October 2014 MSADA Auto Dealer

October 2014 • Vol. 27 No. 10

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BOSTON, MAPERMIT NO. 216

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

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

ENERGYENERGYto Power Internet Sales

TA B L E O F C O N T E N T S

4 FROM THE PRESIDENT: Get Ahead of the Game

6 THE ROUNDUP: A Sprint to Election Season Finale

9 TROUBLESHOOTNG: Data Breach Law and Dealer Precautions

10 ACCOUNTING: Learn from History or Doom to Repeat It

11 LEGAL: “So Where Are You From Originally?”

12 AUTO OUTLOOK

15 FINANCIAL SERVICES: Is Your Dealership Up to Speed on “Play or Pay”?

16 COVER STORY: Energy to Power Internet Sales

19 NEWS From Around the Horn

24 NADA UPDATE: NADA’s Solution Reduces Fair Credit Risks

27 NADA MARKET BEAT

www.msada.org Massachusetts Auto Dealer OCTOBER 2014

The official publication of the Massachusetts State Automobile Dealers Association, IncS TA F F D I R E C T O R YRobert O’Koniewski, Esq.

Executive Vice [email protected]

Jean Fabrizio Director of Administration

[email protected] Brennan, Esq.

Staff [email protected]

Marta Argueta-GuerraAdministrative Assistant/ Membership Coordinator

[email protected]

A U T O D E A L E R M A G A Z I N ERobert O’Koniewski, Esq.

Executive EditorCatherine MacDonald

Editorial [email protected]

Subscriptions provided annually to Massachusetts member dealers. All address changes should be submitted to: MSADA by

e-mail: [email protected]:

Send address change to:One McKinley Square, Sixth Floor

Boston, MA 02109

autoD E A L E R

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

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 DIRECTORYBlumShapiro, 21

Boston Herald, 32ConServ Group, 21

LAR, 24Lynnway Auto Auction, 19

M&T Bank, 20Nancy Phillips Associates, Inc., 23

O’Connor & Drew, P.C., 31Reynolds & Reynolds, 14

Solect, 2Southern Auto Auction, 22

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from the PRESIDENT4

OCTOBER 2014 Massachusetts Auto Dealer www.msada.org

by Scott Dube, MSADA President

I

Get Ahead of the GameIt’s past time for dealers to stop fearing the Internet want to start by thanking all of you who joined me at the In-ternet Sales 20 Group event in Boston. It was a fantastic op-portunity to bring our industry together and pick up more than a few new tricks in a game that’s changing every day.

The biggest lesson I hope all of us took away from the IS20G was that no matter how well we’re doing, we should always be looking for new ways to rede-fine success. Beyond the obvious measures we’ve used to count growth for as long as the industry’s been around, we have a con-stantly more informed customer base walking in each day.

We can do more than worry about Yelp reviews. The Internet Sales 20 Group gave us a chance to show off how some of us are ahead of the curve. My congratulations to all our Massachusetts dealerships who showed their mettle in competitions ranging from SEO to social media.

For those of you who didn’t join us, make sure to check out this month’s cover story and the full report on www.internet-sales20group.com. The next event will be held in May in New York City, and I encourage you to join me there. We will work on getting another one here in the Boston area next year as well.

VoteAs Massachusetts heads into the final days of its governor

election cycle, it’s a good time to remind ourselves and others that the policies being debated between Martha Coakley and Charlie Baker affect us directly in more ways than most realize.

It’s important to remember that if we don’t use our ability to ad-vocate for ourselves, someone else will always be ready to step in to fill that void, usually to our detriment.

So as you head to the voting booth, please remember that now is a great time to remind your legislators in your home-town and in Boston that you are

paying attention. Invite them to your dealership. Let them know how your business is doing and how their decisions are impact-ing you every day.

If you haven’t already given this year, I encourage you to do-nate to our state Political Action Committee. It’s an important way to keep our needs from being shoved off the table on Beacon Hill. It’s the easiest way to contribute to our grassroots effort to keep our legislators informed, and it takes only a few minutes. Contact Executive Vice President Robert O’Koniewski at (617) 451-1051 or [email protected].

Preparations for Preview Night Keep an eye out for information about the date of our next

New England International Auto Show Charity Gala. Bob O’Koniewski and the MSADA staff are planning a fantastic event, and I encourage all of our Associate Members to get in touch with Bob or Jean Fabrizio for information about sponsor-ship opportunities. Jean can be reached at (617) 451-1051 or by email at [email protected].

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MSADA

“We can do more than worry about Yelp reviews. The

Internet Sales 20 Group gave us a chance to show off how

some of us are ahead of the curve.”

5


Name Contact TelephoneADESA Boston Chris Carli (508) 270-5403ADP Dealer Services Maria Trezza (973) 404-4466Albin, Randall & Bennett Barton D. Haag (207) 772-1981American Fidelity Assurance Co. Tom Trudell (413) 885-5477AutoAlert Don Corinna (949) 398-7008AutoRaptor (RAL) Howard L. Leavitt (401) 421-6533Bank of America Merrill Lynch Dan Duda and Nancy Price (781) 534-8543 Bellavia Blatt Andron & Crossett, PC Leonard A. Bellavia, Esq (516) 873-3000 Blum Shapiro John D. Spatcher (860) 561-4000Boston Globe Mary Kelly (617) 929-8373The Boston Business Advisory Group Paul Cuomo (781) 681-1501 Vincent Saccone (781) 681-1519Burns & Levinson LLP Paul Marshall Harris (617) 345-3854Cars.com Heidi Allen (312) 601-5376 CitNOW Jack Gardner (617) 221-8008 Construction Management & Builders, Inc. Kate Sullivan (781) 246-9400CVR John Alviggi (267) 419-3261Dealermine Inc. Karen Parmenter (800) 304-3341 x5179 DealerDOCX Brad Bass (978) 766-9000 DealerTrack Ernest Lattimer (516) 547-2242Downey & Company Paul McGovern (781) 849-3100EasyCare New England Inc. Mike Douglas (770) 246-9724Ethos Group, Inc. Drew Spring (617) 694-9761F & I Resources Jason Bayko (508) 624-4344Federated Insurance John Ballard (859) 312-9896First Citizens Federal Credit Union Joe Ender (508) 979-4728 Fisher & Phillips LLP John Donovan (404) 240-4236 Joe Ambash (617) 532-9320Gulf State Financial Services Stephanie Franklin (713) 580-3143GW Marketing Services Gordon G. Wisbach Jr. (781) 899-8509 Huntington National Bank John J. Marchand (781) 326-0823John W. Furrh Associates Inc. Kristin Perkins (508) 824-4939 Key Bank James Q. Moretti (781) 558-5132KPA Rob Stansbury (484) 326-9765Leader Auto Resources, Inc. Brendan J. Murphy (518) 878-6341Lynnway Auto Auction Jim Lamb (781) 596-8500M & T Bank John Federici (508) 699-3576Management Developers, Inc. Dale Boch (617) 312-2100MetroMedia Energy Timothy Teevens (800) 828-9427Micorp Dealer Services Frank Salkovitz (508) 832-9816Mid-State Insurance Agency James Pietro (508) 791-5566Mintz Levin Kurt Steinkrauss (617) 542-6000Murtha Cullina Thomas Vangel (617) 457-4000Nancy Phillips Associates, Inc. Nancy Phillips (603) 658-0004Northeast Dealer Services, Jim Schaffer (781) 255-6399O’Connor & Drew, P.C. Kevin Carnes (617) 471-1120Performance Management Group, Inc. Mark Puccio (508) 393-1400R.L. Tennant Insurance Agency, Inc. Walter F. Tennant (617) 969-1300Reflex Lighting Ping Weiner (617) 269-4510Resources 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) 591-2886Solect Energy Development Kristen Brandt (781) 733-0223 Southern Auto Auction Tom Munson (860) 292-7500Sovereign Bank Richard Anderson (401) 432-0749Sun Trust Bank Michael Walsh (617) 345-6567 Target Dealer Services Andrew Boli (508) 564-5050TD Auto Finance BethAnn Durepo (603) 490-9615TD Bank Michael M. Lefebvre (413) 748-8272TrueCar Pat Watson (803) 360-6094 Wells Fargo Dealer Services Christopher Peck (508) 314-1283 Wicked Local Media Massachusetts Jay Pelland (508) 626-4334 Windstream Rick Caruth (978) 296-0313; (413) 977-6111 Zurich American Insurance Company Steven Megee (774) 210-0092

AssociAte MeMber Directory

MSADA BOARD Barnstable County

Gary Beard, Dick Beard ChevroletBerkshire County

Brian Bedard, Bedard Brothers Auto Sales Bristol County

Richard Mastria, Mastria Auto GroupEssex County

William DeLuca III, Woodworth Motors John Hartman, Ira Motor Group

Franklin CountyJay Dillon, Dillon Chevrolet

Hampden CountyJack Sarat, Jr., Sarat Ford

Hampshire CountyBryan Burke, Burke Chevrolet

Middlesex CountyChris Connolly, Jr., Herb Connolly Motors

Scott Dube, Bill Dube HyundaiFrank Hanenberger, MetroWest Subaru

Norfolk CountyJack Madden, Jr., Jack Madden Ford

Charles Tufankjian, Toyota Scion of BraintreePlymouth County

Christine Alicandro, Marty’s Buick GMC IsuzuSuffolk County

Robert Boch, Expressway ToyotaWorcester County

Steven Sewell, Westboro MitsubishiSteve 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

All State Offices Up on November 4As we go to press, candidates across the Com-

monwealth are preparing their final pushes for Election Day, Tuesday, November 4. On that day, voters will have the opportunity to mark their choices for a full slate of federal and state offices, including U.S. Senator, all congressional seats, all five constitutional offices, and all 200 state senate and representative seats. Additionally, at the end of the ballot, all voters will be presented the chance to chime in on four ballot questions.

