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Inside this issue
FTC Takes Action Against Two Auto Dealer Chains for Repeated Advertising Violations
Wall Street Journal: Finding Racism Where It Isn't
Takata Tightens Screws on Suppliers as Airbag Crisis Mounts, Report Says
Opinion: How Auto Dealers Gained Our Esteem
GM Dealers Take on More Loaners
Ford Deploys Kiosks to Push F-150
Honda Gives Dealers Social Amp for Toy-Character Holiday Ads
Click here for more auto industry news at NADAFrontPage.com. .
Top Stories
FTC Takes Action Against Two Auto Dealer Chains for Repeated Advertising Violations

The Federal Trade Commission (FTC) announced on December 12 that it is taking action against two auto dealer chains for deceptively advertising the cost of buying or leasing a car.  These actions follow consent orders the FTC entered into with the same dealer chains in 2012 to resolve allegations that they engaged in deceptive advertising related to negative equity and failed to satisfy the disclosure requirements that apply to credit and/or lease ads containing “trigger terms.”  Because the dealer chains agreed in those orders “not to misrepresent any material fact regarding the cost and terms of financing or leasing any newly purchased vehicle,” the FTC is now seeking civil penalties in addition to other forms of relief such as the imposition of extensive compliance monitoring, compliance reporting, and recordkeeping requirements.

According to the FTC’s press release, one of the dealer chains has agreed to settle the charges and, as part of the agreement, pay a civil penalty in the amount of $360,000.  The other dealer chain has not entered into a consent agreement, and the Department of Justice has sought remedies in that case by filing a complaint in federal district court.

With regard to the dealer chain that settled the charges, the FTC states: “the dealerships and advertising company violated the 2012 FTC administrative order by frequently focusing on only a few attractive terms in their ads while hiding others in fine print, through distracting visuals, or with rapid-fire audio delivery. For example, some dealership ads promoted low monthly payments or attractive annual percentage rates and finance periods, while concealing other material items, such as low payments were for leases, not sales; major limits existed on who could qualify for discounts; and offers often included significant added costs.”  With regard to the other dealer chain, the FTC states, in part, that it “allegedly misrepresented the costs of financing or leasing a vehicle by concealing important terms of the offer, such as a requirement to make a substantial down payment… [and] failing to make credit disclosures clearly and conspicuously, as required by the TILA.”

These cases represent the fourth set of advertising enforcement actions brought by the FTC against auto dealers since 2012. 
Source: NADA Regulatory Affairs

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Wall Street Journal: Finding Racism Where It Isn't
By Holman Jenkins

The federal government turns its ‘disparate impact’ hunt on the auto-loan market

When will the government apply its anti-racketeering laws to itself? The 2010 Dodd-Frank Act that created the Consumer Financial Protection Bureau explicitly prohibited the agency from regulating auto dealers, which the agency would like to accuse of racism. Thus the agency has gone after wholesale finance providers instead. These bulk lenders quote dealers an interest rate that dealers, in negotiation with buyers, then “mark up” within fixed parameters. Not that the government alleges actual bias against anyone (except in casual remarks to the press). It alleges only “disparate impact” due to neutral business practices by the wholesale lenders. The government doesn’t even know the race and gender of car buyers (dealers are prohibited from collecting this information). The CFPB itself admits its method overstates African-Americans in the car-buying population by 20%; a private study by Charles River Associates for an auto-finance trade group finds the overstatement closer to 40%. Any peer review panel would surely recognize the CFPB’s strong bureaucratic and political incentives to find the desired discrimination ... Then again, maybe it doesn’t matter since its malpractice is so openly flaunted.
Source: The Wall Street Journal
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Takata Tightens Screws on Suppliers as Airbag Crisis Mounts, Report Says

Takata Corp. has begun enforcing tighter quality controls on a group of parts suppliers as the auto safety equipment maker boosts production to replace millions of air bags recalled for a potentially deadly defect, people familiar with the situation told Reuters. Takata, whose exploding air bags have caused five deaths and a recall of more than 20 million vehicles globally, has come under investigation by U.S. safety regulators and federal prosecutors and intense scrutiny from U.S. lawmakers. Over the last two months, the company has launched a series of "urgent" inspections across its supply network and dispatched managers to parts makers in Japan and Asia to announce the changes, according to those involved, who asked not to be identified.
Source: Reuters
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Opinion: How Auto Dealers Gained Our Esteem
By Jesse Snyder

Auto dealers have a golden business opportunity -- to become their customers' favorite merchants. Here's my take. Several trends in business and technology favor local merchants, including auto dealers, over national conglomerates in terms of treating customers right. I've watched dealers clean up their act. But the door is open to gain even more ground because so many other businesses choose subtle deception as standard practice -- things such as hard-to-avoid fees that aren't illegal but rely on customers not noticing.

