha Cullina Thomas Vangel (617) 457-4000Nancy Phillips Associates, Inc. Nancy Phillips (603) 658-0004O’Connor & Drew, P.C. Kevin Carnes (617) 471-1120Paine Auto Auction Kyle Paine (781) 595-2900 Performance Management Group, Inc. Mark Puccio (508) 393-1400Ray-Jurgen Richard Thibadeau (860) 585-0111R.L. Tennant Insurance Agency, Inc. Walter F. Tennant (617) 969-1300Resource Management Group J. Gregory Hoffman (800) 761-4546Reynolds & Reynolds Marc Appel (413) 537-1336Robinson Donovan Madden & Barry, P.C. James F. Martin, Esq. (413) 732-2301Samet & Company John J. Czyzewski (617) 731-1222Schlossberg, LLC Michael O’Neil, Esq. (781) 848-5028Sentry Insurance Company Eric Stiles (715) 346-7096Shepherd & Goldstein Ron Masiello (508) 757-3311Silverman Advisors, PC Scott Silverman (781) 591-2886Southern Auto Auction Tom Munson (860) 292-7500Sovereign Bank Richard Anderson (401) 432-0749Target Dealer Services Andrew Boli (508) 564-5050TD Auto Finance BethAnn Durepo (603) 490-9615TD Bank Michael M. Lefebvre (413) 748-8272Wells Fargo Dealer Services Christopher Peck (508-314-1283) Wicked Local Media Massachusetts Jay Pelland (508) 626-4334 Zurich American Insurance Company Steven Megee (800) 443-4513

AssociAte MeMber Directory

MsAdA BoARd Barnstable County

gary beard, Dick beard Chevrolet

Berkshire Countybrian bedard, bedard brothers auto sales

Bristol Countyrichard Mastria, Mastria auto group

Essex CountyWilliam Deluca, Woodworth Motors

John Hartman, ira Motor group

Franklin CountyJay Dillon, Dillon Chevrolet

Hampden CountyJack sarat, Jr., sarat ford

Hampshire Countybryan burke, burke gMC

Middlesex CountyChris Connolly Jr., Herb Connolly Motors

scott Dube, bill Dube Hyundai

Norfolk CountyJack Madden, Jr., Jack Madden ford

Charles Tufankjian, Toyota scion of braintree

Plymouth CountyChristine alicandro, Marty’s buick gMC isuzu

Suffolk Countyrobert boch, expressway Toyota

Worcester County steven sewell, Westboro Mitsubishi

steve salvadore, salvadore auto

Medium/Heavy-Duty Truck Dealer Director-at-Large

[open]

Immediate Past PresidentJames g. boyle, Tuck’s Trucks

NADA DirectorDon sudbay Jr., sudbay Motors

OFFICERSPresident, scott DubeVice President, Chris Connolly, Jr.Treasurer, Jack Madden, Jr.Clerk, Charles Tufankjian

MSADA

As we go to press, taxpayers, businesses, gov-ernment services clients, and political observers are anxiously awaiting what the House intends to offer up as a tax package in response to the gov-ernor’s call for a $2 billion net increase in various taxes for the upcoming fiscal year that starts July 1.

Speaker Robert DeLeo (D-Winthrop) recent-ly announced that the House Ways and Means Committee, chaired by Rep. Brian Dempsey (D-Haverhill), will issue its FY2014 budget blueprint on April 10, to be taken up by the full House for debate beginning on April 22. The Speaker has not tipped his hand yet as to what he intends to have the House consider as new tax policies in response to what the governor threw on the table in January.

The Speaker has indicated also that the House shortly will be taking up a transportation bond package that will address various road, highway, bridges, and public transit needs. The Speaker, however, has not disclosed to what extent there will be new funding sources for the transportation projects, such as a hike in the state’s gas tax.

As you may recall, on January 23 the gover-nor unveiled a proposed $35 billion state budget for fiscal year 2014 that included a 7% increase in spending and a net increase of approximately $2 billion in new tax revenues. To ensure that the expansive budget plan is in balance, the governor included using $400 million from the state’s “rainy day” fund. In addition to other numerous proposed tax changes, the governor sought to increase the gas tax annually by pegging it to the Consumer Price Index, increasing the cigarette tax by $1 to $3.51 per pack, repealing the sales tax exemption for certain food items such as candy and soda, and including all bottle items in the nickel deposit law.

The governor’s revenue proposal sought to achieve $1.9 billion in new net revenues by off-setting $3 billion in new income and corporate taxes with $1.1 billion in tax savings by reducing the sales tax from 6.25% to 4.5%. His proposal stacked up as follows:• Increasing the personal tax rate from 5.25% to

6.25%, a 19% hike, getting $2.57 billion in new revenue;

• Eliminating 45 tax exemptions, deriving $1.33 billion in new revenue;

• Doubling the personal exemption, thereby reduc-ing revenues by $1.09 billion;

• Corporate tax policy changes, leading to $194 million in new revenue; and

• Lowering the sales tax from 6.25% to 4.5%, but including certain new items, leading to a $1.1 bil-lion revenue reduction.Overall, the governor’s FY2014 budget plan en-

gaged in no cutting, as evidenced by a 7% spend-ing hike, while asking workers and companies to dig deeper into their pockets to fund this bold expansion of government spending. This proposal was measured against the back drop of the $500 million deficit we are experiencing thus far in the current fiscal year and the projected $1.2 billion deficit for FY2014 that was diagnosed prior to the release of the governor’s plan.

Since the governor’s issuance of the plan, he and his cabinet members travelled throughout the state attempting to engender political support for his tax hikes. Thus far, those efforts have not appeared to have achieved their desired results, at least as evi-denced by the tepid response we have seen from the Speaker, the Senate President, and numerous key legislators.

6


the roundup

by Robert O’Koniewski, Esq. MSADA Executive Vice President

Waiting for the House Shoe to Drop

7


MSADA

Business groups, led by Associated Industries of Massachusetts, NFIB, and chambers of commerce, have expressed opposition to various pieces of the gov-ernor’s tax plan, especially those that will either increase business taxes or eliminate certain business tax credits deemed im-portant to several industries in Massachu-setts.

Once the House shoe drops, the budget will then move over to the Senate, where it is likely to be taken up in mid-May. Differ-ences between the two budgets will need to be resolved by conference committee by the July 1 start of FY 2014.

U.S. Senate Special ElectionWhen John Kerry resigned his Senate

seat on February 1 to become our coun-try’s Secretary of State, his action set in motion quite a scramble to replace him. On April 30, voters will go to the polls to select the Republican and Democrat nominees for the general election, to be held on June 25.

On the Democrat side, two experienced congressmen are duking it out: South Bos-ton’s Rep. Stephen Lynch and Rep. Ed Markey from Malden. The GOP primary features former state representative and former U.S. Attorney Michael Sullivan from Holbrook; State Rep. Dan Winslow from Norfolk; and South Shore business-man and former Navy SEAL Gabriel Go-mez.

