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-- NADA's offices are closed today due to the winter storm. --
Inside this issue
Dealer Reserve Caps Catch On
Commentary: NADA Releases Fair Credit Compliance Program for Dealers
Vehicle Dependability Declines Significantly in J.D. Power Study
Ford's New F-150 Triggers Run on Aluminum
Help Wanted in Your Local Auto Mechanic's Bay
BMW, Kia Plants Cancel Shifts Because of Winter Storm
Chevrolet to Reward Universities, Colleges for Carbon Reduction Initiatives
Click here for more auto industry news at NADAFrontPage.com. .
Top Stories
Dealer Reserve Caps Catch On

The notion of capping dealer reserve and documenting exceptions as a way for auto dealers and lenders to avoid possible allegations of discrimination is gaining industry acceptance. So much so that at least two F&I vendors, Zurich North America and Dealertrack Technologies, are now integrating the approach into the products they sell to dealerships. The National Automobile Dealers Association made the highest profile endorsement when it recommended the approach in January during its annual convention in New Orleans. Almost immediately, Group 1 Automotive Inc., the nation's fourth-largest auto retailer, said it would adopt the recommendation. But other industry members have embraced the approach as well, including the National Association of Minority Automobile Dealers and the Association of Finance & Insurance Professionals, which last fall made forms available for dealerships to document exceptions to a fixed cap on dealer reserve. Some law firms specializing in auto finance and dealership compliance are recommending the approach, too. The Hudson Cook law firm in Hanover, Md., for example, worked with Zurich to come up with software that allows dealerships to track dealer reserve.
Source: Automotive News

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Commentary: NADA Releases Fair Credit Compliance Program for Dealers
By Forrest McConnell, III, NADA chairman

Last year the Consumer Financial Protection Bureau issued fair credit “guidance” to indirect finance sources that seeks to change the way they compensate dealers for arranging financing. Since then NADA has led the charge in defending the dealer-assisted financing model, and is working to prevent the adverse consequences that government-imposed flat fees would cause for consumers, dealers and finance sources alike.

At the same time, we have provided dealers with additional educational resources to strengthen their efforts to comply with fair credit laws. As part of this effort, NADA, the American International Automobile Dealers Association and the National Association of Minority Automobile Dealers issued the NADA Fair Credit Compliance Policy & Program to their respective members on Jan. 24.

This publication provides essential background on this issue, sets forth a fair credit compliance program template that a dealer can adopt, and contains both general and specific instructions for completing the program template. Among many other features, the program template (a) sets forth a fair credit policy that states the dealer’s unambiguous commitment to fair credit compliance; and (b) establishes a voluntary standardized method for determining the amount of dealer compensation that may be earned in a credit transaction.

The compensation method is based on one that was adopted by two dealers in 2007 to resolve Department of Justice allegations of unintentional credit discrimination. It generally involves establishing a set amount of dealer participation that a dealer adds to a buy rate and only deviating from that amount if certain pro-competitive factors that are unrelated to the consumer’s background are present in the transaction and are properly documented. The NADA template also contains sample forms to facilitate this process and it creates management, training, oversight and reporting guidelines to ensure the program is properly carried out.

Adopting the NADA program template, or any portion of it, is an individual dealer decision and is strictly optional. The program does not constitute a “safe harbor” for complying with federal law and no federal agency has endorsed it. However, NADA believes the program, if properly adopted and faithfully executed, will strengthen the dealership’s ability to comply with the federal Equal Credit Opportunity Act.

Dealers can access a PDF of the NADA Fair Credit Compliance Policy & Program at nada.org/faircredit.

Additionally, NADA members can access a Word version of the program template on that web page by entering their user name and password and consenting to a licensing agreement. Dealers should consult with their attorney to determine appropriate fair credit compliance procedures for their dealership to adopt.

