CATA News

[From the Desk of CATA Council, Dennis O’Keefe] Dealers are asking how can I retail vehicles under recall and still protect myself? The answer is probably not what we want to hear.

First of all, most dealers understand that they are prohibited by federal law from retailing new vehicles that are subject to recall. But how about used vehicles? Is a notice of the recall to my customer sufficient? What if I have my customer execute a Hold Harmless Agreement? How do recalls affect Certified pre-owned vehicles? And what are my obligations to notify customers in the service lane?

As an example of a notice of an air bag deficiency, Carfax uses the following language: "Specifically, in some vehicles, the driver's front airbag inflators could produce excessive internal pressure upon deployment. If an affected airbag deploys, the increased internal pressure may cause the inflators to rupture (break apart) and deploy abnormally. In the event of an inflator rupture, metal fragments could pass through the airbag cushion material possibly causing serious injury or fatality to you or others in the vehicle. Past ruptures like this have killed and injured vehicle drivers." Certainly, such language might dissuade a customer from purchasing this vehicle. But will it protect you, the seller, from possibly being sued and being held liable? Hardly! To the contrary, what such language accomplishes is to show that you, the dealer, had actual knowledge of a potential injury-causing condition and sold the vehicle notwithstanding, a recipe for a lawsuit.

Some manufacturers are suggesting notice language for possible future air bag recalls. Again, such notice, while valuable to the customer, would hardly protect you, as again you now have knowledge of a potential injury-causing condition.

What about having your customer sign a Hold Harmless Agreement? While such an agreement MIGHT protect you from a personal injury claim by your customer, it would not protect you from a claim from a passenger or third party who sustained injury due to a faulty air bag deployment or other recall defect. Again, a recipe for a lawsuit.

So, it appears the only way to protect against potential personal injury liability is to not retail the vehicle until it is fixed. This means potentially a lot of vehicles sitting on your lot and depreciating-not a pretty picture, but vastly superior to a multi-million-dollar lawsuit.

What does this mean for CPO, "warranted" or "guaranteed" vehicles with open recalls? Back in January, because of investigations concerning this issue, the FTC entered into a consent decree with General Motors and several dealers that prohibits dealers from claiming their used vehicles are safe or have been subject to a rigorous inspection (CPO) unless they are free of unrepaired safety recalls or unless the companies clearly disclose the recalls in close proximity to the inspection claims. This standard would apply to all.

The so-called FAST Act (Fixing America's Surface Transportation Act) of 2015 provides that a dealer can lose its federal statutory entitlement to be fairly reimbursed for performing safety recall repairs if it fails to notify an "in-brand" service customer of any unremedied safety recalls applicable to their vehicles, if their franchise, operating, or any other agreement with their manufacturer requires such a service lane notice.

Because of the above, dealers might want to consult with their own counsel. However, the CATA urges all dealers to log on to the safercar.gov website, on a regular basis as it is frequently updated, to check the VIN numbers of all used vehicles in inventory prior to sale. The website apparently can retain the information as to who logged in to check a particular VIN, so use this feature to your advantage, not your disadvantage. Don't let your employees make a mistake that will cost you! In the service lane, make sure you are notifying customers about in-brand service recalls, and obtain an acknowledgement from those customers stating either that they authorize recall work to be done, they are declining the recall work, or they will return to have the work done when the remedy becomes available.

[From CATA Preferred Partner, ACV Auctions] In the automotive retail industry, we can’t know what tomorrow will bring. But we can prepare for it the best we can. Not knowing what turns are ahead for our industry doesn’t put us behind the 8-ball. Instead, it allows us to learn and thrive. Currently, we are nearing the end of Q4 in 2023. Are we where we thought we would be a year ago?

Maybe.

I’m sure some guesses have been long forgotten. Perhaps some strong voices made predictions that stuck. The truth is, however, that we are at a point where we have decisions to make about the future. Automotive retail is robust even in the face of disruptions. The question will remain as to how we can overcome struggles and move from surviving to thriving. To answer this, we need to uncover where value rests in the process for the modern consumer. Everything you do from sourcing, managing, and selling automobiles needs to be done in a proactive manner.

