massachusetts auto dealer magazine august 2011

August 2011 • Vol. 24 No. 8

FIRST CLASS MAILUS POSTAGE PAID

BOSTON, MAPERMIT NO. 216

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

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

autoD E A L E R

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

Kurt Vonnegut

The story behind the legendary author’s Cape Cod dealersh ip

AUGUST 2011 Massachusetts Auto Dealer www.msada.org

Name Contact TelephoneADESA Boston Chris Carli (508) 270-5403ADP Dealer Services Nadia Jagessar, (973) 974-4020Albin, Randall & Bennett Barton D. Haag (207) 772-1981Auto Trader.com Jim Menard (978) 347-2522AutoRaptor (RAL) Howard L. Leavitt (401) 421-6533Blum Shapiro John D. Spatcher (860) 561-4000Boston Globe Mary Kelly (617) 929-8373Burns & Levinson LLP Paul Marshall Harris (617) 345-3854CCR LLP Alan Oslomowski (508) 926-2200CVR Scott Herbers (800) 668-2332DealerTrack Tracey Reyes (516) 734-3600Downey & Company James Downey (781) 849-3100Ethos Group, Inc. Drew Spring (617) 694-9761F & I Resources Jason Bayko (508) 624-4344Federated Insurance Brett Faustman (317) 607-6653Gatehouse Media Massachusetts Jay Pelland (508) 626-4334 Greenwood Distributors James Viara (508) 336-5040Improved Illumination James Feeney (508) 801-9205Jewett Construction Brian Gallagher (603) 895-2412 Key Bank James Q. Moretti (781) 558-5132Leader Auto Resources, Inc. John Ackermann (518) 857-8853Lynnway Auto Auction Bob Brest (781) 596-8500M & T Bank John Federici (508) 699-3576McCarter & English Scott Silverman (617) 345-7077Mid-State Insurance Agency John Pietro (508) 791-5566

Name Contact TelephoneMintz Levin Kurt Steinkrauss (617) 542-6000Murtha Cullina Thomas Vangel (617) 457-4000Nancy Phillips Associates, Inc. Nancy Phillips (603) 658-0004NEAD Insurance Trust Charles Muise (781) 431-1450O’Brien, Riley and Ryan, PC Robert J. Ryan (781) 410-2300O’Connor & Drew, P.C. Kevin Carnes (617) 471-1120Performance Management Group, Inc. Mark Puccio (508) 393-1400R.L. Tennant Insurance Agency, Inc. Walter F. Tennant (617) 969-1300Resource Management Group J. Gregory Hoffman (508) 761-4546Responselogix Robert Lee (215) 618-2109Reynolds & Reynolds (800) 896-2886Robinson Donovan Madden & Barry, P.C. James F. Martin, Esq. (413) 732-2301Samet & Company John J. Czyzewski (617) 731-1222Schlossberg & Associates, LLC Michael O’Neil, Esq. (781) 848-5028Sentry Insurance Company Christine Biechler (715) 346-7488Shepherd & Goldstein Ron Masiello (508) 757-3311Southern Auto Auction Tom Munson (860) 292-7500Sovereign Bank Richard Anderson (401) 432-0749Target Dealer Services Andrew Boli (508) 564-5050The Huntington National Bank Elizabeth Donovan (508) 505-7435TD Bank Michael M. Lefebvre (413) 748-8272triVIN, inc. Diane Zewalk (860) 448-3177US Bank Stephen Delaney (617) 603-6607Zurich American Insurance Company Steven Megee (800) 443-4513

MSADA ASSociAte MeMber Directory

WedneSdAy, AUGUST 31• Lynnway Auto Auction, north Billerica, MA• Southern Auto Auction, east Windsor, CT

WedneSdAy, SepTeMBer 7Southern Auto Auction, east Windsor, CTLynnway Auto Auction, Lynn, MA

WedneSAy, SepTeMBer 14• Lynnway Auto Auction, north Billerica, MA• Southern Auto Auction, east Windsor, CT

WedneSdAy, SepTeMBer 21• Lynnway Auto Auction, north Billerica, MA• Southern Auto Auction, east Windsor, CT

WedneSdAy, SepTeMBer 28• Lynnway Auto Auction, north Billerica, MA• Southern Auto Auction, east Windsor, CT

WedneSdAy, JAnUAry 11• MSAdA Annual Meeting/new england International Auto Show preview night Gala

Boston Convention and exhibition Center

Calendar

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.

TA B l e o f C o n T e n T S

6 From the President: Aftershocks, Metaphorical and Real

8 the roUndUP: RTR Hail Mary – Going to the 2012 Ballot?

10 QUestion oF the month

11 trUCK Corner: new Standards, new Headaches

12 AUto oUtLooK

14 insUrAnCe: Maintaining a Drug-free Workplace

15 soUnd oFF: What’s Hot, What’s not

16 Cover Story:

Kurt Vonnegut

20 neWs From Around

the horn

27 nAdA UPdAte:

Dodd-frank law Takes

effect

29 eConomiC UPdAte:

The Cost of Political

Brinksmanship

www.msada.org Massachusetts Auto Dealer AUGUST 2011

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]

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[email protected] Ventosi

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[email protected] Paul Fellows

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autoD E A L E R

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AD DIReCToRy:BlumShapiro, 23

The Boston Herald, 32Improved Illumination, 21

Jewett Automotive Design and Construction, 24

lynnway Auto Auction, 20nancy Phillips Associates Inc., 23

o’Connor & Drew, P.C., 31Performance Management Group, 25

Southern Auto Auction, 22Zurich, 2

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from the President6


by James G. Boyle, MSADA President

s our Association spent the summer fighting back the so-called “Right to Repair” legislation on Beacon Hill, many of us dealers have been busy focusing on our own battles against inventory shortages. Given the tragedies that have caused them, it’s simultaneously easy and impossible to understand the situation.

As I was preparing for the MSADA Executive Committee Meeting this month, I felt the ground beneath my feet loosen slightly, as if a large truck were rolling by. The effect only lasted a few moments, but turning on the news revealed the entire East Coast had just seen the effects of a 5.9 magnitude earthquake that had originated in Mineral, Virginia.

In those few moments, we all saw the briefest glimpse of the sheer terror that befell Japan back in March, which, as we know from the inventory issues, is still recovering from the double disasters of the tsunami and nuclear plant failure that resulted from the destruction of the initial earthquake.

Hopefully, by the end of this year, we’ll be up to speed in terms of inventory after production gets back to some sem-blance of normalcy. It’s important; however, to remember that Japan itself is still in the earliest chapters of what will be de-cades of rebuilding. The media attention on Japan is long gone – it’s up to us to remember to do our part and continue to help in whatever ways we can.

The earthquake we felt here was a tangible reminder of that.I will also add that just a few months after the tornado that

devastated the Springfield area, many of us who don’t live in the vicinity may not be keeping up with the rebuilding there. For any dealers looking to help out somehow within the Com-monwealth, I would encourage you to find out ways to con-tribute.

A New TwistThe forces of nature aren’t the only difficulties the world is

facing right now. Unfortunately, what has been the non-stop focus of the news cycle lately is the economy. With the strug-gling economy, as we’ve seen, come artificially created strug-gles we dealers have to face. See Dick Witcher’s run-down of some of the latest government regulation on our industry on page 11 as one example.

In the ongoing “Right to Repair” fight, we’ve seen a new twist in what had at this point been history repeating itself:

A

Aftershocks, Metaphorical and RealA frightening moment gives a glimpse into months of misery

“Media attention on Japan is long gone – it’s up to us to remember

to do our part and continue to help

in whatever ways we can.”

MSADA 7


MSAdA BoArd Barnstable County

Gary Beard, Dick Beard Chevrolet

Berkshire County[open]

Bristol CountyShawn o’Hara, o’Hara Mazda

Essex CountyWilliam Deluca, Woodworth Motors

John Hartman, Ira Motor Group

Franklin CountySteven lorenz, Don lorenz, Inc.

