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Inside this issue
Important Update on Blumenthal Used Car Recall Amendment
Commentary: Blumenthal Proposal Would Deflate Value of Customer Trade-Ins
CFPB Rejects FOIA Request for Memo on 'Limiting Dealer Discretion'
Report: Detroit's Big 3 Automakers Drive U.S. Economy
Fiat Chrysler to Pay Up to $105 Million in Civil Penalties to NHTSA
As Dealership Sales Climb, Margins Slide
Retailers, Suppliers Pace 2nd-Quarter Shareholder Returns
Mitsubishi Throws in Towel on Fading Era
Top Stories
Important Update on Blumenthal Used Car Recall Amendment

CALL TODAY to oppose the Blumenthal amendment

Sen. Richard Blumenthal (D-Conn.) has officially filed a controversial amendment to prohibit dealers from selling, or even wholesaling, a used vehicle under open recall. The amendment may come to the Senate floor for a vote as part of the transportation bill this week. Majority Leader Mitch McConnell's (R-Ky.) goal is to pass the transportation bill on the Senate floor by Thursday.

Today, NADA, AIADA and NAMAD, the three trade associations representing franchised dealers, sent a letter to Senators urging a “No” vote on the controversial Blumenthal amendment explaining that it would instantly diminish the value of millions of customer trade-ins while not guaranteeing that a single recalled vehicle gets fixed.

The Blumenthal amendment would ground all recalled vehicles at dealerships until remedied but not similarly regulate private sales, creating a two-tiered used vehicle market. The amendment would also:

  • Instantly devalue the trade-in value of vehicles for millions of consumers;
  • Ground vehicles for such minor compliance matters as a wrong phone number in an owner’s manual;
  • Reduce new vehicle sales by as much as a half million vehicles; and
  • Disproportionately hurt rural consumers.  

Dealers and their customers must continue to call their Senators at 202.224.3121 and ask them to oppose the anti-consumer Blumenthal amendment on used cars during the transportation bill debate.

Contact information for the Senate offices is also available at www.senate.gov. Click here for NADA's issue brief on vehicle recall legislation, and click here for talking points opposing the Blumenthal amendment.
Source: NADA Legislative Affairs
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Commentary: Blumenthal Proposal Would Deflate Value of Customer Trade-Ins
By Bill Fox

Imagine what would happen if dealers could only offer a fraction for their customer’s trade-ins, or could not even send the trade-in vehicle to auction. This could be a dark reality if the Sen. Richard Blumenthal (D-Conn.) used car amendment, which would ground all recalled vehicles at dealerships until remedied, is passed.

When a food recall is issued, the product under recall is immediately removed from commerce and tossed from retail shelves. This is not the way it works for a recall involving automobiles. When a particular vehicle is under open recall, that doesn’t necessarily mean it requires the drastic step of grounding the vehicle.  While there are at least 46 million vehicles currently under open recall, the truth is many recalls don’t require the vehicle being taken out of service.  Furthermore, recall notices are often issued even though there is nothing an owner or dealer can do to resolve the problem because of a lack of auto parts.

And some recalls are due to minor causes, such as a printing error in the owner’s manual.

The Blumenthal amendment to the highway bill (H.R. 22) currently being considered by the Senate proposes to ground all used vehicles sold at a dealership under open recall.  (Private sales would remain unregulated.)  The amendment would effectively slash the trade-in value of some recalled vehicles while removing cars from the road needlessly—and the reason could be for something as minor as a warning sticker that may peel off the sun visor. This amendment would cripple the used car market, leaving consumers with diminished trade-in values or fewer options because cars would be grounded indefinitely until parts became available. This would be devastating for consumers, dealers and automakers.

Franchised auto dealers play a critical role in ensuring that recalled vehicles are repaired.

Proposals that ground all vehicles under open recall at a dealership miss the mark: they don’t differentiate between recalls involving a serious defect and those with a negligible impact on safety. Time and time again, they prove to be overly broad measures that do not require the drastic step of grounding cars. A recent survey of 2,100 vehicle recalls revealed that 80 percent of them do not come with any recommendation from the manufacturer or the National Highway Traffic Safety Administration to stop operating the vehicle.

