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  • Friday, April 30, 2021 5:44 PM | Anonymous
    In garages and driveways across America sits a machine with more lines of code than a modern passenger jet. With an internet link, today’s cars and trucks can report the weather, pay for gas, find a parking spot, route around traffic jams and tune in to radio stations from around the world. Soon they’ll speak to one another and alert drivers to sales as they pass favorite stores. And one day, they’ll even drive themselves.
    While consumers may love the features, hackers may love them even more. And that’s keeping many in the auto industry awake at night, worried about how they can stay one step (or two or three) ahead of those who could eventually play havoc with the world’s private transport systems.
    Hackers seemingly can’t wait for the opportunity to commandeer vehicles. In 2019, the automotive cybersecurity company Karamba Security posted a fake vehicle electronic control unit online. In under three days, 25,000 breach attempts were made, and one succeeded.
    The best-known vehicle takeover occurred in 2015 when security researchers on a laptop 10 miles away caused a Jeep Cherokee to lose power, change its radio station, turn on the windshield wipers and blast cold air. Jeep’s parent company, FCA, recalled 1.4 million vehicles to fix the vulnerability. 
    Today, the effects of a breach could range from mildly annoying to catastrophic. A hacker could steal a driver’s personal data or eavesdrop on phone conversations. Nefarious code inserted into one of a vehicle’s electronic control units could cause it to suddenly speed up, shut down or lose braking power.
    A fleet of cars could be commandeered and made to steer erratically, potentially causing a major accident. A hacked electric vehicle could shut down the power grid once the car was charging. Even altering a street sign in ways imperceptible to the eye can trick a car into misperceiving a stop sign as a speed limit sign.
    The problem goes beyond demonstration intrusions. Karamba has been working with a South American trucking company whose fleet was hacked to hide it from its tracking system, allowing thieves to steal its cargo unnoticed. And a quick internet search will reveal scores of successful but so far benign hacks against many of the world’s major automotive brands.
    "To take control of a vehicle’s direction and speed, this is what everyone in the industry is worried about," said Ami Dotan, Karamba’s chief executive. "And everyone is aware this could happen." 
    The challenge may be even greater than securing the world’s airlines. According to a McKinsey & Company report on automotive cybersecurity, modern vehicles employ about 150 electronic control units and about 100 million lines of code. By 2030, with the advent of autonomous driving features and so-called vehicle-to-vehicle communication, the number of lines of code may triple.
    Compare that with a modern passenger jet, with just 15 million lines of code, or a mass-market PC operating system with around 40 million lines of code, and the complexities become clear.
    Vehicle manufacturers understand that a successful hack that caused death or destruction could be a major blow. "The incentive to prevent a giant malicious attack is huge," said Gundbert Scherf, a McKinsey partner and an author of the report.

  • Friday, April 30, 2021 5:44 PM | Anonymous
    Thieves have stolen more than 100 vehicles this year at dealerships from southeast Wisconsin to northwest Indiana, nearly triple the number stolen in all of 2020. Highland Park police on April 20 issued an alert to help slow the efforts.
    Car rental agencies and service shops also have been the targets of thieves, who are stealing vehicles from parking lots and from inside buildings.
    "These thefts have occurred by subjects breaking into the buildings and gaining access to vehicles which have keys left inside or are otherwise accessible. This is commonly found in the service departments of the dealerships," said Brian Bodden, a detective with the Highland Park Police Department.
    Thefts in the area have climbed annually since at least 2017, when just seven vehicles were taken from dealerships in the same area. Police have made arrests, and Bodden said they have recovered some vehicles, sometimes re-tagged out of state. 
    "The offenders have also obtained re-programmers and are targeting high-end Dodge and Jeep vehicles. It is believed this crew is searching social media and other online platforms," Bodden said.
    Police offered several tips to help thwart thieves:
    • Secure all keys 
    • Cut power to overhead service doors 
    • Block service doors with vehicles or other similar items 
    • Make sure alarms are functional and in working order. Call police for all overnight activations 
    • If video surveillance is present, check to make sure that cameras are operational and focused on building areas from which entry can be gained.
    "The technology that was created specifically to eliminate car thefts, such as key fob technology, is now being used against us," a Chicago Police Department official said to reporters last month on a day when five stolen cars were recovered in the city, and 12 people — about half of them teenagers — were arrested.

