April 2015 MSADA Auto Dealer by Massachusetts State Automobile Dealers Association, Inc

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

auto M a s s a c h u s e t t s

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

April 2015 • Vol. 27 No. 4

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

The Big Apple

Ma s s a c h u s e t t s

auto D

St a f f D ir e ct o ry Robert O’Koniewski, Esq. Executive Vice President rokoniewski@msada.org Jean Fabrizio Director of Administration jfabrizio@msada.org Peter Brennan, Esq. Staff Attorney pbrennan@msada.org Marta Argueta-Guerra Administrative Assistant/ Membership Coordinator mguerra@msada.org Aut o D e a l e r M Ag a z i n e Robert O’Koniewski, Esq. Executive Editor Catherine MacDonald Editorial Coordinator macdonaldcs8@gmail.com Subscriptions provided annually to Massachusetts member dealers. All address changes should be submitted to: MSADA by e-mail: mguerra@msada.org Postmaster: Send address change to: One McKinley Square, Sixth Floor Boston, MA 02109 Auto Dealer is published by the Massachusetts State Automobile Dealers Association, Inc. to provide information about the Bay State auto retail industry and news of MSADA and its membership.

Ad Directory Blum Shapiro, 21 The Boston Herald, 32 Ethos Group, 27 Lynnway Auto Auction, 20 Nancy Phillips Associates, 21 O’Connor & Drew, P.C., 31 Reynolds and Reynolds, 28 Southern Auto Auction, 22

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

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

4 6 9 10

From the President: Standing Tall Together THE ROUNDUP: When Will the Legislative Process Start? TROUBLESHOOTNG: Unclaimed Property LEGAL: Running Credit Reports: How To Keep Your Dealership Out of Trouble

12 AUTO OUTLOOK 14 ACCOUNTING: Trust But Verify: Is Your IT Staff Stealing from You? 15 DEALER SERVICES: Securing Dealerships Inside and Out 16 Cover Story: The Big Apple

20 25 26 29

NEWS From Around the Horn nada update: Bringing in the Chairman DEALER SERVICES: Game Plan NADA MARKET BEAT

ADVERTISING RATES Inquire for multiple-insertion discounts or full Media Kit. E-mail jfabrizio@msada.org Quarter Page: $450 Half Page: $700 Full Page: $1,400

Back Cover: $1,800 Inside Front: $1,700 Inside Back: $1,600

Join us on Twitter at @MassAutoDealers www.msada.org

Massachusetts Auto Dealer APRIL 2015

from the President

By Scott Dube, MSADA President

Standing Tall Together Gather with us in Boston For Camaraderie and a Show of Strength

it’s also a chance irst off, I want to acknowl“While all of us can’t be fighting the forOfuscourse, to get together and enjoy edge one last time the winter being in one place at one time. that has finally, maybe, left us good fight for our industry every The Mandarin, where we’ll behind. I want to congratulate day, we should celebrate this rare hold the Annual Meeting, is a everyone for getting through opportunity to all be together in the very impressive location, and what will hopefully be the will make a great setting where worst winter any of us live to same room.” we can talk shop and enjoy a see. As we leave April, maybe drink afterwards. We have also reserved a block of hotel rooms, it’s finally safe to put the snow shovel away for a while. so that hopefully you’ll take advantage of a night out in the Our business is built to expect the unexpected -- weather great city of Boston. wise or whatever else may come. As if it’s not difficult enough Please be sure that you have sent in your registration form if to manage the day-to-day of the retail auto industry, being in you haven’t already, noting whether or not you would like to our great Commonwealth certainly has its own unique chalspend the night. We are also providing a lunch as well. Please lenges. The Chinese curse “May you live in interesting times” send the forms back to jfabrizio@msada.org. is the best fit for the regulatory and legislative onslaught we I look forward to seeing you there for a day of camaraderie dealers face constantly. and getting ahead of the curve. After a few years now of getting And as I will always remind you, that’s why MSADA was the hang of how these events run, I am thrilled to see what ideas created all those years ago. As a member dealer, you know that we are working every day to combat the forces working against and questions you all will bring to the table. While all of us all of us. But as we’ve seen time and again, it’s important for can’t be fighting the good fight for our industry every day, we all of us to stay as plugged in to what’s going on as possible, should celebrate this rare opportunity to all be together in the so that when the time comes we can leverage our grassroots same room. We’re in this together, and there is no better way to strength of 20,000 employees across the state. be reminded of it. Our Annual Meeting on May 1 and Dealer Day on Beacon I also encourage any of you with the time and inclination to Hill on May 13 are meant to serve as a part of how we keep you join your colleagues at our Dealer Day on Beacon Hill on May informed. Both events serve the dual role of helping us keep 13. We’ll gather at the Parker House Hotel at 10 a.m., where we’ll our organization transparent and informing you of just what proceed to several appointments at the State House after a forum and an issues briefing. If you haven’t made a few calls or invited the landscape ahead will look like. At our Annual Meeting, your Representative in for a dealership visit this year, taking a few in addition to an update from Executive Vice President Robhours in one day will be a great way to make sure you’ve put the ert O’Koniewski, we’ll hear from Gov. Charlie Baker, NADA time in this year to making sure your voice is heard. Chairman Bill Fox, and industry experts who will lay out what they see coming in the days and months ahead. .t

APRIL 2015

Massachusetts Auto Dealer www.msada.org

MSADA

A ssociate M ember D irectory Name

Msada Board Barnstable County

Brad Tracy, Tracy Volkswagen

Berkshire County

Brian Bedard, Bedard Brothers Auto Sales

Bristol County

Richard Mastria, Mastria Auto Group

Essex County

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

Franklin County

Jay Dillon, Dillon Chevrolet

Hampden County

Jeb Balise, Balise Auto Group

Hampshire County

Bryan Burke, Burke Chevrolet

Middlesex County

Chris Connolly, Jr., Herb Connolly Motors Scott Dube, Bill Dube Hyundai Frank Hanenberger, MetroWest Subaru

Norfolk County

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

Plymouth County

Christine Alicandro, Marty’s Buick GMC Isuzu

Suffolk County

Robert Boch, Expressway Toyota

Worcester County

Steven Sewell, Westboro Mitsubishi Steve Salvadore, Salvadore Auto

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

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

NADA Director

Don Sudbay, Jr., Sudbay Motors

Officers

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

Contact Telephone

Albin, Randall & Bennett Barton D. Haag (207) 772-1981 American Fidelity Assurance Co. Lennox Cornwall (304) 702-7399 AutoAlert Don Corinna (505) 304-3040 Auto/Mate Dealership Systems Troy Potter (877) 340-2677 Bank 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) 561-4000 Boston Globe Mary Kelly, Tom Drislane (617) 929-8373 The Boston Business Advisory Group Paul Cuomo (781) 681-1501 Vincent Saccone (781) 681-1519 Burns & Levinson LLP Paul Marshall Harris (617) 345-3854 Cars.com Heidi Allen (312) 601-5376 CDK Global Chris Wong (847) 407-3187 Construction Management & Builders, Inc. Kate Sullivan (781) 246-9400 CVR John Alviggi (267) 419-3261 Dealerdocx Brad Bass (978) 766-9000 Dealermine Inc. Karen Parmenter (800) 304-3341 x5179 DealerTrack Ernest Lattimer (516) 547-2242 Downey & Company Paul McGovern (781) 849-3100 EasyCare New England Inc. Mike Douglas (770) 246-9724 Ethos Group, Inc. Drew Spring (617) 694-9761 F & I Resources Jason Bayko (508) 624-4344 Federated Insurance John Ballard (859) 312-9896 First Citizens Federal Credit Union Joe Ender (508) 979-4728 Fisher & Phillips LLP John Donovan (404) 240-4236 Joe Ambash (617) 532-9320 Gulf State Financial Services Cliff Lang (713) 580-3143 GW Marketing Services Gordon Wisbach (781) 899-8509 Huntington National Bank John J. Marchand (781) 326-0823 The Institute For Business Excellence Bill Napolitano (508) 643-2299 John W. Furrh Associates Inc. Kristin Perkins (508) 824-4939 KEEPS Corporation Darcy Silver (718) 309-6133 Key Bank James Q. Moretti (781) 558-5132, Mark Flibotte (617) 385-6232 KPA Mike Hurd (207) 400-6535 Leader Auto Resources, Inc. Chuck August (518) 364-8723 Lynnway Auto Auction Jim Lamb (781) 596-8500 M & T Bank John Federici (508) 699-3576 Management Developers, Inc. Dale Boch (617) 312-2100 MetalWave Mark Babcock (603) 686-4421 Micorp Dealer Services Frank Salkovitz (508) 832-9816 Mid-State Insurance Agency James Pietro (508) 791-5566 Mintz Levin Kurt Steinkrauss (617) 542-6000 Murtha Cullina Thomas Vangel (617) 457-4000 Nancy Phillips Associates, Inc. Nancy Phillips (603) 658-0004 Northeast Dealer Services, Jim Schaffer (781) 255-6399 O’Connor & Drew, P.C. Kevin Carnes (617) 471-1120 Performance Management Group, Inc. Mark Puccio (508) 393-1400 Quik Video Jack Gardner (617) 221-5502 R.L. Tennant Insurance Agency, Inc. Walter F. Tennant (617) 969-1300 Reflex Lighting Ping Weiner (617) 269-4510 Resources 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 Santander Richard Anderson (401) 432-0749 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 Solect Energy Development Kristen Brandt (781) 733-0223 Southern Auto Auction Tom Munson (860) 292-7500 Sprague Timothy Teevens (800) 828-9427 SunTrust Bank Michael Walsh (617) 345-6567 Taino Consulting Group Herby Duverné (617) 797-9316 Target Dealer Services Andrew Boli (508) 564-5050 TD Auto Finance BethAnn Durepo (603) 490-9615 TD Bank Michael M. Lefebvre (413) 748-8272 TrueCar Pat Watson (803) 360-6094 Wells Fargo Dealer Services Christopher Peck (508) 314-1283 Wicked Local Media Massachusetts Jay Pelland (508) 626-4334 Zurich American Insurance Company Steven Megee (774) 210-0092

