January 2018 SDADA Column

Last year I watched (and helped a little) as NADA planned NADA100, a celebration of 100 years of service to dealers. The celebration in New Orleans was spectacular and everyone I talked to who attended had a great time. It was a gala worthy of the occasion.

It was great to walk down memory lane  and recap the rich history of both our trade association and our industry while also celebrating its future. The automobile industry has been an integral part of our nation's history.

Perhaps even more remarkable is that the South Dakota Automobile Dealers Association is celebrating 100 years of service to South Dakota dealers this year. Committees and staff are planning a celebration of this milestone to be held in Sioux Falls, June 13-15.

Details of this grand event will be coming soon but I urge you to mark those dates on your calendar. This will be a celebration of the history of the automobile industry in our state and if you are reading this, you are an important part of that history.

Encourage other dealers, current and past, to join us for this great celebration of the automobile industry in our state. I know one thing about car dealers, we DO know how to celebrate.

July 2017 SDADA Column

In June I attend the American Financial Services Association (AFSA)/NADA Executive Forum in
Washington, DC. These two trade association sponsor this event each year to discuss topics that affect automotive lending. Almost all captive and large automotive lenders were represented at the forum.

The lenders top concerns included cyber security, falling vehicles values and management of ancillary products. Dealers' top concerns were pressure on profitability, new regulatory threats by the CFPB and FTC, and existing regulatory and legal compliance challenges.

It was the first time in several years that regulatory threats did not top both lists. While regulatory threats still loom, it is telling that both lenders and dealers feel other perils have surpassed those.

While a business-friendly administration should keep the regulatory threats at bay, both organizations will have to stay vigilant and watch the beltway regulators!

May 2017 SDADA Column

Relying on the government to protect your privacy is like asking a peeping tom to install your window blinds.

– John Perry Barlow

New technology related to connected cars is evolving quickly. Many of the new features associated with this connectivity require new types of data, which puts privacy in the spotlight for manufacturers, government and consumers. Needless to say, that means that the dealers need to be on top of the issue as well.

When that vehicle is traded and that info remains, both the customer and the dealer remain at risk. Do you have a procedure for deleting the info from a trade?

The Future of Privacy Forum (FPF) and the National Automobile Dealers Association (NADA) released a first-of-its kind consumer guide, Personal Data In Your Car. The Guide helps consumers understand the kind of personal information collected by the latest generation of vehicles, which use data to further safety, infotainment and customer experience.

The Guide describes several components that are integral to properly protecting consumer data. For example, services that collect and share personal information should be accompanied by a clear privacy policy. The reality is that yes, cars are starting to know more about you, but what it knows may save your life.

Personal Data In Your Car highlights that nearly all leading automakers have committed to protecting consumer information by committing to the Automotive Privacy Principles. These Principles guide privacy practices in the automotive industry. They went into effect beginning with model year 2017 vehicles and for subscription services beginning on January 2, 2016.

This guide will help you and your customer protect their private information.

January 2017 SDADA Column

NADA began when a group of 30 dealers came to Washington to fight a proposed 5% luxury tax on new vehicles. Advocating for their customers, these dealers successfully argued the automobile is a necessity, not a luxury. Those dealers won that argument and NADA is still fighting for dealers, their employees and their customers 100 years later.

In a time when all trade associations are struggling to find a way to be relevant to their members, NADA still boasts a 90%-plus membership rate. NADA truly is the "Voice of the Dealer" in all it says and does.

Our association has, in Peter Welch, a President and CEO second to none. We have an exceedingly knowledgeable and ultimately professional staff that is always "looking around the next corner" to help protect and advise dealer-members of both threats and opportunities.

I have been fortunate to serve as your NADA Director since August of 2007. In the 9+ years that I have served as director, I have had occasions to fight on the front lines with many of these fine people against threats from the manufacturers, legislators, regulators and disruptors that face our business. I can report that I'd much rather have them on my team than be facing them. They are formidable foes!

The National Automobile Dealers Association is us. It is the dealers in all 50 states; large and small; multi-point dealers and single point dealers; import and domestic; in metro areas and in rural communities; publicly owned and privately held; working together to make our industry better for our businesses, our employees and our customers.

Let us all celebrate that! As we look forward to our nest century, let us remind ourselves that our success lies in our employees and our customers. When we serve them, our industry thrives!

Happy birthday, NADA!

December 2016 SDADA Column

Red sky at night, sailors' delight.
Red sky at morning, sailors take warning.
- from an ancient rhyme often repeated by mariners

It's almost morning in the Trump administration and I see a red sky!

Tax reform is a recurring threat in DC. Every politician that runs calls for tax reform and every incumbent up for reelection calls for tax reform. It's a standard line in every candidate's stump speech. There's been much lip service paid to the topic and very little elbow grease expended.

That could be changing. It would appear that the Republican Congress and the Trump administration are both serious this time - as in they want real tax reform!

House Ways and Means Chairman Kevin Brady (R-Texas) released a "Tax Reform Blueprint" in July 2016 that outlined the general provisions of a comprehensive tax reform package. When the new Congress convenes in January, the House Ways and Means Committee, the Senate Finance Committee, and the Trump Administration will begin developing the actual text for a tax reform bill.

Here's where it gets complicated...One of the provisions included in the Tax Reform Blueprint, the “Border Adjustment Tax” (BAT), has generated significant concern among several industries, including the automotive sector.  The BAT is not a tariff.  Tariffs are taxes imposed on specified imported products (e.g., the 25% chicken tax imposed on the import of light pickup trucks since 1963).

The House Republican proposal (including the BAT) would modify business income taxes in several ways: reduce the rate from 35% to 20%; accelerate depreciation schedules, eliminate all interest deductions; exempt the cost of exported goods from the taxable receipts subject to income tax (they would be taxed in the jurisdiction in which they were sold); and disallow the cost of any imported goods as a deductible business expense.