As part of our democratic experiment, millions of dollars have been spent on TV and radio ads, brochures, mailings, phone calls, and get-out-the-vote efforts, all designed to get one person or an-other elected, to give one party an edge over the other. By Wednesday, November 5, we may know who got elected, but it will be up to our collective advocacy efforts that decide where future policy directions take us at the state and federal levels.

The battle for the Governor’s office has been a spirited one, pitting the current Attorney General, Democrat Martha Coakley, against Republican Charlie Baker, who carried the GOP banner four years ago, as well. Recent polling has Baker with a slight edge. The other constitutional office races are the following:• Secretary of State: Incumbent Democrat Wil-

liam Galvin faces Republican challenger David D’Arcangelo;

• Attorney General: This seat is open, pitting Democrat Maura Healey against Republican John Miller;

• Treasurer: This, too, is open, with Democrat Deborah Goldberg facing Republican Mike Hef-fernan; and

• Auditor: Republican Patricia Saint Aubin is chal-lenging incumbent Democrat Suzanne Bump.

After winning the special election last year to complete John Kerry’s Senate term, Democrat Ed-ward Markey is running for his first full six-year term against Republican challenger Brian Herr.

Of the nine Congressional seats, two right now are considered competitive. In the Sixth Congres-sional District (north of Boston), Republican Rich-ard Tisei, who narrowly lost two years ago, is fac-ing Seth Moulton, a Salem Democrat who defeated incumbent John Tierney in the Democrat primary in September. In the Ninth Congressional District (South Shore and Cape Cod), incumbent Demo-crat William Keating is getting a spirited run for his money from Republican John Chapman. Both races have seen the Republican candidates with a slight polling lead.

Although voters across the state will participate also in electing all 200 legislators, less than half the seats have someone challenging the sitting in-cumbent. Regardless of that fact, in addition to the usual Election Night surprises where incumbents get unseated, we can expect to see a number of new faces as over 30 seats are open due to retirement, death, or some other reason.

Finally, there are four ballot questions for voters to consider:• Question 1 – Eliminating Gas Tax Indexing: A

YES vote would eliminate the requirement that the state’s gas tax be adjusted annually based on the Consumer Price Index. A NO vote would make no change in the laws regarding the gas tax.

• Question 2 – Expanding the Beverage Con-tainer Deposit Law: A YES vote would expand the state’s beverage container deposit law to re-quire deposits on containers for all non-alcoholic, non-carbonated drinks (with some exceptions). A NO vote would make no change in the deposit law.

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The Roundup

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

A Sprint to Election Season Finale

7


MSADA• Question 3 – Expanding Prohibitions

on Gaming: A YES vote would prohibit casinos, any gaming establishment with slot machines, and wagering on simulcast greyhound races. A NO vote would allow the current casino gaming law to remain in place.

• Question 4 – Earned Sick Time for Employees: A YES vote would put in place a law that would allow workers to earn up to 40 hours of sick time a year to take care of their own health or a family member’s health. A NO vote would make no change in the laws regarding earned sick time.

Election Day Voting Time OffOn Election Day the Massachusetts vot-

ing locations will be open from 7:00 a.m. until 8:00 p.m. This may seem like a long span, but commuting times can impact a citizen’s ability to get to the polls either when they open or before they close.

State law makes an accommodation for this. Under Massachusetts law (MGL Chapter 149, Section 178), an employer must give an employee up to two hours off to vote if their employee requests it. The employee does not have to be paid for this time but should be allowed a two-hour ab-sence after the opening of the polls in the employee’s voting precinct.

OSHA Announces New Recordkeeping Rule

The federal Occupational Safety and Health Administration (OSHA) recently repealed a number of industry exemptions from its mandate that employers with 11 or more employees keep a workplace injury and illness log, including one for car deal-ers that dates back to the 1980s.

Effective January 1, 2015, car deal-ers must use OSHA Form 300 to record workplace injuries and illnesses. By Feb-ruary 1, 2016, dealers also must post an OSHA Form 300A summary of the work-place injuries and illnesses that occurred in 2015.

Dealers can access an OSHA fact sheet on the rule at www.osha.gov/recordkeep-ing2014, as well as an online tool to train

employees on how to fill out the newly re-quired forms, which is available at www.osha.gov/recordkeeping/tutorial.html.

As a concession to our industry, the final rule contains a commitment by OSHA to review the efficacy of these changes in two years, the direct result of the National Au-tomobile Dealer Association’s opposition to the exemption repeal, first proposed by OSHA in 2011.

Overall, the new recordkeeping rule sig-nificantly expands reporting requirements for employers while also mandating the publication of the employer-provided in-formation on the OSHA website.

The new reporting requirements expand the list of severe injuries that employers must report. Employers presently must notify OSHA of all work-related fatalities and work-related hospitalizations of three or more employees within eight hours of the incident. Under the new rule, employ-ers will be required to report all work-re-lated fatalities, in addition to the following: all work-related inpatient hospitalizations of one or more employees; all work-related amputations; and all work-related losses of an eye.

The new rule retains the requirement for reporting all work-related fatalities within eight hours of an incident, but it imposes a 24-hour reporting window for work-related inpatient hospitalizations, amputa-tions, and losses of an eye. All employers are subject to these reporting requirements, even those employers who are otherwise exempt from routinely keeping OSHA 300 logs.

Finally, in a surprise move, OSHA an-nounced that the fatality and injury records will be posted online on the OSHA web-site. Online posting was never mentioned by OSHA during the three-year rulemak-ing process. OSHA indicated that pub-lishing severe injury and illness reports on the OSHA website was in part to publicly shame or “nudge” employers to take steps to prevent injuries so they are not seen as unsafe places to work.

For more information on this new rule, one can visit OSHA’s webpage at www.osha.gov/recordkeeping2014.

Michael Iovanna, RIPOn Sunday, October 19, the Massachu-

setts new-car dealer family lost one of our more active members with the passing of Michael Iovanna of the Pride Motor Group. Michael and his passenger Chip Hincman were killed in a single car acci-dent that evening. We wish to extend our condolences to the Iovanna family, includ-ing his wife and two children, the members of the Pride organization, and the Hincman family. See more about Michael in our News section.

2015 Auto Show, Dealer Summit & Charity Gala

Circle the dates now. MSADA’s 58th edition of the New England International Auto Show will run January 15-19, 2015, at the Boston Convention and Exposition Center in South Boston.

In order to celebrate our Auto Show, dealers, their families, friends, and key employees are invited to attend on Friday, January 16, our Eighteenth Annual Auto Show Charity Gala at the BCEC, from 5:00 p.m. to 10:00 p.m. The Gala benefits our Charitable Foundation’s Automotive Technician Scholarship Program.

Prior to the Charity Gala we will con-duct a Dealer Summit at the BCEC from 2:00 p.m. to 5:00 p.m., at which we will have several speakers discuss on-going events in our industry.

Invitations have been sent out, so be sure to register as soon as possible. For member dealers and their key staff who attend the Dealer Summit, you will receive at reg-istration two free Charity Gala tickets for each meeting attendee. Additional Charity Gala tickets can be purchased in advance for $50 each. (They will be $100 each at the door.)

We urge every dealer principal in this Association to attend these events and bring your key managers with you to see first-hand what your Association is all about.

H.R. 5403 UpdateAs we reported on these pages last

month, NADA and the dealer associa-tions across the country, including your

The Roundup


8

MSADA, have been lobbying the U.S. House of Representatives to take up legis-lation, H.R. 5403, to reform the process by which the Consumer Financial Protection Bureau issues guidance to lenders on auto financing activities.

The bill is designed to require the CFPB to comply with a transparent process that would include public notice and partici-pation, much like what every federal ad-ministrative agency must follow. In an effort to promote this bill, we are striving for a bi-partisan commitment from Re-publican and Democrat legislators. As of this writing, the bill now has co-sponsor commitments from 118 Congressmen, up from 97 last month. The break down is 72 Republicans and 46 Democrats (up from 62R, 35D). So far, Cong. Stephen Lynch (D-South Boston) is the lone Massachu-setts member to commit to the bill, who did so during our meeting with him at the September Washington Conference.

