november 2013 msada magazine

November 2013 • Vol. 26 No. 11

FIRST CLASS MAILUS POSTAGE PAID

BOSTON, MAPERMIT NO. 216

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

autoD E A L E R

M A s s A c h u s E t t s

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

preview2014

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

6 From the President: see You at auto show Preview night

8 the roUndUP: Right to Repair fix Passed – finally

11 LeGisLAtiVe sCoreCArd

13 soUnd oFF: In Today’s Market, There is a buyer for almost

every Dealership

14 troUBLeshootnG: frequently asked Questions

15 ACCoUntinG: Tax advantages of Installing solar energy

systems

16 AUto oUtLooK

18 Cover Story:

new england International

auto show 2014 Preview

22 LeGAL: Dol Cracking Down

on Dealers Using Real Clean

23 ACCoUntinG: Make 2014

a Happy new Year: Consider

These Tax Items

24 neWs From Around the horn

29 nAdA UPdAte: a season of Thanks

32 nAdA mArKet BeAt

www.msada.org Massachusetts auto Dealer NOVEMBER 2013

The official publication of the Massachusetts State Automobile Dealers Association, Incs Ta f f D I R e C T o R Y

Robert O’Koniewski, Esq.executive Vice [email protected]

Jean Fabrizio Director of administration

[email protected] Brennan, Esq.

staff [email protected]

Paul Fellowsadministrative assistant/ Membership Coordinator

[email protected]

a U T o D e a l e R M a g a z I n e

Robert O’Koniewski, Esq.executive editor

Catherine MacDonaldeditorial Coordinator

[email protected]

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aD DIReCToRYbank of america, 2

blumshapiro, 26boston Herald, 36

Downey & Company, llP, 26lynnway auto auction, 24

nancy Phillips associates, Inc., 3o’Connor & Drew, P.C., 35

schlossberg, llC, 28southern auto auction, 27

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Join us on Twitter at @MassautoDealers

from the President6

NOVEMBER 2013 Massachusetts auto Dealer www.msada.org

by Scott Dube, MSADA President

I

See You at Auto Show Preview NightOur Auto Show reminds the public that our business is driven by people

t’s amazing how little can change in a year. I took the reins as MSADA President from Tuck’s Trucks own-

er Jim Boyle at the last Annual Meeting. As he departed, he could reflect on a four-year tenure that included the most catastrophic changes our economy, and our industry, had ever seen. From the ‘08 crash to the Chrysler and GM bankruptcies, our Association had been tested like it had never been before.

What came out of those struggles was a renewed sense of pur-pose. When we encountered “Right to Repair” at home and the Con-sumer Finance Protection Bureau down in Washington, we were pre-pared. And we mobilized to make sure our interests weren’t tossed aside, as so many have attempted to do.

We’re now preparing our 2014 New England International Auto Show and Preview Night, which will mark my one year anniversary. All of this capital we’ve built re-mains in play as we continue the fight against Tesla Motors. If “Right to Repair” was an unsound policy push from aftermarket parts companies, what Tesla is attempting is an attempt to rip up and throw out franchise laws in our state.

It’s a daunting battle, and just one of many we are always pre-paring to face as dealers. And I know I can count on you to con-tinue to remain active in the Association and joining me where our voice is needed to prevent others from taking away our abil-ity to do business.

You’ve read and heard from me time and again how that means interacting with your legislators and making sure they know who you are and where you stand. The New England International

Auto Show is a chance to accomplish the same goal, but have a lot more fun.

The New England International Auto Show is a chance to also get our names out there behind our products. The ingenuity of automotive technology has been in overdrive since the days of first inventing the internal combustion engine, but every year it seems our product is safer, more efficient and more fun.

We all are going to have our own favorites at the Auto Show. Of course, we dedicate our liveli-hoods to certain manufacturers, and we’d damned well better expect they be the best on the floor. But the bigger message is that with all these new models rolled out for the public, we dealers are here to help get them in the vehicle of their dreams.

It’s a critical message: the auto-motive business is a people-driven business. We are here for our cus-tomers. We’re here for their conve-nience and, more importantly, their

safety. That’s why the laws are the way they are, and why we’re always striving to protect and improve them. The Auto Show de-livers that message softly, but it can’t be missed.

With all that being said, the Auto Show is about us enjoying ourselves, too. So we’ve made this year’s Preview Night more convenient and accessible, We’ve moved it to Friday night so that you might “stay in town” and we have a couple of other surprises about the evenings format that are sure to be fun! I encourage you to contact us with any ticket orders and questions. Jean Fab-rizio can be reached at (617) 451-1051 or [email protected]. We’re planning a great night, and I’m excited to see you there.

t

MSADA

We are here for our customers. We’re here for their convenience and, more importantly,

their safety.

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Name Contact TelephoneADESA Boston Chris Carli (508) 270-5403ADP Dealer Services Maria Trezza (973) 404-4466Albin, Randall & Bennett Barton D. Haag (207) 772-1981American Fidelity Assurance Co. Tom Trudell (413) 885-5477AutoRaptor (RAL) Howard L. Leavitt (401) 421-6533Bank of America Merrill Lynch Lawrence Corrente and Nancy Price (781) 534-8543 Bellavia Blatt Andron & Crossett, PC Leonard A. Bellavia, Esq (516) 873-3000 Blum Shapiro John D. Spatcher (860) 561-4000Boston Globe Mary Kelly (617) 929-8373The Boston Business Advisory Group Paul Cuomo (781) 681-1501 Vincent Saccone (781) 681-1519Burns & Levinson LLP Paul Marshall Harris (617) 345-3854Cars.com Tawanda Falconer (312) 601-5052 Construction Management & Builders, Inc. Kate Sullivan (781) 246-9400CVR Scott Herbers (714) 684-2614DealerDOCX Merchon Brower (585) 451-3322 Dealermine Inc. Steve Rogers (800) 304-3341 DealerTrack Ernest Lattimer (516) 547-2242Downey & Company James Downey (781) 849-3100EasyCare New England Inc. Mike Douglas (770) 246-9724Ethos Group, Inc. Drew Spring (617) 694-9761F & I Resources Jason Bayko (508) 624-4344Federated Insurance Chris Welch (724) 766-6666First Citizens Federal Credit Union Joe Ender (508) 979-4728 Fisher & Phillips LLP John Donovan (404) 240-4236 Joe Ambash (617) 532-9320Grant Thornton LLP Alan Oslomowski (508) 926-2200GW Marketing Services Gordon G. Wisbach Jr. (781) 899-8509 Huntington National Bank John J. Marchand (781) 326-0823Key Bank James Q. Moretti (781) 558-5132Leader Auto Resources, Inc. Brendan J. Murphy (518) 878-6341Lynnway Auto Auction Jim Lamb (781) 596-8500M & T Bank John Federici (508) 699-3576MetroMedia Energy Timothy Teevens (800) 828-9427Micorp LLC Ryan Kim (508) 832-9816Mid-State Insurance Agency James Pietro (508) 791-5566Mintz Levin Kurt Steinkrauss (617) 542-6000Murtha Cullina Thomas Vangel (617) 457-4000Nancy Phillips Associates, Inc. Nancy Phillips (603) 658-0004O’Connor & Drew, P.C. Kevin Carnes (617) 471-1120Performance Management Group, Inc. Mark Puccio (508) 393-1400Ray-Jurgen Richard Thibadeau (860) 585-0111R.L. Tennant Insurance Agency, Inc. Walter F. Tennant (617) 969-1300Resource Management Group J. Gregory Hoffman (800) 761-4546Reynolds & Reynolds Marc Appel (413) 537-1336Robinson Donovan Madden & Barry, P.C. James F. Martin, Esq. (413) 732-2301Samet & Company John J. Czyzewski (617) 731-1222Schlossberg, LLC Michael O’Neil, Esq. (781) 848-5028Sentry Insurance Company Eric Stiles (715) 346-7096Shepherd & Goldstein Ron Masiello (508) 757-3311Silverman Advisors, PC Scott Silverman (781) 591-2886Southern Auto Auction Tom Munson (860) 292-7500Sovereign Bank Richard Anderson (401) 432-0749Target Dealer Services Andrew Boli (508) 564-5050TD Auto Finance BethAnn Durepo (603) 490-9615TD Bank Michael M. Lefebvre (413) 748-8272Wells Fargo Dealer Services Christopher Peck (508-314-1283) Wicked Local Media Massachusetts Jay Pelland (617) 757-5571 Zurich American Insurance Company Steven Megee (800) 443-4513

AssociAte MeMber Directory

Msada BOaRd Barnstable County

gary beard, Dick beard Chevrolet

Berkshire Countybrian bedard, bedard brothers auto sales

Bristol CountyRichard Mastria, Mastria auto group

Essex CountyWilliam Deluca, Woodworth Motors

John Hartman, Ira Motor group

Franklin CountyJay Dillon, Dillon Chevrolet

Hampden CountyJack sarat, Jr., sarat ford

Hampshire Countybryan burke, burke gMC

Middlesex CountyChris Connolly Jr., Herb Connolly Motors

scott Dube, bill Dube Hyundai

Norfolk CountyJack Madden, Jr., Jack Madden ford

Charles Tufankjian, Toyota scion of braintree

Plymouth CountyChristine alicandro, Marty’s buick gMC Isuzu

Suffolk CountyRobert boch, expressway Toyota

Worcester County steven sewell, Westboro Mitsubishi

steve salvadore, salvadore auto

Medium/Heavy-Duty Truck Dealer Director-at-Large

[open]

Immediate Past PresidentJames g. boyle, Tuck’s Trucks

NADA DirectorDon sudbay Jr., sudbay Motors

OFFICERSPresident, scott DubeVice President, Chris Connolly, Jr.Treasurer, Jack Madden, Jr.Clerk, Charles Tufankjian

MSADA

A little over a year since the problem was cre-ated, the Massachusetts Legislature before it broke for its holiday recess approved legislation that would reconcile the conflict that exists between two different “right to repair” laws.