November 2016 SDADA Column

The ground beneath me still quakes from the aftershocks of the 2016 presidential election. Donald J. Trump delivered the most improbable of election victories in United States history as he completely shocked pundits, media and other experts.

Now the business of governing begins. What does that mean for Americans? What does that mean for car dealers?

Fortunately for businesses, Trump will be working with a Republican majority in both the House and the Senate. He should have a decent chance to advance some of his agenda.

He is likely to seek vast cuts in regulations that have hampered the small businesses across our country. This bodes well for car dealers.

Trump has said he would dismantle Dodd-Frank Wall Street regulation. Hopefully, that means he is likely to reel in the Consumer Finance Protection Bureau. Regardless, the environment is right for NADA's S 2663, our next effort to tame the CFPB, to be passed.

He has indicated a desire to revise our tax system to make our business tax rate more competitive to keep jobs in America, create new opportunities and revitalize our economy. Again, this likely will serve for small businesses well.

NADA's agenda should find a more favorable environment across the regulatory agencies in DC. That should mean less government in our dealerships.

Hopefully, Trump can focus on those issues that will find some consensus in Congress. There are many issues that both sides agree need attention. Mr. Trump, stay with those....and relinquish your Twitter account!

October 2016 SDADA Column

Virtually every dealer, manager or salesperson I know has been put in the position of having to
explain to a customer that one vehicle, with the same MSRP as the identical vehicle sitting next to it, costs $4,000-5,000 more than the other one. Or they have sold vehicles at a significant loss at the beginning of the month in an effort to hit an objective that will allow them to perhaps(!) break even on vehicles they sell at the end of the month.

Manufacturers do not understand the disruption, confusion and malaise they cause with such ridiculous incentive(?) programs. They do permanent damage to their brand, customer-dealer relations and dealer-manufacturer relations.

The NADA Board of Directors had an extended discussion about this topic at our most recent meeting. The frustration, anger and distrust came quickly to the surface as we talked. There was a wide variety of ideas to deal with it but there was not any consensus. Of course, our anti-trust attorney kept the discussion on track and us out of trouble!

The topic is on the agenda for the next board meeting but I'm not confident that NADA is in a great position to really do anything significant (other than have the discussion with the manufacturers) about this issue.

Like most states, South Dakota has a law on the books that specifically deals with this topic (my emphasis added):

September 2016 SDADA Column

Our South Dakota delegation (Chairman Dutch VanSanten, NADAPAC Chairman Bruce Eide, NextGen delegate Bryan Boocock, and Myron) just returned from the NADA Washington Conference. I got a bit different view of the event this year as Legislative Affairs Chairman.

We are very fortunate to have two Senators (Thune and Rounds) and a Congresswoman (Noem) who understand and support small business issues. I can assure you that this is not universal. As I visit with directors from others states, they are increasingly frustrated with their representation and how Washington works (or doesn't work!).

At last year's conference, we focused on urging support for H.R. 1737, which nullifies the CFPB’s flawed auto finance guidance, requires the agency to study the true impact on consumers before issuing new guidance, places provisions for a public comment period and requires the CFPB to consult with the agencies that currently share jurisdiction over the indirect auto finance market.

After the Washington Conference last fall, the bill passed by a veto-proof majority vote of 332-96; including 88 Democrats! Once again, dealers got it done.

This year, we had over 300 dealers and ATAEs take to the Hill to advocate for S.B. 2663, the companion bill for H.R. 1737 on the Senate side. We urged support for and action on the bill.

Like H.R. 1737, the bill was written on a bipartisan basis and it deserves bipartisan support. But whether a Democrat or Republican, both have recognized a simple truth: Every consumer deserves access to competitive financing and great rates when they buy a new car or truck.

NADA hopes to get it passed in a "lame duck" session after the election. There are a lot of groups betting against the dealers. We'll see what happens!

August 2016 SDADA Column

I believe the next fight coming between the automobile industry and federal regulators is on the fuel economy front. The battle will be over whether to relax the Obama administration’s future mileage targets. While the direct combatants may be the feds and the OEMs, the dealers (and our customers) will be in the crossfire.

The Wall Street Journal reported last month that government regulators said that U.S. auto makers aren’t on track to meet the administration’s fuel-economy standards, but added that the "industry does have the technical ability to meet them" even in the face of cheap gasoline prices.

Last November, the New York Times suggested the reason there aren't more electric cars on the road is because that car dealers won't sell electric cars. We have not hit Obama's goal of 1 million electric cars on the road because of the nation's car dealers.

I'm guessing that you're like me in that you just want to sell whatever your customers want to buy. If there was an overwhelming demand for electric vehicles, dealers across the country would be stocking more of them and selling more of them. But there isn't and we're not! We know that the competitive forces among OEMs compel them to do the same thing - build the vehicles customers want to buy.
My real concern in this upcoming fight is the plight of the light duty truck - specifically the pickups our South Dakota customers drive on a daily basis.  They need a full size truck to do their work. It is work station, an implement, an office and perhaps, even their family vehicle.

While I hope I'm wrong, I don't believe we will see a full-size pickup that will get 50 miles per gallon anytime soon. If we do, I just hope that the OEMs that I represent can offer one!

In the mean time, we do not want the federal regulators to handicap ag producers, working people, outdoorsmen and other truck buyers by downsizing and depowering their pickups.

July 2016 SDADA Column

In late June, I attended the seventh annual year executive forum sponsored by NADA and the
American Financial Services Association (AFSA) where we discussed legislative, regulatory and operational challenges facing auto dealers and finance sources.

Executives from virtually every major finance company and major bank in the nation engaged in indirect auto financing attended the forum along with a dozen or so dealers from the NADA board. There were representatives from the American International Automobile Dealers Association, National Association of Minority Automobile Dealers, and Automotive Trade Association Executives in attendance as well.

While there were several presentations and discussions during the event, it was Consumer Financial Protection Bureau (CFPB) Director Richard Cordray's comments to the group that stuck me.