How did dealers gain esteem while others slip? I see three factors.

1. Auto pricing transparency: Everybody researches vehicles online, including pricing, and arrives knowing dealer cost. With less negotiating drama, dealers can sell on features. Buyers know they got a reasonable deal.

2. Proximity: The closer retailers are to clients, the greater the focus on satisfying customers. The farther removed from customers, the easier for companies to focus on maximizing revenue and profit. Chains and banks went national for economies of scale, but top managers rarely see customers. Locally owned auto dealerships are too close to customers and employees to forget them.

3. A crucial shift in ethics: In my youth, most businesspeople believed they had roughly equal responsibilities to customers, employees and investors. Increasingly, today's mantra is "shareholder responsibility."

It can be a convenient cover. I hear high-level execs excuse iffy policies by saying "I have a responsibility to my shareholders." Mathematicians may calculate that the extra revenue outweighs customer attrition, but I don't believe milk-the-customer is sustainable. By contrast, I see auto dealers and other local retailers focused on customers. If you have to look your customers in the eye, if you'll see them later at the grocery store or church, you treat them well. Dealers depend on satisfied customers for service business, repeat purchases, trade-ins and word-of-mouth. Social media encourage and amplify openness. Sure, dealers know all that instinctively. But the self-damage other industries cause themselves creates opportunity for auto retailers. History is moving toward dealers. Embrace it and become favorite merchants.
Source: Automotive News
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GM Dealers Take on More Loaners

Program aims to increase customer loyalty and test drives

Chevrolet dealer Duane Paddock runs a fleet of 50 vehicles that he loans to service customers and as demos -- up from exactly zero two years ago. His dealership is part of a huge expansion of General Motors' Courtesy Transportation Program, a bid to create better loyalty via the service lane and by getting more people to try Chevy, Buick and GMC vehicles. Last year, GM added elements to the program to entice dealers to sign up, including more cash tied to every loaner vehicle. They get the freedom to choose the vehicles -- Texas dealers can stock pickups while San Francisco stores can load up on Volts. And GM lets dealers still apply new-vehicle incentives when they're sold after they come out of the rental fleet. Apparently, it's working. GM says dealers representing about 90 percent of Chevrolet and Buick-GMC sales volume now operate fleets of new courtesy cars. That's up from about 20 percent of the brands' volume two years ago.
Source: Automotive News
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Ford Deploys Kiosks to Push F-150

As of last week, there were far more 2015 Ford F-150s parked in lots surrounding the factory in Dearborn, Mich., than at dealerships. But even before the trucks arrive in larger numbers, some dealerships can give shoppers a good look at the redesigned F-150 with video kiosks. "Truth About Trucks" kiosks being installed this month in about 1,900 dealerships are part of a huge effort by Ford to educate consumers and salespeople, a testament to how crucial the F-150 is to the automaker and its retailers. The $5,000 interactive kiosks promote the trucks' improved capabilities and fuel efficiency and show why Ford chose to use an aluminum body instead of steel. Ford is covering the cost of about 70 percent of the kiosks for stores that achieved "truck month" sales targets in September and October.
Source: Automotive News
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Honda Gives Dealers Social Amp for Toy-Character Holiday Ads

Auto brands and dealers still have a long way to go to coordinate their marketing efforts effectively in the digital age, but Honda has harnessed up Pokey and enlisted G.I. Joe to get the brand and its dealers closer to that goal during this heavy promotional season. It seems Honda has struck a cultural chord with consumers via its holiday TV-advertising campaign featuring nostalgic cartoon characters in modern roles, hanging around dealer showrooms and talking up Honda vehicles. Always on the lookout for new initiatives, Honda's peripatetic social-media crew also saw an opening. So now, just in time for Christmas, Honda has taken the same endearing cast of cartoon characters and put them in a series of holiday-themed online-only social videos that end in pitches for selected charities.
Source: Forbes
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Quotable

"History is moving toward dealers."

    -- Jesse Snyder, in an Automotive News commentary, Dec. 15  

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