GNYADA May 2017 Newsletter

To read these stories and get the latest news online, visit the GNYADA website at www.gnyada.com

For Dealer Principals / General Managers / Sales Managers The Newsletter A Publication of Greater New York Automobile Dealers Association

1 2017 Auto Show Beats Expectations

MAY 2017 Volume 27, Issue 3

HIGHLIGHTS

Dealerships Targeted for Wage-and-Hour Violations page 3

In-Transit Permit FAQs page 4

OSHAs “Volks Rules” Repealed page 5 New York’s New Paid Family Leave page 6 The Hispanic Market: A Powerful Consumer Segment in Metro NY page 8

The success and impact of the 117th New York International Auto Show was summed up well in an Automotive News article, which stated the following: “A month ago, the word on the street was that ‘New York looks light this year.’ 'Nothing’s happening this year,’ the wise guys said. ‘Nobody’s going.’And of course they were wrong. New York put on a bois- terous display of exactly what’s hot in the U.S. auto market.” The Show exceeded expectations in terms of vehicle debuts, media coverage, and atten- dance numbers, bolstering the Big Apple’s reputation as host to North America’s pre- mier automotive marketing event. The Show tagline What’s Your Drive? was designed to stir emotions and generate excitement about owning and driving a car. During its run, the Show kept this conversa- tion going with more than 50 world and North American new vehicle debuts, as well

as numerous conferences and special events that explored emerging developments in automotive retail. New York Governor Andrew Cuomo offici- ated the Show’s grand public opening. During the ceremony, he drove a Chevrolet Bolt EV across the floor, leading a parade of ten electric vehicles promoting the state’s commitment to eco-friendly cars. At the podium, the Governor called the Show “a New York Institution.” Revising the traditional schedule of events delivered the desired positive effects. The World Car Awards moved to the first Press Day and media attendance doubled. The World Traffic Safety Symposium, which also took an earlier spot in the program, doubled in attendance as well. Complete stats and analyses will be included in the 2017 Show’s “Year in Review” to be distrib- uted to members later this spring.

Local Dealer Raising Autism Awareness page 11

The Newsletter is published by GNYADA, a not-for-profit organization representing franchised automobile dealers in the New York metro area. 18-10 Whitestone Expressway Whitestone, New York, 11357

Dealer Hotline 718.746.5900

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The Newsletter • May 2017

2 Join Us for the GNYADA Annual Meeting

When: Monday, June 19, 2017 Time:

10:00 am - 11:30 am ( Brunch Included) Where: Old Westbury Golf & Country Club, 270 Wheatley Rd, Old Westbury, NY 11568

opportunity to network with dealers, event sponsors and other industry suppliers, who will be present for the Dealer Services tradeshow. For more information, contact Jennifer Berman at the Association: jennifer@gnyada.com or 718.746.5900.

coming term. Members will also elect a slate of new Directors to be installed during the meeting. Nick Toomey will be reinstalled as GNYADA Chairman of the Board, and all Officers will be sworn in as well. The Annual Meeting is a valuable

GNYADA encourages all of its members to come join dealers, allied businesses, and Association representatives at the 2017 GNYADA Annual Meeting . Attendees will learn about the latest activities of the Association and get a preview of what’s on tap for the

3 GNYADA Addresses State/Local Legislative Issues

efforts, it did not advance further. GNYADA will continue working to ensure that it doesn’t proceed further in either house. The second bill would require that the sale of any vehicle with two or more individuals listed on the title must include a notarized document indicating both parties’ consent to the transaction. Currently, there is no such requirement. GNYADA supports this legislation, as it protects dealers and makes it less likely that a vehicle will be grounded because its sale is being disputed in court. The New York City Council passed a bill requiring dealers to disclose any open recalls of used cars prior to sale. Earlier, the Council sought to formulate a bill halting the sales of all used cars with unrepaired recalls. GNYADA met with Council Members to discuss dealer concerns. As a result, many of the Association’s suggestions were incorporated into the bill, including removing the requirement of grounding used vehicles with open recalls. n City Council Passes Recall Disclosure Law

The new City law requires dealers to provide buyers with a written copy of the recall report from NHTSA’s safercar.gov website. The purchaser must initial or sign the disclosure and the dealer must keep a copy on file for five years. This bill will go into effect 120 days after Mayor DiBlasio signs it, which he is expected to do in the coming weeks. Governor Cuomo announced that the State will begin permitting the testing of autonomous vehicles on New York’s roads, after passage of the budget removed some unique legal barriers. GNYADA worked with the Governor’s Office on this issue to ensure that dealers are able to capitalize on advances in automotive technology. The language in the budget permits testing for a limited period of time, until April 1, 2018. Watch for GNYADA Legislative Update emails sharing the latest on these, and further, matters in which the Association is involved. Governor Announces Autonomous Vehicle Tests