If you want more information about this legislation and the topic, including how to contact your Member of Congress, please email me at [email protected].

MSADA Compliance Program Update

We have written extensively on our new employment law/OSHA compliance pro-gram.

Laws and regulations are getting more complicated every year. You can no lon-ger gamble and try to go it alone. We urge every member to take full advantage of this program to keep our dealer body compliant with all pertinent employment and workplace rules. This program is underwritten in substantial part by your Association in order to reduce costs and encourage all of our members to take ad-vantage of this opportunity.

Since our rollout of the program in June, so far 29 dealer principals at 56 dealerships have taken advantage of this program. Are you one of them? If not, why not?

The basics of this program are thus:Employment Law Compliance Pro-

gram: The MSADA has worked out an arrangement with Fisher & Phillips LLP,

the national labor and employment firm with which we have worked for years, to provide the following services to our members, at a special discounted fee.

The MSADA will underwrite a portion of each member’s legal fee for participat-ing in any portion of the program in the following manner:

• If you are a single point dealer, the MSADA underwritten portion of one of the three items offered below will be $500.

• If you have an anchor store and one or more affiliates, the MSADA underwritten portion of one of the three items offered below will be $500 for the anchor store and $300 per affiliate.

The three Fisher & Phillips (F&P) ser-vices dealers can partake in are the fol-lowing. We encourage you to utilize each service; the MSADA financial assistance, however, is only available for a single choice:

1. Pay Plan Review. F&P will review each dealership’s pay plans for all of its employees for compliance with Massa-chusetts and Federal wage and hour law. It will advise each dealership accordingly. The cost for this review is $1200, minus the MSADA portion of $500 (per single point/anchor)/$300 (per affiliate), for a total to you of $700/$900, if this is your selected choice.

2. Employment Handbook/Appli-cation Review. F&P will review each dealership’s employment handbook and application form for compliance with Massachusetts and Federal law and make recommendations accordingly. The cost for this review is $1200, minus the MSA-DA portion of $500 (per single point/an-chor)/$300 (per affiliate), for a total to you of $700 (per single point/anchor)/$900 (per affiliate), if this is your selected choice.

3. Management Training and General Audit: F&P will come to your dealership to provide special training to your manag-ers about compliance with employment laws and the risks to the managers them-selves and the dealership of failing to com-ply with employment laws. This includes training to avoid harassment and interfer-

ence with employee rights on social me-dia. In addition, F&P will meet with top management to perform a general audit of employment law compliance, such as I-9 forms and FMLA. The cost of this training and audit is $1700, minus the MSADA por-tion of $500 (per single point/anchor)/$300 (per affiliate), for a total to you of $1200 (per single point/anchor)/$1400 (per affili-ate), if this is your selected choice.

To take advantage of this opportunity, contact attorney Joe Ambash, the Boston Managing Partner of Fisher & Phillips, by phone at (617)532-9320 or by email at [email protected]. F&P will coordinate with MSADA to ensure that members receive the reduced fee under-written by MSADA.

Occupational/Environmental Safety Law Compliance Program: MSADA has worked out an arrangement with two workplace safety compliance firms that many dealers use presently: John Furrh Associates and KPA.

MSADA will underwrite a portion of each member’s fee charged by either Furrh Associates or KPA for services ren-dered to your dealership(s) during the year in the following manner:• If you are a single point dealer, the

MSADA underwritten portion of ei-ther’s service fee for the year will be $500.

• If you have an anchor store and one or more affiliates, the MSADA underwrit-ten portion of either’s service fee for the year will be $500 for the anchor store and $300 per affiliate.To take advantage of this opportunity

and begin the process, simply contact:• At Furrh Associates – Jennie Cormier:

(508)824-4939 or [email protected]

• At KPA – Rob Stansbury: (484)326-9765 or [email protected] company will coordinate with

MSADA to ensure that members receive the reduced fee for services as underwrit-ten by MSADA.

Should you have any questions, please do not hesitate to contact me.

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MSADA

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wwww.msada.org Massachusetts Auto Dealer OCTOBER 2014

MSADA Troubleshooting

New massive data breaches hit the news every week, as the systems used by hackers become more advanced and industry struggles to keep pace. Previ-ously, this column has addressed some of the basic elements of dealer data protec-tion, including regulatory requirements, such as the “Safeguards Rule” and the “Privacy Rule” implemented by the pas-sage of the Gramm-Leach-Bliley Act, as well as tips for safeguarding a dealer’s customer data when doing business with third-party service providers.

As previously noted, the Federal Trade Commission (FTC) considers the mere ability of a third-party to access a cus-tomer’s nonpublic personal information (NPI) that is held by a dealer to be an of-fense on par with if the third party were to actually access the data.

In July 2012, the FTC announced an enforcement action against a franchised automobile dealer in Georgia alleging that, as a result of the dealership’s fail-ure to implement reasonable security measures to protect its customers’ per-sonal information (including names, ad-dresses, social security numbers, dates of birth, and driver’s license numbers), the personal information of 95,000 consum-ers was made available on a peer-to-peer (P2P) network.

This hardline view will continue to al-low the FTC to punish dealers for failing to safeguard customer data even if cus-tomers suffer no actual harm. However, until recently, the nation’s highest courts

had been hesitant to apply the same stan-dard.

In Clapper v. Amnesty International USA, 133 S. Ct. 1138 (2013), which dealt with the constitutionality of an amend-ment to the Foreign Intelligence Sur-veillance Act (FISA), the United States Supreme Court ruled that the plaintiffs did not have the prerequisite standing to challenge the amendment under Article III of the United States Constitution. To attain standing under Article III, plaintiffs must show (1) an injury in fact, (2) cau-sation, and (3) redressability. In Clapper, the Court ruled that while the plaintiffs’ fears of government surveillance under the amended FISA were not necessarily unreasonable, that harm was not “cer-tainly impending”, and that the plaintiffs’ claims therefore did not rise to the level of an “injury in fact” as required under Article III.

Post-Clapper, many defendants in data breach cases seized on the decision to challenge standing where data was not properly safeguarded but plaintiffs could not show actual access or misuse by third parties. Federal courts throughout the country dismissed claims in such cases, and it appeared that the Clapper decision would prevent plaintiffs from sustaining data breach claims where a misuse of the data could not be proven.

However, two federal court decisions from the state of California have stemmed the tide of Clapper dismissals and left the standing issue in data breach cases unset-tled. In In re Sony Gaming Networks & Customer Data Sec. Breach Litig. (“Sony II”), the federal court for the Southern District of California affirmed an earlier decision in light of Clapper, and ruled that Clapper did not necessarily require plaintiffs in data breach cases to allege that their information was actually ac-cessed by a third party. Instead, the Court, citing the 9th Circuit Court of Appeals decision in Krottner v. Starbucks, stated that the Clapper decision had not altered

the framework that a “credible threat of harm” that was both “real and immedi-ate” would satisfy the injury in fact re-quirement of Article III standing.

Correspondingly to Sony II, the federal court for the Northern District of Cali-fornia recently issued a decision in In re Adobe Systems Inc. Privacy Litigation, which further opened up California fed-eral courts to claims by users who were impacted by a data breach but could not show that their personal information was accessed. In In re Adobe System, hack-ers infiltrated Adobe’s servers and cloud storage system and spent weeks stealing personal information belonging to 38 million customers.

Judge Lucy Koh, writing for the court, distinguished the unique facts in Clap-per and stated that the case did not fun-damentally change the law of standing or reformulate “the familiar standing requirements of injury-in-fact, causation, and redressability.” Additionally, Judge Koh stated that the plaintiffs had standing under Article III because “the risk that Plaintiffs’ personal data will be misused by the hackers who breached Adobe’s network is immediate and very real.”

Dealers should work with a data secu-rity expert to ensure that their customer’s data is properly safeguarded in compli-ance with state and federal law. Addition-ally, NADA’s sample Service Provider Dealer Data Access Addendum, available on the NADA website at www.nada.org/dealerdata, provides dealers with excellent template language for inclusion in any fu-ture contract with a service provider.

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If you require any additional infor-mation on dealer data security regula-tions, service provider agreements, or any other issue, please contact Robert O’Koniewski, MSADA Executive Vice President, [email protected], or Peter Brennan, MSADA Staff Attorney, [email protected], or by phone at (617) 451-1051.

Staff attorney, MSaDa

By Peter Brennan, Esq.

Data Breach Law and Dealer Precautions

MSADAAccounting10


The economy, as well as each and every business, experiences cycles. By all ac-counts, the auto industry is experiencing its fifth straight year of increased new car sales and could possibly see an “unprece-dented” sixth straight year of increases in 2015. No one would have predicted such a run back in 2009, and this resurgence has allowed dealers to recover, then pros-per, and ultimately strengthen their bal-ance sheets. Soon enough, this upward cycle will wane, as interest rates rise and pent up demand is satisfied.