Start with how you acquire. For many dealerships, what you can’t see can hurt you. This applies to the appraisal process and how you source inventory. If you are operating with blinders on, deploying an inefficient trade-in process, or not breaking free from outdated practices, you are putting yourself at risk.

What does this mean?

Simply put, the survival of your lot and business depends on vehicles. Automobiles are the lifeblood of your operations. However, the used car market continues to ebb and flow. This means that the better your stock, the better your ability to provide options to your community. If you couple a strategic approach to consumer acquisition with a data-backed philosophy, you gain insights that tell you not only what and why to stock…but where to get it.

There are plenty of modern solutions available to help you remedy this situation. It’s up to you to pick one and move beyond a simple sandwich board out in front of your lot.

But, don’t stop there. Build value into how you manage your inventory with a next-generation system. Never before has there been such a glut of solutions for your dealership. With data as a component, you learn the best cadence for your daily, weekly, and monthly tasks. You’ll get the upper hand on merchandising and marketing, and discover new avenues to connect with consumers and improve the overall experience. This impacts customer satisfaction, retention, and brand loyalty.

Now, value will never go out of style. As it stands, there are different approaches and styles to how a dealership can sell vehicles to the public. But every shopper is different. Their story, their trade-in, their desire…it produces a unique method for how they want to engage with your dealership, find their automobile, and finally drive it home.

Never discount how much the brick-and-mortar or digital shopping experience can bring a smile to a consumer’s face. Your dealership needs to offer multiple touchpoints. And each of these touchpoints needs to provide value. Always be giving and thinking outside the box. What would you want if you were purchasing a vehicle for yourself?

While many consumers will view buying a car as simply a transaction, you need to build further value into the process in order to create repeat business, drive brand awareness, and manage your reputation. Specifically for the importance of your ratings, encourage customers to engage with you on multiple levels through social media or search engines. Google is your friend and brings many options to enhance your brand’s presence online.

However, not seeing the full picture can hurt you. Much like if you do not take the time to properly assess a vehicle or walk a customer through the appraisal process, ignoring the building or nurturing aspect of the transaction will leave a bad taste in the shopper’s mouth.

Value is valuable. It’s up to you to break down your operations into a series of spots where you can give more to the customer. Only then will you be able to integrate new technologies that streamline consumer acquisition, maximize inventory management, and bolster your ability to sell more vehicles at a higher gross. Modern consumers are looking for benefits. And modern dealerships are poised to deliver value more than ever before.

The NADA recently sent a letter urging U.S. House members to vote in favor of H.R. 4821, the House Interior-Environment Appropriations bill, which includes a one-year limitation to stop the Environmental Protection Agency (EPA) from using funds to finalize or implement its unrealistic electric vehicle (EV) mandate that the fleet be 67.5% by 2032. H.R. 4821 passed the House on November 3.

 The inclusion of the “no funds shall” language was aided by the McClain letter, which urges Republican leadership to preserve the House language stopping these EV mandates and attempting to keep the provision in the final Fiscal Year 2024 funding bill. That letter currently has more than 200 signers by state (issue brief). There will also likely be a Democratic letter to discuss the problems with the EV mandate.  

Along the same line, the CATA has heard from a handful of its dealer members who signed on to an electronic petition that has been circulating urging the Biden administration to “tap the brakes” on the proposed EPA mandates. More than 1,000 dealers have signed the petition. Read and consider the petition here.

The IRS recently announced adjustments affecting the dollar limitations on 401(k) plans for tax year 2024. Since these changes impact everyone who currently sponsors (or is considering sponsoring) a 401(k) plan, the NADA is sharing a chart reflecting the changes with all members, not just those who currently sponsor a NADA Retirement plan.

Now is the time to plan any changes to your personal 401(k) contribution strategy for 2024 and to ensure that your payroll system will capture the new limits beginning in January. Helping dealers and their employees reach their financial goals is our mission. Let us help you ensure that the 401(k) plan that you sponsor is keeping up with the needs of your dealership.

The CATA in partnership with the NADA and Empower have created a unique relationship through which Empower offers flexible, competitive 401(k) plans with fiduciary support and an award-winning service model. For more information, please contact us directly or complete a request for a plan comparison. CATA dealers interested in learning more or seeking to schedule a plan comparison can do so by calling Joseph Orlando at 312-404-3232.

