MSADA, One McKinley Square, Sixth Floor, Boston, MA 02109
auto M a s s a c h u s e t t s
D
E
A
L
E
R
The official publication of the Massachusetts State Automobile Dealers Association, Inc
2013
FIRST CLASS MAIL US POSTAGE PAID BOSTON, MA PERMIT NO. 216
January 2013 • Vol. 26 No. 1
AL
AU
T
NE
OW
W
SH
E
R N AT I O N
O
N
G
LA
INTE ND
FUELING
the
Future
Thank You to Our Preview Night Gala Sponsors Champagne Reception The Boston Globe
Theme Sponsor Southern Auto Auction
Valet Service Cars.com
Food Station Sponsors The Boston Herald CVR Reynolds & Reynolds Huntington National Bank Siverman Advisors
Band Sponsor Zurich Coat Check Construction Management Builders Full Bar O’Connor & Drew
n e w
e n g l a n d
Dessert Station Sponsor Lynnway Auto Auction
Friends of the Scholarship Program AutoAlert Dealer Track Downey and Company TD Bank Micorp LLC Federated Mutual Insurance Co. NADART Performance Management Group
Parting Gift Mid-State Insurance
i n t e r n a t i o n a l
a u t o
s h o w
2 0 1 3
Ma s s a c h u s e t t s
auto D
S t a f f D ir e ct o r y Robert O’Koniewski, Esq. Executive Vice President rokoniewski@msada.org Jean Fabrizio Director of Administration jfabrizio@msada.org Paul Fellows Administrative Assistant/ Membership Coordinator pfellows@msada.org A u t o D e a l e r M Ag a z i n e Robert O’Koniewski, Esq. Executive Editor Tom Nash Editorial Coordinator nashtc@gmail.com Subscriptions provided annually to Massachusetts member dealers. All address changes should be submitted to: MSADA by e-mail: pfellows@msada.org Postmaster: Send address change to: One McKinley Square, Sixth Floor Boston, MA 02109 ADVERTISING RATES Inquire for multiple-insertion discounts or full Media Kit. E-mail tnash@msada.org Quarter Page: $450
Full Page: $1,400
Half Page: $700
Back Cover: $1,800 Ad Directory
Blum Shapiro, 25 The Boston Herald, 26 Lynnway Auto Auction, 24 Nancy Phillips Associates, Inc., 25 O’Connor & Crew, P.C., 35 Southern Auto Auction, 22
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.
E
A
L
E
R
The official publication of the Massachusetts State Automobile Dealers Association, Inc
T a b l e o f C o n t e n ts
4 6 9 10 12 14 18
From the President: A Great Start to 2013 THE ROUNDUP: Return to Taxachusetts?
LEGISLATIVE SCORECARD SOUND OFF: Franchisor Image Programs AUTO OUTLOOK
Cover Story: Preview Night Gala New England International Auto Show
22
NEWS From Around the Horn
26 28 29 30 34
Question of the Month
LEGAL: Dealers Must be Aware of the NLRB INSURANCE: Prepare for Cold Weather Conditions
NADA: Let’s Keep the ‘Momentum’ Going SOUND OFF: Why Third-Party Websites Flourish
www.msada.org
Massachusetts Auto Dealer JANUARY 2013
4
from the President
by Scott Dube, MSADA President
A Great Start to 2013 Auto Show kicks-off year with record attendance
A
s auto dealers, there’s nothing more exciting than seeing a large crowd of people checking out cars. Our New England International Auto Show has always attracted huge crowds, and preliminary numbers show this was among our best years ever. That’s a great way to start 2013. While our economic recovery as a nation remains uncertain at best, our show got more foot traffic than these past few years. Take that into consideration with national sales numbers for 2012 and maybe we can hope that the sea change is actually taking place. Walking the floor of the show, it’s easy to see that there’s good reason for folks to be excited about the prospect of buying a new vehicle in 2013. Innovation in our industry is constant, but the technologies that were just emerging a decade ago are now sitting in front of us in vehicles that are affordable and appealing. But we’re not in the hope business. We go out there every day and work hard. The same is true for MSADA. We are going to continue to advocate for you both at the State House and on Capitol Hill. We are going to continue to make sure dealers are able to do business without added, unnecessary burdens and that the laws on the books continue to be applied. A lot of big things will be happening here in Massachusetts and on the national stage. Issues such as sales tax, Consumer Financial Protection Agency implementation and a couple of very important elections will keep us very busy for this year and next. Please consider contributing to our PACs. Predicting the future is futile, but we do know what’s on deck on Beacon Hill. Check out MSADA Executive Vice President Robert O’Koniewski’s Legislative Scorecard on page 9 for a look at issues that dealers can expect to be considered this year.
Preview Night a Rousing Success Thank you to all those who came out for our New England International Auto Show Preview Night Gala. This was my first JANUARY 2013
Massachusetts Auto Dealer www.msada.org
time since becoming President of MSADA for Preview Night, and it was a proud moment to be there with my fellow dealers, their families and our extended community to celebrate the stunning array of vehicles that you and I are lucky enough to have in our showrooms and support our Charitable Foundation. I want to thank all our Preview Night sponsors, who are recognized on page 2 of this magazine. Please keep them in mind if you need a service they offer. Their support helps bring us the best event possible every year, and ultimately helps educate the next generation of our techs. As always, please feel free to send me any feedback you have about your experience at Preview Night. We aim to outdo ourselves every year, and we want to know what we can do to improve. I’m already looking forward to sharing this experience again with you in 2014.
Tesla If you’ve been following the Tesla saga you know that they are operating a dealership in the Commonwealth contrary to the plain language of the law. We are going to vigorously defend our franchise law and continue this as far as is necessary. I can’t go into a lot of detail here as it is of course ongoing litigation but feel free to contact Bob or myself if you want more details.
NADA Convention We will be hosting our cocktail reception along with O’Connor and Drew again this year at the NADA Convention on Saturday, February 9, at the Peabody Hotel. It is always a great time, and we expect that again this year. We are really excited about our Massachusetts TIME Dealer of the Year nominee, Ray Ciccolo of the Village Auto Group. Ray is a real stand out, and we believe he has what it takes to win the national award. That would be a real honor and well deserved. Hope to see you in Orlando!