By taking action on the last day of its 2013 for-mal sessions, the Massachusetts Legislature helped franchised car and truck dealers across the state to avoid unnecessary sales disruptions beginning next year.

As we go to press, the bill is before the governor for his review and signature.

This problem exists because two RTR laws were enacted in 2012 – one through the usual legislative route (Chapter 241 of the Acts of 2012), which we supported, and one through the initiative petition process in last year’s election (Chapter 368 of the Acts of 2012), which we opposed.

As you may recall, the efforts of the various par-ties last year to achieve compromise on a viable RTR law was based in part on the onerous and un-workable provisions contained in the initiative pe-tition. One such penalty provision in the initiative petition law adversely strikes at the very existence of our dealerships and the livelihoods of our em-ployees for no fault of the dealers: Beginning with Model Year 2015 vehicles (to be sold as of Janu-ary 2, 2014), if a manufacturer cannot or does not want to comply with certain repair and diagnostic requirements demanded in the law, that manufac-turer’s franchised dealers are prohibited from sell-ing or leasing those non-compliant vehicles. This is akin to punishing one brother for the sins of the other.

There was an element of time sensitivity to this

drama. In the first year of its two-year sessions, (the odd year), the Legislature breaks for the year on the Wednesday the week before Thanksgiving. After that day, any matter taken up in the remain-der of 2013 would need unanimous consent of the members present.

Pushing the drama to the limit, on November 12 the Joint Committee on Consumer Protection and Professional Licensure reported a bill out fa-vorable, House 3757, which was essentially the compromise law from last year, except for a small amendment to incorporate all personal vehicles up through Class 3 in weight (14,000 pounds, from the 10,000 currently) into the law’s scope. The House of Representatives unanimously approved that bill the next day and sent it to the Senate. In addition to House Speaker Robert DeLeo (D-Winthrop), we owe a debt of gratitude to the Committee’s House Chairman, Rep. John Scibak (D-South Hadley), for his strong leadership in guiding House 3757 out of his Committee and through that chamber in a day.

The Senate is where the fun started. Various parties who received no satisfaction in the House swarmed that chamber with several amendments. AAA wanted to change the law’s treatment of tele-matic services and be able to grab proprietary mes-saging between vehicle owners, manufacturers and dealers. Truck, motorcycle and RV repairers and owners all wanted their vehicles included in the repair law, as well. It was the medium- and heavy-duty truck issue that presented the most complica-tions.

The Senate Ways and Means Committee, led by Chairman Stephen Brewer (D-Barre), reported the bill out as sent by the House. Immediately, interests

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the roundup

by Robert O’Koniewski, Esq. MSADA Executive Vice President

Right to Repair Fix Passed – Finally

9


MSADA

adverse to dealers and the OEMs signaled through other Senators their interests in amending the bill.

After 72 hours of wrangling that threat-ened completion on the bill in time to avoid the Midnight cut off on November 20, legislators and dealer, manufacturer, and repairer representatives came to an agree-ment to phase in under the statute various aspects of truck coverage in a manner that manufacturers could reasonable comply with over the next five years.

A number of Senators battled to make sure compromise was achieved and sent to the governor before the November 20 deadline: Senate President Therese Mur-ray (D-Plymouth), Majority Leader Stan Rosenberg (D-Amherst), Senate Commit-tee Chairman Thomas Kennedy (D-Brock-ton), Sen. Marc Pacheco (D-Taunton), and Senate Minority Leader Bruce Tarr (R-Gloucester).

The compromise law again being sent to the governor for his signature contains a number of key dealer-related provisions we fought for last year and presently:• Compliance pushed out to MY2018: Manufacturers must comply with a choice of universal non-proprietary interface stan-dards by Model Year 2018;• Vehicle sales prohibition deleted: Re-moves the onerous prohibition on dealer vehicle sales if a manufacturer cannot, or opts not to, comply with the law; • Construction equipment carved out of the law, and heavy-duty trucks phased in;• Protect dealer franchise rights: Language inserted that re-affirms the basis for deal-ers’ warranty and recall work under the franchise agreements and the Chapter 93B franchise law, and prohibits any RTR law from piercing the dealer-manufacturer re-lationship;• No manufacturer-owned repair centers: Language deleted relating to “authorized repair facilities” that would have enabled manufacturers to designate independent repair facilities for warranty, recall, and re-pair work outside the dealer-manufacturer relationship; • Prohibits tooling price discrimination:

Language inserted that protects dealers from having to buy duplicate tools and information from the manufacturers if the manufacturers are offering the same tools and information to independent repair fa-cilities at terms more favorable than or equal to that at which the dealers can ob-tain it as required pursuant to their fran-chise agreements;• Dealer access to key codes affirmed: Re-moves the requirement that dealers obtain key codes and other immobilizer re-set info from the federal body, NASTF, there-by continuing the dealers access to this info directly with the manufacturers, as is the case now;• Prevent interference by manufacturers in dealer’s non-franchise repair services: Cor-rects the definition of “independent repair facility” to state that a new car dealer is such a repair facility when working on ve-hicles outside its franchise line-make and providing dealers the same rights under the law as the non-dealer repairers; • No disclosure of customer information: Prohibits the disclosure to the aftermarket of dealers’ customer information as well as of non-diagnostic and non-repair informa-tion flowing between manufacturers and dealers related to franchise operations; and• Telematic services protected: The law cannot be construed to break a telematic services contract between a manufacturer or service provider, a dealer, and/or a mo-tor vehicle owner.

Minimum WageThe Senate was busy with other matters

while the RTR negotiations occurred. On a 32-7 vote, the Senate approved a bill to increase the state’s minimum wage by $3 over the next three years to $11 an hour, which would be one of the highest mini-mum wages in the country. The bill would also tie future increases in the minimum wage to inflation and require that it always be at least 50 cents higher than the federal minimum wage (currently $7.25/hr.)

The three-step increase would hike the minimum wage to $9 in 2014, $10 in 2015 and $11 in 2016. The last time the Legisla-

ture voted to increase the minimum wage was in 2006 when lawmakers approved an increase to its current level of $8 an hour, phased in over two years.

In addition to Republican Sens. Bruce Tarr (R-Gloucester), Robert Hedlund (R-Weymouth) and Richard Ross (R-Wren-tham), four Democrats also voted against the bill: Sen. Eileen Donoghue (D-Lowell), Sen. Richard Moore (D-Uxbridge), Sen. Kathleen O’Connor Ives (D-Newburyport) and Sen. Michael Rodrigues (D-Westport).

The bill now moves to the House, where House Speaker DeLeo has been less than enthusiastic about a wage hike bill unless it includes reforms to the unemployment insurance system.

Auto-Related LegislationTesla: While the Senate worked on our

RTR compromise bill, in another part of the State House the Joint Committee on Consumer Protection and Professional Li-censure held a public hearing on various auto-related bills that drew considerable interest because of that five-lettered word “Tesla.”

First on the agenda was House 241, filed by Rep. David Linsky (D-Natick), which would allow a vehicle manufacturer to own and operate a new vehicle dealership as long there were no franchised dealers of the same line make. MSADA obviously opposed this bill.

We have seen this fight before. In 2002 the Legislature enacted a major overhaul of Chapter 93B to create a level playing field between dealers and their franchisor manufacturers and address a number of abuses those manufacturers had inflicted, or attempted to inflict, upon their dealers, thereby prompting the need for the statu-tory overhaul.

One such situation the Legislature spe-cifically addressed was to tighten the prohibition on manufacturers owning or operating dealerships, directly or indi-rectly. This was a reaction to attempts by several major manufacturers to do just that not only in Massachusetts but elsewhere across the country.

the roundup MSADA


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Chapter 93B, at Section 4(c)(10), pro-hibits a manufacturer from owning and operating, either directly or indirectly, a vehicle dealership except in two well-de-fined instances – (1) in a successor situa-tion for a limited period of time where an existing dealer needs to be replaced and (2) through a dealer development program in which a manufacturer stakes a dealer recruit in a dealership and the dealer be-comes fully vested over a defined period of time.

All that has changed currently is the name of the manufacturer. Today it is Tesla. Tesla is attempting to do business in Massachusetts by circumventing the very law every dealer, and every manufacturer, must follow. There is nothing in the cur-rent law that prevents Tesla from doing business in Massachusetts, as long as they follow the rules that apply equally to all other auto-related parties.