The NADA organized a Zoom meeting earlier this week for automobile trade association leaders from across the country with Hyundai’s VP of Sales & Marketing Sean Gilpin to gather more information from Hyundai on its recent partnership announcement with Amazon.

We’ve recapped some of the key points here:

• According to Hyundai, the primary objective of program was to deliver innovative experiences and reach new audiences/customers.
• The current structure of the partnership is in a pilot program/beta testing only. Furthermore, this is only open to Amazon employees and their friends/family members—at least at this time during the pilot.
• 8 dealers are in the pilot and most dealers were selected due to proximity to larger Amazon offices.
• The 18 dealerships in the pilot are represented within five states: Seatle, LA, NYC, Atlanta and Denver.
• Pilot launch date is January 2024. General availability launch date (based on feedback/key learnings received from pilot) will launch in April 2024. Hyundai’s goal is to share key learnings from pilot with the NDAC in February 2024 prior to the General Availability launch date in April.
• The process is as follows: the vehicle is discovered via Amazon and the checkout includes the deal jacket, pricing rebates, lending, products all occur via the individual dealer. Hyundai Capital is the only lender. The final transaction, paperwork and vehicle delivery will be finalized at the dealership.
• Complaints/issues with a transaction? Complaint will go to everyone: Hyundai, dealer and Amazon and the parties will work it out together.
• There are no fees for the dealers to participate in the Amazon program (opt-in only), nor are there fees for dealers to integrate its systems.
• Amazon will take the deposit and then distribute that to the dealer (this is the same process that goes for all brokers on Amazon). Amazon will not store social security numbers or other personal information.
• If the customer doesn’t qualify for financing via Hyundai Capital, then the customer will be notified and sent to the dealer to explore other options.
• Regarding whether dealers can offer additional packages/add-ons to the customer? Right now, Hyundai Capital is the only financing option, but perhaps down the road (after pilot) there will be a menu of options from which the consumers may choose.
• Regarding the compensation structure between Hyundai and Amazon, there is no other monetization (i.e. Amazon isn’t getting a cut of the vehicle sold via its platform) other than the added value of the media partnership between Hyundai and Amazon.
• In regard to Amazon’s investment in Rivian stock, the question “Is this a learning for Amazon to learn the process and business at Hyundai dealers’ expense?” Sean Gilpin says he can’t comment on that model on behalf of Amazon, but he did point out that Cox Automotive has invested in brands like Rivian and Lucid.
• What about Amazon’s return policy? All vehicles are backed by Hyundai’s Shopper’s Assurance programs which translate to the individual dealer.
• Trade-ins are not part of the initial pilot launch. Hyundai says that trade-ins would be incorporated down the road, but that Hyundai will count on dealers’ guidance to best facilitate that process. Amazon isn’t in the car business, which is why they want to partner with Hyundai on this process.
•  No comparison to Costco or Sam’s Club programs, according to Hyundai, other than the loyal customer base/cost transparency. The comment was that Dealertrack programs are more similar in that they help the customer locate the vehicle but the transaction takes place via the dealer.
• NADA will ask for a statement from Amazon regarding how customer data collected via this process will be utilized. It was noted that there are varying privacy laws per state so gathering this information is critical prior to the pilot launch (i.e. will dealers need to alter their disclosure agreements).

We will continue to share more once additional information becomes available throughout the beta program.

The Western Golf Association (WGA) awarded Dennis O’Keefe, CATA general counsel, with the Donald D. Johnson Lifetime Achievement Award for his work with the Evans Scholarship. The mission of the Western Golf Association/Evans Scholars Foundation is as follows: “We change lives — on golf courses, in classrooms, and in communities. Our world-class amateur and professional golf events enable us to provide deserving caddies with transformational college educational experiences that go well beyond full tuition and housing scholarships. In doing so, we prepare young people to become leaders who give back so that others may follow.”

O’Keefe served as WGA Director in 1992 and as Chairman from 2014-2015. He was instrumental in bringing the Western Amateur to the Glen View Club in 2021, when the club raised $1 million for Evans Scholars.

Congratulations to Dennis O’Keefe!

We all know dealers are the pillars of their communities and raise money for local charitable organizations throughout the year. The CATA wants to help spotlight its dealer members’ charitable efforts, throughout the holiday season and all year long.

