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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

July 2019 • Vol. 31 No. 7

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

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

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S ta f f D i r e c t o r y Robert O’Koniewski, Esq. Executive Vice President rokoniewski@msada.org Jean Fabrizio Director of Administration jfabrizio@msada.org Peter Brennan, Esq. Staff Attorney pbrennan@msada.org Auto Dealer MAgazine 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: jfabrizio@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, 22 NEAD Insurance Trust, 2 O’Connor & Drew, 32 Southern Auto Auction, 20 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

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

Table of Contents

4 5 6 10 11 12

From the President: Helping You Help Your Customers ASSOCIATE MEMBERS DIRECTORY THE ROUNDUP: Legislature Ramps Up Before Summer Break LEGISLATIVE SCORECARD TROUBLESHOOTING: New California Privacy Law – Coming to Massachusetts? AUTO OUTLOOK

16 Cover Story: Driving In Control

20 24 25 26 28 29 31

NEWS From Around the Horn LEGAL: Pros and Cons of Arbitration Agreements BUSINESS: High Finance nada Market Beat TRUCK CORNER: Register Today for ATD Show 2020 nada update: Heating Things Up ACCOUNTING: Always Ready For Change

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

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

Massachusetts Auto Dealer

JULY 2019

From the President

MSADA

MSADA: Helping You Help Your Customers Do not miss your chance to provide a potentially lifesaving service — for free

By Chris Connolly, MSADA President While the feverish media coverage of autonomous vehicles has dimmed a bit in the past year, there is no question that our vehicles are becoming “smarter” in how they take more and more control out of the hands of the driver. We dealers know, however, that drivers will be behind the steering wheel for a long time to come. And too often, our customers are letting technology in their vehicles lull them into a false sense of security or, worse, they are using their own handheld technology (phones) to distract them into an accident. There has never been a more important time to be a competent driver than now, as more vehicles are on the roads each day “There has with drivers who are potentially not looking never been a out for their own (or your) safety. Your Association is here to help. Through more important our recently reignited In Control partnership, time to be a we are offering our members the chance to a potentially life-saving opportunity competent provide for young drivers to learn driving skills that driver than will prepare them for the realities of the road. As someone who has taken advantage of now.” this program myself, I can say that there are many benefits both as a service to your community and as a customer relationship building tool. We are in the business of putting people in machines that they love, and we need to make sure that they are also keeping themselves safe. These are the kinds of concerns that we as dealers offer our neighbors that an operation such as Tesla will never think about. And that is exactly why our dealer franchise system should remain as the bedrock of the auto industry. As MSADA continues to work to ensure the public learns more about how the dealer franchise system works, customer engagement wins like this should be a no-brainer for our members. When we get bogged down in legislative battles, these are the kinds of details that help our legislators understand how vital we are to the community. Every lawmaker wants to have businesses that increase the safety and welfare of his or her district, and thanks to us, most of them do. For more details about this great program, check out this month’s cover story on page 16. More details about how to coordinate this great service is available on our website. If you have any questions about how to enroll, please email Executive Vice President Robert O’Koniewski at rokoniewski@msada.org. t

JULY 2019

Massachusetts Auto Dealer www.msada.org

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 Don Sudbay, Sudbay Motors

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 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 [Open]

NADA Director

Scott Dube, Bill Dube Hyundai

Officers

President, Chris Connolly, Jr. Vice President, Charles Tufankjian Treasurer, Jack Madden, Jr. Clerk, Steve Sewell

Associate Members MSADA A ssociate M ember D irectory ACV Auctions Will Morris (860) 670-7867 ADESA Jack Neshe (508) 626-7000 Albin, Randall & Bennett Barton D. Haag (207) 772-1981 American Fidelity Assurance Co. Dan Clements (616) 450-1871 American Tire Distributors Pamela LaFleur (774) 307-0707 Armatus Dealer Uplift Joe Jankowski (410) 391-5701 AutoAlert Jessica Gates (816) 506-0515 Auto Auction of New England Steven DeLuca (603) 437-5700 Auto/Mate Dealership Systems Troy Potter (877) 340-2677 Automotive Search Group Howard Weisberg (508) 620-6300 Bank of America Merrill Lynch Dan Duda and Nancy Price (781) 534-8543 Bernstein Shur PA Ned Sackman (603) 623-8700 Blum Shapiro John D. Spatcher (860) 561-4000 BMO Harris Bank Steve Gagnon (813) 447-1723 Boston Magazine Noreen Murray (617) 275-2012 Broadway Equipment Company Fred Bauer (860) 798-5869 Burns & Levinson LLP Paul Marshall Harris (617) 345-3854 Capital Automotive Real Estate Services Daniel Garces (703) 394-1313 CDK Global Chris Wong (847) 407-3187 Construction Management & Builders, Inc. Nicole Mitsakis (781) 246-9400 Cox Automotive Ernest Lattimer (516) 547-2242 CVR John Alviggi (267) 419-3261 Dealer Creative Jeff Hayes 919-719-1333 Dealerdocx Brad Bass (978) 766-9000 Dealermine Inc. Jane Webb (800) 304-3341 DealerSocket Shelly Del Rosario (949) 900-0300 Downey & Company Paul McGovern (781) 849-3100 DP Sales Distributors Andrew Prussack {631) 842-7549

Eastern Bank David Sawyer (617) 897-1125 Eastern Insurance Group William Gross (508) 620-3349 EasyCare New England Greg Gomer (617) 967-0303 Enterprise Rent-A-Car Timothy Allard (602) 818-3607 Ethos Group, Inc. Drew Spring (617) 694-9761 F & I Resources Jason Bayko (508) 624-4344 Federated Insurance Matt Johnson (606) 923-6350 First Citizens Federal Credit Union Joe Ender (508) 979-4728 Fisher Phillips LLP John Donovan (404) 240-4236 Joe Ambash (617) 532-9320 Gatehouse Auto Jay Pelland (508) 626-4334 Gulf State Financial Services Tom Foster (832) 628-1916 GW Marketing Services Gordon Wisbach (857) 404-0226 Hireology Kevin Baumgart (773) 220-6035 Hub International Insurance Brokerage Jim Walsh (603) 494-9016 Huntington National Bank John J. Marchand (781) 326-0823 JM&A Group Jose Ruiz (617) 259-0527 John W. Furrh Associates Inc. Kristin Perkins (508) 824-4939 JP Morgan Chase Bank Alex Khademi (404) 375-4504 Key Bank Mark Flibotte (617) 385-6232 KPA Tim Whelan (303) 802-3019 Leader Auto Resources, Inc. Curt Murray (978) 201-4797 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 McWalter Volunteer Benefits Group Shawn Allen (617) 483-0359 Mid-State Insurance Agency James Pietro (508) 791-5566 Mintz Levin Kurt Steinkrauss (617) 542-6000

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Murtha Cullina Thomas Vangel (617) 457-4000 Nancy Phillips Associates, Inc. Nancy Phillips (603) 658-0004 NEAD Insurance Trust Charles Muise (781) 706-6944 Northeast Dealer Services Jim Schaffer (781) 255-6399 O’Connor & Drew, P.C. Kevin Carnes (617) 471-1120 Performance Management Group, Inc. Dale Ducasse (508) 393-1400 Piper Consulting Jim Piper (207) 754-0789 Resources Management Group J. Gregory Hoffman (800) 761-4546 Reynolds & Reynolds Mike O’Connor (860) 462-7958 Robinson Donovan Madden & Barry, P.C. James F. Martin, Esq. (413) 732-2301 Rockland Trust Co. Manny Silva (781) 982-6806 Samet & Company John J. Czyzewski (617) 731-1222 Santander Bank Richard Anderson (401) 432-0749 Chris Peck (508) 314-1283 Schlossberg & Associates, LLC Michael O’Neil, Esq. (781) 848-5028 Service Credit Union Dave Pasternak (603) 812-8967 Shepherd & Goldstein CPA Ron Masiello (508) 757-3311 Southern Auto Auction Joe Derohanian (860) 292-7500 Sprague Energy Robert Savary (603) 430-7254 SunPower Christie McCarthy (408) 457-2357 Kristin Hodges (707) 694-7759 SunTrust Bank Michael Walsh (617) 345-6567 TD Auto Finance Marc Gerhart (781) 697-1525 TradeRev Amy Davis (617) 512-7033 TrueCar Pat Watson (803) 360-6094 US Bank Vincent Gaglia (716) 649-0581 Wells Fargo Dealer Services Josh Tobin (508) 951-8334 Windwalker Group Herby Duverne (617) 797-9316 Zurich American Insurance Company Steven Megee (774) 210-0092

Massachusetts Auto Dealer

JULY 2019

The Roundup

Legislature Ramps Up Before Summer Break By Robert O’Koniewski, Esq. MSADA Executive Vice President rokoniewski@msada.org Follow us on Twitter • @MassAutoDealers

Summertime and the living is (supposed to be) easy, but not if you are the Massachusetts General Court. The number one legislative priority for our elected representatives and senators each year is the creation and passage of an annual spending plan. As seems the case more times than not over the last 15 years, the House-Senate conference committee resolving differences between the two chambers’ competing budget plans for FY2020 went well beyond the July 1 start of the fiscal year and came up with an agreement on July 21 just as we were going to press. Besides being late by three weeks, the $43.1 billion FY20 budget inspired controversy – albeit limited to the ire of the fiscal watchdogs who pegged actual appropriations at $43.6 billion, not the amount reported by the Legislature – by raising spending $317 million more than either the House budget that was approved in April or the Senate budget passed in May. The bottom line is even about $400 million more than Governor Charlie Baker sought in January when he filed his FY20 spending proposal. The Legislature ultimately approved the conference committee report and sent to the governor for his review a budget for FY20 that increases spending by 4 percent over last year, or $1.6 billion. The next time some politician says, “We do not have the money to do [fill in the blank]”, try not to split your side laughing too much. They always manage to find it when they want it. Once the legislative shore leave ends, however, and all that new spending JULY 2019

