Page 1

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

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

D

E

A

L

E

R

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

February 2013 • Vol. 26 No. 2

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

Dealer of the Year


Call Jean Fabrizio (617) 451-1051, ext. 229, or email jfabrizio@msada.org for your scholarship application, eligibility and details.

May 17, 2013


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

auto D

A u t o D e a l e r M Ag a z i n e Robert O’Koniewski, Esq. Executive Editor Tom Nash Editorial Coordinator nashtc@gmail.com Subscriptions provided annually to Massachusetts member dealers. All address changes should be submitted to: MSADA by e-mail: pfellows@msada.org Postmaster: Send address change to: One McKinley Square, Sixth Floor Boston, MA 02109 ADVERTISING RATES Inquire for multiple-insertion discounts or full Media Kit. E-mail tnash@msada.org Quarter Page: $450 Half Page: $700 Full Page: $1,400

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

A

L

E

R

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

St a f f D ir e ct o ry Robert O’Koniewski, Esq. Executive Vice President rokoniewski@msada.org Jean Fabrizio Director of Administration jfabrizio@msada.org Paul Fellows Administrative Assistant/ Membership Coordinator pfellows@msada.org

E

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

4 6 10 12 14 15

From the President: A Strong Turnout THE ROUNDUP: Fire

and Ice

AUTO OUTLOOK Accounting: Warranty Parts at Retail Rates LEGAL: The New HR Landscape INSURANCE: Is Your Section 125 Plan in Compliance?

16 Cover Story:

19 22 28 30

Dealer of the Year NADA Convention NEWS From Around the Horn NADA UPDATE: Notes from the Convention Economic Update: Weak GDP Suggests Economy Stalled

LAR, 9 BlumShapiro, 24 Boston Herald, 32 Lynnway Auto Auction, 25 Nancy Phillips Associates Inc, 24 Reynolds and Reynolds, 27 O’Connor & Drew, P.C., 31 Southern Auto Auction, 22

Auto Dealer is published by the Massachusetts State Automobile Dealers Association, Inc. to provide information about the Bay State auto retail industry and news of MSADA and its membership.

www.msada.org

Massachusetts Auto Dealer FEBRUARY 2013


4

from the President

by Scott Dube, MSADA President

A Strong Turnout

Massachusetts made its presence felt at the NADA Convention

A

s you know the annual NADA/ATD Convention is the most high profile event for dealers nationwide. It’s a time for both celebrating the success of our industry and talking frankly about the challenges we’re facing from all angles. Like last year, attendance was up, and despite the blizzard many Massachusetts dealers made the trip down to Orlando. MSADA always works to have a strong presence at the Convention. Our reception on Saturday night, co-sponsored by O’Connor & Drew, was well attended. We appreciate their cosponsorship and the continued support of MSADA. I would also like to thank those of you who made the trip down to Orlando. It’s difficult to take time away from the store to attend events like this -- especially hundreds of miles away for several days. Your participation is crucial in making events like these a success, but more importantly staying connected with the overall direction of our industry is in all our best interests. Perhaps no dealer from Massachusetts understands that better than Ray Ciccolo, who was our 2013 TIME Dealer of the Year candidate at the Convention. Ray has worked tirelessly for Massachusetts dealers for decades, serving both within our Association and as NADA Director. As a Dealer of the Year candidate, Ray was certainly a standout. His charity work, which ranges from fundraising for local causes to running and establishing orphanages around the world, made him a popular candidate for the top award. It was a thrill to get to go down to Orlando and see one of our own in the running for such a prestigious honor, and I hope you will join me in congratulating him on his accomplishments. See our cover story about Ray on page 16. Of the many great speakers who presented that weekend, our own Massachusetts dealer and national ATD Chairman Dick Witcher was one of the highlights. Witcher had wise words for

FEBRUARY 2013

Massachusetts Auto Dealer www.msada.org

his fellow truck dealers that obviously apply to all of us: “Truck dealers need to commit to the task of educating and informing people, most importantly our elected officials, of who we are and what our purpose is. They need to have a deeper understanding of our business and the economic engine it is.” As you’ll see in these pages time and again, that task is never ending. The Convention is a great time to reflect on why it’s so important to defend our industry, and to recognize those who do so with so much passion. Congratulations again to Ray on getting some well deserved time in the limelight.

Tesla We continue to work on the Tesla issue. We are committed to ensuring not only Tesla but all companies that want to do business here in Massachusetts follow the rules and respect the franchise system. We know how important the franchise system is, both to our state economy and to the consumer who derives great benefits from franchise law. Remember, we follow the rules, take care of the customer and are bound by the laws of the commonwealth, it’s not too much to ask that manufacturers that want to do business here respect the franchise model and do the same. It’s the least that consumers and our employees deserve!

Annual Meeting Planning Continues Look for our “Save the Date” card and more details coming soon — for now we are excited that we have nailed down the location as the Mariott Long Wharf in Boston, which like the Taj hotel in 2011 will be a beautiful location. In the meantime, should you have any questions, please contact Executive Vice President Robert O’Koniewski at rokoniewski@msada.org or (617) 451-1051.

t


MSADA

A ssociate M ember D irectory Name

Msada Board Barnstable County Gary Beard, Dick Beard Chevrolet

Berkshire County Brian Bedard, Bedard Brothers Auto Sales

Bristol County Richard Mastria, Mastria Auto Group

Essex County William DeLuca, Woodworth Motors John Hartman, Ira Motor Group

Franklin County Jay Dillon, Dillon Chevrolet

Hampden County Jack Sarat, Jr., Sarat Ford

Hampshire County Bryan Burke, Burke GMC

Middlesex County Chris Connolly Jr., Herb Connolly Motors Scott Dube, Bill Dube Hyundai

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

Plymouth County Christine Alicandro, Marty’s Buick GMC Isuzu

Suffolk County Robert Boch, Expressway Toyota

Worcester County Steven Sewell, Westboro Mitsubishi Steve Salvadore, Salvadore Auto

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

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

NADA Director Don Sudbay Jr., Sudbay Motors

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

Contact Telephone

ADESA Boston Chris Carli (508) 270-5403 Admirals Bank John Saviano, Jr. (401) 248-7229 ADP Dealer Services Maria Trezza (973) 974-4020 Albin, Randall & Bennett Barton D. Haag (207) 772-1981 American Fidelity Assurance Co. Dan Clements (800) 450-3506 ext.6515 AutoRaptor (RAL) Howard L. Leavitt (401) 421-6533 Bank of America Maryanne Recupero (800) 991-1770 Bellavia Blatt Andron & Crossett, PC Leonard A. Bellavia, Esq (516) 873-3000 Blum Shapiro John D. Spatcher (860) 561-4000 Boston Globe Mary Kelly (617) 929-8373 Burns & Levinson LLP Paul Marshall Harris (617) 345-3854 Construction Management & Builders, Inc. Kate Sullivan (781) 246-9400 Curran EasyCare Inc. Mike Douglas (770) 246-9724 CVR Scott Herbers (800) 668-2332 DealerTrack Ernest Lattimer (516) 547-2242 Downey & Company James Downey (781) 849-3100 Ethos Group, Inc. Drew Spring (617) 694-9761 F & I Resources Jason Bayko (508) 624-4344 Federated Insurance Chris Welch (724) 766-6666 First Citizens Federal Credit Union Joe Ender (508) 979-4728 Fisher & Phillips LLP John Donovan (404) 240-4236 Grant Thornton LLP Alan Oslomowski (508) 926-2200 Greenwood Distributors James Viara (508) 336-5040 Huntington National Bank Elizabeth Donovan (508) 505-7435 Improved Illumination James Feeney (508) 801-9205 Jewett Construction Alison Jewett (603) 895-2412 Key Bank James Q. Moretti (781) 558-5132 Leader Auto Resources, Inc. John Ackermann (518) 857-8853 Lynnway Auto Auction Bob Brest (781) 596-8500 M & T Bank John Federici (508) 699-3576 MetroMedia Energy Timothy Teevens (800) 828-9427 Micorp LLC Ryan Kim (508) 832-9816 Mid-State Insurance Agency John Pietro (508) 791-5566 Mintz Levin Kurt Steinkrauss (617) 542-6000 Murtha Cullina Thomas Vangel (617) 457-4000 Nancy Phillips Associates, Inc. Nancy Phillips (603) 658-0004 O’Connor & Drew, P.C. Kevin Carnes (617) 471-1120 Paine Auto Auction Kyle Paine (781) 595-2900 Performance Management Group, Inc. Mark Puccio (508) 393-1400 Ray-Jurgen Richard Thibadeau (860) 585-0111 R.L. Tennant Insurance Agency, Inc. Walter F. Tennant (617) 969-1300 Resource Management Group J. Gregory Hoffman (800) 761-4546 Reynolds & Reynolds Marc Appel (413) 537-1336 Robinson Donovan Madden & Barry, P.C. James F. Martin, Esq. (413) 732-2301 Samet & Company John J. Czyzewski (617) 731-1222 Schlossberg, LLC Michael O’Neil, Esq. (781) 848-5028 Sentry Insurance Company Eric Stiles (715) 346-7096 Shepherd & Goldstein Ron Masiello (508) 757-3311 Silverman Advisors, PC Scott Silverman (781) 591-2886 Southern Auto Auction Tom Munson (860) 292-7500 Sovereign Bank Richard Anderson (401) 432-0749 Target Dealer Services Andrew Boli (508) 564-5050 TD Auto Finance BethAnn Durepo (603) 490-9615 TD Bank Michael M. Lefebvre (413) 748-8272 Wells Fargo Dealer Services Christopher Peck (508-314-1283) Wicked Local Media Massachusetts Jay Pelland (508) 626-4334 Zurich American Insurance Company Steven Megee (800) 443-4513