www.msada.org

Massachusetts Auto Dealer APRIL 2015

The Roundup

When Will the Legislative Process Start? By Robert O’Koniewski, Esq. MSADA Executive Vice President Follow us on Twitter - @MassAutoDealers The intramural skirmishing between the Massachusetts House and Senate over the committee structure and process, which we have written about previously, has continued throughout the month of April with no clear resolution in sight, as we go to press, leading to a clampdown on the legislative process. Thousands of bills sit in limbo presently, as legislators, citizens, lobbyists, and interested parties sit by and wait to see how this dispute gets settled. The issue is a simple one – the joint committees, which have initial jurisdiction over 95% of the bills that are filed, consist of twice as many House members than Senators, leading to what the Senate considers to be an inordinate amount of legislative power in the hands of the House of Representatives, thereby causing the death, either prematurely or legitimately, of many Senate proposals. The perception by Senators that the process is skewed against them led to a proposed rule in which Senate members of a joint committee could move Senate bills into the Senate without the approval of the joint committee but by only a vote of the committee’s Senate members. The Senate passed this proposed rule 39-0 and sent its rules package on to the House for its vote. The House opposes such a rule, but, then again, House members on the joint committees have the power to overwhelm Senate members in any committee vote – a power the House does not wish to cede easily. A lack of consensus by the two chambers has led to a deadlocked conference committee and a stalled committee process – for now. How and when this gets resolved is anyone’s guess. In the meantime, your legislative team continues to meet with legislators in preparation of the public hearings starting up, educating House APRIL 2015

Massachusetts Auto Dealer www.msada.org

and Senate members on those issues important to our members, such as the need for and strength of the auto franchise system. Bills that legislators have filed for us to address certain of our issues include the following: • Senate 177, amending to our Chapter 93B dealer franchise law, filed by Sen. Marc Pacheco (DTaunton), referred to the Joint Committee on Consumer Protection and Professional Licensure; • Senate 1820, filed by Sen. Vinny deMacedo (RPlymouth), granting vehicle inspection licenses to franchise auto dealers, referred to the Joint Committee on Transportation; • Senate 493, filed by Sen. Eileen Donoghue (DLowell), and House 258, filed by Rep. Angelo Puppolo (D-Springfield), prohibiting certain OEM practices as they relate to service contracts, referred to separate committees – respectively, the Joint Committee on Financial Services and the Joint Committee on Consumer Protection and Professional Licensure; • House 3074, filed by Rep. John Rogers (D-Norwood), repealing the used vehicle record book (aka the police log), referred to the Joint Committee on Transportation; and • House 962, addressing the problem of lowest in the country insurance reimbursed labor rates for auto body repairs, filed by Rep. Joe Wagner (DChicopee), referred to the Joint Committee on Financial Services. Further, Rep. David Linsky (D-Natick) has refiled a bill to grant Tesla a carve-out, exempting them from the factory-store prohibition in our franchise law. We killed this bill last session, but Tesla has added more lobbyists in an effort to aggressively seek special treatment under current law. We will keep dealers informed as to the date of

MSADA the public hearings on these bills in order to mobilize our grassroots of dealers to contact legislators. Should you require any additional information on these items or wish to volunteer to get involved in the process, please do not hesitate to contact me. Finally, amidst all the publicly discussed angst regarding the procedural stall affecting the joint committees, the House Ways and Means Committee, chaired by Rep. Brian Dempsey (D-Haverhill), released its version of the FY2016 budget, which starts on July 1. The $38 billion fiscal plan contains no new taxes, which thus far is good news for taxpayers and small businesses. The full House will debate this budget proposal the week of April 27. The Senate will take up its own version of the FY16 budget in mid-May. Differences between the budgets will be hashed out in a conference committee, with resolution hopefully completed by the July 1 startup of the fiscal year.

Dealer Day on Beacon Hill – May 13 A vital component of our lobbying efforts and a great opportunity for dealers and their key managers to get involved in the legislative process, our annual “Dealer Day on Beacon Hill” will be held on Wednesday, May 13, in Boston. In the materials we sent out, we are asking our member dealers and their key employees to convene at the Parker House Hotel in Boston beginning at 10:00 a.m. in preparation of walking up to the State House to meet with their representatives and senators to discuss those issues in the automotive industry that dealers are presently confronting. We will have an issues briefing and a keynote address to get dealers in a proper frame of mind to provide legislators a dealer’s perspective on your economic footprint locally and throughout the state in the aggregate. For those dealers we know who will be attending, we will schedule your legislative appointments for you. It is extremely helpful to our lobbying efforts for legislators to see their constitu-

ents face to face and receive a perspective they don’t have in the normal course of their activities. No one knows your business better than you. That knowledge needs to be conveyed to your legislators in an environment and manner they understand, hence our Dealer Day on Beacon Hill. Please circle the date and plan on visiting Boston on May 13.

Save the Date: 75th Annual Meeting – May 1, Boston Your Association will conduct this year’s Annual Meeting on Friday, May 1, at the Mandarin Oriental Hotel in Boston. We have lined up a number of exciting industry speakers for the day, including: • Massachusetts Governor Charlie Baker • NADA Chairman Bill Fox • Industry trainer Jeff Cowan • Tom Worobec from Automotive News • Chris Hopson from IHS Automotive And more… Use the materials that have been sent to you via snail mail and e-mail to register for our event. The day begins at Noon with lunch, followed by our speakers program that commences at 1:00 p.m., and we will wrap up the day with a cocktail reception. We are providing complimentary hotel accommodations for our dealer members who request it, so don’t delay to sign up today.

