SPRING 2012 AIADA

IN THE NEWSObama’s Class-Warfare,Tax-the-Rich BudgetBy Larry Kudlow, The Daily CallerIf you shake out the Obama budget interms of bold headlines, it’s really a classwarfare, tax-the-rich budget. Layer uponlayer of tax hikes are piled on successfulinvestors, small business owners, andcorporations.The capital gains tax goes from 15 percent to 24 percent (including Obamacare).The dividends tax goes from 15 percent tonearly 40 percent, and that’s not includingthe double tax on corporate profits embodiedin dividends and capital gains. The Bush taxcuts for top earners are repealed. There’s the30 percent Buffett Rule minimum tax on millionaires. The carried interest tax for privateequity, hedge funds, and other investmentpartnerships goes from 15 to 39.6 percent.The estate tax jumps to 45 percent. State andlocal bond interest deductions are severelylimited. Oil and gas companies get hit. Sodo banks. And there’s probably more stuffin there I haven’t read yet. Paul Ryan’s pressrelease calls it a 1.9 trillion tax hike, with 47trillion in government spending over the nextdecade and the fourth straight year of trilliondollar deficits.Some kind of corporate tax reform may bereleased in a few weeks. But we don’t knowmuch about it. And while it may lower the toprate, it’s going to penalize U.S. firms operatingabroad by roughly 150 billion in tax hikes. Allin, the Obama budget raises corporate taxesby 350 billion. Just what business does notwant or need.Former Bush economist Keith Hennesseyestimates that new proposals would createa ratio of at least 1.2 dollars of tax increasesfor every dollar cut in spending. Most of thespending cuts would slam Medicare doctors and other health providers. Unlikely tohappen. And there is no overall entitlementreform. Somehow the Obama budget is beingoffered as a substitute for the 1.2 trillion inspending cuts from the super committee.But the slam down in defense remains a hugeproblem.There is no 4 trillion in new deficit savings, because 1.2 trillion was already scoredby the Super Committee. Plus, another 1 trillion was already counted as savings from thewind-downs in Afghanistan and Iraq. And 800 billion comes from interest savings, notprogram cuts.So maybe there’s 1 trillion in spendingreductions over 10 years. But as the detailstrickle out, that’s a big maybe. Compare thatto 47 trillion of total spending increases andat least 1.5 trillion of tax hikes.The deficit for the coming year, which is 1.3 trillion, would be 8.5 percent of GDP.More important, budget spending remainsat over 24 percent of GDP. Debt held by thepublic for 2013 would be 12.7 trillion, or 77.4percent of GDP. In terms of 10-year totals,spending would rise by 47 trillion and deficits by 6.7 trillion.Really, this is a budget that says we mustraise taxes in order to raise spending. It’s a 1percent vs. 99 percent budget. But if these taxhikes ever went through, it would be a 100percent whack at future economic growth.Obama chief of staff Jack Lew was wrongon Sunday [February 12] to suggest that a budget passed in the Senate requires 60 votes. Bylaw, budget reconciliation requires only 51votes. But this budget is dead on arrival. Allthe Republicans and many of the Democratsare not going to vote for across-the-board taxhikes. That’s a good thing.But the question now is: What happensnext? The U.S. is in a heap of fiscal trouble — on the verge of bankruptcy. What arewe going to do about it? ADLarry Kudlow is the host of CNBC’s “TheKudlow Report.”This article originally appeared at TheDaily Caller on February 14, 2012. Reprintedwith permission.6AutoDealer SPRING 2012