t
MSADA
5
A ssociate M ember D irectory Name
Msada Board Barnstable County Gary Beard, Dick Beard Chevrolet
Berkshire County Brian Bedard, Bedard Brothers Auto Sales
Bristol County Richard Mastria, Mastria Auto Group
Essex County William DeLuca, Woodworth Motors John Hartman, Ira Motor Group
Franklin County [Open]
Hampden County Jack Sarat, Jr., Sarat Ford
Hampshire County Bryan Burke, Burke GMC
Middlesex County James Boyle, Tuck’s Trucks Chris Connolly Jr., Herb Connolly Motors Scott Dube, Bill Dube Hyundai
Norfolk County Jack Madden, Jr., Jack Madden Ford Charles Tufankjian, Toyota Scion of Braintree
Plymouth County Scott Shulman, Best Chevrolet
Suffolk County Robert Boch, Expressway Toyota
Worcester County Steven Sewell, Westboro Mitsubishi Steve Salvadore, Salvadore Auto
Medium/Heavy-Duty Truck Dealer Director-at-Large Christine Alicandro, Marty’s Buick GMC Isuzu
Immediate Past President James G. Boyle, Tuck’s Trucks
NADA Director Don Sudbay Jr., Sudbay Motors
Officers President, Scott Dube Vice President, Chris Connolly, Jr. Treasurer, Jack Madden, Jr. Clerk, Charles Tufankjian
Contact Telephone
ADESA Boston Chris Carli (508) 270-5403 Admirals Bank John Saviano, Jr. (401) 248-7229 ADP Dealer Services Maria Trezza (973) 974-4020 Albin, Randall & Bennett Barton D. Haag (207) 772-1981 American Fidelity Assurance Co. Dan Clements (800) 450-3506 ext.6515 AutoRaptor (RAL) Howard L. Leavitt (401) 421-6533 Bank of America Maryanne Recupero (800) 991-1770 Blum Shapiro John D. Spatcher (860) 561-4000 Boston Globe Mary Kelly (617) 929-8373 Burns & Levinson LLP Paul Marshall Harris (617) 345-3854 Construction Management & Builders, Inc. Kate Sullivan (781) 246-9400 Curran EasyCare Inc. Mike Douglas (770) 246-9724 CVR Scott Herbers (800) 668-2332 DealerTrack Ernest Lattimer (516) 547-2242 Downey & Company James Downey (781) 849-3100 Ethos Group, Inc. Drew Spring (617) 694-9761 F & I Resources Jason Bayko (508) 624-4344 Federated Insurance Chris Welch (724) 766-6666 Fisher & Phillips LLP John Donovan (404) 240-4236 Grant Thornton LLP Alan Oslomowski (508) 926-2200 Greenwood Distributors James Viara (508) 336-5040 Huntington National Bank Elizabeth Donovan (508) 505-7435 Improved Illumination James Feeney (508) 801-9205 Jewett Construction Alison Jewett (603) 895-2412 Key Bank James Q. Moretti (781) 558-5132 Leader Auto Resources, Inc. John Ackermann (518) 857-8853 Lynnway Auto Auction Bob Brest (781) 596-8500 M & T Bank John Federici (508) 699-3576 MetroMedia Energy Timothy Teevens (800) 828-9427 Micorp LLC Ryan Kim (508) 832-9816 Mid-State Insurance Agency John Pietro (508) 791-5566 Mintz Levin Kurt Steinkrauss (617) 542-6000 Murtha Cullina Thomas Vangel (617) 457-4000 Nancy Phillips Associates, Inc. Nancy Phillips (603) 658-0004 O’Connor & Drew, P.C. Kevin Carnes (617) 471-1120 Paine Auto Auction Kyle Paine (781) 595-2900 Performance Management Group, Inc. Mark Puccio (508) 393-1400 Ray-Jurgen Richard Thibadeau (860) 585-0111 R.L. Tennant Insurance Agency, Inc. Walter F. Tennant (617) 969-1300 Resource Management Group J. Gregory Hoffman (800) 761-4546 Reynolds & Reynolds Marc Appel (413) 537-1336 Robinson Donovan Madden & Barry, P.C. James F. Martin, Esq. (413) 732-2301 Samet & Company John J. Czyzewski (617) 731-1222 Schlossberg, LLC Michael O’Neil, Esq. (781) 848-5028 Sentry Insurance Company Eric Stiles (715) 346-7096 Shepherd & Goldstein Ron Masiello (508) 757-3311 Silverman Advisors, PC Scott Silverman (781) 591-2886 Southern Auto Auction Tom Munson (860) 292-7500 Sovereign Bank Richard Anderson (401) 432-0749 Target Dealer Services Andrew Boli (508) 564-5050 TD Auto Finance BethAnn Durepo (603) 490-9615 TD Bank Michael M. Lefebvre (413) 748-8272 Wells Fargo Dealer Services Christopher Peck (508-314-1283) Wicked Local Media Massachusetts Jay Pelland (508) 626-4334 Zurich American Insurance Company Steven Megee (800) 443-4513
www.msada.org
Massachusetts Auto Dealer JANUARY 2013
6
The Roundup
Return to Taxachusetts? by Robert O’Koniewski, Esq. MSADA Executive Vice President Well before our string of four Republican governors beginning in 1991 through 2007, our state carried (not so proudly?) the moniker “Taxachusetts” that reflected the heavy tax burden working men and women and businesses suffered under as they labored and competed in one of the more onerous tax environments in the country. Although the Prop. 2 1/2 law limiting local property tax increases that began in 1982 was a good first step in providing some tax relief at least to property owners, Governor Dukakis and the heavily Democratic Legislature felt compelled to jump into the tax hike fray in 1989 and 1990 to pass large hikes in the income and other taxes to keep feeding the ever-increasing size of state government, thereby prompting the electorate to turn to GOP William Weld to help rein in what many considered to be out of control tax and spend policies of the outgoing Dukakis administration. If anything, the string of Governors Weld, Cellucci, Swift and Romney were committed to attempts to keep the tax burden under control, even managing to pass scores of tax cuts for businesses and workers. Although they succeeded in keeping the tax burden under control and tamping down legislative desires for more revenues, no one was going to confuse Massachusetts with the friendlier tax confines of such states as New Hampshire, Texas, Tennessee, or Florida. Now, as Governor Patrick prepares to conclude his final term of office, he seems compelled to make sure the Commonwealth returns to its Taxachusetts days. On January 23 the governor unveiled a proposed $35 billion state budget for fiscal year JANUARY 2013
Massachusetts Auto Dealer www.msada.org
2014, which begins on July 1 of this year, that includes a 7% increase in spending and a sought after net increase of approximately $2 billion in new tax revenues. To ensure that the expansive budget plan is in balance, the governor includes using $400 million from the state’s “rainy day” fund. In addition to other numerous proposed tax changes, as described below, the governor is seeking 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 seeks to achieve $1.9 billion in new net revenues by offsetting $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 stacks 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 an additional $1.33 billion in new revenue; • Doubling the personal exemption, thereby reducing 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 billion revenue reduction. Overall, the governor’s FY2014 budget plan engages in no cutting, as evidenced by a 7% spending hike, while asking workers and companies to dig deeper into their pockets to fund this
MSADA bold expansion of government spending. This proposal needs to be 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. Further, taking another $3 billion out of workers pockets is money not spent in the private economy on such things as cars and trucks, appliances, electronics like TVs and computers, power tools, clothes and shoes, and other big and small ticket consumer goods. When you look at the fact that since May 2012 our unemployment rate has increased from 6.0% to 6.7% in December, does it really make sense to tap consumers for more money that will not be spent in the consumer retail economy? One item we need to hawk is the sales tax exemption for the trade-in allowance. Under current law, the trade-in allowance represents slightly over $100 million in revenue that is not going to the state through the sales tax. In the past, there have been legislators, albeit only a few, that have sought to eliminate this exemption from the tax code. Knowing the impact this exemption has on dealerships and their customers, any attempts to strike the trade-in allowance would be opposed fiercely by your Association. Finally, and more importantly, the reaction to the governor’s plan from legislators has been tepid at best. There weren’t any “dead on arrival” comments from Democratic leadership, but there wasn’t any dancing in the streets, either. As legislators do their due diligence and study the governor’s proposed tax hikes and revenue figures, the key indicator will be what the House does when it issues its budget in early April. All spending and tax proposals need to originate in the House under our state Constitution. Input on tax matters, especially from the business community, will go far to determine what the final tax package will look like. How the House and then the Senate react ultimately to the governor’s
proposed massive tax hikes and the accompanying public input will go a long way to determine if and how far we return to the days of “Taxachusetts.”
Auto Show Preview Night Gala On January 16 your Association and the Massachusetts State Auto Dealers Charitable Foundation held its 16th Preview Night Charity Gala to kick off our 56th edition of the New England International Auto Show at the Boston Convention and Exhibition Center. We feted over 500 guests, including our dealers, sponsors, and other industry representatives, in an effort to raise funds for our auto tech scholarship program. We owe a large debt of gratitude to our sponsors for the evening (the list is on page 2), who step to the plate each year to demonstrate their support for your Association and our Foundation’s scholarship program. We are grateful also to our member dealers who attend and commit their support to the scholarship program through their own financial giving. One face who was sorely missed this year is Bill DeLuca’s. Bill was severely injured in a freak accident in late October during Hurricane Sandy. Bill is a key leader within your Association for ensuring the success of our auto show each year. If there is one member who has been tirelessly committed to our show through his leadership and dedication it is Bill DeLuca. We wish Bill good luck in his continued recovery. We look forward to having him at the ribbon cutting to kick off the 2014 show next year.