If the Democrat grabs this seat, keep an eye on the various electoral dominoes that will fall, for example, as legislators seek to fill the congressional seat that opens up.

Cyber Security WebinarThe number one threat to small busi-

nesses isn’t Obamacare or excessive taxa-tion and regulation, although those can be debilitating in their own right.

The number one actual threat to small businesses here and across the country is cyber-crime. Did you know that almost 70% of small businesses that suffer a cy-ber-attack will close operations within one year after suffering that criminal breach?

Do you think your dealership and your

IT operations are immune from the daily threat cyber criminals pose to your com-mercial viability? If you do, you are whis-tling past the grave yard.

To help our member dealers get a handle on this growing problem in today’s com-puter-driven, wireless economy, MSADA with our accounting partner O’Connor & Drew will be hosting a legal webinar on Wednesday, April 10, from Noon to 1:00 p.m.

Michael Hammond, Director of IT Audit Services for O’Connor & Drew, will dis-cuss current observations and trends of IT security from the dealerships he has visited and advised over the last six months, what this means to your business, and ways to increase your IT security posture to protect you and your business investment from in-creasing cyber threats.

Look for our e-mail bulletins to obtain the information to log on to this webinar on April 10.

Do not miss this opportunity to learn what your IT security system may be miss-ing. Protect yourself before you become one of the 70% of small business cyber victims who will not survive to next year.

There is no charge for MSADA mem-bers.

HR Compliance SeminarOn the morning of Thursday, April 25, in

Worcester, MSADA will host labor attor-ney Joe Ambash of Fisher & Phillips for an HR law compliance seminar to review key issues and statutes dealers and their man-agers need to be familiar with. The topics will include:• Social media issues for dealerships, in-

cluding National Labor Relations Act issues;

• How to train your managers and supervi-sors about critical employment compli-ance topics;

• Understanding lawful hiring practices;• Understanding the leave laws: ADA,

FMLA, Workers Compensation;• The new laws and requirements for crim-

inal background checks;• The importance of documenting your

employment decisions; and

• How to terminate lawfully.The seminar will be interactive and will

include round-table discussions of issues raised by the participants.

Look for our future mailings and bulle-tins to register for this seminar.

MSADCF Auto Tech Scholarships Available

Applications for the Massachusetts State Auto Dealers Charitable Foundation’s 2013-2014 Auto Tech Scholarships are now available on our website at www.msa-da.org. The Foundation’s auto tech schol-arship program awards scholarships to eli-gible applicants for use at post-secondary educational institutions that offer auto tech training programs. Since its incep-tion in 2003, the Foundation has awarded in excess of $700,000 to more than 200 students. A scholarship award is worth $6,000-$13,000 each over two years.

To obtain additional information on the scholarship program, contact Jean Fabrizio at MSADA at (617) 451-1051 or by e-mail at [email protected].

The scholarship application deadline is Friday, May 17. If you know a worthy student who may be eligible for financial assistance, please relay this information to him or her.

Regional Dealer MeetingsThroughout the year we continue to con-

duct regional meetings across the state at which we provide an update on various legislative and legal issues your Associa-tion is addressing, as well as receive in-put from our member dealers on issues of interest. We also invite area legislators to attend the events to encourage active dia-logue between the elected officials and lo-cal dealers.

On Friday, April 26, at 9:00 a.m., we will conduct a dealer legislative meeting at the Hampton Inn in Haverhill for our members and legislators from the eastern end of the Merrimack Valley in the com-munities of Methuen, Haverhill, North Andover, Merrimac, Amesbury, Salisbury, and Newburyport.

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AUtO OUtLOOK


9MSADA

Human (living beings capable of emotion and motivation) Resources (assets from which benefits can be produced)

I have the privilege of being the moderator of HRAuto.org, a “twenty group” for human resource professionals from large privately-held dealer groups. I have worked in the automobile industry my entire life, but for me, each and every meeting with this group is one of my more enlightening experiences. I would like to share with you the group’s bucket list for 2013.

The Issue – Affordable Health Care ActThe details for compliance and the cost of the changes in our

health care system are way beyond the scope of this article, but if you aren’t already preparing for Obamacare, the time to start is now.

The Strategy: The greatest impact on rising premiums will come from putting the formerly uninsurable into the insurance pool. In Massachusetts, for example, premiums doubled when people with pre-existing condition were put onto their employers policies. One way of avoiding some of this pain is to consider being self-insured or going with what is known as a “captive” company. Annual health risk assessments, wellness programs, and tiered premium plans are also becoming popular options for containing health care costs.

StaffingIn spite of our weak economy, the unanimous opinion of the

HRAuto group is their organizations will grow in 2013 and find-ing good talent will be a challenge.

The Strategy: Branding your company as a real career choice and a “best place to work”. The group recently invited six stu-dents, who were soon to graduate from the University of Tam-pa, to visit about their search for employment. Not one student on this panel had ever considered retail automotive as a career choice. This is a communications problem. A recent study pub-

lished by the NADA University found that the average annual earnings in automobile retailing are $5,000 higher than the aver-age worker in the US. Among the top 5% of earners, automo-tive executives average annual earnings were $231,000 versus $160,000 for the US overall. Dealers are very adept at marketing to their customers. Now it is time to apply these skills to attract-ing new talent.

RetentionIf good new talent is in short supply, then retaining your pres-

ent talent becomes a priority. In a survey conducted last year, for the period of January through August, the members of HRAuto hired 795 new sales representatives. At the end of this period, only 43% were still employed by the dealerships. For all posi-tions, the eight month retention rate was just 59%. This, in my view, is an indictment of our industry.

The Strategy: First, review your recruitment and on-boarding processes. The number one reason new hires leave is they don’t feel appreciated. Next, we’ve all heard of exit interviews, how about conducting staying interviews instead. Finally, make reten-tion/turn-over rates an element of your managements’ compen-sation plans and an essential part of their performance reviews.

Personnel Officer of Talent ManagerAs large dealership groups struggle to contain personnel costs,

the role of HR in automotive retailing is rapidly changing. Albeit with some reluctance, operational managers are getting clued-in as to the value of having full service support of their HR de-partments. At the same time, in most dealership operations, HR departments are understaffed, under resourced, and underappre-ciated.

The Strategy: First, get your HR department out of the record keeping business. There are numerous software firms, such as Compli and ADP, who provide on-line applications for a wide variety of record keeping and compliance needs. Invest in these and put the talents of your HR professionals to use where they are most needed: increasing employee productivity. Next, repo-sition your HR professionals by transitioning them away from administrative duties and moving them into more strategic and tactical roles. Include your HR professionals in your sales and operational meetings so they can better understand the personnel needs of your business.

Your HR professionals should be focused on recruiting, brand-ing, on-boarding, training, building engagement, and managing performance because this is where you will find the highest re-turns on your HR investment.

