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Inside this issue
Study Shows Federal Regulations Cost Dealers Billions, Jobs
NADA's Take on 'The Fallacy of Flats'
GM Seeks N.Y. Court for Recall Suits as Deaths Claimed
Ford to Recall Nearly 1.4 Million Vehicles in N.A.
Dealers Paid More for Trades in 2013
WANADA Announces New Leadership
Click here for more auto industry news at NADAFrontPage.com. .
Top Stories
Study Shows Federal Regulations Cost Dealers Billions, Jobs

Franchised new-car dealers in the United States spent a combined $3.2 billion in 2012 to meet federal regulations, a report released today said. Dealers spent the money to comply with 61 major federal rules, the report said. As a result, consumers paid more and the U.S. economy paid in the form of 10,550 fewer dealership jobs, the research found. NADA commissioned the study, “The Impact of Federal Regulations on Franchised Automobile Dealerships,” which was conducted by the Center for Automotive Research in Ann Arbor, Mich. In 2012, the average dealership spent $182,754 to comply with federal mandates governing employment, business operations, vehicle financing, sales, marketing, vehicle repair and maintenance, the study said. The study estimated the overall impact of these costs on the 2012 U.S. economy at $10.5 billion in lost economic output and more than 75,000 fewer jobs.
Source: Automotive News

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NADA's Take on 'The Fallacy of Flats'

The National Automobile Dealers Association has tried for months to impress upon the Consumer Financial Protection Bureau that switching from dealer reserve to flat fees will not eliminate dealerships’ ability to set their compensation for auto loans. But it’s debatable whether the message is sinking in. “You can’t eliminate discretion by going to a flat fee,” says Paul Metrey, NADA’s chief regulatory counsel for financial services, privacy and tax.
 
Last week NADA distributed a memo to its members and the press called “The Fallacy of Flats.” The basic argument -- which NADA introduced in November at an auto finance forum hosted by the CFPB -- is that even if all lenders switched to a flat fee, dealerships would be incentivized to choose lenders based on which pays the highest flat.

The CFPB isn’t allowed to regulate franchised dealerships, but it does regulate lenders. The bureau holds lenders accountable for allowing dealerships discretion in setting dealer reserve, a small amount of interest -- typically up to 3 percentage points -- that dealerships can tack onto the lender’s buy rate on an auto loan for acting as a middleman. The CFPB thinks dealerships take advantage of that discretion to charge minorities and other protected groups extra, which NADA denies. As an alternative, the CFPB wants lenders to switch to flat fees, a fixed percentage of the amount financed, or some other form of compensation that the CFPB considers nondiscretionary.
 
Metrey told me in a phone interview last week that while flat fees might protect lenders against discrimination charges from the CFPB, they wouldn’t protect dealerships from discrimination charges by the regulators that oversee them, such as the Federal Trade Commission and state attorneys general, or by private individuals. For that matter, Metrey said, flat fees wouldn’t protect consumers from hypothetical discrimination, either.
 
NADA is advocating that lenders stick with dealer reserve. But it says dealerships should set a ceiling for dealer reserve and go lower only when it has a legitimate business reason to do so, such as to match a competitor’s offer. Nearly every sizable auto lender is sticking with dealer reserve -- so far.
Source: Automotive News

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GM Seeks N.Y. Court for Recall Suits as Deaths Claimed

General Motors Co. said it wants a New York court to handle lawsuits arising from its ignition defect recall as lawyers for car owners said deaths caused by the flaw exceed the automaker's count of 13. Attorneys representing the owners of the more than 2.59 million recalled GM cars made their allegations of additional deaths [Thursday] as they sought to combine the cases in California or a location other than New York. One lawyer said his firm knew of 60 deaths, without offering supporting proof.
Source: Bloomberg

Editor's note: For more information on the GM recall, go to www.gmignitionupdate.com or www.safercar.gov.

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Ford to Recall Nearly 1.4 Million Vehicles in N.A.

Escapes, Explorers, Tauruses, Fusions targeted in 4 campaigns

Ford Motor Co. said today it is recalling nearly 1.39 million SUVs and sedans in North America, most for the possible loss of power steering. Ford said it will recall 195,527 Explorer SUVs in North America from the 2011 to 2013 model years and 915,216 Ford Escape and Mercury Mariner SUVs from model years 2008 to 2011 on power steering issues. Also, Ford said it will recall nearly 200,000 Taurus sedans in North America from the 2010 to 2014 model years on a corrosion issue. Finally, the company also said it is recalling 82,576 sedans with floor mats that may interfere with the operation of accelerator pedals.
Source: Reuters

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Dealers Paid More for Trades in 2013

As their used-car operations churn out stronger numbers, both franchised and independent dealers have been more willing to shell out extra money for the cars their customers bring to the lots, according to CNW Research. In fact, when considering all 16 vehicle segments included in CNW's data set, franchised dealers offered a weighted average of $10,406 in 2013 for trade-ins from customers shopping for new vehilces and $6,257 for trade-ins from customers looking to buy used, the firm said in its latest Retail Automotive Summary. Those represent gains of 12.61 percent and 4.79 percent, respectively, from 2011.
Source: Auto Remarketing

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WANADA Announces New Leadership



John O'Donnell



Gerry Murphy




 

 

For 82 years, the name Murphy has been synonymous with the Washington Area New Automobile Dealers Association. That changes July 1 when John O’Donnell, WANADA executive vice president, replaces longtime president and CEO Gerard N. Murphy. A third-generation executive at WANADA, Murphy followed his father, Mike, and grandfather, Richard, in leadership positions.

A dinner marking the legacy was held May 29 at the newly-built Marriott Marquis, which provides direct access to the convention center—the site of WANADA’s annual Washington Auto Show. Attendees included prominent auto dealers, dealer association executives, members of Congress, state lawmakers and local councilmen.

Among Murphy’s legacies is re-establishing the Washington Auto Show and elevating it as a large-market consumer show and a public policy event. The show has become a platform for innovation and connection with industry leaders and Congress, the White House and the federal regulators.

O’Donnell becomes CEO of WANADA after 12 years in senior executive positions at the association. Murphy will continue to serve on the WANADA staff as general counsel. 
Source: WANADA

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Quotable

"The additional costs for new-car dealerships to comply with federal regulations are passed along to our customers in the form of higher prices, which results in lower vehicle sales and reduced employment at dealerships."

   
-- NADA Chairman Forrest McConnell, commenting on a study conducted by the Center for Automotive Research, Automotive News, May 30

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