  • Friday, April 30, 2021 5:44 PM | Anonymous
    Major automakers and suppliers will press Congress again to address the global shortage of semiconductor chips that has curtailed auto production around the world. A U.S. Senate subcommittee will hear May 4 testimony from auto industry groups urging action to address production of "mature node" chips.
    The industry backs proposals to spend tens of billions of dollars to boost U.S. semiconductor production and new tax incentives to help chip companies offset costs of creating new lines within existing facilities.
    "There is an undeniable need to expand semiconductor capacity in the U.S. to meet the growing demand within the auto industry, as well as other sectors across the economy," John Bozzella, the head of the Alliance for Automotive Innovation, will tell the panel in testimony seen by Reuters.
    Bozzella wrote in an April 19 letter to U.S. congressional leaders that some of the new funding should be used to build new chip capacity that "will support the auto industry, as well as other sectors that rely on mature nodes – including defense, medical, and critical infrastructure."
    Ann Wilson, senior vice president at the Motor & Equipment Manufacturers Association, will tell the Senate panel that auto suppliers are facing "a significant supply chain crisis."
    Automakers have warned the shortage could result in 1.3 million fewer vehicles built this year in the U.S. and disrupt some production for at least another six months.
    Both Ford and Stellantis in late April announced additional chip-related production cuts, while Volkswagen announced production cuts in Mexico.
    President Joe Biden’s proposed $2 trillion infrastructure investment package includes $50 billion for semiconductor production and research. It also includes another $50 billion to create a new office at the Commerce Department to monitor domestic industrial capacity and fund investments in the production of critical goods.

  • Friday, April 30, 2021 5:44 PM | Anonymous
    Two bills in Springfield — one in the House of Representatives, the other in the Senate — that have been championed by the CATA, the Illinois Automobile Dealers Association, and others are gaining bipartisan support as the General Assembly nears the May 31 end of its spring legislative session.
    Dealers, their employees, and other supporters of the bills are urged to convey that support to their senators and representatives.
    One measure, House Bill 3940, would amend the Illinois Motor Vehicle Franchise Act to redefine how manufacturers must compensate dealers for repairs of vehicles under warranty. Senate Bill 58 would abolish the $10,000 limit on the trade-in credit allowance for first division vehicles, a limit that took effect in 2020. 
    Both bills have advanced out of their chamber of origin. SB 58 passed the Senate unanimously in March and on April 28 was assigned to the House Revenue & Finance Committee. HB 3940 reached the Senate April 21 and at this newsletter’s deadline was awaiting assignment to a committee.
    Automakers consider different time guides for the same repair when technicians fix a car under warranty versus the longer time considered when customers pay for the work. The bill requires manufacturers to compensate dealerships for warranty work in the same manner that retail customers pay for retail work, in terms of time allowances, labor rates, and parts prices.
    Mechanics Local 701, the union representing area technicians at dealerships, is working with the CATA to advance the legislation. Supporters say HB 3940 would bring a fairness to the payment process that could attract new technicians to dealerships. Wisconsin has had similar policy in place for more than a decade.
    In addition to establishing an equitable compensation scheme for warranty work, the bill would prevent manufacturers from imposing cost recovery fees or surcharges to overcome the bill’s effect. For manufacturers, it would preserve their right to approve or disapprove dealership claims, and it ensures manufacturers have a way to charge back any false or unsubstantiated claims they paid.
    Capping the trade-in credit increases the cost of new vehicles and used vehicles bought at retail. Gov. J.B. Pritzker has voiced his backing of SB 58. The cap took effect in 2020 following moves to find funding for Pritzker’s multibillion dollar state capital infrastructure plan.
    Under SB 58, infrastructure projects would instead be funded, in part, by increasing the sales tax charged in private vehicle sales. For instance, the current $390 sales tax on a 1-year-old vehicle sold privately for less than $15,000 would increase to $465. If the same vehicle sells for $15,001-$20,000, the sales tax would be increased from $750 to $850. The tax rates for private transactions haven’t changed in more than 30 years, and the modest increases are much less impactful than a trade-in credit cap, which costs consumers hundreds of dollars and harms dealers statewide.
    If the General Assembly passes SB 58, the change to restore the full trade-in allowance on First Division vehicles would take effect 120 days after the governor signs the bill. As currently written, the trade-in credit cap exempts Second Division vehicles.
    Dan Marquardt, a Buick-GMC dealer who leads the CATA’s Government Relations Committee, noted that few constituents ever contact their lawmakers on pending legislation, so if supporters of the two bills prod their legislators to pass these, it will have an impact.