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Michael McKean, President of ocd consulting, llc, a life-long autoMotive Professional, is the founder and Moderator of hrauto.org.

byMichael McKean


Accounting10

A Bucket List for 2013MSADA


11

It is typical that dealerships have em-ployees that work in the dealership’s parts department. Usually, these em-ployees are paid a weekly salary, plus a “commission” or “bonus” based upon the efficiency with which they handle their responsibilities (e.g., just-in-time inventory, obsolescence management, leakage, etc.).

Given the nature of the industry, it is common for these parts department em-ployees to work in excess of 40 hours per week. Any non-exempt employee in Massachusetts that works in excess of 40 hours per week is entitled to 1.5x their pay rate for each hour worked in excess of 40 hours. This rule applies to hourly as well as salaried employees.

A typical parts counter employee at an auto dealership is considered by the Mas-sachusetts Department of Revenue to be a non-exempt employee in Massachu-setts, which means that they are legally entitled to overtime pay. Most dealers are surprised when I tell them that their parts counter employee is entitled to 1.5x pay for each hour worked in excess of 40 hours per week.

Some common dealer responses are:“But they are not hourly, they get a

weekly salary. So they don’t get over-time.”

“If I had to pay overtime, then the bo-nuses I have paid in the past would have been smaller.”

“We have a written agreement that waives overtime pay.”

Unfortunately, irrespective of any ar-rangement between the employer and the employee, the parts counter employee is going to be entitled to overtime pay for each hour worked in excess of 40 hours

in any given week. Additionally, in Massachusetts, any

employee that is successful in bringing an overtime claim against his employer is automatically entitled to treble dam-ages (i.e., three times (3x) the amount of their actual overtime claim), plus their attorneys fees. This rule applies even if

the employer had a good faith belief, or reasonable position, that the employee was not in fact entitled to overtime pay. These damage provisions could turn a $10,000 overtime claim into a $50,000 liability very quickly.

Classification IssuesThe cherry on top of this sundae is that

an overtime claim may trigger an audit of employee records. Such an audit may not be restricted to overtime pay. The U.S. Department of Labor and the Massachu-setts Department of Revenue are actively auditing how businesses are classify-ing employees, e.g., are employees that should be classified as W-2 employees being misclassified as 1099 independent

contracts. The standard for being classi-fied as a 1099 independent contractor in Massachusetts is very stringent.

Without getting into the language of the statue, if a dealer has a worker show-ing up to the dealership on a regular ba-sis participating in the day-to-day opera-tions of the dealership, then it is almost certain that Massachusetts will consider that worker a W-2 employee and not a 1099 independent contractor.

Obviously, if you are a Massachusetts auto dealer and you are not paying your parts counter employees overtime, you should take steps to implement a proper pay plan. Admittedly, it is difficult to im-plement a new pay plan without drawing attention to the deficiencies of the previ-ous plan. However, there are techniques to accomplish this kind of implementa-tion while minimizing risk to the dealer and it is always better to address and fix a known issue, than to let the issue linger until its inevitable blossoming.

There may also be ways to character-ize your parts counter employees so that they are exempt from overtime pay. In addition to consulting with your team of professionals, the “Massachusetts State Auto Dealers Association Wage/Hour Compliance Guide - August 2012” is a good resource for all auto dealers.

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Michael O’Neil is a PartNer at schlOss-berg, llc aNd caN be reached at [email protected].

MSADA LegalBy Michael T. O’Neil, Esq.

“the cherry on top of this sunDAe is thAt

An overtiMe clAiM MAy

trigger An AuDit of eMployee

recorDs.”

Parts Counter Employees Entitled to Overtime Pay

Misclassification could cost you

12 MSADA


insurance

A recent letter to the Dear Abby® ad-vice column complained of a car “swerv-ing and weaving in and out of the next lane.” The car would erratically slow down and speed up, leading the writer of the letter to conclude that the driver was drunk. After pulling along side, the writer discovered to her dismay that the driver was speaking to a passenger in sign lan-guage – signing with both hands while watching the passenger rather than the road.

Conversing in sign language may not be the most common distraction for driv-ers, but the effect is much the same as more frequently encountered distractions such as talking on the phone or texting – drivers lose their concentration and some-times they lose control of their vehicles.

According to the National Highway Traffic Safety Administration (NHTSA), almost 20 percent of all crashes in 2008 involved some type of distraction, result-ing in 6,000 deaths and more than half a million people injured.

Employers that require employees to drive as a part of their job should be vigilant about curbing distracted driv-ing. The safety of employees and others is the principal concern, but employers also should be aware of the liability ex-posures distracted driving can produce. Lawsuits involving employees distracted by cell phones and other devices while driving have resulted in multi-million dollar settlements. Liability issues can be especially troublesome for employers that provide employees with, or require employees to use, cell phones or other

portable communication or information devices.

Driving DistractionsDistracted driving has become a high-

profile issue since the advent of mobile phones, but the problem is not restricted to newer technologies. Eating and drink-ing, grooming, changing radio stations, and reading maps have long been causes of distractions that lead to accidents. But with the now nearly universal use of mobile phones, and especially with the growth of “smart phones” that simplify texting and enable Internet access almost anywhere, distracted driving has become an epidemic.

Distracted driving falls into three cat-egories:

• Visual, when the driver takes his or her eyes off the road;

• Manual, when the driver takes his or her hands off the wheel; and

• Cognitive, when the driver’s mind is engaged in another activity and is no lon-ger paying sufficient attention to what is happening on the road.

Using a mobile phone while driving

often involves all three types of distrac-tions: the driver looks at the phone to make a call or read a text message, han-dles the phone to make a call or to type a message, and becomes mentally absorbed in the conversation or text message ex-change.

Numerous studies have shown that us-ing a cell phone impairs driving ability. A University of Utah study found that us-ing a cell phone while driving, whether handheld or hands-free, delays a driver’s reactions as much as having a blood al-cohol concentration at the legal limit of .08 percent.

While talking on a mobile phone while driving is a serious problem, for obvious reasons texting, instant messaging and e-mailing can be far worse. A Virginia Tech Transportation Institute study concluded that texters are 23 times more likely to be involved in accidents or near-accidents than other drivers.

A study by CareerBuilder found that 54 percent of employees who use smart phones – including 66 percent of sales employees, 59 percent of professional and business services employees, and 50

The Costs of Distracted DrivingWhile there’s no cure for stupidity, prevention is key

By Steven Megeest e v e n Me g e e i s r e g i o n a l s a l e s M a n a g e r a t t h e fr a M i n g h a M re g i o n a l off i c e f o r Zu r i c h no r t h aM e r i c a co M M e r c i a l’s Pr o g r a M s & di r e c t Ma r K e t s’ b u s i n e s s u n i t.he cAn be reAcheD At [email protected].

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MSADA

percent of healthcare workers – admit to checking them while driving.