FTC Crackdown on Dealership Fraud The Federal Trade Commission, on March 26, announced the results of a national crackdown, called Operation Ruse Control, conducted in conjunction with state and local law enforcement agencies, to protect consumers when purchasing or leasing a car, encompassing 252 enforcement actions in the areas of deceptive advertising, automobile loan application fraud, odometer fraud, deceptive add-on fees, and deceptive marketing of car title loans. This was the second major enforcement sweep in 14 months, the last one netting ten dealers for deceptive advertising in January 2014. www.msada.org

According to the FTC, since January 2014, federal, state, and local law enforcement agencies have collectively brought 187 enforcement actions in the United States and 65 enforcement actions in Canada against dealers (both licensed and unlicensed), dealer employees, service providers, auto lenders, auto title lending companies, auto loan modification companies, and others for a variety of civil and criminal charges. The charges include claims of deceptive advertising, automobile loan application fraud, odometer fraud, deceptive add-on fees, and deceptive marketing of car title loans. Here is a sampling of the details: • Vehicle Purchase Add-Ons: For the first time, the FTC has taken action involving add-ons, such as extended warranties, payment programs, GAP, credit life insurance, road service, theft protection, and undercoating. In one case, the FTC found that consumers were pitched an auto payment program that claimed consumers would save money, but failed to disclose that the significant fees charged for the service often cancelled out any actual savings. • Deceptive Advertising: Action was again taken against dealers whose ads touted sales, lease or financing options that seemed attractive, but were cancelled out by fine-print disclaimers. In another instance, disclaimers did not disclose relevant terms, such as required down payments. • Auto Loan Modification: According to the FTC’s complaint, defendants violated the FTC Act and Telemarketing Sales Rule by misrepresenting that they would obtain auto loan modifications for consumers and provide full refunds if they failed to do so. The defendants allegedly charged consumers up-front fees to negotiate an auto loan modification on their behalf, but then often provided nothing in return. We would like to draw special attention to a chart at https://www. ftc.gov/system/files/attachments/ press-releases/ftc-multiple-law-enforcement-partners-announce-crackMassachusetts Auto Dealer APRIL 2015

The Roundup down-deception-fraud-auto-salesfinancing/150326rusecontrolchart.pdf, which sets forth the state level actions.

MSADA

To help assist dealers, dealer attorneys, ad agencies, and others involved in dealer advertising in understanding the wide range of federal requirements that apply to dealer ads, NADA recently released its latest compliance publication entitled A Dealer Guide to Federal Advertising Requirements. This guide, which is available as a pdf at www.nada.org, contains examples of “bad” and “good” ads and includes short chapters on 41 federal advertising topics, such as the use of discount claims, email advertising, green marketing claims, internet advertising, satisfaction guarantees, and “trigger terms.” Readers can quickly access content on any topic by clicking on a hyperlink in the Table of Contents. It is important to note that, while the guide addresses numerous federal advertising requirements, it does not address additional advertising requirements that may be imposed at the state or local level, which vary considerably and must be addressed when dealer ads are reviewed for legal compliance. MSADA members can access Massachusetts-related advertising information, including our legal bulletins and the Attorney General’s advertising reguslations, at our website, www.msada.org.

amount is taxable income in the year it is earned. Dealers should be aware, however, that there are several mechanisms available to them that may be able to reduce the impact of the current tax obligation associated with factory image program payments. In a brief article entitled Tax Implications of Dealership Facility Image Upgrades, the dealer accounting firm Boyer Ritter outlines these mechanisms and provides an example of how applying them may help a dealer to preserve a manageable cash flow. Dealers are encouraged to share and discuss this article with their tax advisor. Dealers may recall, as discussed in MSADA Bulletin #27/2014 (5/22/2014), the Internal Revenue Service in April 2014 released guidance addressing the tax treatment of payments that dealerships receive from manufacturers pursuant to facility image programs with three different sets of features. In the guidance, the IRS Office of Chief Counsel concluded that the manufacturer payments under each of the three programs must be included in the dealership’s gross income. At that time we encouraged dealers who receive manufacturer facility image program payments to consult with their tax advisor concerning this guidance. The IRS Guidance is available at this link: http://images.magnetmail.net/images/clients/NADA/attach/Imaging_ CCA_0514.pdf

Tax Implications of OEM Imaging Programs

Ben Franklin Institute of Technology – Summer Interns

Many auto dealers renovate their facilities as the result of factory-mandated image programs. These programs typically involve factory financial assistance to participating dealers to offset a portion of their investment. Dealers often assume they can reduce the cost basis of this investment by the amount of factory assistance received and are surprised to learn that IRS issuances to date on the topic, although informal and disagreed with by some dealer tax advisors, state that this

Your Board of Directors continually explores initiatives to improve dealership operations. One such area of need that the Board has identified is the recruitment of properly educated and trained service repair technicians for our members’ dealerships. Recently the Board has been working with the Ben Franklin Institute of Technology (BFIT), located in downtown Boston, to explore steps designed to help develop a “farm club” of technicians for

NADA Federal Ad Rules Guide Book

APRIL 2015

Massachusetts Auto Dealer www.msada.org

our dealers. Founded in 1908, BFIT’s renowned Automotive Program is one of the oldest in the nation and provides training on state-of-the-art equipment underscored by a strong academic foundation. Toward this end, as an initial step in this process, we are partnering with BFIT to help launch a Summer Internship Program. We are very excited about this venture, as it will provide our dealers with the opportunity to tap into a large network of automotive students who are eager to gain hands-on work experience during the Summer. If you are interested in hosting a BFIT intern this Summer or want to learn more about the program, please contact Phyllis Molta, Director of Career Services and Industry Partnerships by email at pmolta@bfit.edu or by phone at (617) 588-1347.

MSADCF Auto Tech Scholarships Available Applications for the Massachusetts State Auto Dealers Charitable Foundation’s 2015-2016 Auto Tech Scholarships are now available on our website at www. msada.org. The Foundation’s auto tech scholarship program awards scholarships to eligible applicants for use at post-secondary educational institutions that offer auto tech training programs. Since its inception in 2003, the Foundation has awarded almost $1 million to more than 200 students. A scholarship award is worth $6,000-$13,000 each over two years. Six years ago the Foundation’s scholarship program expanded to include not just manufacturer-backed programs but also general automotive technology programs at a greater number of colleges in the Massachusetts area. This gives dealers an even greater chance to capitalize on a highly skilled base of potential employees. To obtain additional information on the scholarship program, contact Jean Fabrizio at MSADA at (617) 451-1051 or by e-mail at jfabrizio@msada.org. The application deadline is Friday, May 22, 2015. t

Troubleshooting

MSADA

Unclaimed Property By Peter Brennan, Esq.

MSADA Staff Attorney Every February, the Massachusetts treasurer’s office makes a splash in the media by listing some of the big names appearing on the state’s list of unclaimed property. This year’s list featured such notable and easily locatable names as David Ortiz, Tom Brady, and even Barack Obama. Treasurer Deborah Goldberg used the celebrity examples to encourage current and former Massachusetts residents to scan the unclaimed property list to see if their names appeared. When a spokesman for President Obama stated that the President would not be claiming his $312.46 refund from Comcast, the Treasurer’s office was not necessarily disappointed. This is because, if the property on the state unclaimed property list is not claimed within a certain time period, it can be liquidated through an auction or simply transferred to the state’s unclaimed property fund. Under the law, whenever the state’s unclaimed property fund reaches $500,000, anything in excess of the $500,000 is credited to the state’s General Fund. Once in the General Fund, the money can be spent on whatever lawmakers deem necessary. This process is known as escheatment, wherein property with no known claimants reverts to the state. Due to tight budgets and the promise of escheat dollars, many states around the country have been stepping up en-

forcement of their unclaimed property laws. While Massachusetts has not yet experienced such a crackdown, in fiscal year 2013 legislators were able to balance the budget with the help of $20M that was transferred from other funds into the aforementioned unclaimed property fund before finding its way to the General Fund. As the Legislature grapples with a deficit and tries to avoid cuts proposed by Governor Baker in his first budget, creative legislators will be leaving no stones unturned in their quest for revenue. Businesses must report and remit unclaimed property to the state in accordance with M.G.L. c. 200A, § 7 and 960 CMR 4.03. The Commonwealth’s unclaimed property law recently received an “A” ranking from the Council on State Taxation, a business-taxation trade association, due in part to the law’s clarity and the reasonableness of the statutes of limitation imposed on holders of unclaimed property. While the law may be one of the country’s best, it does contain several important provisions that can prove confusing in practice to business owners. The most common forms of unclaimed property that a dealership might come into possession of are the following: unclaimed payroll checks, uncollected customer rebates, uncashed checks, F&I product cancellations, accounts receivable credit balances, customer overpayments, credit balances, and buyer deposits that legally must be returned to the buyer. With a few exceptions, the dormancy period in Massachusetts for property (including all types listed above) expires after three years. To comply with Massachusetts law, a dealer must file a record for and remit to the unclaimed property division of the treasurer’s office all unclaimed property held by the dealership with an expired dormancy period as of June 30 of the reporting year. www.msada.org