Hampden CountyJack Sarat, Jr., Sarat ford

Hampshire CountyBryan Burke, Burke GMC

Middlesex CountyJames Boyle, Tuck’s Trucks

Chris Connolly Jr., Herb Connolly MotorsScott Dube, Bill Dube Hyundai

Norfolk CountyJack Madden, Jr., Jack Madden ford

Charles Tufankjian, Toyota Scion of Braintree

Plymouth CountyScott Shulman, Best Chevrolet

Suffolk CountyRobert Boch, expressway Toyota

Worcester County Joel Baker, Baker Cadillac

Steven Sewell, Westboro Mitsubishi

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

Christine Alicandro, Marty’s GMC Isuzu

Immediate Past President[open]

NADA DirectorRaymond Ciccolo, Village Auto Group

OFFICERSPresident, James G. BoyleVice President, Scott DubeTreasurer, Jack Madden, Jr.

Clerk, Chris Connolly, Jr.

Aftershocks, Metaphorical and RealA frightening moment gives a glimpse into months of misery

proponents pushing the bill through the summer and ultimately com-ing up short. But, as former Massachusetts Saab dealer Kurt Vonnegut once put it, “History is merely a list of surprises. It can only prepare us to be surprised yet again.” (See our cover story about the world-renowned author’s time in our industry on Page 16.)

So now we are facing a battle over whether “Right to Repair” is going to be on the ballot, bypassing the legislature entirely. As we continue to fight this bill, regardless of whatever tricks the proponents pull, please remember to be in contact with your legislator to let them know how your business would be affected by its passage.

See Robert O’Koniewski’s column on page 8 for more information about where things stand.

Dealer of the Year Nominee SelectedI’m happy to report that following our Executive Committee Meet-

ing in late August we have selected the Massachusetts Dealer of the Year for 2012, who will also be our nominee for the TIME Dealer of the Year Award.

The nominee, who we’ll announce at our Annual Meeting in Janu-ary, is both a great dealer and a valuable member of the community.

Mark Your CalendarEarlier this month you received “Save the Date” cards for MSADA’s

Annual Meeting and New England International Auto Show Preview Night Gala. Be sure to put January 11, 2012 on your calendar, and watch for formal invitations that should be on their way in the coming weeks.

As the preparation for the events continues, I can assure you we have an action-packed schedule that will be worth the trip. Watch this space for more information as it becomes available.

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8


the roundup

The Right to Repair gang hasn’t won in the State House, so now they are looking to go to the ballot box.

For the sixth year now we have been battling against the coalition led by the aftermarket parts industry that has been promoting this so-called “right to repair” issue that would allow them to engage in a backdoor effort through a new law to grab the OEMs’ proprietary information on parts and diagnostic/repair equipment – a new law, by the way, that has not been passed by any state leg-islature or the U.S. Congress and will only inflict harm on dealers’ warranty work and parts sales.

The RTR gang has had a difficult time getting any traction in the Massachusetts General Court for their statutory grab. As more and more sun-shine is thrown upon the RTR proposal, the pre-varications, obfuscations and innuendoes used by the RTR gang are exposed for what they re-ally are – nothing but bunk.

With no success at the State House to date, the RTR gang now wants to take their con to the voters directly. The RTR gang claims they have over 25,000 people who have signed peti-tions at their stores in support of RTR. They now are going to try and parlay what they think they have into a ballot question petition drive that is intended ultimately to bypass the Legislature.

The Massachusetts Constitution contains a provision that allows an individual to file an initiative petition for a law to be submitted to the voters for their approval or rejection. An initiative petition for a law may also be used to propose a law seeking to repeal or amend a

particular section of an existing law. The initia-tive petition process allows for the placing of a matter before the Legislature initially, after ob-taining the required number of signatures. If the Legislature takes no action, the proponents can obtain additional signatures to have the matter placed on the November 2012 ballot.

It is not an easy process.On August 3, the RTR gang filed with the

Massachusetts Attorney General four initiative petitions, each in some form seeking to imple-ment a RTR law.

Our state Constitution excludes from the ini-tiative process subjects that relate to religion, judges, the courts, particular localities of the Commonwealth, specific appropriations, and certain provisions of the state Constitution’s Declaration of Rights. The AG bears the respon-sibility of determining whether the petition is an acceptable subject of the Initiative Petition pro-cess. If so, the AG must prepare a fair and con-cise summary and returns this summary and the proposed law to the petitioners. If the AG deter-mines the petition relates to an excluded matter, the petition is disallowed.

In addition to the constitutional prohibition, an initiative petition would be just like any other state law – it cannot get into matters of federal exclusivity, for example. Also, as a result of the 2006 Supreme Judicial Court decision in Carney v. Attorney General, the state Constitution im-poses a “relatedness” requirement that petitions must adhere to if they contain multiple provi-sions or concepts.

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

RTR Hail Mary – Going to the 2012 Ballot?

9


MSADA

As part of the AG’s review process, opponents can submit comments re-garding the appropriateness of the peti-tion. After discussions with our partners opposing RTR, it was decided that the Alliance would submit comments to the AG, and they did on all four petitions. The Alliance submitted a 53-page brief detailing the reasons why the petitions should not be approved, including vio-lation of the U.S. Constitution’s takings clause, non-compliance with the Mas-sachusetts Constitution’s relatedness requirement, and infringement upon the rights of free commercial speech.

We will know by September 7 as to whether the AG approves or rejects the petitions. The losing party can appeal the decision to the courts. Unless over-turned by court action, if rejected by the AG, the initiative petition process stops there. If approved, the Secretary of State would prepare and print blank petitions to be available by September 21. In order to be placed before the Legislature, the petition must contain certified signatures at least equal to 3% of the total vote cast for all candidates for governor, exclud-ing blanks, at the last state election. This means that the initiative petition must be signed by a minimum of 68,911 certified voters. No more than one-quarter of the certified signatures may come from any one county (this number is 17,228). The signatures must be gathered and placed before the local boards of registrars for certification by November 23, 2011. The certified signatures then must be filed with the Secretary of State by December 7, 2011.

After the necessary number of signa-tures have been certified and filed with the Secretary of State, the Secretary transmits the petition(s) to the House for legislative action on the first legislative day of 2012 (January 4, 2012).

The petition gets numbered and re-ferred to a committee, which must hold a public hearing on it and issue a report. Any legislative action on the petition must be taken by each branch of the Gen-

eral Court before the first Wednesday in May. The initiative petition may not be amended by the General Court. If the General Court approves the initiative and the Governor signs it or it passes over his veto by a two-thirds vote of both houses, it becomes a law. In a rarely used proce-dure, after rejecting the proposed initia-tive, the General Court may formulate a legislative proposal of its own, to be grouped on the ballot with the initiative measure as an alternate choice.

If the petition is rejected by the Gen-eral Court or if the General Court fails to act by the first Wednesday in May, the proposed ballot measure, in an infre-quently used process, may be amended by a majority of the ten original signers. Any amendment proposed pursuant to this infrequently used process must be approved by the Attorney General as perfecting in nature; that is, the amend-ment does not materially change the substance of the measure.

The petitioners may force the original or amended petition on the ballot at the next regular state election by submit-ting a written request to the Secretary by the appropriate deadline for additional petition forms and then collecting the required number of additional certified signatures on these forms. This request should indicate that a majority of the first ten signers wish to obtain additional petition forms.

The signatures of an additional 1/2 of 1% of the vote cast for Governor (ex-cluding blanks) at the last state elec-tion must be filed with the Secretary of the Commonwealth. This means that the additional signature require-ment is 11,485 certified signatures. The same provision applies that no more than 1/4 of these signatures may come from one county; this is 2,871. For an initiative petition for a law to be passed by the electorate, the Constitu-tion requires that at least 30% of the vot-ers who cast ballots in the election must vote in the affirmative on the question, and a majority of the ballots cast on that

question must also be affirmative.The Constitution states that a law pro-

posed by an initiative petition takes ef-fect thirty days after the state election, or at such time after the election as may be provided in such law. The courts have not definitively decided whether this means thirty days after the election, or thirty days after the certification of the election results by the Governor’s Coun-cil, which usually occurs in late Novem-ber or early December.

Obviously, the initiative petition pro-cess is designed to allow one to go right to the voters and bypass the 200 mem-bers of the General Court. The debate shifts venues and becomes a political campaign and not a lobbying effort. It is an expensive undertaking, whether you are the proponents or opponents; it will cost each side $5-10 million, mostly for TV and radio ads. We will keep our member dealers informed of the events as they occur.