Mobile phones are near-ubiquitous, but they are not the only type of technology that causes distractions. A GPS device, for example, can be enormously distracting if a driver attempts to program it while the vehicle is in motion. Laptop computers and DVD players also can be sources of distraction: an Ohio truck driver pleaded guilty to causing a fatal accident on a New York highway in December 2009 while viewing a pornographic video on his laptop.

Liability IssuesEmployers can he held liable for in-

juries caused by employees using cell phones and other devices while driv-ing, especially if the employer provides the cell phones, or if cell phone use is a necessary or encouraged part of their job. Third-party liability can be incurred based on the legal principle of vicarious liability. This legal principle provides that an employer is responsible for the harm caused by an employee if the employee was acting within the course and scope of his or her employment at the time the accident occurred. Additionally, an em-ployer may be considered directly negli-gent for its own conduct if it encourages or permits employees to use cell phones for business without adequate training or consideration of safety issues, or if it hires an employee whose driving record should have been a red flag.

Employers have long been liable for vehicle accidents involving employees who are acting “within the scope of their employment” or even operating a com-pany vehicle for personal use, but mobile phones dramatically expand employers’ potential liability. Mobile phones enable people whose job may be at a desk to work from a car, even when driving is not part of their job.

Risk ManagementTo avoid the risk that a call or text mes-

sage may be blamed for accidents, em-ployers have implemented policies con-

cerning mobile phones and other devices, some of which are described below:

• Prohibit the use of cell phones and other handheld devices for business pur-poses while operating a motor vehicle, including “hands-free” phones;

• Institute a “total ban” on all mobile communication devices while driving;

• As a condition of receipt, require em-ployees to sign an acknowledgement that company phones are not to be used while operating automobiles or other equip-ment;

• For employers who reimburse em-ployees for business calls made from their private cell phones, require employees to certify that they did not use the phone in any way that violates company policy;

• Limit the scope of certain employ-ees’ job descriptions so that it is clear that their positions do not include using cell phones while driving; and

• Discipline employees for violations of the policy.

Employers also need to encourage in-ternal practices that support policies pro-hibiting mobile phone use in vehicles. Employers that emphasize the need for employees to regularly “check in” or to “stay in touch” while away from the of-fice must be clear about their priorities. Employers also should discourage sched-uling calls or sending text messages at times when they know an employee like-ly will be driving.

Employers need to stay abreast of the technologies used in their businesses and

the potential liability issues they raise. Limousine services, for example, often manage reservations and dispatch cars through laptop computers, and need to assure that proper controls are in place so that the computers do not create distrac-tions. GPS devices are now nearly essen-tial for commercial drivers of all types, and policies should be implemented con-cerning their safe use.

While there may be no cure for stupid-ity, companies nonetheless should make it clear that watching videos, playing video games, or engaging in other similar activities while driving on company busi-ness will result in immediate and severe disciplinary action.

So far, the law and standards of accept-able behavior lag the safety issues created by distracted driving, making it all the more imperative that companies address the issue with diligently enforced rules for safe technology usage. Driving while talking on the phone does not have the social stigma of driving while drinking, even though the result can be much the same, and state laws vary on the legality of cell phone distracted driving use in the car.

While laws specifically addressing technology use while driving are still developing, good old-fashioned com-mon law torts have proved quite adequate for holding companies liable for damage caused by their employees who are dis-tracted while driving.

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“Employers can be held liable for injuries caused by employees using cell phones and other devices while driving.”

MSADAMSADAMSADACOvEr STOry MsAdA14


by Tom Nash

Massachusetts has a unique role navigating industry challenges faced by auto dealers. Commonwealth dealers are frequently the first to face the assaults made on deal-ers nationwide. Whether it’s Tesla trying to open an illegal dealership or the “Right to Repair” proponents digging in on Beacon Hill, these dealers often need a heavyweight champion in their corner – on a national scale.

Luckily, they have two: Dick Witcher and Don Sudbay.Witcher, owner of Minuteman Trucks in Walpole, has

served as chairman of the national Association of Truck Dealers for a year. Sudbay, owner of Sudbay Automotive in Gloucester, is the Massachusetts Director for the Na-tional Auto Dealers Association. Both are making their presence known nationally, from visiting legislators to grappling with manufacturers.

A more restrictive environmentWitcher, who previously served a tenure as Vice Chair-

man of ATD, has come to the position with an optimistic outlook but a realist’s sense of the day-to-day in Washing-ton. He has his finger on the pulse of the many significant challenges that interfere with the industry landscape in Massachusetts.

Two Seats at the Table

“All dealers need to have a heightened awareness of what’s going on and what might happen.”

– Don Sudbay, NADA Director

Massachusetts dealers face more than their share of national industry challenges. Dick Witcher and Don sudbay are here to help.

“This environment is much more restric-tive than my compatriots experience around the country,” he said. “Other dealers can start a business in six months and not go through all of that regulatory stuff, that hard handed-ness we experience here.”

Witcher said operating costs – from em-ployee compensation to cost of land – are higher than in other parts of the country.

“These challenges make it difficult for manufacturers to treat everyone fairly,” Witcher said. “OEMs, for example, develop a universal picture of a dealer that often ends up being inaccurate in a state like Massachu-setts.

“Mercedes will say, ‘Jeez if they can do it in California they should be able to do it in Boston.’ The OEMs need to recognize the conditions of the market here.”

Working toward fairnessSudbay said his biggest challenge will be working with the

manufacturers to try and make sure they have programs that treat all the dealers fairly. He’s meeting with GM in April to discuss its facilities program, which has been widely criticized for not allocating enough funds for Massachusetts dealers’ facilities.

“What NADA is about is fairness, fairness for all dealers. Whether they’re large, small; rural, urban, suburban – it’s about having a level playing field for all dealers,” he said. “We need to continue to work for that. It’s not going to happen overnight, but we need to keep advocating for that.”

Sudbay is an industry legacy: His grand-father was General Manager at a Buick deal-ership in the 1930s. And even though much has changed since Sudbay’s father founded his dealership in 1965, Sudbay’s industry knowledge has made him a formidable op-ponent against the hurdles faced by Massa-chusetts dealers.

“In the position I’m in, I’m exposed to a lot more and I see what’s out there on the

horizon. There are threats. All dealers need to have a heightened awareness of what’s going on and what might happen. Being involved makes a huge difference.”

“Whenever I meet my dealer friends, I let ‘em know what the issues are. I let them know what’s out there and I try to keep them abreast as to what’s happening. Everybody’s running their business. Their main thing is day-to-day running their automo-bile dealerships and a lot of times they don’t see the big picture. I understand that totally.”

15MSADACOvEr STOry MsAdA


“This environment is much more restrictive than my compatriots experience around the country.”

– Dick Witcher, ATD Chairman

Two Seats at the Table16


Understanding the impactsAlso an enthusiastic advocate for his cause, Witcher said he is

“interested, willing and able to go any place to speak to people about issues regarding trucks from a dealer’s perspective.”

