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April 18, 2016 FacebookTwitterFlickrRSSSEND TO A FRIENDPRINT
Inside this issue
Overtime Case Goes from the Service Desk to High Court
Fed and Automakers Prepare to Review 54.5 MPG CAFE Goal
Toyota Seen Losing $277 Million as Quakes Halt Japan Output
Two Opportunistic Dealers are Looking for More Volkswagen Stores
Ford: No Interest in Merger with Fiat Chrysler
Most Polled Lenders Say Auto Financing Will Increase
Top Stories
Overtime Case Goes from the Service Desk to High Court

Dealers fear a flood of adviser back pay claims

A shorthanded U.S. Supreme Court this week will take up the case of five dealership service advisers who sought overtime pay for their 55-hour workweeks, a dispute that could have big implications for dealerships and their compensation structures. The question before the court is whether service advisers fall into the same category as dealership salespeople, mechanics and parts department workers, who are explicitly exempted from overtime pay requirements under the Fair Labor Standards Act. Dealers and many courts have long understood the answer to be yes, and dealerships have structured their bookkeeping and compensation practices accordingly, with many paying service advisers on commission, according to the National Automobile Dealers Association. But the Obama administration and a ruling by the 9th U.S. Circuit Court of Appeals have challenged that assumption. If the Supreme Court agrees, many service advisers presumably would qualify for overtime pay under the Fair Labor Standards Act, which established the standard 40-hour workweek in 1938. According to NADA, service advisers work an average of 47 hours a week.

Such a decision would "upend" dealers' understanding of the law and create "widespread unanticipated liability and disruption" at dealerships nationwide, NADA said in a brief filed in the Supreme Court case. It also could result in "hundreds of millions of dollars" in claims by service advisers seeking to recover back pay, said Steven Szakaly, NADA's chief economist. Switching to an hourly wage system with overtime could encourage dealers to hire more service advisers with shorter work hours, leading to lower per-employee pay and higher turnover, Szakaly says. "There's no positives," in applying the overtime law to service advisers, Szakaly said. "You're just creating a lot of uncertainty in the industry and eliminating what was an excellent alignment of the economic interests of the consumers, the employers and the employees."
Source: Automotive News

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Fed and Automakers Prepare to Review 54.5 MPG CAFE Goal

Federal regulators are quietly gathering data, running simulations and publishing report after report. This summer, a two-year, $35 million investigation by the EPA and National Highway Traffic Safety Administration will spark a long-simmering debate about the future of green cars in the U.S. Automakers and environmental groups are watching closely as the agencies assemble an argument for maintaining or adjusting federal fuel economy targets. This midterm review is part of the deal finalized in 2012 to double the U.S. fleet's average fuel economy from that of 2008. The 2025 model year goal calls for a 54.5 mpg fleetwide average -- or an adjusted real-world average of about 40 mpg on Monroney stickers. The review promises to be tense as gasoline prices remain low, consumers turn away from green cars and costs of new technology stack up. The feds' analysis will affect automakers' product strategies for a decade.
Source: Automotive News

 
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Toyota Seen Losing $277 Million as Quakes Halt Japan Output

Toyota Motor Corp. may see its operating profit reduced by about 30 billion yen ($277 million) for the current quarter after a series of earthquakes struck southern Japan and disrupted parts supplies to the world’s largest automaker. Production shifts stopped late last week at Toyota’s Kyushu factories and will extend to other Japan assembly lines in stages throughout this week, Toyota said in a statement. Japan’s most devastating earthquakes since March 2011 began striking the southern island of Kyushu on Thursday and have halted some engine and parts production for Aisin Seiki Co., chip manufacturing for Renesas Electronics Corp. and Mitsubishi Electric Corp. and motorcycle output for Honda Motor Co. Toyota’s loss of production may reach 56,000 vehicles for Toyota and Lexus and 7,500 units for minicar maker Daihatsu Motor Co., Koichi Sugimoto, a Tokyo-based analyst at Mitsubishi UFJ Morgan Stanley wrote in a report Monday.
Source: Bloomberg

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Two Opportunistic Dealers are Looking for More Volkswagen Stores

'A good time ... to buy low.'

Dealers Clay Cooley and Jason Kuhn are contrarians: They have been buying Volkswagen dealerships despite the company's slumping sales and its ongoing scandal over diesel-emissions cheating. Cooley, who owns Clay Cooley Auto Group in Dallas, bought two Volkswagen stores last month. Kuhn, president of Kuhn Automotive Group of Tampa, Fla., which already owned two VW stores, bought another in Atlanta in January 2015 and will break ground in “a few months” for a VW store in Columbus, Ohio, aiming to open it in the second quarter of 2017. And they're not done. Each dealer wants to own more VW stores, even as buy-sell advisers have downgraded the value of the brand's stores to practically nothing. “The pendulum has swung too far,” Kuhn said. “Valuations for VW stores have come down to a point where they are a screaming 'buy' for us.” Kuhn admits: “Volkswagen has work to do to get past the financial issues caused by this crisis, repairing U.S. consumers' perception of the brand and to rectify the damage done to the brand by the diesel fraud. It won't be easy.” But he believes VW will do exactly that, which is why he's willing to “take the risk to continue to invest our money behind the VW name.”
Source: Automotive News

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Ford: No Interest in Merger with Fiat Chrysler

Ford Motor Co. reiterated that it has no interest in merging with Fiat Chrysler Automobiles NV, after CEO Sergio Marchionne said Friday that Ford was one of three potential partners for a tie-up. “As we consistently have said, Ford has no plan or interest other than to continue to accelerate our One Ford plan, deliver product excellence and drive innovation in every part of our business,” the company said in an emailed statement Friday to The Detroit News. Ford’s statement follows comments made by Marchionne earlier in the day on the sidelines of the company’s shareholders’ meeting in Amsterdam. He said Ford, Volkswagen AG and Toyota Motor Corp. were the potential automakers left for a “big” auto industry merger after General Motor Co. rebuffed the company in 2015. Spokespeople with Toyota and Volkswagen declined to comment on the matter. Marchionne, according to Bloomberg, admitted that what he was “interested to do is not doable now,” but said “the door has never been closed” on a deal with a major competitor.
Source: The Detroit News

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Most Polled Lenders Say Auto Financing Will Increase

More than half of surveyed auto lenders say they expect their auto-financing originations will increase this year. If they are right, that would easily put outstanding auto-loan portfolios in the U.S. past the $1 trillion mark, a record. Experian expects that to happen by mid-year. The number stood at $987 billion at the end of 2015. Using remote-control devices during electronic polling at the American Financial Services Association’s annual Vehicle Finance Conference, 54.5% of attendees say they expect their origination volumes to rise this year. About 14% say they expect a decline, 24.4% expect no change and 7.1% aren’t sure. A hot topic of auto retailing today is how quickly the car-buying process takes at dealerships. Some industry people say it takes too long. They say an hour is something to shoot for. Conversely, others say a 60-minute car deal is rushing things.

The National Automobile Dealers Association predicts light-vehicle sales of 17.7 million this year, and 53.1% of polled conference attendees agree with that, with 31.5% saying it’s too high and 15.4% saying it’s too low.
Source: WardsAuto

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          Quotable
          "But I don't look at it as risk. I just get up every morning and sell cars."

             ---  Clay Cooley, a dealer that has been buying VW dealerships despite the automaker's slumping sales and its diesel-emissions scandal, Automotive News, April 18

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