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VIEW FROM THE HILLForecast: GridlockDealers Can Expect Legislative Stalemate This Election YearElection year politics, new tradeagreements, controversial recessappointments, and legislativecongestion are adding up to aninteresting — and even frustrating — spring in the nation’s capital. As always,AIADA is on the front lines to protect the interests of America’s international nameplate autoretail industry.as the “Ambush Election Rule,” the NLRB resolution of disapproval to prevent an agencybelieves it will reduce unnecessary litigation from enforcing a rule. The House followed suitand delays.when Representatives John Kline (R-Minn.),Several business groups, including AIADA Phil Roe (R-Tenn.), and Phil Gingrey (R-Ga.)have taken issue with the rule. The U.S. introduced a similar resolution. AIADA supChamber of Commerce and the Coalition for ports both resolutions.a Democratic Workplace — of which AIADAAt the time of publication, Congress isis a member — filed a suit in federal court to back in session, and President Obama hasblock the rule on the grounds that it violates presented his State of the Union address andthe National Labor Relations Act, the Admin- budget to Congress. However, it appears thatTPP Heats Upistrative Procedures Act, the Regulatory Flex- Washington is in for a logjam this election yearAnti-international rhetoric has ratcheted ibility Act, as well as free speech.as both sides carry on their partisan rhetoric.up considerably in recent months. Japan hasThe same week the rule was adopted, Sena- AIADA will continue to spread its message ofcontinued its efforts to join the Trans-Pacific tors Mike Enzi (R-Wyo.) and Johnny Isakson free trade, lower taxes, and less governmentPartnership (TPP), which is currently being (R-Ga.) introduced a resolution challenging regulation in the interest of securing a positivenegotiated between the U.S. and nine partici- the rule under the Congressional Review Act, environment for today’s international namepating Pacific Rim countries. AIADA recently which allows Congress to introduce a joint plate auto dealers. ADsubmitted comments to the Office of the UnitedStates Trade Representative (USTR) concerningJapan’s stated interest in joining the TPP.During a recent hearing, Deputy UnitedStates Trade Representative Demetrios MaranAccording to the Constitution, the Senate must confirm alltis emphasized that the U.S. would only allowpresidential nominees for federal offices. However, the presidentJapan to enter TPP negotiations if it is willingcan bypass that rule by making an appointment during a Senateand prepared meet the high standards setrecess period. This is known as a “recess appointment.” Presidentswithin the agreement. Japan’s inclusion in thetypically utilize this option if it looks very unlikely the nominee willTPP is an issue that greatly impacts internagarner the 60 votes needed to beat a filibuster.tional auto dealers, and AIADA will continueto keep tabs on its status.What is a Recess Appointment?NLRB Tactics ContinueLabor issues continue to make waves inWashington this spring. In January, PresidentObama made several controversial “recessappointments,” ignoring the fact that the Senate was still holding pro forma meetings. Threeof his appointees filled spots on the NationalLabor Relations Board (NLRB) — Sharon Block,Terrence Flynn, and Richard Griffin. With allfive seats filled, the NLRB is once again operating at full power.T he ter m of N L R B Cha i r ma n Cra igBecker — one of President Obama’s previousrecess appointees — expired in December.Dealers will recall that prior to his departure,the board rushed to adopt its final rule amending union election case procedures. Known8AutoDealer SPRING 2012What is a Pro Forma Session?The U.S. Senate defines a pro forma session as “a briefmeeting of the Senate (sometimes only a few minutesin duration).”*When President Obama invoked his presidential recessappointment privilege on January 4, the Senate wasstill holding pro forma meetings every three daysduring their holiday break in an effort by Republicanleaders to prevent him from making such appointments.*www.senate.gov

DE ALER INVOLVEMENTThe Dealer Voice:More Important Than EverSo far in 2012, sales and job creationfigures paint a positive picture forthe international nameplate autoindustry. While the industry isrecovering and moving forward,dealers cannot afford to become complacentand lose attention to events happening onCapitol Hill and in Washington.The Detroit Three and United Auto Workers (UAW) are doing all they can to undermine the international auto retail industryand hinder its success. Their targets includeYOUR business. A fundamental part of theirstrategy includes persuading a Congressand an administration that is enamoredwith “Made in America” rhetoric.This is where international nameplatedealers play a pivotal role. As a dealer, YOURvoice is the one Congress wants to hear.Dealers must possess the tools to make theirvoices heard effectively in Washington. Beginby attending AIADA’s 6th Annual International Auto Industry Summit on May 23and 24 in Washington, D.C. This grassrootsfocused event is an exceptional opportunityfor dealers to arm themselves with the information and skills to take their business concerns directly to their members of Congress.On Thursday afternoon of the Summit,AIADA’s Legislative Action Network (L.A.N.)will focus its efforts on meetings on CapitolHill between Congressional members, theirstaff, and AIADA dealer advocates. With somany auto-industry related issues — suchas free trade, taxes, and the economy — atthe forefront of Washington, AIADA needs3 Ways You Can Raise Your Voice1 Join the L.A.N.2 Register and attend AIADA’s 6thAnnual International Auto IndustrySummit on May 23 – 243 Request a meeting with yourmember of CongressYOU, our trusted dealer advocates, to buildrelationships with your members of Congress and engage them on these and otherkey issues.Upon registering for the Summit,AIADA will assist you in setting up a meeting with your Congressional members andprovide you with the knowledge and talking points needed to speak authoritativelyon the issues that matter to your businessand employees. Visit www.AIADA.org/eventsand select the option on the registration formto meet with your elected officials. AIADAwill contact you to get the ball rolling.Don’t wait. Seize the chance to makeyour voice heard by registering today forthe 6th Annual International Auto Industry Summit. If you haven’t already done so,now is also a good time to become an activemember of the L.A.N. It is the best way tostay connected and know what your members of Congress are doing to help or harmyour business. ADThe dealer voice is the most effective at combatingpotentially harmful legislation and policy.SPRING 2012 AutoDealer9