www.msada.org

Massachusetts Auto Dealer FEBRUARY 2013

5


6

The Roundup

Fire and Ice by Robert O’Koniewski, Esq. MSADA Executive Vice President While winter storm Nemo blanketed much of the northeast with 2-3 feet of snow, over 70 Massachusetts dealers found their way at an ideal time to hit Orlando, Florida for the 2013 National Automobile Dealers Association, where there was nothing but sunny, 80 degree weather throughout the event. The weekend proved special for one of Massachusetts’ own dealers. Ray Ciccolo, our past NADA director, carried the honor of Massachusetts TIME Magazine Dealer of the Year into the competition against 56 other representatives from across the country. The state honor is based on a compilation of works on behalf of the state association, efforts for social and charitable organizations, and commitment to the community. Although Ray did not receive the national award, he and his colleagues on the stage that day are all winners for the successes on behalf of their fellow dealers and fellow citizens where they live and work. Please see our cover story on Ray beginning on page 16. Following Saturday’s opening session, at which Ray and his colleagues were honored, we held our state cocktail reception at the Peabody Hotel, jointly sponsored by our partner O’Connor & Drew, where MSADA President Scott Dube welcomed Massachusetts dealers and MSADA associate members in town for the festivities. Ray also gave warm remarks with his family in attendance, including his wife, Grace. If there is one word that can be used to describe Ray it is “commitment”. Throughout his life and career, Ray exudes commitment to family, to country (once a Marine, always a Marine), to community (local and world), and to our industry. In all regards Ray’s contributions have been immeasurable and long-lasting. TIME could not have selected a FEBRUARY 2013

Massachusetts Auto Dealer www.msada.org

better representative to carry the moniker “Dealer of the Year.” Congratulations to Ray on a job well done!

Consumer Protection Committee Re-Forms While dealers from around the globe gathered in Orlando and experienced chamber of commerce weather calling for short sleeve shirts, shorts, golf clubs and tennis rackets, Massachusetts legislators were slogging through their winter doldrums to begin the effort to kick off the 188th session of the General Court House Speaker Robert DeLeo (D-Winthrop) and Senate President Therese Murray (D-Plymouth) began the organization process for each’s respective chamber, including the establishment of committee rosters. Election results and retirements led to the swearing in of less than twenty new faces on Beacon Hill (compared with 2011 when over 40 new legislators began their first term). Hand in hand with that go considerable changes among chairmanships and committee ranks. One of the committees that has oversight of issues of considerable import to us is the Joint Committee on Consumer Protection and Professional Licensure. This committee has jurisdiction over such issues as Lemon Law, our 93B franchise law, consumer protection laws such as the Car Buyers Bill of Rights, and the so-called “right to repair” act, which needs further action due to passage of the November initiative petition. As the 2013-2014 session commences, 7 out of the 17 Committee members will be new to this body, including four newly elected legislators – two senators (Ives and Lovely) and two repre-


MSADA sentatives (Cutler and Moran). Although Thomas Kennedy (D-Brockton) returns as the Senate chairman, the new House chairman is six-term representative John Scibak, a Democrat from South Hadley. Here are the committee members with their party and hometown (* indicates returning committee member): Rep. John Scibak, House Chair (DSouth Hadley) Rep. Paul Brodeur, House Vice Chair (D-Melrose)* Rep. Tackey Chan (D-Quincy)* Rep. Josh Cutler (D-Duxbury) Rep. Tricia Farley-Bouvier (D-Pittsfield) Rep. Frank Moran (D-Lawrence) Rep. Rhonda Nyman (D-Hanover)* Rep. Angelo Puppolo (D-Springfield)* Rep. Timothy Toomey (D-Cambridge) Rep. Steven Howitt (R-Seekonk)* Rep. Donald Humason (R-Westfield)* Sen. Thomas Kennedy, Senate Chair (DBrockton)* Sen. Anthony Petruccelli, Senate Vice Chair (D-East Boston)* Sen. Kathleen O’Connor Ives (D-Newburyport) Sen. Joan Lovely (D-Salem) Sen. James Timilty (D-Walpole)* Sen. Michael Knapik (R-Westfield)* As the legislative process gets into gear and the public hearings unfold, these individuals will be reviewing some of the most important legislation for dealers. For instance, this will be the starting point for the right to repair debate, again.

RTR - Three Time’s the Charm? First, as you may recall, the Legislature on July 31 set aside time on the last day of its 2012 formal sessions to pass a compromise bill that we, our franchise manufacturers, and the Right to Repair Coalition agreed on in an effort to bypass the planned November initiative petition. The governor signed this bill into law on August 7, thereby creating Chapter 241 of the Acts of 2012. Then, even though we were in agreement to promote a “Vote No on Question One” campaign to urge voters to reject the

initiative petition as unnecessary due to the passage of Chapter 241, several members of the RTR Coalition, led by AAA, broke away from that group to aggressively run an ad campaign calling for passage of the ballot petition. The initiative petition ultimately passed by voters at the November ballot by an 85%-15% margin, thereby creating Chapter 368, a RTR law in conflict with Chapter 241. Being stabbed in the back by unbroken deals is not a unique experience in politics, but one as prominent as this leaves much residual damage for parties to overcome as we now take a third swing at the issue. In an effort to reconfirm “a deal is a deal”, we, the OEMs and the Coalition, minus AAA and a few other smaller members in its group, have filed legislation, House 184, which would re-enact the law that was passed by the Legislature in July. The bill is sponsored by House leader Rep. Garrett Bradley (D-Hingham) and will be before the Consumer Protection Committee. Competing against our effort, AAA has filed legislation that would toy with certain aspects of the deal. A learned reading of the AAA bill does not shed light on the specifics of their alleged problems with Chapter 241. We can hope the public hearing will accomplish what AAA has not been able to do to date – articulate their actual issue with the original deal.

93B Legislation Last year, the Legislature passed and the governor signed into law Chapter 152 of the Acts of 2012, which addressed certain dealer-OEM issues through our franchise law, Chapter 93B, including establishing a formula for the parties to rely on to ensure dealers receive actual retail-level reimbursement for warranty work and parts. For this year’s session, your Government Relations Committee, chaired by John Hartman of the Ira Motor Group, developed a set of additional amendments to the franchise law. Filed by Senator Marc Pacheco (D-Taunton), a long-time ally of franchise dealers, Senate 129 also will be vetted by the Consumer Protection Committee. www.msada.org

Issues addressed in Senate 129 include the following: • Amends the price discrimination prohibition protection for dealers to identify the type of facility upgrade programs that violate price discrimination protections; • Prohibits vehicle surcharges by manufacturer to pay for warranty reimbursement at the statutorily required retail rate; • Clarifies the current limit on the manufacturer ownership of dealerships and direct sales of vehicles by manufacturers; • Protects dealers from investing in costly facility upgrades under the threat of termination when the dealer does not have a reasonable expectation to recoup the investment; • Limits how often the manufacturer can request a facility upgrade; • Places the burden on a manufacturer to justify the financial benefits of a facility upgrade; • Eliminates backdoor facility upgrade demands through untenable incentive programs; • Prohibits 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 goods or services of substantially similar quality from a vendor chosen by the dealer; and • Protects dealers from manufacturers’ using export chargebacks to penalize dealers for cars that get exported without dealer’s knowledge. Other members of the GRC are Scott Dube, Bill Dube Hyundai; Jack Madden, Jack Madden Ford; Charles Tufankjian, Toyota of Braintree; and Jim Boyle, Tuck’s Trucks. We will keep dealers informed as to the date of the public hearing and mobilizing our grassroots of dealers to contact legislators on this package of amendments.

UI Rate Freeze 5x On Friday, February 15, the governor signed a $115 million supplemental spending bill for FY2013 that freezes unemployment insurance rates at the current

Massachusetts Auto Dealer FEBRUARY 2013

7


8

The Roundup Schedule E, thereby saving businesses an estimated $500 million for the year. The rate freeze was made retroactive to January 1. This is the fifth rate freeze in as many years that we in the business community have sought and successfully won. According to state officials, the four previous UI rate freezes have saved Massachusetts businesses $1.7 billion.