Tesla Update As 2012 came to a close, Norfolk County Superior Court Justice Ken Fishman on December 31 issued his decision (1) denying our motion for reconsideration of his initial decision to reject our request for injunctive relief to shut down Tesla’s illegal factory-owned/operated store and (2) approving Tesla’s motion to dismiss our suit. Judge Fishman did not rule on the merits of our case but has decided the matter www.msada.org
based on the technical issue of whether MSADA and the plaintiff dealers have standing to sue under Chapter 93B, our state franchise law. The judge has agreed with Tesla’s reasoning and relied on pre2002 case law to say that we do not have standing. We, alternatively, argue that we and the dealers do have standing as a result of amendments we pushed for in a major re-write of 93B that was signed into law in 2002; one such change was to the “standing” language in the injunctive relief section of the law to allow any party to sue, not just a dealer affiliated with the particular manufacturer being challenged. After considerable review and discussion of the decision, your Association leadership decided to move forward with an appeal of Judge Fishman’s decision, and, as required under the judicial rules, we filed our notice of appeal with the court on January 22. There are several internal, procedural steps that need to resolve themselves within the court system before the parties begin to file legal briefs with the appeals court, which is still a number of weeks away. We will continue to keep you abreast of developments as they occur.
NADA New President On January 8 the National Auto Dealers Association Board of Directors selected Peter K. Welch as its new president, filling the position left vacant when Phil Brady resigned to take a position with Phillips 66. Welch, 59, has been president and chief executive officer of the California New Car Dealers Association (CNCDA) in Sacramento since 2003, and has managed its government affairs office, including legal, legislative and regulatory affairs, since 1990. It’s the country’s largest state organization for new-car dealers. The decision was made at a special meeting of the NADA board of directors in Dallas on January 8, following an extensive nationwide search. Welch will become the NADA president officially
Massachusetts Auto Dealer JANUARY 2013
7
8
The Roundup on February 1. “Peter will be a great leader at NADA,” said Bill Underriner, a Montana dealer who serves as the NADA Chairman. “He has an impressive track record in California, where every day he faced some of the toughest regulatory and legislative issues in the industry. He’s a car guy who comes highly recommended not just from people in California, but also across the nation.” A native of Detroit, Michigan, Welch has been married to Cheryl Welch for 32 years. They have three children. He earned a bachelor’s degree from the University of Michigan; a master’s degree from the University of Durham, England; and a law degree from Loyola Marymount University of Law, Los Angeles. Prior to joining the CNCDA, he was a partner with a Los Angeles law firm.
Dealership Insurance Booklet Mandate Eliminated New-car dealerships are no longer required to provide printed copies of the Relative Collision Insurance Cost Information brochure to car and truck buyers upon request. On January 10 President Obama signed legislation that repeals the outdated mandate and eliminates the $1,000 fine that dealerships face for failing to comply with the 1970s-era law. The booklet was originally designed to provide car buyers with information on the different insurance costs to repair vehicles, but was not helpful to consumers in the showroom. The Obama administration, in a 2011 submission to Congress, said that “a prospective buyer does not need a brochure from the federal government to obtain this information, since insurance agents are trained to provide advice on how model selection affects insurance premiums.” In an NADA survey of its members, 96 percent of new-car dealers reported that none of their customers had ever asked to see the brochure in the 21 years dealers were required to stock it. The federal government and the Insurance Institute for Highway Safety, which compiles the data, JANUARY 2013
MSADA can still make the information available to the public online or by other means. The legislative effort was led by House sponsors Reps. Gregg Harper (RMiss.) and Bill Owens (D-N.Y.), as well as Sens. Amy Klobuchar (D-Minn.) and Roger Wicker (R-Miss.), who directed the bill through the Senate.
FTC Rejects Proposed Changes to Cooling-Off Rule The Federal Trade Commission (FTC) has completed its systematic review of the Cooling-Off Rule and decided that no changes to the rule are warranted except for potentially increasing the monetary threshold at which the rule applies. The Cooling-Off Rule requires sellers who are engaged in door-to-door sales of consumer goods or services, with a purchase price of $25 or more, to provide the buyer with certain oral and written disclosures regarding the buyer’s right to cancel the contract within three business days from the date of the transaction. Among other exclusions, the Rule exempts “sellers of automobiles, vans, trucks or other motor vehicles sold at auctions, tent sales or other temporary places of business, provided that the seller is a seller of vehicles with a permanent place of business.” The FTC’s sole proposed change to the rule would increase the threshold at which the rule applies from $25 to $130 to account for inflation that has occurred since the FTC first issued the rule in 1972. During the comment period that preceded the FTC’s rule review, several consumer groups filed a joint written comment with the FTC that proposed several changes to the rule, such as (i) removing the exemption for motor vehicle sales at temporary locations, (ii) expanding the rule to cover used car sales at any location, including sales at the dealer’s premises, and (iii) prohibiting arbitration agreements in door-to-door sales contracts. However, consistent with a comment filed by NADA, the FTC declined to propose these changes. In support of its determination, the FTC cited the existence
Massachusetts Auto Dealer www.msada.org
of other legal remedies that address the consumer groups’ concerns, the fact that the rule was never intended to be applied as broadly as that proposed by the consumer groups and, in the case of arbitration agreements, the consumer groups’ failure to present evidence “to show that there is any widespread abuse of arbitration agreements occurring within the doorto-door sales industry that might warrant a provision addressing the use of arbitration agreements.” (Keep in mind that the FTC’s determination on arbitration agreements under the Cooling-Off Rule is separate from the Consumer Financial Protection Bureau’s current study of such agreements under the Dodd-Frank Act.)
Regional Dealer Meetings Throughout the year we continue to conduct regional meetings across the state at which we provide an update on various legislative and legal issues your Association is addressing, as well as receive input from our member dealers on issues of interest. We also invite area legislators to attend the events to encourage active dialogue between the elected officials and local dealers. On January 25 we met in Gardner with our northern Worcester County dealers. Steve Salvadore, our MSADA director for the area, hosted the meeting at which several legislators and their aides attended: State Senator Jennifer Flanagan (DLeominster), State Rep. Stephen DiNatale (D-Fitchburg), and State Rep. Dennis Rosa (D-Leominster). Our next event will take us to Hyannis on Cape Cod on Friday, February 22. In addition to these events, we will continue with our on-going practice of moving our Board meetings to different areas of the state and tying dealer-related presentations into those dates. Check our mailings for events coming to your area. Finally, due to an editing error, our December Auto Dealer omitted State Rep. Steven Howitt (R-Seekonk) as an attendee at our dealer meeting in Middleborough on December 14.
t
99
www.msada.org www.msada.org
Massachusetts Auto Auto Dealer Dealer DECEMBER JANUARY 2013 Massachusetts 2012
10
Sound Off
The Impact of Franchisor Image Programs on Dealership Real Estate By Nancy Phillips Historically, automotive transactions have included both the franchise and real estate of the dealership. Dealership prices were defined by fluctuation in the amount of goodwill paid combined with current market value for real estate holdings. As the economy has ebbed and flowed, mid-level intangible franchise value has ranged from 2% to 8% of total revenues while the long term premium brands have steadfastly produced business value factors of 15% to 30%. Business Value as a Percnt of Total Revenues 1990– 2012
BRAND ELEMENTS AND FACILITY UPGRADES EQUATE TO HIGHER GOODWILL The information in this article is based on approximately 50 actual auto dealership transactions facilitated by Nancy Phillips Associates between 2008 and 2012. Dealerships holding premier level franchises were excluded because purchasers continued to support real estate prices at full market value. Also excluded were franchises sold for market area consolidation into a pre-existing facility. The facts revealed tell an interesting story. During the last five year period ending in 2012 an astounding 95% of dealerships sold required additional expense for brand enhancements or facility upgrades in order to obtain approval. The remaining 5% approved without additional conditions had recently completed very large facility upgrades and were fully compliant with all of their franchisors specifications. Of the dealerships needing more investment, half had to be relocated for the purpose of renovating a different facility or to undergo construction of a completely new one. Transactions Incurring Brand-related Expenses 2008–2012
IT’S TIME TO THINK DIFFERENTLY ABOUT DEALERSHIP REAL ESTATE Real estate for both mid-level and premium franchises over the fifteen year period leading up to 2008 was almost always part of the dealership transaction and, except in very distressed circumstances, usually delivered full market value to the seller. Brand enhancements and facility upgrades as conditions for approval of new dealers were not the norm and rarely had a significant impact on the amount of goodwill paid for the franchise. Dealership real estate values during this time remained strong and, if anything, were viewed in more favorable terms by both buyers and financial institutions than other forms of commercial property. But, between 2008 and 2012 much has changed in our industry and new trends have emerged that may affect how you think about dealership real estate and even the timing of your own exit strategy.