In October 2012, MSADA initiated a lawsuit against Tesla Motors Inc. for at-tempting to own and operate a car deal-ership in the Town of Natick, which, we argue, violates the (unambiguous) prohibi-tion against such ownership as contained in Chapter 93B. Our litigation is now be-fore the Commonwealth’s Supreme Judi-cial Court, having been moved up from the Appeals Court directly by the SJC.

MSADA, our sister state associations across the country, and the National Auto-mobile Dealers Association take these ef-forts by Tesla very seriously. We see this as a blatant attempt by Tesla to undermine the dealer franchise system – a system which has served the Commonwealth’s consumers and economy rather well.

The benefits of the current dealer fran-chise system are substantial. The franchise network promotes consumer competition and public safety, and instills confidence in the consumer that there will be some-one there when help is needed.

Our 412 franchised new car dealers, who represent almost 20% of the Com-monwealth’s retail economy, provide in-calculable competitive opportunities for consumers. Not only do our dealers com-

pete for the consumers’ dollars inter-brand (Ford dealer vs. Chrysler dealer vs. Toyota dealer, etc.), but they also compete against each other intra-brand (Ford dealer vs. Ford dealer, Nissan dealer vs. Nissan dealer, etc.), all to provide the best value for the astute consumer. What’s better for the consumer – competition amongst 412 stores or a system of 25 manufacturer enti-ties offering factory-dictated terms at set prices?

All state governments require the dealer to invest in brick-and-mortar facilities to ensure there is an independent franchised dealer available to car owners for the life of the vehicle, not just at the point of sale. Buying a car is not like buying any other product. When you have a problem with your iPad, for example, it affects only you. When you have a problem with your car, it affects you and the driving public. It’s a matter of public safety.

Finally, the Massachusetts Legislature has affirmed a dealership system, an-chored by store ownership by indepen-dent small businessmen and women and not the franchisor factories. For more than 100 years, automakers have contracted with franchised dealers to sell and service their vehicles because it’s the most effi-cient and cost effective option. Ford and General Motors tried owning their own dealerships and failed. Factory stores do not deliver better customer service, and they do not reduce customer cost. Auto dealers’ total investment in land, equip-ment and facilities exceeds $150 billion nationally. Without the franchise system, auto manufacturers would shoulder these expenses themselves.

93B: As you may recall, the Legislature last year passed and the governor signed into law Chapter 152 of the Acts of 2012, which addressed certain dealer-OEM is-sues through our franchise law, Chapter 93B, including establishing a formula for the parties to rely on to ensure dealers re-ceive actual retail-level reimbursement for warranty work and parts.

For this year’s session, Senator Marc Pacheco, a long-time ally of franchise

dealers, filed Senate 129 to address ad-ditional on-going concerns in the dealer-manufacturer relationship. At the public hearing MSADA President Scott Dube and I testified in favor of the bill, which was opposed by the manufacturers and Subaru New England, the lone distributor in the state.

Issues addressed in Senate 129 include the following:• Amends the price discrimination prohi-bition protection for dealers to identify the type of facility upgrade programs that vio-late price discrimination protections;• Prohibits vehicle surcharges by manu-facturer to pay for warranty reimburse-ment at the statutorily required retail rate;• Protects dealers from investing in costly facility upgrades when the dealer does not have a reasonable expectation to recoup the investment and limits how often the manufacturer can request a facility up-grade; • Eliminates backdoor facility upgrade demands through untenable incentive pro-grams;• Prohibits a manufacturer from requir-ing a dealer to purchase goods or services from a vendor selected, identified, or des-ignated 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’ us-ing export chargebacks to penalize dealers for cars that get exported without dealer’s knowledge.

We will continue to work with the man-ufacturers on this bill to develop a prod-uct that will provide dealers the additional protections being sought.

Doc Fee Cap: The Committee had on its agenda Senate 95, filed by Sen. James Eldridge (D-Acton), which would cap the doc prep fee at $75. No one testified in favor of this proposal. MSADA is op-posed.

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MSADA


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MSADAinsurance

By Nancy PhillipsMany of the most desirable deal-

erships are aggressively targeted by other dealers and dealership groups. But if you want to grow and aren’t the biggest fish in the sea, there are still good opportunities out there that are different from what you thought your dream store may be.

Meet Steve Pelletier - young, ambi-tious, successful in the Maine lumber industry - now turned auto dealer in Fort Kent, Maine. When Norm Martin, the Ford dealer in town wanted to sell, he engaged Nancy Phil-lips Associates to assist him and introduced us to Pelletier in the process. Steve was very entrepreneurial, highly ambi-tious and strong financially. We liked him immediately and thought he was just what the community of Fort Kent needed.

While we would never dare to present a franchise applica-tion to Ford proposing a lumberman as their new dealer, we did come up with a creative way to sell to Pelletier, keep-ing the original owner in place for a period of time. Pelletier upgraded the facility immediately endearing himself to Ford in the process and the business grew faster than anyone an-ticipated.

When the Fort Kent General Motors dealership burned to the ground in a massive fire just one year ago, it’s owner Carl Theriault, also called on Nancy Phillips Associates for help. Thus began the most unusual transaction in our 25-year his-

tory of selling dealer-ships. We represented both buyer and seller and worked through a multitude of obstacles to consummate the sale and rebuilding of the dealership that Gen-eral Motors classified as non-existent.

We have just returned from celebrating the grand opening of Steve Pelletier’s new Chev-rolet, Buick and GMC dealership and wanted to share this story of the new dealer who saw opportunity where others did not and our role in making it all happen.

If you own a dealership in an outly-ing area or one that has other chal-lenges, remember there may be an option you never consid-ered that could add significant value to your exit plan. Think-ing outside the proverbial box as a buyer may just land you a dealership with low expense, less competition and a big upside potential. The difference between terminating a franchise and looking at an empty building and finding someone to replace you is enormous.

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Nancy Phillips Associates specializes in sales, acquisitions and evaluations of franchised automobile

dealerships. Contact Nancy Phillips at 603-658-0004 or email [email protected].


Do you have an opinion you want to share? Send submissions to [email protected].

sOUnd OFF

In Today’s Market, There is a Buyer for Almost Every Dealership

13

Valley Motors, owned by Carl Theriault for 15 years, burnt to the ground in october of 2012, leaving him in uncharted wa-ters. With the help of nancy Phillips associates the dealership was sold and reopened just one year after the fire.

nancy celebrating with previous “Valley Motors” owner Carl Theri-ault and steve Pelletier, who got his start in the industry through nancy Phillips associates.

steve Pelletier, with his family and employees, gets ready to cut the ribbon at his new deal-ership. Most of the town of fort Kent, and even the governor’s wife, came to celebrate the grand opening just one year after the original dealership burnt to the ground.

MSADA

MSADAtroubleshooting14


Here at your Association, we field legal inquiries from dealers and their employees on a daily basis. Many of these questions reappear from time to time, and this column will periodically review some of the most frequently asked questions that we field on behalf of members.

Q: What type of information am I allowed to request on a job ap-plication?

Numerous state and federal laws dic-tate the kinds of information that must be either included or excluded from em-ployment applications. Dealers need to ask the right questions to avoid liability on a charge of negligent hiring, but also avoid requesting prohibited information so as to prevent a hiring discrimination lawsuit.

Solicit relevant job related informa-tion to help you determine whether an applicant is qualified for the listed posi-tion such as education level, work expe-rience, and skills. Make sure to include an authorization to be signed by the ap-plicant allowing the employer to check all references and conduct a credit and background check, as well as a verifica-tion statement that the applicant must sign to verify the information provided in the application.

Refrain from requesting any infor-mation that pertains to the following

subjects: Age, National Origin, Gender, Sexual Orientation and Religion. Infor-mation regarding an applicant’s criminal record must not be requested on the ini-tial employment application, but an em-ployer may ask the applicant about his or her criminal history during the inter-view process.

Additionally, employers may not re-quest health or disability-related infor-mation, but may ask whether the ap-plicant can perform the functions of the job with or without reasonable accom-modation, whether they can meet the attendance requirements of the position, and if the applicant holds any required licenses.

Contact your Association for a legally compliant template for a job application.

Q: If I terminate an employee for stealing dealership funds, do I have to give the employee her last paycheck? Can I instead apply these funds towards the loss?

While withholding an employee’s final paycheck after dismissing the employee for theft might seem like a reasonable and fair action in light of the circumstances, such practice was prohibited by the Massachusetts Su-preme Judicial Court in a 2011 decision. Under Camara v. Attorney General, an employer cannot deduct from an em-ployee’s wages without a “valid set off,” which requires a clear and established debt, determined by an impartial third party, such as a court.

Even if an employer has a specific policy requiring the employee to reim-burse the company for lost money, the policy would be ruled invalid in court, and the deduction would not be permit-ted. If an employer wishes to seek reim-bursement under similar circumstances, he must get a judgment against the em-ployee in court.

Without the valid set off, the employer would be liable for treble damages under the law: three times the amount of any invalid deduction. In addition to obtain-ing a judgment, the dealer should also notify their insurance carrier because employee dishonesty may be covered under the dealership policy.

Q: What is full-time versus part-time employment?