Massachusetts Auto Dealer www.msada.org

needs to be replicated in future years, hide your wallet. While the collective General Court finally came to a resolution on this year’s budget, the standing committees were holding public hearings on bills they have before them, in time for the solons to break for their August vacation. Throughout the month your legislative team has been actively presenting our positions to legislators at public hearings and in private meetings. On July 15 the Joint Committee on Consumer Protection and Professional Licensure held a public hearing to take testimony on our proposed amendments to Chapter 93B, the motor vehicle franchise law (House 262, filed by Rep. Dan Hunt, D-Dorchester, and Senate 179, filed by Sen. Marc Pacheco, D-Taunton). MSADA President Chris Connolly of Herb Connolly Motors and I testified in favor of the bills. The manufacturers, naturally, opposed them. The issues being addressed by the 93B legislative proposals are the following: • Prohibit vehicle surcharges by manufacturers to pay for warranty reimbursement at the statutorily required retail rate; • Limit how often the manufacturer can request a facility upgrade; • Prohibit a manufacturer from requiring a dealer to purchase goods or services from a vendor selected, identified, or designated by a manufacturer or distributor by agreement, program, incentive provision, or otherwise without making available to the dealer the option to obtain the

MSADA goods or services of substantially similar quality from a vendor chosen by the dealer; • Protect dealer ’s customer data from OEMs and other third parties; • Prohibit an OEM from arbitrarily or unreasonably altering the geographic area of responsibility within which it measures the dealer’s performance; • Protect dealers from manufacturers’ using export chargebacks to penalize dealers for cars that get exported without dealer’s knowledge; • Prohibit manufacturers from placing a surcharge on the vehicle invoice as a means of recouping warranty reimbursement costs directly from dealers; • Clarify the current limit on the manufacturer ownership of dealerships and direct sales of vehicles by manufacturers; • Address various dealer and consumer related issues surrounding recalls, including compensation for parking cars while waiting for parts from the factories and the disclosure of open recalls to consumers; and • Prohibit a factory from competing with its franchised dealers by offering leases or subscription services for vehicles of the same line make as those sold by its franchised dealers. On that day, we also testified in favor of our legislative proposal to create an appeals process for class 1 licenses – Senate 172, filed by Sen. Patrick O’Connor (R-Weymouth), House 206, filed by Rep. Tackey Chan (D-Quincy), and House 234, filed by Rep. Michael Finn (D-West Springfield). To fill a void in current law, the bills would create a process for a party to appeal the alleged improper issuance of a class 1 franchised dealer license by a municipality to an alleged non-factory franchised entity. Finally, at the public hearing we opposed House 282, filed by Rep. David Linsky (D-Natick), which would allow a factory to bypass the current statutory factory-dealership prohibition and open a factory-owned store, without a dealer, if there is no same line-make dealer in the

state (the so-called Tesla Exemption). We have worked to kill this bill for the last three sessions; this year we are similarly committed to defat it. As the solons anticipate their Summer break for August, the Joint Committee on Financial Services, co-chaired by Rep. James Murphy (D-Weymouth) and Sen. James Welch (D-West Springfield), has not yet scheduled a hearing for six bills in which we have an interest: • Insurance Labor Rates Paid to Auto Body Repairers. House 3558, filed by Rep. Lou Kafka (D-Stoughton), and Senate 658, filed by Chairman Welch, would establish a process for setting insurance reimbursable labor rates paid to auto body repairers that is in line with the current economics of the industry in Massachusetts. The average rate presently paid by insurance companies to repairers is the lowest in the country. This bill is strongly supported by your Association and the auto body repair industry and strongly opposed by the auto insurance companies. • Motor Vehicle Service Contracts. In addition to creating a regulatory framework to oversee the sale and implementation of motor vehicle service contracts, these bills – Senate 576, filed by Sen. Diana DiZoglio (D-Methuen), and House 1087, filed by Rep. Angelo Puppolo (D-Springfield) – would prohibit the factories from requiring dealers to exclusively sell OEM-only extended service contracts or extended maintenance plans. The bills are opposed by the factories and their captive finance arms. • Diminished Value. Senate 629, filed by Sen. O’Connor, and House 960, filed by Rep. William Driscoll (D-Milton), would create an administrative process for vehicle owners to appeal to get diminished value of damaged vehicles returned to the vehicle owner. The bills are supported by your Association, but the auto insurance industry has strongly opposed similar legislation previously. And in the category of beating the EV www.msada.org

issue to death – as we wrote last month, the state will be ending on September 30 the five-year old program providing rebates to consumers purchasing zero-emission vehicles. On July 23, the Joint Committee on Telecommunications, Utilities and Energy held a public hearing on four bills that would statutorily create a ZEV rebates program with the intention of earmarking funds for it – House 2873, filed by Rep. Jonathan Hecht (D-Watertown), House 2875, filed by Rep. Brad Hill (R-Ipswich), House 2923, filed by Rep. Jeffrey Roy (D-Franklin), and Senate 1923, filed by Sen. Michael Barrett (D-Lexington). The next day, the House passed Speaker Robert DeLeo’s $1 billion (yes, billion with a B) GreenWorks legislation (House 3997) that would set aside $30,000,000 for the purpose of continuing the Massachusetts Offers Rebates for Electric Vehicles (MOR-EV) program, offering rebates in the range of $2,500-$5,000 for the purchase or lease of battery electric vehicles, fuel cell electric vehicles, and zero-emission vehicles with a retail price of not more than $40,000. The ball now moves to the Senate’s court. One cannot take this issue lightly, as the sales requirements our dealers and their franchisor factories face by 2025 will be here sooner than one thinks. Massachusetts is one of nine states – along with Connecticut, Maine, Maryland, New Jersey, New York, Oregon, Rhode Island, and Vermont – that have adopted the California emission standards, including rules regarding ZEVs. The franchisor manufacturers operating in these nine states, as a result of needing to comply with the regulations promulgated by the California Air Resources Board, are presently under the gun to meet the CARB standards for the ZEV mandate. This rule requires, beginning with Model Year 2018 vehicles, that up to five percent (5%) of all vehicles “sold” by a manufacturer be either battery electric vehicles (BEV) or plug-in hybrid electric vehicles (PHEV), with the state committed to having 300,000 EVs regisMassachusetts Auto Dealer

JULY 2019

The Roundup tered and on the road in Massachusetts by 2025. (EVs are presently around 2 percent of registrations each year here.) Our franchised dealers have been active participants in the state’s MOR-EV program, which supports customer purchases of ZEVs with a rebate of up to $1,500 per qualifying vehicle. Since January 2016, the Commonwealth has issued over 14,000 rebates, totaling over $30 million. Our member dealers have aggressively marketed and attempted to sell all ZEVs which their franchisor manufacturers deliver to them. (By “deliver to them” I mean “which the dealers must buy from their manufacturers pursuant to their franchise agreements.”) However, there are a number of barriers to ZEV sales, including, but not limited to, consumers facing higher prices for EVs with limited range when compared to the gasoline-fueled models, as well as a lack of investment in readily available charging infrastructure. Environmental groups have accused dealers of being apathetic, unknowledgeable, and unsophisticated salespeople of EVs. This is nothing but scapegoating, quite frankly. Dealers are highly motivated to sell each and every product on their lots, once they are delivered to them (once they buy them from the manufacturer), because dealers own these vehicles and incur substantial finance costs on each vehicle they hold in inventory until the vehicle is retailed. A major concern amongst franchised dealers and the dealer associations in these nine states is how the ZEVs get counted in order for the manufacturers to receive credit for a sale under the current regulations. The current CARB rules award credits when the manufacturer delivers vehicles for sale to a dealer, not when the vehicles are actually retailed and put on the street. Our association, collectively with the other state and metro associations representing franchised dealers in the aforementioned eight states above, have expressed our concern to CARB that, by awarding ZEV credits in this manner, the regulation removes the incentive for a manufacturer to deliver a vehicle to the market at a price and with equipment that JULY 2019

will sell. The manufacturers frequently pressure dealers to buy unpopular or slow-moving product in exchange for receiving more generous allocation of more popular products. In the matter concerning ZEVs, however, the environmental benefits intended with ZEVs cannot be achieved until or unless those vehicles are placed in service, which only occurs following a ZEV’s retail sale or as part of a fleet sale. As legislators contemplate statutory provisions designed to improve ZEV sales, there needs to be a comprehensive and cooperative approach that involves state and local governmental bodies, pertinent private entities who can assist with charging infrastructure commitments, the vehicle manufacturers, and the franchised dealers who carry the actual financial burden of retailing and servicing these vehicles once purchased from their franchisor manufacturers. Finally, as it relates to the CARB regulation regarding “delivered for sale”, as stated previously, we must operate under the CARB’s meaning that each respective manufacturer’s credit percentage is determined based upon the delivery of the vehicles to franchised dealers, not when the vehicles are actually sold at retail or as part of a fleet sale. MSADA and our sister associations in the other eight states firmly believe that the credit should accrue when the vehicle is titled, registered to a customer, and then driven over the curb. It is a significant concern of our member dealers that their franchisor manufacturers simply dump vehicles on dealers, forcing them to buy in amounts necessary for the manufacturers to meet the CARB obligations for “delivered for sale.” We have asked CARB to review this particular regulation. We will inform you of any adjustments CARB makes in the program, but I would not hold my breath waiting.