JANUARY 2013
Massachusetts Auto Dealer www.msada.org
Added Expense
No Added Expense
In conjunction with economic factors, brand enhancement programs and facility upgrade requirements play a major role in the changing climate for dealership acquisitions. The added cost of these initiatives can no longer be viewed as long term investment in real estate and therefore should be
MSADA redefined as additional goodwill paid for the franchise opportunity. New brand related costs fall generally into the following three categories. For nearly every dealership sold today, the minimum incremental cost range of up to $750,000 can be expected in order to cover essential brand elements; a second cost tier of $750,000 to $2 million can be anticipated if an upgrade of the existing facility is also required. Normally term agreements covering these initiatives can be negotiated with the franchisor so that costs are absorbed over a reasonable period of time. For those franchisors requiring new construction, it is nearly impossible to get away with less than an average investment of from $2 to $5 million and higher if a new land acquisition is necessary. Added Cost of Branding and Upgraded Facilities
25%
35%
40%
$0–$750,000 $750,000–$2,000,000 $2,000,000 and up
DOES BRANDING CONTROL DEALERSHIP ACQUISITIONS? The consequence of brand related costs for the significant number of dealers whose franchise and real estate were sold together is telling. While business value has risen overall, fluctuating based on economic factors and the Auto Industry Crisis of 2008 – 2010, changes in how real estate is viewed began in 2008 and will most certainly continue through 2013 and probably many years beyond. In 40% of the dealership transactions that transpired between 2008 and now, real estate was sold for 10% to 25% less than current market value while the owners of the remaining 60% of these dealerships were forced to sell for less than 75% of value in order to unload their franchises. Purchasing a dealership during this time has become so much more difficult than it ever was before. In addition to all of the added hard costs, there is loss of business that goes along with down time while dealerships are made ready. New sites approved for re-locations are prime and therefore among the most expensive properties to be found. Working capital requirements are higher and franchisors are exceptionally
selective regarding who they wish to represent them. Profiles of the dealers who made acquisitions over the five year period reviewed herein show that 65% of the purchasers already owned a small or large group of dealerships while only 35% were owners of a single store. In selling dealerships, the only way to properly facilitate the owner’s exit plan is by procuring the most desirable candidate who understands and will support franchisor requirements and has stellar sales and service performance ratings as well. DEALERSHIPS ARE PRICED HIGHER, PURCHASERS ARE FEWER AND REAL ESTATE IS NOT WHAT IT WAS • Dealerships are more expensive than ever before because of brand enhancements and their attendant facility upgrades • The assumption that your dealership real estate is the pot of gold at the end of the rainbow is not applicable in this time period or for the foreseeable immediate future. • It is nearly impossible for someone who is not a dealer in good standing with a current franchisor to obtain approval for a dealership acquisition • Dealership transitions enable the franchisor to substantially improve dealer location and upgrade aged facilities • Franchisors have effectively and quickly addressed branding requirements as part of the approval process for those who wish to become newly appointed dealers • Although in this article we have chosen not to disclose which franchisors are the most successful in motivating stagnant dealers to transition out of their network into retirement or something else entirely, our confidential dealership data clearly points to different levels of requirements and achievement rates among particular franchisors IN 2013 THE CLIMATE FOR DEALERSHIP SALES AND ACQUISITIONS REMAINS STRONG And the reason is so very simple. It is the law of real estate. They just don’t make them anymore, at least not very often. Owning dealerships and operating them properly is a still a great way to make money and until the entire system changes – not likely for the next decade or two – dealership transactions will continue to take place at a steady pace and with strong amounts paid for the intangible value of the franchise.
t Nancy Phillips Associates specializes in sales, acquisitions and evaluations of franchised automobile dealerships. Contact Nancy Phillips at 603-658-0004 or e-mail auto@nancyphillips.com.
Do you have an opinion you want to share? Send submissions to tnash@msada.org.
www.msada.org
Massachusetts Auto Dealer JANUARY 2013
11
12
AUTO OUTLOOK
JANUARY 2013
Massachusetts Auto Dealer www.msada.org
MSADA
www.msada.org
Massachusetts Auto Dealer JANUARY 2013
13
14
New England International Auto Show MSADA
New England International Auto Show
Preview JANUARY 2013
Massachusetts Auto Dealer www.msada.org
PREVIEW MSADA NIGHT
Night www.msada.org
Massachusetts Auto Dealer JANUARY 2013
15
R N AT I O N
AL
AU
OW
FUELING
JANUARY 2013
T SH
W
N
G
LA
INTE ND
O
E
New England International Auto Show
NE
16
the
Massachusetts Auto Dealer www.msada.org
Future
PREVIEW MSADA NIGHT
www.msada.org
Massachusetts Auto Dealer JANUARY 2013
17
18
MSADA 2013 New England International Auto Show 2013
JANUARY 2013
Massachusetts Auto Dealer www.msada.org
www.msada.org
21 19
Massachusetts Auto Dealer JANUARY 2013
20
MSADA 2013 New England International Auto Show
JANUARY 2013
Massachusetts Auto Dealer www.msada.org
www.msada.org
21 21
Massachusetts Auto Dealer JANUARY 2013
22
NEWS
from Around the Horn
BOSTON
Boston Globe Highlights Hybrids at Auto Show Of the 500 vehicles on display at this year’s New England International Auto Show, at least 25 were alternative-fuel cars, ranging from diesels to full electrics. One car, Ford’s Fusion Energi, a plug-in hybrid, is estimated to deliver 21 miles of traveling on electricity before its gas engine has to kick in — nearly double the range of the Prius plug-in that debuted last year. It will compete also with the Chevrolet Volt, last year’s most popular plug0in, with more than 23,000 sold. At least 16 hybrids are new for the 2013 model year market share, including all-electric vehicles, is expected to increase to 5 percent from 3.3 percent in 2012, according to WardsAuto, an industry tracking firm. But given the volatility of gasoline prices — last year they hit a record average of $3.62 per gallon nationwide, according to the Energy Information Administration — that number could rise significantly in coming years.
JANUARY 2013
Massachusetts Auto Dealer www.msada.org
MSADA
NEWS from Around the Horn WILBRAHAM
2013 Ford Fusion Earns AOL Autos Car of the Year Honor AOL Autos editors test-drive nearly every new car released in a given year, providing them an impressive breadth of knowledge of vehicles. That expertise gives the publication’s pick for Car of the Year impressive weight in the industry, and it has selected the 2013 Ford Fusion over class competitors like the Nissan Altima and perennial favorites like the BMW 3 Series. Editors for AOL Autos applauded the redesigned Fusion’s bold design and interior features, including available dual-zone climate control, leather upholstery and push-button start. They also gave the Fusion high marks for its improved fuel efficiency, which is up to 34 mpg on the highway for the gasoline-powered model and the
MSADA
move the dealership from Danvers to Salem within a month of obtaining the license. However, the license approval faces a possible legal challenge from Young World Academy, a preschool and daycare that has an ongoing legal battle with Stutz. Young World, which is located next to the dealership, has pending Land Court cases against Stutz over the use of the street and other issues. PEABODY
Acura RDX Churns Out EighthStraight Record Sales Month in December Awards and accolades look nice in the trophy case, but what really determines a redesigned vehicle’s success is whether it makes a measurable impact on the sales floor. The 2013 Acura RDX crossover continues to do just that following its launch in May 2012, selling 4,024 units in December 2012 month for a 155-percent increase year-over-year. December marked the eighth-consecutive month that the RDX has set a monthly sales record. Featuring a sleeker, more aerodynamic exterior, the 2013 Acura RDX offers a more dynamic ride with the help of a new engine, a new six-speed automatic transmission and the option of an advanced all-wheel-drive system. The standard 3.5-liter V6 powerplant produces 273 horsepower while returning up to 28 mpg on the highway, good for increases of 33 horsepower and four miles per gallon compared to its four-cylinder predecessor. Inside, the compact crossover benefits from a new, sweeping interior design with extensive use of leather, noise-reduction technologies and more leg and shoulder room.