Doc Prep Fee The beginning of the year is a perfect time for each dealer to review the amount of his or her documentary preparation fee charged on the motor vehicle purchase contract at each dealership. In Massachusetts there is no state law that sets the amount of the doc prep fee. Here in Massachusetts the doc fee cannot be additional profit but instead, as a fee charged for cost recovery purposes, must have a reasonable relationship to the costs incurred by the dealer for the doc prep activities.  It cannot include any RMV fees or the EVR (CVR/TriVIN) fee, nor can it have anything to do with the Title Preparation Fee. The Title Preparation Fee (which is on a separate line on the P&S) has been capped by the Legislature at $5. You cannot charge a titling fee higher than $5, nor can you roll your costs above the $5 into the doc prep fee. Any cost you incur in preparing or procuring title above the $5 amount cannot be passed on to the consumer other than through the gross profit earned on the vehicle. Additionally, our AG’s advertisement regulations require that the fee be fully disclosed on the Motor Vehicle Purchase Contract and in any advertised vehicle price.  Therefore, the fee cannot differ from customer to customer, or month to month, nor should it be waived for any customer.  It must be consistent for each customer.  Any deviation could hold you open to potential liability under the Mass. Consumer Protection Act (MGL Chapter 93A) and the AG’s regulations, which include stiff penalties, treble damages, and attorney’s fees.  Under this regulatory scheme, for instance if your ads include a $100 doc fee, and your MVPC includes a $100 doc fee, and you charge a FEBRUARY 2013

MSADA $100 doc fee that the customer then pays, you are OK. In effect, the fee is a separate component of the transaction and really has nothing to do with the vehicle price.  The fee is a mechanism for the dealer to incorporate a method of cost recovery for activities a dealer must go through for each purchase.  Similarly because the dealer must calculate the fee amount by looking at total transactional costs related to documentary preparation and dividing that by number of transactions, it cannot change day-to-day, week-to-week, etc.  An annual analysis will determine the doc prep fee for you.  Thus, it cannot be $150 for six months, then drop to $75 for an OEM promotion, and then shoot back up to $150. In short, if you are charging a “doc fee,” be sure you can justify the amount and charge every customer the same amount. Do not charge anyone a title preparation fee higher than $5. (You are not, however, required to put an itemization on the P&S. It is sufficient to have an explanation available if you are asked by a customer to justify the “doc fee.”) Some states have laws that set the amount that the dealers cannot exceed, and some include a statutory procedure one must submit to in order have the fee approved. Of the 50 states, Massachusetts is one of the few that appears most open to individual dealership calculation without governmental approval.

MSADCF Auto Tech Scholarships Available Applications for the Massachusetts State Auto Dealers Charitable Foundation’s 2013-2014 Auto Tech Scholarships are now available on our Foundation’s website at www.madcf.org/autotech.php. 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 in excess of $700,000 to more than 200 students. A scholarship award is worth $6,000$13,000 each over two years.

Massachusetts Auto Dealer www.msada.org

Four years ago the Foundation’s scholarship program expanded to include not just manufacturer-backed programs but also general automotive technology programs at a greater number of colleges in the Massachusetts area. This gives dealers an even greater chance to capitalize on a highly skilled base of potential employees. To obtain additional information on the scholarship program, contact Jean Fabrizio at MSADA at (617) 451-1051 or by e-mail at jfabrizio@msada.org.

Regional Dealer Meetings Throughout the year we continue to conduct regional meetings across the state at which we provide an update on various legislative and legal issues your Association is addressing, as well as receive input from our member dealers on issues of interest. We also invite area legislators to attend the events to encourage active dialogue between the elected officials and local dealers. On February 22 we met in Hyannis with our Barnstable County dealers. Gary Beard, our MSADA director for the area, hosted the meeting at which several legislators attended: State Rep. Randal Hunt (R-Sandwich), State Rep. Sarah Peake (D-Provincetown), and State Rep. Cleon Turner (D-Dennis). Look for our announcements for upcoming meetings in the Merrimack Valley and Western Mass. In addition to these events, we will continue with our on-going practice of moving our Board meetings to different areas of the state and tying dealer-related presentations into those dates. As part of these events, on February 26 at the Peabody Marriott we hosted a seminar, “2013 Legal and Accounting Updates”, conducted by attorney Scott Silverman and O’Connor & Drew accountant Frank O’Brien. The seminar included a primer on how dealers can take advantage of the new warranty reimbursement formula to receive from the OEMs what is rightfully owed for doing the OEMs’ work for them. Check our mailings for events coming to your area.

t


99

www.msada.org

Massachusetts Auto Dealer DECEMBER 2012


10

AUTO OUTLOOK

FEBRUARY 2013

Massachusetts Auto Dealer www.msada.org


MSADA

www.msada.org

Massachusetts Auto Dealer FEBRUARY 2013

11


12

Accounting

Warranty Parts at Retail Rates – The Time is Now How to navigate your manufacturer’s hesitance with our 93B

by Frank O’Brien Frank O’Brien is a principal at O’Connor & Drew, P.C and is director of the internal audit and fraud division.

By this point, most dealers have at least a general knowledge of the new warranty law that is part of the amended 93B Dealer Franchise Law. It has been over six months since Governor Patrick signed the law into effect and many dealers are now benefiting from the additional gross profit that comes with factory approval. Since 2009, over 100 Massachusetts dealers have been approved for warranty parts sales at retail rates as the original 93B contained a retail parts provision. However, the old law provided little detail as to the method of calculation to substantiate a dealer’s “retail rate.” In the absence of a defined calculation method, several manufacturers (e.g. Ford, General Motors, Chrysler, Kia) required its franchised dealers to adhere to its National Warranty Reimbursement Policy. Others (e.g. MercedesBenz, Volkswagen, and Toyota) simply refused to comply. The new warranty parts law strengthens the language to the warranty reimbursement requirements of the manufacturers and eliminates any ambiguity by clearly defining the required method of calculation in order to determine a dealer’s retail rate.

The New Law Specifically, the new warranty law requires manufacturers to adequately and fairly compensate the motor vehicle dealer for labor, parts and materials furnished under the dealer’s vehicle warranty obligation. The new law defines “fair and adequate compensation” as the rate and price customarily charged for retail customer repairs. The new law also explicitly states that a dealer shall establish its retail rate by preparing a 100 sequential repair order analysis of customer paid repair orders that are normally used in warranty like repairs, and lists the types of parts to exclude. This language should limit the manufacturers’ ability

FEBRUARY 2013

to avoid compliance. It should be noted that the 100 repair order analysis often requires the dealer to accumulate substantially more than 100 total repair orders due to non-qualifying repair orders such as maintenance, internals and warranty. In our experience, the average submission includes 750 to 1,500 repair orders. It is important to understand that the manufacturers will not approve dealers for retail rates without preparing the 100 repair order analysis. Simply quoting the law and requesting a rate adjustment will not work without providing the supporting analysis to substantiate it.

Manufacturers That Have Approved At this point it is easier to list the manufacturers that have not approved any Massachusetts dealers. To the best of my knowledge, Toyota, Mercedes, Infiniti, Volkswagen and Fiat are the only manufacturers that have yet to approve dealers. Toyota, Mercedes and Volkswagen have all resisted based on the fact that they reimburse dealers at Manufacturers Suggested Retail Price (“MSRP”), which will be discussed more later in the article. While no Infiniti or Fiat dealers have submitted for approval, we are currently working on an Infiniti dealer so we hope to get an Infiniti approval soon. The remaining manufacturers have all approved in the state: Honda, Acura, General Motors, Ford, Chrysler, BMW, Audi, Nissan, Subaru, Hyundai, Volvo, Mazda, Land Rover, Jaguar, and Porsche.

Impact on the Bottom Line Most manufacturers reimburse dealers for warranty parts at a rate of cost plus 40%. The average dealer marks up retail parts at a much higher rate. Based on our experience, we’ve seen a wide range of approved mark-up percentages, ranging from cost plus 52% on the low end to cost plus 107% on the high end. The average dealer falls somewhere between 70% and 80%. The impact this will have on the dealership’s bottom line will vary based on the approved mark-up percentage and the volume of warranty part sales they generate. On the next page is an example of a General Motors dealership who sells about 85 cars a month. This dealership was approved at just over 80%, and as a result, added an additional $110,000 of gross profit annually. General Motors dealers seem to have the most warranty work of the Domestic 3. Luxury lines get the most bang for their buck as the

Massachusetts Auto Dealer www.msada.org


MSADA

13

average luxury line dealer should add $200,000 or more. On average, dealers should expect approximately $50,000 to $100,000 of gross profit annually. Some manufacturers (e.g. Mercedes, Nissan, Toyota, Volkswagen, Audi) reimburse their dealers’ MSRP on warranty parts. It is important to understand that “MSRP” is not actually retail. Dealers often charge their customers rates well above MSRP. Dealers should calculate the difference between the two rates and the expected impact an increase to retail would have on its bottom line. Remember, MSRP is a simply a rate controlled by the manufacturer.

Time is Money This process can be very time consuming. The sooner a dealer is approved, the sooner it can begin reaping the benefits of the higher rate. Due to the labor intensive nature of this project, it typically takes dealership personnel several months to submit and receive approval from the manufacturer. The manufacturer must respond to the dealer within thirty days of submission. However, the manufacturer has the ability to reject the submission if material errors exist. This has the potential to prolong the process. To avoid the delay, it is highly recommended that an experienced accounting firm or other professional be hired. We have assisted numerous Massachusetts dealers in obtaining retail rate reimbursements for warranty parts over the past few years. Because of our extensive experience on this issue, we have a solid understanding of the process and the parts that each manufacturer will accept as qualifying that will help ensure a timely submission and approval.