  • Friday, April 16, 2021 5:48 PM | Anonymous
    Zurich, an allied member of the CATA, is excited to sponsor AutoTeam America’s Buy/Sell Summit & Forum this month. Traditionally held in conjunction with the NADA Show, this year’s event will be presented virtually through a series of four webinars. Join Alan Haig from Haig Partners and a lineup of industry experts.
    Upcoming topics include:
    • Leading Buyer Panel featuring Jamie Albertine from Mile-One; Franklin McLarty of McLarty Diversified Holdings; and Jeff Swickard, Swickard Auto Group
    • New Strategies in Auto Retailing with Andrew Walser of Walser Automotive Group; Warren Zinn of Warren Henry Automotive Group; and Mark Boniol of Mark Dodge 
    Registration is free and sessions are 11 a.m.-12:15 p.m. CDT April 21 and 28.  For more information, visit the AutoTeam America website

  • Friday, April 16, 2021 5:48 PM | Anonymous
    Sustainability has made its way onto the dashboard of many company executives, and the money is set to follow — particularly in the electric vehicle space, if investment trends and research and development commitments are anything to go by.
    "ESG (environmental, social and corporate governance) has become a priority for our industry, not only for the long-term impact of the emissions but also ... quality of the governance issue," Nissan CEO Makoto Uchida said April 13. 
    "And ESG has a significant impact on how we, carmakers, do our business. Of course, for the past couple of decades, industry has come under considerable pressure from government and society to be more sustainable, but dealing with a more conscious consumer," Uchida said, has prompted "more emphasis on areas like electrification, autonomy and connectivity, which I think the industry has to move on."
    Nissan recently announced its goal to be carbon-neutral by 2050, and plans to electrify 100% of its new vehicles on offer by the early 2030s. The fully electric Nissan Leaf, a car that the company has produced since 2010, hit 500,000 units in sales in 2020.
    Investment into EVs and EV components appears to be on a runway. California-based investment firm Wedbush believes EV stocks could climb as high as 50% this year, stressing that there’s room in the market for more than just Tesla. And in 2020, market research firm Fortune Business Insights valued the EV industry at around $250 billion.
    EV components and materials also are set to gain. Goldman Sachs in a February note highlighted six EV battery specialists with significant potential upside.  
    ‘A business imperative’
    For Zurich Insurance CEO Mario Greco, there really isn’t any other option but to pursue ESG solutions in the face of climate change. 
    "There is a business imperative," Greco said. "The most important thing is to work on prevention. Insuring against the climate risk, it is expensive and it will become more expensive." 
    Zurich has set new climate targets for its investments and operations as it seeks to become a net zero emissions business by 2050.
    "We need to transform the industrial sector and transform our societies," Greco said. "And insurance can support this transformation — the thing insurance cannot do is to pay just the damages of the climate transformation. But the transformation of the industrial sectors and the transformation of the way we live today is something that we will be living and we will be happy to continue pushing forward."
    Insuring against climate risk will be a major challenge as weather events become more extreme. What’s necessary in this context is "work on prevention and work on transforming these risks into different business models," Greco said.
    But none of this means fossil fuels are going away anytime soon; in fact, demand for fossil fuels is set to rise significantly in the coming years as urban populations continue to boom. 
    To counter that, Greco said: "I think we need to embed the carbon cost into the pricing mechanism — today the pricing does not affect the final price of any good we buy. We have to fully embed that in the cost of the goods and that will speed up and facilitate the transformation of the oil industries."