Three-Day Right of RescissionIn addition to the four RTR petitions,

a group of citizens out of Worcester filed an initiative that would create a three-day right of rescission of a motor vehicle pur-chase contract for the purchase of new and used vehicles. In addition to the rescission provision, the petition would create a law dictating the manner of maintenance and disposition of vehicles traded in as part of a vehicle purchase transaction.

This is something that we have seen as legislation up at the State House for many years, including the current ses-sion. We have always opposed the bills, and the bills usually never leave com-mittee.

As part of the previously described process, your Association filed com-ments asking the AG to deny approval for this petition as it violates the “relat-edness” standard described in the Car-ney decision. We will await the AG’s decision due the first week of Septem-ber, and then proceed accordingly.

continued on next page

MSADA10 insUrAnCe MSADA


the roundup

???Question of the MonthBy robert o’Koniewski, esq. MSAdA executive Vice president

No. If the trade-in is part of a valid motor vehicle purchase contract transaction, there is not a time limit on the expiration of the trade-in allowance as the customer awaits the new vehicle from the dealer. As long as there is a dated, binding vehicle purchase contract and the dealer has the trade-in(s), the buyer is held to the contract and the trade-in values and tax allowances are valid. This is affirmed in the Massachusetts Department of Revenue Letter Ruling No. 00-2, 01/28/2000, which states: “The execution of a legally binding contract to purchase a new vehicle at the time of trading in another vehicle to the Dealership and use of the proceeds from the trade-in as a non-refundable deposit on that contract satisfies the requirement that the sale of the new vehicle take place at the time of the trade-in. Although six months or more may elapse between the actual trade-in and the delivery of the new vehicle, the retail customer is contractually bound to purchase the new vehicle at the time of the trade-in. In the remote event that either the buyer breaches the contract, dies before the new vehicle is available, or is otherwise unable or unwilling to complete the purchase of the new vehicle, then no sale of another vehicle to that retail customer would occur and the issue of a trade-in reduction on the sales price of that vehicle would be moot.”

As a benefit of MSADA membership, member dealers can call their Association and seek guidance to answering any type of legal question related to their dealership operations, from franchise law rights to sales tax to human resources, just to name a few. One of the more interesting queries recently was the following:

IS THERE AN EXPIRATION DATE FOR THE SALES TAX ALLOWANCE ON A TRADE-IN WHEN DELIVERY OF THE NEW VEHICLE WILL BE SOME MONTHS OUT?

Member Contact SurveysA couple of weeks back I e-mailed the

member contact survey forms to way-ward members who have yet to submit their updated information. Since the beginning of the year we have been re-questing our members to complete the dealer contact information surveys so that we have the most up-to-date re-cords for our dealers. If you have not yet filled out your form, please do so today. Please note any corrections, ad-ditions, and deletions on the form and return it to MSADA by fax at (617) 451-9309. If you have any questions, please contact me. It is extremely vital that we have your most effective e-mail address to ensure that you are receiving all our electronic communications.

Economic Impact SurveyYour MSADA is using the folks at

Auto Outlook to conduct a survey of our member dealers to ascertain the real monetary economic impact that dealers have in their cities and towns and on our Commonwealth. People not involved in our industry, including lawmakers, are consistently surprised by the fact that our dealers’ businesses account for al-most 20 percent of the total retail eco-nomic activity in Massachusetts.

Getting these figures out is crucial to raising awareness of our industry’s im-portance, especially as the governor and legislators ponder various new methods of raising revenue. Dealers and our cus-tomers’ purchases are consistently made targets of revenue initiatives that hurt

the economy and our customers’ pock-etbooks. But facts don’t lie, and we need to make it difficult for those who look to businesses to bear the burden during tough times to justify cutting us off at the knees more than they already have.

You should have received the survey form a couple of times by mail and e-mail, including as part of our Bulletin #13 on March 15, and it has been includ-ed in each of our magazines since then. Please take the time to complete the sur-vey for each of your dealerships and fax it to Auto Outlook at (610) 640-2907. We need returns from at least half our mem-bers for our survey to be accurate. If you have not received the survey form, use the form on page 3 of this issue.

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MSADA the trUCK Corner

by Michael McKean Michael McKean, President and founder of ocd consulting, is a lifelong ParticiPant and observer of the retail autoMotive business. contact Michael at [email protected]

by Dick WitcherDick Witcher iS vice preSiDent of AtD AnD the DeAler principAl At MinuteMAn truckS, inc.

“Blah blah blah blah...”I am in DC at least once and often three times in a

month to lobby on Capitol Hill or in the various regu-latory agencies. I understand a little DC-speak, but that is what Washington sounds like to me lately. I hope I can voice my opinion without morphing into a rant about Congress and the Administration.

First, let me say that I am not against the environ-ment, safety or taking responsibility.

I am against being the world’s policeman militarily and environmentally, balancing the needs of others on the backs of our citizens and penalizing the economy with regulations which harms business.

In previous articles I talked about the financial im-pact of controlling nitrous oxides and particulates: it was a good thing for the environment but added as much as $25,000 plus the 12 percent federal excise tax to the cost of a truck without increasing productivity. Enforcement of the regulations caused a run on the purchase of new trucks before each stage of increasing regulations. There was a subsequent loss of thousands of jobs, especially manufacturing jobs, and an increase in the cost of goods delivered. By this previous practice we created a historic model for the federal government to use as it implements new regulations for the future.

As an aside, an acquaintance of mine who is a lob-byist for the American Trucking Association tells me the EPA originally estimated the additional cost of Nox and particulate removal would be under $2,000 per engine; he tells me the EPA was off by 1600 per-cent. But, it is not unusual for the federal government to under estimate cost and over estimate benefit.

A couple of weeks ago the President announced new fuel economy standards for medium and heavy trucks. Who can argue against better fuel economy? Standards are not the issue! For on highway trucks and tractors, fuel is the largest variable expense – what business-man does not try to control expense? In 2007, Congress mandated the National Academy of Sciences study fuel economy in medium and heavy trucks. The NAS de-termined there are tipping points at which truck own-ers will add fuel saving devices and until those tipping points are reached there was no cost benefit to imple-menting the devices. The Administration completely ignored economics and opted for environmentalism.

A short update on what the new regulations define for three vehicle categories: heavy-duty pickup trucks and vans; tractors; and vocational vehicles. There are sub-classes within those groups, acknowledging the difference

between, for example, a day cab tractor and one with a high-roof sleeper. Standards will be applied in different ways and will be phased in at different rates depending on the nature of the truck’s job, because it’s obvious that efficiency can’t be measured the same way in all cases.

It’s a wildly complex rule -- how could it be anything else? — that affects trucks (and buses) built in 2014 through 2018. It covers pretty much everything from class 2b vehicles grossing 8,500 pounds on up to Class 8 trucks and tractors. The joint DOT/EPA program aims to improve fuel efficiency on the average tractor-trailer by something like 20 percent by 2018. By the way this EPA became involved when the President decided we were addressing green house gases and not just fuel economy.

Given the wide divergence of tractor-trailers out there, that improvement percentage varies a lot. The range is actually 9 to 23 percent, compared to a 2010 baseline. Vocational-vehicle improvements will be in the 6-9 percent range, and heavy pickups and vans will need to improve by 17 percent for diesel-powered vehicles, 12 percent for gasoline-engine trucks.

The regulations are estimated to add $6,200 to the cost of a tractor; I haven’t been able to figure that out since some of the technology has yet been invented. Going back for a minute: we added $25,000 plus FET for Nox and now we are going to add $6,200 plus FET for fuel economy/green house gas control and the Ad-ministration is considering adding roll over control devices to all new trucks at a cost of about $3,000 plus FET in other words about $35,000 plus FET to the cost of a on highway tractor with no pay back to the owner. In the last six years the price of an on highway trucks has increased up to 40 percent with no payback.

We know from our past experience these added costs will keep older trucks on the road longer, reduce the number of new truck purchases reducing the number of manufacturing jobs, reduce the tax collected for the Sur-face Transportation Trust Fund, reduce the introduction of new safer trucks, create higher hurdles for new truck-ing startups and increase the cost of delivered goods.