Broker Bill Moving Forward The Association is meeting regularly with the AG’s office to further examine the disruption of new car sales due to the ongoing operations of non-licensed brokers and leasing companies. GNYADA recently introduced new legislation to curtail the way brokers and leasing companies operate. Support for this legislation is building, and the Association is grateful to the bill sponsors, Senator Marty Golden and Assemblyman Peter Abbate, along with Assemblyman Michael Cusick, in helping to usher this legislation into becoming law. Senate Advances Lease Fee & Multiple Owner Bills The New York State Senate advanced two bills of interest to dealers: First is a bill that would prohibit end-of-lease fees. This would require dealers to absorb certain expenses without being able to recoup them. Last year, a similar bill advanced to the Assembly and Senate floor, but due to GNYADA’s opposition n

Greater New York Automobile Dealers Association • www.gnyada.com

The Newsletter • May 2017

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4 Local Dealerships Targeted for Wage-and-Hour Violations A federal judge approved a

ensure that such calculations result in payments of at least the minimum wage and overtime (at time and one- half the minimum wage) for each week during the month. The plaintiffs also prevailed on their claim of unpaid commissions because of impermissible deductions such as “auction expenses,” damage to dealer vehicles, or for disciplinary reasons. The judge found the dealer group’s violations to be “willful” — i.e., the dealer knew its obligations and failed to comply. Therefore, the dealer had to pay additional penalties on top of its obligation to pay the unpaid wages. The same class action firm recently commenced an action against another area dealer group and the dealer principals; this action is nearly identical to that which was brought against the dealer group in the settled case. Furthermore, another class action claim on behalf of parts

counterpersons at a Brooklyn-based dealer group has been filed alleging failure to pay overtime, requiring off- the-clock work and failing to provide Payday Pay Rate notices. These two cases are still in the very early stages. GNYADA will be paying close attention as they progress and keeping members apprised of important developments. Safeguard Against Similar Claims Failing to pay workers properly can prove prohibitively expensive and even expose dealer principals or supervisors to personal liability. Dealers are encouraged to use the resources available under GNYADA’s Employee Relations Plan. These include the publication Dealership Employee Pay Rate and Payday Forms: Instructions for Completing Notice and Acknowledgement Forms and access to specialized labor counsel. For further questions about wage and hour issues, call 718.746.5900.

$5.9 million settlement to resolve a class action lawsuit against a New York dealer group. The suit was brought by salespeople alleging that the dealer failed to pay minimum wage and overtime and made impermissible deductions from wages and commissions. Both the individual dealer principals and the dealer group were found jointly liable for these violations. According to the dealer group’s salespeople, the dealer paid a base salary of $20 per day plus a percentage of each car or service sold. Salespeople earned an average of $50K per year but during a slow week may have earned only $100 for 45-55 hours of work. Since New York law requires that minimum wage and overtime wages be calculated on a weekly basis, the judge held that the dealer violated wage and hour laws. Dealers who reconcile commissions for salespeople on a monthly basis must

NADA Director’s Column FTC Receptive to Dealer Issues

Commission (FTC)’s Acting Director of the Bureau of Consumer Protection, Thomas Pahl. My fellow Committee members and I were encouraged by Mr. Pahl’s view toward working with NADA to address important dealer issues. Dealer advertising of used cars with open recalls was the dominant discussion topic. The meeting also covered such varied matters as the FTC’s recent revisions to the Used Car Buyers Guide, the status of the

CFPB’s Disparate Impact Initiative, recent amendments to the Military Lending Act, and the status of litigation involving the Department of Labor’s “White Collar” Overtime Rule. Future NADA Director’s Columns will update members on these important issues, as well as an outline for the best Comprehensive Tax Reform plan that NADA has seen in decades.

by Bob Vail, Vail Buick GMC, NADA Director Greater New York

At NADA’s most recent Regulatory Affairs Committee meeting, we were joined by the Federal Trade