Please send any information, press releases, images, videos, etc. to Communications & Marketing Manager Hayley Feichter for a special spotlight in our next e-Headlines and for our social media channels.

[From the Herald-News] The mayor of Joliet reverted to his business role Thursday when hosting a ribbon-cutting for the largest Hyundai dealership in North America. The 67,500-square-foot dealership building on Essington Road is three times the size of Terry D’Arcy’s former Hyundai location.

“It’s the biggest in North America,” D’Arcy said while conducting a tour of the new facility. “I have a lot of faith in Hyundai. I plan to grow into it.”

The Joliet Region Chamber of Commerce with D’Arcy held a ribbon-cutting ceremony Nov. 9. The front showroom area was spacious enough to hold the large crowd that attended. D’Arcy was joined by Tia Battle, Hyundai director and general manager for the central region, and others for the event.

“We are so very happy that you are part of the Hyundai family,” Battle said at the ceremony, noting that D’Arcy is part of the Hyundai Brand Ambassadors group that includes the top dealers in the nation.

Battle mentioned some of D’Arcy’s other achievements beyond being elected mayor of Joliet in April. He served as president and chairman of the Chicago Auto and Trade Association and also is a past chairman of the Chicago Auto Show.

The Hyundai dealership at 2000 Essington Road sits next to the D’Arcy Buick-GMC dealership on 25 acres of land where D’Arcy has established his Joliet business. He also has a dealership in Morris for Chevrolet, Buick and Cadillac vehicles. D’Arcy has been a Hyundai dealer for 23 years. He has been an auto dealer for 32 years.

The car wash at the Joliet property can wash 80 vehicles an hour, a feature D’Arcy said comes in handy, as every vehicle that gets serviced also gets a car wash. The Buick-GMC and Hyundai dealerships each have 38 service bays.

Customers may not notice it, but as they drive into the service area, they cross over a fixture equipped with technology to measure tire tread depth, check the brakes and conduct other safety checks. “It takes 40 pictures of your car,” D’Arcy said. “This is the latest technology.”

The Hyundai dealership is equipped with eight charging stations – four on the outside and four on the inside – for electric vehicles. In a matter of weeks, Hyundai customers will be able to bring their vehicles back to the dealership for charging, which can take a half-hour, and wait inside where a customer service area includes Starbucks coffee machines. The dealership also features an indoor staging area, where a buyer’s car is parked right by the desk where the transaction is completed.

D’Arcy bought the Essington Road property 20 years ago. He opened the Buick-GMC dealership 15 years ago, and that facility has doubled in size since he opened it.

The Hyundai dealership may be a little large, but D’Arcy said it’s built for expansion. “We want to grow into it,” he said, “not out of it.”

Kia continues to take comprehensive action to support our customers in response to this situation that has been created by criminals using methods of theft promoted and popularized on social media to steal or attempt to steal certain vehicle models.

Kia strongly encourages eligible customers to have the software upgrade that developed and rolled out earlier this year installed. The upgrade is designed to restrict the operation of the vehicle’s ignition system should a potential criminal attempt to steal a locked vehicle without the key, and Kia remains confident that this upgrade further enhances the vehicle’s security once it is installed. To date, close to 900,000 vehicles nationwide have received the upgrade and Kia continues to spread awareness about its availability by establishing a dedicated website with detailed information here, hosting off-site events in multiple cities – Milwaukee, Cincinnati, St. Louis, Minneapolis, Baltimore, Rochester, Seattle and Philadelphia – to make it easier for eligible customers to have the upgrade installed, and partnering with Carfax to inform owners that their vehicle is eligible for the upgrade. Planning for similar events in the Chicago area in coming months has commenced.

Kia will also continue to provide steering wheel locks to owners of impacted vehicles that are not eligible for the software upgrade at no cost to them. These free steering wheel locks further enhance the vehicle’s security and can serve as a theft-deterrent for potential car thieves. Kia customers can obtain free, Kia-provided locks through their local law enforcement or they can request a steering wheel lock from Kia directly through the dedicated website. To date, Kia has distributed more than 300,000 locks and Kia will continue to provide them as they are needed. Earlier this year, Kia also announced an agreement that will allow customers who have been impacted by vehicle thefts to receive additional benefits and the brand is hopeful that the individuals who have been affected will soon be able to access these benefits.

