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Inside this issue
Supreme Court Ruling Could Favor All Groups Debating Bias in Auto Lending
Honda Restates Earnings After Airbag Recall Costs Increase
GM to Take $600M 2Q Charge for Venezuela Operations
Suzuki Says Four-Year Effort to End VW Pact Is Coming to an End
One Third Of Motorists Believe MPG Ratings Are Wrong
Alfa Romeo Launches US Comeback After 20 Years
Click here for more auto industry news at NADAFrontPage.com. .
Top Stories
Supreme Court Ruling Could Favor All Groups Debating Bias in Auto Lending

The Supreme Court’s decision today to endorse a broad interpretation of a legal theory used to fight housing discrimination provides ammunition for groups at odds over the CFPB’s power to pursue discrimination in auto lending. The legal theory -- disparate impact -- holds that a policy or practice can be deemed discriminatory and illegal if it has a disproportionate adverse effect on minorities or other protected classes, even if the discrimination was unintentional. The Consumer Financial Protection Bureau has used disparate impact to attempt to prove illegal discrimination in auto finance. The court’s ruling affirming that disparate impact claims are permissible under federal housing law could actually work in auto lenders’ favor, one dealer lawyer said.

Len Bellavia, of Bellavia Blatt & Crossett in New York, pointed to a provision in the ruling that could be positive news for auto lenders. It endorses having clear proof of disparate impact, he said. According to the court’s ruling, “a disparate-impact claim relying on a statistical disparity must fail if the plaintiff cannot point to a defendant’s policy or policies causing that disparity. A robust causality requirement is important in ensuring that defendants do not resort to the use of racial quotas.” That language could prove useful to the auto lending industry because it holds that a plaintiff must prove his or her case with reliable data, Bellavia said. “The court laid out requirements that you can’t assume a disparate impact case is valid. You need to rely on data that makes the case,” Bellavia said. “That actually helps lenders that are fighting the CFPB because it validates their defense. “That’s the language that auto lenders and the NADA will be very intrigued by in defending CFPB initiatives,” he added.

The National Automobile Dealers Association said in a statement that the Supreme Court decision does not address the relationship between disparate impact and the Equal Credit Opportunity Act, which auto lenders are subject to. “Still, NADA and its members do not believe there is any place for discrimination in the marketplace, so we will continue to encourage the adoption of the NADA Fair Credit Compliance Policy and Program because it is the most-effective way of minimizing the potential for fair credit risk under ECOA,” the statement said. NADA’s Fair Credit Compliance Policy and Program calls for capping dealer reserve at a set percentage, say, 2 percent, and documenting the reason for any instance when a dealership reduces the amount, say, to meet a competitors’ offering.
Source: Automotive News

Editor's note:  Yesterday’s decision under the Fair Housing Act does not apply to the Equal Credit Opportunity Act, which governs auto financing.  In addition, the rationale the Supreme Court used to support its decision similarly does not apply to the Equal Credit Opportunity Act.  These critical distinctions aside, it is important to note that the Supreme Court prominently stated in its opinion that business practices having a disparate impact are unlawful only if they are “unjustified by a legitimate rationale.”  In 2014, NADA released to its members the optional NADA Fair Credit Compliance Policy & Program, which is designed to ensure that any discounts from a dealer’s standard dealer participation rate that are offered to consumers are supported by a legitimate business reason.  Accordingly, yesterday’s Supreme Court decision further underscores the value that the NADA program can provide to a dealer and its finance sources in providing a “legitimate rationale” for the dealer’s pricing decisions.
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Honda Restates Earnings After Airbag Recall Costs Increase

Honda Motor Co. restated its financial results for the fiscal year ended in March, to account for additional costs to cover an expanded recall of cars equipped with Takata Corp. airbags. The automaker said it revised its operating profit to 606.88 billion yen ($4.92 billion) under U.S. accounting standards, from 651.68 billion yen stated in April. The new figure represents a 19 percent decline from the previous year.
Source: Reuters

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GM to Take $600M 2Q Charge for Venezuela Operations

General Motors Co. said Thursday it expects to take a $600 million special item charge against second quarter earnings as it further devalues its Venezuela operations. The automaker, in a call with analysts and investors, said the charge stems from changing the way it determines the exchange rate in Venezuela amid current economic conditions in the South American country. “Despite the significant challenges in Venezuela, this market continues to be very important to us,” said Tom Timko, GM vice president, controller and chief accounting officer. GM also took special charges and devalued its Venezuelan operations in 2013 and 2014.
Source: The Detroit News
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Suzuki Says Four-Year Effort to End VW Pact Is Coming to an End

Suzuki Motor Corp.’s four-year effort to end a failed partnership with Volkswagen AG is reaching an end, though the outcome remains uncertain. Arbitration proceedings on the Japanese carmaker’s effort to force VW to sell back a 19.9 percent stake have been concluded, and the companies are now awaiting the ruling, Suzuki President Osamu Suzuki told investors on Friday. Volkswagen and Suzuki have been in arbitration since November 2011 following the breakdown of a deal brokered in 2009 by Osamu Suzuki and Ferdinand Piech, VW’s former chairman.
Source: Bloomberg
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One Third Of Motorists Believe MPG Ratings Are Wrong

“Your mileage may vary,” has become something of a modern-day catchall phrase for verbal waffling. It’s as perfect as any disclaimer ever to be crafted by corporate lawyers, and is indicative of the pervasive attitude that today’s cars rarely even come close to attaining their estimated fuel economy. In fact, according to a recent survey conducted by AAA in Orlando, Fla., one-third of all Americans believe their vehicles’ EPA ratings to be inaccurate as far as “real world” driving is concerned. But is this a case of inaccurate ratings or owners driving their vehicles without regard for maximizing their mileage?
Source: Forbes
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Alfa Romeo Launches US Comeback After 20 Years

After a 20-year absence from the American market, Alfa Romeo is back and looking to draw in an entirely new generation of buyers, starting with the new Giulia sedan it introduced in Milan, Italy on Wednesday. The sleek four-door, which will reach showrooms in the U.S. and other parts of the world early next year, takes aim at such dominant luxury competitors as the BMW 3-Series, Audi A4 and Mercedes-Benz C-Class. Alfa Romeo abandoned the U.S. market in 1995, the victim of sharply declining sales which many analysts blamed on both ongoing quality problems and increased competition from European luxury brands.
Source: CNBC
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Quotable
"NADA and its members do not believe there is any place for discrimination in the marketplace, so we will continue to encourage the adoption of the NADA Fair Credit Compliance Policy and Program because it is the most-effective way of minimizing the potential for fair credit risk under ECOA."

   
-- NADA in a statement on the Supreme Court's decision on disparate impact under the Fair Housing Act, Automotive News, June 25

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