As he reviewed the bureau’s activities in the area of vehicle financing, he insisted on calling our retail discounting of interest rates a "dealer markup" and suggested several times that some type of "flat rate" compensation to dealers was a preferred model. While it was not a surprise to hear this, it was frustrating to see and hear how narrow-minded he still was on this issue.

A survey of those in attendance revealed that top concerns for finance sources include exams and enforcement actions, cybersecurity, compliance, changes in vehicle values and hiring, training and retaining employees.

Dealers are most concerned with new regulations from the FTC and CFPB, existing regulations and compliance, and hiring, training and retaining employees. New opportunities focused on technology improvements and mobile financing options for lenders, and leasing and e-contracting for dealers.


House Again Rebukes CFPB Over Its Flawed Auto Finance Guidance 

By a bipartisan vote of 260-162, the House of Representatives passed an amendment offered by Rep. Frank Guinta (R-N.H.) that would nullify the Consumer Financial Protection Bureau's (CFPB) flawed auto finance guidance by preventing the CFPB from spending any funds to enforce the guidance. The amendment was added to the fiscal year 2017 Financial Services appropriations bill (H.R. 5485) on the House floor. This House action is another rebuke of the CFPB's auto finance guidance, which threatens a consumer's ability to receive a discounted auto loan from a dealer. This is the first time Congress has used the appropriations process to rein in the CFPB. Nineteen Democrats and 241 Republicans voted for the amendment.

Last November, the House passed Rep. Guinta's bill, H.R. 1737, by a bipartisan vote of 332-96. This bill would nullify the CFPB's 2013 auto finance guidance and establish a transparent process with public participation to determine future auto finance guidance. In contrast, the CFPB issued the flawed 2013 guidance without any public comment or transparency, and the agency admitted it has failed to study the impact of its guidance on consumers.

Economic Analysis Reaffirms That State Franchise Laws Lower Prices, Benefit Consumers 

Retail prices for new cars are lower for consumers because of state franchise laws, according to a new economic analysis from the Phoenix Center for Advanced Legal and Economic Public Policy Studies.

The analysis, “State Automobile Franchise Laws: Public or Private Interests?” found that state franchise laws serve to foster intense competition among franchised new-car dealers, which “demonstrably lowers prices for consumers” and “alter[s] the way consumers buy cars and service in a positive way.”

“Franchise laws do not limit competition or lead to higher prices,” said study co-author and Phoenix Center Senior Fellow Professor T. Randolph Beard. “In fact, all the evidence suggests that there is intense competition leading to very low margins on new car sales.”

The Phoenix Center study came in response to recent scrutiny of state franchise laws by the Federal Trade Commission (FTC) and others, and the suggestion that these laws are outdated. The study concluded, however, that state franchise laws are indeed still very beneficial to consumers.

“When selling an automobile-service bundle, our analysis indicates that franchised auto dealers have a better incentive with respect to consumer desires than car manufacturers,” said study co-author and Phoenix Center Chief Economist Dr. George S. Ford. “As such, it is not unreasonable for state legislatures to choose a market design that best serves their constituents in the form of local auto franchise laws.”

June 2016 SDADA Column

Do Americans know how lucky they really are? They have Uncle Sam to protect them from themselves.

The Federal Trade Commission has proposed a survey of consumers regarding their experiences trading in, buying and financing vehicles at dealerships. The commission will conduct 40 interviews with consumers that are 90 minutes in length.

In 2015, there were over 38 million used vehicle transactions and over 17 million new vehicle transactions in our country. The FTC will conduct 40 interviews and will then have a complete understanding of the automotive market in America!

This survey is a repeat of the one the FTC conducted five years ago. That survey found no systemic problems with the auto-retailing sector. Processes have certainly gone to hell since that survey!

I know I can be a bit cynical but perhaps we should survey health care patients, attorney clients, insurance company customers, mobile phone customers, etc. Is there no room for improvement in any of these transactions? Some would suggest that market forces and competition would be very good at improving and streamlining the processes.

At some point, perhaps consumers must be responsible for their own choices. There are many options in  the marketplace. Consumers have control over where they buy. That can (and should) be the ultimate regulator!

A Peek Behind the CFPB Curtain

This "must see" video (http://goo.gl/Mcu0qe) takes a somewhat humorous look at the shenanigans going on with the CFPB in their attempt to regulate and punish those involved in auto finance lending. This is your government at work!

Supreme Court Issues Pro-Dealer Opinion in Service Writer Overtime Case 

The Supreme Court issued an opinion in Encino Motorcars v. Navarro, vacating a 2015 Ninth Circuit Court of Appeals decision that had held that dealership “service writers” are not covered by the federal “salesmen” exemption from overtime pay. In doing so, the Supreme Court expressly rejected a 2011 U.S. Department of Labor (DOL) interpretative regulation that service writers/advisors are not "salesmen" exempt from overtime. In particular, the Court faulted DOL for failing to give adequate weight to dealerships’ reliance interests during the rulemaking process, and for failing to provide a “reasoned explanation” for the abrupt change of policy. The Supreme Court’s decision requires the Ninth Circuit to reconsider its prior decision consistent with the language of the Fair Labor Standards Act (FLSA) without giving “controlling weight” to the DOL’s 2011 regulation.

In March 2015, the federal Ninth Circuit Court of Appeals ruled that service writers are not exempt from overtime as “salesmen.” That decision was based on the Ninth Circuit’s conclusion that preamble language found in a 2011 DOL rulemaking constituted an interpretation of the FLSA entitled to legal deference. Together with the state dealer associations covered by the Ninth Circuit, NADA filed an amicus brief in support of a certiorari petition with the U.S. Supreme Court. The Supreme Court granted “cert” in January and heard oral argument in April. Former Solicitor-General Paul Clement expertly (and successfully) argued on behalf of the petitioner with NADA’s amicus brief being cited several times during the argument and in the Opinion itself.