Tactics of the Manufacturers We have yet to see any direct retribution towards any of the approved dealers, which is a common fear amongst dealers. Although some dealers have endured warranty audits, there is no evidence that these audits were a direct result of their warranty parts approval. Dealers have been and will continue to be audited; it’s the nature of the beast. Additionally, as more dealers are approved, it limits the manufacturer’s ability to single out dealers. Despite the lack of direct retribution towards the dealers, the manufacturers have engaged some practices to minimize their cost relating to this issue. We have listed some below: • Recoupment – Nissan surcharges all of its Massachusetts dealers $55 per vehicle to recoup the additional warranty costs. • Failure to Pay on All Parts – The law states that the approved retail is to be paid on all factory warranty work including campaigns and recalls. Nissan and Mazda fail to pay on all its parts (e.g. remanufactured transmission) while other manufacturers have been rumored to refrain from paying retail on recalls or goodwill. • Dollar Limitation – Subaru limits the dollar value on which the approved rate is applied based on the dollar value of the parts in

the submission. • Option A versus Option C – General Motors transfers all approved dealers from Option C (automatic annual increase) to Option A (manual submission) for warranty labor rates. Some dealers object to this tactic since it places to onus on the dealer to properly manage its effective labor rate and ensure it does not drop below it warranty rate. This is truly a no brainer. In fact, one dealer called it “the biggest no brainer in the history of the automotive industry.” Dealers should submit for a rate increase as soon as possible in order to start capitalizing on the additional revenue. There is no reason to delay. If you would like any additional information, please call Frank O’Brien, CPA, CIA, CFE at (617) 471-1120.

t

www.msada.org

Massachusetts Auto Dealer FEBRUARY 2013


14

LEGAL

MSADA

by Joseph W. Ambash

The New HR Landscape: Hiring and Leaves of Absence Remember when a dealership — like most other employers — could hire and fire employees at will and hold employees accountable for their absences and leaves from work? Well, that isn’t entirely the case anymore, and the risks of making human resources mistakes can be very costly. Your government, both state and federal, is a participant with you in each phase of the employment relationship, from hiring, to managing employee leaves, to ending the relationship. They are looking over your shoulder. Here are a few key issues and the critical take-aways.

Hiring Recently, the Equal Employment Opportunity Commission started looking very carefully at the manner in which employers screen out applicants who have criminal records. Why? Because the EEOC has concluded that screening out individuals with criminal records has a disproportionate impact on minorities. Therefore, the agency has issued some guidelines about how employers are supposed to deal with background checks. If you conduct such checks – either by yourself or through a third party agency – it is important to maintain a written policy that says you will not automatically screen out applicants based simply on an arrest record. It is also important to take an individualized look at each applicant’s criminal record to determine whether it should, in fact, disqualify someone. For example, an individual with a larceny conviction applying for a cashier’s or bookkeeper’s job might legitimately be disqualified, but a detailer with such a conviction should not automatically be screened out, because it has little to do with the job. The date of a conviction also matters – if it occurred long ago and the individual has subsequently held responsible employment,

FEBRUARY 2013

automatically screening that individual out may be considered discriminatory if the result has a disproportionate impact on individuals of color. Massachusetts recently passed new regulations regarding criminal background checks. The regulations permit every employer in Massachusetts to have access to Criminal Offender Record Information (CORI) which is maintained on a public website administered by a state agency. But the regulations require companies who perform five or more CORI checks a year to have a written policy explaining how they use that information, and employers who rely on CORI information to disqualify an applicant must give the applicant a copy of the information. The takeaway: When hiring, be very aware of the new focus on background checks, and develop lawful policies to deal with this issue.

Leaves of Absence There are some recent developments in this area also. We all know about the Family and Medical Leave Act (FMLA) and the Americans With Disabilities Act (ADA). But did you know that the EEOC has issued new regulations about the FMLA, and that it has a special focus on employer leave and absenteeism policies? The FMLA governs unpaid leaves of absence, up to twelve weeks annually, for eligible employees for their own serious illness, for birth or adoption of a child, for the serious illness of a spouse or parent or for military-related issues of a spouse, parent or child. It also requires employers to permit eligible employees to take “intermittent” leaves – partial days off, for example – for serious illnesses. Recent regulations issued by the EEOC have created a new poster that employers must post in the workplace; certain revised forms; and

Massachusetts Auto Dealer www.msada.org

they have expanded certain requirements of military leave and intermittent leaves. The takeaway: Make sure your HR staff becomes familiar with the new requirements, and train your managers to understand that FMLA leave is guaranteed to eligible employees. The EEOC is also currently on a campaign to challenge employers whose absenteeism policies are considered too restrictive. For example, the EEOC maintains that a “no fault” absence policy which says an employee will receive discipline for exceeding a certain number of absences a year, is unlawful because it may not take into account FMLA absences and the need to provide “reasonable accommodations” to individuals with a disability who are protected under the ADA. Similarly, the EEOC takes the position that having a firm “cutoff” for leaves of absence – for example, saying an employee on a sick leave must return to work with no restrictions within a year – also violates the ADA because it does not take into account the need to accommodate the specific disabilities of employees. The takeaway: Dealers should pay careful attention to their leave of absence policies to make absolutely sure they comply with the FMLA and the ADA. The costs of non-compliance can be very high. The EEOC has achieved multi-million dollar settlements against companies whose policies were not in compliance with the EEOC’s interpretation of these laws.

Joe Ambash

is

managing

Boston office of Fisher & Phillips, a national law firm representing management in labor and employment law. He can be reached at jambash@ laborlawyers.com. partner of the


Insurance

MSADA

15

Is Your Section 125 Plan in Compliance? Avoid IRS disqualification with these steps

By Dan Clements American Fidelity Assurance

To learn more about how to keep your Section 125 Plan compliant, please contact Dan Clements with American Fidelity Assurance Company at 800-450-3506, ext. 6515 or via email at dan. clements@af-group.com.

A Section 125 Plan is a great program that allows employees to purchase certain eligible insurance benefits on a pretax basis. Regularly reviewing your plan to make sure it is compliant with IRS regulations will help it remain a valuable part of your employees’ benefit package. Areas of your plan to that should be reviewed are listed below.

Plan Document Requirements To be legal, the plan must be in writing and must operate in accordance with its written plan terms. An employer should have an up-to-date copy of its plan document. The document should be reviewed periodically by the employer and any inaccurate information should be revised. In particular, the employer should verify the following items are correct on the plan document: • plan year cycle; • insurance benefits, carriers, and descriptions; • eligibility of the insurance benefits offered under the plan; • eligibility requirements for participation in the plan; • flexible spending account minimum and maximum contributions (if offered); • non-elective (employer) contributions and elective (employee) contributions.

Plan Design Requirements A legal Section 125 Plan must offer a choice between at least one taxable benefit (such as salary) and one qualified ben-

efit (such as health insurance). A plan that does not offer this choice is not a Section 125 and may be disqualified by the IRS in the event of an audit. The plan must only offer eligible benefits as defined by the IRS. This includes health insurance (traditional plans, HMOs, PPOs, high deductible health plans, and self-insured plans), dental and/ or vision insurance, cancer insurance, disability insurance (long and short-term), and certain term life insurance. It could

rules established for those accounts. This includes the uniform coverage rule which states that a participant’s full Health FSA annual election must be made available to him/her regardless of the amount of contributions made to the account, and the “use or lose rule” which states that any funds remaining in a participant’s account at the end of the period of coverage are forfeited back to the employer. An employer is also restricted on the use of any FSA forfeitures. Using FSA forfei-

“A legal Section 125 Plan must offer a choice between at least one taxable benefit (such as salary) and one qualified benefit (such as health insurance).” also include Flexible Spending Accounts (FSA), such as Dependent Day Care FSA and Health FSA (also known as Unreimbursed Medical Accounts, as well as Health Savings Accounts (HSA). Offering benefits other than excepted benefits defined by the IRS that defer compensation is not allowable. The employer should have signed election forms for each employee that either shows the benefits elected under the plan or that the employee is waiving participation under the plan. The plan must also follow specific terms included in the document such as those pertaining to the grace period (if offered) and eligible mid-plan year election changes.

Flexible Spending Account Requirements A plan that offers one or more Flexible Spending Accounts must follow the

www.msada.org

tures other than as expressly allowed in the Code Section 125 Regulations could cause the plan to be out of compliance. The plan must also require that the FSA claims meet specific eligibility requirements and must be properly substantiated. The plan cannot allow for claims to be reimbursed that were incurred prior to the plan’s period of coverage. The information provided here is only a brief summary that reflects our current understanding of select provisions of the law, often in the absence of regulations. All interpretations are subject to change as the appropriate agencies publish additional guidance. American Fidelity does not provide legal advice – as such, we suggest that employers and individuals consult with their legal counsel and/ or tax advisors about how Health Care Reform may impact them.

t

Massachusetts Auto Dealer FEBRUARY 2013


16

Cover Story “I went in to buy a used car and came out buying the dealership.”

Dealer of the Year FEBRUARY 2013

Massachusetts Auto Dealer www.msada.org


MSADA

Working to the Top Ray Ciccolo went from humble beginnings to becoming one of the most successful auto dealers in the country, all while remembering his roots

R

ay Ciccolo once likened his occupation to a “human trash compactor.” Growing up in workingclass Cambridge, his first job was as a bottle breaker at the Ritz-Carlton in Boston. The multi-franchise dealer has come a long way since then. Today, his Village Automotive Group includes nine locations in Greater Boston and sells Audi, Cadillac, Honda, Hyundai, Nissan, Porsche, and Volvo brands. But he hasn’t forgotten his roots. In February, Ciccolo’s vast community support helped earn him recognition as TIME’s 2013 Dealer of the Year for Massachusetts. One of the industry’s most prestigious honors, TIME Dealer of the Year recipients are among the nation’s most successful auto dealers who also demonstrate a long-standing commitment to community service. Ciccolo was among only 57 auto dealers – out of 17,000 nationwide – nominated for the 44th annual award. Ciccolo said it was an honor to be nominated by MSADA Executive Vice President Robert O’Koniewski and the Board of Directors. “It was a wonderful experience. It was one of the highlights of my career to be nominated.” It’s a career full of highlights. Besides building a multi-dealership business from the ground up, Ciccolo has been one of the dealer community’s most important advocates. He served for 12 years as Massachusetts NADA Director, becoming a stalwart presence on Capitol Hill who helped make inroads with the state’s congressional delegation toward more business-friendly policies. “Ray has been the dealers’ go-to guy on Capitol Hill for over a decade,” O’Koniewski said. “Very few realize that his out-

reach to key members of Congress has had major positive implications for all dealers nationally. His focus always has been ‘What can I do to improve my fellow dealers’ situation?’” It’s Ciccolo’s work outside of the auto industry, however, that he seems to take the most joy in talking about.

