auto

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

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

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

August 2011 Vol. 24 No. 8

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

Kurt Vonnegut

The story behind the legendary authors Cape Cod dealership

MSADA A SSociAte M eMber D irectory

Name Contact Telephone Name Contact Telephone ADESA Boston Chris Carli (508) 270-5403 ADP Dealer Services Nadia Jagessar, (973) 974-4020 Albin, Randall & Bennett Barton D. Haag (207) 772-1981 Auto Trader.com Jim Menard (978) 347-2522 AutoRaptor (RAL) Howard L. Leavitt (401) 421-6533 Blum Shapiro John D. Spatcher (860) 561-4000 Boston Globe Mary Kelly (617) 929-8373 Mintz Levin Kurt Steinkrauss (617) 542-6000 Murtha Cullina Thomas Vangel (617) 457-4000 Nancy Phillips Associates, Inc. Nancy Phillips (603) 658-0004 NEAD Insurance Trust Charles Muise (781) 431-1450 OConnor & Drew, P.C. Kevin Carnes (617) 471-1120 OBrien, Riley and Ryan, PC Robert J. Ryan (781) 410-2300 Performance Management Group, Inc. Mark Puccio (508) 393-1400 R.L. Tennant Insurance Agency, Inc. Walter F. Tennant (617) 969-1300 Resource Management Group J. Gregory Hoffman (508) 761-4546 Responselogix Robert Lee (215) 618-2109 Reynolds & Reynolds (800) 896-2886 (413) 732-2301

Burns & Levinson LLP Paul Marshall Harris (617) 345-3854 CCR LLP Alan Oslomowski (508) 926-2200 CVR Scott Herbers (800) 668-2332 DealerTrack Tracey Reyes (516) 734-3600

Downey & Company James Downey (781) 849-3100 Ethos Group, Inc. Drew Spring (617) 694-9761 F & I Resources Jason Bayko (508) 624-4344 Federated Insurance Brett Faustman (317) 607-6653 Gatehouse Media Massachusetts Jay Pelland (508) 626-4334 Greenwood Distributors James Viara (508) 336-5040 Improved Illumination James Feeney (508) 801-9205 Jewett Construction Brian Gallagher (603) 895-2412 Key Bank James Q. Moretti (781) 558-5132 Leader Auto Resources, Inc. John Ackermann (518) 857-8853 Lynnway Auto Auction Bob Brest (781) 596-8500 M & T Bank John Federici (508) 699-3576

Robinson Donovan Madden & Barry, P.C. James F. Martin, Esq. Samet & Company John J. Czyzewski (617) 731-1222

Schlossberg & Associates, LLC Michael ONeil, Esq. (781) 848-5028 Sentry Insurance Company Christine Biechler (715) 346-7488 Shepherd & Goldstein Ron Masiello (508) 757-3311 Sovereign Bank Richard Anderson (401) 432-0749 Southern Auto Auction Tom Munson (860) 292-7500 Target Dealer Services Andrew Boli (508) 564-5050 The Huntington National Bank Elizabeth Donovan (508) 505-7435 TD Bank Michael M. Lefebvre (413) 748-8272

triVIN, inc. Diane Zewalk (860) 448-3177 US Bank Stephen Delaney (617) 603-6607 Zurich American Insurance Company Steven Megee (800) 443-4513

McCarter & English Scott Silverman (617) 345-7077 Mid-State Insurance Agency John Pietro (508) 791-5566

Calendar
WedneSdAy, AUGUST 31 Lynnway Auto Auction, north Billerica, MA Southern Auto Auction, east Windsor, CT WedneSdAy, SepTeMBer 7 Southern Auto Auction, east Windsor, CT Lynnway 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

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.