The solution is far simpler: increase the federal ex-cise tax on diesel fuel; make the cost benefit tipping points occur sooner; make the market demand more fuel efficient trucks; reward the best ideas and manu-facturers with profit; replenish the Surface Transpor-tation Trust Fund (we all know our roads and bridges need fixing); and make it an operating cost for the truck owner instead of a capital cost.

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11

New Standards, New Headaches

12


AUtO OUtLOOK


13MSADA

MSADA14

The Department of Labor estimates drug users contribute to billions of dollars in lost productivity and increased health care costs. According to a study sponsored by the National Institute on Drug Abuse (NIDA), drug-using employees are also more likely to be involved in a workplace accident and more likely to file a workers’ compensation claim. As an employer, you know that this means money out of your pocket and off the bottom line.

A solution for these problems is avail-able. Implementing a comprehensive sub-stance abuse program at your dealership will address most of the drug abuse issues. Substance abuse programs are already mandatory in some states and industries; they are a good idea for everyone. These programs will not eliminate drugs but will deter drug usage by your employees. If you adopt the drug-free strategy, you should have a program that is clearly writ-ten, understood by all who are affected by the policy and administered in a fair and consistent manner.

Consider the following points before de-veloping a substance abuse policy, and be mindful of local, state and federal laws relat-ed to such a policy prior to implementation:• What is the company’s position on drug and alcohol use as it applies to the workplace?• What drug deterrence procedures will be used? • Will employment be contingent upon passing a drug screen? • Will drug testing be conducted pre-place-ment, randomly, investigative for cause, or on a scheduled basis?

• What are the consequences of positive tests? • What are the responsibilities of both the employee and employer? • What Employee Assistance Programs (EAP) are available to the employee? • Have you selected a licensed, competent lab, and do you follow proper protocol in dealing with the lab?

The Department of Labor recommends that your formal substance abuse program contain at least the following components:

Written substance abuse policy • Explain why you are implementing a program, i.e. employee health and safety, quality, productivity, etc.; • Describe substance abuse-related behav-iors that are prohibited – use, possession, transfer or sale of illegal drugs, working while under the influence, etc.; • Thoroughly explain the consequences for violating the policy.

supervisor training • Their role in implementation; • Observing and documenting unsatisfac-tory job performance; • Effects of substance abuse in the workplace.

employee education • Information on dangers of alcohol and other drugs; • Impact of substance abuse on workplace safety, quality, productivity, absenteeism, etc.;

• How the policy applies to employees and the consequences of violating it; • Describe basic components of the drug-free program, the employee assistance pro-gram and the testing procedures.

employee assistance program • Job-based program intended to assist workers; • Cost-effective method to reduce acci-dents, workers’ compensation claims, ab-senteeism, etc.; • Valuable component of a substance abuse program.

drug and alcohol testing • Essential hiring tool; • Effective deterrent to substance abuse; • Evaluate all aspects–who, what, when, etc.

A drug-free policy may have a posi-tive effect on employees if management includes them in the planning stages and solicits suggestions from them. Employers should document and maintain records of all actions regarding the drug-free policy. All training should be documented and signed by employees, supervisors and managers to verify understanding of the drug-free program.

Act today — you can’t afford not to have a substance abuse program. Remember to consult with legal counsel before imple-menting any substance abuse or drug test-ing program to ensure it complies with all federal, state and local laws.

For additional information on substance abuse programs and how it can benefit your business, contact your local Zurich ac-count executive. Also, check out: National Institute on Drug Abuse, www.nida.nih.gov; Substance Abuse and Mental Health Ser-vices Administration, www.samhsa.gov; and at www.drugfreeworkplace.com.

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Maintaining a Drug-Free WorkplaceEmployee substance abuse can mean money out of your pocket

By Steven MegeeSt e v e n Me g e e i S r e g i o n A l S A l e S M A n A g e r At t h e fr A M i n g h A M re g i o n A l of f i c e f o r Zu r i c h no rt h AM e r i c A co M M e r c i A l’S pr o g r A M S & Di r e c t MA r k e t S’ b u S i n e S S u n i t.

insUrAnCe


“Take action today — you

can’t afford not to have a substance-abuse program.”

By Nancy PhillipsWe are pleased to report that the

value trends we projected in April 2010 for Volkswagen, Subaru and Ford have proven to be accurate. Today there is firm evidence that these particular makes are now at the top of the list of franchises dealers should look for.

Take another look at our data published in DealersEdge and compare it to the most current information for sales of these franchises. The median value for the subject franchises in our first chart of 4.2 percent as compared to the current median

value for year-to-date transactions in 2011 of 6.2 percent represents a 2 percent increase in the amount of intangible value paid as a percent of total revenues. How do we expect these values to change in the immediate future? Regardless of the potential for more economic turmoil in our country, we believe this upward trend will continue.

It is also interesting to note that in the same period of time (May 2010 – June 2011), we have added Kia to our list of value increased franchises and it is increasing at an accelerated rate. These market share surges just may be here to stay as these franchises continue to chip away at the stake once held by the usual highly valued franchises Honda and Toyota.

Some analysts believe we have re-entered a growth period in our industry. While I hope their new increased estimates for vehicle sales ring true, it is more likely that we will remain growth challenged for some years to come.

What bearing does all this have on franchise values? Consumers are wary and are looking for lower cost, better quality, fuel economy and longevity in their vehicle purchase. All of the up and coming franchises on our list share most of

these attributes and know how to market them well. As this relates to dealership acquisitions, if you are big –

keep growing. There will be more consolidation, re-alignment and departures along the way and larger dealers will need to continue expansion to keep competitors at bay.

For the smaller, marginally profitable or capital impaired dealers, owning a dealership under current market conditions might not be a good gamble for the future. Especially when you can sell now while dealerships are in demand and get more than you could in recent years or - if you own a Volkswagen, Subaru, Hyundai or Kia dealership - more than ever before.

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Nancy Phillips Associates specializes in sales, acquisitions and evaluations of franchised automobile dealerships. Con-

tact Nancy Phillips at (603) 658-0004 or e-mail [email protected].


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

MSADAsOUnd Off

What’s Hot, What’s NotWill recent market surges continue?

15

The Business Value factor (BVf) represents the amount of business value paid for the intangible worth of the franchise as a percentage of total dealership revenues.

DATA PUBLISHED IN APRIL 2010

FranchiseBuyer Type Trade Area

Business Value PNVR

Business ValueFactor

subaru individual 50,000 $1,136 3.3%subaru individual 250,000 $2,466 3.6%Volkswagen individual 1,000,000 $2,083 4.0%Ford small

Group50,000 $2,804 4.2%

Volkswagen Audi

small Group

250,000 $2,670 4.5%

Volkswagen small Group

1,000,000 $2,336 5.5%

Median Value $2,249 4.2%

CURRENT DEALERSHIP TRANSACTIONSMAy 2010 THROUgH JUNE 2011

FranchiseBuyer Type

Trade Area

Business Value PNVR

Business ValueFactor

Volkswagen individual 500,000 $2,614 4.3%Volkswagen small

Group100,000 $3,207 4.4%

Kia small Group

1,000,000 $2,101 4.4%

Ford individual 50,000 $6,122 7.6%Volkswagen small

Group300,000 $3,344 8.2%

nissan small Group

100,000 $4,500 8.3%

Median Value $3,648 6.2%

AUGUST 2011 massachusetts Auto dealer www.msada.org

MSADA MSADA16 MSADACover Story

Kurt VonnegutThe story beh ind the legendary author’s Cape Cod dealersh ip

By Tom Nash

In December 1956, a Swedish aircraft manufacturer was ready to sell its most recent entry into the automobile world in the United States. Its first shipments of Saab 93s were imported to a warehouse in Hingham, where they were prepared for sale. The dealers who signed up were optimistic that a two-stroke, compact European car would catch on.

Kurt Vonnegut, an author who had been struggling to support his family in West Barnstable, was among the first believers. He had yet to write The Slaughterhouse-Five, which established him as one of the great American authors of the 20th century. A Saab franchise was a way to make ends meet.

Today, it’s a chapter of his life that deserves exploration, especially given the influence Vonnegut’s stint as a Massachusetts auto dealer would have on his work.