Keys to Success Reflecting on growing up poor, Ciccolo has said education was a key to his growth as a person and his ultimate success as a businessman and a dealer. His accomplishments have allowed him to help other young people access the same opportunities. Ciccolo is a founding member of the Lexington Education Foundation, which provides grants to sustain excellence in public schools, and he has endowed a scholarship at his old high school to help underprivileged students. Ciccolo also established Keys to Success in Boston, a program that rewards students’ accomplishments with “KeyCards,” gift cards for area businesses. At the end of the year, one randomly selected KeyCard holder receives a refurbished used car from his company. Ciccolo has said these projects pay tribute to the importance of education, and help him give back to a society that assisted him in leading such a meaningful life. However, Ciccolo’s altruism doesn’t stop with the community that helped him reach his success. He and his wife, Grace, have taken their philanthropy international. The couple is currently building a home for orphaned babies in Haiti. Ciccolo is also a founding member of the Global Smile Foundation, which provides free surgical care for underserved children born with facial congenital deformities. And he supports Alliance for Children, a group that provides adoption services for children, birth families and adoptive parents around the world.

www.msada.org

Massachusetts Auto Dealer FEBRUARY 2013

17


18 18

Dealer of the Year “It was a wonderful experience. It was one of the highlights of my career to be nominated.” — Ray Ciccolo, Village Automotive Group

“You can never escape the emotional component of being poor,” Ciccolo said. “Each and every one of you can make a difference.” “Being a good corporate citizen starts at the top,” he said, adding, “We spend a significant amount of time trying to save and avoid estate taxes. Let me tell you, it’s a whole lot more fun giving it away in your lifetime.” O’Koniewski added, “We all know Ray to be a great dealer and a major player in the political arena. What’s really impressive is that the charitable reach of Ray Ciccolo goes well beyond Boston and extends over three continents. Few people -- dealers and non-dealers -- can say that.” Ciccolo was honored at the 96th annual NADA Convention & Exposition in Orlando. Ciccolo is a well-known presence at the convention, and not just for his high profile work as a director. A speech he gave at the 94th convention in 2011 offered a glimpse of what it was like to make it in the auto industry from humble beginnings. At that time NADA was honoring Ciccolo as its 2011 NADA Director of the Year.

From left to Right: Mary Underriner, Grace and Ray Ciccolo, Outgoing NADA Chairman Bill Underriner, Debbie Westcott and new NADA Chairman David Westcott.

“What we lacked in material things, which were many, we more than made up for it with the love and support of our large extended family,” he said at the San Francisco convention. “We all shared and nurtured the unquestioned belief that in America anything and everything was possible, even for a poor Italian family.” Ciccolo described the chance visit to a struggling used car FEBRUARY 2013

dealership in 1963 that launched him into the automotive industry. “I went in to buy a used car and came out buying the dealership,” he said. “So with zero experience as an auto dealer, I jumped into the car business with both feet running full speed to stay alive. And here I am today – still running.” Ciccolo seemed a popular choice to take home the top award -- while it ultimately went to North Carolina dealer Michael Alford. For Ciccolo, however, seeing the work he and his team had put in over the years recognized was enough. “It was a terrific event, and they showed a lot of visuals up on the stage of the things you were involved in,” he said. “One of the pictures was of the multiple sclerosis road race we have at Boston Volvo every year. They showed a check for $100,000 that we sent.” Besides seeing his charity work recognized, the highlight for Ciccolo was all about family. A daughter and two son-in-laws are part of the business. “The great thing was having my family there, my [five out of seven] grandkids there. We took them on the exhibit floor. They were able to pick up a lot of the trinkets that these people were giving out. The current and future generations of the business were there.”

Massachusetts Auto Dealer www.msada.org

t


MSADA NADA Convention

Industry Leaders Speak Out in Orlando

Westcott: Industry and Regulatory Issues Top List of Dealer Concerns “The issues posed by stair-step incentive programs and by mandatory facility upgrades are just two of the most recent examples of manufacturers intruding into dealers’ businesses.” Despite the industry and regulatory challenges of the moment and an uncertain future, David Westcott, the new chairman of the National Automobile Dealers Association, said he remains confident about the future of auto retailing. He said one of the biggest challenges facing dealers is their relationship with manufacturers. “The issues posed by stair-step incentive programs and by mandatory facility upgrades are just two of the most recent examples of manufacturers intruding into dealers’ businesses,” said Westcott, in remarks at the NADA Convention and Expo. Westcott, a Buick, GMC and Suzuki dealer in Burlington, North Carolina, said the development of stair-step incentives are an understandable response to the need for higher sales by the manufacturer, but “many stair-step incentive programs raise fundamental questions of fairness.” With diverse markets, some larger or more affluent than others and often located in the same geographic area, Westcott urged dealers to press manufacturers for ways to make sure that all dealers, from the largest to the smallest, are treated fairly and equitably. “Sometimes facility upgrades are needed, but that decision must be tied to the particular needs of a dealership and not driven by a one-size-fits-all mandate,” he said. Westcott urged dealers to become part of an effort to remove government mandates by providing feedback on how “useless and obsolete policies” are affecting their stores, so that NADA could look into getting rid of them.

Highlighting a recent success, Westcott in his first speech as NADA chairman, raised a booklet in his hand and asked if anyone knew what is was. “This is the insurance booklet that practically no one ever asked for, but dealers were still required to have on hand for our customers or face a $1,000 fine,” he said. “Did you know this requirement was on the books for 21 years? But not anymore – we fought and Congress got rid of it.” “Some of these regulations are just plain silly,” Westcott added. “This year, we are looking to eliminate the rule that requires a dealer to sign a document that basically says a new car has an emissions system. Seriously, has anyone here ever gotten a car from the factory that didn’t have a muffler?” Westcott said the federal government is forcing the auto industry through a period of rapid change, citing several challenges, such as higher fuel economy requirements, potential regulation of auto lenders by the Consumer Finance Protection Bureau and tax reform. “The impact that vastly higher fuel economy requirements will have on the number of new vehicles our customers are willing and able to buy could be dramatic,” Westcott said. “And who knows what unintended adverse consequences will result from the major tax reform efforts in Washington.”

Underriner Decries Manufacturer Intrusion “The one-size-fits-all approach is just plain wrong.” Auto manufacturer intrusion into dealer businesses, such as factory-initiated dealership renovation programs and stair-step pricing, are two critical issues facing new-car dealers, said Bill

www.msada.org

Massachusetts Auto Dealer FEBRUARY 2013

19


20

NADA Convention Underriner, outgoing chairman of the National Automobile Dealers Association. NADA released a report on the Phase 2 results of its multiyear project on facilities programs. This groundbreaking research surveyed dealers, manufacturers and industry experts, in order to determine whether these programs paid off today, in terms of the next three to five years’ ROI (return on investment), and also whether they were creating the kinds of dealership facilities that would still be competitive tomorrow, looking 10 or 15 years further out. The new report, conducted by industry consultant Glenn Mercer, provides valuable assistance for dealers on how to approach facilities programs. “The report provides clear guidance on when facilities programs are warranted and likely to pay off and when they are not,” said Underriner, in remarks at the 96th annual NADA Convention and Expo, held this year in Orlando, Florida. “Facility programs focused on brand standardization often fail to pay off,” added Underriner, a Buick, Honda, Hyundai and Volvo dealer in Billings, Montana. “In contrast, facility programs focused on expansion or modernization of stores that need renovation can pay off.” Underriner added that manufacturers’ facilities programs must provide dealers with flexibility in order to be successful. “The one-size-fits-all approach is just plain wrong. There is incredible diversity among dealers,” he said. “Rigid standards often raise costs and produce little return.” The Phase 2 study, which also looked at the future of dealerships, indicated that “dealers are well positioned to build a stronger future,” he said. The work on future dealership facilities produced several findings, including: (1) Resilience of the Franchise Model – “Past predictions of radical change threatening our industry have not come true. Experts predicted the onset of multi-branding, widespread build-toorder and the bypassing of traditional retail channels,” Underriner said. “None of these changes have happened, thanks to the resilience of the franchise model.” (2) Current Trends Continue – Present trends with increased sales per store, higher consumer expectations and increased reliance on technology will continue. The report concludes that the “rate of change may be slower than many pundits might expect,” he added, since car transactions are both complex and highly regulated. (3) Centralizing Support and Administrative Operations – The study indicated that industry may move away from a dominant “fully-integrated” dealership model towards other options, including a “leaner” store that focused entirely on sales and service, with all administrative and support functions moved offsite. (4) Innovative Service Operations – The study also looked at ways to improve both the customer experience and the dealerFEBRUARY 2013

Massachusetts Auto Dealer www.msada.org

ship’s bottom line through experiments in the area of service, where there is enormous upside for dealers and OEMs alike. Format options related to this could include satellite service, shared service facilities, pick-up and drop-off shuttles and even driveway retrieval, Underriner added. Another area of concern for many dealers is two-tier incentives programs, which often results in auto manufacturers attempting to impose one-size-fits-all programs on dealers, he said. “NADA has had a long-standing position in support of a level playing field for all dealers. Unfortunately, history shows that, at times, manufacturers’ create incentive programs that favor some dealers over others,” Underriner said. “These unfair programs are bad for dealers, bad for automakers and bad for customers. Twotier pricing: Harms brand credibility; Hurts dealers of all sizes; and destroys customer confidence in dealers and automakers.” “We must speak with one strong voice: Factory top-down control will never work,” he said. “It will always fail because it negates our ability to innovate and adapt to local community needs.” Underriner’s term as NADA chairman ended Monday, February 11, when North Carolina dealer David Westcott, NADA vice chairman, took the gavel. “Serving as chairman of this great association and representing America’s new-car dealers around the world has been a great honor,” Underriner said.