AUGUST 2011

Massachusetts Auto Dealer www.msada.org

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D E A L E R
S TA f f D I R e C T o R y Robert OKoniewski, Esq. executive Vice President rokoniewski@msada.org Jean Fabrizio Director of Administration jfabrizio@msada.org Tricia White Accounting Manager twhite@msada.org Tom Nash editorial Coordinator tnash@msada.org Nicole Ventosi Administrative Assistant/ Scholarship Coordinator nventosi@msada.org Paul Fellows Administrative Assistant/ Membership Coordinator pfellows@msada.org Subscriptions provided annually to Massachusetts member dealers. All address changes should be submitted to: MSADA by e-mail: tnash@msada.org Postmaster: Send address change to: one McKinley Square, Sixth floor Boston, MA 02109 ADVeRTISInG RATeS Inquire for multiple-insertion discounts or full Media Kit. e-mail tnash@msada.org Quarter Page: $450 Half Page: $700 full Page: $1,400 Back Cover: $1,800 Inside front: $1,700 Inside Back: $1,600
The official publication of the Massachusetts State Automobile Dealers Association, Inc

MA s s A c h u s E t t s

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

6 8 10 11 12 14 15

From the President: Aftershocks, Metaphorical and Real the roUndUP: RTR Hail Mary Going to the 2012 Ballot? QUestion oF the month trUCK Corner: new Standards, new Headaches AUto oUtLooK insUrAnCe: Maintaining a Drug-free Workplace soUnd oFF: Whats Hot, Whats not

16 Cover Story:
Kurt Vonnegut

20 27 29

neWs From Around the horn nAdA UPdAte: Dodd-frank law Takes effect eConomiC UPdAte: The Cost of Political Brinksmanship

AD DIReCToRy: BlumShapiro, 23 The Boston Herald, 32 Improved Illumination, 21 Jewett Automotive Design and Construction, 24 lynnway Auto Auction, 20 nancy Phillips Associates Inc., 23 oConnor & Drew, P.C., 31 Performance Management Group, 25 Southern Auto Auction, 22 Zurich, 2

www.msada.org

Massachusetts Auto Dealer AUGUST 2011

from the President

by James G. Boyle, MSADA President

Aftershocks, Metaphorical and Real

A frightening moment gives a glimpse into months of misery

s our Association spent the summer fighting back the socalled 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, its 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, well be up to speed in terms of inventory after production gets back to some semblance of normalcy. Its important; however, to remember that Japan itself is still in the earliest chapters of what will be decades of rebuilding. The media attention on Japan is long gone its 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 dont live in the vicinity may not be keeping up with the rebuilding there. For any dealers looking to help out somehow within the Commonwealth, I would encourage you to find out ways to contribute.

Media attention on Japan is long gone its up to us to remember to do our part and continue to help in whatever ways we can.
A New Twist
The forces of nature arent 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 struggling economy, as weve seen, come artificially created struggles we dealers have to face. See Dick Witchers 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, weve seen a new twist in what had at this point been history repeating itself:

AUGUST 2011

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MSAdA BoArd
Barnstable County
Gary Beard, Dick Beard Chevrolet

Berkshire County
[open]

Bristol County
Shawn oHara, oHara Mazda

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

Franklin County proponents pushing the bill through the summer and ultimately coming 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 worldrenowned authors 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 OKoniewskis column on page 8 for more information about where things stand.
Steven lorenz, Don lorenz, Inc.

Hampden County
Jack Sarat, Jr., Sarat ford

Hampshire County
Bryan Burke, Burke GMC

Middlesex County
James Boyle, Tucks Trucks Chris Connolly Jr., Herb Connolly Motors Scott Dube, Bill Dube Hyundai

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

Plymouth County
Scott Shulman, Best Chevrolet

Dealer of the Year Nominee Selected

Im happy to report that following our Executive Committee Meeting 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 well announce at our Annual Meeting in January, is both a great dealer and a valuable member of the community.

Suffolk County
Robert Boch, expressway Toyota

Worcester County
Joel Baker, Baker Cadillac Steven Sewell, Westboro Mitsubishi

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

Christine Alicandro, Martys GMC Isuzu

Mark Your Calendar

Earlier this month you received Save the Date cards for MSADAs 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.

