March 2018 SDADA Column

South Dakota Automobile Dealers:

This is my final column as the South Dakota NADA Director so I want to start off by thanking you, my fellow dealers, for the opportunity to serve in that capacity for the past nearly 11 years. I appreciate the input, feedback and support you have given me as we worked together on the challenges facing the automotive industry both nationally and in our state.

I reflected upon the (over one hundred!) columns I have written during my tenure. What a long, strange trip it's been!

Among the challenges we faced together were: The Great Recession of 2008, CAFE Standards, Red Flags Rule, bridge loans for automakers, automaker bankruptcies, "Cash for Clunkers", facilities image programs, the Dodd-Frank bill and creation of the CFPB (and our exclusion from their oversight), navigating the barrage of Obama Administration regulations (Risk Based pricing, Privacy notices, etc.), the threat to repeal LIFO, stair step programs, electric cars, autonomous vehicles, disparate impact allegations, recalls and, most recently, tax reform.

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!

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.

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.

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.

November 2015 SDADA Column

Are you my friend? Or are you family? Do you want to buy the tag vehicle? Or does that one have a "super" tag? Is it "Black Friday" yet? It's Thursday but we can give you the "Black Friday" deal! But I'm not sure that you can buy on "Black Friday" if you're in the military! That's not confusing!

When the salespeople are confused, it's a pretty good bet that the customer is confused. Are the incentives designed to confuse? That seems like a rhetorical question. But is it?

Most dealers want to offer the customer all the incentives available. They typically are not an additional cost to the dealer. Dealers, however, may not offer all the incentives available to the customer because there are so many, they are so confusing and they are poorly communicated to the dealership personnel.

Customers are NOT confused about one thing - they do remember the biggest number they hear on the television ad. They may not be certain what vehicle it applies to, how to qualify or when it ends. But they DO remember the number!

Who gets to clarify the incentives for Mr. Customer? The dealer does. How does that work when the dealer is buried in the 60 page bulletin that explains the incentives. Hey manufacturers, maybe you should consider simplifying the incentives!!!

Perhaps the dealership compliance officer can help us with the incentives!

CFPB Bill Passes by Wide Margin House in Bipartisan Vote

Congress rejected the Consumer Finance Protection Bureau's attempt to eliminate dealer discounts in the showroom. Eighty-eight Democrats joined all the Republicans in passing the "Reforming CFPB Indirect Auto Financing Guidance Act" by a 332-96 vote.

The bill requires the CFPB to withdraw the flawed guidance that attempts to eliminate a dealer's ability to discount auto financing for consumers. The bill also requires the minimal safeguards the agency failed to follow, such as public participation and transparency. Nothing in the bill would restrict the CFPB's ability to enforce fair credit laws in auto financing.

Before the vote, the Wall Street Journal weighed in on how some Democrats are fed up with the Administration's unending parade of regulations.

NADA Convention Registration Now Open 

Online registration for the 2016 NADA Convention & Expo in Las Vegas is off to a fast start. Nearly 2,200 dealers and their managers registered to attend the convention during the first five days of registration, up 12 percent compared to the same time a year ago. And as one of the most popular destinations in the country for meetings and conventions, four hotels in NADA’s convention block have already sold out. They are Encore at Wynn, Marriott Convention Center, Renaissance Hotel and Wynn Las Vegas.

Sixteen hotels are still available in NADA’s block. Other top hotels include the Cosmopolitan of Las Vegas, Aria Resort & Casino and Vdara Hotel & Spa. Aria and Vdara are located in CityCenter, which is considered a city within a city spread out over 67 acres on the Las Vegas strip and includes hundreds of restaurants and shops, spas, shows, nightclubs and other unique attractions.

The NADA 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.

ICYMI (In Case You Missed It…)

Why are there no Malibus in Malibu? Are there Tacomas in Tacoma?

But the factory guys are the industry's smartest people...just ask them!

Your car got hacked; not jacked - HACKED...who's problem is it?

Driving a new Corvette through the showroom windows is a very expensive way to learn how to drive a manual transmission!

Ford wants more friends and a bigger family.

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?