  • Friday, April 16, 2021 5:48 PM | Anonymous
    Many vehicle owners drove fewer miles last year because of COVID-19 and stay-at-home orders. Nevertheless, overall customer satisfaction with auto dealer service departments still increased for a sixth consecutive year.
    That is according to the J.D. Power 2021 Customer Service Index Study, which showed dealer service visits declining only by 6% from 2019. Overall satisfaction increased to 847 (on a 1,000-point scale) from 837 in the 2020 study.
    Chris Sutton, J.D. Power’s vice president of automotive retail, said completing work right the first time and focusing on customers’ needs play an important role in satisfaction. "And dealers are nailing these key performance indicators nearly 100% of the time," Sutton said in a news release.
    "By continuing to provide an exceptional service experience," Sutton added, "dealers have an opportunity to seize an even greater share of the market. It’s notable, too, that while service was less frequent in 2020, customers responded very well to convenience services such as vehicle pick-up and drop-off at their home."
    The study also measured customer satisfaction with dealer service among mass market and premium vehicle brands. One key finding is how remote or online payment options boost satisfaction. Only 6% of premium owners and 1% of mass market owners used those methods. But pick-up satisfaction is highest among those who used that option.
    Among premium customers who pay remotely or online compared with handling payment via a cashier, satisfaction scores improved 44 points. Satisfaction improved 69 points among mass market customers.
    "This is an example of a process some dealers may have put into place as a safety measure during the pandemic, but which they may want to keep in place, as customers find they like it more," Sutton said.
    Another top finding is that using express service increases satisfaction. Satisfaction among customers who did not use express service for maintenance is flat compared with a year ago. But among those who used express service, satisfaction increased 10 points during the pandemic.
    The 2021 Customer Service Index Study also shows that battery-electric vehicle owners are less satisfied with maintenance than repairs. During dealer service visits, nearly twice as much maintenance work takes place on average than repair work.
    The maintenance-to-repair ratio for EV owners is nearly an even split, however.
    More complex service repair work usually results in lower customer satisfaction than maintenance work. But the opposite is true for battery-electric vehicle owners. J.D. Power said a main reason for that is that battery-electric vehicle owners are 2.5 times more likely to not experience their service completed right the first time.
    "EVs are in their early stages and dealers seem to be experiencing growing pains with servicing these vehicles," Sutton said. "Automakers may want to invest in more dealer service training. Otherwise, they run the risk of losing return customers."

  • Friday, April 16, 2021 5:48 PM | Anonymous
    The average monthly loan payment for a new car is approaching $600, according to Experian, which analyzes millions of new- and used-vehicle loans.
    "We went up higher amounts year over year in 2020 than we ever really have before and hit record highs in loan amounts and record highs in payments," said Melinda Zabritski, senior director for Experian’s automotive financial solutions team.
    Experian’s latest auto financing report covers the fourth quarter of last year, when new-vehicle sales improved but were still well below the sales pace in 2019.
    Nonetheless, those taking out loans to buy a new vehicle borrowed an average of $35,228, an increase of almost $2,000 from a year earlier. As a result, monthly loan payments jumped $13 to a record high of $576, according to Experian. Loans for used vehicles also hit all-time highs, with consumers borrowing an average of $24,467, up almost $1,700 year over year.
    Experian said monthly payments for used auto loans jumped $18, to $413 — the first time the average topped $400.

  • Friday, April 16, 2021 5:48 PM | Anonymous
    Zeigler Auto Group, which has a presence in Michigan, Indiana and Illinois, has been ordered to pay 214 employees a total of $85,111 in minimum wages and overtime back wages following an investigation by the U.S. Department of Labor.
    Federal investigators determined that the dealer group failed to ensure that its commission-based sales consultants earned a $7.25 federal minimum wage at 13 stores in the three states, including five in Illinois.
    Investigators noted violations involving 80 sales consultants specifically at 10 locations. The other 134 employees who did not receive wages for which they were entitled held different jobs than sales, the labor department said.
    "Employees paid on commission basis must earn at least the federal minimum wage per hour of work completed. If they do not, employers must make up the difference," said Mary O’Rourke, Wage and Hour Division district director in Grand Rapids, Michigan.
    "Our investigation ... (put money into the pockets of workers who were underpaid, and) levels the playing field for employers who play by the rules. Other employers in this industry should use this investigation as an opportunity to review their own pay practices and avoid similar violations," she said in a statement.
    The federal agency found Zeigler violated the Fair Labor Standards Act when it:
    • Failed to assure that sales consultants’ commissions covered at least the federal minimum wage for all the hours that they worked.
    • Wrongly classified some salaried employees in their business development centers as exempt from overtime requirements, and then failed to pay them overtime despite their duties not qualifying for exemption.
    • Failed to maintain accurate payroll records.
    The investigation period covered February 2018 through August 2020, he told the Detroit Free Press. The findings were made public March 31. Federal authorities have been working with Zeigler Auto Group and confirmed the company has repaid the back wages and overtime, said Scott Allen, a labor department spokesman.