Sleepy’s Update As we have written extensively, our state’s highest court, the Supreme Judicial Court (SJC), issued a decision on May 8 in Sullivan v. Sleepy’s LLC that upended

Massachusetts Auto Dealer www.msada.org

the current treatment of compensation of 100% commission-paid employees. In that decision, the SJC concluded: • Draws and commissions cannot be retroactively allocated as hourly and overtime wages and Sunday pay, even if these draws and commissions equaled or exceeded the minimum wage for the employees’ first forty hours of work and one and one-half times the minimum wage for all hours worked over forty hours or on Sunday. • Employees are entitled to separate and additional payments of one and one-half times the minimum wage for every hour the employees worked over forty hours or on Sunday. This month, your Association briefed Governor Baker, Speaker DeLeo, and Senate President Karen Spilka on the issue and what it means to our members’ dealerships. Other affected industries have done similarly. If a legislative solution were to come about, these three leaders would be instrumental in effecting the fix. In the meantime, we have advised dealers to act immediately to review their operations and make the necessary adjustments: • As of now, it is imperative going forward that dealerships pay any 100% commission-paid employees $18 per hour, separate and apart from their commissions, for any time worked over 40 hours in a workweek or on Sundays. If you are paying a recoverable draw each week, make sure that draw covers at least the number of hours worked (up to 40) multiplied by the current minimum wage of $12 per hour. Do not use a draw to cover OT hours or Sunday pay. That said, the more conservative course, at this point, may be simply to pay, separate and apart from commissions, minimum wage for all hours up to 40 each week, issue a separate and additional check to cover payments of one and one-half times the minimum wage for every hour the employees worked over forty hours or on Sunday, assessing its effect on employee compensation and adjusting commis-

MSADA sion structures as necessary. (The Sunday pay issue is complicated by legislative error in last year’s Grand Bargain; without wasting time and space here explaining it, be sure to pay any Sunday hours worked at time and one-half.) • Dealerships need to do a complete review of their pay plans with competent counsel and beef up their in-house recordkeeping to avoid wage-hour liability moving forward: (1) require the keeping of accurate time cards at your stores and always require employees to record their hours worked; (2) monitor overtime hours worked and consider implementing an overtime approval process; and (3) always pay employees for all hours worked. Write clear, specific, detailed pay plans for each job position. Focus with clarity on the terms used in those plans (hourly rate, regular rate of pay, etc.). Prior to the Sleepy’s decision there were seven dealership-related cases in state court regarding the compensation of 100% commission-paid employees. Since that decision, as a direct result of plaintiffs’ attorneys soliciting dealership employees, including posting such solicitations throughout all social media sites, as of this writing there are at least 30 more dealership-related cases filed and eight others involving furniture retailers. This list will continue to grow unabated as the plaintiffs’ attorneys troll the ranks of current and former dealership employees to feed at the litigation trough. If dealers do anything this month, review your pay plans, make the necessary adjustments, and keep a closer eye on all hours worked so that prospective liabilities can be eliminated.

Save the Date: NADA Washington Conference – September 15-17 Each year NADA organizes its fly-in of dealers and state association executives from around the country in order to lobby Members of Congress on issues important to the franchised auto retail industry. Your Association brings a hardy group

of dealers to press the flesh and advocate for dealership issues with our nine House members and two Senators. This year’s event will occur on September 1517. NADA and your Association pick up the travel expenses of our member dealers to attend. If you are interested in being a part of our traveling delegation and seeing first-hand how Congress works (or does not work – that whole “We the People…” thing seems to be have been set aside down there), please email me at rokoniewski@msada.org and we will get you registered. Also feel free to contact me should have any questions. We look forward to hosting you for this event.

Save the Date: Dealer Hall of Fame Ceremony – October 2-4, Chatham In order to honor those who have been titans within our industry in Massachusetts, your Association will conduct its Second Annual Dealer Hall of Fame ceremony October 2-4 at the Chatham Bars Inn on Cape Cod. We will be sending out nomination materials by email and snail mail. If you know a dealer or dealers who should be recognized in our next Hall of Fame class, please submit the nomination form to us when you receive it. Criteria upon which dealers should base their nominations include, but are not limited to, the following: commitment to the industry and the Association; time in the business; community involvement; and overall positive impact on the industry. We are looking forward to our members’ input to help with the selection process.

MSADA Dealer Support Programs Re-Approved for 2019 – Are You Using Them? Since 2014 your Association has administered a program in which we subsidize the cost of certain compliance efforts dealers go through at their stores. Through this program, we have supported dealers’ use of Fisher Phillips for employment law services such as pay plans, employee handbooks, etc.; KPA, Furrh Associates, and Ethos Group (newly addwww.msada.org

ed in 2019) for OSHA and environmental compliance; and O’Connor & Drew for tax compliance and cybersecurity protection. Your Board of Directors voted at its December board meeting to continue these programs for 2019, with a vendor addition: Piper Consulting was added to the list of workplace/environmental services vendors. In addition to the compliance assistance, your Board voted to reauthorize the community outreach program for 2019, in which we are assisting dealers’ charitable efforts up to $1,500 annually. Directors made a change here, too: Beginning this year, each single/anchor store will be eligible for a $1,500 reimbursement, and each additional member affiliate store will be eligible for an additional $250 per store, with a cap of $2,000 total for a dealer group (anchor store + two affiliates). Do not hesitate to contact us regarding these programs so you do not lose out on these services supported by your Association.

Our PACs - NADAPAC & NCDPAC We appreciate the contributions we receive from our member dealers who answer our calls for donations to our PACs. Each year MSADA expresses itself politically through NADA’s federal PAC, NADAPAC, and through our state PAC, the New Car Dealers Political Action Committee (NCDPAC). We depend on contributions from our dealers to keep these PACs strong, as we need to have an active voice in Washington and on Beacon Hill. Contributions to our PACs are an inexpensive insurance policy. Since by law we cannot use our membership dues or other association revenues for political contributions, the PACs help us to remain strong politically as we advocate for our dealers’ interests in the political process. If you have not yet given to the PACs this year, please contact me at rokoniewski@msada.org, and we can make sure your contributions happen. Thank you. t Massachusetts Auto Dealer

JULY 2019

LEGAL

MSADA

By Joseph W. Ambash and Jeffrey A. Fritz

Pros and Cons of Arbitration Agreements

As many of you know, litigation can be very expensive. And class actions—which are more and more frequent, especially in the wage-and-hour context (such as the recent flurry of class actions filed against dealers in light of the unfortunate Sleepy’s decision)—can be even more costly. To manage the risks and costs associated with litigation, some employers require their employees to enter into arbitration agreements, frequently with class action waivers. This article generally describes these agreements and touches on the pros and cons of using them. What is an Arbitration Agreement? An arbitration agreement is an agreement between two or more parties to settle certain disputes outside of court and, instead, through private arbitration. Whereas trials take place in courtrooms, with judges and/ or juries deciding the issues, arbitrations usually take place in a conference room, with an arbitrator or a panel of arbitrators acting as judge and jury. Some employers require their employees to enter into arbitration agreements as a condition of employment. Others offer arbitration agreements to employees but allow them to opt out if they so choose. While arbitration agreements can (and, if enforceable, will) limit an employee’s ability to seek redress for alleged violations of law in court, they cannot (and will not) limit an employee’s ability to file claims with a governmental agency, such as the Massachusetts Commission Against Discrimination, the U.S. Equal Employment Opportunity Commission, and the National Labor Relations Board. But there can be limits to the role an employee can play in an administrative proceeding if he or she has agreed to arbitrate. What is a Class Action Waiver? Arbitration agreements can contain class action waivers. A class action waiver is a clause in the agreement through which an employee agrees to pursue any and all claims only on an individual basis, thereby precluding him or her from filing any class action lawsuit JULY 2019

against his or her employer, or joining in any class actions filed by other employees. Are They Enforceable? Generally, yes, so long as they are fair, drafted appropriately, and supported by adequate consideration. You can require new employees to sign arbitration agreements upon hire, as a condition of employment. For current employees in Massachusetts, you can condition continued employment on their signing an arbitration agreement but, if so, you have to be prepared to fire anyone who refuses. Alternatively, you can pay current employees some amount (say, $100) as consideration for their entering into an arbitration agreement. What are the Pros? One benefit to arbitration, obviously, is that it is a private proceeding, which means less chance of negative publicity for your dealership. Moreover, arbitration generally is less costly (although that is not necessarily the case), less formal, more streamlined, quicker, and less subject to appeal than litigation in court (of course, some of these “pros” can cut both ways). Furthermore, the parties get to choose (through an agreed-to process) the arbitrator(s) who will hear their case. Those arbitrators may have a certain expertise in employment law and generally are less swayed by emotion or bias than a jury (although sometimes they have a tendency to just “split the baby” in deciding cases). And, of course, the class action waiver can allow you to avoid costly class actions. What are the Cons? Individual arbitration is not without its potential disadvantages. Indeed, it is not necessarily less costly than litigation in court: While employers don’t pay courts or judges to hear their cases, they frequently foot the lion’s share of the filing fees and arbitrator fees, which can very expensive. And disputes can arise over the enforceability of the arbitration agreement itself, which can add (sometimes significant) legal expense (including evidentiary hearings and appeals on the issue). Moreover, while a chance ex-