William Rodney Allen, author of Un-derstanding Kurt Von-negut, noted that while some are surprised by Vonnegut’s time as a dealer, the venture wasn’t out of charac-ter for him. Saabs represented an intersection of his fascination with technology and his roots in Indiana, where his family had been in the hardware business.

“Everybody was a car nut who grew up in that genera-tion,” Allen said. “The car was becoming very important. It was a status symbol; a way to entertain girls. He had that normal connection between manliness and sportiness and the artistic life and the automobile. All of that was genuine and quite characteristic of him.”

“Weapons, machines, bombs, automobiles were taking off like crazy,” Allen added. “The machine was king in the ’40s and ’50s and he was really fascinated -- and a little bit wary at the same time — about what machines were doing to our lives and to humanity.”

“I believe my failure as a dealer so long ago explains what would otherwise remain a deep mystery: why the Swedes have never given me a Nobel Prize for literature.”

– Kurt Vonnegut, Saab Cape Cod

Vonnegut took to using his old Saab letterhead for self-portraits and silk-screen prints.

1917Cover Story MSADA


A cranberry red Saab

Vonnegut, an Indianapolis native, studied chemistry at Cor-nell University before dropping out and enlisting in the Army in 1943. He was captured during the Battle of the Bulge, and as a prisoner of war witnessed the Allied forces’ firebombing of Dresden. After arriving home, his career veered from news reporter in Chicago to General Electric public relations in Sche-nectady, New York.

During those years, Vonnegut honed his skills as a fiction writer. When he began selling short stories to magazines in 1950, he decided to quit his job at GE and move his young fam-ily, then consisting of a son, Mark, and daughter, Edie, to Cape Cod so he could focus on writing.

A few years later, he had published only one novel, Player Piano, and the short story market was drying up. Television had

begun to take over household eyeballs, just as the automobile had begun to turn the transportation industry upside-down. Af-ter he and his then wife, Jane Marie Cox, had their third child, money became even tighter.

“Writing wasn’t going very well. He was getting ready to pack it in,” recalled Mark Vonnegut. “He ran across a Saab dealer somewhere around New Bedford and was taken with it and thought on its merits it should beat the VW all hollow.”

The fact that the new venture emerged from desperation never registered for Edie Vonnegut.

“I remember the excitement in the house,” she said. “We were part of presenting this very elegantly designed piece of technol-ogy and it felt very sophisticated. It felt more about art and cut-ting edge design than about cars.”

“I especially remember the cranberry red Saab we suddenly had in the yard and dad photographing my mother on the hood of the car,” she added. “She was very beautiful and looked like a glamorous model perched there. Maybe they were thinking to use the pictures for an ad though they were never published.”

Smoking and worrying

Vonnegut set up “Saab Cape Cod” in a stone building on Route 6A in West Barnstable, operating, according to Mark, as sole proprietor with one mechanic on-hand. Edie remembers spending time there as her father worked.

“It was odd to have him go to an-other place to work, as up until then he had al-ways worked at home,” she said. “He would look after his cars and business

and write when there was nothing else to do. Though mainly I think he spent his time smoking and worry-ing whether he’d sell any cars or not.”

The initial luster of the vehicles faded quickly for Vonnegut. As he writes in his essay, “Have I Got a Car For You!,” published in 2004, the quart of oil re-quired with each gas fill-up was just one of the quirks that made the vehicle a hard sell.

“The chief selling point was that a Saab could drag a VW at a stoplight,” Vonnegut wrote. “But if you or your significant other had failed to add oil to the last tank of gas, you and the car would then become fire-works. It also had front-wheel drive, of some help on slippery pavements or when accelerating into curves.

Kurt Vonnegut

Saab factory, circa 1950s

Kurt Vonnegut took this photo of his wife, Jane Marie Cox, posing on the hood of a Saab 93. (Courtesy of edie Vonnegut)

An ad from the 1957 new england Telephone directory, courtesy of SaabHistory.com.

MSADA MSADA18 MSADA


Kurt Vonnegut — Saab Dealer MSADA

There was this selling point as well: As one prospective cus-tomer said to me, ‘They make the best watches. Why wouldn’t they make the best cars, too?’ I was bound to agree.”

Mark remembers his father also becoming frustrated by the customers, noting that “he was exasperated by their lack of vi-sion and their haggling over price.”

There were other troubles with the franchise besides slow sales and difficult customers. In an interview featured in Allen’s Con-versations with Kurt Vonnegut, Vonnegut admitted Saab repre-sentatives “threw me out of their mechanic’s school. No talent.”

Allen notes Vonnegut’s fic-tion, meanwhile, was show-ing promise. The time spent in the less-than-busy showroom meant more time writing. “Af-ter things were headed south,” Allen explained, “he describes himself as sitting in his Saab along the side of the road with a ‘for sale’ sign in the back of the window writing The Sirens of Titan.”

A renaissance manIt’s not clear exactly when

Vonnegut shut down the fran-chise. Business records that were held by the town are long

gone, and Allen notes that Vonnegut’s recollection of dates is spotty. It seems 1961 is the consensus among Saab enthusiasts.

By that point, Vonnegut had published both a collection of

short stories and Sirens of Titan, which, given its 22nd century space quest setting, saw critics further categorize him as a sci-ence fiction writer, a label he was never comfortable with. The following novels, Mother Night, revolving around the aftermath of World War II, and Cat’s Cradle, satirizing the Cold War arms race, established the audience that would herald The Slaughter-house-Five as a work of genius in 1969.

From that point until his death in 2007, Vonnegut became re-garded as one of the key authors of American fiction. He contin-ued writing novels into the 1990s, and wrote essays into his 80s.

Among the most obvious references to his time as a Saab dealer in his fiction can be found in Breakfast of Champions, which fea-tures protagonist Dwayne Hoover, a Pontiac dealer in the Midwest.

In a 2005 newspaper interview, Vonnegut noted that the time spent failing as a dealer furthered his resolve to find a way to write about what he witnessed in Dresden, saying, “Occasion-ally I would say to myself, ‘You actually experienced the fire-bombing of Dresden, the biggest massacre in European history, in which 135,000 people were killed in one night -- why don’t you write about that?’”

Asked how his life would be different had his father been suc-cessful as a dealer, Mark, now a pediatrician in Milton, said it’s impossible to think about. “There’s no way in hell that would have or could have happened,” he said. “Ultimately he stuck out like a sore thumb and couldn’t have been anything but a writer.”

Edie, today an artist living in Barnstable, remembers that to her, the vehicles themselves defined how she viewed the endeav-or. “I thought of my father as a writer, and a renaissance man who happened to represent an exquisite machine. Never a car dealer. The Saab seemed as fancy as a spaceship at the time.”

t

The stone building where Vonnegut ran his Saab franchise is still standing on Route 6A in West Barnstable.

Kurt Vonnegut — Saab Dealer

f rom Around the HornNEWS


20

GREENFIELD

Lorenz dealership Closure ends nearly 60-year run

Don Lorenz Inc. Buick and GMC was scheduled to close this month after 57 years, making it the latest in a series of dealership closing in the Pioneer Valley. Owner Steve Lorenz told The Springfield Republican that the building and the car franchises have been sold, but he can’t reveal the buyer

of the dealership site. The franchises were sold back to General Motors.

Lorenz told The Republican he’s retiring because he had a stroke in 2009.

“I can’t do what I used to do,” he was quoted as saying. “In this business it’s not unusual to work 11-, 12-hour days. I’m only working three or four hours a day.” Lorenz’s father, Don, started the business in 1954 selling new Buicks a few blocks south on Federal Street. The family then added Oldsmobile, GMC Truck, Pontiac and

Cadillac franchises.The dealership has 12 employees left and many of them already have job

offers elsewhere. Lorenz Honda, also in Greenfield, was also sold last year.

FRAMINGHAM

In Memoriam: philip Sewell, father of Worcester County director Steve Sewell

Philip D. Sewell, 89, of Westborough, formerly of Framingham, died on Tuesday, August 2, 2011 at the Ichabod Washburn Hospice Residence in Worcester. He was the husband of Constance M. (Levine) Sewell.

Born in Framingham, he was the son of the late Chester and Elsie (Dinsmore) Sewell. He was a 1940 graduate of Framingham High School and attended Norwich University in Vermont.