Immediate Past President

[open]

NADA Director
Raymond Ciccolo, Village Auto Group

OFFICERS
President, James G. Boyle Vice President, Scott Dube Treasurer, Jack Madden, Jr. Clerk, Chris Connolly, Jr.
Massachusetts Auto Dealer AUGUST 2011

www.msada.org

the roundup

RTR Hail Mary Going to the 2012 Ballot?

by Robert OKoniewski, Esq.
MSADA Executive Vice President
The Right to Repair gang hasnt 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 legislature 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 sunshine is thrown upon the RTR proposal, the prevarications, obfuscations and innuendoes used by the RTR gang are exposed for what they really 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 petitions 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 initiative petition process allows for the placing of a matter before the Legislature initially, after obtaining 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 implement a RTR law. Our state Constitution excludes from the initiative process subjects that relate to religion, judges, the courts, particular localities of the Commonwealth, specific appropriations, and certain provisions of the state Constitutions Declaration of Rights. The AG bears the responsibility of determining whether the petition is an acceptable subject of the Initiative Petition process. If so, the AG must prepare a fair and concise summary and returns this summary and the proposed law to the petitioners. If the AG determines 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 imposes a relatedness requirement that petitions must adhere to if they contain multiple provisions or concepts.

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Massachusetts Auto Dealer www.msada.org

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As part of the AGs review process, opponents can submit comments regarding the appropriateness of the petition. 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 violation of the U.S. Constitutions takings clause, non-compliance with the Massachusetts Constitutions 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 overturned 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, excluding 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 signatures 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 referred 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 General 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 procedure, after rejecting the proposed initiative, 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 General Court or if the General Court fails to act by the first Wednesday in May, the proposed ballot measure, in an infrequently 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 amendment 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 submitting 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 (excluding blanks) at the last state election must be filed with the Secretary of the Commonwealth. This means that the additional signature requirement 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 Constitution requires that at least 30% of the voters 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 proposed by an initiative petition takes effect 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 Governors Council, which usually occurs in late November or early December. Obviously, the initiative petition process is designed to allow one to go right to the voters and bypass the 200 members 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 Rescission

In 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 purchase 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 session. We have always opposed the bills, and the bills usually never leave committee. As part of the previously described process, your Association filed comments asking the AG to deny approval for this petition as it violates the relatedness standard described in the Carney decision. We will await the AGs decision due the first week of September, and then proceed accordingly. continued on next page

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the roundup insUrAnCe

Question of the Month
By robert oKoniewski, esq. MSAdA executive Vice president

MSADA

? ? ?

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?
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.

Member Contact Surveys

A couple of weeks back I e-mailed the member contact survey forms to wayward members who have yet to submit their updated information. Since the beginning of the year we have been requesting our members to complete the dealer contact information surveys so that we have the most up-to-date records for our dealers. If you have not yet filled out your form, please do so today. Please note any corrections, additions, and deletions on the form and return it to MSADA by fax at (617) 4519309. 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.
AUGUST 2011

Economic Impact Survey

Your 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 almost 20 percent of the total retail economic activity in Massachusetts. Getting these figures out is crucial to raising awareness of our industrys importance, especially as the governor and legislators ponder various new methods of raising revenue. Dealers and our customers purchases are consistently made targets of revenue initiatives that hurt

the economy and our customers pocketbooks. But facts dont 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 email, including as part of our Bulletin #13 on March 15, and it has been included in each of our magazines since then. Please take the time to complete the survey for each of your dealerships and fax it to Auto Outlook at (610) 640-2907. We need returns from at least half our members for our survey to be accurate. If you have not received the survey form, use the form on page 3 of this issue.

Massachusetts Auto Dealer www.msada.org

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the trUCK Corner

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 trucks job, because its obvious that efficiency cant be measured the same way in all cases. Its 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 havent 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 Administration 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 Surface Transportation Trust Fund, reduce the introduction of new safer trucks, create higher hurdles for new trucking startups and increase the cost of delivered goods. The solution is far simpler: increase the federal excise 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 manufacturers with profit; replenish the Surface Transportation 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.

