MSADA, One McKinley Square, Sixth Floor, Boston, MA 02109
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FIRST CLASS MAIL US POSTAGE PAID BOSTON, MA PERMIT NO. 216
March 2019 • Vol. 31 No. 3
The official publication of the Massachusetts State Automobile Dealers Association, Inc
Up to the
Challenge
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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.
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The official publication of the Massachusetts State Automobile Dealers Association, Inc
Table of Contents
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From the President: Springing Ahead ASSOCIATE MEMBERS DIRECTORY THE ROUNDUP: Just How Far Left Will The General Court Eventually Tilt? TROUBLESHOOTNG: Avoiding Traps in Vendor Contracts LEGAL: USDOL Issues Proposed New OT Rule AUTO OUTLOOK
16 Cover Story: Up to the Challenge – MSADA Director Christine Alicandro Karnolt
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Ad Directory Ethos Group, 2 Southern Auto Auction, 20 Nancy Phillips, 22 BlumShapiro, 22 NEAD, 31 O’Connor & Drew, 32
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ADVERTISING RATES Inquire for multiple-insertion discounts or full Media Kit. E-mail jfabrizio@msada.org
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Quarter Page: $450 Half Page: $700 Full Page: $1,400
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NEWS From Around the Horn ACCOUNTING: The First Quarter 2019 Slow Down Could Be Worse Than You Think IN MEMORIAM: Ira Rosenberg nada Market Beat TRUCK CORNER: What Mardi Gras and the Truck Industry Have in Common nada update: Moving Forward as One
Back Cover: $1,800 Inside Front: $1,700 Inside Back: $1,600
Join us on Twitter at @MassAutoDealers www.msada.org
Massachusetts Auto Dealer
MARCH 2019
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From the President
MSADA
Springing Ahead By Chris Connolly, MSADA President As we emerge from our Presidents Day events and look forward to Spring, this time of year reminds me that the seasons will blend together into one long, unending run if you do not stop and appreciate them. You and I know our business is hard, grinding work. Being an auto dealer is an all-consuming task. This is not a job so much as a calling -- and a business that requires total dedication every day. MSADA began, and continues, as an organization that looks out for our common interests while you are out doing what you do best. According to the mission statement in our bylaws, MSADA’s primary focus is to be the dealers’ voice before state, federal, and local governing bodies and administrative agencies as well as all public and media outlets. A few of us take on the responsibility of working through the day-to-day and looking ahead at the overall picture of our industry. In this month’s cover story, we learn more about MSADA Board Director Christine Alicandro’s background and her unique perspective as a truck dealer when it comes to issues on Beacon Hill and Washington. I thank her and our entire board for their continued efforts. You have a role to play in this work, too. Spring is the perfect time to make what is hopefully at least a yearly call with your Congressional and State House representatives. Your legislator should care about how your business is doing -- not just how you feel about the hot button issue of the day. With this new season, I encourage you to grow your relationship with your legislators at the national, state, and local levels. They are relationships that will always pay off when it counts, and building them can be as simple as a few minutes here and there. While we can point to allies such as Gov. Charlie Baker as evidence of some relief from the onslaught of overregulation, it is never a good time to tally victories with this crowd. So next time you see Christine and our other board members, please take a minute to show your appreciation for their efforts. And if you have questions about how you might approach a new representative, or simply have never done this before, be sure to ask them for insight. Our own Executive Vice President, Robert O’Koniewski, remains at your service for these types of questions, as well. At the federal level, we will be sending an MSADA contingent to the AIADA fly-in on April 9-10 and NADA’s Washington Conference in September. While not all of us have the time or ability to contribute at the director level, we can all be useful in helping to spread the word about our role in the communities we serve. In addition to hearing what is on our plate at the upcoming Annual Meeting on May 3, I encourage you to join us at our annual Dealer Day on Beacon Hill on May 22. More details on both are available in Bob’s column on page 6. t MARCH 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 Bellavia Blatt, PC Leonard A. Bellavia, Esq (516) 873-3000 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 Globe Anthony Merullo (617) 929-2337 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 Mike Otis (315) 382-3675 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
Eastern Bank David Sawyer (617) 897-1125 Eastern Insurance Group William Gross (508) 620-3349 EasyCare New England Greg Gomer (617) 967-0303 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 Micorp Dealer Services Robert Calhoun 617-285-4833 Mid-State Insurance Agency James Pietro (508) 791-5566 Mintz Levin Kurt Steinkrauss (617) 542-6000 Murtha Cullina Thomas Vangel (617) 457-4000 Nancy Phillips Associates, Inc. Nancy Phillips (603) 658-0004
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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 Reflex Lighting Daryl Swanson (617) 269-4510 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 Sentry Insurance Company Eric Stiles (715) 346-7096 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 Target Dealer Services Andrew Boli (508) 564-5050 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
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The Roundup
Just How Far Left Will The General Court Eventually Tilt? By Robert O’Koniewski, Esq. MSADA Executive Vice President rokoniewski@msada.org Follow us on Twitter • @MassAutoDealers
Political animals of all stripes roam the countryside, across this great nation of ours. Here in the Commonwealth, since the inception of our state legislature in 1780 – our Massachusetts General Court – a number of different political parties have come to dominate its governance at various times during her history. Over the course of almost a quarter of a millennium, the citizens of this Commonwealth have sent to the General Court politicians representing a wide range of divergent heritages, backgrounds, views, affiliations, and philosophies. We have had, just to name a few, Federalists, Democrat-Republicans (of the Jefferson kind), Whigs, Know Nothings (the closest manifestation of a “hate” party if there ever was one), and numerous iterations of Democrats and Republicans which have evolved to what we have come to know today. Now that brings us to the genus of political animal that seems to be consuming excessive media attention today – the “progressive” Democrat. This is no mere liberal Democrat; this is the left of the left Democrats, to the point where everyone wants to ask, “Are they socialists?” On the national and local stage, the so-called “progressives” want to inflict transformative policies that would alter the economic, financial, social, and constitutional landscapes as we know them today. In the political arena, they have also demonstrated a willingness to eat their own within the Democrat party. We saw this last year in two very prominent situations. First, there was the very liberal – many had called him a “progressive” – Jeff Sanchez, a DemMARCH 2019
Massachusetts Auto Dealer www.msada.org
ocrat state representative from the Jamaica Plain neighborhood of Boston who served as chairman of the House Ways and Means Committee under Speaker Robert DeLeo, a very traditional Democrat whom no one will accuse of being a “progressive”. Mr. Sanchez was easily ousted in the September Democrat primary because a small cadre of “progressive” activists in his district perceived that he was neither liberal enough nor strong enough to stand up to the not-so-progressive leadership of the Speaker, who is certainly a fine man and an effective legislative leader. Exhibit B in this transformational example of today’s Democrat party would be the “progressives’” ouster, also in last year’s Democrat primary, of Congressman Mike Capuano of Somerville, the epitome of a traditional working-class, lunch bucket Democrat. Congressman Capuano certainly checked all of the standard “liberal” boxes during his time down in Congress but for, again, the cabal of “progressives” who plotted his defeat in his district – the old JFK/Tip O’Neill district – who thought him not liberal enough. These are just two of the successes the “progressives” nailed to the wall last year, but the damage could have been worse. Several moderate Democrat legislators beat back primary challenges from “progressives” but were very close in the final ballot tally. Why is this important, especially since Massachusetts is already considered a certified “blue” state and a bastion of liberal politics? You just want to sell and service cars – why should you care? Well,