Overtime FAQ for Dealers

As I mentioned in this space last month, the U.S. Department of Labor (DOL) issued a rule that dramatically increases the salary and compensation levels that must be met in order for "white collar" dealership employees to be exempt from overtime. NADA has issued a new FAQ publication on the white collar rule's impacts on dealerships and their employees.

OSHA Issues New Injury and Illness Electronic Reporting Mandate 

Starting in 2017, certain dealerships must begin submitting employee workplace injury and illness records to the Occupational Safety and Health Administration (OSHA). All dealerships must maintain reasonable procedures by which employees can report work related injuries and illnesses promptly and accurately. The new reporting rule builds on existing mandates requiring dealerships with 10 or more employees to accurately record and post employee workplace injury and illness using OSHA Forms. In the future, these forms must be made available to OSHA and state labor inspectors upon request. Car dealerships with fewer than 250 employees at a single "establishment" are not required to submit forms to OSHA.

April 2016 SDADA Column

Are you paying your service adviser overtime pay? If you don't know, it may be a good time to check.

The U.S. Supreme Court is checking. They took up that question last week (April 20) in the case of five dealership service advisers who sought overtime pay for their 55-hour workweeks. The ruling could have big implications us and how we pay our service advisers.

We have always assumed service advisers fall into the same category as dealership salespeople, mechanics and parts department workers, who are exempted from overtime pay requirements under the Fair Labor Standards Act. Many of our service advisers are paid commission.

But (surprise, surprise) the Obama administration has challenged that assumption. A California district court disagreed with the administration. But the 9th Circuit reversed that decision, breaking with previous appeals court decisions dating to the 1980s and paving the way for the Supreme Court to settle the dispute.

I have a non-lawyer, non-regulator, simple man's question: If the service writers are on commission, how do you determine what time and a half is? Is it based on minimum wage or some kind of combination?

About that current vacancy on the court - yes, that could affect the outcome in this case. It raises the prospect of a 4-4 tie, which would keep things as they are. The good news for South Dakota dealers (for now): The 9th Circuit's ruling would apply only in its nine-state Western jurisdiction.

We can expect to hear a ruling this summer.

NADA 100

Next year, NADA celebrates its 100th anniversary with various events, including the NADA 100 convention in New Orleans.

The NADA story began when 30 dealers traveled to the nation’s capital in 1917 to persuade Congress not to impose a luxury tax on cars. They successfully argued that the automobile is a necessity of American life, not a luxury. From that group effort, NADA was born.

Since then, NADA has experienced many major milestones. And so have its dealers.

Each dealer’s story is an integral part of the NADA story, especially since so many generations of dealers have been steadfast NADA members. These stories range from store openings and mergers to dealers meeting with their members of Congress on Capitol Hill.

To learn more about these important dealer milestones, NADA has launched the “Share Your Story” contest. Dealers can submit photos, videos, newspaper clippings, print and digital ads, their own dealership histories or other memorabilia. If you participate in NADA’s “Tell Us Your Story” contest, you have a chance to win one of two an all-expense paid trips to the 2017 NADA 100 show in New Orleans. Ten runners up each will win VISA gifts cards worth $100.

One trait best describes NADA, its dealers and the franchised business system: the ability to adapt. Whether it’s dealing with economic curveballs or learning the latest digital technology, being adaptable has allowed this association and its members to thrive during the past 100 years. And it continues to propel us toward the future.

Looking back, it’s interesting to see just how much NADA has changed—and adapted—over the years.

South Dakota has several dealerships with a rich history. I hope they will consider partaking in this great event!!

March 2016 SDADA Column

I recently returned from a pair of NADA committee meetings in Washington, D.C. Our Legislative Affairs Committee is preparing for a "full court press" (my March Madness reference) in the Senate on our bill limiting the CFPB's 2013 auto lending guidance. This bill was submitted in the Senate earlier this month by Sen. Jerry Moran (R-Kan.) after it passed in the house last November by a wide 332-96 margin. I can assure you that our committee is ready for this effort and we will prevail!

I am serving on the NADA Regulatory Affairs Committee for the first time. While this committee works hand-in-hand with Legislative Affairs on many issues, it is more focused on monitoring regulations and affecting change in regulatory agencies and Legislative Affairs is more focused on the same on the Congressional side.

Each year, NADA publishes "The Regulatory Maze", which documents all of the regulations an automobile dealership is subjected to in each department. It illustrates the mind-numbing challenge dealerships have to keep from running afoul of the federal regulatory process.

After sitting through a six-hour presentation of all the regulatory challenges we face, I had to wonder how any dealer can turn the key in the front door each morning without the benefit of a true compliance officer under his/her employ.

My suggestion to any small/medium dealer is to become familiar with the NADA Regulatory Affairs site. You need to log in to get all the guidance available. If you don't see what you need, give them a call at 800-252-6232. Please let me know if I can help direct you to the right department or person.

Let me finish by suggesting that even though you might not have a full-time compliance officer working for you, you have an incredibly talented staff at your trade association that has your back when it comes to the many threats from our federal government.

NADA Fair Credit Guidance

NADA has an optional program designed to strengthen a dealer's ability to comply with fair credit laws while preserving the competitive benefits of dealer-assisted financing.

In January 2014, the National Automobile Dealers Association (NADA), the American International Automobile Dealers Association (AIADA), and the National Association of Minority Automobile Dealers (NAMAD) released to their members the Fair Credit Compliance Policy & Program. The Fair Credit Compliance Policy & Program is an optional program that is designed to strengthen a dealership’s efforts to comply with fair credit laws.

You can find information on the program here.

Use myNADAPlanner for a Better Convention Experience

If you are planning to attend the 2016 NADA Convention and Expo, you should consider downloading the NADA Convention app. It is the best way to get the most out of your convention experience.