Massachusetts Auto Dealer www.msada.org

ists in court of getting the case dismissed at several points in the litigation, that chance is significantly less in arbitration. Furthermore, depending on the case, sometimes an employer might prefer more formality, stricter adherence to evidentiary rules, and broader discovery, which are hallmarks of litigation in the courts. And finally, depending on a number of factors, sometimes class litigation may be preferable to and more efficient for employers, rather than having to litigate a number of individual arbitrations (with initial filing and case management fees alone, off the bat, of several thousand dollars). Sometimes, an employer may want to litigate the issue common to the “class” only once, with the settlement and/or trial putting it to bed once and for all, rather than have to litigate the issue tens or hundreds (or, for some employers, thousands) of times, in individual arbitrations. And with limited appeal rights, employers can be stuck with a rogue arbitrator’s unfavorable decision in any given matter. There is no one-size-fits-all answer as to whether arbitration agreements are appropriate for your dealership. If you are interested in exploring whether they are appropriate for yours, you should consult competent counsel to assist in that assessment and, if appropriate, in their drafting and implementation. t

Joe Ambash is the Managing Partner and Jeff Fritz is a partner at Fisher Phillips, LLP, a national labor and employment firm representing hundreds of dealerships in Massachusetts and nationally. They can be reached at (617) 722-0044.

Troubleshooting

MSADA

New Cal. Privacy Law – Coming to Mass.? By Peter Brennan, Esq. MSADA

Staff Attorney Perhaps you’ve spoken with a dealer in California or read in Automotive News about the new data privacy law that goes into effect in the Golden State on January 1, 2020. The California Consumer Privacy Act (CPPA), currently the broadest law of its kind in the country, is creating major headaches for businesses in that state and elsewhere. Consumer laws that start in California usually come to Massachusetts, and to nobody’s surprise a bill that might surpass the CPPA in its breadth will be considered by the General Court during the current legislative session. The CCPA was enacted in June 2018, following closely behind the European Union General Data Protection Regulation (GDPR) that went into effect the previous month. The California legislature’s stated goal in passing the CCPA was to give California residents greater control over the information that businesses collect about them. The law granted consumers new rights in several key areas. First, the bill grants consumers the right to request that a business disclose the following: (1) the types of personal information that it collects about the consumer; (2) the categories of sources from which that information is collected; (3) the business purposes for collecting or selling the information; and (4) the types of third parties with which the information is shared. Second, the CCPA also grants a consumer the right to request the deletion of his or her personal information. When

the law goes into effect, a business will have to delete that personal information upon receipt of a verified request from the consumer. A consumer may also opt out of the sale of their personal information, and businesses are prohibited from discriminating against the consumer for exercising this right. The law does authorize businesses to offer financial incentives to consumers for the collection of their personal information. Third, the CCPA creates a private right of action, so that consumers can file a lawsuit against companies that are alleged to have violated the law by failing to implement and maintain reasonable security practices. The law also voids a waiver of the consumer’s rights, rendering arbitration agreements unenforceable. The likely result of these provisions is a wave of class action lawsuits in California sometime in 2020. Unfortunately, the CCPA also includes a provision allowing for enforcement actions and civil penalties by the Attorney General. The Massachusetts bill, Senate 120, An Act Relative to Consumer Data Privacy, filed by Sen. Cynthia Creem (D-Newton), borrows very heavily from the CCPA but does have some key differences. Senate 120 applies to all for-profit businesses with an annual gross revenue of more than $10 million, lower than the CCPA threshold of $25 million. The Massachusetts legislation contains a broader private right of action, as compared to the CCPA, because it encompasses all violations of the law, while the CCPA private right of action is more limited. Additionally, Senate 120 does not include a provision contained in the CCPA that allows businesses a thirty-day grace period, after notification, to cure a violation before an enforcement action by the Attorney General may commence. The one saving grace of the Massachusetts legislation, compared to the California law, is that the law would not go into effect until January 1, 2023, which could provide a much longer lead-in period for www.msada.org

Massachusetts dealers to comply, depending on when, or if, it is passed. Senate 120 is currently before the Joint Committee on Consumer Protection and Professional Licensure, a committee that is no stranger to data privacy laws. During the last legislative session, the committee passed An Act Relative to Consumer Protection from Security Breaches, which updated the Massachusetts Data Breach Notification Law. After a long process, that law was finally enacted on January 10, 2019, several days after the expiration of the legislative session. With any luck, the committee can be convinced to delay action on additional consumer data privacy legislation for the duration of this legislative session. A hearing on Senate 120 has not yet been scheduled. To prepare for the implications of the California bill, experts have advised dealers doing business in the state to take inventory of all the data in their systems. With a multitude of vendors being used at every dealership, mapping the data that runs through the dealership is a tall task, and California dealers are now up against a short deadline. To make matters worse on the West Coast, even though the law has not gone into effect, progressive legislators out there have filed scores of amendments to make the law tougher on businesses. Your Association will be working to kill this dangerous bill; however, while the fate of Senate 120 is uncertain, it might be wise for dealers to begin this arduous data-mapping process for themselves. It is generally only a matter of time before what begins in California usually arrives on our shores. t If you have a question on this or any other legal topic, 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) 4511051. Massachusetts Auto Dealer

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AUTO OUTLOOK

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Massachusetts Auto Dealer

JULY 2019

AUTO OUTLOOK

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Massachusetts Auto Dealer

JULY 2019

RACE TO THE FINISH COVER STORY

Driving In CONTROL By Jeff Breeze

JULY 2019

Massachusetts Auto Dealer www.msada.org

fter taking this class and returning to your car, before turning on the engine, the first thing you might do is re-adjust your mirrors. People are so concerned with their blind spot, but focus their side mirrors so that what they see is the side of their own car. Some of the most important tips that you will learn at In Control’s secluded closed-course in North Andover are that simple, even if it is just about how essential it is to wear your seat belt. Not only is it a safety measure, but it keeps a body safely in place behind the wheel when you are in a dangerous situation, thus allowing you to keep better control of your vehicle. In Control is a driver’s training program that teaches around 2,000 students per year how to drive safely. Their 4½ hour program involves classroom lessons that are then applied directly as students get time behind the wheel to learn about how to use ABS braking, how to avoid distracted driving, and even proper distance to follow behind vehicles (not 50 feet, but instead three seconds). It is more than just a refresher course. This is what should have been learned in the first place, but no one else teaches this.

MSADA According to In Control Executive Director Dan Strollo, “The premise is that it is hands-on closed-course training. Students are going to be seated next to instructors who all have experience as racecar drivers. They are not there to promote racing, but they are people who can have their eyes closed and

know what someone has done wrong. They are experts in how a vehicle performs and the dynamics behind it.” MSADA has renewed a partnership with the group to help promote safe driving. Back in 2001, the program was known as Skid School, but it was a victim of the economy when the partnership stopped in 2009, after having over 1,500 participants. This time around, through MSADA, In Control has discounted the price, from the normal $350 to $270 and the Association is subsidizing another $261 to get it down to $99 for anybody that signs up through a participating dealer’s website. Plus, students can save between 5%-10% off their auto insurance for passing this program. (This is valid for most major carriers; In Control has an agreement with nearly 85% of the market in the Commonwealth.) “I was trying to think about ways that the Association could make the dealer members give back a little bit more to their community and make it easy for them to do it in a way that’s good for their customers, their customers’ children, and even their own kids if they want,” MSADA President Chris Connolly said. “We sell cars, we’re in the auto transportation business, so this is a great way to help promote safety.” As a term, Skid School didn’t inspire confidence, and, as In Control, the true nature and purpose of the program has a much more fitting title. As Strollo said, “One of the pieces of information that I picked up was that there were a lot of parents that

were intimidated by the term Skid School, and they just didn’t like the idea of bringing their kids to a program that they saw as encouraging skidding.” Connolly has not only used his own dealerships as the pilot for this endeavor, but he’s also been an active participant himself. “Both my daughters have done it, and I think it’s a terrific program. It saves lives and it gives the kids the experience that they need. When you look at the statistics of fatalities in the United States in automobile accidents, I think almost 50% involve someone under the age of 20. It’s a lack of experience and knowing how to avoid certain dangerous situations.” The crash rate for new drivers is in the 60%-75% range in the first two years of earning a driver’s license. Between infancy and 45 years old, with the exception of some spikes in opiate abuse recently, car crashes are the number one cause of death. It used to be that 15-18 year olds were the highest death rates for car crashes, but now that has shifted to ages 19-25. “Many kids are waiting until they are 18 to get their license, so they aren’t on the road in such numbers below the age of 18,” Strollo said. “They can also use Uber, and they aren’t motivated to get the license the same way. They don’t get as much driving in simply because they don’t have as many options. Heck, they aren’t even as motivated to go places; back in my day, if I wanted to see my friends I had to drive over to meet up somewhere. Now they can get on social media and not leave their house. It’s a different world, but it hasn’t ended up saving any lives unfortunately.” In Control’s goal is precisely that - to save as many lives as they can. Their m.o. is crash prevention. In Control Director of