11

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 regulatory agencies. I understand of Michael McKean, President and founder a little DC-speak, but ocd consulting,what Washington sounds like to me lately. I that is is a lifelong ParticiPant and observer of the retail autoMotive business. hope I can voice my opinion without morphing into a contact Michael at MMcKean@ocd.coM rant about Congress and the Administration. First, let me say that I am not against the environment, safety or taking responsibility. I am against being the worlds 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 imDick Witcher iS vice preSiDent of AtD AnD pact of controlling nitrous oxides and particulates: the DeAler principAl At it was a good thing for the environment but added as MinuteMAn truckS, inc. 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 lobbyist 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 percent. 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 businessman 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 determined there are tipping points at which truck owners will add fuel saving devices and until those tipping points are reached there was no cost benefit to implementing 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 subclasses within those groups, acknowledging the difference

New Standards, New Headaches by Michael McKean

by Dick Witcher

www.msada.org

Massachusetts Auto Dealer AUGUST 2011

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AUtO OUtLOOK

AUGUST 2011

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insUrAnCe

MSADA

Maintaining a Drug-Free Workplace

Employee substance abuse can mean money out of your pocket

By Steven Megee
Steven Megee iS regionAl SAleS MAnAger At t h e f r A M i n g h A M r e g i o n A l o f f i c e f o r Z u r i c h n o rt h A M e r i c A c o M M e r c i A l S progrAMS & Direct MArketS buSineSS unit.

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 available. Implementing a comprehensive substance 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 written, understood by all who are affected by the policy and administered in a fair and consistent manner. Consider the following points before developing a substance abuse policy, and be mindful of local, state and federal laws related to such a policy prior to implementation: What is the companys 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-placement, randomly, investigative for cause, or on a scheduled basis?
AUGUST 2011

Take action today you cant afford not to have a substanceabuse program.
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 behaviors 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.

How the policy applies to employees and Describe basic components of the drugfree program, the employee assistance program and the testing procedures. the consequences of violating it;

employee assistance program Job-based program intended to assist workers; Cost-effective method to reduce accidents, workers compensation claims, absenteeism, etc.; Valuable component of a substance abuse program. drug and alcohol testing Essential hiring tool; Effective deterrent to substance abuse; Evaluate all aspectswho, what, when, etc.
A drug-free policy may have a positive 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 cant afford not to have a substance abuse program. Remember to consult with legal counsel before implementing any substance abuse or drug testing 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 account executive. Also, check out: National Institute on Drug Abuse, www.nida.nih.gov; Substance Abuse and Mental Health Services Administration, www.samhsa.gov; and at www.drugfreeworkplace.com.

supervisor training Their role in implementation; Observing and documenting unsatisfactory 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.;

Massachusetts Auto Dealer www.msada.org

sOUnd Off

MSADA

15

Whats Hot, Whats Not

Will recent market surges continue?
By Nancy Phillips
We 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
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.

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

CURRENT DEALERSHIP TRANSACTIONS MAy 2010 THROUgH JUNE 2011

Franchise Volkswagen Volkswagen
Kia Ford Volkswagen nissan Median Value

Buyer Type individual small Group small Group individual small Group small Group

Trade Area 500,000 100,000 1,000,000 50,000 300,000 100,000

Business Value PNVR $2,614 $3,207 $2,101 $6,122 $3,344 $4,500 $3,648

Business Value Factor 4.3% 4.4% 4.4% 7.6% 8.2% 8.3% 6.2%

DATA PUBLISHED IN APRIL 2010

Franchise subaru subaru Volkswagen Ford Volkswagen Audi Volkswagen Median Value Buyer Type individual individual individual small Group small Group small Group Trade Area 50,000 250,000 1,000,000 50,000 250,000 1,000,000 Business Value PNVR $1,136 $2,466 $2,083 $2,804 $2,670 $2,336 $2,249 Business Value Factor 3.3% 3.6% 4.0% 4.2% 4.5% 5.5% 4.2%

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.