Hyundai President Delivers Keynote “You provide jobs, provide a stable tax base and contribute to philanthropic causes in your local communities across the country. Yet it seems like every day someone is bashing the U.S. automotive retail system as being out of touch or inefficient.” Addressing a packed house of U.S. automotive dealers, Hyundai President & CEO John Krafcik delivered the industry keynote address. Krafcik encouraged the industry to defy conven-


MSADA ATD Chairman: Our Voice Needs to Be Heard “Truck dealers need to commit to the task of educating and informing people, most importantly our elected officials, of who we are and what our purpose is.” Dick Witcher, chairman of the American Truck Dealers (ATD), urged the nation’s commercial truck dealers to get more involved in their association and build relationships with their members of Congress. “Truck dealers need to commit to the task of educating and informing people, most importantly our elected officials, of who we are and what our purpose is,” said Witcher in remarks during the ATD Convention and Expo. “They need to have a deeper understanding of our business and the economic engine it is.” Witcher, chief executive officer of Minuteman Trucks in Walpole, Mass., said it is vital that members of Congress visit truck dealerships and get a hands-on look at what deal-

tional wisdom and touched on the ways Hyundai and its dealers have taken unconventional approaches with its design, retail processes, and premium products. Krafcik also spoke to the entrepreneurial spirit of dealers and the critical role they play in leading innovation in the auto industry. Krafcik opened by complimenting the industry on its recent achievements and affirmed his confidence in the automotive retail model. “You provide jobs, provide a stable tax base and contribute to philanthropic causes in your local communities across the country. Yet it seems like every day someone is bashing the U.S. automotive retail system as being out of touch or inefficient. From our perspective at Hyundai, the franchised dealer system in the U.S. works because it’s the concentrated distillation of another system that we know works. One that’s been proven over the last couple of centuries -- the American free enterprise system.” Following examples of the way Hyundai is creating a more open and transparent relationship with its dealers, Krafcik commented on Hyundai’s philosophy of defying convention. “We like to say that when the whole industry moves to the left, we’ll

21

ers accomplish every day. “If we don’t do that, how can we complain when regulations that don’t suit us are enacted?” he added. “Those who legislate need to understand the commercial trucking business before they can regulate it,” Witcher said. “Far too many good intentions have essentially backfired and hurt those that the regulation was originally designed to help.” For example, Witcher said previous EPA emissions regulations that were intended to help clean the air and increase fuel mileage increased the cost of a new truck by $10,000 to $25,000 due to cost of complying with the regulation. The unintended consequence was that truck owners held on to their trucks longer which resulted in decreasing sales and lost jobs, and trucks on the road did not have the safety features, cleaner exhaust and latest fuel economy technology that the new models had, he added. “The intent of the regulation was to help make their air cleaner but in many ways the exact opposite happened as owners couldn’t afford to buy the newer, safer and cleaner trucks,” Witcher said. Witcher also stressed the importance that government regulators and members of Congress understand the role of ATD. “We’re an association dedicated to helping all dealers,” he said. “It is up to everyone to commit to the task of informing people that we are much more than an annual convention and the Dealer Attitude Survey.”

have a look in that direction, but we’ll look even more intently at the opportunities on the right. From our point of view, that’s leadership. We’ve distilled that philosophy into a three-word mantra: defy, design, delight.” Krafcik cited Hyundai’s all-four-cylinder engine approach with Sonata and its unconventional premium product retail strategy with Genesis and Equus as examples. Keeping Hyundai’s premium products under the Hyundai banner paid off, resulting in stronger buyer demographics and a nine percent market share in the premium segments in which it competes. Krafcik concluded by offering a glimpse into Hyundai’s future premium product design direction with the recently unveiled HCD-14 Genesis Concept and how he thinks the industry can overcome future challenges. “At Hyundai, we know our success is a direct function of your efforts, and your achievements. Your skill and commitment, and your entrepreneurial spirit, give me confidence that going-forward, as an industry, we’ll continue to defy conventional thinking, and delight consumers in ways that we can’t even imagine today.”

t www.msada.org

Massachusetts Auto Dealer FEBRUARY 2013


22

NEWS

from Around the Horn

MSADA

MENDON

Meehan Recognized in Ford’s ‘Salute to Dealers’ Program Ford and Lincoln dealers contribute between $35.1 million and $84.6 million to charities and nonprofits in their communities across the U.S. per year, according to the results of a Ford Motor Company survey, and Massachusetts dealer Kevin Meehan is recognized as one of the six top givers. Ford’s Dealer Giving study, the first of its kind, was administered by Ford to its dealers and was conducted in association with the 13th annual Salute to Dealers awards ceremony which took place on February 8, in tandem with the National Automobile Dealers Association (NADA) Convention in Orlando, Florida. The Salute to Dealers awards recognizes dealers who go above and beyond when it comes to giving back to their communities. Six dealers were selected from among more than 8,500 Ford dealers worldwide for exhibiting unparalleled giving, dedication and leadership to their communities. “When he purchased a large parcel of land and built three stateof-the-art facilities to house his Ford, Chevrolet and Chrysler dealerships, Kevin Meehan had a vision of what he would bring to the town of Mendon in money and resources,” Ford noted in

FEBRUARY 2013

Massachusetts Auto Dealer www.msada.org

a statement. “As a result, he and his family open their home and dealerships for a variety of local causes and community building events, which they support all year long. For the past 10 years, Meehan has hosted the largest outdoor Christmas display in New England (43 acres) benefiting the Salvation Army. In addition, he provided funds and leadership for construction of a new police headquarters as well as renovations to the local hospital, swimming lake and recreational areas. His efforts further extend to children’s, community relief and veterans causes, among others.”


NEWS from Around the Horn

MSADA

LYNNFIELD

NORWELL

Cadillac Dealership Expected to Open in April

Former Hanover Car Dealership Employee Sentenced with Embezzlement

A new Herb Chambers Cadillac dealership is expected to open in Lynnfield in early April. In February Lynnfield selectmen approved a class 1 motor vehicle license application for the dealership, on the condition the occupancy permit process is finished. Attorney Ted Regnante represented the dealership at the meeting. He said Chambers’ existing Mercedes dealership in Lynnfield is “one of the most successful dealerships in the U.S.” and that the location at 395 Broadway was chosen over a location on Route 114 in Danvers. Regnante said this choice came in part because of Lynnfield’s demographics, but it was primarily motivated by the reception Chambers’ Mercedes dealership in town has received. Regnante told selectmen the dealership will cost $4 million to build and should add to the town’s tax base while requiring relatively little in services. The dealership will feature a 22,000 square foot building on two levels, with 50 to 60 employees. The company also has a policy of trying to hire local residents, according to Regnante. The attorney also said the company has tried to be a good neighbor with abutting property owners by taking steps such as reducing the lighting wattage at the Mercedes dealership. NORTHHAMPTON

Car Buying Driven by Need, Excitement over New Models For years there were fewer and fewer new car dealers in Northampton as names like Cahillane Dodge and Dana Automotive Chevrolet and Volkswagen fell by the wayside. That trend reversed in 2012, most notably along the King Street sector of Route 5. Ford of Northampton, owned by Agawam’s Sarat Ford Lincoln, moved into the old Dana building and Tommy Car Auto Group moved its Volkswagen and Hyundai dealerships into the old Steve Lewis Subaru space on Damon Road as it prepared for a brand-new site at the old Kollmorgen plant in Route 5. Elsewhere in the city, work continues on Lia Auto Group’s building, which will be a 9,000-square-foot Kia dealership on King Street where Lia already has a Honda dealership. In November, owners Anthony F. Troiano and Robert Artioli opened Northampton Chrysler Dodge Jeep Ram pickup in the former Ford dealership building at 55 Damon Road. Other dealers are also expanding. In Wilbraham, Balise Ford is getting a new building. Curry Honda-Nissan in Chicopee has completed a new Honda showroom and repair garage. Dealers of all new-car makes are finding an easier time selling, according to national statistics. It’s a rebirth fed by new models, low interest rates and demand left unfulfilled during the depths of the recession. With people keeping their cars longer, more than 11.3 years on average, good, clean used cars are also at a premium.