MSADA this month, the State House News Service ran a small piece reporting that Democrat state Reps. Tricia Farley-Bouvier of Pittsfield and Jack Patrick Lewis of Framingham were elected as co-chairs of the House’s progressive caucus by its members for the 2019-2020 session. (And as Exhibit 3 in our discussion of the Democrat party’s transformation, Lewis was elected as caucus co-chair to replace long-time Rep. Byron Rushing, a black, inner-city Boston member of the DeLeo leadership team – a “progressive” and city leader going back to a time when racial strife was ripping the city apart – who lost his primary because the district “progressives” did not think him “progressive” enough, either.) The News Service also reported that the House Progressive Caucus now has a record number of 60 members. Keep in mind that, in the 160-member House, a candidate for speaker needs 81 votes to win; Democrats now hold 127 seats, and “progressives” are almost half that number, yet only 21 short of a full majority. If “progressives” make the electoral push they are promising for 2020 – a presidential election year when more people are enthused to participate in our election processes than one sees during the typical off-year elections – do not be surprised if the “progressives” push their numbers into the 80s in the House, an occurrence which would certainly give them enough votes to control the Democrat caucus and elect their own brand of leaders. The 40-member Democrat-controlled Senate is not much different. There, the Senate Progressive Caucus, chaired by Sen. Jamie Eldridge of Acton, counts 18 of the 34 Democrat senators as members. In effect, they could have control of the Democrat caucus there and are just three votes shy of having control of the chamber. That caucus also saw a couple more members added during the past election cycle. If one were to think this trend was not troubling in regards to the moderate course the state has charted on business policies, taxes, and spending under the leadership of Republican Governor Charlie Baker, legislative “progressives” have vowed
to succeed in their search for more revenues in order to achieve their stated goal of “promoting social, economic, and environmental justice for all people in the Commonwealth”. It was no accident, then, that this month Senate President Karen Spilka unveiled the preliminary plans for a long-term exploration of the state tax system, with designs on higher taxes and more revenues for various new priorities. Even though the more moderate House has previously held back on specific tax-hike discussions, for his part Speaker DeLeo now has left the door open to new revenue streams this year and invited the business community to come to him with tax ideas that it could support to invest in public transit improvement, traffic mitigation, and education. Conversely, right now Governor Baker remains opposed to “broad-based” tax increases but does recognize the need for new revenues for transportation infrastructure, education reform, and housing construction policies – items the Governor has designated as priorities for his second term. Nevertheless, we always need to be cognizant of any efforts by certain legislators who have the business community in their crosshairs, especially regarding new taxes and fees. All of which leads, finally, to you and your participation in the state and federal legislative processes. Pursuant to the mission statement in your Association’s bylaws, MSADA’s primary focus is to be the dealers’ voice before state, federal, and local governing bodies and administrative agencies, as well as all public and media outlets, in order to promote legislation and policies favorable to our industry and to oppose such proposals that would bring harm to our members and the industry. As such, your Association’s leadership, staff, and lobby team have as our primary mission making sure no harm comes to dealers here on Beacon Hill or down in DC in the halls of Congress. However, we cannot do it alone. Although much of the lobbying we do is to prevent bad legislative ideas from becoming law, we also work to pass favorable laws, such as last session’s reform of www.msada.org
the used vehicle record book and the allocation of vehicle inspection licenses to franchised new-car dealers. We always call on our member dealers for support – to make calls or send emails to elected officials, to attend member-legislator meetings, etc. This year, we ask that you set aside time to attend our May 3 Annual Meeting at the Mandarin Oriental in Boston (complimentary hotel room Friday night) where our keynote speaker will be Governor Charlie Baker. Also, our annual Dealer Day on Beacon Hill is Wednesday, May 22 – we need your presence there to attend meetings with your local legislators, which we will schedule for you, to discuss certain bills we are promoting and opposing. And if you are so inclined, the federal AIADA and NADA Washington conferences are April 10-11 and September 16-17, respectively. Your attendance and input would be greatly appreciated.
MSADA Bills Sent to Committees Our readers may recall that in our February issue we discussed the legislation that certain legislators have filed on behalf of your Association. Since then, the House and Senate clerks have begun to refer bills to the appropriate committees for hearings. The committees have not yet established their hearing schedules, however. Thus far, our bills have been referred accordingly: Joint Committee on Consumer Protection and Professional Licensure, co-chaired by Sen. Paul Feeney (D-Foxborough) and Rep. Tackey Chan (D-Quincy): • 93B Amendments – Senate 179 (Pacheco) and House 262 (Hunt). The issues addressed include the following: • Prohibits manufacturers from placing a surcharge on the vehicle invoice as a means of recouping warranty reimbursement costs directly from dealers; • Limits how often the manufacturer can request a facility upgrade; • Prohibits a manufacturer from requiring a dealer to purchase goods or services from a vendor selected, identiMassachusetts Auto Dealer
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The Roundup fied, 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 goods or services of substantially similar quality from a vendor chosen by the dealer; • Protects dealers from manufacturers’ using export chargebacks to penalize dealers for cars that get exported without the dealer’s knowledge; • Protects dealer’s customer data from OEMs and other third parties; • Prohibits an OEM from arbitrarily or unreasonably altering the geographic area of responsibility within which it measures the dealer’s performance; • Clarifies the current limit on manufacturer ownership of dealerships and direct sales of vehicles by manufacturers; and • Addresses various dealer- and consumer-related issues surrounding recalls, including compensation for parking cars while waiting for parts and disclosure of open recalls to consumers. • Class 1 License Appeals – Senate 172 (O’Connor), House 206 (Chan), and House 234 (Finn). These 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 entity.
presently paid by insurance companies to repairers is the lowest in the country. • D i m i n i s h e d Va l u e – S e n a t e 6 2 9 O’Connor) and House 960 (Driscoll). These refiled bills would create an administrative process for vehicle owners to appeal to get diminished value of damaged vehicles returned to the vehicle owner.
Joint Committee on Financial Services, co-chaired by Sen. James Welch (D-West Springfield) and Rep. James Murphy (D-Weymouth): • Motor Vehicle Service Contracts – Senate 576 (DiZoglio) and House 1087 (Puppolo). These refiled bills would prohibit OEMs from requiring dealers to exclusively sell OEM-only extended service contracts or extended maintenance plans. • Insurance Labor Rates Paid to Auto Body Repairers – Senate 658 (Welch) and House 3558 (Kafka). These refiled bills 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
Have you registered yet for our upcoming annual meeting? Your Association will conduct this year’s meeting – our 79th – at Boston’s premier spot, the Mandarin Oriental Hotel. Our speakers’ lineup so far includes our keynote address from Massachusetts Governor Charlie Baker; Jason Stein, publisher of Automotive News; Guido Vildozo of IHS Automotive Group; and more. In addition, we will provide a state legislative and regulatory update, as well as reports from your MSADA president, Chris Connolly, and our NADA director, Scott Dube. We start the day at Noon with registration and a buffet lunch, and our Speakers Program will run from 1:00 p.m. to 5:00 p.m. There will be a Cocktail Reception immediately after the program.
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Joint Committee on Transportation, co-chaired by Sen. Joseph Boncore (D-Winthrop) and Rep. William Straus (D-Mattapoisett): • Temp Tags – Senate 2133 (Rush) and House 3031 (Golden). These refiled bills would create a statutory process for allowing temp tags for out-of-state purchasers. A temp tag law already exists, authorizing the RMV registrar to issue such tags; the law, however, has never been implemented. This bill would provide a process for implementation. We will keep dealers informed as to the date of the public hearings on these bills in order to mobilize our grassroots coalition of dealers to contact legislators. Should you require any additional information on these items or wish to volunteer to get involved in the process, please do not hesitate to contact me.