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.

t
Nancy Phillips Associates specializes in sales, acquisitions and evaluations of franchised automobile dealerships. Contact Nancy Phillips at (603) 658-0004 or e-mail auto@nancyphillips.com.

Do you have an opinion you want to share? Send submissions to tnash@msada.org.

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MSADA Cover Story MSADA

MSADA

Kurt Vonnegut
The story behind the legendary authors Cape Cod dealership
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, its a chapter of his life that deserves exploration, especially I believe my failure given the influence as a dealer so long ago Vonneguts stint as a Massachusetts auto explains what would dealer would have on otherwise remain a deep his work. mystery: why the Swedes William Rodney Allen, author of Un- have never given me a derstanding Kurt Von- Nobel Prize for literature. negut, noted that while Kurt Vonnegut, Saab Cape Cod some are surprised by Vonneguts time as a dealer, the venture wasnt out of character 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 generation, 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.
Vonnegut took to using his old Saab letterhead for selfportraits and silk-screen prints.

AUGUST 2011

massachusetts Auto dealer www.msada.org

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begun to take over household eyeballs, just as the automobile had begun to turn the transportation industry upside-down. After he and his then wife, Jane Marie Cox, had their third child, money became even tighter. Writing wasnt 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 technology and it felt very sophisticated. It felt more about art and cutting 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.

19 17

Saab factory, circa 1950s

A cranberry red Saab

Vonnegut, an Indianapolis native, studied chemistry at Cornell 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 Schenectady, 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 family, 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

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 another place to work, as up until then he had always worked at home, she said. He An ad from the 1957 new england would look Telephone directory, courtesy of after his cars SaabHistory.com. and business and write when there was nothing else to do. Though mainly I think he spent his time smoking and worrying whether hed 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 required 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 fireworks. It also had front-wheel drive, of some help on Kurt Vonnegut took this photo of his wife, Jane Marie Cox, posing on the hood of a Saab 93. (Courtesy of edie Vonnegut) slippery pavements or when accelerating into curves.
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MSADA Kurt Vonnegut Saab Dealer MSADA

MSADA MSADA

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

There was this selling point as well: As one prospective customer said to me, They make the best watches. Why wouldnt 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 vision and their haggling over price. There were other troubles with the franchise besides slow sales and difficult customers. In an interview featured in Allens Conversations with Kurt Vonnegut, Vonnegut admitted Saab representatives threw me out of their mechanics school. No talent. Allen notes Vonneguts fiction, meanwhile, was showing promise. The time spent in the less-than-busy showroom meant more time writing. After 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 man
Its not clear exactly when Vonnegut shut down the franchise. Business records that were held by the town are long gone, and Allen notes that Vonneguts recollection of dates is spotty. It seems 1961 is the consensus among Saab enthusiasts. By that point, Vonnegut had published both a collection of
AUGUST 2011 Massachusetts Auto Dealer www.msada.org

short stories and Sirens of Titan, which, given its 22nd century space quest setting, saw critics further categorize him as a science fiction writer, a label he was never comfortable with. The following novels, Mother Night, revolving around the aftermath of World War II, and Cats Cradle, satirizing the Cold War arms race, established the audience that would herald The Slaughterhouse-Five as a work of genius in 1969. From that point until his death in 2007, Vonnegut became regarded as one of the key authors of American fiction. He continued 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 features 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, Occasionally I would say to myself, You actually experienced the firebombing of Dresden, the biggest massacre in European history, in which 135,000 people were killed in one night -- why dont you write about that? Asked how his life would be different had his father been successful as a dealer, Mark, now a pediatrician in Milton, said its impossible to think about. Theres no way in hell that would have or could have happened, he said. Ultimately he stuck out like a sore thumb and couldnt 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 endeavor. 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.