A former employee of Dave Delaney’s Buick GMC car dealership in Hanover was sentenced recently for embezzling almost $100,000 from her employer. Susan Morris, 44, was sentenced to four months in prison, to be followed by two years of supervised release and restitution of $96,920. In October of last year, Morris pleaded guilty to wire fraud. From April 2010 to March 2012, while Morris was working in the accounting department of the dealership, she embezzled $96,920 from the company’s bank account. Morris processed dozens of fake return transactions, each time fraudulently “returning” the funds to her debit card. The Boston office of the U.S. Secret Service investigated the case. WATERTOWN

New Ford Fusion Adds to Safety Credentials with NHTSA Five-Star Rating The redesigned 2013 Ford Fusion has added another bullet point to its safety resume: The midsize sedan recently earned a five-star Overall Vehicle Score in the New Car Assessment Program from the National Highway Traffic Safety Administration. NHTSA recently upped the standards of its crashprotection tests, expanding its injury criteria, incorporating broader data from dummies and introducing more tests starting with 2011-model-year vehicles. The new Ford Fusion proved it had all the angles covered in the stringent frontal, side-impact and rollover evaluations, thanks to a new Personal Safety System featuring advanced front crash sensors and a chassis composed of 10 percent more high-strength steel than its predecessor. “The Fusion has been making waves for its bold new styling and impressive fuel economy, but it has quickly proven that it is built to protect its most precious cargo as well,” said Peter King, general manager of Watertown Ford, a Greater Boston Ford dealership. www.msada.org

Massachusetts Auto Dealer FEBRUARY 2013

23


24

NEWS from Around the Horn NATICK

Jeep Patriot Climbs to Top of Its Segment in KBB. com 5-Year Cost to Own Awards The 2013 Jeep Patriot is already the lowest-priced SUV on the market, but according to Kelley Blue Book’s KBB.com, the capable compact is also the most affordable in its segment when it comes to long-term cost of ownership. Topping the Compact SUV/Crossover category, the Patriot recently received a 2013 5-Year Cost to Own Award from the auto-research site, with the model estimated to cost drivers just $35,161 during five years of ownership. The Jeep Patriot bested the 2013 Mitsubishi Outlander Sport and 2013 Honda CR-V to nab its segment award,

with KBB.com editors noting the off-road capability of its available Freedom Drive II 4WD system. “Most vehicles in the Patriot’s segment are SUVs in name only, but Jeep brings legitimate all-conditions performance into the picture, and you won’t pay dearly for it at the pump either,” said Richard Gill, owner of Brigham-Gill Chrysler Jeep Dodge Ram, a Natick Jeep dealership. “The Patriot’s low price point attracts a lot of customers into our showroom, but buyers should take extra comfort in knowing that KBB.com has found that the vehicle remains a great deal even as the years pass.” FEBRUARY 2013

Massachusetts Auto Dealer www.msada.org


MSADA PEABODY

Acura RDX Tops German Competitors for KBB.com 5-Year Cost to Own Award Car buyers tend to fixate on the price tag when shopping, but one automotive site notes that a vehicle’s total purchase cost usually accounts for less than half of its total cost of ownership during a five-year period. Kelley Blue Book’s KBB.com recently found that the redesigned 2013 Acura RDX offers the best long-term investment in its segment when all costs are considered, presenting the compact crossover with a 2013 KBB.com 5-Year Cost to Own Award. KBB.com determines its 5-Year Cost to Own Awards by evaluating each vehicle on a broad range of criteria, including Kelley Blue Book Fair Purchase Price, projected depreciation and costs for financing, insurance, fuel, repairs, scheduled maintenance and state fees. Besting the 2013 Mercedes-Benz GLK-Class and 2013 BMW X3 in the Luxury Compact SUV/Crossover category, the Acura RDX is projected to cost $49,620 during the first five years of ownership. “To maintain value in a luxury segment, a vehicle not only has to be able to keep day-to-day costs down, but it needs to have a

look and feel that won’t lose their luster after a few years,” said Joel Avery, general manager of Acura of Peabody. “The new Acura RDX is designed to meet both those needs; it has sophisticated style lines and a sportier ride, but it also maintains the brand’s signature quality and reliability.”

www.msada.org

Massachusetts Auto Dealer FEBRUARY 2013

25


26

NEWS from Around the Horn BOSTON

Ernie Boch Jr. May Make Offer for Boston Globe The Boston Business Journal reported this month that Ernie Boch Jr. may be looking to buy The Boston Globe. The New York Times bought the paper in 1993 for $1.1 billion, and had previously tried to sell it off in 2009 amid a threat to shut it down without major union concessions. It announced its intention to attempt another sale earlier this month. A Boch spokeswoman forwarded this statement: “Ernie Boch Jr., president and CEO of Boch Enterprises and a lifelong Bostonian, is exploring the opportunity of purchasing The Boston Globe. Ernie is teaming up with Bruce Mittman, president and CEO of Mittcom (the Newton marketing agency), and partner in Community Broadcasters (the radio station group in upstate New York). Together they bring the financial resources and decades of experience in media and marketing necessary to make this purchase viable.” The Globe is also up for sale with the rest of the New England Media Company, which includes The Telegram & Gazette and a 49-percent stake in the free Metro daily in Boston. It’s estimated the asking price may be in the $100 million range.

WORCESTER

WILBRAHAM

Former Chevy Dealer Buys Storefront Property

Rosenberg Returns as Chair of Infiniti Advisory Board

John Medeiros, a former Wilbraham-based car dealer has purchased the former P.W. Sherman Inc. building at the corner of Millbrook Street and Gold Star Boulevard for $1.9 million. The building had been the longtime home of the family-owned P.W. Sherman office furniture store until the business was purchased by Brockton-based office supply company W.B. Mason in March 2011. W.B. Mason purchased P.W. Sherman’s client list and kept the company’s eight employees, according to the Telegram & Gazette. Medeiros owned and operated Medeiros Williams Chevrolet on Boston Road in Wilbraham for many years. He lost his General Motors franchise in 2010, and the dealership closed the following year. According to documents in the Wilbraham Board of Selectmen’s office, the Medeiros Williams Chevrolet’s license to sell automobiles was not renewed after it expired in December 2012.

David Rosenberg will serve a second year as chairman of the Infiniti National Dealer Advisory Board. “There are a lot of initiatives in progress and I’d like to see them through,” said the Massachusetts multibrand dealer. “When they asked me, I said, ‘Absolutely.’ I think continuity is great for Infiniti as it works toward becoming a Tier 1 luxury brand.” Rosenberg and his father, Ira, had been working together in auto retailing in decades past. In January 2000 they sold the family dealerships to the publicly held Group 1 Automotive, and son David accepted a corporate position with the chain. In 2007 he climbed back into the role of dealer principal, assembling a new group of stores in Massachusetts, New Hampshire and Maine called Prime Motor Group. Rosenberg works as CEO from the head office in Westwood, Mass.

FEBRUARY 2013

Massachusetts Auto Dealer www.msada.org


MSADA

www.msada.org

Massachusetts Auto Dealer FEBRUARY 2013

25


28

NADA Update

Notes from the Convention Don Sudbay, President of Sudbay Automotive Group, represents MSADA members on the NADA Board of Directors. He welcomes your

questions

and

Dealership Insurance Booklet Mandate Eliminated

concerns

(donsudbayjr@sudbay.com). I just returned from the NADA Convention in Orlando, and to those of you who didn’t get stuck in the “Nemo” blizzard, it was a great convention. I was especially pleased that the manufacturer-dealer meetings that I attended all allowed ample time for dealer input. That was not the case last year in Las Vegas, and it was good to see some healthy dialogue. NADA and I are committed to all dealers, whether high or low volume, urban or rural, having an opportunity to express their concerns to the manufacturers. Also, thanks to all of you who completed the NADA Spring Dealer Attitude Survey. As a member of the NADA Industry Relations Committee, I look forward to presenting the findings to the manufacturers in April or May.

NADA Selects New President The National Automobile Dealers Association has selected Peter K. Welch as its new president. “I’m excited and honored to be selected as the next NADA president,” said Welch, 59. Welch has been president and chief executive officer of the California New Car Dealers Association in Sacramento since 2003, and had managed its government affairs office, including legal, legislative and regulatory affairs, since 1990. It’s the country’s largest state organization for new-car dealers. “NADA is a well-run organization. I look forward to following in the tradition of strong leadership at NADA. I’m ready to roll up my sleeves and get started,” Welch said. In connection with the appointment of Welch as NADA president, Underriner also announced the promotion of the following individuals: Joseph L. Cowden, Executive Vice President, Chief Operating Officer and CFO; Andrew D. Koblenz, Executive Vice President, Legal and Regulatory Affairs and General Counsel; and David W. Regan, Executive Vice President, Legislative Affairs.

NADA-TV: New NADA President Discusses Priorities and Issues Facing Dealers Peter Welch, the new president of the National Automobile Dealers Association, discusses his upcoming role and the challenges facing dealers during an in-studio interview on AutoFocus with David Hyatt. Welch, whose experience in FEBRUARY 2013

the new-car business ranges from lawyer to legislative advocate and most recently, president and chief executive officer of the California New Car Dealers Association, said he was “thrilled” and “honored” when he received the call that he had been selected.

New-car dealerships are no longer required to provide printed copies of the Relative Collision Insurance Cost Information brochure to car and truck buyers upon request. President Obama signed legislation today that repeals the outdated mandate and eliminates the $1,000 fine that dealerships face for failing to comply with the 1970s-era law. “This bill removes a regulatory burden from dealerships that helps reduce our cost of doing business,” said Bill Underriner, chairman of the National Automobile Dealers Association and a multifranchise dealer from Billings, Montana.

NADA Launches New Energy Ally Program to Help Dealerships Reduce Energy Use NADA and the Environmental Protection Agency (EPA) have partnered to help new-car dealers reduce their energy consumption through the Energy Star program. As part of this effort, NADA and EPA are encouraging dealerships to complete a brief survey that will give the agency a benchmark to better compare the energy usage of dealerships across the country and allow certification of those dealerships that perform well. The survey (www.nada.org/energystar) asks dealers to share their yearly utility bills, square footage—inside and out—and different types of equipment used at the dealership. “NADA’s ultimate goal is to help dealers learn ways to save energy and reduce their costs,” said Don Chalmers, chairman of NADA’s Government Relations Committee, and a Ford and Lincoln dealer in New Mexico. “Before we can begin the Energy Star certification process, we need to benchmark the energy usage of at least 500 dealerships.” To encourage participation, NADA has launched a new program called Energy Ally. Businesses, such as accounting, consulting and energy management firms, that assist at least five dealerships to complete the survey will be awarded an NADA Energy Ally designation. These contractors can use the recognition to market their services to other dealerships. (Information on how to apply to become an Energy Ally is available at www.nada.org/energystar). NADA has produced a video (www.nada.org/energystar) demonstrating the costsaving benefits of implementing an energy-efficiency plan highlighting efforts at a dealership in Christiansburg, Virgina. The video also highlights the importance of dealers taking the survey and the ease of the data input.