Annual Meeting – May 3, Boston Gov. Baker to Speak Don’t Delay – Register Today
Massachusetts Auto Dealer www.msada.org
We have sent out our invitation and registration materials via emails and snail mail. We will again this year provide a hotel room at the Mandarin for any member dealer who desires one for Friday evening. Be sure to register before hotel space runs out. Contact Jean Fabrizio to register at jfabrizio@msada.org or (617) 451-1051.
Dealer Day on Beacon Hill May 22 As mentioned earlier in this column, a great opportunity for dealers and their key managers to get involved in the legislative process is our annual “Dealer Day on Beacon Hill”, which will be held on Wednesday, May 22, in Boston. We are sending out information soon on this event. We are asking our member dealers and their key employees to convene at the Parker House Hotel in Boston beginning at 10:00 a.m. in preparation of walking up to the State House to meet with their representatives and senators to discuss those issues in the automotive industry that dealers are presently confronting. We will have an issues briefing to get dealers in a proper frame of mind to provide legislators a dealer’s perspective on their economic footprint locally and throughout the state in the aggregate. For those dealers we know who will be attending, we will schedule your legislative appointments for you. It is extremely helpful to our lobbying efforts for legislators to see their constituents face to face and receive a perspective they don’t get in the normal course of their activities. No one knows your business better than you. That knowledge needs to be conveyed to your legislators in an environment and manner they understand, hence our Dealer Day on Beacon Hill. Please circle the date and plan on visiting Boston on May 22.
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.
MSADA Through this program, we have supported dealers’ use of Fisher Phillips for employment law services such as pay plans, employee handbooks, etc.; KPA and Furrh Associates 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 about these programs so you do not lose out on these services supported by your Association.
NADA 2019 Workforce Study Now Open Registration Ends April 12 The NADA/ATD 2019 Dealership Workforce Study is now open. Your chance as an NADA/ATD member to register to participate ends on April 12. Dealers are encouraged to enroll now at www. nadaworkforcestudy.com to participate in the 2019 Dealership Workforce Study. NADA provides this annual report so both car and truck dealers can use it to finetune employee compensation and benefits and promote retention. Only through robust participation does this report allow for valuable information and statistical analysis. Following dealer feedback, NADA has redesigned the survey to obtain more insight into compensation plans for variable operations positions. This will only further assist participants and users of the study in their decision-making with regards to pay structure.
All participating NADA/ATD members will receive a complimentary custom report for their store. This exclusive report will give you a Workforce Management Scorecard that compares and ranks your dealership against peer-level dealerships on key metrics related to compensation, retention, and turnover. In addition, all participants will receive a complimentary copy of the 2019 Dealership Workforce Study National and Regional Trends in Compensation, Benefits and Retention Report. Participants will also be granted access for up to one year to the Database Search Tool where they will find all of the data submitted for each of the past workforce studies. Enrollment closes on April 12, 2019. Once enrolled, the deadline for submitting all required data is May 15, 2019. For any questions please contact Joe Fleming at 703-448-5891 or workforcestudy@nada.org.
MSADCF Auto Tech Scholarships Available Applications for the Massachusetts State Auto Dealers Charitable Foundation’s 2019-2020 Auto Tech Scholarships are now available on our website at www.msada.org. The Foundation’s auto tech scholarship program awards scholarships to eligible applicants for use at post-secondary educational institutions that offer auto tech training programs. Since its inception in 2003, the Foundation has awarded over $1 million to more than 200 students. A scholarship award is worth $6,000-$13,000 over two years for each student selected. Ten years ago the Foundation’s scholarship program expanded to include not just manufacturer-backed programs but also general automotive technology programs at more colleges in the Massachusetts area. This gives dealers an even greater chance to capitalize on a highly-skilled base of potential employees. To obtain additional information on the scholarship program, contact Jean Fabrizio at MSADA at (617) 451-1051 or jfabrizio@msada.org. The application deadline is Friday, May 24, 2019. www.msada.org
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.
2019 Dues Invoices In January your Association sent out 2019 dues invoices to all of our dealership and associate members. Our members’ dues help fund the Association’s activities on their behalf, including our lobbying on Beacon Hill and in Washington, our member counsel services, and our education and training activities. Over the last several years we have witnessed quite a bit of economic disruption in our industry, including governmental over-regulation. More than ever, our dealers need a strong MSADA. MSADA will continue to lead on the various issues that threaten the viability of our dealerships. We will strive tirelessly to keep you informed of developments in our industry and how they will play out in Massachusetts. These efforts also include working closely with NADA to better serve our members. Our strength lies in our members. With your continued support and membership renewal, we can build on our current foundation and enhance your Association’s core purposes of communication, advocacy, and education. t Massachusetts Auto Dealer
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Troubleshooting
MSADA
Avoiding Traps in Vendor Contracts By Peter Brennan, Esq. MSADA
Staff Attorney A common issue we deal with in the legal wing of MSADA’s world headquarters is that many dealers don’t know the details of their contracts with vendors. Many may not even be aware of the existence of certain contracts. While you might be obligated to honor the terms of any vendor agreements already in place, the following tips can help you to avoid vendor contracting pitfalls in the future. First, take an inventory of all the contracts (factory, DMS, and other vendors) you have executed. Know what you have bound your business to with outside partners. Second, review who has the authority to sign a contract on behalf of the dealership. You might think that only the dealer or general manager can bind your dealership in an agreement, but this is not the case. In several instances that have been brought to our attention, a service manager or finance director had signed off on a contract, without the dealer’s knowledge, that later proved to be disadvantageous to the dealership. While the dealer may want to void a contract not signed by an appropriate officer of the business, an agreement will generally be deemed valid if the dealership signatory acted with apparent authority to bind the company, the vendor was not unreasonable in its reliance on that authority, and the parties performed per the contract’s terms. Consequently, it is important to have a company policy in place, ideally in the employee handbook, that explicitly states the employees that MARCH 2019
may sign contracts on behalf of the dealership. Employees that violate the policy must be disciplined. Next, read the fine print, all of it. Now, we understand that this is unlikely and perhaps unrealistic. Most people will look at a form contract only long enough to ensure that price matches what the salesperson had told them. It is not a bad idea for you to have your legal counsel read every contract and discuss those terms with you. You need to know what you have sign on for. So, in addition to ascertaining the price, make sure that you at least understand and accept these main points of the contract: Term: How long is the term of the contract, and does it automatically renew? A shorter contract term is generally better as it provides the dealership with more flexibility. Many vendor contracts will contain a clause that states something along these lines: “Agreement will automatically renew unless notification is received sixty days prior to renewal date as specified”. This is an example of an automatic renewal, or evergreen, clause. While some states have addressed evergreen contract clauses legislatively to give the parties to the contract additional rights of cancellation, Massachusetts has not. If you find yourself on the wrong end of such a contract it can be a headache to extricate yourself from the agreement, if it is possible to do so at all. Some vendors try to make it impossible to cancel the contract, even if notice of cancellation is timely provided. Review all current vendor contracts for the presence of an evergreen clause so that you are prepared to give notice of cancellation by the required date if you do not wish to be held to the terms of the automatic renewal. Indemnity: Often, indemnity clauses in vendor-drafted agreements are so broad that the dealership could be on the hook to indemnify and even defend the vendor if a third-party brings or threatens a legal action relating to the product being contracted for. The dealership should ensure
Massachusetts Auto Dealer www.msada.org
that it is only responsible to indemnify the vendor when the cause of the underlying legal action is alleged to be misconduct by the dealership. Venue/Jurisdiction: If a vendor contract states that “any claim arising out of or relating to this agreement shall be brought exclusively in the state or federal courts of competent jurisdiction located in the State of [XXX], but your dealership is based in Massachusetts, the vendor will already have the upper hand if a dispute leads to litigation. You will be forced to incur costs to hire local counsel in the jurisdiction, travel to hearings, etc. If possible, remove this section entirely or substitute the state where your dealership is located. Privacy Practices: At a minimum, ensure that a contract with any vendor that will have access to your customer data contains language required by all state and federal data security laws, such as Gramm-Leach-Bliley and the Massachusetts Data Privacy law. Additionally, the dealership should ensure that the vendor will only use the data for the specific purpose of providing the service covered by the contract and cannot sell the data in any form. This is a complicated issue that gets more complex every year. MSADA has issued several legal bulletins and other writings on the topic which are available through our website, and NADA has also published a guide on the issue. This is an abbreviated list that barely scratches the surface of the issues that may arise in any vendor contract. As always, the best practice is to have legal counsel review every contract that the dealership considers – before it is signed. 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) 451-1051.