Kia feels lawsuits filed by municipalities against the brand, like the one filed by the city of Chicago earlier this year, are without merit and should be dismissed. Like all Kia vehicles, the specific models at issue in this case are subject to and comply fully with the requirements outlined in applicable Federal Motor Vehicle Safety Standards, including FMVSS 114 that governs theft protection measures. Additionally, The National Highway Traffic Safety Administration (NHTSA) has publicly stated that it has not determined that this issue constitutes either a safety defect or non-compliance requiring a recall under the National Traffic and Motor Vehicle Safety Act.

Kia is actively working cooperatively with law enforcement agencies in the city of Chicago and across the country to combat car theft and the role social media has played in encouraging it and remains committed to supporting customers and to vehicle security.

The Chicago City Council has passed the new Chicago Paid Leave and Paid Sick and Safe Leave Ordinance (the “Ordinance”).

Covered Employers and Employees

The Ordinance applies to all employers with employees in Illinois. The Ordinance covers employees who, in any two-week period, perform at least two hours of work while physically present within the geographic boundaries of Chicago.

The Ordinance does not affect the validity or change the terms of a sick leave or PTO policy in a valid collective bargaining agreement (CBA) in effect on January 1, 2024. Following that date, the requirements of the Ordinance may be waived in a bona fide CBA if the waiver is set forth explicitly in the agreement in clear and unambiguous terms. Employees working in the construction industry who are covered by a bona fide CBA are exempt from the Ordinance.

Accrual, Carryover, and Frontloading

On January 1, 2024, or when employment begins – whichever is later – covered employees will accrue one hour of Paid Sick Leave and one hour of Paid Leave for every 35 hours worked. Time will be accrued in whole-hour increments and not in fractions of an hour. However, employers with more generous policies can maintain a monthly accrual. Exempt employees are presumed to work 40 hours per workweek for the purposes of accrual unless their regular workweek is less than 40 hours, in which case paid leave accrues based on that regular workweek.

Employees are entitled to accrue up to 40 hours of Paid Sick Leave and 40 hours of Paid Leave in a 12-month accrual period. Employees may carry over up to 80 hours of Paid Sick Leave and up to 16 hours of Paid Leave from one 12-month accrual period to the next.

In lieu of accruing time, employers may frontload 40 hours of Paid Sick Leave and 40 hours of Paid Leave on the first day of the 12-month accrual period. If the full 40 hours of Paid Leave are frontloaded at the beginning of the 12-month accrual period, unused time does not carry over from one 12-month period to the next. The unused time can be forfeited unless the employer denies access to the time in a manner that prevents the employee from having meaningful access to their paid time off, in which case the employee must be permitted to carry over the denied hours. Importantly, frontloading 40 hours of Paid Sick Leave does not eliminate an employer’s obligation to carry over up to 80 hours of unused Paid Sick Leave from one 12-month accrual period to the next.

To summarize, because the Ordinance does not impose usage caps, if an employer selects an accrual method, an employee could be entitled to use up to 56 hours of Paid Leave and 120 hours of Paid Sick Leave by the employee’s third 12-month accrual period. If an employer instead selects the frontload method, an employee would still be entitled to use up to 120 hours of Paid Sick Leave by the employee’s third 12-month accrual period, but they would not have more than 40 hours of Paid Leave to use in a single 12-month accrual period.

Using Leave

Employees may not use their Paid Sick Leave until they have completed 30 days of employment, and they may not use their Paid Leave until they have completed 90 days of employment.

Employers may set a reasonable minimum increment of use for Paid Sick Leave and Paid Leave. The minimum increment for Paid Sick Leave may not exceed two hours and the minimum increment for Paid Leave may not exceed four hours. If an employee’s shift length is less than the minimum increment of use, the minimum increment of use will be the length of the employee’s scheduled shift.

Employees may choose to use Paid Sick Leave or Paid Leave prior to using any other leave provided by the employer or by the city, state, or federal law.