During WW II he served as a fighter pilot for the U.S. Army Air Corps. Mr. Sewell was employed as a salesman in the major appliance department

at Jordan Marsh. In later years he worked at his son Steven’s car dealership, Westborough Mitsubishi.

He was a member of the Church of the Nazarene in Framingham, enjoyed Ice Boating and had built several Ice Boats. He also enjoyed all sports and never lost his love of flying and airplanes.

In addition to his wife, he is survived by one son, Steven E. Sewell and his wife, Heather, of Upton; two daughters, Pamela Avis and her husband, Raymond, of Ashland and Catherine Sewell of Worcester; one brother, Rev. Quentin Sewell and his wife, Joann, of Ashland; four grandchildren, two great grandchildren and many nieces and nephews.

Donations in his memory may be made to the Framingham Heart Study, 73 Mt. Wayte Ave., Suite 2, Framingham, MA 01702.

Steve lorenz


f rom Around the Horn MSADA 21

BOSTON

MSAdA Appears Before Greater Media Boston

On August 18, MSADA President Jim Boyle and Executive Vice President Robert O’Koniewski

traveled to Greater Media Boston on Morrissey Boulevard to pro-vide an update to over 40 radio sales associates of the auto in-dustry’s current status, including

dealer attitudes and customer trends as well as what businesses and consumers can ex-pect over the next several months with the state and national economy.

Bob Pedder, Greater Media’s executive direc-tor, invited the duo to speak as part of the group’s monthly meeting in which industry and business leaders brief the GMB team on various economic conditions currently and potentially.

“As a dealer who invests considerably in radio and other media, I am looking for cost effective ways to hook the customer not only today, but over the long haul for not just sales, but for service as well,” Boyle said. “Plus I am also interested in spreading my reach beyond just what one can touch within the local newspaper market. Radio is a great way to get the husband and wife listening to my pitch in a captive setting, usually while they are sitting in their car together.”

Greater Media Boston is a locally owned com-pany based in Braintree that owns and operates many radio stations and newspapers - primar-

ily in Boston, New Jersey, Philadelphia, Detroit and Charlotte. In Boston, GMB operates WBOS (Radio 929), WTKK (969 Boston Talks), WKLB (Country 102.5), WROR (Home of Loren and Wally at 105.7) and WMJX (MAGIC 106.7).

“Dealers are by nature optimistic individuals, and they need to be in order to successfully face the adverse conditions of the economy we have seen over the last couple of years,” O’Koniewski related to the group. “They are always looking for new tools and pitches to expand their reach and grow their customer base, especially in growing their service and parts businesses as sales numbers remain stagnant.”

WESTBOROUGH

GM dealer to Build new FacilityWestborough Buick GMC is planning an expansion that will involve

moving to a vacant lot and building a new facility.The new site, a former Chevrolet dealership, is near the Westboro

Shopping Center.“Our business has been growing the last few years,” Owner Michael

Bates told The Worcester Telegram & Gazette. “We’ve outgrown the current facility. I need a bigger and better facility, and a better location.”

The location, valued at $3 million according to town records, was once the home of Cloverleaf Chevrolet, which closed in 2006. Since then, it had been used by a car rental company.

Bates said renovations will cost around $2 million, including improvements to the roof and heating and electrical systems. He estimated the dealership will be able to move to the new location in the Fall.While the dealership’s current home has a 150-vehicle capacity, the new site will be able to hold more than 200 vehicles.

The body shop for the dealership will remain at the old location at 88 Turnpike Road. There are no immediate plans to hire more employees.

from Around the Horn22 NEWS


It has been a long time coming, but the electric Chevrolet Volt has finally debuted at Massachusetts Chevy dealership Quirk Chevy, giving Greater Boston drivers another sustainable vehicle to consider.

Until recently, the Volt had only been available in seven U.S. states due to limited production, but orders for the Chevy Volt opened to all 50 states in June and availability is expected to spread nationwide before the end of the year.

With a battery-powered range of roughly 35 miles, the 2011 Chevy Volt can complete small trips without using a drop of gasoline. Should the 16-kWh lithium-ion battery deplete itself though, drivers never have to worry about getting stranded thanks to a gas-powered onboard generator that takes over to boost the Volt’s combined range to approximately 407 miles.

“The Volt is a game-changing vehicle, and it’s great to finally have it in our showroom,” said Haykel Ammari, general manager of Quirk Chevy. “This is a very big moment for us and for Massachusetts car buyers, who have always been a progressive group when it comes to looking into hybrid and electric vehicles. Our Greater Boston Chevy customers now have a chance to test-drive the next generation of automotive innovation.” The Chevy Volt at the new england International Auto Show

BRAINTREE

Volt Makes debut at Quirk Chevrolet

DANIEL ZEESE PHOTO

BEDFORD

Volkswagen TdI Clean diesels Growing In popularity

Volkswagen’s clean-burning TDI diesel technology is gaining speed in the United States, accounting for 24.1 percent of the automaker’s sales in the country in July.

“Americans are getting past their former perceptions of diesel vehicles, and with the TDI diesels drivers can have their cake and eat it too,” said Ray Hovsepian, general manager of Massachusetts VW dealer Minuteman VW. “They’re as fuel friendly as many hybrids, but the available torque in our clean-diesel Volkswagens mean you can easily blow by your electric competition.”

Performance and fuel economy were two major reasons why the VW Touareg TDI was chosen for a record-setting trip covering the Pan-American Highway.

A team of three adventurers led by Rainer Zietlow departed from Argentina on July 2 before passing through 13 countries en route to their final destination of Deadhorse, Alaska. The trip covered nearly 16,000 miles but took the team less than 12 days to complete, thanks to the Touareg TDI’s ability to efficiently carry the travelers through a barrage of rough conditions.

Volkswagen currently offers TDI Clean Diesel technology in five of its vehicles, including the VW Golf, Jetta sedan, Jetta SportWagen, Passat, and Touareg SUV, giving car buyers a wide variety of responsive, fuel-efficient vehicles from which to choose. A TDI version of the 21st Century Beetle, which VW estimates will get 40 mpg on the highway, will be available in 2012.

“The 2012 Passat TDI can go nearly 800 miles between fill-ups, which is incredible mileage no matter how you look at it,” Hovsepian added. “You could drive from Boston to Philadelphia and back again with fuel to spare, which can’t be claimed by too many vehicles.”

continued on next page

23MSADA


2011 Volkswagen Jetta Sedan TDI

from Around the Horn24 NEWS


Clean diesels Growing In popularityfrom previous page

Volkswagen is enjoying increased sales in America throughout its lineup. July sales increased 21.7 percent over the same month in 2010 and year-to-date sales are up 22.2 percent compared with the same period last year. Leading the charge are the Jetta sedan and Jetta SportWagen, which together saw 15,713 units fly off VW dealership lots. Meanwhile, the all-new 2012 Passat started off on the right foot by selling 1,183 units in July despite limited availability.

BOSTON

BMW Builds Up Its Car-Charging network in Greater Boston

Massachusetts is about to get a major boost to its electric-vehicle-charging network, and future owners of BMW electric vehicles will be able to take full advantage. Coulomb Technologies, the company behind the nationwide ChargePoint

Network, and BMW have jointly announced that more than 150 charging stations are being installed in the Boston Metro area. The new Massachusetts ChargePoint Network will be fully compatible with the BMW ActiveE electric vehicle when it debuts at select BMW dealerships this fall.

BMW’s partnership with Coulomb Technologies is a preemptive move as the automaker prepares to release a group of electric vehicles over the next few years. The BMW ActiveE will be first in line, with its body based on the BMW 1 Series Coupe, but the 1 Series gasoline-powered drivetrain will be replaced by the ActiveE’s new electric-drive technology. The same electric components will be used in upcoming BMW electric vehicles built for sustainability from the ground up, like the BMW i3 city car due in 2013.

“You know BMW is serious about electric vehicles when you look at the partnerships it has formed to build up its charging network so that local customers will never deal with range anxiety,” said Marshal Cabot, general manager of BMW of Peabody. “BMW has invested a lot of time and energy into creating dynamic electric cars, and their work with the top charging companies is great news for those Greater Boston drivers who are looking forward to more sustainable luxury.”