“I’m going to Brazil in August. I’ve been asked to speak at other dealers associations. It’s about letting people understand the im-pacts and that we’re such a huge part of the economy that they need to understand what they’re doing to us, because it will affect the economy overall.”

Witcher said there is a dedicated core group of dealers in Mas-sachusetts, and those dealers care and participate in various ways that impact their businesses.

“What I’ve been trying to do with trucks for the past year is get them involved at the local level. They need to understand our business before they’re out there making laws.

Witcher noted that might seem more unappealing than ever

given the upcoming post-Scott Brown Senate election, where it’s likely one of the two Democrats vying for the seat once occupied by now Secretary of State John Kerry will win easily. But he says that makes it all the more important to be paying close attention, and that the focus shouldn’t be on party lines.

“You’re not just giv-ing (support) to one side or the other side, you’re picking out pro-business candidates,” he added. “We need to pick pro-business candidates and work with them to get them in place. If you get extremists or philosophical purists, you’re going to lose the ability to go in and talk.”

Sudbay is optimistic about the unusual and often challenging role Massachusetts plays on the industry’s national stage.

“We got thrown into this Tesla thing and also ‘Right to Re-pair.’ Years ago California was always the target and now they’ve thrown the dot at us for whatever reason. But we have the re-sources and we have the determination. We have dealers who care about the franchise system. It’s the future of our business – that’s what’s on the line here.”

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Ways to Get Involved- Contact your legislators about bills that

would affect your business;- Donate to the Dealer Election Action

Committee and our state political action committee, NCDPAC;

- Schedule a visit from your representative to your dealership.

For advice on starting or maintaining a relationship with your representative, contact MSADA Executive Vice President

Robert O’Koniewski at (617) 451-1051.

u.s. senator scott brown visiting Minuteman Trucks.

19

www.msada.org Massachusetts auto Dealer FEBRUARY 2013


from Around the HornNEWS MSADA

PALMER

MsAdA sponsors Pathfinder students at New York Competition

After they took first place in the MSADA’s repair competition this past December, two Pathfinder Regional Vocational Techni-cal High School seniors will head to New York for the National Automotive Technology Competition in April.

This is the school’s second appearance at the NY competition in as many years.

Matthew Lloyd and Katie Letendre will compete against hun-dreds of high school automotive mechanics from throughout the United States and Canada. .

In the MSADA competition, each school team was assigned a particular car for the December event in Ashland. Lloyd and Letendre worked on an Audi.

The work involved such things as diagnosing electrical faults and taking accurate measures of brake components.

Letendre and Lloyd are 18-year-old high seniors who have tak-en the automotive course in each of their four years at Pathfinder. As with other shop courses, they learn theory in a classroom set-ting and then do hands-on work in the automotive shop.

Lloyd has been working on cars since he was 13 and spent many weekends at a garage run by a family friend. When he grad-uates from Pathfinder next spring, Lloyd plans to take business courses at Springfield Technical Community College with a goal of someday running his own automotive business.

Letendre learned her first automotive repair lessons from her father and then really got into the work in the shop classes as Pathfinder. She also intends to earn a business degree at STCC.

18


from Around the HornNEWS 19MSADA

WEBSTER

Long subaru opens New showroom

Long Subaru has an expanded inventory to go with its newly renovated and upgraded showroom.

Scott Barry, the general manager, is a member of the Long fam-ily and represents the fourth generation of the family to work in the car dealership business.

The Long family purchased the former Tri-State Subaru in Oc-tober 2005. It also operates Long Cadillac in Framingham.

Barry, who was previously the manager of Long Buick-Pontiac-

GMC in Framingham, which has since closed, came to the Subaru dealership in 2005 and has been there ever since.

After seven years, Barry said it was time to update the dealer-ship.

“We have modernized everything,” he said. Built by Jewett Automotive Design & Construction, the new

showroom is 5,000 square feet larger than the old one. The area includes Wi-Fi and has private workstations for customers who want to be productive while waiting for their vehicles to be ser-viced.

Barry said the dealership recently added three salespeople, bringing the employee count to 45.

Herb Connolly Acura wrapped up a more than year-long construction project on a new facility with a Grand Re-Opening in March.

The event boasted live music, ca-tered food from Davios Restaurant and a preview of the 2014 Acura RLX, with an estimated 125 people in attendance.

The project involved a complete demolition of the original building, which dated back to the ‘60s, MSADA Vice President Chris Connolly said.

The dealership had been operating in trailers between September 2011 and December 2012, Connolly said, adding that seeing the project through to the March event “feels great.”

FRAMINGHAM

Herb Connolly Acura Hosts Grand Re-opening

from Around the Horn20 NEWS


BOSTON

Massachusetts dealer Groups Named on Top 125 List

Five companies with Massachusetts dealerships were named to the annual Automotive News Top 125 Dealer-ship Groups list, the magazine announced this month.

The dealership groups include Herb Chambers Com-panies at No. 14, whose president is Herb Chambers; Lia Auto Group at No. 45, whose president is William Lia Sr.; Balise Motor Sales Co. at No. 57, whose presi-dent is James Balise Jr.; Metro Motor Group at No. 91, whose president is Michael Grieco Sr.; and Colonial Automotive Group at No. 93, whose president is Law-rence Gordon.

The list is determined by unit sales of new vehicles.

DANVERS

Kelly Talks Expansion with Boston Globe

Brian Kelly had several new projects to talk about with The Boston Globe this month, including what he says will be the largest VW dealership on the East Coast.

That dealership will include a 53,000-square-foot showroom with a wind turbine sitting on top, placed on one of several vacant properties he has purchased in the North Shore area.

While that project is set to be finished next summer, Kelly also said the company’s Fiat and Alfa Romeo combined store is set to open in April on a former Lin-coln-Mercury site. A Maserati dealership will be put in the old VW location, with Kelly adding that the com-bined activity has added at least 100 new jobs in the last year.

MARLBORO

Nissan dealership Gets Makeover

Marlboro Nissan has launched a five-month renova-tion of its dealership on Boston Post Road.

The renovations include the demolition of the exist-ing showroom building and construction of an open, two-story showroom with a second-floor office mez-zanine.

Jewett Automotive Design & Construction, a divi-sion of Raymond, N.H.-based Jewett Construction Co. Inc., has been hired to conduct the renovations.

21MSADA


READING

Honda Gallery Wins dealer of the Year Award for second Year in a Row

DealerRater, a worldwide car dealer review website, has named Honda Gallery as Honda Dealer of the Year for the state of Mas-sachusetts for the second year in a row.

DealerRater’s Dealer of the Year Award Program recognizes se-lect dealerships throughout the United States and Canada for out-standing customer satisfaction. To qualify, dealers must have at least 25 new reviews written on the site in the last calendar year and have an average rating that is higher than 4.0 out of 5.0. Combined, those two criteria form an algorithm to determine the winning deal-erships. Honda Gallery currently carries a score of 4.9 out of 5.0.