Reasons for Use

Paid Leave may be used for any reason. Paid Sick Leave may continue to be used for the same reasons employees can take leave under the current Chicago Paid Sick Leave Ordinance, namely:

Requesting and Documenting Leave

Employers may require up to seven days’ advance notice of a foreseeable need for Paid Leave or Paid Sick Leave. If the need for Paid Sick Leave is unforeseeable, employers may require notice as soon as practicable on the day the employee intends to use the Paid Sick Leave. The Paid Sick Leave notice requirement will be waived in the event the employee is unable to give notice because the employee is unconscious or otherwise medically incapacitated.

Employers may not require documentation for the use of Paid Leave. However, as with the current Chicago Paid Sick Leave Ordinance, an employer may require certification that Paid Sick Leave was used for a permissible reason for absences of more than three consecutive workdays. Reasonable documentation may include the following:

The employee may choose which document to submit and may not be required to provide more than one document per incident of violence or perpetrator of violence. The employer may not delay commencement of Paid Sick Leave or delay wages because the employer has not received certification.

Using Existing Leave Policies

Employers may use their existing paid leave policies for compliance. If an employer has a policy that grants Paid Leave or Paid Sick Leave in an amount and manner that meets or exceeds the requirements of the Ordinance, the employer is not required to provide additional Paid Leave or Paid Sick Leave. However, the existing policy will need to be modified to comply with all other aspects of the Ordinance. If an employer’s current Chicago paid sick leave policy does not comply with the requirements of the new Ordinance, any Paid Sick Leave the employee is entitled to roll over from one 12-month accrual period to the next must be transferred to Paid Sick Leave under the new Ordinance.

Unlimited PTO Policies

The Ordinance explicitly addresses the intersection with so-called “unlimited paid time off” policies. If employers immediately provide unlimited paid time off on the employee’s first date of employment and the beginning of each subsequent 12-month accrual period, the employer need not track any carryover of unused time. Employers may not require preapproval for paid time off offered under an unlimited policy.

Even though accruals are untracked under an unlimited paid time off policy, employers must pay employees the monetary equivalent of 40 hours of paid time off minus the hours of paid time off used in the 12-month accrual period upon an employee’s termination, resignation, retirement, separation, or transfer outside of the geographic limits of the City, unless otherwise provided in a CBA. If the employee used more than 40 hours of paid time off in the 12-month accrual period prior to separation or transfer, the employee would not owe the employer compensation.

Rate of Pay

Employees must receive their regular rate of pay when using Paid Sick Leave and Paid Leave, which includes continuing health care benefits if the employee receives health care benefits from their employer. The regular rate of pay for nonexempt employees will be calculated by dividing the employee’s total wages by total hours worked in full pay periods of the prior 90 days of employment. Wages do not include overtime pay, premium pay, tips or gratuities, or commissions. However, an employee’s hourly rate of pay for leave under the Ordinance cannot drop below the employee’s base hourly wage or the applicable minimum wage.

End of Employment, Rehire, and Transfer

If an employee is transferred to a separate division, entity, or location but remains employed by the same employer, the employee is entitled to all Paid Sick Leave and Paid Leave accrued at the prior division, entity, or location and is entitled to use the accrued leave at the new division, entity, or location.

Upon an employee’s termination, resignation, retirement, other separation, or transfer outside of the geographic limits of the City, certain employers are required to pay the employee the monetary equivalent of all unused accrued Paid Leave, dependent on the number of covered employees. Employees working outside Chicago or in other states are not counted toward these thresholds. Small employers (1-50 covered employees) are not required to pay out unused Paid Leave upon separation or transfer. Medium employers (51-100 covered employees) are required to pay out up to 16 hours of Paid Leave on separation or transfer through December 31, 2024. On or after January 1, 2025, medium employers will be required to pay out all unused Paid Leave on separation or transfer. Large employers (>100 covered employees) must pay out all unused Paid Leave upon separation or transfer effective January 1, 2024.

If an employee has not been offered a work assignment for at least 60 days, the employer must notify the employee in writing that the employee may request a payout of their accrued Paid Leave.

Employers are not required to pay out Paid Sick Leave upon termination, resignation, retirement, separation, or transfer outside of the geographic limits of the City.

Overlap with State Law

Chicago employees will be covered by the Ordinance only, not the Illinois Paid Leave for All Workers Act.

Contact your HR and employment law partner and have your handbook reviewed and updated by our consulting and legal team. For assistance, contact us at 423-764-4127 or by email at sesco@sescomgt.com.