EMBRACING THEFUTUREMERCEDES-BENZ USA’S STEVE CANNONTALKS CARS, DEALERS, AND FOOTBALLBY AIADA STAFFEarly this year, Steve Cannontook charge of Mercedes-BenzUSA. As one who has servedwith Mercedes-Benz in various capacities since 1991, he iswell versed on how to move the luxuryautomaker forward in the competitiveU.S. luxury auto market.Cannon recently spoke with AIADA todiscuss the role the U.S. market plays inMercedes-Benz, the automaker’s relationship with its dealers, and how it is pavingnew marketing ground with its sponsorship of the Louisiana Superdome.The auto industry has beenimpacted heavily by economicconditions over the past few years.How do you think they impactedthe luxury segment? Did theychange the way Mercedes-Benzoperates?That’s certainly a huge question. We’veall been heavily impacted by it. It’s theworst downturn that the auto industryhas ever seen and left a huge imprint onthe psyche of consumers. We saw a dramatic loss of wealth with trillions erased.Most of that has been recouped.continued on page 12Cannon says the U.S. market is “the mostimportant now and will remain one, if not THEmost important, for the next several years.”SPRING 2012 AutoDealer11

“We’ve been on a phenomenal rollwith new products,” says Cannon.One of them is the SL Roadster.continued from page 11The good news is that it feels better now than it did in 2009.Back then, there was a lot of impact; consumers were caught offguard. They were caught off guard with too many bills. But one ofthe things we’ve seen from our customers is that folks have kindof embraced this post-recession era. They’re taking responsibilityand scrutinizing their bills. The savings rate has increased significantly. They’ve been shocked and responded to it by rationalizingtheir expenses along the lines of fewer, better things. [Luxury buyers] felt extremely exposed and have spent the past couple of yearslimiting the exposure.The overall impact on Mercedes-Benz was that, as a company,we went through a painful market correction that forced us tocorrect our own business. The mantra for us inside the companyis that “a crisis is a terrible thing to waste.” We used that time tocut through old business practices that might have been nice wheneverything was rosy, but when we asked the critical questions, theanswer was no. We parted ways with some of those practices.Our dealers have become better businessmen. As the market hasrebounded, they are in a much better position because they’ve takencosts out that they don’t need and been able to make more money.Mercedes-Benz celebrated its 125th year in 2011. Canyou explain the role the U.S. auto market has played inthe brand’s long-term success? What role do you expectit will play in the coming years?The U.S. market is the number one market for Mercedes-Benzand Daimler globally. There is a lot of growth in other BRIC markets. China is coming up in the rear view mirror. For now, the U.S.is the most important global market.Beyond that, it’s the heart of the entertainment industry and popculture. How our brand fits in is very important and that finds itsway across the globe. A perfect example is that Mercedes-Benz is thenumber one product placement brand in Hollywood. It shows up inmore shows and movies that are exported globally. It is a car of celebrity and pop culture that is more global than ever before. That playsinto the reception of the brand — not just here, but everywhere else.In the coming years, the importance of the market isn’t goingto diminish. We are still growing. I’ve seen projections that put theU.S. population over 336 million by 2020. We have Gen Y comingup, and they are 75 million strong. We have an enormous wave of12AutoDealer SPRING 2012influential buyers who are just at our doorstep now. It will have ahuge impact on our overall success. It [the U.S. market] is the mostimportant now and will remain one, if not THE most important,for the next several years.Tell us how your dealer base factors into your futureplans. Do you plan to expand your CustomerONEtraining program as part of your strategy?Dealers absolutely are. Without the dealers, our plans don’tmake sense. An active, engaged, and profitable dealer base is thefoundation on which all plans will be built. The relationship wehave with our dealers is at a 21-year high. They believe in the brandand the current and future value of the franchise. It’s as good as it’sever been. We are going to use that as fuel to continue our growthstrategy in the U.S.Our “Customer Driven to Lead” training program will touch10,000 customer-facing personnel. It is one of our most ambitioustraining programs ever, and it’s only our first step. Our focus willbe aimed at delivering a best in customer experience. Our customers will be regularly delighted with what they receive from theMercedes-Benz brand. That’s our focus.What changes and new products should dealers expectto see in the coming months and years as Mercedes-Benzmakes its play for number one?We’ve been on a phenomenal roll with new products. Last year,we launched five new products in a year. This year, we’re launchingthe SL Roadster, GL, and the GLK facelift (including GLK diesel), aswell as an E-400 Hybrid. On the telematics side, we just announcedmbrace2 at CES — our latest offering featuring internet and remotecapabilities — all updatable via cloud-based networks.In our pipeline over the next several years, we’re going to belooking at a significant expansion of our portfolio. Next year marksthe addition of a new entry point for the brand under the C-Class.We are going to be making the brand more accessible. That’s a hugestep for this company.There will be four new models, the first arriving in 2013 and theothers each year thereafter. These vehicles will be: a small fourdoor coupe, a crossover, a five-door coupe based on the A-Classplatform, and a five-door coupe based on the B-Class (alternativepowertrain).