Station charge time for the ActiveE will take between four and five hours, and while most Massachusetts ChargePoint stations

25MSADA


will be inside of Route 495, drivers of the electric vehicle will be able to charge up at any ChargePoint Network-enabled charging station in America. With a range of roughly 100 miles, however, ActiveE drivers will be more likely to tour city boulevards than take long road trips. The ActiveE has been designed primarily as a commuter car, and an entertaining one at that.

Like most BMWs available in the United States, the ActiveE is rear-wheel-drive, but its electric-motor engine is mounted in the rear of the car between the wheels. This helps the vehicle make the most of the all-electric drivetrain, allowing a direct drive and improved weight distribution. ActiveE drivers will be able to leverage 170 horsepower and 184 pound-feet of torque, which means reaching 62 mph will take just nine seconds.

BMW plans to deliver 700 models of the ActiveE to the United States by year’s end, but the first batch will only be available through a 24-month lease. Other markets that will see the ActiveE this year are the New York metro area and select areas in Connecticut, as well as the Los Angeles, San Francisco, San Diego and Sacramento metro areas.

“This is an exciting opportunity for eco-conscious Massachusetts drivers to get their hands on the next generation of BMW,” Cabot added. “The ActiveE is the perfect commuter car because it is quiet, refined and inexpensive to run because you never have to stop at a gas station. You plug it in at night, and it’s ready to go in the morning.”

GREENFIELD

new rMV Branch opensGovernor Deval Patrick joined state and local officials recently to

celebrate the grand opening of the new full service Registry of Motor Vehicles branch in Greenfield. The branch relocated this week to space at the MassDOT-owned Franklin County Chamber of Commerce Visitor Center located at the rotary at Interstate 91 and Route 2.

“This new location will enhance customer service and convenience for those seeking motor vehicle services,” said Governor Patrick. “By partnering with the Franklin County Chamber of Commerce, we are putting our shared resources to good use, while boosting economic opportunities for the region.”

The Visitor Center will continue to operate on site from April 15 to November 1, and the new RMV office will be open year-round. The former Greenfield RMV branch was located in a privately-owned facility at 280 Main Street, and suffered from a heating and cooling system that did not meet lease requirements to provide sufficient heating and cooling for the volume of business.

The new Greenfield location is the latest addition to the RMV’s continuing efforts to improve customer service and reduce costs by relocating high-cost branches to formerly vacant or under-utilized facilities owned or operated by MassDOT and other public agencies.

nAdA Update

It’s hard to believe it’s been a year since Congress passed one of the biggest regulatory overhauls our nation has ever seen. I’m talking about the so-called Dodd-Frank law (also known as the Wall Street Reform and Consumer Protection Act), which takes aim at lending standards that some be-lieve led to the financial crisis of 2008 and 2009.

Thanks to our successful grass-roots campaign in 2010, dealer-assisted financing was saved from additional federal oversight under the Dodd-Frank law. But auto loans, and more specifically the processes our F&I offices use to issue them, have been affected by the new law, which includes sev-eral provisions related to disclosure of credit terms and action

a creditor must take when turning down a loan application.Here are two big changes every dealer should know about

and some ways NADA is helping us comply with these new rules.

1) New credit score disclosures for adverse action notices – Starting last month, creditors who use a credit score in taking adverse action (such as turning down a request for credit) are required to include the consumer’s credit score in the notices they provide to customers. To help dealers comply with this new rule, NADA has updated its “Dealer Guide to Adverse Action Notices,” explaining when an ad-verse action notice must be issued, what the notice must say, when dealers can rely on a finance source’s notice and other important issues. This guide also includes a model adverse-action notice that NADA developed for dealerships based on the government’s model notice. To download the guide, sign in to or sign up for NADA University at www.NADAuniversity.com, select “Resource Toolbox,” then “Driven,” and “Legal/Regulatory.”

2) Changes to the Risk-Based Pricing Rule – Also includ-ed in the Dodd-Frank law were changes to the Federal Risk-

Based Pricing Rule (RBPR), which requires dealers and other businesses that use credit reports and extend credit to consumers to provide a new notice, known as a Risk-Based Pricing Notice, to customers who receive credit on terms that are less favorable than the terms received by a “sub-stantial proportion” of their other credit customers. (Note, however, that the changes to the RBPR do not affect deal-ers who issue Credit Score Disclosure Exception Notices in lieu of Risk-Based Pricing Notices.) NADA’s “Dealer Guide to the Risk-Based Pricing Rule” has been updated to account for these changes. To download the guide, sign in to or sign up for NADA University at www.NADAuniversity.com, select “Resource Toolbox,” then “Driven,” and “Le-gal/Regulatory.”

3) In addition to the guides, NADA University has pro-duced a brief video on the changes featuring NADA at-torney Brad Miller. You can also view the archived we-binar “New Credit Score Disclosures for Adverse Action and Risk-Based Pricing Notices” at www.NADAuniver-sity.com in the Learning Hub under “Legal/Regulatory.”

Dealers Must Use New IRS Cash Reporting Form

The IRS has issued an updated Form 8300, effective July 1, 2011, that dealers must use to report cash transactions of more than $10,000. Cash payments of more than $10,000 in one transaction or in two or more related transactions must be reported to the IRS using the new form. For a link to the new form and details about cash reporting requirements, visit www.nada.org/regulations.

President Bush and Sergio Marchionne to Keynote 2012 Convention in Las Vegas

Former President George W. Bush and Sergio Mar-chionne, chief executive officer of Chrysler Group and chairman of Fiat Industrial S.p.A., are the scheduled key-note speakers for the 2012 NADA and ATD Convention and Expo in Las Vegas next February. NADA chairmen Ste-phen Wade and Bill Underriner will also deliver industry remarks. The inspirational address will be provided by Aron Ralston, whose autobiography, Between a Rock and a Hard Place, was the subject of the film “127 Hours.”

The 2012 convention, which runs Feb. 3-6 at the Las Vegas Convention Center, will mark the first time that the NADA and ATD conventions will be held together. The convention also includes workshop sessions, franchise meetings, hun-dreds of exhibits and a new Social Connection Zone. Deal-

by Ray Ciccolo

Dodd-Frank Law Takes Effect with Implications for F&I Office

27


“Thanks to our successful grass-roots campaign in 2010, dealer-assisted

financing was saved from additional federal oversight under the

Dodd-Frank law.”

ers and managers are encouraged to register early to take advantage of discounted pricing and reduced hotel rates. To register, visit www.nadaconventionandexpo.org.

Now Playing on NADA-TV … “AutoFocus with David Hyatt”— a television

interview program.Here’s a list of recent interviews:

1. NADA Foundation Chairman Bob Mallon discusses the importance of charitable giving.2. Chief Economist Paul Taylor talks about NADA’s most recent state-of-the-industry report.

To view these videos, visit the NADA-TV channel on NADAFrontPage.com by clicking on the link in the upper right corner of the home page.

Prices of Fuel-Efficient Used Cars Expected to Remain High in August

Although used-car prices likely peaked in June, average trade-in values of many popular, fuel-efficient small cars for the 2006-2009 model years are still expected to be 10 per-cent to 30 percent higher in August than they were at the beginning of the year, says Jonathan Banks, senior analyst with the NADA Used Car Guide. Average trade-in values for three- to five-year-old Toyota Prius are expected to be 30 percent higher in August 2011 compared to January 2011, according to the NADA Used Car Guide. Over the same time period, the Chevrolet Aveo is expected to be up 21 percent.

“Car owners still have a lot of equity built up in their used cars, which puts them in a better financial position to make a down payment on a new vehicle,” Banks said.

Hyundai, Lexus and Subaru Top Rankings in NADA Survey

Dealers’ satisfaction with their respective automakers improved this year, according to NADA’s latest survey of nearly 15,400 franchises. The Dealer Attitude Survey, con-ducted by NADA’s Industry Relations group, measures deal-ers’ sentiments on the value of their franchises, automaker policy decisions that affect the dealership and the automak-ers’ field staff who visit stores. Hyundai finished in the top overall spot for the second consecutive survey period, and its affiliate Kia finished fourth, according to NADA’s 2011 winter survey results. Toyota’s Lexus division, which was recently dethroned after 26 consecutive survey periods in the top slot, came in at No. 2. Subaru finished third for the fourth consecutive time. Mercedes-Benz ranked fifth.