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JULY 2019

RACE TO THE FINISH DRIVING IN CONTROL

Operations Jeremy Randal told a story of a caravan of kids who were in a major accident. The first vehicle was totaled with fatalities. “The driver of the second car was an In Control alumnus and escaped harm. The third car had a passenger in the back seat who had taken the class, and he yelled out to the driver what to do. Everyone in that vehicle walked away unscathed.” In Control is not a driver’s ed class. Instead, the program helps to teach you how to be safe on the road. While some of it is learning the importance of the small things that can make any experience behind the wheel as safe as possible, it is also the practical application that is vital. The only time most people ever get a chance to test their ABS system is when they are in a perilous situation; In Control teaches drivers not only how to slam on their brakes, but how to navigate around obstacles with that brake pressed to the floor. “This program is really based on a European model,” Strollo said. “If you grew up in the US, very few of us had such driver’s ed. Today the requirements in Massachusetts are 30 hours of classroom, 12 hours or driving, 6 hours of observation, and then your parents are expected to go to a two hour class that’s kind of an overview of what driver’s ed is. That’s how you get your license, and the cost is somewhere between $600-$900 depending on the community. If you were to get your license in Germany, you would pay over $6,000 and spend 3 or 4 times as much time behind the wheel of the vehicle. You’re going to be forced to do closed-course training similar to what we do, but probably 3 or 4 times the number of hours. Where it translates is in the driving test itself. Here in Massachusetts, you don’t see a driver’s test that lasts longer than 5 minutes for a new driver. I just had my daughter get her license back in January and her driving test was all of 3 minutes. I get it that you can fail someone in that amount of time, but I don’t think you can determine if someone is really a safe driver in that short a period of time.” Technology has improved the safety of vehicles involved in crashes. While the percentage of crashes that result in fatalities has dropped, the number of total crashes has increased, leaving the net result about the same. “While crumple zones, enhanced safety measures, and everyJULY 2019

Massachusetts Auto Dealer www.msada.org

thing that has been done to improve automotive technology is great, there are less fatalities per accident. But there are more accidents, because we just haven’t taught people to drive better. That is the premise behind what we’re trying to bring in,” Strollo said. “Everything is centered around crash prevention. We’re not looking at rules of the road. We’re not working on basic vehicle operation. This is about what sort of muscle memory experiences can we give you, what sort of instinctual reactions can we try to plant, and can we chisel away at invincibility. The reality is kids just make mistakes, and they think they are invincible.” One of the largest factors in accidents today is distracted driving. Everyone on the road has a phone, and when it rings or sends an alert, the natural reaction is to check it immediately. In Control’s driving test to show drivers their fallibility has the instructors hand you a calculator and try to type in a simple mathematical function. Getting even a single digit typed in before an emergency stop rarely happens. “A couple of the drills we do have to do with distracted driving,” Strollo said. “The research that we see today is that you pull up to a stop sign and too many people will be staring down at

their phone. What’s scary is that when you get to that stop light, you can be the most morally stable, responsible person around, but when you’re at that stoplight, and you heard that chime of a text or an email from work or whatever, the vast majority of people will pick up that phone. It’s rationalized by people thinking, ‘Well, I’m stopped; it’s OK to pick up the phone.’ The problem is that it takes you out of situational awareness. Inevitably the light is going to turn green again, and someone is going to honk at you. But now that you are out of that awareness, it takes 27 seconds before you are fully back in the game again. As a result we are seeing a ton more pedestrians and bicyclists being hit than we have ever seen before, simply because we are so distracted at the time of being stopped. People don’t even realize they’ve been in a distracted driving crash, because they put their

MSADA phone down 20 seconds ago and weren’t fully there.” While the majority of the students who take the class are new drivers, anyone who plans to spend time behind the wheel benefits from participating. Often, parents will take the class alongside their children. After seeing the benefits of putting their teens through the program, some parents have found the class to be good for themselves due to the chasm of change in what you are taught about vehicles since they were in driver’s ed and their deteriorating driving skills. “We had a guy who signed up his daughter and liked it so much he signed up his wife,” Connolly said. She came back and said, ‘I was taught to pump the brakes, and they told me not to; I didn’t know.’ Here’s a woman in her 50s who hadn’t ever thought about it before and only know was learning the right way to use her vehicle.” In Control teaches drivers what their vehicles are capable of, and how to react in emergency situations. It isn’t as though your dad is going to sneak you into a mall parking lot in the middle of the night to try these techniques. The only way to really know how is by actually doing, and not merely trying in an emergency when it is vital. While this is no longer Skid School, the wear on the tires is such that they need to be changed weekly. Connolly understands the importance of safe driving and has worked to promote the program. As well as being an advocate, he remains a participant, and knows the value of this course to any driver. “My son is 16½, and he has his permit,” Connolly said. “Before the summer’s out, and before he takes his driving test, we’ll be up there.” t

How To Participate

Driver safety is an issue that any dealership is concerned with. Joining MSADA’s In Control program for your local drivers is an easy thing to do to help make the streets in your community safer. While Andover may not be an easy trek for all potential students, In Control also has a facility in South Weymouth, as well as working at both at Barnes Airport in Westfield and Pease Airport in Portsmouth, NH. For those looking to become a partner with In Control, it is very easy to talk to Strollo and set up the program. HerbConnolly.com has their information on the front page of their website to show how easy it is for students in the Framingham area to sign up. It redirects to a page on In Control’s site that makes it easy for potential students: All they need to do is type in a discount code when they register. For any dealers looking to become part of the program, contact In Control Executive Director Dan Strollo at Dan@iDriveInControl.org or 617-826-9805

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JULY 2019

NEWS NEWS the NEWSfrom from Around Around the Horn Horn from Around

NEWS the Horn MSADA

DANVERS

Kelly Closes on Sundays Lately it seems as though the trend is for some dealerships to stay open longer and later in the name of customer convenience. Danvers’ Kelly Automotive Group is moving in the opposite direction to benefit its employees. On July 7, Kelly started closing its eight stores on Sundays to create a better work-life balance for its staff. It’s something the company has thought about doing for several years. The dealerships will stay open on the last Sunday of each month and during some important holiday weekends, but the change is a noteworthy gamble at a time when retailers are clawing for every sale in the market. Kelly Automotive, which sells Ford, Nissan, Infiniti, Honda, Volkswagen, and the FCA US stable of brands, says it typically has sold about 50 vehicles companywide on Sundays. While there is a concern that Sunday shoppers could head to nearby competitors who remain open, the group is willing to take the risk. COO Brian Heney believes the Sunday sales likely will shift

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MSADA

to Saturday or Monday. “Time will tell if it hurts our volume or has an effect on our overall profitability,” Heney said. “It’ll be better for our employees and company if we could close on the majority of Sundays throughout the year. Our pro list outnumbered the con list at this point in time. To people who aren’t in our industry, it would seem like it’s not such a big deal to close on Sundays because a lot of the world lives like that. In this business and retail environment to make this move, it’s monumental.” Massachusetts, like most states, has no law forcing dealerships to close on Sundays, and many stay open seven days a week as a result. Robert O’Koniewski, executive vice president of the Massachusetts State Automobile Dealers Association, said it’s up to dealers to make decisions based on numerous factors such as balancing the overhead costs and employee morale. “We’ve had strong blue laws forever here, going back to the Puritan days,” O’Koniewski said. “Then in the ’80s, there was a move afoot to start weakening the blue laws as it relates to stores being open on Sundays. Over the last 30 years, there have been

NEWS from Around the Horn

QUINCY

Summer Camp Renamed ‘Camp Quirk’ After $500,000 Gift The summer day camp run by the South Shore YMCA at Snug Harbor Elementary School will now be known as “Camp Quirk” in appreciation to Dan Quirk of Quirk Automotive for his $500,000 donation. South Shore YMCA executives said the gift will help them to better achieve their goal of bringing services and programs to help all children thrive and grow regardless of their family’s finances. “Kids who are unable to attend summer camp activities can fall behind their peers once school starts again in the fall,” said Paul Gorman, President and CEO of the South Shore YMCA. “Our goals at the Y are to ensure that we offer every kid access to camp, and that our camps are safe, fun, and engaging learning and recreational environments. Mr. Quirk’s gift helps the South Shore YMCA to extend financial assistance to more families in need, ensuring that more children in our community can enjoy the benefits of camp for years to come.” The South Shore YMCA was founded 127 years ago and has been providing summer camp services for the youth of the South Shore since it opened “Kamp Kwinzy” on Robbins Pond in East Bridgewater 100 years ago in 1919. Today, it offers summer day camp programs in Quincy, at Camp Gordon Clark at the Emilson YMCA in Hanover, and at the South Shore Natural Science Center in Norwell, as well as sleepnumerous laws passed to allow for various activities on Sundays.” Heney says the group can counteract any potential dip by improving performance in service, new cars, and used cars. If the group can maintain volume, Heney said the change would be better for the bottom line because expenses would be lower. “Our profitability might stay the same or better because you don’t have all of the expense that’s related to Sundays with timeand-a-half and all the stuff you have to do on a Sunday,” Heney said. “We can make more money and work less hours if we do it properly. That’s my goal for everybody. Make better decisions generally, and we will make more, and we will have happier people.” While stores will be closed on Sundays, the group will moni-

away camps for boys and girls at Camp Burgess and Hayward in Sandwich. “From our earliest days, summer camp has been a core component of our youth development mission,” Gorman said. “Camp serves many purposes, from basic childcare for working families to summer learning loss prevention, teen leadership development, and more. We are truly grateful that Mr. Quirk believes so strongly in supporting the healthy development of children. His transformative gift will have a major impact on thousands of children.” Quirk, the owner of a series of car dealerships bearing the Quirk brand, has been a leading philanthropist in the area for 40 years. He opened his first Chevy dealership in Braintree in 1977 and now owns and operates 15 dealerships in eastern Massachusetts and southern New Hampshire. “For decades now, Quirk Automotive and our family have been committed to giving South Shore residents the keys they need to move forward,” Quirk said. “We are proud to continue to support the South Shore YMCA in its focus on health and development of our area’s youth, especially through summer camp.” Quirk said he hopes his donation spurs more donations from other businessmen and entrepreneurs on the South Shore. tor online customer inquiries. The schedule shift also means staff members will have to make sure the stores are ready for Monday mornings before they leave on Saturdays. Heney hopes the last Sunday of each month will feel like a sales event. “I believe we set the tone,” he said. “If our mindset is that Saturdays and Mondays are going to be very busy and exciting, we’ll have a sense of urgency. Our people portray that to the customer and they feel it and it makes them react. If a store decides they’re going to keep doing things as they do it today, the numbers are going to go backwards, and the numbers will suffer. We can’t allow that to happen. I do think we’ll have a sense of urgency on Saturdays and Mondays more so than we have today.” www.msada.org