Greater New York Automobile Dealers Association • www.gnyada.com

The Newsletter • May 2017 3

Important Reminders about Texting Customers Don’t click “send” without consent

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While text messaging is a quick and efficient way to communicate with customers, dealers must exercise caution when doing so. Having an “established business relationship” with customers, or even their verbal consent, is not sufficient justification to send them marketing texts. Before sending a customer a promotional text, dealers must obtain express, written consent; this can be given in the form of an email, a checked box on the dealer’s website, a voice recording, or a written signature but not via text message. Customers’ opt-in methods must contain clear language that does not obligate them to receive promotional texts if they also (or only) wish to receive service-reminder texts. For example, a repair order stating, “I When a customer purchases a vehicle from a dealership and wants to regis- ter/title it outside NYS, an in-transit permit is required. The below Q&A addresses the questions that DMV- DIRECT most frequently receives regarding these permits: Q If my customer intended to register/title their vehicle out-of-state, but after taking delivery decided they’d prefer to keep their vehicle in New York, can I issue them new plates frommy inventory? A No. The vehicle paperwork must be reprocessed by a local DMV office. When the new title and regis- tration are created, DMV will collect the appropriate NYS sales tax; they will also void the in-transit request so 6

authorize (Dealership) to send me text messages for the purpose of providing updates, offers, discounts and solicitations,” is likely not sufficiently clear. If a dealership intends to send marketing texts, here are best practices to keep in mind: In his/her consent, a customer must provide the phone number to which promotional texts may be sent; Warn customers that message and data rates may apply; Use a clear, conspicuous disclaimer that consenting to promotional texts is not a condition of sale; Include a clear opt-out option in every message. If texting back-and- forth with the customer, the opt-out must be within the first message; Ensure all text messaging goes n n n n n DMV knows the vehicle is remaining in-state. Q How long do I have to submit an in-transit permit to the DMV for processing? A As with all motor vehicle work, the necessary documentation to process a NYS in-transit permit must be remit- ted to the DMV (or your processing service) within five calendar days. Q I’m issuing an in-transit permit for a vehicle with a lien on it. What are my responsibilities for securing the lien? A In this circumstance, the dealership must secure the lien by making sure the correct lienholder information is listed in all documentation for both the in-transit permit and all out-of-

through the dealership, not through employees’ personal devices. Express consent — this can be given by a customer providing a mobile number as the contact for a repair order or verbally stating “text me when my car is ready” — must be obtained to send transactional text messages and updates, such as appointment reminders, service status, or online payment instructions for services performed. GNYADA recommends having separate language on repair orders allowing customers to consent to receive transactional text messages. If a dealer is going to send customers promotional or marketing messages, the dealership attorney should be consulted to ensure compliance with all applicable laws. state paperwork (including the lien- holder section on the back of the MSO/MCO). Failing to do this may cause the dealer to be financially responsible for the lien until it is per- fected/secured. Q How long is an in-transit permit valid? A An in-transit permit is valid for 30 days from the date it is issued. Q Are there any states that do not recognize in-transit permits? A Yes: Massachusetts. Massachusetts does not recognize the NYS in-transit permit.

In-Transit Permit FAQ

If you have DMV-related questions, call DMV-DIRECT at 718.747.0400.

Greater New York Automobile Dealers Association • www.gnyada.com

The Newsletter • May 2017

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Are You Signed Up for the NYS EV Rebate Program? Another tool in the salesperson’s toolbox 7

Sales staff at Penn Toyota noted that the rebate offer is attractive to cus- tomers because the vehicle price is automatically reduced by the dealer, participating dealers simply reduce the contract price by the rebate amount, passing full savings on to the customer at the point of sale. After a dealer logs on to the Dealer Portal to upload documents for an EV transaction, they can visually observe the reservation of rebate funds via the “Remaining Budget” gauge on nyserda.ny.gov. “The state has been clear and concise with directions,” continued DeAngelo. “It’s not confus- ing, it’s been rolled out well to the dealers, and we hit the ground run- ning with our salespeople.”

More than a hundred greater New York dealers are taking advantage of New York State’s “Drive Clean” elec- tric vehicle rebate program to help close more deals. “We orientated sales staff with the program and also reviewed NYSERDA’s materials in our weekly sales meeting,” said Richard DeAngelo, New Vehicle Sales Manager at Rallye BMW. “Customers have come into our store already interested in a car, and the rebate has helped make the deal more affordable for them. It’s another tool in the sales- person’s toolbox.” Rallye BMW car- ries several rebate-eligible EV models and has incorporated NYSERDA's materials into their marketing strategy. President Trump repealed a Labor Department rule known as the “Volks Rule” which extended the window in which OSHA may sanction employers who fail to report workplace injuries and illnesses. Historically, there was a six-month statute of limitations in which OSHA could pursue record- keeping violations, but the Volks Rule expanded this to the entire five-year record retention period. The Volks rule took effect in January 2017, immediately before the end of the Obama presidency. House officials argued that OSHA had overreached its regulatory authority by passing the Volks Rule, and introduced legislation to repeal it; this measure, which was supported by

NYSERDA provides registering deal- ers with packages of marketing mate- rials, including posters publicizing available EV rebates, fact sheets about EV-ownership, and window stickers identifying the dealership as a participant in the program. If your dealership sells qualifying EVs but has not yet enrolled in the rebate program, sign up by visiting nyserda.ny.gov/EV-Dealer-Sign-Up . If NYSERDA discovers a dealership has violated program rules — by, for example, inflating the vehicle price by the rebate amount — the agreement will be terminated.