LEGAL
MSADA
By Joseph W. Ambash and Jeffrey A. Fritz
USDOL Issues Proposed New OT Rule You may recall the United States Department of Labor (“USDOL”), on May 19, 2016, issued revised regulations, which were slated to go into effect December 1, 2016, concerning the “white collar” exemptions to minimum wage and overtime under the Fair Labor Standards Act (“FLSA”). Among other things, those revisions significantly would have increased the minimum salary requirement for employees who qualify for the “executive,” “administrative,” or “professional” exemptions, from $455 per week (which annualizes to $23,660), to $913 per week (which annualizes to $47,476 per year). You also may recall the business community challenged those regulations in the courts and, ultimately, the USDOL was prohibited from enforcing them. Since that time, the USDOL went back to the drawing board and, on March 7, 2019, issued notice of a new proposed rule, which appears to represent a middle ground: most importantly, increasing the minimum salary requirement to $679 per week (which annualizes to $35,308). While the new proposed rule is not yet in effect, it is likely to go into effect in the not-so-distant future. And Massachusetts law as it relates to the “white collar” exemptions will follow suit.
No Effect on Salesman, Partsman, Mechanic, or Commission-Paid Exemptions The FLSA contains a number of overtime exemptions in addition to the “white collar” exemptions that may apply to dealership employees, including salesmen, partsmen, mechanics, and those who earn a majority of their compensation over a representative period in the form of commissions. Fortunately, the USDOL’s new rules have no impact whatsoever on these exemptions, and dealers can continue to rely on them as they have in the past (mindful of the fact that, while Massachusetts has a “garagemen” exemption, which is similar to the FLSA’s mechanic
exemption, Massachusetts does not have an analogue to the salesman, partsman, or commission-paid exemptions).
The “White Collar” Exemptions To qualify for a “white collar” exemption, an employee must, first, satisfy its “duties” test. For example, to qualify for the “executive” exemption, the employee, in fact, must (1) be primarily engaged in managing your dealership or a customarily-recognized department or subdivision thereof, (2) customarily and regularly direct the work of at least two full-time employees (or their equivalent), and (3) have the authority to hire or fire employees (or make recommendations on such issues afforded significant weight). Similarly, to qualify for the “administrative” exemption, the employee’s primary duty must, in fact (1) be the performance of office or non-manual work directly related to the management or general business operations of your dealership, and (2) include the exercise of discretion and independent judgment with respect to “matters of significance.” Fortunately, the USDOL’s new regulations do not impact the “white collar” exemptions’ “duties” tests. If an employee meets the “duties” test for a “white collar” exemption, to be exempt he or she also must satisfy the “salary or guarantee basis” test; that is, he or she must be paid a guaranteed amount per week regardless of the number of hours they work (subject to very narrow exceptions beyond the scope of this article). Since 2004, the salary threshold has been $455 per week. As noted above, the new rules will increase that to $679 per week.
compensation required to qualify for the “highly-compensated employee” exemption from $100,000 to $147,414, and (3) indicate a commitment by the USDOL to review (and increase) the salary threshold periodically.
What Does All This Mean? In the (likely) event this rule goes into effect, employees currently exempt as “executives,” “administrators,” or “professionals” (such as, generally speaking, your managers and higher-level office employees) earning less than the $679 per week salary/guarantee threshold (or $611.10 plus at least $67.90 in incentive compensation) no longer will be exempt and will be entitled to overtime pay, at one-and-ahalf times their “regular rate of pay,” for all hours worked over forty each week. To maintain the exempt status of any such employees, you will need to increase their salary/guarantee accordingly.
What Should You Do Now? You should consider reviewing your “white collar” employees’ pay plans to determine what, if any, changes you will need to make to ensure compliance if and when this new rule goes into effect. Focus particular attention on your managers to ensure you are in position to pay them properly. t
Other Changes In addition to increasing the “white collar” salary threshold to $679, the new rules will (1) provide that employers may attribute nondiscretionary bonuses, commissions, or other incentive payments to satisfy 10% of the salary threshold amount, (2) increase the total annual www.msada.org
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.
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AUTO OUTLOOK
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RACE TO THE FINISH COVER STORY
Up to the Challenge MSADA Plymouth County Board Member Christine Alicandro Karnolt on the past and future of our industry. By Jeff Breeze “At 12, what can you do? I unloaded the parts trailer and put parts away, because that is something that you can do at 12 years old,” Christine Alicandro Karnolt recalls about her start in the family business. Her father, Marty Alicandro, owned a GMC dealership in Kingston that he bought in 1967, and it was the place that Alicandro Karnolt realized that she wanted to be. Now she is the matriarch of a car and truck empire that includes Marty’s Buick GMC in Kingston, Marty’s Chevrolet in Bourne, and Marty’s Isuzu Trucks in Kingston. “I always wanted to do this. In fact, I did not want to go to college, because I knew I wanted to do this. My father made me go to college. But I knew ever since I was little, I always aspired to be a dealer, and I always aspired to be the best dealer.” MARCH 2019
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“We started out with trucks, so for me it was definitely a male-dominated business,” she adds. “I do not want to say he did not have any sons and that is why I got into the business, but he did have two daughters, and I happened to be the one that had an interest and pursued it.” Nowadays, the climate is far different for women looking to get into the automotive industry. Looking at the staff at the various Marty’s locations, you will see women everywhere, from the sales floor to the service department. For Alicandro Karnolt, the challenge was always more of an opportunity, and once she was given a chance to showcase what she could do, people have become more and more accepting. “I was brought into the industry at a young age. In the 1980s there were a lot less females, and it was a lot more male dom-
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inated. Over the past 25 or 30 years there have been so many fathers that have brought their daughters into the industry that the lack of women in the industry is just not the case anymore. “I think that nearly half of our board members have daughters in the industry now,” Alicandro Karnolt adds. “ It has really been nice for me to see our industry advance and capture a female audience and see that this is a thriving industry, that there are so many opportunities for females.”