Massachusetts Auto Dealer

JULY 2019

NEWS from Around the Horn JAPAN

Toyota Tests New Solar Roof Toyota has begun testing a new solar roof for the Prius that it says can add as much as 27.5 miles of range to the plug-in hybrid a day. The solar cells, which are being manufactured by Sharp, are just 0.03mm thick, but deliver around 860 watts of power. They can even charge the car while it is being driven. Public road testing began in July, but there is no timeline for its integration into a commercial vehicle. Back in 2010, Toyota made solar panels available for its cars that could be used to recharge the car’s auxiliary battery (which powers secondary systems like the sat-nav and climate control). The new panels are much more efficient, capable of producing almost five times as much power as the previous model, and can provide over seven times the amount of range. The closest Toyota currently comes to producing a pure electric vehicle is the hydrogen-powered Mirai, so these solar roofs are destined for plug-in hybrids for the time being. Toyota has previously justified its decision to focus on hybrids by saying that, if it uses its battery production capacity to produce a larger amount of hybrids, then it will reduce carbon emissions more than if it produced a smaller amount of pure electric vehicles. However, in June it announced plans to produce an all-electric drivetrain platform in partnership with Subaru, indicating that an all-electric Toyota could arrive eventually. Considering the relatively minor power output you can get from putting solar panels on the roof of a car compared to the roof of a building, not to mention the challenges of doing so, it is not surprising that the idea has not really taken off yet. But there are a few companies experimenting with it. Most notably, the startup Lightyear plans to start delivering its “solar car” to customers in 2021, and Hyundai also announced plans to start installing solar roofs on select cars. DETROIT

How Old Are Your Wheels? The average age of cars and trucks in the U.S. has hit a record 11.8 years, as improved quality and technology allows people to keep them on the road longer. The 2019 figures from data provider IHS Markit show that the rate of increase is slowing, but the average age is still expected to go over 12 years early in the next decade. The average age is up 0.1 years from 2018. “People are feeling comfortable keeping vehicles longer because they’re built better than in the past,” said IHS Markit Director of Global Automotive Aftermarket Mark Seng. “The quality is higher, lasting longer, withstanding the weather. Plus, original owners are keeping their vehicles longer and maintaining them better because they’re financing them for longer, six or even seven years in many cases. That helps improve the overall life of the vehicle.” Western states have the oldest vehicles at 12.4 years, while in the Northeast the average age is only 10.9 years. That’s due largely to less stop-and-start traffic that wears on a vehicle. Weather conditions also play a part. Montana has the oldest average age at 16.6 years, while the youngest is Vermont, with an average age of 9.9 years. The number of light vehicles in use in the U.S. also hit a record of more than 278 million this year, according to IHS, which tracks vehicle registrations nationally. JULY 2019

Massachusetts Auto Dealer www.msada.org

MSADA BOSTON

PUEBLA, MEXICO

The Challenge of Getting 300K EVs on the Road by 2025

Last Beetle Comes Off the Production Line

The Commonwealth has a goal of having 300,000 zero-emission vehicles on the road by 2025, but many experts are wary that the numbers will add up. Sales are growing rapidly, but still occupy a small fraction of the pie, and the looming expiration of rebate incentives combined with concerns over vehicle costs and suitable infrastructure are likely to result in the state coming up short of its goal. Since 2011, approximately 22,000 zero-emission vehicles have been sold in Massachusetts, according to trade association lobby group Global Auto Makers. Zero-emission vehicles include pure battery-electric vehicles, plug-in hybrid electric vehicles and hydrogen fuel cell electric vehicles. But while it looks like electric vehicle adoption is rapidly on the rise - that same group found that from 2017 to 2018 Massachusetts saw a growth rate of 175% in zero-emission vehicle purchases - there are several factors that might hinder Massachusetts from hitting its goal. The state implemented the 300,000 goal because it is one of nine states that is part of the Zero Emission Vehicle Task Force. In 2013, eight state governors signed a memorandum of understanding committing themselves to implementing state programs that would result in at least 3.3 million new zero-emission vehicles being on the road by 2025. Those states included Massachusetts, California, Connecticut, Maryland, New York, Oregon, Rhode Island, and Vermont. In 2018, New Jersey signed on as well. The task force’s goal is to reduce the nation’s reliance on fossil fuels. One reason the state might miss the target, however, is that its electric vehicle rebate program is ending, said Robert O’Koniewski, executive vice president and general counsel for the Massachusetts State Automobile Dealers Association. Baker administration officials cited “accelerated demand” for rebates, in connection with an uptick in electric vehicle sales, and said proposed budget amendments that the administration supported to provide more funding for the five-year-old program failed during House and Senate deliberations in April and May. In Washington, there is also debate among officials and lobbying groups about modifying or ending a program that offer a tax credit to electric car buyers. With shoppers taking those programs into strong consideration when looking to buy an electric vehicle - which still generally tend to be more expensive - the demise of those rebates could be bad news for future electric car sales. “When you look at states that offer some sort of money to consumers to buy these vehicles, that’s a big factor in consumers’ decision-making,” O’Koniewski said. “When you look at places where the money has run out, sales have dropped considerably.” As an example, he pointed to China, which cut its electric car subsidies in March and is seeing a rapid decline in electric vehicle sales.

On July 10, Volkswagen rolled the last Beetle off the assembly line, the end of the road for a car that ran from its start during the Nazi Germany years through hippie counterculture but failed to navigate a swerve in consumer tastes toward crossovers and SUVs. Serenaded by a mariachi band and surrounded by proud factory workers, the final batch of the retro, rounded compact was cele-

brated at a VW plant in Mexico’s central Puebla state more than 80 years after the model was introduced in Germany. The Puebla factory, which already produces VW’s Tiguan crossover, will make the Tarek crossover in place of the Beetle starting in late 2020, Volkswagen de Mexico CEO Steffen Reiche said. The bigger vehicles are more popular in the United States, the main export market for the Mexico factory. The batch of last Beetles will be sold on Amazon.com in a move symbolizing the company’s embrace of the future, Reiche said. Volkswagen said the final Beetle produced at the plant -- a Denim Blue coupe -- will go on display at the company’s local museum in Puebla. “Today is the last day. It has been very emotional,” Reiche said. The Mexico plant has assembled the Beetle -- dropped and later revived in the U.S. -- since 1997. The “Bug,” as the Beetle was nicknamed, debuted in 1938 as an affordable vehicle commissioned by Adolf Hitler to promote car ownership among Germans. With its funky design and inexpensive price, the car became a success story over subsequent decades and was one of the top-selling models of all time as well as the best-selling import in the United States in the 1960s, according to auto publications. In the 1960s, the Beetle was a small-is-beautiful icon of the postwar Baby Boom generation. The 1968 movie “The Love Bug,” which featured a zany anthropomorphic vehicle, stoked Beetle fever. Despite its place in popular culture, sales of the Beetle have been lackluster in recent years. The German automaker announced last September that the Beetle would go extinct. t www.msada.org

Massachusetts Auto Dealer

JULY 2019

MSADA

LEGAL By Joseph W. Ambash and Jeffrey A. Fritz

Pros and Cons of Arbitration Agreements

As many of you know, litigation can be very expensive. And class actions—which are more and more frequent, especially in the wage-and-hour context (such as the recent flurry of class actions filed against dealers in light of the unfortunate Sleepy’s decision)—can be even more costly. To manage the risks and costs associated with litigation, some employers require their employees to enter into arbitration agreements, frequently with class action waivers. This article generally describes these agreements and touches on the pros and cons of using them. What is an Arbitration Agreement? An arbitration agreement is an agreement between two or more parties to settle certain disputes outside of court and, instead, through private arbitration. Whereas trials take place in courtrooms, with judges and/or juries deciding the issues, arbitrations usually take place in a conference room, with an arbitrator or a panel of arbitrators acting as judge and jury. Some employers require their employees to enter into arbitration agreements as a condition of employment. Others offer arbitration agreements to employees but allow them to opt out if they so choose. While arbitration agreements can (and, if enforceable, will) limit an employee’s ability to seek redress for alleged violations of law in court, they cannot (and will not) limit an employee’s ability to file claims with a governmental agency, such as the Massachusetts Commission Against Discrimination, the U.S. Equal Employment Opportunity Commission, and the National Labor Relations Board. But there can be limits to the role an employee can play in an administrative proceeding if he or she has agreed to arbitrate. What is a Class Action Waiver? Arbitration agreements can contain class action waivers. A class action waiver is a clause in the agreement through which an employee agrees to pursue any and all claims only on an individual basis, thereby precluding him or her from filing any class action lawsuit JULY 2019