2017 Economic Impact Survey The Economic Impact Study is one of the most important surveys the Association does. The data collected allows GNYADA to demonstrate the positive impact dealers have on metro NY and to inform legislators about dealers’ importance to the economy. Support this effort by returning the enclosed survey, or get it online at gnyada.com/survey. (Please complete a form for each dealership.)

OSHA’s “Volks Rules” Repealed New measure reduces statute of limitations on record-keeping violations 8

NADA, swiftly passed both houses of Congress before being signed by President Trump. The Volks Rule was officially reversed on May 3, 2017. While OSHA is now prohibited from issuing citations beyond the six- month statute of limitations, employers are still required to maintain injury and illness records for five years. During this period, employers should continue to update their OSHA 300 Logs whenever there is new information that may impact those incident records. For more questions about workplace injury/illness reporting requirements, call GNYADA at 718.746.5900.

For more info, contact Jennifer Berman at jennifer@gnyada.com.

Greater New York Automobile Dealers Association • www.gnyada.com

The Newsletter • May 2017 5

New York’s New Paid Family Leave What Dealers Need to Know

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Starting January 1, 2018, employees in New York State will be eligible for Paid Family Leave Benefits (PFLB); dealers need to start preparing now. Employers that fail to comply with the PFLB law requirements may face penalties that include fines and imprisonment. Set up a Coverage Plan: Employers are not responsible for contributing to or funding paid family leave benefits. Paid family leave coverage will be included under the dealer’s New York State disability policy. The premium Employers will need to deduct the appropriate amounts from employee paychecks to fund PFLB premiums, which they may begin doing on July 1, 2017. The state expects to announce the maximum employee contribution rate around the same time. Review Policies: Employers are advised to review existing paid time off, leaves of absence and family and medical leave policies, which may will be fully funded through employee payroll deductions.

An employer must maintain an employee’s group health plan benefits for the duration of leave as if the employee had continued to work. Additionally, while an employee may not lose any benefits accrued during employment prior to taking family leave, (s)he does not accrue benefits during leave. Notify Employees: Employers should provide written notice to employees, about all employee rights and obligations under PFLB law and how to file a PFLB leave claim. Employers will be required to post a notice about the PFLB law in the workplace. The GNYADA Employee Relations Plan (ERP) Model Handbook will be updated to incorporate the requirements of New York's Paid Family Leave Law. In the meantime, dealers can contact the GNYADA Insurance Brokerage (718.746.8100), for additional infor- mation on preparing for these benefit offerings.

need to be revised to comply with the new law if they do not provide at least equal benefits. Who Is Eligible? In order to be eligible, an employee must work full-time for at least 26 consecutive weeks or part-time for 175 days in a 52 week period. How Can PFLB Leave Be Used? An employee can take PFLB leave at once or intermittently: To care for a family member with a serious health condition; To spend time with a new child during the first twelve months after birth or adoption; To address needs arising out of a family member’s active military service. What Is Included? During the phase-in of the PFLB law, the number of available weeks and maximum pay available will increase yearly. An employee who takes PFLB leave must be reinstated to his/her original position, or a comparable position with equal pay, upon returning to work. n n n

Obtain Expanded Disability Coverage Through GNYADA

GNYADA NOW HAS A SOLUT I ON The GNYADA Insurance Brokerage now offers an enhanced DBL program through ARCH Insurance, an A+ rated company. Participating dealerships can provide employees with: A benefit of either 50% of average weekly wages for 26 weeks or 60% for 52 weeks. A choice of higher weekly benefit: $170, $255, $340, $425, $510, $680 or $850 per week. Dealerships with under 50 employees have monthly rates as low as $1.98 for male employees or $4.48 for female employees. To learn more, contact the Brokerage at 718.746.8100. n n

The GNYADA Insurance Brokerage offers a new disability coverage program that allows members to provide employees with much needed additional security.