In addition to offering a complete convention schedule, it offers a list of exhibitors and workshops. The planner allows you to schedule your time to make the most of your convention experience. Social media is integrated with the app so you can see what others are doing or find interesting. All of this integrates across platforms (phone, notepad or desktop) to give you plenty of flexibility.

February 2016 SDADA Column

If you know me, you know of my interest in and passion for politics. I follow politics at all levels - whether local, state or national.  

My affinity for politics is what initially drew my interest in NADA. I have had the opportunity to serve on the NADA Legislative Affairs Committee in six of my eight years on the board. I have enjoyed that work immensely and have learned a great deal from the NADA Legislative Affairs staff.

NADA Chairman Jeff Carlson has appointed me as the chairman of the Legislative Affairs Committee for 2016. I am grateful for Jeff's confidence and I am looking forward to working with the tremendous Legislative Affairs staff at NADA in the coming twelve months. Our challenges are many. You have read about them in this space.

If you have followed this space, you know that we are defenders. We defending our business model, the franchise system, our product, our customers, general business practices and our OEMs. I never liked defending when I played sports, but I believe that I have gotten better at it. With practice comes proficiency!

"Offense wins games, defense wins championships"   -Coach Paul "Bear" Bryant

If it's true for football, perhaps it's true for politics!

I encourage you to contact me with ANY concerns, questions, thoughts or ideas you might have for NADA Legislative Affairs.


CFPB: Ready, Fire, Aim!

The House Financial Services Committee recently said the Consumer Finance Protection Bureau could be sending payments from Ally Financial’s $80 million settlement fund to non-Hispanic white borrowers because of a potentially unreliable race identification method. This, according to internal CFPB documents.

In fact, the administration is literally just making up victims to meet the number prosecutors announced in the settlement two years ago. The government has had to send out more than 400,000 queries to Ally borrowers asking them if they are black or Hispanic.

From Investors Business Daily:

Of course, it’s Obama and his race-mongers who are hurting consumers.

With their meritless discrimination cases, they are jacking up the cost of auto loans for average Americans — including minorities with good credit. And with their bogus payouts to phantom victims, they are also denying employees of Ally and these other auto companies, many of whom are minorities, tens of millions of dollars in pay raises and bonuses.

Meanwhile the racketeering agency has added Toyota Motor Credit to the list of auto lenders it has extorted (along with Ally, Fifth Third Bank and Honda Financial Services). The payments by these lenders now total over $112 million. We can look forward to seeing how the rest of this money will be distributed!

NADA Convention Fast Approaching 

Online registration for the 2016 NADA Convention & Expo in Las Vegas is open. As one of the most popular destinations in the country for meetings and conventions, several hotels in NADA’s convention block have already sold out.

Hotel rooms are still available in NADA’s block but they are going fast. The  convention—which runs from Thursday, March 31, through Sunday, April 3, 2016—will be held at the Las Vegas Convention Center. For more information or to register, visit www.nadaconvention.org.

January 2016 SDADA Column

I am listening to an Federal Trade Commission "Auto Regulation Workshop" as I write this column. This is a rather optimistic title for this "witch hunt".

The FTC has, in the past, shown they supported manufacturer direct selling. Of course this was only the personal opinion of staff - not an official position. 

So the FTC now conducts a "kangaroo court" with panels stacked against the dealers advocating for a demolition of the franchise system (and State Franchise Laws) and endorsing direct selling by manufacturers. 

They are featuring a parade of panelists that are testifying about how the dealers are getting rich ( "average dealership profits of over $1 million/year"), running monopolies within their local markets, adding cost as a middleman and generally doing all of this at the expense of both the manufacturer and the consumer.

The ultimate irony is that the general theme of the panelists is regulation (in the form of State Franchise Laws) is inefficient and adds cost to the distribution system. There has never been an administration that has introduced more regulations (at great cost to our nation's businesses) in the history of our country. But it is only these State Franchise Laws that add costs - none of the federal regulations are guilty of such a travesty!

We can expect the "findings" of this sham to be marched out as evidence that the franchise system is broken and that State Franchise Laws should be sacked. Elon Musk is smiling all the way to the bank.

This is just another attack by the current administration and its legion of regulators who are bitter about the automobile dealers' success in earning a carve out of the Dodd–Frank Wall Street Reform and Consumer Protection Act in 2010. The attacks by the Consumer Finance Protection Bureau over the past five years are similarly motivated.

I think it is appropriate to end this discussion with a reminder of the Tenth Amendment to the United States Constitution which states that the federal government possesses only those powers delegated to it by the United States Constitution. All remaining powers are reserved for the states or the people. 

That is the Federal Trade Commission you hear in that background muttering "Whatever!". 

Multi-Tier Pricing Strikes Again

You've probably seen the story about Napleton Automotive Group alleging FCA US offered dealers large sums of money to report unsold vehicles as sold. While there are many moving parts to this story and I don't care to opine on this until all the facts are out, it is illustrative of the fact that multi-tier incentives or bribing with "marketing incentives" causes problems for all involved.

It undermines the value of each brand, confuses consumers and now we see it leads to potentially scandalous and misleading reports hitting stock values. It is virtually impossible for dealers to offer transparency in their pricing to consumer if manufacturers will not do the same to their dealers. 

NADA Convention Registration Open 

Online registration for the 2016 NADA Convention & Expo in Las Vegas is open. As one of the most popular destinations in the country for meetings and conventions, several hotels in NADA’s convention block have already sold out. 

Hotel rooms are still available in NADA’s block but they are going fast. The  convention—which runs from Thursday, March 31, through Sunday, April 3, 2016—will be held at the Las Vegas Convention Center. For more information or to register, visit www.nadaconvention.org.

Hang Together? Or Separately?

"We must, indeed, all hang together or, most assuredly, we shall all hang separately."  

-Benjamin Franklin

If you're a student of the American Revolution, you will recognize the quote above. Franklin's message was that the signers of the Declaration (as well as colonists in general) had to help and support each other or they were doomed.