Finding Her Way A graduate of Geneva College in Pennsylvania, Alicandro Karnolt knows her way around all of the parts of the dealership. While she has a Business Management and Management Information Systems degree and has served time at Dealer Son and Daughter School and worked multiple terms on the National Dealer Council for Buick and GMC, she is just as happy working out back getting her hands a little dirty. “I love service. It is one of my favorite departments. I know
that most people say sales, but I loved the challenge when I was in service of having that unhappy customer and then seeing them walk away with a smile on their face because we were able to resolve their problems. That is what makes me happy. I like that. I like putting a smile on people’s face. And that is the fun part of the car business, that we are able to do that. If you have a problem we can repair it, and if you want a nice and newer car, we can do that too.” The most important part of the whole equation is simple. “People. Building relationships, getting to know people, and having lifelong relationships is the most rewarding. And taking that to the next level would be giving back to the community. I really feel it is a business owner’s obligation to give back.” She hesitates on the word obligation, as if fearing that it sounds too imperative, but circles back and says it again, almost verbally italicizing the word. It is not quite a responsibility, but she knows it is the thing that feels right to do. Each year Marty’s employees walk in Plymouth’s Thanksgiving Day Parade, the second largest in the state, and collect almost two tons of food for the local food bank. “We try to get our employees involved. We do charities every single month. We have some sort of fundraiser every month where employees can nominate a charity,” she said. “We do not just write a check. We get involved, and that is the part I like to see.”
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RACE THE FINISH Up toTO the Challenge
“When I was growing up, I would think of the Jetsons and that was so far out there to have electronic stuff popping out and have instant food. But think about it. We are almost there.”
Alicandro Karnolt has been part of the MSADA board for almost a decade during two stints, serving three years as the Truck Director and the past six as the representative for Plymouth County. “I am the dealer that new car dealers should go to in my county if they have a problem or a suggestion with something they need to bring to the legislature’s attention or the factory’s attention or for legal advice. I am supposed to be that liaison to the market.” She finds that she serves as a conduit for communications between the factory and the showroom floor, even if that path often goes through Beacon Hill. It’s the tethers to govMARCH 2019
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ernment that she found to be the most unexpected part of working on the board. “I had no idea truly just how involved we really were in legislation in Beacon Hill and in DC. In all of these different committees, I guess I never really knew the true effect that our State Reps and the U.S. Senate and all of these people that we elect really do have on our industry.”
Facing the Issues With three different storefronts and two growing teenagers, Alicandro Karnolt finds that serving on the MSADA board is something that she loves to do, bringing her love for solving problems from the micro to the more macro level. Instead of issues that affect an individual, this work serves
MSADA the whole industry, which in turn helps make those interpersonal connections better. “The reward is seeing what we are trying to change or trying to make better in our industry for our state dealers. Whether it is something that we have been battling for a long time like our struggles with registry issues. It is a hot topic, and to know that we are making progress is great,” Alicandro Karnolt said. Working on the board brings her face to face with all of the crucial issues facing dealerships today. As each issue arises, it is like a new fire to put out, and it keeps the board members tirelessly working to provide a loud voice for these issues at the State House. “Dealer rights are really important to me: our franchise rights, our territory rights, our marketing rights. We have worked for putting more dealers into the market, improved our parts policies and our purchasing policies. That is probably my focus as a dealer representative - to make sure the factory does what is in the best interest of their dealer body.” Her impact as a female voice does not go unnoticed either. The work-life balance that she has attained is an example for how a dealer can contribute to the good if the entire industry and not merely her own dealerships. “Christine has demonstrated a strong commitment to our industry throughout her time as a member of our Association and also as one of our directors. As a woman in an industry dominated by men, she has shown the capabilities to compete on an equal footing with any dealer – skills she learned and honed over the years from her father,” Robert O’Koniewski, MSADA Executive Vice President said. “First as our Truck Director on the Board and then, after a break, serving for the last six years as our Plymouth County Director, Christine has been invaluable in leading the direction of our Association and working actively with her area legislators and our Governor and Lieutenant Governor to make sure the dealers’ voice is heard in the public policy arena. She not only is a successful dealer in a very competitive environment but also a strong leader for dealers and our industry, exactly what the doctor has ordered in these always challenging economic and political times.” Alicandro Karnolt finds it tough to make predictions about the future of the industry. With technology changing at such rapid rates, she laughed at the thought of where we might be in 20
years and said, “The Jetsons.” While we might not be quite ready for flying cars, things are becoming more digital and more automated. “When I was growing up, I would think of the Jetsons and that was so far out there to have electronic stuff popping out and have instant food. But think about it. We are almost there. I have no idea. Technology is changing so rapidly, almost daily, and it is advancing quicker than you and I can even fathom.” While she is focused more on the near future, it is the traditional perceptions of who and what a car dealer is that Alicandro Karnolt continues to shatter. Twenty years since purchasing Marty’s from her father, sometimes it is the traditions and cliché of a shady guy in a polyester suit with a big cigar that she still needs to fight against. “I would love to change the perception that, as auto dealers, we are always out to ‘get’ you. Maybe there was a time when that view was accurate, but that is so not the case now with all the information being out there.” As Alicandro Karnolt works to try to continue to tear down the stereotype of the unscrupulous car dealer, she finds that sometimes the system still gets in the way. She finds though that so much regulation just brings complication that only helps feed any confusion. “What I would like to see is for the industry to get a little less complicated. However, that is not where we are heading. Whether it is factory incentives or protection laws, we might not have as much paperwork, but we are signing more documents. We are signing our life away. It is so complicated now.” For Christine Alicando Karnolt, making things easier and better for her customers, her employees, her community, and the dealership population as a whole is why she does it. She was born to be a car dealer, and as long as she is, she will continue to strive to be the best dealer. t www.msada.org
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NEWS NEWS the NEWSfrom from Around Around the Horn Horn from Around
NEWS the Horn MSADA
BRAINTREE
Quirk Duo Hit the F&I and Showroom Cover Quirk Chevrolet of Braintree has surprised the world with its recent sales successes. The dealership is number one in the nation in sales of Silverado trucks and is also the top seller nationwide of both the Bolt and Volt lines of electric vehicles. That success has landed GM James Thorp and business development manager Greg Merchanthouse on the cover of the March edition of F&I and Showroom magazine. The feature, “Just Give Them The Price,� focuses on the changes that have been implemented in the past seven years. Nothing has been as radically innovative as the EVs they have been selling, skipping the same old routine in favor of rapid,
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accurate, and transparent responses to all customer queries. Thorp and Merchanthouse both began at Quirk in the early 2000s, but Merchanthouse left in 2006, returning to the company in 2012 with a vision of how to do things better and more simply. The integration of the sales floor with the back of house BDC reps is a big part of the financial transparency. Quirk has BDC reps who are now working on the sales floor after that experience. It is experience coupled with extensive GM training for their entire workforce that has elevated Quirk to one of the top five Chevrolet sellers in the nation.
NEWS from Around the Horn
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NORTHAMPTON
Country Hyundai Wins DealerRater Dealer of the Year Award Country Hyundai has been awarded the 2019 DealerRater Dealer of the Year Award and the 2019 Consumer Satisfaction Award, which recognizes auto dealerships across the U.S. and Canada who deliver outstanding customer service, based on consumer reviews written on DealerRater.com. “Car buyers have spoken and have identified Country Hyundai as the best Hyundai dealer to do business with in Massachusetts,” said DealerRater General Manager Jamie Oldershaw. “The quality and number of reviews for Country Hyundai speak volumes of the top-notch experiences they provide to customers.” The DealerRater Dealer of the Year Awards are based on reviews by new- and used-car shoppers and those who took their vehicles into dealerships for service. Reviewers evaluated Country Hyundai on its customer service, quality of work, friendliness, pricing, and overall experience. Country Hyundai has demonstrated consistently high PowerScore ratings for customer satisfaction, placing it in the top of its class. The PowerScore is determined using a Bayesian algorithm that factors the dealership’s average DealerRater consumer rating and the total number of reviews written about the dealership during the 2018 calendar year. “We want to ensure that our customers are satisfied not only at the time of purchase, but as long as they own their ve-
BOSTON
Two Dealers Join Elite ‘Club’ In its “Race to the Finish Line” two Massachusetts dealerships were named Wolfsburg Crest Club champions for 2018. The award honors those Volkswagen dealers that have met the highest Volkswagen standards in both service and sales. Membership in the Wolfsburg Crest Club is not easy to achieve. It requires a Volkswagen dealer to attain high standards in operation, new vehicle sales, certified pre-owned sales, parts purchases, pre- and post-sale customer satisfaction, and Volkswagen Academy certification. This year’s champions were Brian D. Kelly of Kelly Volk-
hicle,” said Carla Cosenzi, owner of Country Hyundai. “The DealerRater Dealer of the Year Award is reflective of our long-standing commitment to create exceptional customer experiences. Exceeding customer expectations is not an easy task. However, this is exactly what we strive to do every day here at Country Hyundai.” “Today’s car shoppers pay attention to reviews and a dealership’s online reputation, which makes the significance of the DealerRater Dealer of the Year Awards crucial to dealers looking to thrive in today’s business environment,” added Oldershaw. DealerRater has a reachable audience reach of more than 32 million consumers each month.