Fusion Hybrid achieving up to 47 mpg in both highway and city driving. Finally, the editors commended the new generation Fusion for raising the bar in the family sedan segment, with impressive performance, options and value. “The Fusion offers the right balance between features and price point, giving drivers everything they need and want in a sedan without adding on expensive amenities that nobody really uses,” said Jason Perez, General Manager of Balise Ford of Wilbraham. “That value proposition puts the Fusion ahead of its competitors, because nobody else offers the same balance in a vehicle.” SALEM
North Shore Mazda Gets OK The Salem Licensing Board this month unanimously approved a license for North Shore Mazda despite opposition from a neighbor. North Shore Mazda intends to open at the former Stutz Volvo site. Owner Joseph Shaker said earlier this month that he would
“Buyers are continuing to move toward smaller crossovers for improved fuel efficiency and overall practicality, but the RDX stands out from the rest because it provides those things while delivering smart luxury and sophisticated style,” said Joel Avery, general manager of Acura of Peabody. “The new RDX is extremely quiet and comfortable inside, and it has a responsive ride that feels more like a luxury sports sedan than an SUV.” www.msada.org
Massachusetts Auto Dealer JANUARY 2013
23
24
NEWS from Around the Horn RAYNHAM
GMC Celebrates Best Sales Year Since 2007 GMC saw year-over-year sales increase 4 percent nationally in 2012, marking three consecutive years of rising sales and its best sales year since 2007. Sales of crossovers like the GMC Terrain, which posted an 11-percent sales gain in 2012, helped attract car buyers as did the brand’s luxurious Denali trim. Half of all GMC Yukon sales and roughly one third of GMC Acadia sales were Denali models. While GMC’s utility vehicle sales rose in 2012 it was still the GMC Sierra pickup truck doing the heavy lifting, leading the brand’s 2012 sales with 145,325 models finding new homes. “GMC’s reputation for utter reliability and durability has made it a go-to brand for those looking to get the tough jobs done,” said Gary Carter, general sales manager of Mastria Buick GMC Cadillac. “The fact that the GMC Sierra has seen rising sales even with its replacement waiting in the wings speaks to the model’s terrific quality and value.”
JANUARY 2013
Massachusetts Auto Dealer www.msada.org
MSADA LAWRENCE
Jewett Completes Second Commonwealth Motors Dealership MSADA Associate Member Jewett Automotive Design & Construction, a division of Raymond, NH-based Jewett Construction Company Inc., has completed construction of Commonwealth Nissan in Lawrence, its second dealership for Charles Daher’s Commonwealth Motors. This extensive, three-phase project involved renovations
and additions to the former Commonwealth Chevrolet, relocated to a new, 28,400 square foot Jewett-built facility, and included the construction of a 7,300 square foot steel-framed structure to house a newly designed showroom, administration and management offices, as well as renovations to other existing offices and customer waiting areas. Commonwealth’s service department and executive offices, located in the same building, remained active during renovations. ORLEANS
Prime Motor Group Purchases Toyota Stores Orleans Toyota and Hyannis Toyota owner Jack Carter has sold the dealerships to Prime Motor Group, telling the Board of Selectmen late last month it was time to release the business to “some younger guys.” Carter appeared with Prime Motor Group’s Matthew McGovern to request permission to transfer the dealership license, which was approved. Prime Motor Group has 12 other dealerships in Massachusetts and New Hampshire. McGovern, who will manage the dealership, said little would change. “We intend to keep all the employees and take care of our customers,” he said. www.msada.org
Massachusetts Auto Dealer JANUARY 2013
25
26
NEWS from Around the Horn TOKYO
Nissan, Toyota, Honda Post Record Sales for 2012 Japan’s three biggest automakers -- Toyota, Nissan and Honda -- this month posted record sales for 2012, as the results confirmed that Toyota recaptured the world’s biggest automaker crown. The results underscored the trio’s recovery after Japan’s quake-tsunami disaster in 2011 devastated sales and production, and highlighted strong demand in the key Asian and US markets. That helped offset weakness in debt-hit Europe and a downturn in China stemming from a diplomatic row that sparked a consumer boycott of Japanese goods in China, the world’s biggest vehicle market. Toyota sales last year soared 22.6 percent to 9.75 million vehicles, while Nissan saw a 5.8 percent on-year rise to 4.94 million units with record numbers in the US market. Honda, Japan’s number-three automaker, logged sales of 3.81 million vehicles, up from 3.09 million a year earlier. The latest figures confirmed that Toyota regained the global sales title which it lost in 2011 to US-based General Motors, largely due to the natural disasters.
???
Question of the Month By Robert O’Koniewski, Esq. MSADA Executive Vice President
As a benefit of MSADA membership, member dealers can call their Association and seek guidance to answering any type of legal question related to their dealership operations, from franchise law rights to sales tax to human resources, just to name a few.
Q. Can I sell a used vehicle “as is”? No, as this would violate the state’s implied warranty law as well as the Massachusetts Attorney General’s regulations governing the retail sale of vehicles (940 CMR 5.04 et al.) promulgated pursuant to the Massachusetts Consumer Protection Act (MGL Chapter 93A). First, the implied warranty of merchantability is a guarantee provided by law in the sale of all consumer products, including automobiles, even if they cost less than $700 or have been driven 125,000 miles or more before sale to a consumer. The implied warranty is in addition to any express, written warranty. Under the implied warranty, a product must do what it was designed to do with “reasonable” safety, efficiency and ease for a “reasonable” period of time. If it does not run properly, the seller is responsible for repair, replacement or a refund. The law does not define the word “reasonable.” This will depend in part upon the condition, age, and sale price of the vehicle. A dealer cannot deny coverage to a consumer under this warranty. Under the implied warranty of merchantability, merchants cannot sell products “as is” or “with all faults” or with a “50/50 warranty” that requires you to split the cost of any repairs with the seller. Second, under the AG’s regulations at 940 CMR 5.04(15), “it is an unfair or deceptive act or practice for a dealer to use any words or phrases in connection with the retail sale of motor vehicles purchased primarily for personal, family or household purposes, which limit or imply a limitation on the implied warranties of merchantability and fitness for a particular purpose, including such phrases as ‘as is’, ‘with all faults’, and ‘50/50 warranty’.”