NADA 20 Groups for Fixed Ops Managers Meeting this Fall

NADA 20 Groups for Fixed Ops Managers focus on service, parts, and body shop issues. Dedicated fixed op-

erations professionals from similar volume, non-competing dealerships use their combined experience, the best-in-class financial composite, and knowledgeable consultants to tackle the issues that are most important to fixed operations. Here are the meetings coming up this fall:

Chrysler: Nov. 13-15 (Chicago) Ford: Jan. 11-13 (Scottsdale) GM: Sept. 14-16 (Orlando), Nov. 16-18 (Indianapolis) Mercedes: Nov. 16-18 (San Antonio) Nissan: Nov. 9-11 (Las Vegas) Toyota: Dec. 14-16 (Las Vegas) All Import: Nov. 9-11 (New Orleans)

Seats Available in Five Remaining Academy Classes of 2011

There are only five more Academy classes starting in 2011. Classes starting in September include:

Dealer Candidate Academy (starts Sept. 12) General Dealership Management (Sept. 19) Truck Dealer Academy (Sept. 26)Individual Academy classes (e.g., Financial, Parts, Ser-

vice and Variable Parts 1 & 2) are also open to department managers, who may attend a week of classes even if they don’t have a student in the Academy program. Visit www.NADA.org/nadauniversity/academy to download the sched-ule and applications for all programs, or call 800.557.6232, ext. 2 for more information.

NADA Used Car Guide Introduces Mobile VIN Scanner

NADA Used Car Guide has added a VIN barcode scanner to its family of mobile products, which includes NADA Ap-praisalPRO, available for Apple and Android devices. The VIN scanner simplifies the vehicle decoding process by giv-ing dealers the ability to scan and retrieve NADA vehicle values—including features like automatic adjustments for mileage and accessories—more efficiently and faster than ever before. The VIN scanner app is available for download to Android and iPhone mobile devices. For a free a trial sub-scription, go to www.nada.com/scanner or call (866) 974-NADA.

t

ray ciccolo, village auto grouP, rePresents Msada MeMbers on the nada board of directors. he welcoMes your questions and concerns ([email protected]).


MSADA28 nAdA Update

eCOnOMiC UPdAte

Printed on the back of 2010 Federal in-come tax refund checks was an offer from the Federal Government: “Let us help you manage your money.” In the midst of the budget debacle such a suggestion seems ludicrous. Default of the federal govern-ment hangs in the balance of the budget negations in Washington that could tag billions of dollars onto the cost of national borrowing. The government is already helping you manage your money by demanding it for a budget process that creates yearly deficits that defy the imagination.

Key political objec-tives are locked in this three-way struggle be-tween the White House, Republicans in the House of Representatives and Democrats in the U.S. Senate. And the econom-ic stakes are sky high. The President and the majority in the Senate wish to tie up a couple of additional percentage points of the Gross Domestic Product of the United States for use by politicians for the next several decades. By contrast, the majority in the House of Representatives suggests that the 80 percent of government funding that their key constituents currently pro-vide should be enough.

As I write, the House is still struggling to pass a bill that raises the debt ceiling and cuts spending, and the Senate will

likely contribute to compromise legisla-tion. There is still time, but precious little of it.

Hanging in the balance of the budget debate is the fate of the inflation rate over future decades, and baby boomers largely underprepared for retirement would find themselves impoverished by the inflation rate that current spending trends will cre-ate if left unchecked. It would not take a

double-digit rate of inflation to sorely re-duce financial security in the “boomer’s” golden years. Inflation of only 6 or 7 per-cent per year would insure catastrophic retirement outcomes and a slow growth economy that also under serves those of normal working age.

And the impact of the higher 24 per-cent of GDP sought by the administra-tion, compared to the roughly 22 percent average of recent decades, has significant impact on slowing economic growth and the creation of jobs. The choice between

significant taxes or even higher taxes and the choice between private sector jobs and government featherbedding of its own payroll are significant choices for the fu-ture.

The bond rating agencies are paying at-tention to debate on this grab of economic power in Washington, D.C. A reduction of yearly deficits for the long-term outlook will have to be accomplished if the U.S.

wants to retain the AAA rating for its debt that has been en-joyed for recorded debt rating history.

Through CNBC and Fox, subject to interruptions to re-port on the financial problems in Greece and other parts of Europe, the whole world is watching the struggle in our democratic system about our future.

The protagonists in this criti-cal drama have different ideological out-looks, but they all risk the wrath of the voter if the U.S. credit rating is squan-dered, and falls below AAA . The Presi-dent is currently at political risk on the jobs issues. To support current spending, you would have to believe that shovel-ing more money into government creates long-term productive employment, even as state governments lay off their exces-sive hires and cut excessive state govern-ment benefit programs for state workers. Two decades ago the Federal Government

By Paul Taylor, NADA Chief Economist

The Cost of Political Brinksmanship

A shadow hangs over financial markets and the future of automotive retail


29

“Much of the loss of jobs in the economy in state government payrolls will continue over the

next two years, an adjustment that must be made to address state government financial stability.”

cut the generous defined benefit pension for its new employees called Civil Service Retirement System (CSRS) for a 401k type of plan it calls FERS for Federal Em-ployee Retirement System, but the CSRS is driving deficit spending as many baby boomers in lifetime federal service retire under the old plan.

The U.S. economy requires about 140,000 new jobs per month simply to absorb new labor force entrants and make sure that unemployment gets no worse. There were just 18,000 jobs added in June, so the low May number can’t be called an anomaly. Unemployment rate rose to 9.2 percent from the previous 9.1 percent in June. Republicans suggest that increasing taxes and spending more in Washington won’t create meaningful jobs on Main Street. And it won’t park many new cars on Main Street either. Given the amount of noise in the employment data, we should only conclude that the jobs out-look hasn’t improved much in a statistical sense.

However, the economy is growing by less than 2 percent in the first half of the year according to the federal government’s own numbers, and that is much of the rea-son for the slow private sector job growth as state governments add many names to the unemployment rolls. Second quarter

GDP growth was just 1.3 percent. No won-der that job creation is disappointing.

Much of the loss of jobs in the economy in state government payrolls will continue over the next two years, an adjustment that must be made to address state gov-ernment financial stability.

lack of groWth, jobs and neW cars trims neW light vehicles

sales in may and june, but helps manufacturing employment

Lack of new car inventory, along with the slow growth and job creation in the overall economy, have trimmed recent new light vehicles sales. The effort to pro-duce more new vehicles in U.S. factories is helping third quarter manufacturing ac-tivity and employment. That activity will

be third quarter reports from the govern-ment. The private sector is creating em-ployment activity based on the voluntary demand from consumers, but the demand by the Administration for higher fuel economy gains threatens to decrease em-ployment in automotive production and retailing that could help meet the political pressure to lower the unemployment rate.

Even with the less excessive demand for 52 miles per gallon the questions have to asked: Will the customers buy the mix of vehicles needed to meet that requirement, and what will be the cost of additional copper, lead, rare earth materi-als and other scarce materials needed to create the more exotic vehicle drivetrains that are needed to meet the new fuel econ-omy standards.

Countries such as China and Russia will control some of the supplies of materials needed in greater amounts to create the higher mileage vehicles needed for the fu-ture sales mix. The fuel mileage improve-ments over a multi-year horizon will put upward pressure on vehicle prices and some commodity prices. The result? Con-sumers buy somewhat fewer new vehicles and some additional production goes out of the North American area.

What is needed in the next two work-ing days is a down payment on revers-ing current budget trends in Washington. If that is accomplished, lifting consumer confidence in the process, the stronger new vehicle inventory available by mid-August should help the sales volume at dealerships.

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30 eCOnOMiC UPdAte

Paul c. taylor, Ph.d., is chief econoMist of the national au-toMobile 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 auto-Motive industry and Publishing nada’s annual coMPilation of facts and figures, titled nada data.

By Paul Taylor, NADA Chief Economist

“The U.S. economy requires about 140,000 new jobs per month

simply to absorb new labor force entrants and make sure that

unemployment gets no worse. Second quarter GDP growth was just 1.3 percent. No wonder job

creation is disappointing.”

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

massachusetts auto dealer magazine august 2011

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