April 2015 SDADA Column

I recently attended an NADA Government Relations Committee meeting in Washington, DC. I had very productive discussions with all three members of our South Dakota congressional delegation. Senators Thune and Rounds and Representative Noem are all supportive of our legislative priorities: support the CFPB Reform Bill to keep auto loans affordable and accessible, ensure that changes in LIFO and advertising deductibility do not hurt small business, and focus on strategies to boost recall completion rates instead of grounding vehicles for minor recalls.

Each of these priorities is an easy discussion because they have such broad appeal outside of our industry. Community banks are being crushed by the same heavy-handed tactics the CFPB is trying to apply to auto dealers and lenders. Ultimately, fewer community banks and fewer auto lenders does not serve the consumers which is what the CFPB purports to do.

LIFO (last in, first out) is a longstanding inventory accounting method used by businesses to help mitigate rising inventory costs as it allows companies to calculate their income by basing sales on the newest inventory for goods, such as vehicles and parts, which increase in price over time. It is a strategy used by many businesses, big and small, to keep more capital in the business for future investment. Any drastic changes will decrease capital investment by businesses.

Any bill regulating rental and used vehicles under any open recall could cause a significant disruption for consumers, rental companies and dealers. As we dealers know better than anyone, the majority of vehicle recalls do not require the drastic step of grounding the vehicle. In fact, many of the recalls we saw in 2014 would have been handled under "service bulletins" in the past. The current vehicle recall process was not designed to differentiate among potential levels of risk. It would make much more sense to create policies tailored to boost consumer recall response and completion rates. Of course, that's why we shouldn't expect those policies from Washington regulators!

Wall Street Journal Offers Peeks Behind the CFPB Curtain

While Senator Elizabeth Warren (D-MA) was saying that the CFPB should assume oversight of auto dealers, which were left out of the Dodd-Frank Act (a discussion fully vetted during the debate of Dodd-Frank), the Wall Street Journal was offering some insight into exactly how the CFPB goes about their business.

In an April 6 editorial entitled Washington’s Latest Bank Heist, the Wall Street Journal exposed the double secret methodology (Bayesian Improved Surname Geocoding) behind CFPB's accusation that auto dealers are charging minority buyers higher interest rates on car loans than they're charging similar white customers.

A week later, on April 13 in Do Two Half-Victims Make a Whole Case?, the Journal opined that it was unreasonable to fine an auto lender (specifically Ally) if you could not identify a victim.

These two opinion pieces make the auto dealers argument in a very clear and simple manner. No ad NADA could ever buy would come close to the value of these op-ed pieces. I urge you to read them and pass on to anyone who does not understand the issue!

Detroit News Commentary: Direct Auto Sales Could Raise Car Prices

In another article that makes the dealers' case, Lawrence J. Spiwak, president of the Phoenix Center for Advanced Legal & Economic Public Policy Studies, makes the case that intra-brand price competition, which is the by-product of many state franchise laws, saves the automobile consumer money.  Not requiring auto manufacturers to sell their cars through independently owned local dealerships will only serve to drive end prices up for consumers.

Another opinion piece that lays out the issue clearly and concisely in a medium that ads cannot be purchased. Just when you think the media are stacked against you...

Minimum Wage - Hurting Those It Is Supposed to Help

South Dakotans face a minimum wage question when they go to the ballot box in November. The measure, if passed, would raise the state minimum wage from $7.25 per hour to $8.50 per hour. Perhaps Initiated Measure 18's most significant change, however, would be to require inflationary increases each year based on the Consumer Price Index.

While I do not agree at all with the increase in minimum wage, I think the most dangerous aspect of the measure is to tie an ongoing, annual increase in wages to a national inflationary gauge that reflects economic conditions in California or New York rather than South Dakota.

This idea may sound like a good idea in a growing economy when times are flourishing, but think back to the economic meltdown of 2008-09. Would it have made sense for employers to be forced to give raises to workers in a time when they were struggling to keep their doors open? Mandatory pay raises FOREVER! If it sounds too good to be true, it probably is. Where do businesses sign up for ongoing, increased annual revenues to be able to pay these perpetual raises?

So if raising the state's minimum wage is really a good idea, why do we stop at $8.50 per hour? Supporters suggest that workers would receive more than $46 million in new wages, providing a economic stimulus across the state.