All NY businesses are required to offer disability programs that cover NYS’s “Statutory DBL Benefits”. These benefits provide 50% of average weekly wages up to a maximum of $170 per week for up to 26 weeks, after a 7-day elimination period. That $17O weekly maximum is also tax- able. This equates to $736.67 a month for an individual on disability, which frequently fails to meet all the incurred expenses (doctor visits, prescriptions, etc.), particularly in a high-cost-of-living area like NY.

Greater New York Automobile Dealers Association • www.gnyada.com

The Newsletter • May 2017

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Time Records: When to Round Up/Down 10

A dealer may implement a policy requiring management consent before an employee can clock in early or out late and discipline them for failing to do so, but employees must always be paid for all time worked, even if it has not been authorized. 3. Do employees have to be paid for time spent changing into and out of uniform? Courts have generally said that employees do not need to be compensated for the time it takes to change into and out of a standard uniform because: These activities are not “integral and indispensable” to the employee’s principle activities; The time spent in these activities, provided it is under 10 minutes, is trivial If dealership employees have a collective bargaining agreement that specifies how hours must be tracked, its terms must be followed. Timekeeping questions are just some of the inquiries that ERP regularly answers. In addition to expert employment advice, ERP members have access to resources such as employee handbook kits, and one complimentary registra- tion to GNYADA’s Labor Law Seminar. To become an ERP member or register for the Spring Labor Law Seminar ($150 for non ERP members), please contact Phyllis at 718.746.5900 or PhyllisA@gnyada.com . n n

Some of the most frequent inquiries made to GNYADA’s ERP Hotline focus on how to properly track workers’ hours. Recently, a member dealer called the hotline with three important questions touching on this issue: 1. Can my dealership round an employee’s time up or down (i.e. if an employee clocks in at 8:25, can that be rounded to 8:30)? While a dealership can round hours worked, it cannot round by more than 15 minutes. This policy must be con- sistent and must not benefit only the employer, meaning an employer cannot round down when an employee clocks out late but round up when (s)he clocks in early. Applying the “7 minute rule” is the easiest way to ensure consistency. If an employee clocks in for an 8:00 shift at 8:07, round the time down to 8:00; if (s)he clocks in at 8:08, round up to 8:15. 2. Do employees have to be paid for the time between clocking in and actually beginning work; for example, if an employee clocks in at 8:15 for a shift that begins at 8:30? Employees must be paid for all time worked. If an employee clocks in early for a shift but then gets coffee and chats with coworkers, the employer can edit the employee's time-card to reflect this period of inactivity. (The time-card edits should be shown to, and initialed by, the employee.) If, on the other hand, the employee clocks in early and begins to work early, they must be paid for this pre-shift period of time.

GNYADA Wins Environmental Honor

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In recognition of its green initiatives, GNYADA’s Center for Automotive Education & Training was awarded 2017 Gold Status by the IACC’s “Code of Sustainability” accounts for environmental efforts, such as energy efficiency, waste man- agement, recycling, water conserva- tion, and more. International Association of Conference Centers (IACC).

Since the Center was built more than a decade ago, it has operated as a highly ecofriendly facility. Design features include standard conserva- tion measures (such as automatic faucets and motion-sensitive lights) as well as innovative energy saving tools (like automatic temperature con- trols and chilled- and hot-water pumps). In 2012, the Center was equipped with solar panel installa-

tions from which the building now draws roughly 12% of its power. The Association is proud to have earned this honor and to have the Center serve as an example of ecological responsibility.

!

Greater New York Automobile Dealers Association • www.gnyada.com

The Newsletter • May 2017 7

The Hispanic Market: A Powerful Consumer Segment in Metro NY

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Hispanics represent 24% of the popu- lation in greater New York’s designat- ed market area. Since 2000, this demographic has accounted for 100% of the region’s population growth, and Hispanic household incomes of $75K or more per year have beyond doubled in that time. If your market- ing strategy does not include targeted outreach to Hispanics, you’re missing an enormous business opportunity with a rapidly growing market. Important facts about metro New York’s Hispanic auto-buyers: While nearly three-quarters of Hispanics in the downstate region are bilingual, an overwhelming majority speak Spanish in the home and consume Spanish-lan- guage media. Hispanics research autos online and comparison-shop 10% more regularly than Non-Hispanics. 12% of Hispanics in the market for a vehicle are first-time buyers. “For many dealerships, the Hispanic consumer is an untapped opportunity for sales and service growth," says Sara Hasson, Senior VP of Strategy and Insights with Univision Communications Inc. "Start with a simple Spanish-language invitation to your store on TV, radio, digitally or at n n n

