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CATA Bulletin
August 6, 2012

 

New wage rates for unionized techs

August 3, 2012

Many union-free dealers track the technician labor rates paid by their unionized counterparts, to be higher or at least equal to the latter rates. The union rates changed Aug. 1, but not by the amounts a quick glance at the current contract suggests.
 
The current Standard Automotive Agreement (SAA) between certain Chicago-area dealers and IAM Local 701 has a clause stating that if dealers are required to pay a pension surcharge at any time from Aug. 1, 2011, to and including July 31, 2013, then “the wage rates scheduled to take effect Aug. 1, 2012, for all employees will be reduced by twenty-five cents ($0.25).”
 
Indeed, dealers who are party to the SAA have been required to pay such a pension surcharge. Accordingly, the wage rates originally scheduled to take effect Aug. 1 for all employees are reduced 25 cents from the wage rates listed in the SAA.
 
The following chart reflects (in the rightmost row) the revised rates that were implemented Aug. 1 for all area unionized technicians. But the wage rates involve some important points:
 
1. The wage chart applies only for dealers who are party to the SAA that expires July 31, 2013. Dealers who are party to a contract with IAM Local 701 that is different than the SAA, or to a contract that expires on a date other than July 31, 2013, should consult with legal counsel to determine appropriate wage rates and timing.
 
2. The adjusted wage rates apply only to dealers who have a contract with IAM Local 701 which includes the pension surcharge language quoted in Paragraph 2. Unionized dealers who are party to a different contract which has different pension surcharge language—or no pension surcharge language—should consult with legal counsel to determine appropriate wage rates and timing.
 
Classification
8/1/11 Rate
Original 8/1/12 Rate
Revised 8/1/12 Rate
Journeyman Techs (1-40 booked hours)
$29.25
$30.00
$29.75
Journeyman Techs (>40 booked hours)
$30.25
$31.00
$30.75
Body Shop Techs (booked hours)
$20.15
$20.90
$20.65
Body Shop Techs (frame hours)
$24.15
$24.90
$24.65
Journeyman and Body Shop Techs (holiday, vacation)
$29.25
$30.00
$29.75
8 hr. holiday = $238.00
10 hr. holiday = $297.50
Weekly Base Pay (34 hours) (JTs and BSTs)
$994.50
$1,020.00
$1,011.50
Semi-Skilled (legacy)
$15.85
$16.10
$15.85
Semi-Skilled (body shop)
$8.25
$8.25 start rate
*$0.25 increase 8/1/12 for those hired before that date.
$8.25 (not reduced due to minimum wage)
*No $0.25 increase on 8/1/12 for those hired before that date.
*Semi-Skilled (newer hires)
Start: $11.80
6 mo: $12.30
12 mo: $12.80
Start: $11.80
6 mo: $12.30
12 mo: $12.80
*$0.25 increase 8/1/12 if complete 12 months service by that date
Start: $11.55
6 mo: $12.05
12 mo: $12.55
*No $0.25 increase on 8/1/12 for those who have completed 12 months service by that date
*Apprentices (hired after 8/1/05)
1st 6 mo: $13.36
2nd 6 mo: $14.48
Next 12 mo: $15.59
Next 12 mo: $16.70
Next 12 mo: $17.82
1st 6 mo: $13.36
2nd 6 mo: $14.48
Next 12 mo: $15.59
Next 12 mo: $16.70
Next 12 mo: $17.82
1st 6 mo: $13.11
2nd 6 mo: $14.23
Next 12 mo: $15.34
Next 12 mo: $16.45
Next 12 mo: $17.57
*Apprentices (hired before 8/1/05)
1st 6 mo: $13.36
2nd 6 mo: $14.48
3rd 6 mo: $15.59
4th 6 mo: $16.70
5th 6 mo: $17.82
6th 6 mo: $18.93
7th 6 mo: $20.04
8th 6 mo: $21.16
1st 6 mo: $13.36
2nd 6 mo: $14.48
3rd 6 mo: $15.59
4th 6 mo: $16.70
5th 6 mo: $17.82
6th 6 mo: $18.93
7th 6 mo: $20.04
8th 6 mo: $21.16
1st 6 mo: $13.11
2nd 6 mo: $14.23
3rd 6 mo: $15.34
4th 6 mo: $16.45
5th 6 mo: $17.57
6th 6 mo: $18.68
7th 6 mo: $19.79
8th 6 mo: $20.91
Lube Rack Tech
$8.25
$8.25 start rate
*$0.25 increase 8/1/12 for those hired before that date
$8.25 (not reduced due to minimum wage)
*No $0.25 increase on 8/1/12 for those hired before that date
                       