So what is one to do as we move for-ward? Manage your business by follow-ing what the best dealers do in both the good times and the challenging times.

The Devil is in the DetailsFirst, pay close attention to the details.

Ensure yourself that someone in manage-ment is very familiar with the financial and operational aspects of each depart-ment. Familiarity with the details will allow you to quickly understand how ex-ternal changes will impact your results. This requires a certain discipline and persistence. Now is the time to prepare a budget for 2015; this will force you into the details. Remember, it doesn’t have to be fancy.

Cash is KingAccumulating cash is a good thing;

both inside and outside of the business. Money makes money. Having the

appropriate levels of cash and working capital in the business allow you to meet factory and banking requirements, provide funding for expansion, and for taking advantage of opportunities that come your way. Be cautious with debt, even in this rather tempting interest-rate environment. While real estate and blue sky values are based on “fair market value”, debt only moves by you making cash payments!

Why It’s called “Fixed Operations”

A well-run service and parts depart-ment can be the cornerstone of a deal-ership. By its nature, the net income from these departments is more predict-able and can cover much of the dealer-

ships overhead. Be sure to pay attention to this area, as it is often overlooked. Proper labor rates, manager approval for policy adjustments, parts matrix pricing, the right mix of technicians, and inven-tory control are all important factors to watch. Keeping CSI scores high is also a key element, as this can impact factory incentive payments. Also, be sure you are maximizing your manufacturer reim-bursements on warranty parts…we can help you with this one.

People MatterBusinesses frequently analyze the dif-

ferent parts of their business, make cer-tain adjustments, set goals, measure the results, and then find little to no change. Having good people always helps, but

having the right people in the right seats on the bus can make all the difference. Be sure to understand the realistic operating metrics that each department should be achieving and then work to find the right people to manage each area.

An Ounce of PreventionThese relatively good times also pro-

vide an opportunity to ensure the busi-ness is protected. There is no shortage of Federal and state agencies checking small business for various compliance matters. Amongst the most important items to have a handle on:• Wage and overtime policies are proper;• F&I regulations are followed;• Adherence to documentation for manu-

facturer rebates and incentives;

• Sales tax is properly collected and paid (incidentally, we have seen an increase in sales tax audits of auto dealers in re-cent months); and

• I.T. systems and sensitive personal data are protected and not subject to an “easy” compromise.Dealers are among the most entrepre-

neurial of all business-people. The com-munities they serve and the people they employ benefit greatly from this “can do” attitude. The great lesson from the last recession was that “managing risk” isn’t just a phrase. We know quite well that as CPAs our nature is to row a little too close to shore. The risks dealers take is often what makes the business thrive; just don’t find yourself too far “out” when the tide turns. t

Learn from History or Doom to Repeat Itby Mark DowMark Dow, CPa, MST iS a PrinCiPal aT o’Connor & Drew, P.C. anD haS ServeD anD aDviSeD auTo DealerS for over TwenTy-five yearS. he Can be reaCheD aT 617-471-1120 or [email protected]

“Dealers are among the most entrepreneurial of all business-

people. The communities they serve and the people they employ benefit

greatly from this ‘can do’ attitude.”


MSADA Legal 11

“So where are you from originally?” Seems innocent enough, right? Just po-

lite and friendly banter. Perfectly accept-able topic of conversation with someone you meet at a party or in some other social setting. Nothing offensive about the ques-tion; indeed, it demonstrates your interest in learning more about the person and his or her background.

But while your motives may be the same if you asked the same question of an ap-plicant during a job interview, that question and other seemingly innocuous questions can create risk for your dealership. That’s because, in a job interview setting, an in-terviewer is presumed to ask questions the answers to which he or she will consider to determine whether the applicant is suit-able for the job. Questions that don’t have such a focus can be risky. The following are some examples:

So where are you from originally? “Mexico.” You now know the applicant’s national origin, and the reason you know is because you asked for that information in the context of an interview for a job. Of course, both state and federal law prohibit employers from making adverse employ-ment decisions based on national origin. Assuming you ultimately choose not to hire the applicant—for reasons having nothing to do with the fact that he is from Mexico, of course—you’ve made a national origin discrimination claim more difficult to de-fend. His story: “The interviewer specifi-cally asked about my national origin dur-ing his job interview, and once he learned I was from Mexico, he decided not to hire me.” Better not to ask the question, and not know the applicant’s national origin (or any other non-obvious protected statuses) when making the decision on whether to hire or not to hire. (That holds true, of course, for any employment-related deci-sions (i.e., promotion, termination, etc.).)

Have you ever been arrested? Okay, probably less polite to ask about, even in a social setting. But Massachusetts law spe-

cifically prohibits employers from asking applicants or employees about (1) arrests that did not lead to a conviction, (2) first-time convictions for drunkenness, simple assault, speeding, minor traffic violations, affray, or disturbing the peace, or (3) mis-demeanor convictions that are at least five years old, unless the applicant had another conviction within the prior five years. Ask-ing whether an applicant (or employee) has ever been arrested would encompass such questions and would be illegal. On a

related note, you should be aware that, in Massachusetts, you cannot ask about an applicant’s criminal history on an employ-ment application.

Do you have any medical conditions that would limit your ability to do the job? Your intention here, no doubt, is good. As a conscientious employer, you want to know if your employee has a medi-cal condition that you can reasonably ac-commodate. But the better approach here is to focus not on the applicant’s medical con-dition but on his or her ability to do the job. The less risky phrasing of this question is: “This job requires the ability to do ‘x’. Can you do ‘x’?” If the answer is “no,” then the follow up question would be: “Is there any-thing we could do that would enable you to do ‘x’?” You’ve received the information you sought, and you didn’t even have to ask about the applicant’s medical condi-tion—which may or may not be a protected “disability” or “handicap” under federal or state law—before making your decision.

When do you plan to retire? Unless the position is temporary or short-term, most

employers aren’t looking to hire employees who plan to leave in a year or two. Most employers look for competent employees who will stick around for a while and grow with the company. Asking an applicant when he or she plans to retire, however, could support an age discrimination claim in the event that you do not hire him or her.

Do you have kids? Do you plan to have kids? Questions like these, which es-sentially focus on an applicant’s familial responsibilities, especially when asked of a woman, can support a sex discrimination claim. These questions evince stereotypes about a woman’s familial obligations that might take her time or attention away from the workplace. Here again, better to focus on the requirements of the job, not on the things that might make an applicant un-able to fulfill them: “This position requires your attendance from 9am to 5pm, Mon-day through Friday. Are you able to be here during those times?”

This is by no means an exhaustive list of questions you should not ask an appli-cant during a job interview, but it illustrates the point: The more your questions focus on the duties, responsibilities, and require-ments of the job, the less risk you’ll have of a discriminatory failure-to-hire claim. Your hiring managers need to know this.

t

“So Where Are You From Originally?”By Joseph W. Ambash and Jeffrey A. Fritz

Joe aMbaSh iS the Managing Partner anD Jeff fritz iS counSel at fiSher & PhilliPS, llP, a national labor anD eMPloyMent firM rePre-Senting hunDreDS of DealerShiPS in MaSSachu-SettS anD nationally. they May be reacheD at 617 722 0044.

“The more your questions focus on the duties, responsibilities, and

requirements of the job, the less risk you’ll have of a

discriminatory failure- to-hire claim.”


AUTO OUTLOOK12 AUTO OUTLOOK


MSADA 13

MSADA 15Financial Services

The Patient Protection and Affordable Care Act, also known as PPACA or Obam-aCare, was enacted in March 2010. When this legislation was originally introduced it faced many challenges; however, most of the law was upheld and will be impacting business owners very shortly. The most daunting task for employers is certainly the “Play or Pay” provision slated to begin January 1, 2015. Not only do auto dealers have to be aware of how many employ-ees they have, they also have to make sure their coverage is affordable and that they are offering insurance to the right people on the plan or they will face penalties.

Do you feel confident in your understanding of the law and how it could impact your auto dealership?

It is important for auto dealers to under-stand who this law impacts and how:• Currently, the magic number is 50 full-

time employees or a combination of full time and part-time employees. Variable hour employees are crucial to this cal-culation and can often be overlooked. In order to calculate your full-time em-ployees or full-time equivalents, simply take the number of full-time employees as your first number. Once you have that number, calculate the number of hours worked by variable hour employees and divide that by 1,560 (130 hours a month x 12 months).

• Next, add all the hours worked by your variable hour employees. For this ex-

ample, let’s say it equals 30,000 hours. The calculation would be 30,000 divided by 1,560 = 19 full-time equivalent em-ployees. You would add 19 full-time equivalents to the number of full-time employees and that would be your total employee count. If that number is over 50, you must comply with the regula-tions. Now that we have determined whether

or not you need to comply with the law, it is important to dig deeper into some of the financial impacts this could have on your business. If you are an auto dealer who employs variable hour employees that are not currently offered benefits, this legislation greatly impacts your dealer-ship. Variable hour employees are now eligible for benefits if they average 30 hours per week, during the testing period. Typically, variable hour employees did not receive benefits if they work under 35 or even 40 hours. With the new law it is im-portant to understand when an employee is truly eligible for benefits. Auto dealers are also subject to the reporting and re-cording of information and hours worked with even more scrutiny. To determine if someone is “eligible” for benefits that is a variable hour employee, he or she must satisfy an employer determined measure-ment period. If the employee works the required amount of hours during the mea-surement period, he or she is eligible for benefits, such as health and dental insur-ance. Again, this is another task that the auto dealer must complete and keep track of due to these changes.