swagen in Danvers and Lawrence M. Gordon of Colonial Volkswagen in Westborough and Colonial Volkswagen of Medford. Each year, these Wolfsburg Crest Club Awards are given for outstanding commitment, customer service, professionalism, service, customer care, as well as dealership milestones, such as highest sales in a region, highest certified pre-owned sales, and more. www.msada.org
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NEWS from Around the Horn BOSTON
Nine Dealerships Earn J.D. Power Awards This year nine Massachusetts dealerships were presented with the J.D. Power Customer First Award for Excellence. The selected dealerships achieved the highest level of customer experience recognition in the program’s five core areas: People, Facility, Processes, Customer Performance Metrics, and Training Certification. The Customer First Award for Excellence was created by dealers and J.D. Power to improve customer satisfaction with Chrysler, Jeep, Dodge, Ram, and FIAT dealerships in the United States with a specific focus on sales, employee training, facility condition, and service experience. The program was originally launched in October 2015. The dealerships who won this year are: Brigham-Gill Chrysler Jeep Dodge Ram in Natick; Central Chrysler Jeep Dodge Ram of Raynham; Colonial South Chrysler Jeep Dodge Ram in Dartmouth; Herb Chambers Chrysler Jeep Dodge Ram of Millbury; McGovern Chrysler Jeep Dodge Ram in Newton; Planet Chrysler Jeep Dodge Ram in Franklin; Quirk Chrysler Jeep Dodge Ram in Marshfield; Quirk Chrysler Jeep in Braintree; and Quirk Chrysler Jeep of Dorchester. SALEM
Local Dealerships Are Feeling Presidential It is a small class of dealerships that earn the prestigious President’s Award from American Honda Motor Co. This year, Massachusetts dealerships Honda North in Danvers and Herb Chambers Honda of Seekonk were among the national winners. Honda North, a member of the International Cars family of dealerships, has been named a recipient for the ninth consecutive year. It is their 12th time overall. In order to qualify for the President’s Award, a dealership must meet all award criteria and fully achieve its new-vehicle sales objective. “We’re humbled and honored to once again be recognized by American Honda for this prestigious award,” said Joseph Hajjar, General Manager of Honda North. “We’re especially grateful for our incredible customers without whom there’s no way we could have achieved such an honor.” Herb Chambers, President of the Herb Chambers Companies, said, “We could not be more proud of our Herb Chambers Honda of Seekonk team for earning the President’s Award from Honda. A commitment to exceptional customer service is our top priority, and this award proves MARCH 2019
Massachusetts Auto Dealer www.msada.org
MSADA CAMBRIDGE
Aptiv Partners With Local AI Startup Aptiv PLC, the parent company of MIT self-driving car spinout NuTonomy, recently announced a commercial partnership with Affectiva, a Boston-based startup that has developed artificial intelligence (AI) software to identify the cognitive state of drivers. Affectiva, which was spun out of the MIT Media Lab, uses its technology to determine in real time if a person in a vehicle is paying attention to the road or if they are distracted. The sensing tech takes into account changes in eye movement and facial expression. “Just as perception and detection of objects outside the vehicle are critical enablers of advanced driver assistance systems, our in-cabin scalable solutions enable us to accelerate interior sensing advanced feature development to a future state of understanding and predicting intent — critical building blocks in a semi- or fully-autonomous world,” Aptiv wrote on its blog. Integrating the software allows Aptiv to build safe, intelligent vehicles for mobility providers and fleet management companies, according to the release.
that all of the hard work is paying off.” The automaker’s annual award is presented to top-ranking Honda dealerships throughout the country based on their achievement of excellence in all areas of operation — customer service and satisfaction, sales, training, and facility. “Since its inception in 1995, the President’s Award has been recognizing top dealers who are unwavering in their pursuit of excellence and customer care. These dealers have proven their dedication to their customers by achieving the rigorous standards established for this award,” explained John Mendel, executive vice president of sales for Honda. SEEKONK
Five in a Row for Chambers Honda The Herb Chambers Companies announced that its Herb Chambers Honda of Seekonk location has been awarded a 2019 DealerRater Consumer Satisfaction Award for a fifth consecutive year. The annual recognition is given to auto dealerships that deliver outstanding customer service as rated by online consumer reviews. DealerRater, the world’s leading car dealer review website, created the Consumer Satisfaction Award program to let online car shoppers instantly spot dealers that provide high-quality customer service.