Additionally, a due diligence notice must be sent by first-class mail to the last known address of every owner with property valued at $100 or more at least 60 days prior to the filing of reports with the unclaimed property division. Due diligence letters sent to owners of property presumed unclaimed pursuant to the law shall include, but not be limited to, the following information: (a) a description of the property, including account number, policy number or other identifying information; (b) a statement explaining that state law requires holders of unclaimed property to report and remit such property; and (c) the date that the property will be reported to the unclaimed property division if there is no owner contact. In the reporting year, the due diligence period for contacting potential claimants lasts from June 30, when the unclaimed property with an expired dormancy period is identified by the business, until September 1. Reports and remittance of unclaimed property to the state must be completed by November 1 of the reporting year. For additional information and to download the necessary unclaimed property reporting forms, please visit the unclaimed property division of the state treasurer’s office at the following: http://www.mass.gov/treasury/unclaimed-prop/. After the necessary reports have been filed, the dealership must retain all owner records and other submitted information for a period of six years from the date of remittance. t If you require any additional information regarding employee complaints or any other issue, please contact Robert O’Koniewski, MSADA Executive Vice President, rokoniewski@msada.org or Peter Brennan, MSADA Staff Attorney, pbrennan@msada.org or by phone at (617) 451-1051 Massachusetts Auto Dealer APRIL 2015

Legal

By Sara Decatur Judge and Paul Marshall Harris

Running Credit Reports: How To Keep Your Dealership Out of Trouble Scenario Let’s suppose that Jane Doe comes into your dealership and wants to obtain financing to purchase a vehicle. Your F&I person has Jane fill out an application for Bank X, which expressly gives Bank X permission to obtain her credit report. Bank X does so, but declines to extend credit. Your diligent F&I person then submits Jane’s credit application to Banks Y and Z, hoping to secure financing for Jane. However, Jane has not given any permission (written or verbal) for her credit application to be submitted to these additional banks. Unfortunately for Jane, Banks Y and Z also decline to extend credit to Jane. When Jane later reviews her credit report, which she is likely to do, after having been denied credit, she is surprised to see credit inquiries from Banks Y and Z. Jane is mad and thinks that these additional inquiries have hurt her credit score. She only gave permission for her credit report to be run by Bank X, not by Banks Y and Z. She accuses your dealership of a violation of the Fair Credit Reporting Act (FCRA). Now Jane is threatening to sue your dealership for violations under the FCRA and its state counterpart, the Massachusetts Fair Credit Reporting Act (MFCRA). The F&I person did not technically violate the law. Still, you have an angry potential customer and will have to contend with the ramifications of her anger. She may post her experience on social media and complain to other would be customers, instructing them not to purchase from you.

The Law and “Permissible Purpose” The FCRA and MFCRA regulate access to an individual’s “consumer report” (more commonly known as a “credit report”). Under both federal and state law, a dealer APRIL 2015

may gain access to an individual’s credit report only with the written consent of the individual, unless the credit report is to be used for certain “permissible purposes,” in which case written consent is not required. A dealer may not knowingly and willfully obtain a credit report under false pretenses, nor obtain a credit report for an impermissible purpose. If a dealer requests a report for a purpose not listed in FCRA, an injured consumer can recover the actual damages caused by negligent noncompliance, or both actual and punitive damages caused by willful noncompliance with the law. In our scenario here, the dealership has a “permissible purpose” to solicit credit information from the financing sources, because the dealership has a “legitimate business need for information in connection with a business transaction that is initiated by the customer.” Under FCRA, each financing source also has a “permissible purpose” to obtain a credit report, as the financing source is considered a “joint user” of the report with the dealership. The dealership did not need the consumer’s express written permission to submit Jane’s credit application to the additional banks, because it had a legitimate business need to get this loan secured on behalf of the customer who initiated the transaction. Massachusetts courts have not yet addressed this “permissible purpose” doctrine as applicable to dealers, but courts in other jurisdictions have directly dealt with this issue. In 2005, the federal District Court for the Northern District of Illinois addressed this issue in Stergiopoulos v. First Midwest Bancorp, Inc. In that case, the consumer argued that he only allowed the dealership to access his credit report and that did not give permission for any third party lender to access his report. The court disagreed. It held that:

Massachusetts Auto Dealer www.msada.org

• the consumer was aware that the dealership intended to assign the retail installment contract to a third party lender; • the bank was not required to have initiated the credit transaction with the consumer directly, so long as the bank is “engaged in a credit transaction in which the consumer is participating”; and • the dealer served as a broker to the transaction and therefore the bank had a permissible purpose to access credit because it intended to use the information “in connection with a credit transaction” involving the customer. Basically, once your customer sits down with F&I and fills out paperwork to purchase and secure a loan on a specific vehicle, you now have a “permissible purpose” to obtain a credit report. However, you are not allowed to run credit reports on any person who walks in the door on the grounds that they are shopping for a car. Care must be taken to determine whether the dealership has a “permissible purpose” to run the customer’s credit. “Permissible purpose” means that a dealer can access credit information “in those circumstances in which the consumer clearly understands that he or she is initiating the purchase or lease of a vehicle AND the seller has a legitimate business need for the consumer credit report.” A customer who simply asks a dealer about a vehicle or potential financing has not necessarily indicated an intent to purchase a specific vehicle. The customer could be just comparison shopping. In that situation, the dealer would need to obtain written permission before obtaining a copy of the credit score (which the dealer might want to do, if it needs the score to answer general questions about available financing.) Dealers should think of it like this: taking a “test drive” does not necessarily mean that a person will buy

MSADA the car. Likewise, general questions about financing do not automatically give a dealer a “legitimate business purpose” to run a credit score without written consent. Only where it is clear — both to the customer and to the dealer — that the customer is actually initiating the purchase or lease of a specific vehicle (and, in addition, the dealer has a legitimate business need for credit report information) may the dealer obtain a report without permission. If a customer is paying cash, the dealership would not have the “legitimate business need” to run the report. However, if the customer is paying by check, courts have found a legitimate business need to obtain the report. However, simply because a practice is legal does not mean that it is the “best practice” for a dealership with respect to customer relations. Obtaining express written permission from customers is a “best practice” for dealers from a customer relations standpoint. If you want to have better customer relations, we recommend that dealerships obtain written permission from all applicants to avoid customer confusion like the situation here, where the customer thinks something illegal was done (even if it was not illegal). Also, written permission removes the burden from the dealership having to later show it had “permissible purpose” to pull the credit score. Furthermore, dealers should be aware of an additional requirement under FCRA. FCRA provides that a dealer must tell its consumers the names and addresses of the financing sources to which it has sent the consumer’s application. This disclosure cannot be a general one that says “we sent your application to multiple institutions”, but rather the dealer must give the consumer the name and address of all institutions to which the application has been sent. We advise against the use of generic permission forms. Rather, dealers should use two separate forms for the customer to sign during the financing process. However, if a dealership fails

to do this, it is the financial institution, and not the dealer, that technically has a compliance problem under FCRA. To avoid this problem, many financial institutions now require dealerships to promise that they will properly make these disclosures to consumers when credit applications are submitted. This promissory language might even be hidden in the terms and conditions of your lending agreements with the financial institution. The first form is a permission form that gives the dealership permission to make application to multiple financial institutions. It lists all of the dealership’s potential financing sources. After the consumer signs this form, the dealership has written permission to submit applications to any of the financial institutions on the list, and the dealership no longer has to worry about whether its actions fall within a “permissible purpose” under FCRA. It is important that the dealership’s F&I department regularly reviews this form to make sure the list of financial institutions is up to date. Care should be taken with any customer who refuses to sign the form, as this may be a “red flag” that the customer may later raise a concern that your dealership has negatively impacted their credit rating by going to more than one financial source. The second form is an “after the fact” disclosure which identifies all of the financial institutions that actually received the consumer’s application. This second form satisfies the financial institutions’ requirement that all dealers disclose the name and address of all financial institutions to which a consumer’s application has been made. Thus, at the end of the process, the consumer receives a list of the names and addresses of all financial institutions which may have accessed the consumer’s credit report, thereby avoiding any surprises. By using these two disclosure forms (and giving copies to the consumer), dealerships can avoid any customer confusion as to which financial institutions accessed the consumer’s credit information. Introducing these forms during the

process builds trust with your customer. Compliance, obtaining permission from customers, and giving full disclosure of all financing sources helps avoid customer confusion, builds rapport and makes customers feel confident in their decision to purchase from you. Using these forms regularly and ensuring they are explained and signed by your customers is the best practice for complying with FCRA and MFCRA. Regular audits of your F&I department will further ensure compliance. If you have questions about FCRA compliance issues, or need advice about the drafting of new forms, please contact us. Sara Decatur Judge: sjudge@burnslev. com or (617) 345-3211; Paul Marshall Harris: pharris@burnslev.com or (617) 345-3854.