When evaluating your dealership’s in- person appeal to the Hispanic car- buying market, consider the following “checklist” of questions: Does your showroom feature Spanish signage and brochures? Do you employ Spanish-speaking salespeople, service advisors, and F&I managers? If you have a children’s section, does it contain Spanish kids’ materials? The Association thanks Univision for providing the statistics cited in this article. Ms. Hasson was a guest speaker at GNYADA's spring NextGen Committee Meeting. The presentation — Building a Hispanic Strategy for Your Store — offered NextGen members stats on the grow- ing power of the local Hispanic mar- ket and shared strategies dealers can employ to improve their outreach. At no cost, GNYADA members can reach out to Univision to request a Primary Market Analysis (PMA), showing Hispanic registrations in their ten-mile radius and how the dealership compares to its competition. To inquire about a PMA, contact Angela Moncayo-Yera, Sales Manager for Univision's New York station, at amoncayo-yera@univision.net.

community events, and reap the rewards of a loyal consumer that is ten years younger than the Non- Hispanic population in New York.”

Increasing Your Spanish-Audience Appeal

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To reach this growing segment of motivated buyers, first decide how much of your annual/monthly budget will be spent on Spanish advertising and showroom enhancements. Then, determine where that ad budget is most effective (television/cable, print, radio, targeted digital ads, etc.). As a guide, the top 10 auto brands invest 12% of their national television advertising in Spanish language TV. It is important that dealer ads follow in suit across local platforms. Almost all OEMs have Spanish-lan- guage versions of their websites and shopping tools accessible through a “Change Language” or “Español” link. Dealerships are encouraged to offer translation options for their sites as well. Given this group’s tendency toward online vehicle research, hav- ing Spanish-language vehicle detail pages gives a dealership a tremen- dous leg-up over a competitor that may not.

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Greater New York Automobile Dealers Association • www.gnyada.com

The Newsletter • May 2017

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AlliedMember Memo

13 In the Market to Sell a Dealership? by Ken Rosenfield, Rosenfield and Company, PLLC

The past year has seen a tremendous increase in the sale and acquisition of dealerships, both regionally and nationwide. With more buyers in the market than sellers and the cost of capital being so low, there have liter- ally been bidding wars for dealerships of all brands, locations, and sizes. To command your price, position your dealership for sale just as you would your residence. The better shape your financial records are in, the easier the exchange of information will be. Other items to have in check are Essential Tools Inventory Compliance, Technician Proficiency Compliance and where you stand with your DMS contract. Additionally, you will need to get your leases and other infrastruc- tural commitments together such as oil and paint contracts. If those are not taken over by the buyer, they could come back to haunt you. Account for Your Market Your dealership’s worth can vary depending on market size, location, market effectiveness and facility com- pliance. The multiples published by Prepare Financials, Tie Up Loose Ends

various brokers can be a good start, but these figures come from limited data — typically large institutional buyers in major metropolitan markets. In many cases, a single-rooftop deal- ership is part of a bundled transaction. To support a higher valuation, obtain early data such as market effective- ness, pump in/pump out data, units in operation, CSI, and your peer group reports from your OEM. Putting together reports of financial data and cash flow returns is time well spent. Buyers should be similarly prepared to support that they are financially able to acquire your dealership. Determine Your “Blue Sky” Worth From a buyer’s perspective, determin- ing a dealership’s intangible value — also known as “blue sky” value — is key. With the competition of qualified buyers, the relatively low cost of funds, and the high return on invest- ment in the automotive retail industry, there are many investment-oriented ways to analyze an asset’s “blue sky” worth. One of these is a payback-on- investment method. Overlay the expected operating structure and expenses over current sales volume or what the manufacturer suggests based

on their market study.

Exercise Due Diligence One of the most important aspects of protecting your investment in your dealership is due diligence. Typically, transactions are only purchases of assets. The assets acquired should be tested for market value and condition. In the valuation of inventory, ensure that all programs and manufacturer credits are accounted for. If the dealer- ship’s DMS system is going to be continued, conduct a thorough check of the system, hardware and licensing agreements. If the DMS will not be continued, be sure to obtain the cus- tomer files, service history, etc. Rosenfield and Co, PLLC, a GNYADA Allied Member, serves the greater New York region and has one of the largest automotive retail practices in the country. They offer a broad spectrum of services to dealers, such as valuation and merger/ acquisition and operational consulting, and financial statement preparation. If you are preparing to sell or acquire a dealership, contact Rosenfield and Co. (917.818.2720) for help with due dili- gence or sales information programs. GNYADA can also help you with DMV licensing needs. To discuss these require- ments, call Sue Bieber at 718.746.5900.

