July 2019 - Greater Cincinnati Automobile Dealers Association

How To Build A Respectful Workplace In Your Dealership

By D. Albert Brannen

There is honor and dignity in work. Successful dealerships understand this axiom and build workplaces where their employees are respected. As a result, they experience lower employee turnover, less employment-related litigation, and fewer problems caused by meddling unions. Their employees are also happier and more productive. This article outlines 10 tips for building a respectful workplace and reaping these benefits.

  1.  Practice The Golden Rule
    The Golden Rule says to treat others as you expect to be treated. Dealerships should treat their employees with the same level of respect and appreciation as they want from employees. On the other hand, dealerships who disrespect their employees will not get the most out of them. Their employees will be less productive, less loyal, and more likely to turn to an outside union to represent them against the employer.
  2.  Walk The Walk, Don’t Just Talk The Talk
    It is not enough for dealerships to have the proper policies or to say the right things to employees. Employees are smart enough to understand when actions are not consistent or in conflict with written or spoken words. In fact, courts even recognize that when a manager’s “actions” undermine the dealership’s policies on harassment, discrimination, or retaliation, the actions control, and the dealership loses certain affirmative defenses that might have otherwise been available for the organization to avoid or at least reduce its liability.
  3.  Lead By Example
    Another way to say “walk the walk” is to lead by example. In history, the greatest generals led their troops from the front. They never expected of their troops anything more than they were willing to do in battle. In the workplace, managers should lead by example and never expect anything of their employees that they are not committed to doing themselves. When leading by example, managers build their own credibility with employees and gain their respect.
  4.  Spend Time With Employees Every Day And Be Accessible
    To fully understand employee perspectives and be aware of changing employee sentiments, managers need to spend time with employees and to be accessible every day. Accessibility gives employees confidence that their manager will be available to help resolve any job-related issues if or when they arise. It may also help the manager spot early warning signs of union activity or employee claims of mistreatment, favoritism, discrimination, harassment, or retaliation.
  5.  Be Empathetic
    Employees have unique concerns, goals, and interests. Often times, those are not the same as their managers. In fact, they can be quite different. Professor Kenneth Kovach of George Mason University has spent decades trying to help supervisors understand the differences between rank-and-file employees in an effort to help supervisors better manage their direct reports. A key element in appreciating “where employees are coming from” is for managers to have empathy for their employees.
  6.  Establish Formal Communication Channels
    At a minimum, dealerships need to have the right formal communication channels in place. Formal channels may include, among others, group meetings and written communications such as informative websites, intranets, newsletters, or letters to employees’ homes about important news employees and their families should know. More sophisticated formal channels may include skip-channel meetings, hotlines, or 360-degree reviews. Having these types of channels in place objectively signals to employees that their employer respects its workers enough to keep them informed and to listen to them.
  7.  Keep Commitments
    Making promises or commitments to employees and then failing to follow through on them is a sign of disrespect. Managers do not have to solve every employee grievance or concern—but if a response or specific action is promised, the manager must deliver.
  8.  Tell Employees What You Want
    Employees respect bosses who honestly tell staff what is expected of them. When managers sugarcoat or dance around problems, or fail to take decisive action, they lose the respect of their employees. Likewise, when dealerships keep employees in the dark, it breeds disrespect and distrust of the dealership.
  9.  Don’t Surprise Employees
    Employees hate surprises like sudden changes in assignments, schedules, mandatory overtime, or terminations. When dealerships spring changes on employees without adequate notice, it signals a blatant disregard and disrespect for the fact that employees have lives and obligations outside of the workplace.
  10.  Expect The Best From Employees
    Dealerships that expect the best from their employees and believe in their ability to succeed generally invest more resources in them. This type of supportive, positive work environment tends to manifest the dealership’s genuine respect for its employees. Likewise, employees tend to reciprocate with more respect for their dealership.

Conclusion

Dealerships must work hard to create and sustain a respectful work environment. Respect does not come easy and it can be lost in a second. But when employees believe their dealership respects them, they are more likely to succeed at their jobs and ultimately they create fewer practical and legal problems for their dealership.