against his or her employer, or joining in any class actions filed by other employees. Are They Enforceable? Generally, yes, so long as they are fair, drafted appropriately, and supported by adequate consideration. You can require new employees to sign arbitration agreements upon hire, as a condition of employment. For current employees in Massachusetts, you can condition continued employment on their signing an arbitration agreement but, if so, you have to be prepared to fire anyone who refuses. Alternatively, you can pay current employees some amount (say, $100) as consideration for their entering into an arbitration agreement. What are the Pros? One benefit to arbitration, obviously, is that it is a private proceeding, which means less chance of negative publicity for your dealership. Moreover, arbitration generally is less costly (although that is not necessarily the case), less formal, more streamlined, quicker, and less subject to appeal than litigation in court (of course, some of these “pros” can cut both ways). Furthermore, the parties get to choose (through an agreed-to process) the arbitrator(s) who will hear their case. Those arbitrators may have a certain expertise in employment law and generally are less swayed by emotion or bias than a jury (although sometimes they have a tendency to just “split the baby” in deciding cases). And, of course, the class action waiver can allow you to avoid costly class actions. What are the Cons? Individual arbitration is not without its potential disadvantages. Indeed, it is not necessarily less costly than litigation in court: While employers do not pay courts or judges to hear their cases, they frequently foot the lion’s share of the filing fees and arbitrator fees, which can very expensive. And disputes can arise over the enforceability of the arbitration agreement itself, which can add (sometimes significant) legal expense (including evidentiary hearings and appeals on the issue). Moreover, while a chance ex-

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BUSINESS

MSADA

High Finance By Mark Dow

Principal, CPA, MST O’Connor & Drew, P.C.

In all likelihood, the long and prosperous business cycle will trail off in the near future. Some automotive economists and prognosticators would tell you that it has already begun. For automobile dealers, a slow-down does not have to include a drastic decrease in profits or loss of working capital. You can thrive during time periods when vehicle sales are not as robust as the recent past. Industrywide, 2012-2014 were very good years for dealers, even though new vehicle sales volume was lower than it is today! The playbook for success is not that big of a secret. Consistently executing the plays is where the challenge lies.

Business Basics Staffing: The right people make all the difference. Proper training and management oversight are critical in order to match your expectations with results. Investing in strong department managers can make a big difference. They can help drive gross profit, which allows the staff to reach their earning potential and not look for employment elsewhere. Forecasting: Preparing a budget is usually not the hard part; it is what you do when a line-item has a significant variance that is key. When the numbers are “way off,” action is required, or the budget process loses meaning. A review of financial statements from 4-5 years ago may be helpful. Identify certain expense items that have increased significantly. While there are some you cannot completely control (i.e. floorplan interest), there are others that cannot be justified (think of all those soft-

ware products and lead generators). Technology: The benefits of technology can be a reduction in cost, an uptick in efficiencies, and a boost in sales through use of the internet. The difficulty lies in the proper use of the available tools; all businesses struggle with this. Consider a meeting to review every software product the dealership uses. It is almost guaranteed that you will eliminate certain monthly costs for products you do not use and you will improve the strategy for the products that you decide to keep. Vehicle Sales: A clear strategy is needed for the sales of certified pre-owned and

“You can thrive during time periods when vehicle sales are not as robust.” used vehicles. This is one area that is not exclusively controlled by the manufacturer and where you have the ability to generate real gross margin. What price point makes sense in your market? Be sure to align your personnel with the different consumer demographics you are targeting. Spend more time on the used car department and the parts and service departments, as these areas are too often neglected. Capital: The automobile business requires significant working capital and facility investments. A sound strategy includes building up operating reserves during the good times to help withstand a slow-down and to put you in position to take advantage of opportunities. The use of any extra cash from your monthly rental income to aggressively pay down real estate loans is a strategy that is rarely regretted. Think of it as forced savings. Financing: The significant decrease in www.msada.org

benchmark Treasury rates may provide an opportunity to lock in low fixed rates through traditional financing or the use of an interest rate swap. This can be executed on floorplan financing as well as on term debt. Insurance: Periodically review your coverages with an insurance advisor to understand what you have and what you don’t have. Consider cybersecurity coverage, business interruption riders, and a personal umbrella policy. Additionally, be sure you have a third-party assessment of your current data security practices and controls. Data breaches can be devastating to a business. Internal Controls: Be sure to periodically test each department to ensure that dollars are not slipping through the cracks. This includes processing and collection of receivables, monthly reconciliation of parts inventory, and an unannounced review and testing of your cash controls. Human Resources: Review pay plans to be sure that they are in sync with the current level of business and that they conform with federal and state regulations. The ruling in the Sleepy’s case should be reviewed by legal counsel (not discussed and interpreted internally), compared to your current practices, and modified to conform to the ruling. The retail automotive industry is a leading economic indicator. While current trends point to a slow-down, a detailed review of key procedures, strategies, and metrics will allow you to keep your foot on the gas! t Mark V. Dow, Principal, CPA, MST, joined O’Connor & Drew in 1986 and became a principal in 1993. Dow is currently responsible for managing accounting, auditing, and tax services for a wide range of clients. He works extensively with contractors and distributors and is primarily focused on commercial for-profit and high-net-worth clients. Mark has also presented various seminars on automobile dealership finances. Massachusetts Auto Dealer

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26 JUNE 2019

Patrick Manzi

NADA Senior Economist

Boyi Xu

Economist

JULY 2019

Massachusetts Auto Dealer www.msada.org

MSADA

NADA MARKET BEAT

JANUARY 2016

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Massachusetts Auto Dealer

JULY 2019

MSADA MSADA

TRUCK CORNER

Register Today for ATD Show 2020 By Jodie Teuton Chairwoman, American Truck Dealers ATD Chairwoman Jodie Teuton is vice president of Kenworth of Louisiana and Southland Truck Leasing in Gray, Louisiana.

“the tools you need to build and improve all departments of your dealership”

ATD Show 2020 will deliver the latest news, innovations, and trends in the commercial truck industry, along with the information and solutions that will help drive your dealership towards success. ATD Show returns to Las Vegas on February 14-17, and registration is now open. In addition to hearing from me on ATD’s accomplishments in the opening general session, attendees will have the opportunity to hear from incoming Chairman Steve Bassett. At the Sunday general session, Bassett will announce his goals and platform for ATD during his term. Plus, find out who will be named 2020 Truck Dealer of the Year; this national award recognizes commercial-truck dealers for business performance, industry leadership, and community service. Second-generation dealer Steve Bassett represents the Volvo, Mack, Hino, and Isuzu brands and employs 180 people at three locations in Indiana and Ohio. He represented the Volvo dealer network as ATD line representative before being elected vice chairman of ATD in 2019. Reconnect with ATD and NADA and gain insights from the truck industry’s top influencers. During this full weekend of member-focused programming, you will get to experience can’t-miss events and sessions like these:

Education for the Entire Dealership ATD/NADA Academy instructors and featured industry experts will bring you the tools you need to build and improve all departments of your dealership — leadership, Fixed Operations, and Variable Operations. Plus, ATD Show attendees will have access to more than 100 education sessions happening at the concurrent NADA Show 2020, which takes place at the nearby Las Vegas Convention Center. Whatever your dealership needs, you will find JULY 2019

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it here. ATD Expo is the auto industry’s premier marketplace, with top industry companies offering hundreds of products, solutions, and services in one place. Exhibitors from both Fortune 500 companies and exciting new start-ups will be on hand at the Westgate Las Vegas Resort & Casino to offer new and exciting tools to help grow your business’ success and keep you ahead of your competition.

Making Connections Meet your truck dealer peers and dive into timely discussions based on topics selected by attendees at The ATD Exchange. Learn the latest updates and changes happening with your brand, get to know other successful dealers, and talk directly to truck makers about your concerns at the 2020 Make Meetings. Plus, do not miss the ATD Welcome Reception, sponsored by Shepherd Insurance and hosted on the ATD Expo floor, where you’ll connect with dealers, exhibitors, OEMs, and industry leaders. View the full ATD Show 2020 schedule at www.atdshow.nada.org. Do not forget, ATD Show 2020 attendees will also have access to the NADA Expo taking place at NADA Show 2020, featuring more than 700,000 square feet of exhibits from more than 500 top vendors in the automotive industry for all your dealership needs. With so much to see and learn, there will be no shortage of things to do during our upcoming show. Learn more and register today at atdshow. org. The best hotel selections fill up quickly, so do not delay. Register before September 13, 2019, to save $100 off the on-site price with Early Bird pricing. We will see you in Las Vegas! t

NADA Update

By Scott Dube

Heating Things Up Scott Dube, President of Bill Dube Hyundai and MSADA Immediate Past President, represents NADA’s Massachusetts members on the NADA Board of Directors. He can be reached at scott@dubecars.com. We dealers are used to looking much further down the line than many of our retail peers. In this business, we always have to think past the season we are in to the challenges ahead. As we continue to experience change in all corners of our showrooms, service bays, and F&I offices, I encourage you

“We always have to think past the season we are in to the challenges ahead.”

to think ahead to the NADA Show coming up in February 2020. Registration is now available, and the time to do so is now. That being said, I also want to remind you that I hope you will join me in D.C. from September 15-17 for the NADA Washington Conference. It is not too late to plan your attendance to this critically important show of strength for our industry. Please reach out if you have any questions.