Greater New York Automobile Dealers Association • www.gnyada.com

The Newsletter • May 2017 9

GM’s RSI Revision Doesn’t Go Far Enough 14

As a result of the Beck Chevrolet decision, General Motors informed its New York dealers that it will alter the Retail Sales Index (RSI) performance measurement. After reviewing the announced changes, concerns remain about whether these changes are suf- ficient enough to make the RSI calcu- lation a fair measurement of dealers’ sales performance. In the Beck case, GM used Beck’s RSI calculation to threaten termina- tion of the franchise. However, the court, upholding New York’s Franchise Law, found that GM’s RSI formula was not a reasonable sales performance formula, because it failed to account for regional brand- bias in local markets. GM has advised dealers that, starting with the first quarter of 2017, it would measure dealers’ market share against same brand dealers within the same Designated Market Area (DMA). According to GM’s notice, there are ten DMAs which encom- pass New York State. With this new method, dealerships will be assigned The FTC’s “Red Flags Rule” requires dealerships to institute and enforce an Identity Theft Prevention Program (ITPP). A critical part of any dealer- ship's ITPP is a procedure for flag- ging counterfeit drivers’ licenses. To uncover a phony ID that may be used in a transaction, dealers should: 1. Examine IDs for peeling corners, distorted fonts or images, or unreflec- tive holograms; each of these can be evidence of a falsified document. 2. Make sure the face on the ID 15

ships, there will always be some ranked at or near last. The Dealer Sales and Service Agreement makes no mention of requiring dealers to achieve a cer- tain ranking. Thus, there is no con- tractual basis by which GM can judge performance based upon RSI ranking in the DMA. The new formula does not account for shopping patterns in a dealer- ship’s market, which create unique sales challenges. The use of DMAs does not remove the faulty results of measuring dealers against the performance of same brand dealers in other parts of the State. (Some of the DMAs include areas outside of NY.) GNYADA recommends that GM dealers should contact GM and go on-record about any known issues with their assigned APR/AGSSA and other unique market circumstances out of their control, which can impact new vehicle sales. The Association thanks Richard Sox, Esq. from Bass Sox Mercer for this article. n n n ple, someone purchasing a car should know the names of their lenders or former employer. This is info that would appear on a credit check, but not in someone’s wallet, hence the “out-of-wallet” name. If a dealer determines that someone is attempting a transaction using a phony driver’s license, (s)he is advised to contact law enforcement. For further questions regarding institut- ing a Red Flags Rule Policy at your deal- ership, contact Susan Bieber at 718.746.5900 or susan@gnyada.com.

a new RSI and a ranking comparing their performance to the average mar- ket share for the brand in the DMA. Before taking adverse action against a dealership based upon its new RSI calculation, GM “may” take into account additional factors such as: assigned territory (APR/AGSSA); overall registration effectiveness of the brand in the assigned territory; proximity of an OEM manufactur- ing facility; construction at the dealership roadwork near the dealership; any other issues brought to GM’s attention by the dealer. Despite these changes, there continue to be several fundamental problems with the new RSI measurement: Dealers continue to be measured against an average market share. By definition, not all dealers can be at or above 100% RSI. Ranking dealers’ RSI continues to result in a faulty conclusion. Within a finite number of dealer- n n n n n n matches the face that’s in your store. If the buyer’s age doesn’t seem con- sistent with their driver’s license’s date-of-birth (or if they don’t look anything like their license) request a second form of ID for confirmation. 3. Any alarms from a credit report- ing company (freeze notices, active duty alerts, inconsistent spending pat- terns, etc.) should be taken seriously. 4. Administer an “out-of-wallet” test if an ID feels suspicious. For exam- n n

Four Tips to Reveal a Counterfeit ID

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Consumer Groups Sue FTC Over Dealer Settlements

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still exercise caution in using the term “certified” when selling or advertising such vehicles. While federal law permits the sale of used vehicles with open recalls, the New York Attorney General’s Advertising Guidelines state that only vehicles “certified” under a manufac- turer’s program can be advertised as such. As nearly all OEM programs make vehicles ineligible for certifica- tion if subject to an open recall, an ad that refers to a recalled vehicle as “certified” could be deemed decep- tive or misleading by the AG. Additionally, in light of subpoenas

and recent settlements with the New York Attorney General’s Office, deal- ers’ policies regarding the sales and advertising of used cars with open recalls should include disclosure throughout the process. GNYADA encourages dealers to always disclose any recalls to cus- tomers by checking safercar.gov and have them sign an acknowledgement that they have been provided that information before delivery. For further questions regarding the sale/advertisement of used cars subject to open recalls, please call the Association at 718.746.5900.