Massachusetts Auto Dealer www.msada.org


29 FTC Warns Dealers on Buyer’s Guide The Federal Trade Commission has warned 11 used car dealerships in Jonesboro, Arkansas, that their failure to properly display the “Buyers Guide” on used vehicles offered for sale violates the FTC’s Used Car Rule. FTC staff inspections in Jonesboro found that eight dealers failed to display Buyers Guides on almost all used cars offered for sale, and three dealers failed to display the guides on a significant number of used cars. Ten dealers properly displayed the guides on all or nearly all of the used cars offered for sale. The FTC sent warning letters urging the 11 dealers to come into compliance by properly displaying the guides in a clear and conspicuous location on all used cars.

NADA Economist: New-Vehicle Sales Momentum to Continue in 2013 The sales momentum of new cars and light trucks established last year is likely to continue in 2013, predicts Paul Taylor, chief economist of the National Automobile Dealers Association. Taylor expects more than 15.4 million new vehicles will be purchased or leased in the United States this year, an increase of 1 million vehicles over 2012. Last year, 14.4 million new vehicles were sold.“Pent up demand, affordable auto loans and enticing new-vehicle designs add up to a solid sales year that will outperform the overall U.S. economy,” Taylor said. Taylor highlighted several factors that will support stronger auto sales in 2013.

NADA University Launches Special Ops Training Programs, Allowing Dealership Managers to ‘Zero In’ on Their Departments NADA University has introduced an all-new Special Ops training program that allows dealership managers to hone skills for specific departments by attending individual weeks of the NADA-ATD Academy’s program. The training focuses on the following areas of dealership operations: Financial Management; Fixed Operations I – Parts; Fixed Operations II – Service; Variable Operations I – Used Vehicles; Variable Ops II – New Vehicles. To learn more about dates and availability of Special Ops sessions, and to download the application, visit the Academy section at www.NADAuniversity.com or call (800) 557-6232.

NADA University Adds FUEL to Dealer Training and Education With Launch of Private Social Network NADA U FUEL, a private online community, is being launched by NADA University exclusively for these eligible NADA and American Truck Dealer (ATD) members: Academy Students and Alumni; 20 Group Members; and NextGen ATD Members. The online community was created to enhance and expand the collaboration and idea-sharing that

already exists among these groups. FUEL provides community members with instant access to peer discussions, subject matter experts and NADA U’s comprehensive education and training resources. It’s the space to exchange ideas and tips for doing business; discuss trends in the marketplace; resolve business problems; give and get advice; and keep in touch. FUEL’s custom online platform is powered by DrivingSales, whose technology creates an individualized profile and view, displaying only the content that is relevant and useful to each user. Eligible members may activate the FUEL profile or learn more about the private community at NADAuniversity. com or by calling (800) 557-6232.

Enhanced NADA U Online Launched NADA University has launched an enhanced and enriched NADA University Online (NADAUniversity.com) with new and expanded features designed to custom-tailor the user experience. With an all-new look and feel, the site provides dealership users job- and task-specific training and education organized into categories and topics that align with their needs. New features of NADA University Online include My Career Path, with job-specific training recommendations, links to relevant NADA U content, and tracking capabilities; and the Library, which is stocked with NADA U publications and documents and also allows dealers to upload dealershipspecific files for easy access exclusively by their employees. The all-new Training Center, the centerpiece of NADA University Online, combines all the resources of Learning Hub and Resource Toolbox in one convenient location and has been designed to make room for the new educational features. Dealers and their staffs attending the NADA Convention are invited to stop by NADA University Booth No. 2001 in the Expo Hall for a personal demonstration of the enhanced site.

NADA U Enhances the HR Essentials Product, Adds it to the Learning Hub Premium Subscription The HR Essentials management tools, with content powered by Bloomberg BNA, have proven invaluable to users over the years. Job Descriptions Online enables managers to customize job descriptions quickly and easily. The product contains descriptions for more than 100 dealership-specific jobs—and thousands of additional jobs. HR Essentials also includes Performance Evaluations Online and HR Policy Handbooks Online. The package is included in the Learning Hub Premium Subscription at no additional charge. The package and the individual components are also available separately as an annual subscription. Members may log in to NADAuniversity.com, go to the NADA U Store/Specialty Products, and click on the product to purchase. They may also order by phone at (800) 557-6232, Ext. 3.

www.msada.org

t Massachusetts Auto Dealer FEBRUARY 2013


30

Economic Update By Paul Taylor, NADA Chief Economist

Weak GDP Reading at the End of 2012 Suggests That the Economy Stalled The Federal Reserve’s Federal Open Market Committee met on January 29 and 30, reporting that “growth in economic activity paused in recent months, in large part because of weather-related disruptions and other transitory factors. Employment has continued to expand at a moderate pace but the unemployment rate remains elevated.” As a result, monetary policy will remain essentially the same, and the Fed will continue to buy financial paper at the rate of about $40 billion per month of new Mortgage Backed Securities (MBS) and $45 billion per month of U.S. Treasury securities. The Fed will also reinvest principal payments from MBS they already own, and roll over their investments in U.S. Treasury securities currently owned. All of this keeps the level of liquidity in the U.S. economy very high. And the FOMC restated its position that “if the labor market does not improve substantially” it could engage in additional accommodative policies to further increase liquidity. At levels of unemployment above 6.5 percent, the Fed promised an “exceptionally low range for the federal funds rate.” The FOMC did not repeat the assurance that rates would not start to rise before 2015, and so the need to see progress by the U.S. Congress and the Administration on reducing profligate federal spending levels. The flat fourth quarter report, with GDP falling 0.1 percent at an annual rate in the fourth quarter of 2012, will keep immediate inflation concerns at bay. However, with the economy awash in liquidity, a significant pick up in the growth rate will trouble the bond markets in the future, particularly if too little progress is made to reduce federal spending levels. If growth were to really accelerate, the Fed could start to lift rates by the last months of 2014. Futures contracts in debt markets suggest that the financial markets do not currently expect any lift in rates during FEBRUARY 2013

2014, and the flat quarter for GDP growth at the end of 2012 also suggests that interest rates may stay at a low level during 2014. Watch the growth rate of the economy and measures of inflation carefully. And monitor the approach of Congress to reduce current Federal overspending. Looking around the world, growth worldwide is expected to be 3.5 percent in 2013. Growth is currently slow but adequate nearly everywhere but in Europe, which was in recession at the end of the year. Despite this, employment news from Germany and Spain was good in December with the unemployment rate at 6.9 percent in Germany. The drop in unemployment in Spain results from a decrease in the number of job seekers there, so the jury is still out for this country’s economic trial. The International Monetary Fund has revised the outlook for Europe downward, and expects a contraction there of 0.2 percent in 2013. Like the United States earlier, banks in Europe now enjoy higher liquidity, but there are delays in providing an improvement in “private sector borrowing conditions according to the IMF outlook issued January 23. The IMF expects an expansion in Japan of just 1.2 percent in 2013. Growth in emerging markets and developing economies is expected to increase 5.5 percent during 2013. Elsewhere, the China Institute forecasts 8.4 percent growth there for 2013, while the IMF projects growth of 8.2 percent. The IMF expects growth during 2013 of 3.5 percent in Brazil, 3.4 per-

Massachusetts Auto Dealer www.msada.org

cent in Mexico, 5.9 percent in India and 4.3 percent in Russia. Spain GDP is expected to contract by 1.5 percent and expect a fall of 1 percent in Italy. So the overall 2013 outlook is upbeat for growth in the world despite overall contraction of 0.2 percent in the Euro area.

Dealers Need to Capture Parts Sales for Cars That Are Six Years or Older The U.S. has a growing portion of vehicles more than six years old, according to federal data. The boom years of new car sales managed to hold the share of vehicles 0 to 5 years of age constant in the 2001 measurement as compared to that of 1995. The decline of relative share for those two groups had resumed in the measurement for 2009. This survey is only done every five or more years, so we have a more recent measure from that source. Midway through 2012, R. L. Polk published the average age of cars, placing it at 11.1 years of age. All of these statistics suggest that flat dealership parts and service revenue sales are that much more of a concern as we look forward. The adoption of longer warranties to more than 6 years by many manufacturers would help solve this distressing trend for franchised new car dealers. For the most recent period available, the first 11 months of 2012, service and parts revenue for the typical dealership was essentially flat, falling by a slight 0.1 percent.

t

Paul C. Taylor, Ph.D., is Chief Economist of the National Automobile Dealers Association’s Industry Analysis, where he oversees NADA’s industry analysis activities, which include research on a wide range of factors impacting the retail automotive industry and publishing NADA’s annual compilation of facts and figures, titled NADA DATA.


25 Braintree Hill Office Park Suite 102 • Braintree MA 02184 • Tel. 617.471.1120 • Fax 617.472.7560


Massachusetts Auto Dealer Magazine February 2013  

The official publication of the Massachusetts Sate Automobile Dealers Association, Inc.