Neither Massachusetts nor Federal law defines what constitutes a “full-time” or “part-time” employee.

Most employers handle the designa-tion of “full-time” versus “part-time” internally for purposes of establishing employee benefits such as paid vaca-tions, sick days, and, most importantly, participation in the employer’s group health insurance plan. Massachusetts health care reform set the standard for FTEs at 35 or more hours per week, while Obamacare (the Affordable Care Act) considers the full-time threshold to be 30 or more hours per week. For health plan eligibility purposes, employ-ers should refer to the current federal standard.

For the purposes of establishing em-ployee benefits such as paid vacations, sick days, paid holidays, etc., employ-ers are free to set their own standard for FTEs, but should make sure that the pol-icy is consistently applied and written down, preferably in an employee hand-book. The employee handbook should be designed with the assistance of coun-sel and distributed to every employee at the time of hire, with the employee sign-ing a statement acknowledging receipt of the handbook.

If you have a question that you would like to see answered in this column, please contact Peter Brennan, MSADA Staff Attorney, at [email protected] or by phone at (617) 451-1051.

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Frequently Asked Questions

Staff attorney, MSaDa

By Peter Brennan, Esq.

15


MSADA Accounting

Solar energy is a natu-ral, clean renewable en-ergy source that offers both cost savings and se-curity for businesses. It can reduce electric bills substantially while pro-viding a stable and af-fordable source of energy for the business. Many businesses are moving towards environmen-tally friendly solutions to meet their building and energy needs. For these

businesses, solar energy may not only be an attractive “green” alternative to reduce their environmental footprint, but a tax sav-ings opportunity as well. The installation of an efficient, clean, energy producing renewable energy system now could mean both lower electric bills and tax savings in the future.

Federal Tax IncentivesIn order to encourage the use of renewable energy, including

solar energy, the United States federal government has insti-tuted the federal energy investment tax credit program. Under this program, an investment tax credit for installing solar energy systems is available in the amount of 30% of the cost of those systems. There is no cap on the amount of qualifying costs or the amount of the credit available to individual property owners. It includes not only the solar equipment, but the cost of installation as well. The credit is available to qualified commercial property owners through 2016. If the credit cannot be fully utilized in the year the system is installed, it may be carried forward for five years or until 2016.

Systems eligible for the federal energy investment tax credit include those solar systems that generate electricity to heat, cool or provide lighting to illuminate the inside of a structure. The original use of the equipment must begin with the taxpayer. All applicable design, performance, and quality standards in effect at the time the equipment is acquired must be met in order to qualify for the credit. Federal incentives don’t end there, though. In addition to the federal energy investment tax credit, there is a deduction available for the first year the equipment is put into service in the amount of 50% of the cost of the equipment. This deduction is available under the existing Bonus Depreciation Rules. The remaining cost may be depreciated over the next four years.

Massachusetts Tax IncentivesMassachusetts has an aggressive renewable energy program

which requires electricity providers to obtain increasing amounts

of the electricity consumed in the state each year from solar sourc-es. This gives rise to the need for providers to purchase renewable energy credits from outside sources. That means businesses that generate solar power have the very real opportunity to generate an incremental revenue stream by selling energy credits for excess power generated by their solar systems. This technique further reduces the cost of energy for Massachusetts businesses.

Massachusetts allows businesses to deduct the cost paid or in-curred from the installation of qualified solar systems from net income for state excise tax purposes when certain criteria have been met. Furthermore, solar systems that qualify for the deduc-tion from net income will not be taxed under the tangible property measure of the state’s corporate excise tax for the length of the equipment’s depreciation period. This means, a qualifying prop-erty owner may not pay any Massachusetts excise tax on the new solar system for up to five years.

The value added to taxable property as a result of installing a qualifying solar system will be exempt from local property taxes for a period of 20 years.

Solar system equipment and materials are exempt from sales tax in Massachusetts.

The following is an example to illustrate the potential tax sav-ings for a Massachusetts S-Corporation:

Assuming a savings on utility costs plus revenue generated from the sale of renewable energy credits of $10,000 to $15,000 per year, the remaining cost could be fully recovered in approxi-mately 7 - 10 years.

If you would like more information on this topic, please contact Maureen Burns Fradera at 800-849-6022 or [email protected]

t

Cost of System $300,000Federal Energy Tax Credit 30% (90,000)Cost of System After Tax Credit $210,000Other Potential Tax Savings:Federal Tax Savings on Bonus Depreciation for Owners in the 39.6% Tax Bracket ($300,000 cost less 50% of investment tax credit of $90,000 = 255,000 depreciable base * 50% bonus depreciation = $127,500 X 39.6%)

(50,490)

Massachusetts S-Corp. Income Tax Savings ($300,000 X 2.75%)

(8,250)

Massachusetts Corporate Excise Tax Savings ($300,000 X .026%)

(7,800)

Massachusetts Tax Savings for Owners ($300,000 X 5.25%)

(15,750)

Total Potential Tax Savings $91,290Cost of System in Year 1 Less All Potential Savings $118,710

Tax Advantages of Installing Solar Energy Systems

Maureen BurnS fraDera iS a Senior Manager at Downey & CoMpany anD SpeCializeS in auto DealerShip aCCounting.

By Maureen Burns Fradera

16


AUtO OUtLOOK


17MSADA

New England International Auto Show


18

Buick Lacrossethe LaCrosse’s new advanced technologies include camera- and radar-based safety features that work with General Motors-patented safety Alert seat

2014 PreVieW

Cadillac Cts sedanthe new Vsport model offers a new Cadillac twin-turbo V-6 and the brand’s first eight-speed automatic transmission.

GMC sierra Hdnew and enhanced features for the 2015 sierra Hd lineup include Cornerstep rear bumper, eZ Lift and Lower tailgate, standard upper tie-downs and other features that make cargo handling easier.

scion iQthe iQ is powered by an efficient 94-hp 1.3-liter four-cylinder engine, paired with a Continuously

Variable transmission.

19MSADANew England International Auto Show


Mini Hardtopevery new Mini has 3 driving modes you can switch on the fly: sport Mode, Green Mode and mid-mode.

Lincoln MKCthe base MKC shares a 2.0-liter, 240 horsepower ecoBoost four-cylinder engine with the MKZ.

toyota Highlander Hybrid Limited this is one of the first auto show appearances for this vehicle.

Chevrolet sparkContinuously variable transmission on gasoline spark with 3.75 final drive ratio increases highway fuel economy to 39 mpg, improves acceleration, and reduces engine noise at highway speeds

20


iBeetlethe iBeetle is the first model series of the Volkswagen Group in which the iPhone will become an integrative component.

Rolling into Showrooms in 2014

2014 New England International Auto Show

Chrysler 300the 2014 Chrysler 300s features body-colored door handles and fascia inserts, a glossy black finish for the belt molding and light surrounds, and a new black chrome grille.

nissan Gt-rthe Gt-r gets new lighting technology for 2015, including multi-Led head-lights that lend the car a new light signature at night.

equus Ultimateequus employs a unique

thermoelectric technology that controls the heating, cooling and humidity of

www.msada.org Massachusetts Auto Dealerr NOVEMBER 2013

21PREVIEW

Rolling into Showrooms in 2014

Ford Transit Connect WagonPowered by either a 2.5-liter four-cylinder or an EcoBoost 1.6-liter four pot, the front-drive Transit Connect Wagon may be had in one of two wheelbase configurations.

Kia K900The 2015 Kia K900, Kia’s newest luxury sedan, is the brand’s featured vehicle for the auto show. The all-new K900 is scheduled to go on sale next year and be available with either a V6 or V8 engine.

Audi AG S3 SedanThe S3 has a range-topping S3 with 300 hp and Quattro.

Mercedes E350 CabThe E350 Cab’s fuel-saving ECO Start/Stop system automatically shuts off the engine at stoplights and other idle situations. As soon as the driver lifts off the brake, the engine instantly restarts for immediate acceleration response.

MSADA


22 Legal

We have learned that the Department of Labor has approached several dealers in the past couple of weeks and demanded payment of overtime for detailers working for Real Clean (Kilnapp Enterprises). The amounts range from a few thousand to tens of thousands of dollars. In some cases the DOL has asked the dealer to pay “liquidat-ed damages,” meaning a penalty equal to the total back pay owed.

This is a serious situation for dealers who have relationships with Real Clean, and it will only get worse.

As we have previously reported, the DOL has been visiting dealerships for months, demanding to interview dealer-ship employees and Real Clean employees. Their primary objective has been to tie the dealerships to Real Clean, in order to claim that the dealership is a “joint employer” of the Real Clean personnel. After the DOL completes its investigation, which typi-cally also covers FLSA compliance for the dealership employees, the DOL schedules a “closing conference” and demands back-pay and overtime it claims is owed both to any dealership employees who were im-properly paid, as well as to employees of Real Clean.

The dealers, of course, do not employ any of the Real Clean employees directly, nor do they supervise or control their work. Under the brokerage arrangement with Real Clean, the dealer pays a fee directly to Real Clean for detailing or recondition-ing each car, and Real Clean is exclusively responsible for paying its employees and contractors.