NADA 2020 Registration Now Open The Auto Industry Event of the Year returns to Las Vegas on February 14-17, 2020! NADA Show 2020 will deliver the latest news, innovations, and trends in the automotive industry, along with the information and solutions that will help you drive your dealership towards success. The best hotel selections fill up quickly, so do not delay. Register before September 13, 2019, to save $100 off the on-site price with Early Bird pricing! More than 100 industry workshops will be available, including our popular Distinguished Speaker Series and a preview of the highly-successful NADA Professional Series for managers. NADA Academy instructors and other industry-leading experts will bring you the tools you need to build and improve all areas of your dealership—Leadership, Fixed Operations, Human Capital, Legal and Regulatory, Marketing, and Variable Operations.

Plus, this year, NADA education will feature a new Digital super track, which will contain workshops specifically designed to maximize your dealership’s digital presence as you navigate the constantly-changing world of automotive digital marketing. Whatever your dealership needs, you will find it here. NADA Expo is the auto industry’s premier marketplace, with more than 500 companies offering thousands of products, solutions and services in one place. Whether you are looking to engage with current providers or shop for new suppliers, exhibitors from both Fortune 500 companies and start-ups will be on hand to offer new and exciting ways help grow your business’ success, boost your company’s bottom line, and keep you ahead of your competition. Learn the latest changes happening with your franchise, get to know other successful dealers under your brand, and talk directly to automakers about your concerns at the 2020 Franchise Meetings. Do not miss the NADA Valentine’s Day Welcome Reception, co-hosted by J.D. Power where you will celebrate your love for the automotive industry with more than 2,000 dealers, OEMs, and key auto-industry players. Plus, meet your peers and dive into timely discussions based on topics selected by attendees at The Exchange. The 2020 Expo will also feature a new First-time Exhibitors Showroom, where new vendors and technologies will be offered together in a special area. For details and to register, go to www.nada.org.

Why Everyone Should Attend an Auto Show By Charlie Gilchrist, NADA Chairman If you want to explore the latest and greatest that the auto industry has to offer, then without a doubt your first stop should be a local auto show. Many elements of our industry are evolving due to advanced technology and ever-changing market conditions. But auto shows remain a beacon of influence, because it is where consumers can still touch and feel products across all segments and brands. It is no coincidence that more than 11 million consumers are attending U.S. auto shows every year, with 68 percent of them planning a new-vehicle purchase within 12 months. Sure, I proudly sell vehicles to the greater driving public, but I am also a consumer myself. Through the eyes of a buyer and as a Texan, there is nothing that excites me more than seeing the new 2020 Ford Explorer or the Mustang Shelby GT 500 on display, often for the very first time. An auto show is an amazing one-stop destination where people like me can get the first look at the best OEM’s have to offer, from redesigns of iconic models to a showcase of future offerings. www.msada.org

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NADA Update Shows are also one of the few places where a brand’s style is personified by the vehicles in the annual line-up, and that style becomes congruent with a customer’s own lifestyle. The greatest impact of an auto show, however, is that it exerts tremendous influence over a customer’s vehicle purchase consideration, and it greatly promotes brand loyalty. In fact, the data continues to demonstrate that auto show attendees are consistently twice as likely to make a new-vehicle purchase within a year of visiting a show versus the general population. Many of the customers I have spoken with have expressed that attending a show makes them feel more confident and informed about a vehicle they have been waiting to purchase. Auto shows also have the advantage of strengthening relationships with loyal brand followers while at the same time introducing the public to new brands. In fact, 21 percent of attendees have purchased from a brand they have never considered before visiting an auto show. My dealerships are located in the Dallas-Fort Worth area, and I am proud to say that the 2019 DFW Auto Show in Dal-

“There are not many places where consumers can get behind the wheel of multiple brands under one roof, get a personal experience and a glimpse into their driving future.” las was a huge success. The show’s Ride & Drive program, in particular, was sold out, and it received participation from 13 OEMs. The DFW Show capitalized on its ability to showcase the latest technology which continues to be a changemaker in the selection of a new vehicle. At the Fort Worth Show, we will be adding educational booths which we think will be extremely beneficial for students and attendees who are curious about today’s technological advancements. I have no doubt that attendee numbers will continue to rise at my local auto show. The reality is that there are not many places where consumers can get behind the wheel of multiple brands under one roof, get a personal experience and a glimpse into their driving future. I am an eager supporter and attendee of auto shows, and I hope you are too!

NADA Show Keynote Speakers Announced Each year, NADA brings outstanding speakers and industry professionals to share insights on leadership, innovation, and motivation for our NADA Show attendees. Check out NADA’s newly-announced keynote speakers for NADA Show 2020: The Right Honourable David Cameron, Former Prime JULY 2019

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MSADA Minister of the United Kingdom One of the most prominent global influencers of the early 21st Century, David Cameron served as Prime Minister of the United Kingdom from 2010 to 2016. He offers lessons in leadership at an extraordinary and turbulent time in global affairs – not least on how he built economic strength; created inward investment across the UK and Europe against the backdrop of an emergent Russia and China; and navigated complex international security challenges. David Cameron will provide an unrivaled perspective on the future of the European Union and Britain’s place in the world following Brexit, and a unique insight on the rise of populist politicians and parties at a time of profound global change. Kathleen Madigan, Comedian Kathleen Madigan will entertain us with her offbeat – and often politically incorrect – observations of things we all relate to, including family, news, the weather, travel, and, of course, politics. Also speaking during our NADA Show General Sessions: Charles W. Gilchrist, 2019 NADA Chairman Charlie Gilchrist is president of Gilchrist Automotive, which comprises 10 franchises in the greater Dallas-Fort Worth area. Gilchrist is 2019 NADA chairman Association and represents Northern Texas’s franchised new-car dealers on the association board of directors. Rhett Ricart, 2019 NADA Vice Chairman Rhett Ricart is president and CEO of Ricart Automotive Group, in Groveport, Ohio. Founded in 1953, the organization today employs more than 500. Ricart is 2019 NADA vice chairman and represents Ohio’s franchised new-car dealers on the association board of directors.

NADA Responds to NHTSA Decision Not to Increase Fuel Economy Penalties for Automakers In response to the Trump administration’s announcement not to raise monetary penalties for automakers who fail to meet fuel economy requirements, NADA issued the following statement: “NADA supports the data-driven analysis and informed process NHTSA undertook in making the decision to suspend the doubling of penalties on automakers for noncompliance with fuel economy standards. The action accounts for today’s market realities and is an important step in maintaining vehicle affordability for American families and consumers. Affordability is key to encouraging fleet turnover—the most successful means to maximize the number of cleaner, safer and more fuel-efficient vehicles we get on the road every year, and in building on the progress the industry has already made on increasing fuel economy and lowering vehicle emissions.” t

MSADA

ACCOUNTING

Always Ready For Change By Christopher Peck Director of Business Development Santander Dealer Commercial Services

In today’s marketplace, to quote a wise man: “The only thing constant is change.” The list of “whys” would last longer than this article, but a few of the contributing factors are the rise of social media (giving everyone a platform), political division, global warming, and an extension of the bullish economic trend. Media outlets report daily on these items, as well as the primary and secondary results of the volatility. Now, to suggest that some bankers know best how to respond to volatility in everything is ludicrous. However, with over 40 years of lending into this industry, we can offer some basic observations and recommendations for Owners of auto dealerships: • Cash remains king. Through years of measuring financial results, it is crystal clear that dealerships with a healthy dose of excess cash (or equivalents) sit in the driver’s seat. • Operational consistency matters. • Financial planning, budgeting, and measuring for the dealership against realistic goals should be a regular habit. Kneejerk reactions should not be. • It is likely everyone has an insurance policy for weather catastrophes and business interruption. And it is also likely that many have a written plan for these events. But when was the last time you ran a “fire drill” in the event of credit card fraud, or the sudden departure of a key staff member, or your dealer lot flooding, or your interest rates rising again? If you have been avoiding these

“Adding an automotive detail business to the dealership’s other revenue streams could be a good idea. But entering into the coal mine exploration business may not be.”

kinds of drills, it’s time to reconsider. • Expansion to other revenue sources is often a good idea, but only into areas where the Owner is an expert and/or there is a (very) trusted advisor in that area who reports to the Owner. For example: It is safe to say that adding an automotive detail business to the dealership’s other revenue streams could be a good idea. But entering into the coal mine exploration business may not be. • Inventory management is as important as ever. Fiscal year 2017 was the first year in many years that the average dealer’s floor plan interest charge was not entirely covered by manufacturer rebates. The tactics and depth of fraud are going to change during a time when client convenience is paramount. Becoming more efficient is a worthy goal, but cutting corners that leave loopholes for fraud is not. Here are some things a banker can help you with: • Review the fraud protection on your www.msada.org

checking accounts. Effective security options include Positive Pay, use of a non-operating account for third-party wires, ACH fraud protection services, and various account alerts. Is your “user list” of staff with account access up to date? • Interest rate protection products. • Commercial/Corporate purchasing cards to increase security and transaction transparency, coupled with potential revenue sharing. • Smart cash (vault). In summary, even smart, diligent, and active operators can get caught off guard in this volatile marketplace. But the size and scope of exposure can be minimized by careful thought and preparation on the part of a dealership’s leaders. So, ask yourself, are you ready to face volatility and accept the opportunities it can bring, or not? t Massachusetts Auto Dealer

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