*Employees who are hired before 8/1/12 into a job classification with a wage progression (semi-skilled techs—newer hires and apprentices of any hire date) will not have their wages reduced from its current level on 8/1/12, but the wage at the next progression step will be reduced by $0.25. Employees who are hired into such classifications on or after 8/1/12 will be hired at a start rate that is $0.25 lower, as listed in the chart above (third column).                        
                         
                         
Chicago-area Auto Dealers IAM Local 701 Standard Automotive Agreement: Aug. 1, 2012 Wage Rates

 
 
 

New law helps dealers get car titles quicker

August 3, 2012

Dealers soon can obtain a lien release certificate of title from the Illinois secretary of state’s office for $20, under a law signed July 20 by Illinois Gov. Pat Quinn. The matter cleared both chambers of the Illinois General Assembly without a dissenting vote.
 
The new law attempts to accelerate the process because some lienholders do not act quickly to release titles of trade-ins after dealers pay off the loans. Some dealers have been ticketed for not having titles for all the vehicles on their lots, and current laws subject those dealers to having their licenses to sell suspended or revoked.
 
While lienholders are required to release a title within 20 days after a loan balance is settled—10 days if it is settled with cash—banks increasingly ignore the deadlines, citing far-flung centralized locations where all payments must be routed and other reasons.
 
The new lien release certificate of title will dramatically speed up the turnaround of traded-in vehicles.  With the governor’s signing of this legislation, the secretary of state’s office is programming its computer systems and preparing forms and procedures to implement this legislation. Dealers should expect to be able to take advantage of the lien release certificate of title beginning in mid-September.
 
The new law also changes the criminal provision for violators of the Illinois Vehicle Code, giving secretary of state investigators the discretion to issue an administrative citation rather than subject dealers to criminal penalties.
 
 

IRS Form 8300 recently updated

August 3, 2012

The Internal Revenue Service on July 8 revised Form 8300 for reporting receipt of cash in excess of $10,000. The revisions do not appear to affect the two pages of the form that are completed by a dealer.
 
The changes appear to be limited to minor editorial revisions and revisions to the instructions concerning taxpayer identification numbers.
 
The form does, however, mandate that it is the version to be used for transactions after June 30, 2011. Consequently, dealers should discard any hard copies of IRS Form 8300 that are not the June 2011 revision.
 
Go online to www.irs.gov and access the online Form 8300. It can be filled in online. And by using that method, you will know you are using the most current form.
 
 

Subprime car loans return to favor with lenders

August 3, 2012

Consumers without top-tier credit are finding it easier to get new car loans, as banks and other lenders are lowering the scores needed to qualify.
 
While that means additional sales for automakers, and enables more motorists to get into new cars and trucks, it raises questions as to whether lenders are falling into the same risky lending practices they followed before the recession.
 
“There are a lot of lenders now that are into the subprime business,” said one dealership sales manager. “What used to be a good score at a 650 or 700, now 550 is a good score.”
 
During the first quarter of this year, total U.S. car loans totaled $52.5 billion. That’s 49 percent higher than the same period in 2009 — the recession’s low point — according to Equifax’s National Consumer Credit Trends Report. Also during the first quarter, the average amount financed on new vehicles rose by $589, to $25,995, and for used cars by $411, to $17,050.
 
Furthermore, buyers are stretching out payments for longer terms: The average length of new- and used-vehicle loans jumped a full month during the first three months of this year, to 64 and 59 months, respectively.
More loans and looser lending restrictions have helped boost new-car and -truck sales to levels not seen in four years. Estimates call for 14 million to 15 million vehicles to be sold in the U.S. this year, about 30 percent higher than in 2009.
 
“We’ve certainly seen the market loosen up for subprime,” said Melinda Zabritski, director of Automotive Credit at Experian, a consumer and business credit reporting firm.
 
“We’re seeing it very close to what it was in pre-recession levels, but those days we probably will not return to. I think you’ll still see the loans themselves a little more conservative.”
 
Bank risk professionals expect a lending increase to borrowers with less desirable credit. The analytics company FICO polled 192 risk managers at banks throughout the United States last month and found that half predict growth in subprime auto loans will lead all other sectors for 2012.
 