Not only do you have to offer coverage to employees, but the coverage also must now pass the affordability testing. The amount that your employees pay for their insurance through payroll deductions can-not exceed 9.5% of their annual W2 earn-ings. Let’s look at an extreme example: An employee who works 30 hours per week and is paid $12 per hour makes $18,720 per year. If we calculate 9.5% of the an-

nual salary, the employee cannot pay more than $1,778 annually for their health insur-ance coverage.

What are the penalties for not being in compliance with the law? If you do not offer health insurance coverage at all to your employees, then your auto dealership will pay $2,000 per employee per year, minus the first 30 employees. This is based on total employee count, not eligible em-ployees. For example, a company with 300 employees would pay an annual non-tax-deductible fine of $540,000: (300EE’s – 30)*$2,000 = $540,000

If you offer health insurance and do not meet the affordability test, your fine is $3,000 per employee that receives subsi-dized health care coverage through an ex-change. The affordability fine is only trig-gered when an employee goes to a health exchange because the insurance coverage offered by the employer is not affordable. By simply offering unaffordable coverage, there is no fine assessed until an employee goes to an exchange and receives a federal subsidy for their coverage.

In conclusion, if you’re like most busi-ness owners you probably found this ar-ticle confusing and a bit overwhelming. This is why it is extremely important to have a health care professional who under-stands all the compliance issues of the Af-fordable Care Act. This is the reason The Boston Business Advisory Group part-nered with CBA to provide high quality service to the members of the MSADA. The legislation is not going away, and, unfortunately, most of the responsibility falls onto the employer. Now, more than ever, your auto dealership must be work-ing with a consultant who understands how the pieces of the law fit together and impact your business.

t

The boSTon buSineSS aDviSory GrouP will aDDreSS your finanCial iSSueS on a MonThly baSiS. eMail SPeCifiC queSTionS or SuGGeSTionS for fuTure ar-TiCleS To [email protected].

by Jed DavidsonJeD DaviDSon iS a ParTner of The boS-Ton buSineSS aDviSory GrouP. he SPeCializeS in eMPloyee benefiTS.

Is Your Dealership Up to Speed on “Play or Pay”? What you don’t know could cost you $2,000 or more per employee!


1616


COVER STORY

by Catherine MacDonald Dealers seeking a refreshing boost of energy and enthusiasm will certainly find it at a three-day intensive workshop with expert panels and success stories, where audience engagement and inter-action is encouraged. But if those features don’t quite do it, there’s always the all-night cruise ship party.

From September 22-24, dealers from across Massachusetts and several other northeast states attended the Internet Sales 20 Group event. The workshop puts dealer principals, general man-agers, consultants, and vendors in a room together for an interactive, educational experience. Attendees heard from ex-perts, including 25 speakers and panels. Dealers learned how many components of their operations can bolster Internet sales, with tips and advice on everything from human resources to SEO (Search

Engine Optimization), from recruiting to digital marketing. MSADA President Scott Dube said the workshop provided him

and his staff with very specific ideas about what they could be do-ing differently. He gleaned valuable tips regarding the sales floor, the Internet department, and new products and services that are available to dealers.

“We learned about social media; how to better position our-selves in that area, and to be more global about it,” Dube said. “We have a number of different projects underway as a result. We’re putting some new things into play.”

Director of Business Development for Mastria Auto Group, Michelle Mastria, also has implemented changes with social me-dia based on advice from the workshop.

“One of the things I did right away when I got back is start ‘So-cial Media Monday’ with my sales team. For 20 minutes we get together on Monday morning and talk through ways they can en-

gage with our Facebook page,” Mastria said.The sales team quickly picked up on new

methods, and customers are responding.“Page engagement has gone through the

roof,” Mastria said.Sean Bradley, an automotive Internet

sales, business development and auto mar-keting expert, organizes the event through

ENERGYENERGYto Power Internet SalesDealers pick up tips for sales success at September’s exciting Internet Sales 20 Group workshop

ENERGY17MSADA


Dealer Synergy and also serves as MC. He says the IS20G event works on two sets: skill set and mind set.

“The skill set is technology, strategy, secrets, and tips,” Brad-ley said. “Mindset means we have to feed your mind. We have to build excitement.”

This enthusiasm was a key takeaway for participants, includ-ing Dube.

“If nothing else you get a ton of energy that you otherwise would miss out on,” he said.

Bradley said the event is structured to “get everybody ex-cited. That’s why I do the rock star VIP features. I want them to connect with each other.”

He is referring to the Spirit of Boston cruise ship party that took place the first night of the workshop, which Mastria praised as a tone setter for the next few days of the event.

“It just allowed people to let down their guard, and not feel so much like you were with a bunch of strangers. Once you’re able to break through that barrier, information flows more easily. All of a sudden we weren’t just attend-

ees; we were having fun together and laughing together,” she said.

Mastria said the cruise night built camaraderie among at-tendees.

“The next day you could see people talking a little bit more and sharing a little bit more. It just really enabled it to be a more interactive type of thing,” she said.

Preparing for his next IS20G event in New York this May, Bradley said he was pleased with the Boston event.

“If dealers are all willing to leave their dealerships for sev-eral days at a time, you have to create an amazing environ-ment,” he said. “Everything in my vision was exactly how we executed it.”

The IS20G Boston

Composite Analysis and

AwardsA major selling point of the IS20G workshop was the dealership

composite. Dealer Synergy and many of the Internet Sales 20 Group sponsors spent more than six weeks performing complimentary consultations and research on 28 dealerships in order to collect the data compiled in the workshop’s composite study. The dealerships were graded and ranked based on 7 Key Performance Indicators: SEO, Social Media, Credit Applications, Mystery Shop Calls, On-line Reputation, Response Audit, and Website Scope.

The SEO category assessed the dealership’s main website for ac-cessibility on mobile devices and desktops, made sure links worked properly, and included proper alt tags, headers, and more. The over-all test was how well their sites ranked on search engines based on content and key words.

With social media being crucial for exposure, this category looked at total fans, followers, and subscribers on the most popular social media sites like Facebook, YouTube, and Twitter.

For the Mystery Shop study, every dealership received two moni-tored calls and were graded in the following areas: initial experi-ence, greeting, and phone etiquette.

Dealerships’ reputations were graded on their ratings on online review sites, such as Google Reviews, Yahoo Local, Yelp!, Dealer Rater, Edmunds, Cars.com, and more. The dealerships were as-sessed based on the number of reviews, the ratings, and their en-gagement with reviewers.

The Response Audit category was graded based on the dealer-ship’s ability to provide confirmation of vehicle availability, offer test drives, and their overall professionalism while providing details about vehicle inventory.

When assessing Website Scope, the most important aspects are the ease of use for the customer. The composite analysis looked for an easy search button for inventory, explanatory videos, such as a used vehicle walk around, and testimonials. Other aspects included a clear call to action, contact information, and a site that was up-to-date and relevant.

The Credit Miner Credit Applications category looked specifi-cally at credit applications on each dealership’s site. Two key fac-tors were the ease of use and response time after submission. It is important to ensure that dealerships are serving their clientele in the most professional and prompt manner possible.

Additionally, a lead estimate was conducted, courtesy of Auto-bytel. They analyzed the lead opportunities in the local areas sur-rounding each dealership in the composite. Their search radius spanned from 5 to 25 miles.

16 Energy to Power Internet Sales18


MSADA

SEO (Search Engine Optimization)Toyota of BraintreeWhy They WonToyota of Braintree’s SEO strategy included great keywords, alt tags, and meta data. Their content was fresh, relevant, and updated consistently so they showed up at the top of results in multiple organic searches.

How You Can Emulate Their SuccessTake time to make sure your content is consistent with what words you want to appear in search engines. The words you choose affect the visibility of your website in search engines and need to be decided based on your target audience. Meta tags play a major role in this process so it’s important to focus your SEO Strategy around these keywords.

SOCIAL MEDIA Route 44 Toyota in RaynhamWhy They WonRoute 44 Toyota’s Social Media had the most engagement, sub-scribers, fans, and interactions with these fans as well as follow-ers. Their content was unique, engaging, and professional.

How You Can Emulate Their SuccessDo not just make your dealership’s site about just your deal-ership. Be sure to post relevant stores, industry news, and local activities and events in your community. It’s impor-tant to see social media as a tool to interact with your cus-tomers and potential customers -- not just an advertisement platform.