“Our top goal is to always provide a great customer experi-ence for the car buyers who visit our showroom, and we’re always pleased when a customer is impressed enough to take to Deal-erRater and let others know about it,” said Frank McLaughlin, general manager of Honda Gallery. “Winning this award is a great validation of the way we do business, by putting the customer first, and we’re very happy that people see the value in that higher level of customer service.”

HYANNIS

Hyundai sets second straight February sales Record

Boosted by strong gains from its Santa Fe crossover, Hyun-dai recorded its best-ever February sales last month. The auto-maker moved 52,311 units in the United States, outselling last year’s record-breaking February by 2 percent. A strong Presidents Day weekend and healthy inventory levels at dealerships helped Hyundai reach that impressive tally.

Redesigned for the 2013 model year, the Hyundai Santa Fe nameplate sold 6,339 units last month, a 64 percent increase over February 2012. The 2013 Santa Fe Sport launched last year as a five-passenger crossover with Hyundai’s new “fluidic sculpture” design and the option of either a standard 2.4-liter or turbocharged 2.0-liter engine. Meanwhile, the longer-wheelbase, seven-passen-ger 2013 Santa Fe will be arriving at showrooms later this month sporting a 290-horsepower 3.3-liter V6 engine.

“The new Santa Fe and Santa Fe Sport manage to mix style, function and features better than any other crossovers in the same price range, as well as some that cost thousands of dollars more,” said JJ Hoyt, general manager of Balise Hyundai of Cape Cod, a Hyannis. “Either option offers plenty of cargo capacity and seat-ing for the whole family when it’s time to hit the road.”

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from Around the HornNEWSRAYNHAM

Buick Enclave Earns NHTsA Five-star safety Rating

The National Highway Traffic Safety Administration recently gave the 2013 Buick Enclave its top five-star Overall Vehicle Score in its New Car Assessment Program. Featuring a new indus-try-first front-center airbag that deploys between the front seats, the latest Enclave offers greater protection during far-side impacts.

To earn a five-star rating from NHTSA, a vehicle must score well in a range of tests, including a frontal crash test, a side-barrier crash test and a new side-pole crash test. The Buick En-clave’s top score indicates that the risk of injury in a crash is much lower for its occupants than the industry average, but the vehicle’s airbags and reinforced chassis only make up a portion of its comprehensive safety design. Buick engineers also out-fitted the Enclave with active safety equipment to help drivers avoid accidents in the first place, including the available Side Blind Zone Alert and Rear Cross Traffic Alert systems.

“Buick vehicles are more than luxurious, they’re also incred-ibly safe thanks to their advanced chassis designs and innovative technology, including the front-center airbag in the Enclave,” said Gary Carter, general sales manager of Mastria Buick GMC Cadillac. “Our customers want to feel safe out on the road, whether they’re alone or with the whole family and then some, and the Enclave lets them drive with confidence.”

NORWOOD

BMW X3 xdrive28i Wins Car and driver’s Luxury sUV Comparison

Car and Driver recently put three compact luxury SUVs to the test to see which one provides the best combination of per-formance, comfort and style. Though each model is powered by a turbocharged 2.0-liter four-cylinder engine, the Audi Q5 2.0T, Range Rover Evoque and BMW X3 xDrive28i offered up vary-ing results during testing. In the end, the automotive publication chose BMW’s offering, which didn’t disappoint in any of the overall categories.

Car and Driver editors put the three upscale utilities through their paces on the publication’s 10Best evaluation loop, as well as on the streets of Birmingham, Mich. The BMW X3 earned high marks for its responsive steering and smooth suspension, quiet cabin and comfortable overall ride. Testers also commend-ed the X3 for its quick acceleration and attractive styling.

“The compact luxury SUV segment is crowded with com-petitors, but Car and Driver’s latest comparison shows how the BMW X3 stands out from the rest,” said Phil Driscoll, general manager of BMW Gallery of Norwood. “From its elegant ex-terior to its functional cabin that doesn’t skimp on comfort and amenities, the X3 offers the perfect balance for discerning fami-lies who demand the best.”

PEABODY

Acura Gets sales Boost from New Models, and More Are on the Way

Last spring, Acura launched a redesigned 2013 RDX cross-over and a new 2013 ILX compact sedan, and both models are still boosting the luxury auto brand’s sales after nearly a year on the market. February marked the 10th consecutive monthly sales record for the Acura RDX, which moved 2,795 units, a 178 per-cent increase compared to the same month last year. Meanwhile, the Acura ILX continued its steady month-to-month growth, with 1,997 models sold.

According to Bloomberg, Acura is hoping to greatly accelerate that sales momentum with a $1 billion investment into a range of new models. First up is the brand’s new flagship sedan, the 2014 Acura RLX, which goes on sale later this month. More spacious, powerful and fuel efficient than the outgoing Acura RL, the RLX favors comfort and sophistication over flashiness, donning new Jewel Eye LED headlights, sharp horizontal design lines on its sides and the latest AcuraLink infotainment system in the cabin.

“With their focus on refinement and ride, the latest RDX and new RLX are out to prove that Acura offers more than just a high-value, high-tech lineup,” said Joel Avery, general manager of Acura of Peabody. “In addition to their streamlined styles, both vehicles feature increased interior space and forgiving sus-pensions, so drivers and passengers don’t just see the difference, they can feel it in many ways.”

PEPPERELL

Conway Chevy Buick sells Franchises Back to GM

After 33 years in business, Conway Chevrolet Buick has sold the franchises back to GM, the dealership announced recently.The former dealership is now operating as Conway Service and Sales Center.

Consumer Protection Agency reportedly Targets Dealer-Assisted Financing

As you will see when you read the following message from our NADA Chairman, David Westcott, the newly formed Consumer Financial Protection Bureau poses a significant threat to all dealers. The elimination or “flat-rating” of our fi-nance reserve income will make it even more difficult for our new and used vehicle departments to be profitable. NADA will do everything in it’s power to preserve this legitimate source of income for our dealers. Over the years we have saved our customers a collective huge amount in interest costs over what they may have received dealing directly with finance sources. We also have been able to arrange financ-ing for some of our customers who would have been turned down by other sources. We should all be proud of how we have helped our customers in the purchase of new vehicles and be prepared to defend our position.

Message from NADA Chairman Dave Westcott:Several media outlets have reported that the Consumer

Financial Protection Bureau is considering enforcement ac-tion against several large commercial banks for compensat-ing dealers in a manner that allegedly may have resulted in violations of the Equal Credit Opportunity Act. The law was enacted in 1974 to bar discrimination in lending. The ac-tions focus on whether consumers from certain demographic groups pay more dealer participation than similarly situated consumers from other demographic groups.

The rumored allegations do not involve intentional dis-crimination in auto finance, but instead are based on uninten-tional and unproven conduct under the disputed “disparate impact” theory of liability. This theory is based on an after-the-fact statistical analysis of whether one group paid more for credit than another group.