For more information, contact the author at DAbrannen@fisherphillips.com or 404.240.4235

OADA’s Workers’ Compensation Programs: Are You Maximizing Your Savings?

In August, CareWorks Comp and OADA will begin mailing quotes to dealers for workers’ compensation coverage for the 2020 policy year.  Many dealers will be in the position of considering both Traditional Group and Retrospective Group programs and determining which program offers the better opportunity for their individual dealership or dealer group.  OADA consistently provides strong programs for dealers to consider for workers’ compensation coverage, providing both a traditional group rating and the best performing retrospective group rating program for automobile dealers in the state.

OADA gives every member who qualifies for both savings program the opportunity to choose which program works best for their dealership.  If you haven’t given OADA authority to provide you with a quote for traditional and retrospective savings programs, DO NOT WAIT.  Call Sara or Matt at OADA today, or visit HERE and complete the form electronically.  There’s no cost and no obligation.  You owe it to yourself to find out what you may be missing.

Here is a brief description of the differences between OADA’s two programs:

TRADITIONAL GROUP RATING

Traditional group rating has been available in Ohio since 1991. This program is tiered allowing dealers the opportunity to reduce their premiums up front from 20% to the BWC maximum of 53%.  There is no waiting for a refund: dealers take advantage of the savings immediately by paying a reduced amount upfront.  With OADA’s traditional group rating there is virtually no risk for the current policy year.    

RETROSPECTIVE GROUP RATING

Retrospective group rating has been available to employers in Ohio since 2009. Retrospective group rating differs from traditional group rating in that instead of projecting savings by the group’s past performance, it measures the actual performance of the group for the policy year.  Any claims that are incurred by an individual member of the group will count against all program participants as it relates to potential refunds for the group.  However, OADA and CareWorks Comp strive to create a strong group of policies to protect members risk performance and investment. This has resulted in the best performing group retrospective program for automobile dealers in the state. 

There are some considerations dealers should take into account with Retrospective group rating.  First, dealers will pay their full premium (not a reduced premium as is done with traditional group).  If the group performs as we anticipate the dealership will receive a refund over a three year period at 12 months, 24 months, and 36 months one year after the policy year ends.  While the chances are extremely remote, if the whole group were to perform catastrophically, dealers would be responsible for paying additional premium.  The key to Retrospective group rating is in the underwriting. 

Remember that our underwriting has produced outstanding results for many dealers and recent data from the Ohio BWC has identified OADA’s retrospective group rating program as out-performing other retrospective programs offered to members of the automotive industry.


This article was provided by the staff of the Ohio Automobile Dealers Association.

Detect Car Dealership Red Flags

By James C. Bianchi and Edmund J. Reinhard

As the auto industry responds to changing market conditions such as ebbing vehicle sales, dealership group chief financial officers, lenders and investors sharpen their focus on dealer profitability and overall financial performance.

That’s particularly true for those dealerships that are highly leveraged due to rapid expansion in recent years.

Knowing where to look, what to watch for and what questions to ask can help prevent unpleasant surprises.

Start with Basics

Curiosity, common sense and general business judgment are essential when evaluating dealership performance.

A review should begin with verifying key financial information, how it is recorded and how it is reported.

The review should include verifying inventory existence and valuation, as well as accounts receivable, floor plan balances and proper recording of /dealership accruals.
(Wards Industry Voices contributor Ed Reinhard, left)

Potential warning signs of existing problems include:

  • Significantly aging inventory.
  • Inventory that is not regularly adjusted to market value.
  • Floorplan balances without inventory costs.
  • A recent history of aggressive, highly leveraged acquisitions.
  • New or expanded facilities that are based on planning volumes and projections rather than historical performance.
  • Significant prepaid and other receivable balances.
  • High levels of employee turnover in the accounting department.
  • Accounting staff with only minimal industry experience or formal training.
  • Delays in final closing entries and annual internal financial statements.
  • An unusually large number of year-end adjusted journal entries, especially those that go beyond the expected adjustments. That includes inventory adjustments, depreciation and provision for chargeback.