I believe that is much like a local community. If those of us in a community do not support our local businesses, we won't hang separately or be executed, but we are doomed.

If you live in a small town, you surely have been encouraged to “buy local.” But what, exactly, does "buy local" really mean? Certainly you are being encouraged buy groceries, hardware and clothing locally. But the higher the price of the items you buy locally, the greater the impact your purchase has on the local economy.

According to the website local-first.org, $73 of every $100 you spend returns to the community through avenues such as taxes (which support the local schools and teachers), payroll (which employees may again spend locally), and other expenditures (like support of local events, activities and organizations).

When you buy locally, businesses have the opportunity to create more jobs locally. Simple economics dictates that more local jobs means a greater demand for workers and thus higher wages and/or better benefits for everyone in the marketplace.

When you buy in Mitchell, Rapid City or Sioux Falls or online, none of the money spent stays in in our local community to pay taxes, payroll or any other expenditures. In other words, you are not supporting the local schools and teachers, local events, activities or organizations. 

"But I Can Save Money"

Can you save money? Are the goods or services you are buying really less expensive? Are they of the same quality? Did you consider the value of your time (driving or riding to another community)? Did you factor in the cost of your transportation (fuel, maintenance, depreciation of your vehicle, etc.)? Did you factor in the cost of shipping and handling (of an online order)?

My experience is that, if given the opportunity, local business owners do or would be willing to match the true cost of goods. To be fair, this should include some of the costs mentioned above. The question is, are you willing to give them that opportunity. Do you care enough about the future of our community to look at a transaction fairly and give the local vendor that opportunity?

I am not advocating feel-good, it's-worth-paying-more-for-local concept. I believe that if you do give the local businesses the opportunity to earn your business, you will be rewarded with better prices, better service and a better community. 

Proud to be Your Local Automobile Dealer

As an automobile dealer with stores in Chamberlain and Winner, I ask you to consider applying the logic above when you purchase your next vehicle. I would enthusiastically welcome the opportunity to help you find your next vehicle, get the financing package that fits your needs and provide service for your vehicle going forward. I believe we can bring value and enjoyment to your ownership experience.

Find the Right Vehicle...

The automobile world has changed drastically over the past 15-20 years. It used to be that you would have to go to the dealership to see a vehicle. The internet allows you to shop online for the right vehicle. Smart phones and tablets let you do that from virtually anywhere. 

It does not make sense for a small town dealership to stock hundreds of vehicles and pay the interest associated with stocking so many vehicles when we can have access to many more vehicles without the expenses. We have a network of dealer-partners across the Midwest with which we trade and buy cars, trucks and SUVs. This expands our "true" inventory exponentially. 

Our professional staff will find the new or used vehicle you are looking for. You won't have to drive all over looking for that "just right" automobile. You tell us what to find, and WE WILL FIND IT!!

...At the Right Price...

When you buy local at Harry K's, you will save money! Our prices will reflect lower costs and will

save you money when compared big city stores. Our overhead expenses (interest, taxes, facility, utilities, salaries, etc.) are much lower and we pass that savings on to our customers!

...And Payment...

At Harry K's, we have access to more than a dozen different financial institutions that specialize in automobile financing. We will shop these banks and pit them against each other to get you the best interest rate possible. 

We will use our buying power to help you get financed even if you have had some bad luck in your financial past. We will work hard to serve your financing needs because you're not just another customer, you're our friends and/or neighbor as well!

...And We'll Take Care of You Down the Road...

Our service professionals are training weekly so that they provide the best service for your vehicle. The value to you is that you can be assured that your vehicle will continue to perform at the highest level and when you come back to trade your vehicle, it retains the greatest value possible because we have a service record.

Growing Together

We believe that when businesses in the community thrive, the community thrives. Unlike big city businesses or dealerships, we are proud to give back to our community. We know the summer rec and swim team schedules because our sons and daughters play and swim on the teams. We are not just your local dealer, we are stakeholders in your community. Supporting your local dealer means supporting the small-town community.


You are more to us than a paycheck or a profit. You are our friends and neighbors. Give us a chance to earn your business. I believe you benefit and our community will benefit!

December 2015 SDADA Column

Since June 16, 2015, one person has been on the news virtually every night. Every Sunday he is on some (or all) of the Sunday morning news shows (often on the phone!). His presence has made typically uninteresting early campaign debates “must see” TV. Despite pledging to spend as much as $1 billion on his campaign, he has spent less than $2 million as of the most recent election reports.

But why would Donald Trump spend any more than that? That attention has propelled Trump to the top of virtually every national and early-state poll. Facebook has a tool (Facebook Signal) that journalists use to identify trends, photos, videos and posts from Facebook and Instagram for use in their storytelling and reporting. According to Facebook Signal, he is responsible for 80 percent (or more) of the conversation around the 2016 presidential race on any given day.

Love him or loathe him, Trump could teach all of us a thing or two about getting free publicity. I would love to see a dollar value for the publicity that he has gotten the past six months. Which raises the question: Is all publicity is good publicity?

I don’t know what will happen in the Republican race over the next six months but I do know we can count on two things: we will see much, much more of “The Donald” and it won’t be boring!

Consumer Finance Protection Bureau Gets Thrashing in Press

Since the House of Representatives voted to pass H.R. 1737, the Reforming CFPB Auto Financing Guidance Act, on Nov. 18, 2015, the CFPB has been deservedly ridiculed in the media. Many news outlets have found the CFPB actions so onerous that they have called for most drastic actions.

The Wall Street Journal has been particularly pointed in its criticism as they published an opinion piece entitled “Shouting ‘Racism’ Is a Career Move” in which they detail how the CFPB justified framing people for crimes they didn’t commit presumably if it serves a policy or political agenda. The WSJ also posted a video entitled “Consumer Financial Profiling Bureau” on their website in which they discuss the federal enforcement agency’s flawed model of racial discrimination in auto lending. Then on December 9, the WSJ followed up with “The Consumer Bureau Cover-Up” in which they suggest that the CFPB knew their data showing racial bias was false but sued anyway.