It is essential that this analysis be conducted in a statisti-cally reliable manner. Otherwise, it can produce flawed find-ings that could serve as a springboard for disrupting the “op-tional” dealer-assisted financing system, which has served consumers at all credit tiers extremely well.

Dealers provide a valuable service that increases access to and reduces the cost of financing to car buyers. A dealership’s ability to discount the interest rate it offers to consumers—which is made possible by the customer’s ability to negotiate rates at the dealership—would be eliminated if CFPB action leads to an arbitrary flat fee compensation system.

Removing the dealer’s ability to “meet-or-beat” the best interest rate available to a customer from competing finance sources would significantly weaken rate competition and re-sult in more expensive financing for consumers.

We’re committed to ensuring that all categories of consum-ers are protected and treated fairly. As NADA demonstrated during the Federal Trade Commission roundtable sessions, dealer-assisted financing provides overwhelming consumer benefits in the marketplace today, including access to afford-able credit for millions of Americans who do not have tradi-tional relationships with banks.

Bipartisan Bill to Repeal Obsolete Paperwork Requirement at Auto Dealerships Introduced

Legislation (H.R. 724) was introduced in the U.S. House of Representatives that would eliminate a mandate that re-quires dealers to certify if a new vehicle has an emissions system. Under the Clean Air Act, dealers are required to pres-ent written confirmation to the buyer that a visual inspection has been completed of a new-vehicle’s emissions system. The bill, introduced by Reps. Bob Latta, (R-Ohio), and Gary Peters, (D-Michigan), eliminates the obsolete and unneces-sary requirement. “There are already enough documents for car and truck buyers to read at the sale of a new vehicle. Eliminating this redundant form makes sense,” said NADA Chairman David Westcott.

NADA’s Westcott: Industry and Regulatory Issues Top List of Dealer Concerns

Despite the industry and regulatory challenges of the mo-ment and an uncertain future, NADA Chairman David West-cott said he remains confident about the future of auto re-tailing. He said one of the biggest challenges facing dealers is their relationship with manufacturers. “The issues posed by stair-step incentive programs and by mandatory facility upgrades are just two of the most recent examples of manu-facturers intruding into dealers’ businesses,” said Westcott, in remarks at the NADA Convention and Expo on Feb. 11. Westcott, a Buick, GMC and Suzuki dealer in Burlington, N.C., said the development of stair-step incentives are an understandable response to the need for higher sales by the

don sudbay, President of sudbay autoMotive grouP, rePresents Msada MeMbers on the nada board of directors. he welcoMes your questions and concerns ([email protected]).

nAdA Update


MSADA 23

nAdA Updatemanufacturer, but “many stair-step incentive programs raise fundamental questions of fairness,” he said.

FTC Warns Small Businesses: Don’t Open Email Falsely Claiming to be from FTC

The Federal Trade Commission is warning small busi-nesses about an email that pretends to be from the FTC with “NOTIFICATION OF CONSUMER COMPLAINT” in the subject line. The email was not sent by the FTC. The email falsely states that a complaint has been filed against their company. It contains a link to consumer complaints, a link to contact the FTC and an FTC telephone number—but the email is fake. The FTC’s advice: Do not open the email. If you have opened it, do not click any links or attachments because they may install a virus or other spyware on your computer; and delete the email. To learn more about mali-cious software (malware), visit OnGuardOnline.gov.

NADA Launches New Energy Ally Program to Help Dealerships Reduce Energy Use

NADA and the Environmental Protection Agency have partnered to help new-car dealers reduce their energy con-sumption through the Energy Star program. As part of this effort, NADA and EPA are encouraging dealerships to com-plete a brief survey that will give the agency a benchmark to better compare the energy usage of dealerships across the country and allow certification of those dealerships that per-form well. To encourage participation, NADA has launched a new program called Energy Ally. Businesses, such as ac-counting, consulting and energy management firms, that as-sist at least five dealerships to complete the survey will be awarded an NADA Energy Ally designation. These contrac-tors can use the recognition to market their services to other dealerships. Information on how to apply to become an Ener-gy Ally is available at www.nada.org/energystar. The survey (www.nada.org/energystar) asks dealers to share their yearly utility bills, square footage—inside and out—and different types of equipment used at the dealership. Before the Energy Star certification process can begin, the energy usage of at least 500 dealerships has to be benchmarked. Dealers that participate in the survey and reduce their power usage will be recognized by Energy Star for their efforts to reduce the dealership’s impact on the environment.

Deadline to Participate in 2013 Dealership Workforce Study Extended to April 30

The deadline to participate in the 2013 Dealership Work-force Study has been extended to April 30. It’s the only NADA-ATD study that compares an individual dealership’s compensation and benefits, retention and turnover, work schedules and hours of operation to aggregated peer data. With the results, dealers will be empowered to make data-based decisions when recruiting, hiring and motivating em-

ployees. Only NADA and ATD members are eligible; there is no charge to participate.

To participate, go to www.nadaworkforcestudy.com, and follow the step-by-step directions to complete the survey and upload your payroll data file. There are separate processes for single dealership enrollments and multidealer group en-rollments. Each participating dealership will receive a com-plimentary individualized Basic Report comparing its data against data aggregated on a regional and national basis. Participants will also receive a complimentary Dealership Workforce Study Industry Report. Participants may purchase an individualized Enhanced Report, which compares the in-dividual dealership’s data against data for the franchise and state.

NADA University has once again teamed up with Delta-Trends and Northwood University. DeltaTrends is handling data collection and analysis. Northwood University will pre-pare the Industry Report. The first annual Dealership Work-force Study was completed in 2012.

2013 NADA and ATD Convention Workshops Now Online at NADA University

The workshops held at the 2013 NADA and ATD conven-tion in Orlando are now available online. Included in the best-value Learning Hub Premium Subscription or available as packages or individually in multiple formats, the work-shops are led by top industry trainers covering all areas of the dealership business. The workshops encompass seven tracks for car dealers and three for truck dealers, with a total of 58 recorded sessions. The workshops are designed for anyone working in a dealership. Dealers are encouraged to share them with their managers and staff through NADA Univer-sity’s Learning Management System. Members can log onto www.NADAuniversity.com and go to the NADA U Store to purchase the Learning Hub Subscription or 2013 Workshops, or can be ordered through NADA University Customer Ser-vice at (800) 557-6232.

NADA University Online Launches ‘My Career Path’ to Facilitate Training

NADA University’s new “My Career Path” for dealership employees features job-specific training recommendations, links to relevant content from NADA University and tracking capabilities for a growing list of job positions. Career paths are organized into six areas of training, which includes core courses, dealership basics, marketing and operations, legal and regulatory, customer relations and employee relations. Career paths are now available for the general manager, new- and used-vehicle sales consultant, service advisor, F&I manager, service manager, sales manager and parts manager, with more on the way. Sign into www.NADAuniversity.com to begin.