None of these indicators is necessarily proof of financial problems, but each one should be viewed as a sign that some additional scrutiny is warranted.

Dig Into Details

Factory statements are designed to track certain financial and performance indicators that are of importance to the manufacturer. These indicators are not necessarily those that matter most to dealership group owners, CFOs, lenders or investors.

In addition, factory statements are not designed to comply with generally accepted accounting principles (GAAP). Factory statements typically classify certain income and expense items differently from how a GAAP-compliant statement would classify those items. That means some commonly used ratios and metrics will differ.
(Wards Industry Voices contributor James Bianchi, left)

Most users will have several critical indicators they rely on to get a general picture of a dealership’s overall condition.

Among these are inventory-to-floor plan ratio, days aging on contracts in transit, days aging on used inventory and floor plan without costs.

Regardless of the specific data points a user tracks, they should be compared against recognized industry benchmarks and – above all – tracked over time to spot critical trends.

It is important to look past the numbers and dig into the details in order to identify the underlying financial and operational factors that drive the numbers. That means examining the supporting schedules and interim reports from which the financial statement data was derived.

Ask the Right Questions

An accurate evaluation of a dealership’s performance and financial position often comes down to asking the right questions. For example:

  • Are cash reconciliations being completed and reviewed, and are all items reasonable and current in nature?
  • Are used-vehicle values being recorded properly?
  • Are goodwill balances supported with revenue and growth in line with projections at the time of creation?
  • Are chargeback provisions recorded accurately?
  • Is service department profitability improving to offset margin pressures on new-vehicle sales?
  • Are owner distributions consistent with current-year earnings?
  • Are prepaid balances or “other assets” consistent with historical averages or expectations, or could they be hiding expenses?
  • Are receivables growing while sales are decreasing?
  • Are loans from owners or related parties larger than expected? Are they growing? Do collection issues exist?
  • Are long-term assets such as owner’s notes incorrectly recorded as current assets such as parts or service receivables – thus distorting working capital?
  • Are company vehicles recorded as inventory rather than as long-term assets – thus distorting the current ratio?
  • Are year-end audit adjustments and write-offs properly posted to the income statement or retained earnings?

These questions are a starting point, not a complete list. But they represent the inquisitive mindset necessary to evaluate a dealership’s financial position accurately.

As the industry adapts to changing economic trends and buyer demographics, it becomes even more important for owners, CFOs, lenders and investors to dig into the details behind the financial statements.

CPAs James Bianchi (james.bianchi@crowe.com) and Ed Reinhard (ed.reinhard@crowe.com) are with Crowe, an accounting and consulting firm.


Reprinted with permission from WardsAuto.

State Budget Update: Big Victory for Dealers – Legislative Leaders Retain Full Business Income Deduction

The following is an update from the Ohio Auto Dealers Association.

OADA is happy to report that Ohio House and Senate leaders have agreed on a compromise budget that retains the full Business Income Deduction (BID) for dealers and most other businesses (excluding lobbyists and attorneys) set up as pass through entities (PTEs).  Negative changes to the BID were made in both the House and Senate versions of the budget, however with continued advocacy from OADA staff, dealer members and other interested businesses, the BID was fully restored in conference committee. Governor DeWine, who played a key role in the BID negotiations, signed the budget today.

The BID allows owners of PTEs to exclude the first $250,000 in business income from Ohio income tax, with income above that threshold taxed at a 3% flat rate (versus the normal rate based on income).  OADA worked with legislators in 2013 to create the BID to help spur investment, and we have been advocating for BID retention over the last few months during the budget debate, where it has been on the chopping block to help pay for state services.

Check with your CFO or accounting team to calculate what you have realized in BID savings since 2013.  It is significant!