U.S. News and World Report published a December 2 article entitled “Take Away the CFPB's Keys” in which they rip the CFPB for overreach and call for the abolition of the federal agency. They praise Congress for their bipartisan rebuke of the CFPB and ordering it to ensure that a cost impact and other real studies are conducted before this kind of policy can take effect.

All of this criticism of the CFPB has me crying crocodile tears! I only wish I have had the chance to shed these tears five years ago!

New York Times Takes Cheap Shot at Auto Dealers

The New York Times published an article in their December 1 issue suggesting that car dealers won’t sell electric cars. They could not cite any reasons why we might not be interested in selling electric vehicles but we were the reason electric cars haven’t reached the heights they were supposed to.

Peter Welch, president of NADA, wrote a Letter to the Editor, published in the December 9 issue of the NYT. In it, he explains that dealers sell what consumers want and the reality is that electric vehicles — and the infrastructure that supports them — unfortunately do not yet suit the needs, desires or budgets of most car buyers.

ICYMI (In Case You Missed It…)

Dealers accused of running a monopoly?

Do you remember this Saturday Night Live skit about bows on cars?

Are people ready to buy cars through vending machines?

Hey boss – what do I do with the $50,000 cash I found in this trade-in?

This New Yorker was scammed in Billings by fake auto dealership.

Woman destroys her husband's car after catching him with his mistress.

October 2015 SDADA Column

What if you were asked to travel over 1,400 miles to a place of complete dysfunction, where people
think differently (not raising the budget is viewed as cutting it); act differently (people says things they don't believe to get recognition); fight with their friends (members are known to battle it out on the Hill before breaking bread together later that day); and generally act like they have no connection to the people who sent them there in the first place?

Your mission (should you decide to accept it): to change minds, affect policy change and to make it all happen fast (before the makeup of Congress changes again!). Sounds easy right?

Our South Dakota delegation to the NADA Washington Conference in September (Chairman Bruce Eide, Jim Burgess, Dutch VanSanten, NextGen delegate Nick Simon, Myron and me) accepted the mission. The jury is still out on the success of the mission!

As any South Dakota dealer who has attended the NADA Washington Conference can attest, the experience of traveling to DC to learn the issues and lobby our Congressional delegation is invaluable. Not only do dealers learn the current issues that NADA is addressing, they get an opportunity to meeting Senators Thune and Rounds and Representative Noem on their turf and seeing how our government works up close and personal.

The addition of the NextGen program keeps our national association relevant. Many trade organizations are struggling to remain pertinent to their young members. I am extremely pleased that we have brought a NextGen member of the delegation each year that NADA has offered the program. I believe that Nick found this year's NextGen program to be of value.

The Washington Conference is one of the best investments of time and money our South Dakota Automobile Dealers Association makes each year.

Safety Recalls into the Foreseeable Future

One of the issues we discussed with our South Dakota Congressional delegation was legislation that would ground all vehicles under open recall at a dealership. This "one size fits all" concept is flawed because it fails to differentiate between recalls that involve a defect that should be immediately addressed and those with a negligible impact on safety, such as an incorrect phone number in the owner’s manual, or an airbag warning sticker that might peel off the sun visor.

At our October NADA board meeting, we had an extended discussion about how dealers should handle safety recalls. NADA has issued guidance for this topic. It can be found here. (Because of the sensitive nature of this topic, you must log on to nada.org with your user id and password to access this guidance.)

I want to encourage you to look at this valuable information. Dealing with recalls will be a significant part of our business going forward. We are the front line for almost all safety recalls and thus promote the safety of the motoring public. We need to handle these recalls effectively and correctly.

NADA Convention Registration Now Open 

Considered the “Automotive Industry Event of the Year,” the NADA convention includes dealer-manufacturer franchise meetings, new educational workshops for dealers and managers, hundreds of exhibitors on the expo floor showcasing the latest equipment, services and technologies for dealerships and numerous networking events for attendees.

The NADA convention—which runs from Thursday, March 31, through Sunday, April 3, 2016—will be held at the Las Vegas Convention Center.
Dealers and their managers who register by Nov. 27, 2015, will receive the early-bird rate—a $100 discount from the onsite registration rate.
For more information or to register, visit www.nadaconvention.org.

ICYMI (In Case You Missed It…)
A 60-year dealership employee receives a 2015 Chevrolet Colorado truck as a parting gift.

The mind-numbing number of automobile color choices and color names can paralyze customers.

One industry consumer magazine asks the question: Why Do We Keep Buying Vehicles at Dealerships? 

Will Volkswagen AG's twelve brands survive the recent emissions cheating scandal?

July 2015 SDADA Column

But the bottom line would be that auto dealers would be exempt from direct supervision by the consumer financial protection bureau. The Senate auto dealer compromise, if accepted by House negotiators, would be one of Obama's most high profile losses in his efforts to overhaul Wall Street regulations. The main contours of the House and Senate bills generally match the administration's goals, but Obama has personally lobbied against efforts to carve auto dealers out of the consumer agency's jurisdiction.   - CBS Money Watch, June 23, 2010

In 2010, a Senate made up of 59 Democrats and 41 Republicans and a House made up of 233 Republicans and 200 Democrats passed a Dodd-Frank bill creating the Consumer Financial Protection Bureau (CFPB). Immediately concerns were raised since due to its unprecedented investigative and regulatory authority, its lack of accountability, and the unparalleled authority placed in its sole director, Richard Cordray.

Despite the above mentioned dealer exemption, the CFPB has made every effort possible to indirectly end the auto lending business model. Beginning with the Ally Bank settlement in December 2013 ($98 million) and recently the agreement by American Honda Finance Corp. to pay up to $25 million, the CFPB has bullied, intimidated and harassed automobile lenders in an attempt to end discretionary dealer markups.