The DOL claims that the Real Clean contractors are not independent, but are “jointly” employed by the dealer and either Real Clean or the contractor. Therefore, the DOL says the dealers are responsible for monitoring their hours and pay, and making sure they are paid minimum wage

and overtime.When the dealers explain to the DOL

that they have no knowledge of or control over the Real Clean personnel, the DOL often threatens them with liquidated dam-ages or legal action if they don’t pay the money, which covers alleged back pay for two years.

Even if a dealer decides to pay the DOL, that does not relieve the dealer of liability, because each day Real Clean employees are not paid overtime or minimum wage constitutes a new violation. The DOL, therefore, can come back again and de-mand more back pay unless something has changed.

What Should Dealers Do?If they feel that the DOL has no legiti-

mate reason demanding money from them for work done by Real Clean employees, dealers have a variety of options to con-sider, including:• Real Clean has indemnification agree-ments with some dealers. It has indicated that it will consider offering indemnifica-tion agreements to all of its dealers. Real Clean is asking the dealers not to agree to pay the DOL, but instead to let Real Clean’s lawyers defend them. Real Clean has indicated through its lawyer that it will not reimburse any dealers who choose to pay the DOL directly.• Therefore, dealers have the option of not paying the DOL and permitting Real Clean to defend any lawsuits against them. How-ever, any such offer by Real Clean will not stop the DOL from coming back, or other government agencies like the Attorney General from getting involved. It may also lead to time-consuming litigation. Fur-thermore, being defended by Real Clean’s attorneys might give the impression that there is, in fact, a close relationship be-tween the dealer and Real Clean. And the

dealer may have a real dispute with Real Clean, so its lawyer would have a conflict representing the dealer in any event.• Dealers can pay the DOL and end their relationship with Real Clean if they feel the risks are too great. In connection with that, they can demand reimbursement by Real Clean or consider offsetting any amounts paid against monies due to Real Clean.• If a dealer ends its relationship with Real Clean, the dealer can hire detailers direct-ly, and pay them properly as employees of the dealership. Alternatively, a dealer can engage the services of another outside company to provide detailing services. Of course, the dealer should take steps to ensure that the new detailing company is complying with all employment laws, in-cluding wage-hour. • Dealers can demand that Real Clean guarantee full compliance with all laws by Real Clean and its contractors, and build in appropriate offsets and penalties against Real Clean if there are violations.

Each of these options requires careful consideration and involves weighing risks and benefits. The situation is very com-plicated. Each dealer should consult with counsel to help determine the best course of action for your dealership.

Fisher & Phillips will continue to moni-tor the situation and provide advice and guidance to dealers as requested. Please contact Joe Ambash at (617) 532-9320.

t

Alert: DOL Cracking Down on Dealers Using Real Clean

By Joseph W. Ambash

Joe aMBaSh iS Managing partner of the BoSton offiCe of fiSher & phil-lipS, a national law firM repreSenting Manage-Ment in laBor anD eM-ployMent law. he Can Be reaCheD at [email protected].

MSADA 23


Accounting

As the holidays approach us and the 2013 tax year is coming to a close, it is not too late for you to make some financial decisions to help make your tax bill a little less painful. You still have time to ob-tain some additional deductions that will reduce your overall tax burden. In a year where the level of your adjusted gross in-come will determine if you owe additional taxes on your net investment income and possibly cause a reduction in the amount of your deductible itemized deductions and personal exemptions, it will really be worth your time to plan accordingly. In addition to federal tax considerations, there are also some state tax items to keep in mind for the 2013 tax year.

Increase your basis in a Partnership/S Corporation

If your dealership operates as a part-nership or is an S Corporation, you may need to increase your basis in the enti-ty in order to deduct a loss from it this year. If you have an S corporation, keep in mind you must actually have a finan-cial outlay to the entity in order to obtain additional basis in the entity. A personal guarantee on a loan to an S Corporation will not by itself create additional basis for you to offset losses against.

Dispose of a passive activity with sus-pended losses

If you are considering selling your in-terest in a passive activity, sell it before year-end in order to deduct any prior years’ suspended losses in the 2013 tax year. Once you have disposed of your entire interest in the activity, all suspend-ed losses can be used not only to offset any of your current year passive income but also used to offset ordinary income earned from other sources.

Realize capital losses on depreciated stock holdings

Individual taxpayers can deduct up to $3,000 from their ordinary income if they have net capital losses in excess of net capital gains. Capital losses will also reduce investment income that could be subject to the 3.8% net investment in-come tax, which takes effect for the 2013 tax year. You can preserve an investment position while realizing a tax loss, if you sell the original holding and then buy the same securities at least 31 days later. Al-though you will lock in your tax loss by year-end, be aware that you do run the risk of an upward price movement by having to wait the 31 days.

Review your 2013 estimated tax payments

Overall, the tax year 2013 has been a good year for the auto industry. If you are a corporation and predict having taxable income for 2013, make sure you pay your Federal and state estimated tax payments before year-end. You will owe penal-ties and interest if you don’t pay in either 100% of your 2013 or 2012 tax liability, whichever is lower, by year-end. You can’t base your 2013 tax estimates on your 2012 tax return unless you incurred a 2012 tax liability. Your 2012 tax return must also have been for a full 12 month period. If your 2012 tax return did not reflect a tax liability or you had a short tax year, you

must base your estimated tax payments on your 2013 estimated tax liability.

State tax updates to keep in mindNew England states continue to make

changes effecting businesses operating in their states. For tax years beginning January 1, 2013, Massachusetts imple-mented a Wellness Credit for businesses that set up a wellness program for their employees. The credit is equal to 25% of the cost associated with implementing a certified wellness program, with a maxi-mum amount of $10,000 per business in any one fiscal year.

Effective July 1, 2013, Rhode Island amended its regulations requiring sin-gle-member limited liability companies (LLCs) that are disregarded entities to obtain their own Federal taxpayer iden-tification number. Even though a single-member LLC isn’t required to file its own Federal income tax return, it is still required to file the Form RI-1065 with payment of the annual charge.

Effective for tax periods on or after December 31, 2013, New Hampshire has raised the gross receipts requirement and the enterprise value tax base for de-termining whether a business must file a N.H. Business Enterprise Tax return (BET). Every business enterprise with gross receipts in excess of $200,000 (previously $150,000) during the taxable period or an enterprise value tax base that is greater than $100,000 (previously $75,000) must file a BET return on or be-fore March 15 (if filing a Federal corpo-rate tax return), and April 15 for all other business enterprises.

If you have any questions about any of these items, please contact Kathryn M. Loranger, CPA, O’Connor & Drew, P.C., at [email protected], or by phone at (617) 471-1120.

t

Make 2014 a Happy New Year: Consider These Tax Items

By Kathryn Loranger Kathryn loranger, Cpa, tax Manag-er, haS Been with the aCCounting, tax, anD BuSineSS ConSulting firM o’Connor & Drew, p.C. SinCe 2011. She haS 18+ yearS of puB-liC aCCounting expe-rienCe prior to Join-ing the firM.

DANVERS

Kelly Profiled in Automotive News

Dealer Brian Kelly discussed his managerial priority of treating his employees well in a recent issue of Automotive News.

“We try to take good care of our employees, and they take care of the customers,” Kelly told the publication. “I just feel it’s the right thing to do.”

Five of Kelly’s eight rooftops -- Nissan stores in Lynnfield and Woburn, his Honda store in Lynn, an Infiniti and a brand-new Volkswagen store, both in Danvers -- are among Automotive News’ 100 Best Dealerships To Work For.

They made the short list, Kelly said, because of the lessons his late father taught him on how to run a dealership.

“My father was a very generous, outgoing kind of a guy. He died five years ago, but I still quote him three or four times a day,” said Kelly. “To me, you do nice things, and if it pays off, it pays off. If it doesn’t, it doesn’t. You can’t expect anything in return.”

Kelly listed a number of extras and perks his employees enjoy, including dinners out, catered lunch, clothing allowances, health

insurance that kicks in on employees’ first day, birthday recogni-tion and flowers on February 14.

The methodology flows through employees to customers, who Kelly said regularly tell him about his employees going an extra mile to take care of their issues and needs.

“It keeps customers coming back,” Kelly told Automotive News.

SOMERVILLE

Herb Chambers Companies Ranked among Top Places to Work

Herb Chambers Companies were ranked a “Top Place to Work” by The Boston Globe for the fifth consecutive year.

This year, they were ranked fifth among largest companies. Companies in this category must employ at least 1,000 people.

“We are most honored to be included in The Boston Globe’s ‘Top Places to Work’ this year,” said Herb Chambers in a written statement. “Whether in sales, service, customer relations or fi-nance, our employees are the pulse of our business and we are in-credibly appreciative for all of their dedication and stellar work.”


from Around the HornNEWS24


25MSADAfrom Around the HornNEWS

BOSTON

Mass. Vows 3.3M Zero-Emission Vehicles by 2025

Massachusetts Gov. Deval Patrick recently joined governors from seven other states to pledge to get 3.3 million zero-emission vehicles on roadways by 2025 in an effort to curb greenhouse gas pollution from transportation sources.