MYSTERY SHOPWestboro ToyotaWhy They WonThis dealership was awarded best Mystery Shop Calls based on good phone etiquette displayed by the coordinators, includ-ing greeting and closing, and overall exceeding the needs of the caller.

How You Can Emulate Their SuccessIt’s important to start with a set guide for how to take and make phone calls. Having a process in place and training your team accordingly ensures that all the right information is gathered, that the customer is heard, and that ultimately their expectations are met. Starting this way makes it easier to sell the appointment and the vehicle.

RESPONSE AUDITToyota of WatertownWhy They WonThe Response Audit award was received based on having the right content with the fastest responses about vehicle availabil-ity, test drive, and more. They went above and beyond to not only provide information but great customer service.

How to Emulate Their SuccessAlways remain educated about information at your dealer-ship. At any given time you should be able to provide in-formation about vehicles in stock or that you can access. Having a plan in place for handling responses is important, so training is imperative to guarantee great customer satis-faction.

CREDIT MINER APPLICATIONBernardi Toyota of Framingham and Toyota of BraintreeWhy They WonThese two dealerships tied for Credit Miner Application, because both dealerships had great credit applications that were easy to fill out and both had a quick response time.

How You Can Emulate Their SuccessIt is important to make credit applications easy and simple. Ask enough information but not too much that you turn them off. And make sure they know how important they are to you by responding quickly.

THE PINNACLE AWARDToyota of BraintreeWhy They WonToyota of Braintree scored highly in all of the seven KPIs, which makes them our Pinnacle Award Winner. They combined supe-rior customer service skills with a high online reputation, a great SEO strategy, ease of navigation on their site, and were overall very successful in all areas assessed.

How You Can Emulate Their SuccessMake sure your dealership has an exceptional website, ap-pears well in search engines, has a call to action, and above all make sure you always provide excellent customer ser-vice. It seems overwhelming now, but start by improving one area at a time and you’ll start exceeding not only your customers’ expectations but your own.

Mass. Dealer Composite Winners


from Around the HornNEWS

LAWRENCE

Commonwealth Motors Featured in Globe

Charlie Daher, owner of Commonwealth Motors, was recently featured in The Boston Globe. The article detailed how his busi-ness has grown and how he strives to give back to the community in which he grew up.

Daher bought an eight-acre dealership in Lawrence in 1991, just after the financial climate forced its closure. Today, that deal-ership, Commonwealth Motors, has gone from eight to thirty acres and from two to five brands.

Commonwealth has more than 300 employees and a 1,000-car inventory that draws customers from all over New England in search of Chevy, Honda, VW, Kia, and Nissan brands.

“We do a lot of little things like pay for computers and field trips, but this month we have our Kid’s Cancer Buzz-Off and in December we have the second annual Commonwealth Motors Christmas Classic, a boys and girls high school basketball tour-nament with 16 teams,” Daher says in the article. “After the tour-

nament, one de-serving player on each team gets a $1,000 college schol-arship. I can’t stress enough how much we’re involved in the city, and we really enjoy doing it.”

The Lawrence City Council has appreciated the dealership’s involvement so much that they named the street outside the deal-ership Commonwealth Drive.

His favorite part about selling cars, Daher said, is still what got him into the business in the first place. “I love a challenge. It’s what kept me going when I started and it’s still my favorite thing about working here. You find challenges in every corner of this business, and I love that.”

19


from Around the Horn20 NEWS

Kid’s Cancer Buzz-Off

Charlie Daher and Common-wealth Motors partnered for the second year with the One Mission Kid’s Cancer Buzz-Off.

Proceeds from the Kid’s Cancer Buzz-Off benefit Boston’s Chil-dren’s Hospital, The Jimmy Fund at Dana-Farber, and The Family Reach Foundation.

The second annual Common-wealth Motor’s Buzz-Off took place on October 19 at Common-wealth Chevrolet. The event includ-ed giveaways such as sports tickets and memorabilia, concert tickets and gift cards, among others.

from Around the HornNEWS


21MSADADANVERS

Group One Auto Host Local Politicians

Recently Group One Auto hosted two local politicians in Danvers to provide support for their races. In the top picture, MSADA Director for Essex County John Hartman welcomed to Group One’s Ira Toyota former state Senator Richard Tisei (R-Lynnfield), who is the GOP nominee for the Sixth Congressional District presently held by Cong. John Tierney. Tierney lost his Democrat primary race in September, however, to political newcomer Seth Moulton. Also attending the event, at which MSADA presented Tisei with a DEAC check, were Massachusetts NADA Director Don Sudbay,

MSADA Executive Vice President Robert O’Koniewski, MSADA staff attorney Peter Brennan, and MSADA legislative agent Jim Hurrell. Hartman also played host to state Rep. Ted Speliotis (D-Danvers) at Ira Toyota and Ira Subaru (bottom picture). Rep. Speliotis, who is serving his ninth term at the State House, is currently the House Chairman of the Committee on Bills in the Third Reading, through which all legislation in the House must pass. He previously served as House Chairman of the Joint Committee on Consumer Protection and Business Regulation, which handled our 2012 amendments to the Chapter 93B franchise law and the “right to repair” legislation.

from Around the Horn22 NEWS


LYNN

Pride Motor Group Dealer Mourned by Colleagues

Michael Iovanna, the president of the Pride Motor Group based in Lynn, Massachusetts, died in a fatal automobile crash that also killed Chester Hincman in Middleton on October 19.

Iovanna, 50, of Middleton, was driving a Ferrari with the 40-year-old Hincman of Danvers when it spun out and hit a tree, bursting into flames near the intersection of Peabody Street and Bow Street, near Iovanna’s Mill Street home. The pair were pro-nounced dead at the accident scene, according to Middleton Po-lice.

“It’s been very sad. Our thoughts and prayers are for Mike and his family and the passenger’s family,” Pride Motor GroupVice President Paul Bertoli told The Daily Item.

Born in Winthrop, Iovanna was a resident of Swampscott be-fore moving to Middleton. He was a graduate of the former St. Dominic Savio High School in East Boston and Stonehill Col-lege, class of 1986.

As a business man, Iovanna’s friend Leo Farma said he always put people first.

“When a conflict came up, he never looked at it as ‘I’m right,

they’re wrong.’ He looked at it as, ‘How can we resolve this?’ He was always concerned about the people; the clients and those who worked with him. He made them understand they were in it together,” Farma told the Boston Herald.

Following news of Iovanna’s passing, the Kelly Honda deal-ership nearby on the Lynnway displayed a message on its elec-tronic sign that read “R.I.P. Mike I.”

Iovanna is survived by his wife, Suzanne (Mara); a son, Mi-chael Jr; and a daughter, Alexandra.

RAYNHAM

Bolder 2016 Mazda MX-5 Miata Makes Its Debut

The Mazda MX-5 Miata put the roadster back on the map when it launched in the late 1980s, so it only made sense for a popular rock band from that decade to play in the next genera-tion of the sports car. Duran Duran helped unveil the 2016 MX-5 Miata on Sept. 3 in Monterey, Calif., but despite that rocking ode to the past, the fourth-generation roadster showcased a new design that is decidedly modern.

While it nods to the original MX-5 Miata with its smooth, line-free flanks, the 2016 model is lower and wider than past genera-


MSADA 23

tions, sporting an “impossibly low” hood and a drastical-ly sloping nose for a more aggressive look. Accentuating that bolder front-end are slim, slanted LED headlights and an oversized Mazda logo. Moving down the side of the new MX-5 Miata, the A-pillars have been pulled backward and blacked out along with the side mirrors, while the muscular rear-end tappers dramatically into the new circular LED taillights.

“The MX-5 Miata has dedicated fans who love the roadster’s affordable performance, but many of them have told Mazda that they’d like the car to have a more confident style that would better reflect its engaging handling,” said Barry Chew, sales manager of Mastria Mazda. “With the debut of this next-generation model, Mazda has fulfilled those requests and then some, as the MX-5′s smiling front fascia has been replaced with a mischievous smirk.”

Underneath its sleeker sheet metal, the 2016 Mazda MX-5 Miata will ride on an all-new SKYACTIV-CHAS-SIS that will not only allow the roadster to drop about 220 pounds compared to the outgoing model, but will also help it achieve a lower center of gravity than any previ-ous generation. Though official powertrain details have yet to be announced, the new MX-5 Miata is expected to offer fuel-saving SKYACTIV engines and transmissions when it goes on sale stateside in the middle of next year.

PEABODY

Acura Three-Peats in Edmunds Best Retained Value AwardsBuying a luxury vehicle should be viewed as an invest-

ment, meaning that savvy shoppers should not only consider the initial purchase price, but also how much they will get back for a model when they trade it in down the road. Ac-cording to Edmunds.com, Acura is the undisputed king of long-term value, as the marque was recently named the top luxury brand in the auto-research site’s Best Retained Value Awards for the third straight year.