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MSADA


25

As we saw earlier this month, Wash-ington elected officials appeared poised to take the easy road by letting the automatic spending cuts, called sequestration, take effect after March 1st. Several factors are likely to mitigate the overall out-come, but as the Congress struggles with an alternative to mindless spend-ing cuts during March and April, several other facts of life are obvious:

The spending cuts contained in the sequester are roughly a modest 2 percent cut in fed-eral spending, and are especially mod-est in relation to the very large run-up in federal spending over the last several years.

If not reduced more dramatically, that multi-year binge of federal spending will still leave us with a federal government that is much larger when expressed as a share of the Gross Do-mestic Product (GDP).

The propaganda on the impact of the spending cuts from the Administration points to pain from late planes and trains, food shortages resulting from furloughed inspectors and other horrors. When the Ad-ministration and the majority in the Senate figure out that they will be tagged with part of the blame for all of this, we may see the magic of compromise emerge from the po-litical system. Elected politicians are under immense pressure to administer the budget sequester in a more enlightened way, and

voters are already struggling with the tax increases the Administration insisted upon that raised the payroll tax back to 6.2 per-cent of middle-class wages from 4.2 per-cent.

For the long term, current actions have serious consequences. In the last 40 years, the share of GDP taken by federal taxes has averaged less than 18 percent, and ex-ceeded 20 percent only in 2000. The cur-rent trend in federal spending will take us over a peak of 34 percent of GDP, opening a deficit gap equal to at least 14 percent of GDP, even if taxation were allowed to oc-cur at a rate of 20 percent of GDP. The cur-rent range of argument has gone well be-yond the usual “tax at 19 percent and spend at 21 or 22 percent” that characterized the deficit debate for the past 30 years.

The President’s recently exiting Trea-sury Secretary called this spending trend “unsustainable.” The new Treasury Sec-

retary, Jack Lew, is perhaps the deftest of available Democrats on budget issues. But it will be difficult to convince anybody on either side of the aisle that spending at 24 percent and later at 34 percent of real

GDP is not dangerous to future civil order in the U.S. Critics are correct to compare the current situation in the U.S. to the patterns that have put Greece, Spain and Italy into extreme fiscal dif-ficulty. Why is spending escalating so rapidly?

Current administration policy calls for guns, but-ter and enhanced medical care. In the Clinton years, medical spending went up while defense spend-ing moved down in share of total output. So Jack Lew will have to be a deft speaker in the com-ing months to sell what remains an unsustainable fiscal policy. And tax in-

creases to cover these gaping deficits are not likely given the size and the history of taxation to GDP in this country.

What Is Currently happenIng In the u.s. eConomy and

automotIve retaIl? Data from Experian and the American

Bankers Association on auto loans shows stability of repayment in recent quarters. The Federal Reserve data on household as-sets shows the recovery the recovery of the net assets position for the household sector. The line chart shows luxury vehicle sales following that recovery of net financial as-sets of households with a one-year lag.

Currently, most of the economy looks

By Paul Taylor, NADA Chief Economist

Much Ado About very Modest Budget Cutting

economic Update

much as it did before the recession. Homes priced below the $1 million level are mak-ing a modest but steady 4 percent overall gain on a yearly basis. The rising stock market indexes are driving up the Federal Reserve household sector asset data found in the Z1 statement, which does not include home equity. Values of stocks owned out-side of retirement programs are driving up net assets for many households that pur-chase the majority of new luxury cars in the U.S. economy. The recovery of luxury vehicle sales has followed the recovery of net financial assets for the household sector in Federal Reserve data.

Home equity recovery helps to drive the will of consumers to replace non-luxury vehicles, now 11.4 years of age according to R.L. Polk data. And the progress of the broad stock market indexes push up net financial assets for many households, and drives up luxury vehicle sales as it enhanc-es net assets positions for many wealthier households. (“Luxury car sales” includes sales of new luxury cars, luxury SUVs, luxury pickup trucks and luxury CUVs.)

None of this is surprising, and CUVs are still the biggest overall light vehicle sales category, despite success of new small and mid-sized car designs now at the nation’s auto shows. Households continue to make sensible decisions based on available facts about long-term expected gasoline prices and other costs of owning particular car models. Households continue to buy ve-hicles that meet their needs for room for passengers and for life style activities, in-cluding vacations for the family.

NADA Industry Analysis believes it will take gasoline above $4.50 per gallon before there is a sales surge on small cars that causes their market share to eclipse the share of each of the other two popu-lar classes: CUVs and mid-sized cars that household believe meet their expectations fully for the range of household activity. There is not really a “new new” here except that Washington’s ability to interrupt eco-nomic improvement and impact the cost of owning and operating a light vehicle has grown.

If our elected officials move decisively

on the deficit and debt issues over the com-ing days, one concern of households will fade into the background. Then the is-sue becomes fuel economy mandates that threaten to put U.S. households on public transportation. “Sell us a car or crossover we can all fit into comfortably, and one that obtains reasonable mileage in the process” seems to remain the obvious theme of new car sales as we continue through the Spring.

Recently, gasoline is getting more expen-sive while energy in general is not. That re-lationship will not be expected to last while Europe remains in recession, as it will dur-ing 2013. So there is no new paradigm for automotive retailing as the next several years unfold, except that we think there will be more vehicles running on cheap and abundant natural gas.

Industry Analysis has captured the real-ity of the typical middle-class household (start of recovery of the household nest egg in home equity) and typical upper middle class household when we add in data on net household assets that is driven in the short run by the value of stock shares owned outside of household retirement programs. These factors added to population growth, growth of licensed drivers, low interest

rates and income growth provide key pre-dictors of the future of light vehicles sales.

Used cars will continue to hold value until demand for used cars stops growing in relation to the increase in trade-ins that comes from strong new car sales. That will not happen in the next 10 months. Prices for used cars will remain solid while drift-ing back toward the relative relationships to new car prices experienced in past years. The volume of used cars and trucks avail-able for sale remains somewhat tight and incentives do not lower effective new ve-hicle prices as much as in the past.

As the economy continues to grow, used car demand should strengthen as the job market improves along with economic growth. As an act of self-preservation, elected federal officials will be busy over the coming days, weeks and months miti-gating the impact of spending cuts. If they are looking as much as two years ahead, they will also be looking to reduce the take of the federal government spending by lowering the growth rate of federal spend-ing to below the growth rate of the overall economy and federal tax revenues.

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economic Update26


Paul c. taylOr, Ph.d., is chief ecONOMist Of the NatiONal au-tOMObile dealers assOciatiON’s iNdustry aNalysis, where he Oversees Nada’s iNdustry aNalysis activities, which iNclude research ON a wide raNge Of factOrs iMPactiNg the retail autO-MOtive iNdustry aNd PublishiNg Nada’s aNNual cOMPilatiON Of facts aNd figures, titled Nada data.

“As an act of self-preservation, elected federal officials will

be busy over the coming days, weeks and months mitigating the impact of spending cuts.”

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Massachusetts Auto Dealer Magazine March 2013

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Transcript of Massachusetts Auto Dealer Magazine March 2013