“We would like to congratulate Herb Chambers Honda of Seekonk,” said DealerRater General Manager Jamie Oldershaw. “DealerRater’s extensive review database allows shoppers to identify dealerships that are providing excellent customer experiences, and it’s clear that Herb Chambers Honda of Seekonk stands out amongst its peers in the U.S.” “This is a wonderful award for our Herb Chambers Honda of Seekonk dealership,” said Herb Chambers, President of the Herb Chambers Companies. “Our number-one goal is to create an exceptional customer experience at all of our locations, and earning a fifth straight Consumer Satisfaction Award shows us that our goals are being met on a consistent basis. Thank you to DealerRater for this great honor.” Herb Chambers Honda of Seekonk has achieved consistently high scores on the DealerRater website, placing it among the top dealerships nationwide. Consumer Satisfaction Awards are given to the top 10 percent of U.S. new-car dealers based on their PowerScore™. “We at Herb Chambers Honda of Seekonk would like to thank all of our clients for helping us achieve this high honor,” said Scott Birtles, Herb Chambers Honda of Seekonk General Manager. “We would also like to thank our staff and support team for all of their efforts this past year.” t www.msada.org
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ACCOUNTING
MSADA
The First Quarter 2019 Slow Down Could Be Worse Than You Think Jeffrey J. Caruso
O’Connor & Drew, P.C. Jeffrey
has experience
in audit and tax services to closely held businesses
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Profitability numbers in 2019 for most auto dealers are lagging behind what we saw in the first few months of 2018. Hopefully though, most dealers will end up ahead of last year after March wraps up and the spring and summer months help to crank things up again. Even during the good times, we always emphasize the importance of understanding cash flow. Maybe you didn’t pay much attention to it, because your bottom line was in the black. Now that your bottom line may not be quite as black as you’d like or might even be turning to an ugly shade of red, we may have your attention. In this article, we will identify the areas where some of your cash might be hiding and provide some suggestions on how to free it up. Proper analysis here will help you to understand where your cash is. Often it is not in the checkbook. A common industry guide is to have 20% more current assets than current liabilities or a ratio of current assets to liabilities of 1:2. Even though you may be at or above this metric, upon closer examination, you may see that the “working capital” is actually tied up in parts, used car equity, and aged receivables. If that is the case, then the capital is not really “working”, other than maybe against you. The common term for cash that may be MARCH 2019
tied up is “frozen capital.” The best example of this is parts inventory. Without a doubt, you need to invest in your parts, but you don’t need a 90-day supply. A properly utilized inventory management system should allow dealers to manage their inventory down to the absolute minimums. Parts employees should be reminded, for instance, to get a deposit when a customer needs a special part. Get creative with pay plans and make sure the parts department is on the hook for any inventory management problems. To understand the impact to cash flow of maintaining excess inventory, let’s use the 45 days’ supply standard. You roughly need to have 1.5 months of inventory on hand. If you are selling $150,000, your inventory should be $225,000. At a 60day supply, your inventory would now be $300,000. An extra $75,000 is now tied up
“Proper analysis here will help you to understand where your cash is.” unnecessarily. This cash can be use somewhere else. Until recently, the cost of funds has stayed in check. However, at the close of 2018 we saw that many dealers had a net interest expense related to their floorplan. This is due, both in part, to swelling new car inventories and an uptick in interest rates. With floorplan costs on the rise, depositing that cash into a floorplan offset account or paying down a line of credit is a better option than having extra parts inventory. However, we are willing to bet that this is not the only place where your cash may be tied up. Other areas include receivables and vehicle inventory. The appropriate days’ supply of vehicle
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inventory can vary by model and whether it is a new or a used unit. Managing to a 60-day used supply and a 90-day new supply may seem too aggressive to some, but it’s a long-standing practice of many profitable dealerships. Inventory supplies that are higher are either tying up used vehicle equity or impacting your borrowing costs. Taking a “blow” on a unit to free up cash can be difficult to handle, but if managed properly you will, in most cases, end up with a better unit to sell at a profit. Consider an “operational” write-down on some aged units to get them off the lot. Customer and warranty receivables can also present a problem. No one knows when, but everyone thinks a recession is coming. We certainly have had a great run in the current cycle; however, it is best to reduce the dealership’s risk when possible by limiting the extent of credit granted to customers for parts. Dealerships should formalize the credit process with a credit application and reference checks if there is any question about a customer’s credit worthiness. This is critical in a large wholesale parts business. A good benchmark to follow is that parts and service receivables should be roughly no more than 50% of the current month’s retail and wholesale parts and service sales. For warranty receivables, the amount of cash tied up in the receivable balance is correlated to how often the manufacturer is paying claims. If you are paid monthly, then your balance should be roughly one month’s sales. With warranties and other factory receivables, the paperwork must be impeccable, and factories are less and less likely to take a resubmission. If you are unsure about how your net income or loss has impacted your cash position over a period, you should consider conducting a cash flow analysis. t
In Memoriam IN MEMORIAM
Ira Rosenberg Prime Motor Group founder Ira Rosenberg, a tireless salesman and entrepreneur who loved people and never took “no” for an answer, died peacefully, with his family by his bedside, on March 28. Rosenberg, a straight-talking, wisecracking veteran of the car sales industry, leaves behind a legacy that includes a multi-state auto dealership chain with 1,800 employees. Rosenberg grew up in Malden, Massachusetts, and as a kid worked as a soda jerk at the local drug store. He joined the Navy in 1955, and began his auto career in 1960 changing tires in a used-car lot at Porter Chevrolet in Cambridge, while attending Suffolk University. Growing up poor and not doing well in school, he soon saw the automotive industry as his ticket to success. He finally graduated to the showroom floor and sold his first car at Sea Crest Cadillac Pontiac in Lynn in 1970. “The minute I sold my first car, I knew that it was for me. I loved it,” Rosenberg said. “The first car was a Chevrolet, a 1950 Chevrolet Impala coupe, turquoise bottom, white painted roof. In those days we had painted roofs.” Frustrated with the cutthroat nature of the dealership, Rosenberg opened up a used car lot on Highland Avenue in Salem “with two borrowed used cars and my last paycheck of $140.” In 1975, he bought his first Toyota dealership and he would go on to buy several dealerships, acquiring seven in Danvers, all within a half-mile of each other. By the 1980s he had created the Ira Motor Group, the dealership chain that branded itself with Rosenberg as the face and the signature slogan, “Ira, Ira! Zero down at Ira!” His son, David Rosenberg, earned an MBA from Columbia University and took an interest in the family business, and worked side-by-side with his father until they decided to sell
Ira Motor Group to Group 1 Automotive in 1999. The move also marked Ira Rosenberg’s first retirement from the car business. That retirement didn’t last, and he famously told his wife Judy that if he couldn’t go back to work he would need to get a lobotomy. He soon returned to the automotive industry, purchasing three car dealerships in Maine during the early 2000s. These formed the beginning of Prime Motor Group, which would later merge with David Rosenberg’s Clair Auto Group, a nine dealership operation across New England. The Rosenbergs worked together with David acting as CEO and Ira as the key adviser until he retired from the business in October 2017 after nearly 60 years in the business.
In his later years, Rosenberg liked to tell humorous stories about those early days in the car business, where tough, often eccentric salesmen would sometimes yell at customers, steal sales from each other, and pull various underhanded tricks to get an edge. “Maybe I shouldn’t be telling you this, but at (the Chevrolet dealership where Rosenberg first worked), we had offices, and every office was bugged,” he recalled. “The sales manager would have you go to the customer and try to get the best price and then come back, and we could turn on the thing, and you’d listen to the husband and wife go, ‘Well I’m not going to pay him any more,’ or, ‘We’ll give him a little more money,’ something like that.” t www.msada.org
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Patrick Manzi
NADA Senior Economist
Boyi Xu
Economist
MARCH 2019
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MSADA
NADA MARKET BEAT
JANUARY 2016
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TRUCK CORNER
What Mardi Gras & The Truck Industry Have in Common Traditions are what define our industry
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.
What do Mardi Gras, NADA’s centennial celebration, and I all have in common? We all have a connection to the city of New Orleans, where the biggest celebrations take place. And whether you had the fortune to experience NADA’s 100th anniversary in 2017 or this year’s Mardi Gras in the Big Easy, those of us in the commercial truck industry should always find reasons to celebrate. As a Louisiana native, I wanted to take the opportunity to share the rich history of Mardi Gras with you and encourage truck dealers to take time to celebrate your own legacies and traditions. The first Mardi Gras took place on March 3, 1699, thanks to French explorers Pierre Le Moyne d’Iberville and Sieur de Bienville, who landed near present-day New Orleans. The explorers held a small celebration and dubbed their landing spot Point du Mardi Gras. In the decades that followed, New Orleans and other settlements began marking this “holiday” with street parties, masked balls, and lavish dinners. In 1837, the first recorded New Orleans Mardi Gras parade took place and eventually evolved into a weeks-long festival, a rich tradition that continues to this day. My family and I have had the fortune of being on the streets of New Orleans to experience the revelry with locals and visitors from all over the country. It is amazing how a celebration brings people together. Although Mardi Gras is over, I hope a similar
positivity and upbeat spirit continues to flourish wherever you are in the country. While you may not hold parades, we should celebrate our successes, such as meeting our dealership objectives, hitting high sales numbers, and furthering our fleet with the safest and most fuel-efficient trucks ever. We should appreciate good moments, such as supporting our local communities and making a difference as philanthropists and engaged members of our community. Most of all, we should always note our own histories: where we came from; how we started in the truck industry; and how we can keep our traditions alive so that they are preserved for future generations to come. NADA’s own 100th anniversary in New Orleans was a prime example of how worthwhile it is to celebrate our shared history and everything we have worked toward through decades of change and evolution. As truck dealers, we will always have peaks and valleys. Strive to find your own Mardi Gras and celebrate the good times when they come around. Reminder: Our annual ATD Congressional FlyIn is June 19-20 in Washington, D.C. Please consider attending to lobby your member of Congress as we work to eliminate the federal excise tax on heavy-duty trucks. We need your dealer input in order for us to be successful. t
“We should always note our own histories: where we came from; how we started in the truck industry; and how we can keep our traditions alive.”