A number of consumer protection agencies are seeking to overturn agreements reached between the Federal Trade Commission (FTC) and several dealer groups, relating to the advertisement and sale of pre- owned vehicles with open recalls as “certified preowned”. The plaintiffs’ complaint is that the FTC is permit- ting sales of vehicles with open recalls to continue. The case is ongoing, and the FTC has, so far, not backed down from its position that proper disclosures may suffice in allowing the sale of pre- owned vehicles with open recalls; however, dealers in New York should

17 Local Dealer Raising Autism Awareness

“Autism is a very underrepresented issue in the com- munity,” said Leader in Cars President, Jordan Daiagi Harary. “There are a million different groups that need our help, but the amount of support isn’t matching the need.” Leader in Cars kicked off the local initiative by posting a video on their social media channels asking followers to recommend organizations in the area to make donations to. In the video, Mrs. Daiagi Harary pledged to contribute a preset dollar amount to the selected organization(s) for every car sold at Garden City Mazda, Huntington Mazda, and New Rochelle Hyundai. Followers sent more than 400 responses covering thirty organizations, which was whittled to the following three: ACDS Nassau/Suffolk Autism Society of America D3 Sports and Recreation “There is a lack of organizations that help adults with autism, so it was important that we support those as well,” continued Mrs. Daiagi Harary. “Our goal is to bring awareness to the cause, not just throw money at it.” For more information, visit www.licauto.com

As a regular feature of the Newsletter, GNYADA has started highlighting the charitable efforts of area dealers who seek to positively impact their communities. This month, we focus on one local dealer group's mission to promote autism research and benefit organizations that help families affected by autism. Since March, Garden City Mazda, Huntington Mazda, and New Rochelle Hyundai have equipped vehicles with light-blue license plate frames in support of the national advocacy organization Autism Speaks. In addition, the stores’ dealer group, known as Leader in Cars, launched a regional campaign to assist local autism schools and organizations in need of funding.

Greater New York Automobile Dealers Association • www.gnyada.com

The Newsletter • May 2017 11

GNYADA Meets the Needs of its Members

As members of the Greater New York Automobile Dealers Association, dealers have access to a wealth of services and programs aimed at keeping their business operations compliant, efficient, and profitable. The below list of pro- grams is a reminder of just some of the ways in which GNYADA has its members’ backs:

DMV-DIRECT processes titles and registrations for over 200 dealers. They can handle rush duplicate titles in as little as three days. In addition to helping dealers with plate transfers, renewals, and VIN search- es, DMV-DIRECT is also the only DMV partner out- side of Connecticut that can issue Connecticut plates. Learn more at gnyada.com/dealers/regis- tration/overview .

The GNYADA Insurance Brokerage covers all of your dealership’s insurance needs, including health and dental coverage, workers’ comp, vision plans, disabil- ity, life insurance, medicare and flexible spending accounts. The Brokerage also consults dealers on required changes to their insurance offerings and helps them keep compliant with IRS form filing. Learn more at gnyada.com/dealers/insur- ance/overview .

The Dealer Discount Club , offers GNYADA members lowered prices on the products and services that dealers use the most, including office supplies, required forms, and data storage. To find a vendor that fills your needs, email Jennifer@gnyada.com .

GNYADA’s Employee Relations Plan (ERP) gives you personal assistance with labor law compliance. Call the ERP Hotline at 718.746.5900 for guidance on workplace concerns like hiring / firing practices, wage payment issues, worker conflicts and much more. The Association’s team of Labor Law attor- neys is standing by to answer your questions. Learn more by visiting gnyada.com/dealers/employ ee/overview .

Employment Corner

Contact Us: Greater New York Automobile Dealers Association 18-10 Whitestone Expressway l Whitestone, NY, 11357

Dealer Hotline: 800.245.4640 Headquarters: 718.746.5900 email: assistance@gnyada.com DMV-DIRECT: 718.747.0400

GNYADA Insurance Brokerage, LLC: 718.746.8100 New York International Auto Show: 718.746.5300 Center for Automotive Education & Training: 718.640.2000

GNYADA’s Employment Corner is a free recruiting and job placement service that lists qualified candidates for positions at dealerships. If you have a position to fill, call 718.640.2012

The information contained in this newsletter may not be relied upon for the avoidance of tax penalties. Readers are urged to discuss any issues raised in this newsletter with their legal and tax professionals.

Printed on FSC certified material. All original material except where noted. © GNYADA 2017

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