Stay tuned for more educational information on this topic and the NADA Fair Credit Compliance Policy & Program, including an NADA University webinar that will be announced to dealers in the near future.
Source: NADA Chairman's Column
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Vehicle Dependability Declines Significantly in J.D. Power Study

For the first time since 1998, vehicle dependability has declined, according to the 2014 J.D. Power Vehicle Dependability Study released [Wednesday]. Most of the problems are with engines and transmissions, the report said. Over all, the study found 133 problems for each 100 vehicles, compared with 126 a year ago. David Sargent, global automotive vice president of J.D. Power, called the results a “step backward” and characterized the 6 percent increase in the number of problems as “very significant.” The study, now in its 25th year, measures problems experienced by the original owners of three-year-old vehicles over the previous 12 months. This year's study is based on responses of more than 41,000 owners of vehicles from the 2011 model year. Not all automakers suffered a decline, however. Fifteen had fewer problems than in the last study, one automaker stayed the same and 15 had more problems.
Source: The New York Times

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Ford's New F-150 Triggers Run on Aluminum

Ford Motor Co.'s new aluminum-bodied F-150 pickup has triggered a stampede among automakers, sending many of the company's competitors scrambling to ink deals with aluminum suppliers for the weight-saving metal. “There's isn't an automotive manufacturer that makes vehicles in North America that we're not talking to,” said Tom Boney, head of North American automotive business for Novelis Inc., the world's largest supplier of the aluminum sheet used by automobile manufacturers. “Our customers will be making announcements fairly regularly over the next six years that will transform the automobile industry.” Boney also is chairman of the Aluminum Transportation Group, part of the Aluminum Association, and he says “every boardroom” in the auto industry was forced to take a close look at Ford's plans and adjust their own product plans accordingly. That is because there is no simpler way to boost fuel economy than by reducing vehicle weight, and boosting mileage is something all automakers need to do. The question now is this: Is there enough aluminum to go around? In the near term, the answer is no.
Source: The Detroit News
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Help Wanted in Your Local Auto Mechanic's Bay

In the next year or so, a car or truck dealership somewhere is going to be very happy to see Jillian Lukatchik, now 20, walking in the door. "You know you are going to be working your butt off," Lukatchik said cheerfully. She's on the road to graduate from the Universal Technical Institute in Exton with a specialty in Cummins engines for diesel trucks. At the Philadelphia Auto Show at the Convention Center, it's all about the bling - the latest models, the latest engineering, the latest automotive loveliness. In their service departments, dealers are worried - the supply of vehicle mechanics, now known as technicians, can barely keep up with demand. "If you are an auto technician and you don't have a job, you don't want a job," said Mark Rogers, an automotive consultant with the National Automobile Dealers Association. "Dealers fight each other to take technicians."
Source: The Philadelphia Inquirer
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BMW, Kia Plants Cancel Shifts Because of Winter Storm

BMW and Kia canceled shifts at their U.S. plants today because of severe winter weather in the Southeast. A winter storm warning is in effect until 6 p.m. Thursday for the area, with snow and ice potentially causing power outages and treacherous roadways. BMW's decision to cancel the "A" shift "was made to protect the safety of our employees as they drive from various areas of Upstate South Carolina and Western North Carolina," said Sky Foster, a spokeswoman for BMW Manufacturing in Spartanburg, S.C. BMW Manufacturing in Spartanburg is the company's only North American factory and is the company's sole global source of X3, X5 and X6 crossovers. Kia Motors' assembly plant in West Point, Ga., planned to cut its second shift short at 5 p.m. ET today and cancel the third shift for this evening due to weather-related parts shortages. Other auto plants in the Southeast are operating, but also are monitoring the weather and may make production changes as the conditions develop.
Source: Automotive News

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Chevrolet to Reward Universities, Colleges for Carbon Reduction Initiatives

General Motors Co. said Wednesday that its Chevrolet brand will financially reward U.S. colleges and universities for their carbon reduction initiatives. The automaker's largest brand has created a formula that allows higher education institutions to earn money for upgrades that reduce greenhouse gas emissions. Chevrolet worked with an advisory team led by the Climate Neutral Business Network to develop the new methodologies. Ball State University in Indiana and Valencia College in Orlando are among the first colleges and universities to try the new methodologies, GM said, adding that 675 campuses have pledged to reduce carbon emissions.
Source: The Detroit News
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Quotable
"NADA has led the charge in defending the dealer-assisted financing model, and is working to prevent the adverse consequences that government-imposed flat fees would cause for consumers, dealers and finance sources alike."

    -- NADA Chairman Forrest McConnell, III, commenting on the NADA Fair Credit Compliance Policy & Program issued to dealers late last month, NADA Chairman's Column, Feb. 2014
NADA Market Beat
Light-vehicle Sales Drop in January
Chairman's Column
NADA Releases Fair Credit Compliance Program for Dealers
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