The Edmunds.com 2014 Best Retained Value Awards rec-ognized brands and 2014-model-year vehicles that have the highest projected five-year residual values based on their average cash True Market Value prices during a period of three to five months, depending on each model’s launch date. With a projected five-year residual value of 45.4 per-cent, Acura bested all other luxury brands, while the 2014 Acura TSX, TSX Sport Wagon and ILX topped the Luxury Midsize Sedan, Luxury Wagon and Luxury Compact Sedan categories, respectively.

“When you purchase other luxury items, you expect them to remain valuable for years to come, so if you choose to

hold your luxury vehicle to those same standards, then your best bet is an Acura,” said Joel Avery, general manager of Acura of Peabody. “While the brand’s three-peat in the Best Retained Value Awards is impressive, the fact that the Acura ILX won its segment in just its second model year on the market may be even more remarkable.”

MSADANADA Update by Don Sudbay

In the paragraphs below you will read Forrest McCon-nell’s comments to the Automotive Press Association in Detroit. As he mentions, there is a tremendous amount of misinformation regarding the benefit that automobile deal-ers provide to the motoring public.

Peter Welch, our NADA President, speaks about why we need state franchise laws. Without these laws the manufac-turers would have the opportunity to totally upend our busi-ness model. In the coming months, Massachusetts dealers may be asked to contact your state legislators to help us with our franchise law and other auto industry issues. It is important that we all have a good working relationship with our local state reps and senators so they will listen to us when issues arise.

A Special Note from NADA Chairman Forrest McConnell: NADA Fair Credit Com-

pliance Policy & Program “When I met with the Automotive Press Association in

Detroit earlier this month, I had one goal in mind: inform the journalists and industry executives about how the real dealer franchise system works and set the record straight. There’s been a lot of misinformation reported in the news lately about the business model of new-car dealerships.

“The fact of the matter is that the dealer retail network is the most competitive, cost-effective and pro-consumer model for buying and financing vehicles.

“Fierce competition between local dealers in any given market drives down prices for car buyers both in and across brands. If a factory owned all of its stores it could set prices and car buyers would lose virtually all bargaining power and would be stuck paying the full sticker price. Further, dealer-assisted financing—which is always optional—pro-vides car buyers with competitive rates on auto financing, which are frequently more affordable than what car buyers can get from a bank or credit union. But the federal govern-

ment is trying to take away the right of car buyer’s to get discounted rates from dealers.

“In March 2013, the Consumer Financial Protection Bu-reau, without prior notice or public comment, issued ‘guid-ance’ on indirect auto lending that pressures finance sources to compensate dealers with a flat fee. The CFPB claims that negotiated interest rates between dealers and their custom-ers can create a significant risk of unintentional ‘disparate impact’ discrimination.

“The National Automobile Dealers Association strongly opposes discrimination in any form and fully supports the efforts of the CFPB, the Department of Justice, the Federal Trade Commission and other federal agencies to eliminate it from the marketplace. However, it is essential that the

government address this issue in a way that will effectively address fair credit risks while preserving competition in the marketplace.

“A government-imposed flat fee model wouldn’t benefit consumers, because it would eliminate their ability to get a rate discount on their auto financing. Under the current system, dealers have an incentive to select lenders that offer them low, wholesale buy rates, and dealers frequently have to discount the APRs they offer their customers to earn their business. This dynamic drives down rates for our custom-ers. If the CFPB were to succeed in getting the industry to shift to an across-the-board flat fee compensation system, dealers’ incentive would shift to choosing lenders that pay them the highest flat fee, which in turn would frequently result in higher APRs for consumers.

“A mandatory flat fee compensation system also would fail to remove the fair credit risks that a dealer is exposed to

NADA’s Solution Reduces Fair Credit Risks

Don SuDbay, PreSiDenT of SuDbay auToMoTive GrouP, rePreSenTS MSaDa MeMberS on The naDa boarD of DireCTorS. he welCoMeS your queSTionS anD ConCernS ([email protected]).

“It is important that we all have a good working

relationship with our local state reps and senators so they will listen to us when

issues arise.” — NADA Director Don Sudbay

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MSADA Accounting26 MSADANADA Updatewhen it lacks a legitimate business explanation for earning different amounts in its credit transactions.

“Fortunately, NADA has identified a way forward that ad-dresses both fair credit and competition considerations.

“Last January, the NADA developed the NADA Fair Credit Compliance Policy and Program that provides a dealer with an optional mechanism to promote compliance with fair credit laws. The program was released in partner-ship with the American International Automobile Dealers Association and the National Association of Minority Au-tomobile Dealers.

“The voluntary program addresses fair credit risks by ensuring that the amount of dealer reserve earned in a transaction is supported by a legitimate business reason. A dealer following the program sets a standard starting point for dealer reserve that it includes in its credit offers to con-sumers and only deviates from that rate for predetermined, legitimate business reasons. These include the presence of a monthly budget constraint, a more competitive offer, and inventory reduction considerations. The dealer docu-

ments each pricing decision so that it can demonstrate that it was based on a legitimate, non-discriminatory factor. The NADA program fully incorporates the program created by the Department of Justice for two auto dealerships in 2007 to resolve fair credit cases.

“By creating this structure and supporting it with appro-priate training and oversight, the NADA program provides a mechanism for addressing fair credit concerns at the con-sumer, dealer and lender levels.

“Last month, U.S. Reps. Marlin Stutzman (R-Indiana) and Ed Perlmutter (D-Colorado) introduced H.R. 5403, a bipartisan bill that would nullify the CFPB’s 2013 auto

lending ‘guidance.’ The bill would require new CFPB guid-ance involving auto financing to be transparent and open to public participation. Already 118 Members of Congress (46 Democrats and 72 Republicans) in the U.S. House of Rep-resentatives have committed to cosponsor or are cospon-sors of this important measure. For more information, visit www.nada.org/cfpb.

“The NADA Fair Credit Compliance Policy & Program presents the industry with a realistic and effective means of addressing fair credit risks at all levels and in a manner that preserves robust competition in the marketplace. The fed-eral government should encourage its broad adoption.

“Competition in automotive retailing is the cornerstone of the franchised new-car dealer network, which benefits both car buyers and automakers.

“Competing with the dealer down the street or on the In-ternet benefits car buyers across the nation. Dealers compete fiercely against each other on vehicle pricing, financing, and service which reduces costs for consumers.

“As a percentage of total sales in the new-car, used-car, and service/parts departments, net pretax profit at new-car dealerships was just 2.2 percent in 2013.

“Our manufacturers benefit from a high return on capital in making vehicles, as opposed to the low margin of selling them, because dealers bear the cost and risks of these invest-ments—at virtually no cost to the manufacturer.

“The franchised dealer network is the most competitive, the most cost-effective, and most pro-consumer model for buying and selling new cars and trucks. If manufacturers sold directly to customers, there would be zero competition in pricing vehicles, parts, and service. Car buyers would be stuck paying the full sticker price, because there would be no ‘same brand dealership’ to shop and compare prices.”

Bill Fox Elected NADA Chairman for 2015Bill Fox, who represents New York’s franchised new-car

dealers on the NADA board of directors, will assume the position of NADA chairman and CEO at the 2015 NADA Convention & Expo next January in San Francisco.

“It is a true honor to serve this industry and this board. This is an exciting time for the auto industry and for dealers across the country,” Fox said.

“We will continue to advo-cate strongly for dealers and the franchise system which is the best and most efficient model for consumers, dealers, and manufacturers alike,” he added.

“Competing with the dealer down the street or on the Internet benefits car buyers across the nation,” McConnell

said in remarks to the Automotive Press Association in Detroit. “Dealers compete fiercely against each other

on vehicle pricing, financing and service which reduces costs for

consumers.”

— NADA Chairman Forrest


27MSADA AccountingNADA UpdateHe currently serves as a partner in Fox Dealerships, which

sells Chevrolet, Chrysler, Dodge, Honda, Jeep, Ram, Scion, Subaru and Toyota brand vehicles in the upstate New York cities of Auburn and Phoenix.

Jeff Carlson (left), who represents Colorado’s deal-ers on NADA’s board, was elected vice chairman.

Carlson is president of Glenwood Springs Ford and Glenwood Springs Subaru in Glenwood Springs, Col-orado, and partial owner of Summit Ford in Silver-thorne, Colo.

Neale Kuperman, who represents dealers in New

York City, was elected treasurer, and David Shepherd from Kansas was elected secretary.

The elections took place at NADA’s recent board meeting in Scottsdale, Arizona.

2014 Truck Dealer of the Year Speaks to Business Students at

Indiana UniversityKyle Treadway, president, dealer principal, and legal

counsel of Kenworth Sales Company in Salt Lake City, Utah, spoke to students at Indiana University’s Kelley School of Business earlier this month.

As the winner of the 2014 Truck Dealer of the Year, an annual award sponsored by the American Truck Dealers (ATD) and Heavy Duty Trucking magazine, Treadway was invited to speak to students about entrepreneurship and marketing.

“Kyle raised the bar for our students,” said Chris Littel, lecturer in the management and entrepreneurship depart-ment at Indiana University. “His presentation, insight, and answers to students’ questions were spot on and blended perfectly with our course content and goals.”