If that is true, think of the economic impact an increase to $50 per hour would have. Why not go to $75 per hour; or even $100 per hour? Think of the new houses, cars, boats and appliances that would be sold. Retail businesses would go wild!

Why that is ridiculous you say. Why? Will $50 per hour have a negative effect on employment and on the economy? How do we know? Why would this wage be any different than $8.50 per hour?

What $8.50 really represents is the politicians best guess at what will make him look like he supports the "little guy" or "underdog". The politician can legislate a raise for the low end of the wage scale. He can buy votes.

Meanwhile, the "little guy" takes the potential raise at face value. He does not consider that he may lose his job. If he is not providing $8.50 per hour of value, his employer may choose to eliminate his job. And if that happens, will he blame his employer or the politician that advocated for a raise in minimum wage?

Business owners will have to raise prices to pay for these raises. The "little guy's" raise does not buy as much as it did. So we must raise the minimum wage again. And so the vicious circle continues.

In Los Angeles, the city council recently passed a $15.37 minimum-wage law for large hotels. However, the law contains a provision that allows unions to waive the requirement in collective bargaining. So if you're a hotel, you have a choice: pay an uneconomic wage necessitating increase in prices to compensate or partner with the union to force your employees into a collective bargaining agreement that will see them earn less and force them to pay union dues (which will end up in the coffers of Democrat politicians).

We have a very good, nearby example of how wages can be increased in a much more efficient way. If we look to our neighbors to the north, we see a perfect laboratory for how to really increase wages.

We hear stories about signing bonuses and $13 per hour starting wages in fast food restaurants in western North Dakota. This is simply a response to the demand for workers being greater than supply. More job opportunities will raise wages every time. Employers are forced to compete for workers and the best way to compete is to offer a better wage or better benefits.

Perhaps we should consider asking small businesses what we can do to help them grow their businesses and create a greater demand for workers. Most of the small business owners I know would say that one of the greatest drags on their business is government regulation.

It is a great risk and a lot of work to start and run a business. If one takes on that endeavor, they should have the right to hire whomever they please and at a wage they can afford. They should be able to give raises to employees who really deserve them. Let us allow the market to dictate whether or not that happens.

I can tell you that I haven't paid minimum wage to an employee for longer than three months for 20+ years. Those minimum wage workers were all summer help who were allowed time off for all there baseball games during the summer (that was a significant number of games!). They were paid minimum wage but they had a very accommodating job!

I hope the voters of this great state make a logical rather than emotional decision in November. Don't throw a wet blanket over the economic engine of CNBC's Top State for Business for 2013.

VOTE NO ON SOUTH DAKOTA INITIATED MEASURE 18!

August 2014 SDADA Column

The New York Times started a firestorm with this August 8th editorial about sub-prime automobile lending. The article is rife with comments like this one:

Banks that are scrambling to buy such loans have sometimes formed alliances with unscrupulous dealers, including one who was indicted on grand larceny charges that he defrauded two dozen buyers.

In typical fashion, the New York Times suggests that ALL dealers are guilty of the actions of a few, all car loans are bad and, somehow these people would find a way to get a car without the high interest rates otherwise. Finance 101 - interest rates reflect the risk involved in the deal. High risk = High Interest rates.

Stephen Gandel, Fortune, provides a bit of balance with this August 13th article about sub-prime lending and GM's purchase of AmeriCredit (now GM Financial). Jim Henry, Automotive News, reports on the issue in this August 13th article as well. Moody’s Analytics senior director Cristian deRitis chimed in here.

NADA President, Peter Welch, rebutted the misguided New York Times editorial here. Welch is quoted, “Enforcement of existing laws against a small minority of bad players is in everyone’s interest, but smearing an entire industry for the misdeeds of a few is just plain wrong.”

This from Welch's rebuttal:

A subprime auto lender CEO ... said another big distinction is that mortgage brokers sold mortgages with no stake in how well those mortgages would perform in terms of repayment over the long term. In contrast, he said, the subprime auto lenders that sell asset-backed securities typically agree to buy back the loans if they perform below stated thresholds. “It’s called skin in the game,” the executive said. “That’s a big difference.”

Hopefully this issue dies a quick death. I'm sure the CFPB would love to weigh in.