JANUARY 2013
Massachusetts Auto Dealer www.msada.org
MSADA
www.msada.org
Massachusetts Auto Dealer JANUARY 2013
25
28
LEGAL
MSADA
by Joseph W. Ambash
Like It or Not, Dealers Must Be Aware of the NLRB
Last month we talked about an NLRB decision that left thousands of employers scratching their heads about the limits some federal agencies will go to in order to defy common sense. In that case, the National Labor Relations Board the agency which enforces the laws regarding unionizing and “concerted activity,” decided that a dealership rule about courtesy in the workplace was overbroad and therefore unlawful. The NLRB intrusion into “courtesy” rules in non-union workplaces was not an isolated incident. As The Wall Street Journal recently opined, “The National Labor Relations board isn’t suffering for work, but President Obama’s appointees at this arbiter of labor relations are nonetheless grabbing a vast new mission: Regulating the workplaces of companies that have no union at all.” Why are these developments so important to non-unionized employers in particular? Because the NLRB sees its current mission as aggressively advising non-unionized employees of their rights to engage in “concerted activity” (i.e. acting together to address workplace concerns) and it is issuing more and more decisions which expand the regulation of both unionized and non-unionized companies. Consider some of the following decisions the NLRB has made: •An auto dealer hired a salesman who became increasingly unhappy with the compensation system. So he met with the owner to discuss it. The salesman lost his temper and in a raised voice called him a number of profanity laced names. He also told the owner that he is stupid, nobody likes him, and everyone talks about him behind his back. He then stood up, pushed his chair aside, and told the owner that if he fired him, he would regret it. The owner then fired the salesman. The salesman filed a charge at the NLRB claiming that the
JANUARY 2013
owner interfered with his right to engage in “concerted activity,” i.e. to complain about his pay. The NLRB then found that the firing was unlawful because the salesman was engaged in “protected activity” despite his profane and threatening outburst. •A company had a straightforward rule banning insulting, provocative and confrontational messages on employee clothing. A group of employees showed up wearing a union-provided T-shirt that the company found insulting. It told the employees to remove them. The union filed a charge at the NLRB claiming this interfered with the employees’ right to engage in “concerted activity.” The NLRB ruled that the company violated the law by requiring the employees to take off the shirt. •The NLRB recently ruled that employers may have to turn over confidential witness statements made by employees during harassment and other investigations to unions who represent the employees in disciplinary matters. This decision will compromise unionized employers’ ability to assure employees confidentiality during investigations that legally must be undertaken to deal with harassment and other allegations. •The NLRB recently ruled that an employer’s decision to fire five employees for their “bullying” comments on Facebook was unlawful because the employees were engaged in “concerted activity.” •The NLRB recently ruled that where a union contract requires union objectors to pay an “agency service fee,” the union can include certain costs of its lobbying activities in the agency service fee. This, of course, requires objectors to finance the union’s political activities! •The NLRB recently ruled that certain “at will” statements in non-unionized employers’ handbooks are an illegal interference with employees’ rights to engage in pro-
Massachusetts Auto Dealer www.msada.org
tected activity. •The NLRB recently ruled that certain nonunionized employers’ workplace arbitration contracts designed to resolve disputes without expensive litigation violate employees’ rights to file charges at the NLRB. In light of the NLRB’s seemingly irrepressible charge to expand the protections of the National Labor Relations Act for both unionized and non-unionized employees, dealerships cannot afford to ignore these developments. Remember, anyone can file a charge against an employer at the NLRB and the agency will investigate it and may find you in violation of the law. Here are the two major things you should be doing now, particularly if you do not have any unions: •Review your handbooks and other work rules to determine if they contain language that might be construed as a violation of the National Labor Relations Act. •Train your managers about the meaning of “concerted activity” so they will avoid statements or discipline that could be challenged as unlawful. Because the NLRB often ignores what normal business people consider common sense, the burden is on employers to recognize that we now operate in an “Alice in Wonderland” world and they must pay attention to these developments.
t
Joe Ambash
is
managing
Boston office of Fisher & Phillips, a national law firm representing management in labor and employment law. He can be reached at jambash@ laborlawyers.com. partner of the
Insurance
MSADA
29
Health Care Reform Best Practices Five Steps to Build Your Long-Term Strategic Plan
By Dan Clements American Fidelity Assurance Company’s
his-
tory is rooted in understanding how new laws will impact employers and finding new ways to make compliance more manageable for our customers.
To
learn more about everything
we can do for you, contact
Dan Clements at 800- 450-3506, ext. 6515 or email dan.clements@ af-group.com.
The comprehensive Health Care Reform law that was signed in 2010 by President Obama has brought about many challenges for auto dealerships. With so many moving parts, employers across the nation are struggling to understand the new requirements, figure out how to comply with them, and keep up with the changing rules. However, the bottom line is, what do you do with your health plan now? Our recommendation is to focus on the provisions with upcoming effective dates (such as the new W-2 reporting of health care costs and distributing Summaries of Benefits and Coverage during open enrollments) and begin thinking about how your organization will be affected after 2014. The following are five steps to help you develop your long-term strategic plan:
1) UNDERSTAND YOUR RESPONSIBILITIES The first step is to understand how each of the new Health Care Reform provisions impacts your organization. For example, how will your major medical plans need to be amended to comply with the plan design mandates? What administrative obligations apply? How, if at all, will you be affected by the Free Rider Penalty, and will you want to consider changes in work schedules, plan contributions, or eligibility? Will you, your insurance company, or third party administrator be responsi-
ble for paying each of the new fees? You can find more information about each of these requirements, including video summaries, at HCReducation.com.
2) ASSESS WHETHER YOUR HEALTH PLAN COSTS ARE SUSTAINABLE The next step is to understand how your plan costs could be affected and, if costs are increasing, whether they are sustainable for your organization. Possible cost drivers include the plan design mandates and new fees. Employers also need to consider whether they will need to allocate additional resources to comply with the new administrative obligations. Finally, you can assess whether your plans could trigger a Free Rider Penalty or Cadillac Tax using online calculators available at HCReducation.com.
3) UNDERSTAND YOUR CHOICES After you understand your responsibilities and their impact on your plan costs, the next step is to understand your choices. An employer’s plan options for providing health coverage can be summarized into four paths beginning in 2014: a) Maintain your current plan without significant changes. b) Transition to a lower cost design, such as a high deductible health plan paired with Health Reimbursement Arrangements or Health Savings Accounts. c) Sponsor a State Exchange plan if you are an eligible employer under the terms of your State’s Exchange (in most states, employers with fewer than 100 employees beginning in 2014). d) Decide not to sponsor a plan any more and instead help employees purchase their own coverage through the State Exchanges.
www.msada.org
4) DESIGN AN IMPLEMENTATION STRATEGY After deciding what your plan sponsorship role will be long-term, the next step is to design an implementation strategy. Best practice is to take into account all of the following: • Benefit design and eligibility for your plan; • Cost management techniques; • Administrative obligations that apply to the path you selected; • Impact on employees; • Employee communication about plan changes; and • Resource availability to implement plan changes and manage your benefit plans long term.
5) IMPLEMENT YOUR PLAN The final step is to implement your plan. Remember that clear and frequent communication to employees about plan changes is always best practice. For more information, you are encouraged to visit HCReducation.com, where you can find detailed summaries of the rules, calculators, compliance check lists, and much more. The information provided here is only a brief summary that reflects our current understanding of select provisions of the law, often in the absence of regulations. All interpretations are subject to change as the appropriate agencies publish additional guidance. American Fidelity does not provide legal advice – as such, we suggest that employers and individuals consult with their legal counsel and/ or tax advisors about how Health Care Reform may impact them.
t
Massachusetts Auto Dealer JANUARY 2013
30
NADA Update
Let’s Keep the ‘Momentum’ Going Don Sudbay, President of Sudbay Automotive Group, represents MSADA members on the NADA Board of Directors. He welcomes your
questions
and
concerns
exhibiting innovative products and services for dealerships on the expo floor. Invest in your future. Brighter days are ahead. Let’s keep the momentum going. We look forward to seeing you in Orlando. For more information or to register, visit www.nadaconventionandexpo.org.