It’s easier for banks to loan money when interest rates are low and the rate at which banks loan money to one another is close to zero percent. That’s one reason subprime auto lending is already on the rise.
 
Room for subprime to grow
 
Subprime consumers generally have credit scores of 640 and below, though cutoffs vary by lender. Scores range from 300 to 850; people with scores above 720 are generally given favorable interest rates, because they are seen as more likely to pay their bills.
 
The average credit score for people financing a new vehicle remained substantially higher than subprime during the first quarter, but it dropped six points, to 760; for used vehicles, the average credit score dropped four points, to 659, analysis by Experian found.
 
Experian, one of the major credit reporting firms, expects the average credit score for new-car buyers could fall as low as 750. That estimate is comparable to credit scores during the first quarter of 2008 — just before the collapse of the economy and auto industry — when credit scores averaged 753 for new-car buyers and 653 for used-car buyers.
 
The subprime category typically comprises about one-quarter of the new-vehicle finance market, Zabritski said. That explains why the average credit score for new-car loans is still higher than the subprime average. But there’s still room for the subprime category to grow.
 
The number of vehicle loans made to people with less-than-desirable credit jumped 11.4 percent this year. Lenders not only are loosening their leashes, but more subprime customers are also seeking out auto loans.
 
Those subprime customers, however, aren't getting the rates they could, said Hank Hubbard, president of the nonprofit Communicating Arts Credit Union in Detroit, which helps those with poor credit refinance loans at better rates. Many, he said, are paying 25 percent a year.
 
"You could argue from a social perspective that disadvantaged people paying 20 percent interest rates is not such a good thing," said Edmunds.com CEO Jeremy Anwyl, "but from a credit perspective, it's not a bad practice."
 
Consumers 'have a choice'
 
Hubbard said for the past few years, many of the credit union's customers who have credit scores below 640 had the impression they would not be approved for an auto loan — or would be approved, but only with a sky-high interest rate.
 
"People don't realize they have a choice," Hubbard said. "(The lenders) are taking people with decent credit and charging them high amounts." He points to a story of one man who was saddled with a six-year used-car loan with a 24.95 percent annual percentage rate. He had a monthly payment of $619 and was on track to pay as much in interest as he would for his 2005 GMC Yukon. CACU refinanced him twice and lowered the monthly payments to $386.
 
 

New-car fuel efficiency at new high

August 3, 2012

The fuel efficiency of new cars on U.S. roads hit an all-time high in the first half of this year, according to research released July 26 by an auto industry analysis firm.
 
The average rate was 23.8 mpg, up 1.1 mpg over the same period in 2011, said Alan Baum, principal of Baum & Associates in West Bloomfield, Mich.
 
Baum attributed the improvement to several factors. First, there are more hybrids and plug-in hybrid vehicles. Second, many new gas-powered vehicles are powered by smaller engines than the models they replaced.
 
Third, the industry is motivated by the government’s standard that will require automakers to achieve a laboratory average of 35.5 mpg by 2016.
 
“In the past, the way the fuel economy of the cars sold increased was by people reducing the size of their vehicles and in this case, we got a 1.1 mpg increase. That’s a lot in one year, and the primary reason was there was improvement in miles per gallon across the board,” Baum said.
 
Larger vehicles are getting more efficient at a similar rate of improvement as compact and subcompact cars. Higher mpg benefits consumers concerned about the environment or what they spend on gas. Automakers also are responding to changing consumer tastes.
 
“Automakers have signed on to the new fuel economy requirements, not because they’re good guys but because it’s good for business,” Baum said.
 
Luke Tonachel, senior vehicles analyst at the Natural Resources Defense Council, which sponsored the analysis, sees the benefits of better fuel efficiency extending even beyond that. “The standards provide a pathway for innovation that brings more choices for consumers,” Tonachel said. “It brings more jobs to build the technology, and it’s reducing the pain at the pump as well as our nation’s dependence on oil.”
 
But automotive consultant Jim Hall of 2953 Analytics in Birmingham, Mich., isn’t impressed. “We’re living in a time of increased fuel costs and increased sensitivity to fuel costs,” he said. “Common sense tells you fuel economy will be (a higher) consideration.”
 
But, Hall warned, “Gasoline is a commodity. It will go down again,” meaning the pump price.