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Massachusetts Auto Dealer APRIL 2015

t Disclaimer: This article is not intended to provide specific legal advice in relation to any situation you or anyone else may have. The information contained in this article is not provided in the course of an attorneyclient relationship and is not intended to constitute legal advice.This article is not intended to be advertising and is not intended to constitute the solicitation of business or the practice of law by the author or Burns & Levinson LLP in any jurisdiction where they are not permitted to practice.

Attorneys Sara Decatur Judge and Paul Marshall Harris are partners in the Automotive Group at Burns & Levinson LLP in Boston, Massachusetts. For over 20 years they have been dedicated to advising and assisting motor vehicle dealers in all aspects of their evolving business.

They

assist with strategic

planning for dealerships, employment advice, pay plan compliance, consumer disputes, buy/ sell agreements, family business and estate planning, as well as intellectual property and trademark matters for dealerships.

AUTO OUTLOOK

APRIL 2015

Massachusetts Auto Dealer www.msada.org

MSADA

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Massachusetts Auto Dealer APRIL 2015

Accounting

MSADA

Trust But Verify: Is Your IT Staff Stealing from You? By Michael Hammond Joining

2012, Michael is the DiIT Audit Services at O’Connor & Drew, P.C. Michael has twenty years of extensive Information Technology expertise in various disciplines, including operations, control design, and testing. the firm in

rector of

In the digital age where the competitive advantage can come from strong technology, your IT infrastructure, more than ever, is one of the most critical components to growing and supporting your business. But how much do you really know about what it takes to run it and who you have entrusted to maintain it for you? If you are not a technology company, it is wise to leave the Information Technology to the experts, but it is still part of your business. Therefore, you need to ensure that you are managing it with every bit of rigor that you manage the rest of your business and understand the basics on how it should operate, the expenses, and operating costs. Just as there is financial fraud, there can be fraud in your IT environment as well. Some common IT fraud risks to consider: • Is your IT staff buying hardware or software and reselling it on auction sites? • Is your IT staff buying hardware or software and returning it to the vendor in the form of cash or credit? • Does your controller know the difference between a Cisco ASA 5505 and a Cisco ASA 5585? (By the way, the difference could be over $180,000!) APRIL 2015

• Have you recently purchased a large number of IT assets and thought to yourself, why do we need 25 MS CALs and just what do they actually do? • Is staff piggybacking on your technology resources for personal use? Are they buying an “extra” computer and taking it home? IT fraud risks are not restricted to IT staff as the perpetrators, even some computer savvy employees within your company can be stealing your assets: • Running personal or seedy websites from within your network. You may not notice the website being hosted from within your network, but maybe an unexplained slowness despite IT purchasing increasing levels of bandwidth. • Using your Internet connection to host their own email or file sharing server. Peer-to-Peer file sharing still exists and despite the cost of storage being cheaper than ever, it can cost you money. To compound the storage cost, they may even be using your network as the repository to house these illegal files. Another critical area of fraud in your IT environment relates to the security of your information. Secure asset disposition is critical to the protection of data at rest through the ends of its lifecycle. You rely on your IT staff to remove obsolete hardware, but are you retaining “death certificates” of the destroyed hard drives? Data that remains on those hard drives could contain confidential company information, or worse, Federal or state regulated personal sensitive information. Your IT staff may think that they are helping the company by saving a few dollars by not destroying the drives, and who doesn’t need a little more hard disk space at home, but this practice can cause serious harm to your organization. Finally, are you getting the service that you pay for from your IT vendors?

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• Businesses rely on the knowledge that an outside vendor brings to the table. But unless you are educated and knowledgeable about IT, how do you know if your vendor is charging you for the services that they did actually perform? • Implementing and fixing technology related portions of your business could often take longer than expected. Company management often expects software to perform correctly straight out of the box, but more often a custom configuration is needed to get the functionality that you desire. To achieve this, qualified IT professionals are hired and the hours can quickly add up, but are those hours realistic? Would you know how to verify an estimate? To mitigate IT fraud risk there are many layers of controls. The first is to allow your controller to obtain the training needed to accurately understand requests for IT purchases and how to reconcile purchase orders against invoices. The next best control point to reduce IT asset fraud is to capture a reasonably accurate IT asset inventory at the time of purchase. After the purchase, perform an audit of your IT assets, both hardware and software. Annually, reconcile the list of devices against purchase orders. There are automated asset management products on the market that can assist in performing this function, or consider a manual review yearly as part of your continuous IT monitoring program. Information Technology is a business enabler. Don’t let IT fraud diminish its value or your bottom line. t If you have any questions about IT fraud risk or IT security in general, feel free to contact O’Connor & Drew, P.C. at (617) 471-1120 or Michael Hammond at mhammond@ocd.com.

Security Services

MSADA

Securing Dealerships Inside and Out

Herby Duverné Principal & CEO of Taino Consulting Group Hduverne@TainoCG.com

Matthew Riley

Operations Manager at Taino Consulting Group MRiley@TainoCG.com

From open lots to showrooms, service areas, and other areas, automobile dealerships must be prepared for the possibilities of theft, vandalism, and fraud at any given moment. An easy way to think about security is thinking about security in three key sectors: people, property, assets. Each of these three sectors has unique security controls that can help lower the risk of security incidents, many of which could be implemented at low costs. Starting with “people,” an automobile dealership can benefit by properly training employees in general security policies and procedures and ensuring employees take individual responsibility for the security of the dealership. Examples of important security policies and procedures could be what to do in the event a fire or natural hazard, what to do in a shelter-in-place situation, or even how to properly manage and inventory keys stored on-site. Employee knowledge of what atypical behaviors and scenarios to look out for is usually the first line of defense in any

security program. Conducting annual or semi-annual training exercises has been an emerging security best practice as it can be accomplished for low costs with a high benefit. Much like the security culture cultivated by the United States Department of Homeland Security, implementing a “see something, say something” culture in employees can often be the first defense in preventing a potential security incident at the dealership. “Property” can be thought about in three levels: property perimeter, building perimeter, and office perimeter. Monitoring ingress and egress to the property is a key factor in securing the property perimeter and ensuring only authorized personnel and vehicles are moving on and off site. Also, conducting regular inspections of access control measures such as perimeter fencing and ensuring a well-lit perimeter is often a deterrent for wouldbe vandals or thieves. Keeping a wellmaintained landscape and creating or installing natural boundaries such as trees, rapid elevation changes, or large boulders can be a very effective method of ensuring perimeter control without creating an unwelcoming property appearance. Ensuring the building is secure and locked down during off-hours is critical to the overall security of the dealership. Regular inspections of the building perimeter should also be conducted to ensure there are no unauthorized gaps in the property perimeter. With the building perimeter, key things to keep in mind would be door, window, and roof access. Also, clearly marking the building with ‘no trespassing’ signage and installing proper lighting is often enough to deter a would-be vandal of thief. In the office perimeter, motion sensing systems should be utilized during offhours. Motion sensing cameras are often

an extremely effective security control, as key personnel or law enforcement could be notified if cameras or other security systems are triggered by atypical movement. During business hours, area management should be considered in order to keep customers and unauthorized personnel out of sensitive areas such as data centers, facility management areas, and key storage areas. Implementing a badging or visible ID system is also an effective security control, as it not only improves security but presents a certain level of professionalism and security culture in staff and management. “Assets” to a dealership can be thought of as the valuable commodities, intellectual property, and proprietary information at the core of the business. In the case of dealerships, these assets would mostly consist of automobile inventory, valuable parts stored on-site, and other miscellaneous items of value on the property. There are direct security measures that can be deployed at dealerships at no cost, such as block parking in showrooms, at the end of aisles, lot entrances, and around valuable vehicles. The purpose of block parking is to limit movement of stored vehicles on-site, and make it difficult to rapidly remove a high-valued vehicle from the property if a key was somehow obtained. Also, arming the alarm systems in cars can often be enough to deter a would-be vandal or thief. Much like the property perimeter, proper lighting and regular lot inspections are also extremely effective controls in protecting assets critical to business function. Overall, a dealership does not have to invest staggering amounts of money to ensure security at their facility. Usually the most effective measures are the most easily implemented. t

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Massachusetts Auto Dealer APRIL 2015

Cover Story

The Big Apple The next generation of auto techs heads to NYC to show their skills. By Catherine MacDonald

A fter a lifetime of passion

and three years

of training at Blackstone Valley Tech, Auto Tech seniors Jacob Bisson of Sutton and Bryce DeMers of Uxbridge are at the peak of their secondary education skills. The pair first proved it when they finished on top at the MSADA auto tech competition in February. The victory earned them an MSADA-sponsored trip to New York City to compete in the National Automotive Technology Competition, held during the New York International Auto Show at the Jacob Javits Center earlier this month.