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NADA Update
By Scott Dube
Debunk Mode
We need to make sure our message rings out amidst the noise 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. As the auto industry continues to confront issues from all sides — regulators, legislators, our own manufacturers among them — it is always important to make sure that we are getting our message out there. Avoiding the opportunity to have a platform means others will take up that space. I am thrilled that NADA is growing its communications team in order to better illustrate for the public why the franchise dealer model remains in the best interest of consumers and their communities. As you will see below, NADA works from several angles day-in and day-out to make sure that unfavorable narratives, and even mistruths, are corrected. As your NADA Director, I look forward to working to further these goals as we roll onward.
NADA Bolsters Communications Team NADA has announced two staff promotions, as well as the hiring of Juliet Guerra, a veteran communicator and public affairs professional, as director of media relations. Jared Allen was promoted to vice president of communications earlier this year. Allen joined NADA in 2015 as senior director of media relations. He will continue to oversee NADA’s media-relations engagement and strategy and serve as the organization’s primary spokesman. He also will oversee much of NADA’s external communication strategy – including message development, digital communications, and policy speechwriting – and will serve as a senior member of NADA’s policy-development team. Additionally, Ben Tesfazghi has been promoted to manager of legislative affairs. Tesfazghi joined NADA in 2016 as a legislative research analyst. In his role as manager, Tesfazghi will help implement NADA’s legislative agenda by engaging with members of Congress and congressional staff, as well as developing advocacy documents regarding NADA’s legislative priorities. In her role as director of media relations, Guerra will help
NADA further build out its advocacy communications capabilities. She will serve as one of the organization’s media liaisons and spokespersons, reporting to Jared Allen. Prior to joining NADA, Guerra was senior director at The Herald Group, a full-service public affairs firm, where she planned and implemented integrated communications strategies for corporations and trade associations, including the Japan Automobile Manufacturers Association. She also launched the firm’s local grassroots field offering. Prior to The Herald Group, Guerra was a vice president of corporate affairs at Sentinel Strategic Advisors, a D.C.based boutique political consulting firm. At Sentinel, Guerra advised corporate and industry association clients on political giving and government affairs engagement strategies. Earlier in her career, Guerra was a senior project manager at Direct Impact, a subsidiary of Burson Cohn & Wolfe and a leading grassroots public relations and branding firm. There, she planned and implemented data-driven grassroots communications campaigns to influence public opinion, brand reputation, and purchase consideration for corporations, including Ford Motor Company. “It’s an incredibly exciting time to join the NADA team,” Guerra said. “Auto dealers are an integral component of the U.S. auto industry, the U.S. economy, and to thousands of local communities. I look forward to making a positive impact on their businesses, their customers, and their advocacy efforts.” Guerra is a Dallas native and a graduate of Southern Methodist University with a bachelor’s degree in business administration.
The Curious Case of the FICO Indirect Financing “Stats” Patrick Manzi, NADA Senior Economist A recent item in Automotive News that many readers may have glossed over nearly caused me to fall out of my chair. The story was about a recent FICO survey showing that the number of customers who acquired new-vehicle financing at the dealership had dropped 10 percentage points from 2017 to 2018 and was now down to 63 percent. That was certainly news to me. But I suspected something was off when I read that the 2017 number was 73 percent. Because that is just not accurate. As we know, the true figure is much higher than that. So I looked at the JD Power PIN data. Sure enough, my
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NADA Update concerns that I had somehow missed an absolutely earth-shattering development in auto financing were unfounded. According to the PIN data, the share of new-vehicle purchasers who utilized dealer-assisted financing was 83.1 percent in 2017 and 83.7 percent in 2018, confirming that (1) it had not moved and (2) was far higher than suggested by FICO. So what happened? Well, the Automotive News story was not inaccurate. That is because it was just reporting on a FICO survey. But the FICO survey data is – to be blunt – just way, way off target. A few things are probably happening here. The first is the sample size. FICO surveyed 510 customers in the U.S. That’s compared to millions of transactions from more than 14,000 reporting retailers that make up the PIN dataset. The second is related to how the data was collected. FICO was using a customer survey, meaning their data was
NADA works from several angles day-in and day-out to make sure that unfavorable narratives, and even mistruths, are corrected.” dependent on customer recollections of how they financed new-vehicle purchases. But one could easily see an incredibly high rate of unintentional misreporting here, given that a customer’s understanding of what type of financing he or she engaged in might be inaccurate. For example, does every customer who obtains dealer-assisted financing from a lending source that does not contain the name of the automaker or the dealership understand that it is not, in fact, a direct loan that they obtained themselves? My guess is probably not. The PIN data, on the other hand, is based solely on how the transaction actually occurred; it is rock solid. To be fair, Automotive News‘s coverage of this FICO survey was primarily to convey FICO’s findings on what customers say they intend to do in the future. In this regard, there is potentially some interest in knowing that, according to MARCH 2019
MSADA FICO, “many” customers who chose dealer-assisted financing for their last vehicle purchase would not choose it again. But there are numerous problems with how the alternative options were explained. And, of course, there is still the glaring sample-size problem. As an economist, I would need to see much more robust data and presentation before I even started drawing any conclusions. The one conclusion I can draw as a result of this is that dealer-assisted financing is as healthy and robust today as it was last week, last month, and last year.
February Sales Edge Lower Nationwide Through February, new light-vehicle sales were down 2.5% compared to this time last year. The monthly SAAR of 16.53 million units represented the lowest monthly SAAR since February 2015. The crossover segment continued to make major gains, ending the month with almost 40% market share year-todate. Sales in the first two months of the year have been held back by crippling winter storms, the federal government shutdown, and uncertainty surrounding tax refunds. Vehicle affordability will be a concern throughout the year as new-vehicle prices and borrowing costs both continue to rise. We expect many consumers will gravitate to the used-vehicle market, with dealer lots full of off-lease vehicles offering many of the same features as today’s new vehicles—but at a significant discount. We expect 2019 to end with light-vehicle sales of 16.8 million units.
The Automotive Forum Returns to NYC on April 16 The 2019 Automotive Forum – held on the eve of press days at the New York International Auto Show – returns to the Grand Hyatt in midtown Manhattan for a full day of speaker presentations and panel discussions on Tuesday, April 16. The 10th annual Automotive Forum – hosted by NADA, J.D. Power, and the New York auto show – brings together automotive executives, new-car dealers, thought leaders, and others to discuss issues that will impact the U.S. and global auto industry and overall economy. The OEM speaker lineup for 2019 includes: • Bob Carter, executive vice president of sales, Toyota Motor North America; • Scott Keogh, president and CEO, Volkswagen Group of America; • Anders Gustafsson, president and CEO, Volvo Car USA; • Fred Diaz, president and CEO, Mitsubishi Motors North America; and • Erwin Raphael, chief operating officer, Genesis Motor America. t
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www.msada.org Massachusetts Auto Dealer MARCH 2019 For more information contact Charles Muise • (781) 431-1450 • cmuise@neadinsurancetrust.org