Dealer Franchise System

I don't know if you saw John McElroy's editorial, Tesla Is Wrong, Franchise System Is Better, about the franchise system. You can read it here. He makes the case for the franchise system over factory stores:

Dealers will happily take your used car as a trade-in, no matter what brand it is. They’ll pay you a wholesale price, then turn around and retail it in their used-car lot. Do you think factory-owned stores would be interested in selling used cars from another car company? Never. Just for kicks, go ask your Tesla dealer about handling your trade-in. They send you to AutoNation.

What’s more, dealers are consumer advocates when it comes to doing warranty and recall work because they get paid by the factory to do it. Do you think factory-owned stores would be so consumer-friendly? Of course not. Warranty and recalls would represent higher cost, not more revenue.

McElroy's closes with the point that this is discussion is not about Tesla, but rather when Chinese automakers finally start selling cars in the American market. Do you think that the Chinese manufacturer will take good care of the consumer when he/she buys the $10,000 car? Who will be that consumer's advocate for warranty work? Who will point out the safety concerns and the needs for recalls? I think we know the answer to that one.

Attendee Registration and Housing Now Open for 2015 NADA Convention in San Francisco

Online registration for the 2015 NADA Convention & Expo in San Francisco is now open. Make your hotel reservations as soon as possible because rooms will fill up quickly. Early bird registration ends Sept. 12, which includes a $100 discount from the onsite rate.

The NADA convention runs Thursday, Jan. 22, to Sunday, Jan. 25, at the Moscone Center. The keynote speakers are former Florida Governor Jeb Bush and NADA Chairman Forrest McConnell, III, on Friday, Jan. 23; Jay Leno and NADA Vice Chairman Bill Fox on Saturday, Jan. 24; and inspirational speaker Beck Weathers on Sunday, Jan. 25. Click here for the speaker bios.

The NADA convention includes dealer-manufacturer franchise meetings, hundreds of educational workshops for dealers and their managers, several hundred companies exhibiting on the expo floor and numerous networking events. For more information or to register, visit www.nadaconvention.org.

Macroeconomics 101 - It Ain't Rocket Science

"How the Economic Machine Works" - created by Ray Dalio who runs Bridgewater, one of the largest hedge funds in the country.

This is a great video on how the economy works. It's simple, quick and very enlightening. Please take 30 minutes and watch and encourage your family, friends and neighbors to watch. We can't fix it if we don't understand it!

Please pass it on!

December 2013 SDADA Column

One of a trade association’s (i.e South Dakota Automobile Dealers Association or National Automobile Dealers Association) main functions is as a representative body. A trade association advances the collective view and position of its members to government departments, agencies, regulators and legislators. It also communicates the collective view and position to the media and other opinion-makers.

It is in this capacity that the SDADA will work to work to repeal South Dakota's Damage Disclosure law in the upcoming legislative session. I know each of you recognize the many deficiencies of this law so I will not discuss that in this space.

But I will offer this experience. I opened a body shop at my Ford store in February of 2013. It has been truly amazing how many consumers have asked us to work with them to keep the damage under the $5,000 threshold for a damage disclosure. This law does not work for consumers, dealers, body shops or insurance companies. No one is well served by the law. IT IS A BAD LAW!

In order to repeal the law, however, it will take a concerted effort by our entire organization - I mean dealers and their staffs, our association staff and our vendor/partners. It is a battle worthy of fighting but we must work together to be successful. We will need support from ALL SDADA members. That means coming to our annual legislative reception, being willing to testify, making phone calls to legislators among other efforts.

We don't yet know what we will have for opposition but I know we can win this issue regardless of opposition because it is an outdated law, our organization commands great respect among legislators and we have the political capital necessary to win. But it will take a broad, grassroots effort.

I am committed to do what I can to repeal this law. I urge you to consider how you might help with this effort!

Bill to Reduce Paperwork at Auto Dealerships Advances in House

The House Energy and Commerce Committee on Wednesday approved by voice vote a bipartisan bill, H.R. 724, which would eliminate some red tape required by the Environmental Protection Agency when buying a new car or truck. The bill would repeal a 1977 mandate, which requires dealers to certify that a vehicle complies with the Clean Air Act. (This form is required to be presented by the dealer to the purchaser of a new vehicle even though all vehicles must comply with the Clean Air Act before being sold in the United States. Additionally, a Clean Air Act certification sticker can be found under the hood of most vehicles, or in the owner's manual, making an additional certification by the dealer redundant.) The legislation now goes to the floor of the House for consideration.