The CFPB continues to have the dealer finance model squarely in its crosshairs. I don't think I need to mention to this audience that were it not for finance income, the new vehicle department would be largely unprofitable in most stores.

Though a couple of automotive lenders have embraced a flat fee model, most have remained committed (for now) to the current dealer discretion finance model. One has to wonder how long they (especially non-captives) will endure the CFPB's scrutiny.

NADA recently filed a Freedom of Information Act (FOIA) request to make public an agency memo that appears to plainly undermine the Bureau's long-standing claims that it is not targeting auto dealers through enforcement actions.

The Dodd-Frank Act specifically prohibits the CFPB from regulating auto dealers. Yet the Bureau's actions have caused many, including both Republican and Democratic members of Congress, to question whether the CFPB has attempted to skirt its jurisdictional boundary in an effort to regulate dealers.  -NADA News Release

Reps. Frank Guinta (R-N.H.) and Ed Perlmutter (D-Colo.) have introduced H.R. 1737, the Reforming CFPB Indirect Auto Financing Guidance Act of 2015. The legislation would repeal a CFPB bulletin from 2013 that was designed to pressure lending institutions into eliminating the availability of auto financing discounts.

Stay tuned. It would seem this issue is far from settled!

Blumenthal Wants to Ground Used Cars With Open Recalls

The Senate will soon vote on an amendment that would make it illegal to sell for dealers to sell any vehicle with an open recall. Though the Senate Commerce Committee (chaired by Senator Thune) shot down the Democratic amendment proposed by senators Ed Markey (D-Massachusetts), Bill Nelson (D-Florida) and Richard Blumenthal (D-Connecticut) that would ground vehicles with an open recall, it appears the amendment will be introduced on the Senate floor.

As we dealers know, many recalls have almost nothing to do with vehicle safety. We have recently seen recalls for items as trivial as a printing error in the owner’s manual. General Motors recalled Camaros because the air bag warning label on the sun visor may peel off.

Senator Thune recognized the logistical issues that go with such a policy when interviewed in the New York Times earlier. Imagine a South Dakota dealer taking an Infiniti or Porsche with an open recall on trade. The dealer would have to load that vehicle on a trailer and haul it to Minneapolis or Omaha. That would not lead to  favorable treatment for a consumer either.

Keep your eye on this issue as well.

ICYMI (In Case You Missed It…)

Subaru dealership employee chastises manufacturers for offering more lucrative car deals through Costco than through their own dealer network.

NHTSA blocks former chief from testifying in a class-action lawsuit against Toyota.

Despite some main stream media reports to the contrary, more than one industry expert says there is no bubble in automobile lending.

And finally…

Obama's overtime plan might impact auto dealers

March 2015 SDADA Column

One of my mantras when I am working on a glass of good bourbon and a fine cigar is to "never allow the truth to derail a good story". It's usually good for a laugh. It's always justifies my embellishment!

Somehow though, it is not quite as funny when the Department of Justice abides by the same premise. In May 2009, the U.S. Justice Department looked at the economic effects of state franchise laws that ban on direct sales of vehicles by manufacturers to consumers. The author of the Justice Department report, economist Gerald Bodisch, used the example of a direct sales model, a GM program in Brazil, whereby a consumer could order a Chevrolet Celta online. He opined about how wonderful this program was.

There was only one problem with this report - the program ended in 2006 because it was too costly. That is a full three years before the report by the DoJ was filed. This earned the Department of Justice four Pinocchios from the Washington Post.

Silly me. I did not expect that it would be acceptable for the Justice Department to embellish. I wonder what kind of bourbon Mr. Bodisch drinks. It would appear that it's something in the 100-proof plus range! Cheers!

CFPB's Richard Cordray Takes Tough Questions From Congress

I don't know if you've seen this video of Richard Cordray, director of the Consumer Financial Protection Bureau, testifying before members of Congress who expressed serious concerns about the CFPB’s guidance on dealer-assisted financing. It is worth a couple minutes of your time to see that the CFPB's behavior has garnered bipartisan dismay. (Watch Rep. Roger Williams (R-Texas), a car dealer, tell a story of what really happens in the showroom.)

Members on both sides of the aisle noted that the agency has overstepped its jurisdiction and continues to ignore an important Charles River Associates study that questions the CFPB’s testing methodology. The flawed methodology is being used in the CFPB’s overreaching guidance of auto loans, yet Cordray refused to discuss the CFPB’s reasoning in dismissing the study.

NADA Supports Efforts to Disapprove NLRB Ambush Rule

In December, the National Labor Relations Board (NLRB) issued the "ambush" election rule which shortens the time between when union organizers ask for a union election and when that election must take place. The rule forces companies to allow these elections to occur as soon as 11 days after they're notified. The rule's new timeframe limits an employer's ability to communicate with employees prior to the election. The rule also requires employers to provide, within two business days of an election direction, employees' personal telephone numbers and e-mail addresses.

NADA opposed this rulemaking in a number of ways, through filing multiple sets of comments and our involvement with the Coalition for a Democratic Workplace (CDW). CDW filed a lawsuit in the United States District Court for the District of Columbia to stop the implementation of this rule and coordinated multi-industry Senate and House letters in support of S.J. Res.8., which NADA signed. S.J. Res. 8 is a joint resolution nullifying this rule through the use of the Congressional Review Act. On March 4, the Senate approved S.J. Res. 8 by an almost party line vote of 53-46. The House is expected to take the measure up on March 18. The President's advisors announced on March 3 that they will recommend a veto of the resolution. Congress would need a two-thirds majority to override a presidential veto.

NADA believes that the current election timeframe is reasonable and allows employees to hear from both the union and the employer before making a decision. The NLRB's rule upsets this balance by putting employers at a disadvantage. Contact NADA Legislative Affairs if you are interested in learning more about the upcoming vote in the House by sending an email to legislative@nada.org.