In addition to retaining the BID, under the state budget:

  • No increase in the CAT or sales tax rates
  • No sale tax expansion on services used by dealers and other businesses
  • No increase in the dealer title fee or dealer license fee
  • Preserves the trade-in credit on new motor vehicle purchases and the vendor discount, which is the portion of the sales tax dealers retain for collecting it on behalf of the state

OADA would like to thank the dealers, dealership employees and metro association executives for their efforts in contacting legislators to urge support for the BID retention and other issues important to our industry.  Dealer grassroots with legislators and participation in the Dealers Investment Group (DIG) remain key to our success.  Dealers may contact Zach Doran at zdoran@oada.com or Joe Cannon at jcannon@oada.com with any questions regarding the state budget, or to find out how you can join the team in supporting our advocacy efforts going forward.

Hot Air Balloons, Fireworks, Biplanes and a Car Show at The Ohio Challenge

On July 19 and 20, thousands will be in attendance in Middletown for The Ohio Challenge, Greater Cincinnati’s annual hot air balloon festival. This is the events 17th year, and takes over 300 volunteers to put on. Among the sponsors for the event are our friends at Middletown Ford.

Up to 25 hot air balloons and their pilots are expected to attend, giving attendees a chance to see them up close in action and even take tethered balloon rides during the day. At night, the balloons will light up the night sky with the Balloon Glow.

Other activities include skydiving, fireworks shows and rides in a biplane, and a car show with over 100 cars. Just up I-75, this is one of the region’s largest summer events and a great stop for a quick weekend road trip.

To learn more, go to OhioChallenge.com.

New Study From Cincinnati’s Swapalease.com Compares the Cost of Ridesharing and Leasing a Vehicle

Many have predicted that ridesharing platforms, such as Uber and Lyft, might in the near future come to replace the private vehicle as the primary mode of personal transportation. One of the main arguments used to back these claims are the expenses users could avoid by ditching their car. Without parking, fuel, insurance and maintenance, a city-dweller, they argue, need only rely on their ridesharing service of choice for the occasional trip to the grocery store, airport or office. A more careful analysis, such as the study just released from Cincinnati’s Swapalease.com, tells us that in fact, consumers who rely on ridesharing service pay nearly twice as much annually as those who lease a vehicle.

The Swapalease.com study compared the costs of leasing vs. ridesharing based on average distances traveled and costs in major U.S. cities, where the wide availability of drivers make relying exclusively on ridesharing a realistic possibility. With an average annual mileage of 10,000 miles traveled, an average fuel economy of 25 mpg and an average fuel cost of $3.00 per gallon, the average cost of leasing a vehicle—inclusive of insurance, parking and maintenance—came to $5,880 annually. This contrasted to over $11,000 annually for someone who used ridesharing exclusively, based on an average of 17 trips per week, plus the occasional rental car.

The data from this study echoes AAA’s findings from last year that found that relying exclusively on ridesharing was even more expensive than owning a new vehicle in 20 major urban markets. For those who attended our Spring Voice of the Dealer Luncheon, you may remember Peter Welch exploring this topic in his presentation. In addition to the savings of private vehicle ownership, Peter shared the findings of a series of focus groups NADA conducted on the topics.

Unsurprisingly, when asked if they would rather keep their personal vehicle or rely exclusively on ridesharing for personal transportation, an overwhelming 89% (including 81% of millennials) preferred to keep a personal car. 93% reported that a personal vehicle provided freedom. In addition, most participants valued their time even over any potential savings associated with ridesharing. This was another mark against ridesharing, which entails an average wait time of 6 minutes per trip, adding up to thousands of hours a year. One participant’s quote summarized the general attitude succinctly: “Why would I want to give up my car when I could just keep my car AND rideshare?”

Nonetheless, Peter pointed to efforts either underway or openly discussed to undermine private vehicle ownership. This ranged from reducing public parking in urban centers, to increasing taxes on gas and vehicles, to requiring either special permits for private ownership or outright banning it altogether. While these proposals currently remain hugely unpopular, (65.1% opposed efforts to prohibit private vehicles in city centers, 67% opposed reducing parking spots) Peter reminded us of the necessity to remain watchful and advocate forcefully against such efforts where they attempted.