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Massachusetts Auto Dealer www.msada.org

MSADA The team received technical assistance from Imperial Chevrolet — where Bisson works as a tech. That expertise on the vehicle the students had been assigned for the New York competition brought them a familiarity that instructor Derek Stienstra, a former Imperial Ford tech, said proved immensely helpful. “Imperial Cars is great,” Stienstra said. “They let us come in for any of our competitions and are very hospitable. They give us any bays we need, any vehicles we need, and any tools we need. Imperial has been awesome for that.”

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Massachusetts Auto Dealer APRIL 2015

The Big Apple

On the Sidelines After a train ride into midtown Manhattan, tools in tow, the team arrived at the Javits Center ready to tackle the first day of the competition, which consisted of a set of workstations where the 30 teams’ knowledge on everything from wheel alignment to job interviews would be evaluated. The competition took place alongside the New York International Auto Show, which featured hundreds of vehicles from every major manufacturer and several new model unveilings. The impressive surroundings didn’t phase the team, however. Working on the cars was the fun part. This was the day when knowing how to handle a tire balancer and the ins and outs of electrical systems would dominate the competition – it also counts for 60 percent of the final scores. Stienstra, who had worked with the students for months on preparing for the competition, could only stand by and watch as his students competed. Like most of the students here, he said, the first day of competition is the most stressful. “It kills me to only be able to APRIL 2015

Massachusetts Auto Dealer www.msada.org

just watch,” Stienstra added. “I want to be able to go up to them and ask them questions and see how they’re doing.” Stienstra takes a team approach to preparing its students for competitions. He chooses not to focus on an elite group but instead make the resources available to everyone. The formula has worked so far, but the instructor can sense his students’ nerves. “These competitions do not take away from any of the actual curriculum, so we do stuff on the students’ time,” Stienstra said. “Our program is pretty solid and our job is to get the information to them and guide them through the process. For a school like us, to win the state competition and be here is a win in itself.”

MSADA

MSADA Scholarships Help Meet Demand for Technicians The Final Challenge With scan tools set up and judges assigned, the teams worked for three hours to get their vehicles running in the second phase of the competition. While every manufacturer and most major brands were represented, the same bugs appear in each. The competition comes down to knowing the nuances of the car. For Bisson and DeMers, the competition came as a chance to show they could proceed calmly and follow procedure. As Stienstra watched students poring over readouts, he noted one of the lessons he had tried to impart was to not let frustration block progress. Ultimately, when the buzzer sounded the car had not started. “We were right there toward the end but just ran out of time,” Bisson said. “We got most of the bugs,” Bryce added. In a post-competition interview, the students said they felt good about how they performed, and that they’re ready for the road ahead of them as they graduate from Blackstone Valley in June. Bisson plans to attend MassBay Community College to study through their GM program, while DeMers is considering several options. Both will be competing at the national Ford AAA competition in June. Meanwhile, MSADA Executive Vice President Robert O’Koniewski said the team’s overall academic success is just one way the Association supports its next generation of auto techs. “We are very proud of these students,” O’Koniewski said. “They represent the best of what our young Massachusetts technicians have to offer. We need to continue to grow our involvement with the next generation through sponsoring this competition, our Foundation scholarship program, and working with MassBay, Ben Franklin, and other schools to help show students the opportunities at our dealerships.”

In 2003, the Massachusetts State Auto Dealers Charitable Foundation began its Automotive Technician Scholarship Program. The Foundation is the charitable arm of the Massachusetts State Automobile Dealers Association. More than 200 students have benefited from over $900,000 in scholarships. Massachusetts Bay Community College has been a long-time partner and has the most extensive partnership with the Foundation in the state. Students from colleges, including Benjamin Franklin Institute of Technology, Springfield Technical Community College, and Massasoit Community College, have also received scholarships from the Foundation. The Scholarship Program is competitive. A two-year scholarship ranges from $6,000 to $13,000 per year. Less than 10 percent of the students who apply are accepted. Students must maintain a 3.0 average in their tech courses, and they must have secured a co-op appointment in a Massachusetts new car dealer repair shop. A co-op is technically an internship and students are paid, offsetting the cost of tuition of the program at MassBay. The tuition for the automotive technician program is $16,000. Each year the MSADA sponsors a team to compete in a technician competition at the Auto Show in New York in April. The competition is fierce and some 400-500 competitors statewide apply to be part of it. The field of auto mechanics is changing dramatically. Today’s mechanic needs to know how to operate a keyboard as well as a stick shift. As cars with sophisticated onboard computers become the rule rather than the exception, the profession is becoming more white collar, and technicians now need to be computer- as well as mechanically-savvy. Auto mechanics are now called technicians, and for good reason. While they may still sometimes get their hands dirty, more often than not, they turn to computers to help them diagnose a problem and perhaps even give them the repair instructions. MassBay, part of the state’s community college system, is training this new breed of automotive technicians at its state-of-the-art automotive center in Ashland. MassBay’s Automotive Center is known for having one of the best programs in the Northeast. Its strong partnership with area dealers ensures that its students get to work and train on the latest models.

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Massachusetts Auto Dealer APRIL 2015

NEWS from Around the Horn from Around

NEWS the Horn

NORWELL

Ciccolo Invests $15 Million in New Dealerships Village Automotive Group will be opening two dealerships this summer – two firsts on the South Shore: the first free-standing Porsche and Audi dealerships. Owner Ray Ciccolo’s Porsche and Audi dealerships had been sharing a building in Norwell. Now, he is building new stores for each. The Porsche store is being built at 75 Pond Street in Norwell, and the Audi store is being built at the original location, 59 Pond Street in Norwell. The original dual-site was a total of 22,000 square feet, with 17,000 square feet occupied by Audi and 5,000 square feet occupied by Porsche. Now, Audi will be expanding to 33,000 square feet and Porsche to 15,000 square feet. The all-service, state-of-the-art stores will offer luxury amenities such as sleek new waiting lounges for customers, on-site car washes and prep centers, self-service cafés with complimentary beverages and snacks, and more. Both stores will significantly increase the number of service stalls and car showrooms as well. Ciccolo estimates the total cost of the two projects, includ-

APRIL 2015

Massachusetts Auto Dealer www.msada.org

ing each store’s new facility, furniture, fixtures and equipment to be over $15 million; Audi will exceed $10 million and Porsche about $5 million. He plans to hire more salespeople and technicians at each. Approximately 12 new positions will be created at Audi, in addition to his current 38 employees; eight new positions will be created at Porsche, in addition to the seven they currently employ. While Ciccolo aims to have the Porsche store opened by mid-

June and the Audi store opened by mid-July, construction is only at about 25 percent in terms of what needs to be done at both stores; he describes the process as arduous, due to Boston’s snow-heavy winter.