  • Friday, April 16, 2021 5:47 PM | Anonymous
    While 2020 sales were down 14.7% compared to 2019, sales in 2021’s first quarter were extremely strong, the National Automobile Dealers Association reported April 8. The seasonally adjusted annual rate for March was 17.75 million units, the second-highest March ever, coming in slightly behind the SAAR in March 2000, with the 2021 first quarter SAAR at 16.8 million units, up significantly from the first quarter of 2020 SAAR of 14.8 million units.
    "The coronavirus pandemic definitely had an impact on vehicle sales in 2020. While demand was strong, inventory was challenging given manufacturing facility closures and the chip shortage that began to heat up at the end of the year," said NADA Chief Economist Patrick Manzi. "New light-vehicle sales in 2020 came to a close with 14.46 million units."
    The NADA now estimates new light-vehicle sales will reach 16.3 million units for the year, up from the original 2021 sales forecast of 15.5 million units and a 12.7% increase compared to 2020 sales.
    Average incentive spending per unit totaled $3,452, a decrease of $963 and $336 relative to March of 2020 and March of 2019, respectively.
    As demand remains high for new vehicles, vehicle production continues to be negatively impacted by the shortage of microchips. Inventory at the end of the first quarter of 2021 was 12.8% lower than at the beginning of the year, resulting in fewer choices on dealer lots. At the end of the first quarter of 2021, industrywide supply fell to 39 days from 48 days at the quarter’s beginning. If sales remain strong in April without a significant boost of inventory, a decline in sales by late in the second quarter is expected due to low inventory levels.
    In the first quarter of 2021, production also was impacted by a reduced supply of resins used in many automotive parts, as well as by severe winter storms that caused manufacturing closures. The chip shortage is extending into the second quarter and will cause further vehicle production losses; North American vehicle production is expected to total 15.8 million units in 2021.
    "We expect that production shortages will continue to impact new-vehicle sales for at least the second quarter and likely spill over into the third quarter," Manzi said. "The longer these production disruptions linger, the longer it will take for automakers to rebuild inventories to levels necessary to meet demand, and the less likely it is that automakers will be able to make up sales lost to both retail and fleet customers."
    Inventory shortages for new vehicles continue to support robust used-car sales and values alike. After moderating for the final months of 2020, used-vehicle prices began to climb in the first quarter of 2021. NADA anticipates used-vehicle market activity will remain elevated into the summer as the industry continues cope with new-vehicle production and inventory difficulties.
    At the macro level, GDP was anticipated to grow at an annualized rate of 6% in the first quarter of 2021, according to the Federal Reserve Bank of Atlanta. The NADA anticipated that real GDP for the 2021 would reach 6% to 6.5%. In the labor market, initial jobless claims have fallen below 1 million per week, but remain at historically high levels. According to the Bureau of Labor and Statistics March jobs report, 916,000 jobs were added and revisions upward were made to January and February reports. 
    As vaccinations continue, jobs gains are expected in the second quarter of the year with more Americans returning to daily life. At franchised new-car dealerships, employment totaled 1,077,900 at the end of 2020, a strong improvement after bottoming out in April 2020 at 888,000. The NADA anticipates pent-up demand for travel and services spending as the economy reopens; the savings Americans have built during the pandemic will also play a role, but will not be a major driving factor of economic expansion.
    "The economy continues to show strong signs of recovery from the coronavirus pandemic," said Manzi. "The widespread dissemination of the COVID-19 vaccine and the stellar new light-vehicle sales in March are reasons to be optimistic for the remainder of 2021."

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