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NEWS
GREENFIELD

from Around the Horn

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 cant reveal the buyer of the dealership site. The franchises were sold back to General Motors. Lorenz told The Republican hes retiring because he had a stroke in 2009. I cant do what I used to do, he was quoted as saying. In this business its not unusual to work 11-, 12hour days. Im only working three or four hours a day. Lorenzs father, Don, started the business in 1954 selling new Buicks a few blocks south on Federal Street. The Steve lorenz 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 Stevens 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.
AUGUST 2011 Massachusetts Auto Dealer www.msada.org

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WESTBOROUGH

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BOSTON

MSAdA Appears Before Greater Media Boston

On August 18, MSADA President Jim Boyle and Executive Vice President Robert OKoniewski traveled to Greater Media Boston on Morrissey Boulevard to provide an update to over 40 radio sales associates of the auto industrys current status, including dealer attitudes and customer trends as well as what businesses and consumers can expect over the next several months with the state and national economy. Bob Pedder, Greater Medias executive director, invited the duo to speak as part of the groups 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 company based in Braintree that owns and operates many radio stations and newspapers - primar-

GM dealer to Build new Facility

Westborough 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. Weve 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 dealerships 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.

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, OKoniewski 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.

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Massachusetts Auto Dealer AUGUST 2011

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NEWS from Around the Horn

BRAINTREE
DANIEL ZEESE PHOTO

Volt Makes debut at Quirk Chevrolet

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 Volts combined range to approximately 407 miles. The Volt is a game-changing vehicle, and its 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

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BEDFORD

23

Volkswagen TdI Clean diesels Growing In popularity

Volkswagens clean-burning TDI diesel technology is gaining speed in the United States, accounting for 24.1 percent of the automakers 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. Theyre 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.

2011 Volkswagen Jetta Sedan TDI

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 TDIs 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, fuelefficient 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 cant be claimed by too many vehicles. continued on next page
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NEWS from Around the Horn

Clean diesels Growing In popularity
from 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 electricvehicle-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. BMWs 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 ActiveEs 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

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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 years 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 its ready to go in the morning.
GREENFIELD

25

new rMV Branch opens

Governor 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 privatelyowned 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 RMVs continuing efforts to improve customer service and reduce costs by relocating high-cost branches to formerly vacant or underutilized facilities owned or operated by MassDOT and other public agencies.

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Massachusetts Auto Dealer AUGUST 2011

nAdA Update

by Ray Ciccolo

27

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

Its hard to believe its been a year since Congress passed one of the biggest regulatory overhauls our nation has ever seen. Im 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 believe 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 several provisions related to disclosure of credit terms and action 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 substantial proportion of their other credit customers. (Note, however, that the changes to the RBPR do not affect dealers who issue Credit Score Disclosure Exception Notices in lieu of Risk-Based Pricing Notices.) NADAs 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 Legal/Regulatory. 3) In addition to the guides, NADA University has produced a brief video on the changes featuring NADA attorney Brad Miller. You can also view the archived webinar New Credit Score Disclosures for Adverse Action and Risk-Based Pricing Notices at www.NADAuniversity.com in the Learning Hub under Legal/Regulatory.

Thanks to our successful grass-roots campaign in 2010, dealer-assisted financing was saved from additional federal oversight under the Dodd-Frank law.
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 consumers 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 adverse action notice must be issued, what the notice must say, when dealers can rely on a finance sources notice and other important issues. This guide also includes a model adverse-action notice that NADA developed for dealerships based on the governments 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 included in the Dodd-Frank law were changes to the Federal Risk-

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 Marchionne, chief executive officer of Chrysler Group and chairman of Fiat Industrial S.p.A., are the scheduled keynote speakers for the 2012 NADA and ATD Convention and Expo in Las Vegas next February. NADA chairmen Stephen 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, hundreds of exhibits and a new Social Connection Zone. DealMassachusetts Auto Dealer AUGUST 2011

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

MSADA
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)

Now Playing on NADA-TV AutoFocus with David Hyatt a television interview program.
Heres a list of recent interviews: 1. NADA Foundation Chairman Bob Mallon discusses the importance of charitable giving. 2. Chief Economist Paul Taylor talks about NADAs 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.