NEWS from Around the Horn

MSADA

HOLYOKE

Dealer Hopes to Convert Vacant Lot into New Showroom Longtime car dealer Gary Rome hopes to turn a vacant lot into a new dealership, but is facing local opposition. “The initial benefit would be taxes, because they need tax revenues,” Rome told ABC40. “I believe about 25 percent of the city is businesses, that went down dramatically to where it used to be. And a lot of that business is non-profit, so it doesn’t generate taxes.” The car dealership would generate millions of dollars in property tax revenue. It would also create 50 new full-time jobs. One proponent says she lived on Whitings Farms Road for 50 years and that the overgrown field has always been a waste. “You couldn’t walk your dogs, your children couldn’t play there. It seems to me that we are one of the poorest cities in the state. We need the revenue. And why not have someone who’s willing to help the local people?” Opponents of this project and other previous proposals for the site fear traffic will overwhelm the area. A spokesperson for Gary Rome told ABC 40 the hours that the dealership will be open won’t be late, and that traffic would not be excessive. WEST SPRINGFIELD

Bertera Subaru Cuts Big Check for Make-A-Wish Massachusetts and Rhode Island Bertera Subaru donated more than $39,000 to MakeA-Wish Massachusetts and Rhode Island late last month, $250 for every new car sold between November 20, 2014 and January 2 of this year. Charlotte Beattie, CEO of Make-A-Wish Massachusetts & Rhode Island, told 22News how this money will be used. “Through this gift, we are going to be able to grant at least seven, possibly eight children’s wishes in the next several months, which is just incredible.” According to information from the Centers for Disease Control and Prevention, about 500 children in Massachusetts and Rhode Island are diagnosed with a serious medical condition each year. Make-A-Wish Massachusetts & Rhode Island says it’s approaching wish No. 7,000. www.msada.org

Massachusetts Auto Dealer APRIL 2015

NEWS from Around the Horn SOMERVILLE

Herb Chambers Partners with the Jimmy Fund The Jimmy Fund and The Herb Chambers Companies announced a year-long campaign this month designating the industry-leading automotive family as an official partner of the Jimmy Fund. The campaign will support Boston’s Dana-Farber Cancer Institute through raising funds for adult and pediatric cancer care and research to improve the chances of survival for cancer patients around the world. New England’s largest auto retailer will partner with the Jimmy Fund through numerous community initiatives to increase fundraising and awareness, beginning with an initial gift of $225,000. “The partnership with The Herb Chambers Automotive Family is a triple play of benefits for the Jimmy Fund – funding, awareness, and direct consumer engagement,” said Suzanne Fountain, associate vice president and director of the Jimmy

APRIL 2015

Massachusetts Auto Dealer www.msada.org

Fund. “We are grateful for the support of Herb and his company in supporting our events and helping us raise vital funds for Dana-Farber Cancer Institute.” “We are privileged to partner with the Jimmy Fund, and we couldn’t have aligned ourselves with a more worthy cause,” said Herb Chambers. “Conquering cancer is a goal that we all share with the Jimmy Fund, and it is my hope that this partnership will afford our team members, clients, and community members an opportunity to contribute. This partnership exemplifies our longstanding commitment to support organizations that help make a positive impact on the communities in which we live and serve.” Additionally, to coincide with Jimmy Fund Awareness Month in August, The Herb Chambers Companies’ dealerships will accept financial contributions to the Jimmy Fund from customers and will match those gifts up to $225,000. Furthermore, The Herb Chambers Companies will contribute five Clear Channel billboards to the Jimmy Fund to assist in raising awareness.

MSADA

AWARDS SEASON CONTINUES FOR OUR DEALERS Volkswagen

Customer First Club for unparalleled customer satisfaction: Coastal Volkswagen, Hanover Colonial Volkswagen, Westborough Kelly Volkswagen, Danvers Paul Clark VW, Brockton Volkswagen Gallery, Norwood Volkswagen of North Attleboro Wellesley Volkswagen

Infiniti

MAZDA

President’s Club 2014 Award Winners: Liberty Mazda, Wakefield Mastria Mazda, Raynham Quirk Mazda, Quincy

Toyota

2014 Rent a Car National leadership Award: Expressway Toyota, Dorchester

Ford

Acura

Financial Services 2014 Council of Excellence Award Winners: Acura of Peabody

President’s Award: Bonnell Motors Imperial Ford Lamoureux Ford Quirk Ford Stoneham Ford Townsend Ford Watertown Ford

Honda

2015 Award of Excellence: Infiniti of Norwood

2014 President’s Award: Herb Chambers Honda of Burlington Herb Chambers Honda of Westborough Honda North (consecutive five-year winner)

Financial Services 2014 Council of Excellence Award Winners: Balise Honda, West Springfield Hyannis Honda Weymouth Honda

HARTFORD

Tesla Sales Bill Move Ahead in Connecticut A leader of the Connecticut legislature’s transportation committee says that Tesla Motors will be able to sell cars in Connecticut later this year. “The majority, like me, would love to see Tesla happen,” Antonio Guerrera, the committee’s co-chairman, told The Hartford Courant. “Tesla is not going to be killed.” Currently in Connecticut, all new cars have to be sold through dealerships owned by outside franchisees. Tesla, which manufactures the luxury electric cars in California, has showrooms in New

York and Massachusetts, but in Connecticut it only has a service garage. A bill in the Connecticut legislature would allow Tesla to sell directly to customers. However, exactly what the bill will look like is still being negotiated with lobbyists for the automobile dealers, who originally opposed direct sales. Fisker Automotive could also become included in the legislation. Guerrera said he has talked to the Connecticut Automobile Retailers Association, and, he said, “they haven’t come out and said ‘no’ yet” to including Fisker in the bill. He said CARA’s executives said they would have to talk to their members about whether they can accept direct sales from two companies. www.msada.org

Massachusetts Auto Dealer APRIL 2015

NEWS from Around the Horn

HOLYOKE

State Approves Grant for Marcotte Ford A state economic development panel approved tax incentives and other benefits for planned expansions at Marcotte Ford in Holyoke last month. The dealership will invest a total of $5 million on a two-phase project. The dealership plans to construct a 16,000-square-foot commercial truck repair facility at 933 Main Street, adjacent to their existing location at 1025 Main Street. Once the truck center is done, Marcotte plans to renovate the existing 27,000-square-foot showroom, rental department, and repair and parts shop to meet Ford’s design standards. Showroom upgrades include new access ramps, retaining walls, new lighting, paving, and display areas. Marcotte plans to create 12 net-new full time jobs and retain 114 full-time jobs. Holyoke supported Marcotte with fiveyear Tax Increment Financing Agreements with a total value of $204,751. The agreement for 1025 Main Street is valued at $72,384 and the agreement for 933 Main Street is valued at $132,367, according to the state.

MSADA

1.0-liter EcoBoost three-cylinder engine, a unit that has been named International Engine of the Year for an unprecedented three years in a row. Though its engine block is small enough to fit inside a commercial airplane’s overhead compartment, the 1.0-liter EcoBoost’s low-inertia turbocharger churns out nearly twice the maximum rpm of those found in modern Formula 1 racecar engines. Last fall, another segment-altering EcoBoost powerplant debuted in the redesigned 2015 Ford Mustang, producing 310 horsepower while netting up to 32 mpg on the highway as a 2.3-liter four-cylinder unit. “Though you’ll find an EcoBoost engine in everything from the Fiesta subcompact to the Expedition full-size SUV, the concept is always the same, and that’s doing more with less when it comes to performance,” said Jeff Klein, general sales manager of Thomas Ford in Beverly. “This EcoBoost evolution has probably been the most impactful in the pickup-truck market, where Ford has introduced a sustainable blueprint for the 21st century with its F-150.” NORWOOD

Billy Ray Cyrus Gives Boch Charity a Boost Billy Ray Cyrus, the “Achy Breaky Heart” heartbreaker and father of Miley, appeared in Norwood late last month to help Ernie Boch Jr. raise more than $250,000 for Music Drives Us.

BEVERLY

Ford Produces Five Millionth Vehicle to Feature an EcoBoost Engine Since the debut of the first EcoBoost engine on the Ford Taurus SHO in 2009, the line of responsive-yet-efficient powerplants has helped change the complexion of several vehicle segments. Earlier this month, Ford produced its five millionth EcoBoost-equipped vehicle at its Michigan Assembly Plant, signifying just how prevalent the engines have become in their roughly six years on the market. Fittingly, the five millionth model is a Ford Focus with a

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Massachusetts Auto Dealer www.msada.org

“He slayed it. The women were going crazy for him,” Boch told The Boston Herald. “He and his wife, Tish, stayed at my house for three days before they headed to New York. We had a grand old time.”

NADA Update

By Don Sudbay

Bringing in the Chairman Don Sudbay, President of Sudbay Automotive Group, represents MSADA members on the NADA Board of Directors. He welcomes your

questions

and

concerns

(donsudbayjr@sudbay.com). I hope that you are reading this message before our Annual Meeting on Friday, May 1, and that you will be joining us for a very informative and productive day. We are very fortunate to have our NADA Chairman, Bill Fox, address us. Bill has an extremely busy schedule, and we are honored to have him with us. The last time we had an NADA Chairman address us was in 2000, when Harold Wells joined us for a breakfast meeting. Bill will be available for Q&A, and I hope you will be able to take time out of your busy schedules to welcome him to Massachusetts.