The E-400 Hybrid is one of the vehiclesMercedes-Benz is launching this year.Last summer, Mercedes-Benz opened a company-ownedflagship showroom on New York’s 11th Avenue. How hasbusiness been so far, and what are your hopes for thatstore in the future?The store in Manhattan is one of the top stores in the country.For a lot of people, New York is the capital of the world and brandslike ours need to be present and have flagship stores. We say, ‘InManhattan, luxury has a new address.’For our dealer body, we’ve walked the talk. We’ve pushed themhard over the past three years to update their facilities. We are practicing what we preach with a state-of-the-art Autohaus investmentdirectly in Manhattan.More than 300 of Mercedes-Benz dealerships haveimplemented the Autohaus design into their dealerships.What was the purpose of the Autohaus program, andhow is it being received by customers?So far, 312, or more than 90 percent of our dealer body, have participated in the program. The reception has been phenomenal. Wedid it because we didn’t have a consistent expression for our brandat retail. We had great facilities, lousy facilities, and everything inbetween. There was no kind of expression that said, ‘When youcome into Mercedes-Benz, this is what you can expect.’Over the last three years, we’ve moved our facilities furtherand faster than anyone in the industry. 1.4 billion was investedin facilities that are coming online. We now have state-of-the-artfacilities that are consistent with our brand. They are open andthey are bright. They are high-tech. Customers tell us they enjoydoing business. Dealers are telling us that they’re attracting newtalent to their stores because workers want to work in an environment like that. Everyone is validating this approach.The average age of Mercedes-Benz customers is slightlyhigher than that of BMW customers. What are you doingto attract younger buyers while retaining your existingcustomer base?I’m not worried about it at all. Our marketing is reaching outto younger buyers. We have new products coming online thatwill, from a product and pricing standpoint, reach out and attractyounger buyers. We have in-car connective services that we arelaunching

Peters of Nashua Mr. Paul Ritchie Hagerstown Honda Mr. Robert V. Rohrman Bob Rohrman Auto Group Mr. Brad Strong Strong Volkswagen Mr. Morrie Wagener Morrie’s Imports The Magazine of the AIADA BOARD OF DIRECTORS SPRING 2012 VOL. 6, NO. 2 PRESIDENT Cody Lusk PRODUCTION EDITOR Hannah Oliver DE