Representatives from all eight states signed a memorandum of understanding that would increase infrastructure and make other changes to help increase market share for electric cars, hydrogen fuel-cell electric vehicles, and plug-in hybrids.

Gov. Patrick said more electric vehicles are key to the state’s efforts to grow the region’s economy.

“Diversifying transportation fuels and providing drivers with options will help reduce vulnerability to price swings in imported oil that hurt consumers and our economy,” Patrick said in a state-ment.

The other states involved are Rhode Island, Vermont, Con-necticut, New York, Maryland, Oregon, and California. The eight states together represent about 23 percent of the U.S. auto market.

The agreement signed last month requires no specific financial commitment from each state. But each has already launched in-centive programs and other policies meant to increase sales of zero-emission vehicles.

Massachusetts pays incentives of up to $7,500 per vehicle to cities that buy electric models, and up to $15,000 for each charg-ing station built.

NATICK

Natick Town Meeting approves Car sales Bylaw, Paves Way for Tesla

Natick’s Town Meeting has approved a short-term change to town zoning bylaws to allow for limited car sales at the Natick Mall and in the Golden Triangle area, a decision that paves the way for Tesla to sell its automobiles directly to consumers.

As passed on October 17, the bylaw allows for a “Limited Salesroom for Motor Vehicles,” which is defined as “a retail establishment for the sale of Motor Vehicles with … having no more than four vehicles on site for sale, test driving or dis-play, with no repair services” — provided a com-pany gets a special permit from the town Planning Board.

Because it involves a change to zoning bylaws, the new bylaw will have to be approved by the state Attorney General before it can take effect.

The new bylaw will offer relief to the electric car manufacturer Tesla Motors, who had previ-ously been granted temporary waiver to sell its cars out of a showroom in the Natick Mall in July.

The company’s attempt to sell cars directly to consumers had rankled many dealers in the state, culminating in a lawsuit by the Massachusetts State Auto Dealers Association last fall that was ultimately thrown out of Norfolk Superior Court.

Feds Officially Investigating Tesla Fires

Following several crashes, federal safety regulators have opened a probe into a series of fires in Tesla Motors Inc. electric cars.

The National Highway Traffic Safety Administration said re-cently that it would investigate why two of the expensive Tesla Model S sporty hatchbacks have caught fire this year following accidents in which the battery casing that serves as the undercar-riage of the car cracked open.

A third fire, which took place in Mexico, won’t be part of the investigation because it is outside the agency’s jurisdiction.

NHTSA noted that in the two U.S. fires, one in Seattle and the other in Nashville, the battery monitoring system in the cars warned the drivers, allowing them to pull over and safely exit the vehicles before the battery emitted smoke and fire.

The fires have contributed to a 37 percent drop in the value of Tesla’s stock, after it reached a high of $193.37 on September 30.

RAYNHAM

2014 Nissan Pathfinder Hybrid Rolls Out for Efficient Winter Commuting Nissan Pathfinder Hybrid

If the Farmers’ Almanac can be trusted, New Eng-land is in for a brutal upcoming winter, meaning Mas-sachusetts commuters will want a vehicle that can handle the relentless snow and ice without costing them more at the gas pump. Arriving in time to battle whatever weather might be in store, the new 2014 Nis-san Pathfinder Hybrid is on its way to dealerships with an impressive combination of fuel economy and all-conditions capability.

Returning up to 26 mpg in combined city and high-way driving, the new Pathfinder Hybrid is 24 percent more efficient than regular Pathfinder models, pair-ing a 2.5-liter four-cylinder gas engine with an elec-tric motor and a compact lithium-ion battery pack.

Despite its extra gas mileage, the hybrid system of-fers similar performance to the Pathfinder’s standard 3.5-liter V6 engine, generating a total output of 250 horsepower and 243 pound-feet of torque compared to the gas-only model’s 260 horsepower and 240 pound-feet of torque. When it gets messy on the road, an available All-Mode 4×4i Dial allows the driver to select between two-wheel drive, four-wheel drive or an Auto Mode that starts out in two-wheel drive but senses when power should be sent to all four wheels for greater traction.

“In past winters, drivers would need to choose be-tween cost savings or capability when selecting their ride, but the latest Pathfinder, especially the new hybrid model, is designed to offer both,” said Bruce Garcia, general sales manager of Mastria Nissan in Raynham. “That means a lot to parents who need more space and extra grocery money for their growing families but also want to keep their kids safe when driving in the snow.”

from Around the Horn26 NEWS


NEEDHAM

Mass. Ford dealers Excited For arrival of 45 MPG Fiesta sFE

The EPA has officially certified the 2014 Ford Fiesta as getting 45 miles per gallon highway, adding to Ford’s growing fuel effi-cient lineup which includes 3 new hybrids and 2 plug-in hybrids.

The Fiesta SFE, scheduled to arrive in Massachusetts Ford dealerships in December, will be the most cost-effective gas sub-compact car in highway mileage in the Commonwealth.

With Ford’s new Eco-boost engine and a manu-al transmission, the Fiesta SFE is very aggressively priced at $16,740 at local MA Ford Dealers.

The gas Fiesta SFE at 45 MPG Hwy exceeds the miles per gallon of many

hybrids on the market. The efficient turbocharged engine generates 123 horsepower and 125 pound-feet of torque and is available as a sedan and a five-door hatchback with a choice of automatic or manual transmission.

PEABODY

2014 Range Rover sport to attempt Fastest Trek across Empty Quarter

As the largest sand desert in the world, the Empty Quarter is characterized by dunes that swell as high as 850 feet and temper-atures that can surpass 120 degrees. Those conditions won’t stop Land Rover from attempting to drive the redesigned 2014 Range Rover Sport across the treacherous Middle East desert in record time this week, as the brand has total confidence in the off-road capability of its newest SUV.

With experienced Spanish off-road driver Moi Torrallardona behind the wheel, a production-spec 2014 Range Rover Sport will take off at dawn from Wadi Adda Wasir, Saudi Arabia, and travel 622 miles across the Empty Quarter before its expected arrival at the United Arab Emirates border around dusk. With an all-new aluminum body structure that is about 800 pounds light-er than its predecessor, the new Range Rover Sport is the fast-est, most agile and most responsive Land Rover ever, and those claims will be put to the test on extreme terrain that is usually reserved for specialist sand vehicles.

“The Range Rover Sport’s lighter unibody frame allows the

27MSADA


from Around the Horn28 NEWS MSADA


SUV to be not only faster and more fuel efficient but also just as capable as past models due to the strict use of high-strength aluminum,” said Dave Edwards, general manager of Land Rover Peabody. “The new chassis also connects to a next-gen four-cor-ner air suspension, giving the Range Rover Sport extra maneuver-ability for traversing the huge sand dunes in the Empty Quarter.”

PEABODY

With Its RLX, acura Emphasizes style and sophistication at sEMa show

While the annual SEMA Show in Las Vegas likely evokes scenes of outrageously tricked-out vehicles for most driving en-thusiasts, Acura elected to take a more sophisticated route this year to highlight its all-new Acura RLX flagship luxury sedan. The auto brand teamed with Evasive Motorsports and MAD In-dustries to showcase two customized RLX models at the after-market event last week, and both rides emphasized refinement and responsiveness over juiced-up performance.

Donning a carbon-fiber front-bumper lip and vents, a revamped rear bumper and a customized exhaust with titanium tips, the 2014 Acura RLX VIP Sedan by Evasive Motorsports is equally at

home traveling to the office or to the concert hall. Completing that upscale look are Chargespeed carbon-fiber side skirts and 21-inch Advan F15 wheels, while prototype Tein Street Flex coilovers allow the RLX VIP Sedan to assume a lower stance. Inside the cabin, passengers are coddled with custom neck pillows featuring a Jordan Brand-inspired elephant print.

“With its upswept design lines and sleek Jewel-Eye LED head-lights, the new Acura RLX doesn’t require many modifications to stand out on the road, so Evasive Motorsports and MAD In-dustries focused more on complementing its style rather than changing the design direction,” said Joel Avery, general manager of Acura of Peabody. “The RLX is also the most powerful Acura sedan ever, so it didn’t need much in the way of performance up-grades to satisfy the SEMA audience.”

nAdA Update by Don Sudbay

As we end 2013 I think we can all be thankful for the progress our industry and our dealerships have made in the past five years. We all remember the dark days that beset us in the fall of 2008. Dealers are truly a group of resilient en-trepreneurs, and we have helped lead the way for our coun-try out of the worst economic conditions since the Great Depression. Your state and national dealer associations have played a major part in helping us all through these difficult times. The franchise system is alive and well, and please be assured that MSADA and NADA will continue to advocate for all of us. A safe and happy holiday season to all.

A Special Note from NADA Chairman David Westcott:

“November is a special month. As the leaves change to bright, fall foliage outside NADA’s headquarters, it is a good time to take stock of what we’re thankful for. For one, I’m thankful to be a franchised dealer, and I bet you are too. I’m proud to be part of a group of resilient entrepreneurs that do what nobody else can: keep America moving.

“Meeting the trans-portation needs of our customers is essential to a strong economy, a strong community and a strong country. But there’s more.