New Study Outlines Best Practices to Improve Automotive Dealership Performance in the Digital Age U.S. new-car dealers have tremendous opportunities to expand their businesses and improve profitability, despite challenges to current retailing models, consultants from McKinsey & Company said at the 2015 National Automobile Dealers Association/J.D. Power Automotive Forum in New York City. During the Forum, McKinsey & Company’s Stefan Knupfer, a senior partner and 20-year veteran in the auto industry, and Robert Mathis, a partner within the firm’s Automotive & Assembly Practice, unveiled Fast Forward: How US Auto Dealers Can Drive Sustainable Economic Performance in the Digital Age, a new study that provides a strategic perspective on opportunities and challenges in the U.S. retail-auto sector. Among their key findings, McKinsey and NADA found that, if carmakers and dealers make the necessary investments to achieve operational excellence and streamline marketing expenses, dealer profitability, on average, could hit the levels of today’s top quartile performing dealers. These benefits could include increased returns on marketing investments and higher customer satisfaction. “A top industry priority should involve encouraging and creating high-performing auto dealerships,” says Knupfer. “Our research busts the myth that most of the factors that effectively drive dealer success, such as sufficient scale and brand strength, remain beyond the industry’s control. Instead, we discovered that internal operating practices dif-

ferentiate highly-profitable retailers from their peers today even more than in 2006 when NADA and McKinsey conducted a similar analysis.”

Buffett: The Dealer System Works Warren Buffett, chairman and CEO of Berkshire Hathaway, and Larry Van Tuyl, chairman of Berkshire Hathaway Automotive, discussed a variety of topics during the 2015 NADA/J.D. Power Automotive Forum in New York City. Speaking about his recent entry into the auto-retailing market, billionaire investor Warren Buffett said that consumers, manufacturers and auto dealers all benefit from the nation’s franchised dealer network. “The dealer system works well for the manufacturer. It works well for the dealer, and it works well for the consumer. It’s been around now for a very long time,” said Buffett, chairman and CEO of Berkshire Hathaway, at the NADA/ “The dealer system works well for the manufacturer. It works well for the dealer, and it works well for the consumer. It’s been around now for a very long time.” –Warren Buffett

J.D. Power Automotive Forum in New York. Earlier this year, Berkshire Hathaway acquired the Van Tuyl Group, the nation’s fifth largest private chain of car dealerships. “Usually when a distribution system becomes that firmly established, there’s a reason for it, and I just don’t see that changing,” Buffett said.

NADA: New-Car Sales on Pace for 17 Million Units in 2015 Improving economic conditions, new vehicles entering the marketplace and pent-up demand will continue to drive U.S. auto sales this year, says Steven Szakaly, chief economist of the National Automobile Dealers Association. “While economic growth faltered slightly in the first quarter, the outlook for the rest of 2015 is still strong,” said Szakaly at a press briefing before the NADA/J.D. Power Automotive Forum in New York City. With the first three months of the year in the books, U.S. new-car and light-truck sales are on pace with NADA’s forecast of 16.94 million vehicles, which would be a 3.1 percent increase from 2014. “We now expect first quarter GDP to grow by only 2.1percent, hurt by the west coast port strike, weather impacts and declining oil investments. Car sales will continue to outpace overall economic growth.”

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Dealer Services

Game Plan

By Rob Sneed Rob Sneed

is a development representative

Ethos Group Consulting Services and the author of various articles on the automotive industry. and motivator for

The most successful organizations, regardless of industry, have a well-designed game plan. Their leaders think through the end-game, envision likely challenges, and implement strategies in anticipation of what may come. They prepare for success and refuse to accept excuses for unpreparedness and disorganization. Recognizing the need for a detailed game plan may sound simple, but often times it requires that you embrace change. This change in perspective can be difficult, because it is easy to get attached to the way you have always done things. It is important to remember that what got you here may not get you there! To deal with the dynamics of an everchanging and growing business, you must have a game plan. It must be well-designed, adaptable, and align your organization’s day-to-day operations with your organization’s strategic initiatives, vision, and goals. Leaders must have the vision, sweat, persistence, and endless attention to detail to lead their organizations to victory. Take the time to begin with the end in mind, and you will experience success at a new level.

Eliminate the Excuse First, you need to address the number one reason that leaders fail to create a robust game plan for their people: TIME. Finding time to create a game plan is difficult because there will always be other APRIL 2015

interests competing for your time and attention. Yes, yesterday’s deals are still outstanding. Yes, today’s business will not get done without today’s focus. The reality is that planning will always yield a net gain of time. Always! If you want to speed up your growth, you have to reject the notion that there is no time to slow down.

The Four Priorities of a Visionary Game Plan Your game plan should outline your vision for your organization while acting as a roadmap for success. Your game plan should not be static, unchanging words on a page, but rather an adaptable tool that will accommodate to changing needs. The best strategic plans will focus on the four following priorities: 1. Developing Market Share. Increasing sales is all about taking better care of the people in your market. As customers are more satisfied with the way they buy, finance, maintain, and service their purchases, you will see business compound. In order to grow market share, you should outline a strategy for the marketing of vehicles through advertising, merchandizing of inventory on the lot, creating an exceptional buying experience, and completing the ownership in the service department. 2. Maximizing Revenue. There is nothing wrong with prioritizing profit! Consumers are willing to pay more when they get more. By aligning your organization’s game plan to deliver on customers’ wants and needs, you earn the right to ask for a premium for your services. 3. Expense Control. Making money is one thing, and keeping it is another. You must structure your organization’s game plan in a way that retains the earnings so that you can reinvest in your organization. 4. Customer Satisfaction. Satisfied customers are your best resource and should never be undervalued. You cannot compromise when it comes to creating a truly exceptional, world-class, and completely satisfactory experience that earns your customers loyalty!

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Tips for Maximizing the Momentum when Creating a Visionary Game Plan

Designing a game plan can be intense. In fact, game planning comes at the expense of two of your most precious resources: time and energy. If you intend on getting the maximum impact out of every effort (energy), then you must invest your resources in preparation (time). The alternative to preparation is to proceed without a plan. Doing so can result in an imbalanced, inefficient approach that may lead to disorder in your organization and compromise your mission. If you want your organization to experience growth, you have to commit to growing your business. That commitment to growth requires preparation and planning in order to achieve desired results and continued success. It starts by clearly defining your vision and creating an action-oriented game plan. Here are three things that you should embrace daily in order to make success happen: Ditch the Doubt: You have a vision for the organization that no one else does and a responsibility to cast that vision for the team and align the resources to make sure that vision becomes a reality. The success that will be enjoyed by many starts with you. Move forward with confidence! Commit to Change: Nothing truly great is accomplished comfortably. Change is often uncomfortable. If you want to experience greatness and reach the next level, you will probably have to get uncomfortable! However, if you commit to change, then you can overcome the discomfort that is part of the change process. Create Correct Habits: Often times, old habits prevent the realization of new opportunities. You do what you do because it is all you know to do. Create new habits by repeating the things that make daily success happen and eliminating the things that you know are less effective. Eventually those repetitions create a correct habit that will allow you to build unstoppable momentum. t

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Massachusetts Auto Dealer MARCH 2015

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

MARCH 2015

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NADA Market Beat

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Produced by Steven Szakaly, NADA Chief Economist With this issue we premiere the new Market Beat. While the look is different—with fewer words and bolder, more user-friendly graphics—all the major industry trends are here. Browse down to see the latest light-vehicle sales, as well as year-to-date market share for the OEMs, major vehicle segments and powertrain. Industry watchers, ourselves included, were pleasantly surprised by the jump in March auto sales to 17.05 million SAAR (seasonally adjusted annual rate). Clearly, pent-up demand needed to be unleashed after all the wicked weather in February. As for Q1

overall, the economy was clearly a bit rocky, with employment growth weakening substantially, but strong fundamentals persist: low interest rates, a solid housing market and strong sales. Add in lower fuel prices, and consumers are likely to continue buying pickups and crossovers. The only downside is that cars—even those in the luxury segment—continue to shed market share. The takeaway here: March was a good month, Q1 was decent for automotive and our forecast remains on track with its 2015 sales forecast of 16.94 million SAAR.

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NADA Market Beat

APRIL 2015

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