NADA is advocating for a better solution. A more viable approach would be to improve the recall process by differentiating between truly dangerous defects in which vehicles should be immediately taken off the road versus trivial issues where there is no harm to driver safety or the public good.

Policies should be tailored to boost consumer recall response and completion rates. The average vehicle recall completion rate is 75 percent. America’s dealers support a 100 percent completion rate and we urge NHTSA to improve the recall process by designing a database that handles multiple VIN requests as a single inquiry.

Dealers should call their Senators today at 202.224.3121 and tell them to vote “No” on Sen. Blumenthal’s ill-conceived amendment.  This amendment would diminish in an instant the trade-in value of millions of vehicles, while not guaranteeing one recalled vehicle gets fixed.
Source: NADA

Bill Fox is 2015 NADA chairman and a multi-franchise dealer in upstate New York.

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CFPB Rejects FOIA Request for Memo on 'Limiting Dealer Discretion'

The Consumer Financial Protection Bureau (CFPB) has rejected a Freedom of Information Act (FOIA) request by the National Automobile Dealers Association (NADA) to release a memorandum that shows the agency seeking to exercise jurisdiction over auto dealers, which is prohibited under the Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank).
 
According to a June 30, 2015, article in American Banker, three senior CFPB officials sent CFPB Director Richard Cordray a memo outlining how a proposed settlement with American Honda Finance Corp. would further the agency's "goal" of "significant[ly] limiting dealer discretion."

"The significant limitation of dealer discretion, which in turn reduces fair lending risk, is one of the goals we have been seeking with respect to the indirect auto matters, and this settlement proposal attains that goal," Jeffrey S. Morrow, Jane M.E. Peterson and Rebecca J.K. Gelfond wrote in a June 16, 2015, memo to Cordray about the proposed Honda settlement, according to American Banker.
 
The statement undercuts the numerous claims made by Cordray and other CFPB officials that the agency is not targeting auto dealers through enforcement actions. The leak of the memo prompted NADA to request its release under FOIA.
 
Yet in a reply to NADA Chief Regulatory Counsel Paul Metrey, the agency's FOIA manager said that the leaked memo was “privileged” and therefore protected from public scrutiny.
 
NADA President Peter Welch sharply criticized the CFPB's response.
 
"The CFPB appears to be way outside the swim lane Congress authorized it to swim in and an increasing number of Democrats and Republicans are justifiably concerned about the agency’s secrecy and its actions.”  Welch said. "The CFPB's response only suggests that they have even more to hide than first thought."
 
This week the House Financial Services Committee is scheduled to consider bipartisan legislation that would rescind the CFPB's March 2013 guidance on auto lending, which the agency has used to outline its assault on dealer-assisted financing. The legislation, H.R. 1737, which already has 54 Democratic and 69 Republican cosponsors, would also require the CFPB, when issuing guidance on indirect auto lending, to engage in a transparent process that benefits from public input and a consideration of its impact on consumers as well as small, women-owned, and minority-owned businesses.
 
"Ultimately, both the Reforming CFPB Indirect Auto Financing Guidance Act and NADA's FOIA request are about ensuring government transparency and accountability on behalf of consumers, who simply can't afford to be denied millions of dollars in potential savings without having a say in the matter,”  Welch added.
Source: NADA

Editor's note: To download NADA's Fair Credit Compliance Policy & Program, click here.
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Report: Detroit's Big 3 Automakers Drive U.S. Economy

Detroit's Big 3 automakers -- General Motors, Ford Motor and Fiat Chrysler -- and their suppliers are now responsible for 3% of the nation's economy and provide the largest source of manufacturing jobs, finds a new report. And they big and healthy again. Sales of new American-made cars have risen 58% in the past five years following the recession, according to a trade group, the American Automotive Policy Council. "American automakers drive the U.S. economy and their investments are making America more competitive in a global economy, and making significant contributions to the revival of manufacturing here in America," says Matt Blunt, the former governor of Missouri who is president of the council.
Source: USA Today
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Fiat Chrysler to Pay Up to $105 Million in Civil Penalties to NHTSA