NADA Convention Mobile App for 2014 Now Available

The mobile app for the 2014 NADA Convention & Expo is now available for download for smart phones and tablets. The free app, which syncs with myNADAplanner, allows attendees to maximize their convention experience by providing: up-to-the-minute updates on workshop sessions and events; workshop handouts and presentations that can be downloaded; a customized schedule builder; walking maps to navigate the convention center and expo floor with exhibitor descriptions and booth locations; and tools to stay organized.

The app is available for iPhone, iPod Touch, iPad and Android devices. To download, visit the App Store or Google Play Store and search for NADA2014.

April SDADA Column

The theme of this column is government regulation and how it continues to impact every facet of our business.  You will find below three more intrusions: one in advertising, one in service and one in the finance office.

In March, I attended an NADA Public Affairs meeting that really got my attention. In addition to the Tesla discussion (see my column in last month's SDADA bulletin), we learned that the Consumer Finance Protection Bureau (CFPB) has indirect lending through dealerships square in its bull's-eye. With the way the profits are distributed in most new vehicle stores, that should scare the hell out of us!

Lat month, the CFPB released a bulletin that claims indirect lending through dealerships may result in minorities paying more for auto loans. Though dealers are exempt from CFPB oversight, auto lenders are not. So the CFPB’s guidance could drastically change how auto finance sources compensate dealers for arranging auto loans. In other words, banks could get rid of finance reserve.

It would be very interesting to see the methodology by which the CFPB has come to this conclusion. They are not accusing anyone of intentional discrimination. The CFPB issued its guidance based on a theory called disparate impact. If minorities end up paying more for credit than non-minorities in the same credit tier, then it is considered unintentional discrimination. But how does CFPB determine disparate impact exists in today’s marketplace?

Disparate impact can only be proven through a statistical analysis of past transactions, but the CFPB has not revealed how it is conducting its analysis or what data it’s relying upon. There is also no indication that the Bureau has studied how moving to a “flat fee” compensation method would impact the marketplace.
We know that dealer-assisted financing—which is optional—increases access to and reduces the cost of credit for millions of Americans. Our customers overwhelmingly choose dealer-assisted financing because it’s convenient and competitive.

Before this consumer-friendly model is disrupted, the CFPB should explain how it is conducting its analysis. The Bureau also should demonstrate the effect flat fees would have on today’s intensely competitive auto financing market.

The regulatory beast that is the federal government continues to extend its ugly tentacles into every facet of our business and our lives. This is an issue that’s not likely to go away, so stay tuned.

FTC Staff Revises Online Advertising Disclosure Guidelines 

Our second example of intrusive government regulations is the Federal Trade Commission's release of a  new guidance for mobile and other online advertisers that explains how to make disclosures clear and conspicuous to avoid deception. Updating guidance known as Dot Com Disclosures, which was released in 2000, the new FTC staff guidance, .com Disclosures: How to Make Effective Disclosures in Digital Advertising, takes into account the expanding use of smartphones with small screens and the rise of social media marketing. It also contains mock ads that illustrate the updated principles. Like the original, the updated guidance emphasizes that consumer protection laws apply equally to marketers across all mediums, whether delivered on a desktop computer, a mobile device, or more traditional media such as television, radio or print.

Connecticut Body Shop Faces More Than $50,000 in OSHA Fines

Finally, if you don't do what "Big Brother" wants you to, this is what happens. Hoffman Auto Body Shop has been cited by the U.S. Department of Labor’s Occupational Safety and Health Administration for nine alleged violations of workplace safety standards at its Connecticut Avenue facility in East Hartford. The auto body repair shop faces proposed fines of $54,300. OSHA’s Hartford Area Office began their inspection on Dec. 6, 2012, to verify correction of hazards cited during a 2011 inspection. In the 2012 inspection, OSHA identified hazards similar to those cited during the 2011 inspection. Specifically, equipment and materials, some of it flammable, were stored near paint spray booths and electric panels. The stored materials limited access to extinguish potential fires, presented fire and shock hazards and impeded cleaning around the booths, which allows potentially combustible materials to accumulate.