“As I travel and meet dealers around the country, I can’t help but be impressed with what dealers do outside of their showrooms. Dealers are philanthropists, civic leaders and the cornerstones of their communities. They fund hospitals, support schools and back local police

and fire departments. That is why NADA is proud to co-pro-duce the TIME Dealer of the Year Award, a national initia-tive that recognizes the industry’s most successful new-car dealers who also demonstrate a longstanding commitment to community service.

“The award, sponsored by Ally Financial, is now in its 45th year. It is considered the industry’s most prestigious award for new-car dealers.

“TIME recently announced 57 nominees from a field of more than 8,700 dealers nationwide. This select group from across the country will be honored at our 97th annual Con-vention & Expo in New Orleans. And the national winner will be announced on Saturday, at the opening session of the convention, on January 25.

“NADA’s ties with the awardees extend beyond the award show. In fact, of all the previous TIME Dealer of the Year national winners, 11 are Ambassadors of the National Automobile Dealers Charitable Foundation. These winners also include past NADA chairmen and presidents and cur-rent board members.

“NADA is extremely proud to be part of this legacy. The NADA Foundation, which serves as the philanthropic arm of our association, was established in 1975. The foundation has expanded beyond the Ambassador program to include emergency relief for dealership employees, educational and road safety grants, and support for Canine Companions, including its Wounded Warrior initiative, as well as CPR training manikins to organizations in all 50 states. This is

all made possible by the contributions from our members to the founda-tion.

“If you are not already an Ambassador, you should become one.

“A dealer, company, association or individual makes a contribution of $10,000 in his or her own name or in the name of someone they would like to recognize and honor. The foundation then

guarantees that a grant of at least $1,000 will be presented to an entity the Ambassador selects every three years in per-petuity. It’s like having your own foundation without having to bother with administration and overhead.

A Season of ThanksThe franchise system is alive and well

Don SuDbay, PreSiDent of SuDbay automotive GrouP, rePreSentS mSaDa memberS on the naDa boarD of DirectorS. he welcomeS your queStionS anD concernS ([email protected]).


29

“I can’t help but be impressed with what dealers do outside of their showrooms. Dealers are philanthropists, civic leaders and the cornerstones of their

communities.” –NADA Chairman David Westcott

MSADAnAdA Update

“Today, there are 650 Ambassadors who collectively do-nate about $250,000 each year to charities of their choice, usually in their local communities.

“Dealers are giving more than ever. The 2013 Dealer Charitable Survey, sponsored by Ally and NADA, showed a 65 percent increase in donations and volunteerism among dealers in their local communities.

“NADA salutes the Dealer of the Year award nominees and we congratulate every individual on the list. We salute all of our NADA Ambassadors who have generously do-nated their time and resources to others. And we salute all dealers across the country who make a difference in their communities and have given others something to be thank-ful for during the holiday season.

“For more information on the TIME award nominees, visit: www.allydealerheroes.com. For more information about the TIME program, visit: www.timedealeroftheyear.com.

“For more information on the NADA Charitable Foun-dation or to become an Ambassador, email us at: [email protected].

“From our NADA family to yours, have a safe and happy Thanksgiving!”

NADA and CFPB Take Center Stage in Washington in November

Richard Cordray, director of the Consumer Financial Protection Bureau, provided the agency’s semi-annual report to Congress in testimony to U.S. Senate Banking Committee on November 12. During questioning from the Senators, Cordray admitted that the CFPB needs to provide more transparency on its methodology, but expressed con-cern about dealers setting auto loan rates. “Like Congress, NADA is still waiting for the CFBP to share the methodol-ogy it uses to determine that statistical discrimination exists in the auto lending,” said NADA President Peter Welch.

Welch stressed that many factors outside of race can impact an interest rate such as the amount financed, ve-hicle class, whether the car is new or used, the size of the down payment, term of the loan, time of the month and au-tomaker sales incentives, etc, “Without understanding the bureau’s computer modeling there is no way to determine if the CFPB’s conclusions are reliable or come to a resolution that protects the affordability and accessibility that dealers can offer their customers today,” Welch added.

Six of the 22-members on the Senate Banking Commit-tee signed a letter to Cordray on Oct. 30 expressing concern about the CFPB’s guidance issued last March “that could curtail a pro-competitive feature of the indirect vehicle fi-nancing market and to request greater transparency for the bureau’s activity related to this matter.” They are Ranking

Member Mike Crapo (R-Idaho), Kay Hagan (D-N.C.), Hei-di Heitkamp (D-N.D.), Joe Manchin, III, (D-W.V.), Jerry Moran (R-Kan.) and David Vitter (R-La.).

In March, the CFPB—without public comment or formal rulemaking—issued guidance that pressures lenders into compensating dealers arranging financing with flat fees and eliminating any discretion dealers have to “meet or beat” a competitor. Since then, the CFPB has refused to release any of its research that supports the need to force these changes in auto lending. After multiple bipartisan requests from both the House and Senate, the CFPB admitted recently that there was no analysis performed as to how moving to flat fees will help or harm consumers.

“NADA shares the CFPB’s goal of eradicating discrimi-nation. There is no room for discrimination in the car busi-ness or any other business,” Welch added. “In the name of fair lending, the CFPB’s actions will eliminate a customer’s right to negotiate a better interest rate. That is akin to elimi-nating the ability to negotiate a lower sticker price on a car or truck.”

Welch added that consumers benefit from the current system of dealer-assisted financing because consumers can shop at more than 17,000 franchised new-car dealerships that have the ability to “meet or beat” interest rates offered by their competitors. “The current system yields credit that is widely available and competitively priced,” he said. For the latest NADA updates on the CFPB and dealer-assist-ed financing, visit http://www.nada.org/legislativeaffairs/economy-financial/cfpb/default.htm

NADA Unveils Second Annual Industry Report on Dealership Workforce

NADA has unveiled its second annual industry report on car and truck dealership employee compensation, benefits, retention and turnover, and hours of operation and work schedules. The 2013 Dealership Workforce Study Industry Report was produced in partnership with DeltaTrends, and was designed to help dealers meet their No. 1 challenge: recruiting, hiring and retaining top talent. The report helps dealers meet that challenge, with hard data culled from 290,000 car and truck payroll records, and cogent analysis by DeltaTrends, the automotive retailing industry’s leading provider of workforce metrics, guides and trends, and HR best practices. “This is by far the most comprehensive and timely study on the dealership workforce ever produced, and serves as a tremendous resource to help dealers ‘step up their game’ to gain an edge on the competition,” said NADA Chairman David Westcott. To purchase the 2013 Dealership Workforce Industry Report, contact NADA University Online at (800) 557-6232 or complete the form at www.nadauniversity.com/workforcestudy. The opportu-


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nity to participate in the 2014 study will open to NADA and ATD member dealers at the 2014 NADA Convention & Expo in New Orleans from January 24-27.

NADA Convention: 33 Hotels Sold Out; Limited Number of Rooms Available in New

Orleans Dealers and their managers planning to attend the 2014

NADA Convention & Expo in New Orleans should register as soon as possible and book one of the few remaining hotel rooms. Thirty-three out of 36 hotels in the NADA conven-tion block are sold out. Only three hotels have rooms avail-able, which are Embassy Suites, Hyatt Regency and Omni Royal Crescent. “With numerous conferences and events scheduled in New Orleans over the same dates as the NADA convention, hotel rooms are filling up quickly and there’s limited space,” said NADA Convention Chairman Desmond Roberts. “NADA’s hotel rates are guaranteed to be the low-est in town.” The NADA convention runs January 24-27. Dealers and their managers who register by January 16 will receive at $75 discount from the on-site rate. For more infor-mation or to register, visit www.nadaconvention.org.

New Consent Requirements for Telephone Calls and Text Messages Effective October 16

New FCC consent requirements for phone calls and text messages went into effect on October 16, 2013. Dealers should review the rules and work with their counsel and any third party vendors to ensure that all phone calls and text messages they make or send (or that are made or sent on their behalf) meet these new requirements.

Nissan’s Jose Munoz to Keynote NADA/J.D. Power Conference in Los Angeles

Jose Munoz, Nissan’s new senior vice president of sales and marketing for the Americas, will deliver keynote re-marks at the 2013 Western Automotive Conference in Los Angeles on Tuesday, November 19. The half-day confer-ence, presented by NADA and J.D. Power, also includes Stewart Reed, chairman of the Transportation Design De-partment at Art Center College of Design in Pasadena, Ca-lif., who will deliver a special keynote presentation, “Iden-tifying and Cultivating Emerging Talent in Transportation Design.”

The second annual conference, which precedes press days at the Los Angeles Auto Show (http://laautoshow.com), includes a panel discussion on “Diversity Market-ing,” with an emphasis on the Hispanic market. An OEM panel, “Positioning Your Brand for 2015 and Beyond,” will be moderated by CNBC’s Phil LeBeau and includes James O’Sullivan, president and CEO of Mazda North America

Operations; William Fay, group vice president and general manager, Toyota Division; and Thomas Loveless, execu-tive vice president of sales for Kia Motors America.