(donsudbayjr@sudbay.com). I hope many of you are planning on attending the NADA Convention in Orlando. It is a great opportunity to see what’s new in our industry and renew friendships with fellow dealers. This year we will be honoring Ray Ciccolo as our state’s TIME Quality Dealer Award recipient at a reception on hosted by MSADA and O’Connor and Drew on Saturday, February 9, at the Peabody Hotel. Ray was my predecessor as NADA Director for Massachusetts, and I know you all agree he is most deserving of this honor. I look forward to seeing you at the convention, and please remember to complete the NADA Dealer Satisfaction Survey. New-car and light-truck sales are leading an economic recovery. Sales were up 13 percent in 2012, reaching nearly 14.5 million vehicles. It was the best sales year since 2007. The good news is several factors that led to stronger sales in 2012, such as pent up demand, an aging vehicle fleet and the availability of low financing rates on auto loans, are expected to contribute to higher sales this year as well. In business, just like sports, momentum can be a game changer or it can shift on a dime with undesirable results. Sports also teach us the importance of teamwork to achieve and maintain success. So, how can individual dealerships across the country keep the momentum going? One way is to stay focused on the things we can control. Looking ahead, the NADA Convention and Expo in Orlando, February 8-11, offers dealers a significant opportunity to build on the momentum we established last year. In fact, “Momentum” is the theme of the convention. Passion for knowledge, increasing productivity and motivation are all key components of sustaining positive momentum. There’s a lot to learn at the NADA convention, not just for dealer principals but key dealership staff as well. We’re strongly encouraging dealers to bring a team of employees, including general managers, CFOs, F&I personnel and sales, service and parts managers. The entire lineup of convention workshops will provide dealers and their managers with solutions they can implement right away; dealers can meet face-to-face with automaker executives at the franchise meetings to set goals and objectives for the year; and hundreds of companies will be JANUARY 2013
FTC to Study ‘Data Broker’ Industry The FTC recently announced that it is studying the “Data Broker” industry’s practices regarding collection and use of consumer data. The FTC issued orders to nine data brokerage companies: Acxiom, Corelogic, Datalogix, eBureau, ID Analytics, Intelius, Peekyou, Rapleaf and Recorded Future. The FTC is seeking details about: the nature and sources of the consumer information the data brokers collect; how they use, maintain and disseminate the information; and the extent to which the data brokers allow consumers to access and correct their information or to opt out of having their personal information sold. NADA recently issued a memo to dealers entitled “DEALER ALERT: Are You In Control of Your Data?” reminding dealers that it is critical that they (i) determine who within the dealership is authorized to grant access to dealership data, and (ii) conduct periodic audits of their operations to determine who can access their electronic data, what data they have access to and what they can do with it. MSADA also issued a bulletin on this topic in January 2012.
NADA Issues Guidance Regarding Factory Communications NADA distributed a memo (www.nada.org/regulatory_ affairs/subject/consumer/Factory+Relations) to all NADA members providing some practical guidance in the area of “Factory Relations” and, more specifically, several concrete steps dealers may want to consider when reviewing and responding to communications from their manufacturer. NADA encourages dealers to review these materials, which are a valuable resource when facing this important issue.
FTC Proposes No Substantive Changes to Cooling-Off Rule The FTC has completed its systematic review (http://ftc. gov/opa/2012/12/coolingoff.shtm) of the Cooling-Off Rule and determined that no changes to the rule are warranted except for potentially increasing the monetary threshold at which the rule applies. In making this determination, the FTC rejected several proposed changes to the rule that would have affected automobile dealers, including a proposal to expand the rule’s scope to apply to the sale of used
Massachusetts Auto Dealer www.msada.org
31 cars at a dealer’s premises. The Cooling-Off Rule requires sellers who are engaged in door-to-door sales of consumer goods or services, with a purchase price of $25 or more, to provide the buyer with certain oral and written disclosures regarding the buyer’s right to cancel the contract within three business days from the date of the transaction. Door-to-door sales include those made at a place other than the seller’s place of business; however, the Rule does not apply to “sellers of automobiles, vans, trucks or other motor vehicles sold at auctions, tent sales or other temporary places of business, provided that the seller is a seller of vehicles with a permanent place of business.” The FTC’s sole proposed change to the rule would increase the threshold at which the rule applies from $25 to $130 to account for inflation that has occurred since the FTC first issued the rule in 1972.
EPA Rules Uphold the Burning of Used Oil in Space Heaters On December 21, the EPA made clear that used oil space heaters often found in dealership service departments are not regulated by its new area source boiler rules. EPA also noted how its new rules apply to the used oil that dealerships sometimes ship off-site. Specifically: 1. On-spec used oil fuels are not regulated “wastes.” 2. Off-spec used oil fuels are regulated “wastes” unless destined for burners designed to burn coal. Bottom line, EPA’s new rules support the burning of used oil (including used oil collected from do-it-yourselfers, DIYs) in space heaters vented to the atmosphere and below 500,000 BTUs in size. Dealership used oil generally is on-spec. However dealerships that send used oil off-site for fuel processing should attempt to avoid contamination during storage and consider separately storing/shipping any DIY used oil collected. Dealerships must be willing to collect DIY used oil to be eligible for the federal used oil Superfund exemption. Questions on this matter can be directed to NADA Regulatory Affairs at (703) 821-7040 or regulatoryaffairs@nada.org.
FCC Allows Opt-Out Confirmation Texts The Federal Communication Commission (FCC) recently decided that sending a one-time text message confirming a consumer’s request for no further text messages to be sent does not violate the Telephone Consumer Protection Act or the FCC’s rules. This exception only applies to final, onetime text messages, sent to consumers from whom a sender has obtained prior, express consent to send automated text messages. The confirmation text must be sent within five minutes of the consumer’s opt-out request. The text message may include contact information or instructions as to how the consumer can opt back in, but cannot include any marketing or promotional information. NADA members
can find more on the FTC and FCC requirements regarding text messages at http://www.nada.org/regulatory_affairs under “Telemarketing Sales Rule.”
FTC Proposes Limited Changes to Used Car Rule The Federal Trade Commission (FTC) announced proposed changes to the FTC Used Car Rule “Buyers Guide” that dealers place on used cars they offer for sale. Consistent with comments filed by NADA, the FTC is proposing only limited changes to the rule, declining to include disclosures relating to vehicle history, prior use or title history, or to impose a dealer inspection requirement among the proposed changes. The FTC’s proposed rule includes: • Adding a statement to the Buyers Guide informing consumers that they can seek vehicle history information at an FTC Web site; • Adding a statement in Spanish to the Buyers Guide directing Spanish-speaking consumers to ask for a copy of the Buyers Guide in Spanish, if they desire; • Adding catalytic converters and airbags to the “List of Systems” on the back of the Buyers Guide; and • Placing boxes on the back of the Buyers Guide where dealers will have the option to indicate whether (1) the manufacturer’s warranty still applies, (2) the manufacturer’s used vehicle warranty – such as a manufacturer’s certified used car warranty – applies or (3) some other used vehicle warranty applies.
NADA Convention Offers 61 New Workshops for Dealers and Managers One of the main takeaways of the annual NADA Convention and Expo is attending the workshop sessions, which are presented by experts and professionals from across the auto industry. For 2013, there are 28 new instructors and 61 new workshops, sponsored by NADA University. “Dealers and managers who attend the convention workshops will walk away with solutions they can put into practice as soon as they return to their dealerships,” said Michelle Primm, chairwoman of NADA’s Dealership Operations Committee. “To deliver a wide variety of timely, relevant and profitbuilding workshop topics, we received input from many NADA and ATD directors who contributed their time during the selection process of the 2013 convention workshop topics and instructors.”
Used-Vehicle Prices Close Out 2012 on a Strong Note Despite ever-present fiscal cliff concerns, wholesale price movement in December closed out 2012 on a strong note as the average price for vehicles up to eight years in age ticked up by a slight 0.1 percent to remain essentially unchanged
www.msada.org
Massachusetts Auto Dealer JANUARY 2013
32
NADA Update from November’s level. While prices for all segments fell by a scant 0.7 percent or less compared to the prior month, prices for midsize cars, utilities and vans increased by a collective average of 0.5 percent. When December’s results are considered alongside the 2 to 2.5 percent fall in prices normally associated with the month, it’s evident that demand for used vehicles in general remains firm and that post-Sandy replacement demand is continuing to have a favorable influence on prices. NADA expects that Sandy’s influence on used prices will begin to wane as we move through January, and that the increase in prices normally associated with the end of the first quarter will be muted relative to what is typically seen. On a full-year basis per NADA’s Used Price Index, usedvehicle prices for vehicles up to eight years in age grew by 1.2 percent in 2012 compared to the prior year, and although the increase was well back of a 7.6 percent rise in 2011, it marked the fourth year in a row of used-price growth. For more information, visit www.nada.com/b2b.