Treadway spoke to students enrolled in the school’s New Venture Growth Management class, an undergraduate course that focuses on business case studies. He also spoke to a New Venture Business Planning class, a graduate level course that focuses on key tools and methods to create and grow a new business venture.

Treadway discussed the commercial truck industry, his professional experiences, and lessons he has learned throughout his career. Following his presentation, students asked questions.

“It was a pleasure to speak to the students at Indiana Uni-versity,” said Treadway, who is a former ATD chairman. “It was very interesting to hear the students dissect my remarks

and identify my observations under the rubrics they have studied. I learned a lot.”

Indiana University professors have helped to select the top dealer for the award over the past 20 years.

NADA President Peter Welch in The Wall Street Journal: Dealers Are Efficient,

Competitive: “State automobile franchise laws level the playing field

between dealers and manufacturers.“John Kerr’s op-ed critical of state automobile franchise

laws misses a core reason of why franchise laws exist. They level the playing field between dealers and manufacturers because dealers are prohibited by antitrust laws from ne-gotiating freely with auto makers (‘Tesla Breaks the Auto Dealer Cartel,’ September 17).

“In a truly free market, local new car and truck dealers, who have invested more than $200 billion in their land and facilities, would be able to collectively negotiate their contracts with manufacturers on pricing and distribution. However, dealers are prohibited from federal and state an-

titrust laws from doing this. In fact, dealer groups are under constant scrutiny of their compliance with state and federal antitrust laws, including major investigations by the U.S. Department of Justice in recent decades.

“The automotive market is highly regulated at all lev-els—requiring licensing, insurance, financing, care of haz-ardous materials, all regulated by different bureaucracies. State legislatures passed franchise laws to remedy the an-titrust harm against dealers and to help protect consumers. These laws also have the benefit of adding intra-brand price competition into the marketplace, adding extra consumer accountability on warranty and recall issues, and keeping local ownership of businesses on Main Street. And the fran-chise model is extraordinarily efficient at bringing cars to market with gross margins of less than 6%. It is an extreme-ly competitive system that benefits consumers, manufactur-ers and local communities alike.”

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“[The franchise system] is an extremely competitive system that benefits consumers, manufacturers

and local communities alike.” — NADA President Peter Welch


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

cent, down from a share of 10.0 percent last year. For September 2014 YTD, companies with a base in the Asia/

Pacific region held the largest share of light-vehicle sales in the U.S. at 46.1 percent, which was up from a share of 45.6 percent a year ago. The corresponding share held by companies based in North America was 45.3 percent, down from a share of 45.4 percent last year. The share for the Europe-based companies was 8.6 percent, down from a share of 9.0 percent last year.

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overall There were 1.2 million light-vehicle sales in September 2014.

Sales for this month were down 21.5 percent from August 2014, which has been one of the two highest sales months so far this year. September 2014 sales were up 9.3 percent from September 2013.

September 2014 YTD light-vehicle sales amounted to 12.4 mil-lion, up 5.4 percent from last year. The September 2014 Season-

ally Adjusted Annual Rate (SAAR) for light-vehicle sales was 16.3 million. This month was the sixth month to record a SAAR value in the range of 16.0–16.9 million sales, in-clusive, in 2014.

In terms of September 2014 YTD, car sales held a mar-ket share of 47.5 percent with sales up 90 basis points from last year. The corresponding figures for light trucks put the light-truck share at 52.5 percent with sales up 9.8 percent since last year.

For Q3 2014, there were 4.2 million light-vehicle sales, up 7.8 percent from Q3 2013. Car sales for the quarter were up 2.8 percent from Q3 2013, while light-truck sales were up 12.5 percent from Q3 2013. See Figure 1.

CoMPanieS/branDSCompanies with a geographic base in North America

(Detroit 3 and Tesla Motors) held the largest market share of light-vehicle sales for September 2014 at 45.9 percent of the market, up from a share of 45.1 percent, last year. This was followed by companies based in the Asia/Pacific region at 44.9 percent, unchanged from the corresponding figure a year ago, and then companies based in Europe at 9.2 per-

Review of New Light Vehicle Sales

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

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


29 MSADA

All company categories by geographic bases – North America, Asia/Pacific and Europe – experienced growth in light-vehicle sales in September 2014 YTD figures from last September with the Asia/Pacific region in the lead with 6.5 percent growth.

For Q3 2014, companies based in the Asia/Pacific region held the largest share of light-vehicle sales at 46.9 percent, up from a share of 46.8 percent in Q3 2013. The correspond-ing share held by companies based in North America in Q3 2014 was 44.5 percent, up from a share of 44.0 percent in Q3 2013. In Q3 2014, Europe-based companies held a share of 8.6 percent of light-vehicle sales, down from a share of 9.2 percent in Q3 2013. All company categories experienced growth in light-vehicle sales in Q3 2014 over Q3 2013, with the companies based in North America in the lead with growth of 8.9 percent.

From the Detroit 3 companies, Fiat Chrysler and General Motors were the only companies that experienced growth in their respective September 2014 YTD sales compared to last year; Fiat Chrysler had the most growth in this group at 14.6 percent, while General Motors experienced growth of 4.3 percent in its Sep-tember 2014 YTD sales.

From the group of Asia/Pacific-based companies, all companies experienced some growth in their respective YTD light-vehicle sales compared to last year. Isuzu expe-rienced the most growth in this group at 63.9 percent, followed by Mitsubishi at 29.8 percent.

From the group of Europe-based companies, all companies except Volkswagen and Vol-vo experienced some growth in September 2014 YTD sales compared to last year. Audi was in the lead in this group with YTD light-vehicle sales growth of 14.5 percent, followed by Porsche at 12.1 percent. See Figures 2, 3 and 4.

SeGMenTSThe cross utility vehicle (CUV) segment held the largest

share of September 2014 YTD light-vehicle sales at 26.7 percent, which was up from its corresponding share of 25.2 percent last year. Although the CUV segment was followed by the middle car segment and the small car segment, respec-tively, in terms of YTD market share, both these segments experienced a decline in their respective YTD market shares compared to last year.

The large car segment held the least share of September 2014 YTD light-vehicle sales at 2.2 percent, which was

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

NADA Market Beat30

down from its corresponding share of 2.6 percent last year.

All the segments except for the large car segment experienced growth in YTD sales, compared to last year. The sport utility ve-hicle (SUV) segment experienced the most growth in September 2014 YTD light-vehicle sales at 12.7 percent.

For Q3 2014 light-vehicle sales, the CUV segment was the largest segment with a share of 27.1 per-cent of light-vehicle sales, up from a share of 25.7 percent in Q3 2013. The middle CUV sub-segment was the largest CUV sub-segment in Q3 2014, holding 65.2 percent of CUV sales for the quarter.

Within this sub-segment, the Honda CR-V was the leading ve-hicle in sales with 86,323 units, followed by the Ford Escape with sales of 77,272 units for Q3 2014. See Figures 5 and 6.

Power SourCeGasoline-powered light vehi-

cles held a market share of 93.4 percent of September 2014 YTD light-vehicle sales, up from a share of 93.3 percent a year ago.

Diesel-powered light vehicles held a share of 2.9 percent of September 2014 light-vehicle sales, up from a share of 2.8 percent last year.

In YTD terms, the market shares held by electrics and plug-in hy-brids each grew compared to last year, while those for hybrids and light vehicles powered by natural gas and fuel cell technology each declined over the same period.

In September 2014, the following light vehicles were sold in the alternative power category: 7,072 electrics; no units powered by fuel cell technology; 31,314 hy-brids; 33 units powered by natural gas; and 3,349 plug-in hybrids, amounting to 41,768 total light-vehicle sales.

For the alternative power category, in Q3 2014, the following light vehicles were sold: 19,311 electrics; no vehicles powered by fuel cell technology; 124,936 hybrids; 146 units powered by natural gas; and 15,027 plug-in hybrids, amounting to 159,420 total light-vehicle sales. The Q3 2014 sales for the alternative power category were up 7.8 percent from Q3 2013. See Figure 7.

MoDelSFrom the list of the 15 best-selling light vehicles for Septem-

ber 2014 YTD, seven out of 15 models were from the Detroit 3 companies while the rest were from companies based in the Asia/Pacific region.

There were three pickup trucks and two cars occupying the high-est five ranks of the best-selling light vehicles for September 2014

YTD. The three leading pickup trucks were models from the Detroit 3 companies: Ford F-Series, Chevrolet Silverado, and Ram pickup. The two leading cars were models from companies based in the Asia/Pacific region: Toyota Camry and Honda Accord.

This list marks the reappearance of a Hyundai model – the Hyundai Elantra – amongst the ranks of the 15 best-selling light vehicles this year. The Hyundai Elantra ap-peared on the list for every month this year, except for those for June through August, as the sole Hyundai model. See Figure 8.

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October 2014 MSADA Auto Dealer

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