Other speakers include David Westcott, NADA chair-man; Finbarr O’Neill, president of J.D. Power; Beth Ann Bovino, chief U.S. economist at Standard & Poor’s; and John Humphrey, senior vice president of global automo-tive operations for J.D. Power. The conference, held in con-junction with the Greater Los Angeles New Car Dealers Association and the California New Car Dealers Associa-tion, will be held at the Biltmore Hotel. For more infor-mation or to register, click here: http://www.jdpower.com/events/2013-western-automotive-conference.

Used Vehicle Prices Fall by Largest Amount in Two Years

Wholesale used vehicle prices for units up to eight years in age fell by 3.5% in October, nearly a point higher than the decline recorded in September. This marked the largest fall since October 2011’s similar drop of 3.5%. “Without the drama created by federal lawmakers that resulted in the shutdown, it’s likely that October’s rate of decline would have been directly in line with recent seasonal norms,” said Jonathan Banks, executive automotive analyst for the NADA Used Car Guide, in the November edition of Guide-lines, a monthly report on new and used vehicle sales trends and price movement. Click here for Guidelines: http://www.nada.com/b2b/LinkClick.aspx?fileticket=yRHiTU8_9-M%3d&tabid=85

Lt. Gen. Honoré to Address ATD Convention in New Orleans

Lt. Gen. Russel L. Honoré (U.S. Army Ret.), commander of the Joint Task Force Katrina and Global Preparedness Authority, will deliver keynote remarks at the 2014 Ameri-can Truck Dealers (ATD) Convention & Expo, which runs January 24-27 in New Orleans. As commander of the task force, Honoré led the Defense Department’s response to hurricanes Katrina and Rita in Alabama, Mississippi and Louisiana. Honoré will speak during the ATD general ses-sion at 12:15 p.m., on Monday, January 27. Other speak-ers are Philip Byrd, chairman of the American Trucking Associations, and ATD Chairman Dick Witcher, CEO of Minuteman Trucks in Walpole, Mass. The 51st annual ATD convention runs concurrently with the NADA Convention & Expo. ATD dealers and their managers can attend the NADA speaker sessions and workshops. All attendees who register in advance by Jan. 16 will receive a $100 discount from the onsite rate. For more information or to register, visit www.atdconvention.org.

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overallThere were 1.2 million

light-vehicle sales, in the U.S., in October 2013 – this marked an increase of 6.0 percent from Septem-ber 2013 and an increase of 10.5 percent over last October.

October 2013 YTD fig-ures bring total light-ve-hicle sales to 12.9 million up 8.3 percent from a year ago. The October 2013 Seasonally Adjusted An-nual Rate (SAAR) for light-vehicle sales is 15.2 million.

In October 2013 YTD figures, car sales held a market share of 49.4 percent and these sales were up 5.4 percent from a year ago

while corresponding figures for light trucks put the light-truck share at 50.6 percent with sales up 11.2 percent from a year ago. See Figure 1.

Review of New Light Vehicle Sales

nAdA Market BeatProduced by NADA’s Industry Analysis Group • Angela Lisulo, Economist

comPanieS/branDSCompanies with a geographic base in North America

(Detroit 3 and Tesla Motors) held the largest market share of light-vehicle sales for October 2013: 46.1 per-cent of the market. This was followed by companies based in Asia/Pacific at 43.9 percent and then compa-nies based in Europe at 10.0 percent.

In October 2013 YTD figures, North America-based companies also held the largest share of light-vehicle sales in the U.S. at 45.5 percent. The corresponding share held by Asia/Pacific-based companies was 45.4 percent and that for the Europe-based companies was 9.1 percent. All company categories by geographic bases – North America, Asia/Pacific and Europe – experienced growth in light-vehicle sales in October 2013 YTD figures from last year.

For the North America-based companies, the Detroit 3 companies have collectively held the overwhelming-ly dominant portion of October 2013 YTD sales with a share of 99.7 percent. Amongst the Detroit 3 com-panies, General Motors has taken the lead in October 2013 YTD sales with a share of 39.9 percent (2.3 mil-lion sales) followed by Ford with 34.7 percent and then Chrysler with 25.3 percent.

Of the 3 geographic bases, Asia/Pacific holds the largest num-ber of companies (10) for October 2013 YTD light-vehicle sales, 8 of these companies have bases in Japan while the remaining 2 companies have bases in South Korea. For the Asia/Pacific-based

companies, companies based in Japan held the largest share of total light-vehicle sales at 82.0 percent with Toyota taking the lead in sales volume with 1.9 million sales.

Of the 3 geographic bases, Europe holds the second largest number of companies (7) for October 2013 YTD light-vehicle

FIGURE 1

FIGURE 2


33

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

sales, 5 of which have bases in Germany while 1 is based in Sweden (Volvo) and the other is based in the United Kingdom (Jaguar Land Rover). For the Europe-based companies, companies based in Germany held the largest share of total light-vehicle sales at 91.0 percent with Volkswagen tak-ing the lead in sales volume with 342,962 sales. See Figures 2, 3 and 4.

SeGmentSThere are 4 segments under the light-truck cat-

egory. For total light-truck sales, in October 2013 YTD terms, the cross utility vehicle (CUV) seg-ment has held the largest share of sales at 49.8 per-cent while the van segment has held the least share at 10.5 percent.

There are 4 segments under the car category. For total car sales, in October 2013 YTD terms, the middle car segment has held the largest share of sales at 41.6 percent while the large car segment has held the least share of 3.9 per-cent.

Out of total light-vehicle sales, in October 2013 YTD terms, it is the CUV segment which has held the largest share of sales at 25.2 percent while the large car seg-ment has held the least share at 1.9 percent.

Despite having the least share of total light-vehicle sales, in Oc-tober 2013 YTD terms, the large car segment has experienced the largest growth in sales, of all the segments, since last year: 26.7 percent. This was followed by the CUV segment which has had sales growth of 16.3 percent when compared to figures for October 2012 YTD.

Focus: The small car segment. For 1982-2012, the annual share of small cars out of light-vehicle sales was at its peak in 1982 (24.6 percent) after which it trended downwards to the lowest point in the period in 1998 (12.6 percent) and then gener-ally trended upwards.

For October 2013 YTD, the small car segment has held 19.4 percent of total light-vehicle sales with 2.5 million units up 6.3 percent from last year. For the car category, this segment has held 39.3 percent of sales, October 2013 YTD.

Of the 3 sub-segments within the small car segment, the upper small sub-segment has held

FIGURE 3

FIGURE 4

FIGURE 5

nAdA Market Beat34

the largest portion at 72.4 percent in October 2013 YTD terms while the small specialty sub-segment has held the least share at 6.6 percent in Octo-ber 2013 YTD terms.

In Q3 2013, the leading small car in the upper small sub-segment was the Honda Civic holding 16.5 percent of the sales in the sub-segment with 94,722 units sold up 35.5 percent from Q2 2012. See Figures 5 and 6.

Power SourceAs a power source, gasoline held a

market share of 93.3 percent of October 2013 YTD light-vehicle sales which was down from its corresponding share of 93.9 percent a year ago.

The market share held by the diesel category rose slightly to 2.9 percent, in YTD terms, from its value of 2.8 percent last year. The market shares held by electrics, light vehicles powered by fuel cells, hybrids, light vehicles powered by natural gas and plug-in hybrids have each continued to grow incrementally from last year, in YTD terms.

In October 2013, these were the light-vehicle sales for the alterna-tive power category: 4,012 electrics, 0 light vehicles powered by fuel cells, 33,810 hybrids, 229 light vehicles powered by natural gas and 6,367 plug-in hybrids amounting to 44,418 light-vehicle sales.

Focus: Plug-in hybrid light vehicles. Plug-in hybrids have ranked third, in descending order of sales volume, out of the 5 alternative power sources in October 2013 YTD sales figures, although the sales have nearly been level with those of electric light vehicles which have held the second position. There are 5 brands in the plug-in hy-brid category: Chevrolet, Ford, Honda, Toyota and Porsche. Each of these brands has 1 model except for Ford which has 2 models (Ford Fusion and Ford C-Max).

For October 2013 YTD, the leading model by sales has been the

Chevrolet Volt holding 48.1 percent of total sales of plug-in hybrid light vehicles with 18,782 units sold. However, sales for this vehicle are down 2.7 percent from last October while sales for the Ford Fu-sion, Ford C-Max, Honda Accord and Toyota Prius are all up from last year. See Figure 7.

moDelSIn October 2013 YTD terms, the list of 15 best-selling light ve-

hicles has been dominated slightly by models from the Detroit 3 companies over those from the Asia/Pacific region: 8 models are from the Detroit 3 while 7 models are from Asia/Pacific-based com-panies. From the Detroit 3, Ford has held the lead with 4 models. From the Asia/Pacific-based companies, Honda has held the lead with 3 models.

There have been 3 pickup trucks occupying the top 5 ranks of the best-selling light vehicles for October 2013 YTD: Ford F series, Chevrolet Silverado and Ram pickup occupying the first, second and fifth rank, respectively.

There have been 2 cars occupying the top 5 ranks of the best-sell-ing light vehicles for October 2013 YTD: Toyota Camry and Honda Accord occupying the third and fourth rank, respectively. See Figure 8.


FIGURE 6

FIGURE 7 FIGURE 8

november 2013 msada magazine

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