Healthcare Reform, Dealership Workforce Study Workshops to be featured at 2013 Convention Four workshops on healthcare reform and a workshop on the new Dealership Workforce Study will be presented at the 2013 NADA-ATD Convention and Expo in Orlando. The NADA sessions — “Healthcare Reform and the Impact on the Dealership”— presented by principals from the top-10 accounting firm CliftonLarsonAllen, will be held on Friday, February 8 and Sunday, February 10. Friday’s session will be an overview, and Sunday’s will discuss the health insurance and penalty (HIP) calculator and the financial impact of healthcare reform on dealerships, including key provisions of the health reform bill, timeline for regulations, penalty provisions, health insurance exchanges and tax implications. In the ATD workshops, a panel from Shepherd Insurance & Financial Services, Inc. and American Bankers Insurance Association will present “Health Care 2013 New Taxes and Mandates: Now What?” on Saturday, February 9 and Sunday, February 10. The panel will explore today’s healthcare market, including the cost impact of healthcare reform and new taxes and compliance and coverage requirements. A focus will be cost management strategies through employee communication, wellness programs, creative plan designs and various funding structures. “NADA Workforce Study: How to Compete in Your Market” will be presented by Ted Kraybill of DeltaTrends and Tim Nash of Northwood University on Saturday, February 9, explores implications of the inaugural NADAATD Dealership Workforce Study, which premiered in 2012 and is already proving to be an indispensable resource for workforce management. This workshop will discuss the complex relationships among pay plans, benefits, work JANUARY 2013
schedules, paid time-off and productivity within the context of regional economies. Dealers will learn how to use this new information source to improve dealership profitability by fine-tuning compensation and benefit strategies, attracting new talent and improving employee retention. All NADA and ATD members are encouraged to participate in the 2013 Dealership Workforce Study, which will launch at the convention.
2012 Dealership Workforce Study Industry Report Now Available If you participated in the 2012 Dealership Workforce Study, your Basic Report and Industry Report are available in Resource Toolbox. Call NADA U Customer Service at (800) 557-6232 to activate your “Dealer” access level so you can use these valuable reports—and perhaps garner even more information through the Enhanced Report. Those who did not participate in the 2012 Dealership Workforce Study and whose access level is “Dealer” or GM/Exec may purchase the Industry Report. For assistance, call Customer Service at (800) 557-6232.
NADA ACADEMY 2013 Accepting Applications for New Classes The class start dates are: • DCA: Feb. 25, May 6, June 24, Sept. 9 and Oct. 14 • GDM: Feb. 18, May 20, June 10, Sept. 16 and Oct. 7 • ATD Truck Dealer Academy: March 4 and Oct. 21 Visit www.nada.org/nadauniversity/academy to download schedule and applications. Special Ops training programs allow department managers to attend individual weeks of the Academy. Hone skills specific to your needs in: • Financial Management • Parts • Service • Variable Ops I – digital marketing, inventory control, showroom traffic procedures, new- and used-car sales • Variable Ops II – pay plans; leasing; F&I; new- and usedcar sales; hiring, developing and retaining sales staff; expense controls; ROI Call (800) 557-6232 for dates and availability.
NADA 20 Groups Now Forming Did you know that the NADA 20 Group offers In-Dealership Consultations? A consultant will visit your dealership and personally help identify areas to increase profitability and control expenses. Call (800) 557-6232 Ext. 4 for more information. Join a NADA 20 Group and discover your profit potential! Groups are now forming for Acura, Kia, and Honda dealers. Call (800) 557-6232, Ext. 4 to apply for membership.
Massachusetts Auto Dealer www.msada.org
t
34
Sound Off
MSADA
Why Third-Party Websites Flourish Despite Dealer Frustrations
By Mark Ragsdale
I recently spoke with a large, volume-driven, Massachusetts dealer who said he was backing away from third-party websites. “It’s my inventory they’re using … The leads are junk … My brand is strong enough … We will have a shot at (those consumers) anyway.” Perhaps he is right. Who am I to argue? I’m no longer burdened with the stresses of running dealerships. My job is to study data, track trends, and indentify those opportunities begging for solutions. While the facts definitely support his frustrations, statistically speaking, dealer websites alone are not cutting the trending mustard. In a 4,005-buyer poll conducted by Polk and AutoTrader. com, 70 percent of all buyers shopped the Internet. 46 percent of all buyers found the Internet “extremely helpful” in making their purchase decision, significantly outpacing both traditional advertising and personal referrals. Forty-two percent of all used vehicle buyers and 35 percent of all new vehicle buyers claimed that the Internet was the “most influential” element in their decision-making process. “Well,” you say, “the dealer didn’t tell you he was ripping down his dealership’s website, did he?” True. But that was not the point of our conversation. The question was and is: Do dealers really need the expense and aggravation of thirdparty sites?
More Screen Time, Less Face Time In an AutoTrader.com independent telephone survey of 67,742 car buyers (conducted by KS&R of Syracuse, New York in August 2012), 58 percent of those polled said they visited just one or two dealerships before making their purchase. New car buyers spent an average of 11.5 hours conducting online research and just 7.5 hours offline, including visiting those one or two stores. Used car buyers, on average, invested 11 hours online and only 7 hours offline, including dealership visits. Two-thirds of them utilized third-party sites such as AutoTrader.com, Cars.com, and KBB.com. Why? New vehicle shoppers found vehicle comparison tools more important than pricing information. Used vehicle shoppers ranked pricing information just above vehicle comparison tools. Consequently, unless your dealership website allows consumers to compare different brands across a given market-segment, 46 percent of your market is surfing elsewhere.
Whatever brands emerge among the consumer’s top one or two choices drives where they go next. Unless yours are among the top two, you will never see or hear from the customer, even if there are no guarantees that you will be among the one or two stores she visits. The study showed that Internet shoppers were two-and-a-half times more likely to travel thirty miles or more to purchase than the 30 percent who don’t shop the Internet. Additionally, buyers named Google as the primary path to the website of the dealership from which they ultimately purchased. This means that attention to SEO and Ad words is a good idea. After navigating the cyber-gauntlet and finally picking a dealership or two to physically shop, 70 percent never contacted the store(s) prior to their visit.
Balancing Dealers’ Fiscal Needs with Consumers’ Cyber Needs I remember when dealerships avoided price discussions over the telephone and instead employed techniques designed to set an appointment. Today, many dealer websites cajole buyers into emailing the store for a quote, only to reply with the same old shtick: “Our inventory changes daily. Why don’t you come in?” Third-party sites do list sale prices but walk in lockstep with those dealers who fail to disclose their “20% down, cash or trade” requirements until the buyer shows up. You know the drill. Is there a third-party site out there that thwarts chicanery, charges no subscription or listing fees, alerts alternative-brand dealers when it’s appropriate to offer an alternative product, cans all references to “Invoice,” and doesn’t block dealer offers to consumers predicated upon dealer profit and loss? How about the ability to present an offer on any vehicle in stock that fits the buyer’s defined market segment, with a deep-dive comparison of standard features, benefits, trim, and equipment; information that might cause a buyer to pay you more or pick your brand over another? This is one opportunity that’s begging for a solution.
t Mark Ragsdale is a former dealer and currently VP of Business Development at Bizzlle LLC, a patent-pending online portal that alerts dealers when to present multiple, in-stock, delivered price offers to a buyer, free of charge and with no restrictions. mark@markragsdale.com
Do you have an opinion you want to share? Send submissions to tnash@msada.org.
JANUARY 2013
Massachusetts Auto Dealer www.msada.org
25 Braintree Hill Office Park Suite 102 • Braintree MA 02184 • Tel. 617.471.1120 • Fax 617.472.7560