Fiat Chrysler agreed to pay largest fine ever from NHTSA, submit to three years of oversight of recalls, buy back half-a-million vehicles and offer financial incentives for repair of 1 million Jeeps

Fiat Chrysler Automobiles will pay up to $105 million in fines and penalties to the National Highway Traffic Safety Administration, submit to oversight and buy back nearly half-a-million of the vehicles it has recalled, penalties issued Sunday for the auto company’s lax attitude toward addressing safety issues in millions of its vehicles. NHTSA said it was concerned about slow completion rates on recalls the automaker announced, slow or inadequate notifications to consumers, faulty approaches to fixing the safety issues and improper actions by dealers. The penalty, the largest ever issued by the regulatory agency, reflects a tougher approach to automotive regulation in the wake of high-profile recalls last year by General Motors and airbag supplier Takata.
Source: Detroit Free Press
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As Dealership Sales Climb, Margins Slide

Publics blame competition, changing tastes

Lurking behind those solid second-quarter earnings results from five publicly traded dealership groups last week was a disturbing trend: Profit margins on new-vehicle sales fell at all five companies. "There is something occurring there, whether it's great competition or other factors," said Lithia Motors Inc. CEO Bryan DeBoer. Some dealership group executives blamed tougher competition, particularly among mass-market import brands. Others cited shifting consumer tastes and lower gasoline prices. Still others said there was a drive for volume over margins, and they defended that trade-off.
Source: Automotive News
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Retailers, Suppliers Pace 2nd-Quarter Shareholder Returns

Automakers post loss as sluggish economies hurt sales in many markets

Shareholder returns among global automakers in the second quarter drooped in a down global economy, but U.S. publicly owned retailers and global suppliers handily outperformed most indexes. The automakers' returns fell 4 percent on average, but the suppliers' rose 2.7 percent and the retailers' grew 3.1 percent, according to the Automotive News/PwC Global Automotive Shareholder Value Index. The auto industry fared better when returns are viewed over longer periods. All three groups rose modestly over 12 months and remain solidly higher over three years. Over 36 months, the supplier and retailer returns have more than doubled while the automaker index is 70 percent higher. The second quarter was rough in most major economies outside the U.S., especially in Europe. Shareholder returns for individual automotive companies reflected where they operate, said Jeff Zaleski, PwC partner for U.S. Automotive Transaction Services and a member of PwC's automotive leadership team. "This is truly a global market and although the global market is growing, not all markets are equal," he said.
Source: Automotive News
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Mitsubishi Throws in Towel on Fading Era

JV plants give way to global strategy

Mitsubishi Motors Corp.'s decision last week to sell its only U.S. assembly plant illustrates an emerging new-world order in car production. Mitsubishi's Normal, Ill., plant was part of a wave of Asian-brand joint-venture auto plants in North America that opened in the 1980s and 1990s to do whatever was necessary to crack the all-important U.S. retail market. Mazda, Toyota, Subaru, Isuzu, Suzuki and, briefly, South Korea's Hyundai also opened North American joint-venture production lines in that era. All have either closed or morphed into other production arrangements. The new reality: Auto production is increasingly shifting to more cost-efficient global platforms and world supply bases that serve multiple markets.
Source: Automotive News

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More Articles
 
Quotable
"Proposals that ground all vehicles under open recall at a dealership miss the mark: they don't differentiate between recalls involving a serious defect and those with a negligible impact on safety."

   
-- NADA Chairman Bill Fox, in a commentary urging dealers to contact their Senators to vote "No" on Sen. Richard Blumenthal’s ill-conceived amendment, July 27



"The CFPB appears to be way outside the swim lane Congress authorized it to swim in and an increasing number of Democrats and Republicans are justifiably concerned about the agency’s secrecy and its actions. The CFPB's response only suggests that they have even more to hide than first thought."

   -- NADA President Peter Welch, commenting on the CFPB's rejection of NADA's Freedom of Information Act request to release a memorandum that shows the agency seeking to exercise jurisdiction over auto dealers, which is prohibited under the Dodd-Frank Wall Street Reform Bill, July 27

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