It is heartening to see that the Swapalease.com study confirms the AAA findings of last year to show that private vehicles, whether owned or leased, are both less expensive than relying exclusively on ridesharing services.


This article was originally published in GCADA’s weekly newsletter, Wednesday Weekly on July 17, 2019.

Component 2 EEO-1 Survey Due by September 30, 2019

For over 50 years, the U.S. Equal Employment Opportunity Commission’s (EEOC) has required dealerships with more than 100 employees to file annually an Employer Information Report (EEO-1 Survey). The EEO-1 historically has asked for the number of employees by sex, race, ethnicity and job category. Dealerships must also display an “EEO is the Law” poster.

The EEO-1 Survey was expanded recently and is now more complex. Component 1 of EEO-1 still asks for the employee data listed above. The Component 1 EEO-1 Survey data for 2018 was due to the EEOC by May 31, 2019.

The new Component 2 EEO-1 Survey asks for hours worked and W-2 pay information, by category. On July 15, 2019, the EEOC opened an online portal through which, by September 30, 2019, covered dealers must submit Component 2 EEO-1 Survey data for 2017 and 2018. Covered dealerships should be reciving portal system login information from the EEOC via USPS letter and email. The EEOC offers FAQs and supplemental materials to assist with submission of Component 2 data. Lastly, the EEOC offers help desk assistance at EEOCcompdata@norc.org or 877.324.6214. Questions can also be directed to NADA Regulatory Affairs at regulatoryaffairs@nada.org. Mike Alford
Chairman, Regulatory Affairs Committee

Why Everyone Should Attend an Auto Show

By Charlie Gilchrist, 2019 NADA chairman

If you want to explore the latest and greatest that the auto industry has to offer, then without a doubt your first stop should be a local auto show. Many elements of our industry are evolving due to advanced technology and ever-changing market conditions. But auto shows remain a beacon of influence because it’s where consumers can still touch and feel products across all segments and brands. It’s no coincidence that more than 11 million consumers are attending U.S. auto shows every year – with 68 percent of them planning a new-vehicle purchase within 12 months.

Sure, I proudly sell vehicles to the greater driving public, but I am also a consumer myself. Through the eyes of a buyer and as a Texan, there is nothing that excites me more than seeing the new 2020 Ford Explorer or the Mustang Shelby GT 500 on display, often for the very first time. An auto show is an amazing one-stop destination where people like me can get the first look at the best OEM’s have to offer, from redesigns of iconic models to a showcase of future offerings. Shows are also one of the few places where a brand’s style is personified by the vehicles in the annual line-up—and that style becomes congruent with a customer’s own lifestyle.

The greatest impact of an auto show, however, is that it exerts tremendous influence over a customer’s vehicle purchase consideration and it greatly promotes brand loyalty. In fact, the data continues to demonstrate that auto show attendees are consistently twice as likely to make a new-vehicle purchase within a year of visiting a show versus the general population. Many of the customers I’ve spoken with have expressed that attending a show makes them feel more confident and informed about a vehicle they’ve been waiting to purchase. Auto shows also have the advantage of strengthening relationships with loyal brand followers while at the same time introducing the public to new brands. In fact, 21 percent of attendees have purchased from a brand they’ve never considered before visiting an auto show.

My dealerships are located in the Dallas-Fort Worth area, and I’m proud to say that the 2019 DFW Auto Show in Dallas was a huge success. The show’s Ride & Drive program, in particular, was sold out and it received participation from 13 OEMs. The DFW Show capitalized on its ability to showcase the latest technology which continues to be a changemaker in the selection of a new vehicle. At the Fort Worth Show, we will be adding educational booths which we think will be extremely beneficial for students and attendees who are curious about today’s technological advancements. I have no doubt that attendee numbers will continue to rise at my local auto show.

The reality is that there aren’t many places where consumers can get behind the wheel of multiple brands under one roof, get a personal experience and a glimpse into their driving future. I am an eager supporter and attendee of auto shows, and I hope you are too!