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, Service and Variable Parts 1 & 2) are also open to department managers, who may attend a week of classes even if they dont have a student in the Academy program. Visit www. NADA.org/nadauniversity/academy to download the schedule and applications for all programs, or call 800.557.6232, ext. 2 for more information.

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 percent 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.

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 AppraisalPRO, available for Apple and Android devices. The VIN scanner simplifies the vehicle decoding process by giving dealers the ability to scan and retrieve NADA vehicle valuesincluding features like automatic adjustments for mileage and accessoriesmore 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 subscription, go to www.nada.com/scanner or call (866) 974NADA.

Hyundai, Lexus and Subaru Top Rankings in NADA Survey

Dealers satisfaction with their respective automakers improved this year, according to NADAs latest survey of nearly 15,400 franchises. The Dealer Attitude Survey, conducted by NADAs Industry Relations group, measures dealers sentiments on the value of their franchises, automaker policy decisions that affect the dealership and the automakers 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 NADAs 2011 winter survey results. Toyotas 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-

ray ciccolo, village auto grouP, rePresents Msada MeMbers on the nada board of directors. he welcoMes your questions and concerns (rjciccolo@aol.coM).

AUGUST 2011

Massachusetts Auto Dealer www.msada.org

eCOnOMiC UPdAte
By Paul Taylor, NADA Chief Economist

29

The Cost of Political Brinksmanship

A shadow hangs over financial markets and the future of automotive retail
Printed on the back of 2010 Federal income 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 government 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 objectives are locked in this three-way struggle between the White House, Republicans in the House of Representatives and Democrats in the U.S. Senate. And the economic 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 provide 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 legislation. 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 create if left unchecked. It would not take a 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 future. The bond rating agencies are paying attention 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 enjoyed for recorded debt rating history. Through CNBC and Fox, subject to interruptions to report 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 critical drama have different ideological outlooks, but they all risk the wrath of the voter if the U.S. credit rating is squandered, and falls below AAA . The President is currently at political risk on the jobs issues. To support current spending, you would have to believe that shoveling more money into government creates long-term productive employment, even as state governments lay off their excessive hires and cut excessive state government benefit programs for state workers. Two decades ago the Federal Government

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.
double-digit rate of inflation to sorely reduce financial security in the boomers golden years. Inflation of only 6 or 7 percent 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 percent of GDP sought by the administration, 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
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Massachusetts Auto Dealer AUGUST 2011

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eCOnOMiC UPdAte
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.
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 Employee 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 cant 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 wont create meaningful jobs on Main Street. And it wont park many new cars on Main Street either. Given the amount of noise in the employment data, we should only conclude that the jobs outlook hasnt 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 governments own numbers, and that is much of the reason for the slow private sector job growth as state governments add many names to the unemployment rolls. Second quarter
AUGUST 2011

GDP growth was just 1.3 percent. No wonder 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 government financial stability.

lack of groWth, jobs and neW

cars trims neW light vehicles sales in manufacturing employment

may and june, but helps

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 produce more new vehicles in U.S. factories is helping third quarter manufacturing activity and employment. That activity will

be third quarter reports from the government. The private sector is creating employment activity based on the voluntary demand from consumers, but the demand by the Administration for higher fuel economy gains threatens to decrease employment 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 materials and other scarce materials needed to create the more exotic vehicle drivetrains that are needed to meet the new fuel economy 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 future sales mix. The fuel mileage improvements over a multi-year horizon will put upward pressure on vehicle prices and some commodity prices. The result? Consumers buy somewhat fewer new vehicles and some additional production goes out of the North American area. What is needed in the next two working days is a down payment on reversing current budget trends in Washington. If that is accomplished, lifting consumer confidence in the process, the stronger new vehicle inventory available by midAugust should help the sales volume at dealerships.

Paul c. taylor, Ph.d., is chief econoMist of the national autoMobile dealers associations industry analysis, where he oversees nadas industry analysis activities, which include research on a wide range of factors iMPacting the retail autoMotive industry and Publishing nadas annual coMPilation of facts and figures, titled nada data.

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