As Congress breaks for the Summer Recess we find gas prices still hovering around $3.00 a gallon and over 250 million vehicles on the road.  The 44,321 Independent Motor Vehicle Dealers across the country sold just over 13.6 million of the 42.6 million used vehicles sold in 2006.  Interestingly enough, 3 out of the top 4 selling used vehicles last year were trucks.  All of this is occurring while consumer creditworthiness continues to decline and motor vehicle manufacturers are facing financial hurdles so serious that their existence as we know them could be threatened.  If there is one constant we can expect to see throughout the remainder of 2007, it will be change!

·   Federal Legislative Activity

110th Congress Takes Up Total Loss Disclosure Legislation

True to his word, on February 12th Senator Lott introduced S. 545, titled "The Passenger Vehicle Loss Disclosure Act."  Similar to the Measures introduced at the end of the 109th Congress, the Bill would ensure that certain information regarding vehicles declared a total loss by an insurer or self-insurer are disclosed to the public in a commercially reasonable and electronically accessible manner.  The information that would have to be disclosed includes the vehicle identification number of the vehicle, the date of declaration or determination of the total loss, the odometer reading on that date, a statement as to the primary reason for the declaration or determination of total loss, and a statement as to whether one or more airbags were deployed.  Insurers oppose S. 545 because they claim it does not clearly define "total loss" and that it would be expensive to maintain a data base containing the required disclosures.  NIADA supports the Measure, but recognizes that there are still issues that must be addressed.  It may also seek the inclusion of an amendment to carry forward title brands.

Closing the Tax Gap

President Bush is asking Congress for changes to the tax code that will raise revenue without raising taxes, commonly being referred to as closing the "tax gap".  The Administration wants to go after the 'hidden income' of persons conducting or engaging in business who do not report or pay taxes on the income. To those of us in the motor vehicle industry who have dealt with Curbstoners for years, this sounds all too familiar, as it appears Curbstoning has now gone global.  The focus is mainly on credit card transactions at this time, and it is estimated the change could generate approximately 10.7 billion dollars in tax revenue over the next decade.

CAFE Standards Set to Rise

The House likely will soon vote on corporate average fuel economy (CAFE) mandates that would impact the product mix on dealer lots all across the country. The Senate passed a CAFE mandate in June requiring 35 mpg by 2018, which motor vehicle manufacturers say they cannot meet. Rep. Edward Markey of Massachusetts is likely to offer a similarly proposal as an amendment when the House debates an energy package.  Many within the industry believe the mandates imposed by the Markey amendment are too extreme.  Representatives Baron Hill of Indiana and Lee Terry of Nebraska have introduced an alternative, H.R. 2927, which provides for what the industry feels are more reasonable fuel economy increases: at least 32 mpg by 2022.

· Federal Regulatory Developments

States Get More Time to Comply with Real ID Act

On May 11, 2005, Congress passed the Real ID Act thereby creating national standards for the issuance of state driver's licenses and/or identification cards that had to be in place by May 11, 2008.  According to an analysis that was prepared based upon findings from a survey conducted by the National Governors Association, the National Conference of State Legislatures and the American Association of Motor Vehicle Administrators, implementation of the Real ID Act could cost states more than $11 billion over five years.  As a result, the States asked that the mandatory implementation date be extended and that the Government provide the funds and electronic systems necessary for States to comply.

In response to the States request, the U.S. Department of Homeland Security issued a temporary reprieve to the states allowing them to delay implementation of the strict requirements until December 31, 2009. The Administration still expects States to begin issuing compliant ID's in May of 2008, but will be expected to replace all 245 million licenses held by Americans on a "reasonably prompt basis" over five years.  States that can justify a request for more time could also be granted additional waivers.  One possibility being considered to help ease the financial burden on the States is to use up to 20 percent of the fiscal 2007 Homeland Security grant funding to help States comply.

New "MPG" Ratings May Apply to Older Model Vehicles
 
Beginning with model year 2008 vehicles, the EPA is mandating the use of a newly designed fuel-economy label similar to that found on the Monroney Sticker for light-duty vehicles.  The EPA's goal is to ensure that the information on the labels more accurately reflect real-world driving conditions.  The EPA adopted the new method last December to give more weight to driving factors like higher speeds, harder acceleration and greater use of accessories like air conditioning.  It recently has indicated that it will apply the new method to older cars and trucks as well.  Revised ratings for older model vehicles may help Dealers because they will make comparisons with new vehicles more valid.  Dealers should be prepared to advise consumers that their actual mileage will still vary depending on how they drive and maintain their vehicles and to caution them when comparing newer and older model vehicles. 

Unlikely Allies Challenge NHTSA Tire Rules

Public Citizen, a consumer-advocacy group, and several tire manufacturers have joined together to challenge new rules adopted by the National Highway Traffic Safety Administration (NHTSA) mandating driver alerts for under-inflated tires.  The mandatory tire-pressure monitors are required pursuant to a Law adopted in 2000 in the wake of the recall of more than 6 million Bridgestone/Firestone tires.  The 2nd U.S. Circuit Court of Appeals in New York subsequently threw out an initial regulation, upholding a challenge from the Public Citizen Group claiming that the proposed new rules were not strict enough.  The latest version of the rule adopted by NHTSA in 2005 would require that new vehicles include dashboard lights indicating when tires are 25 percent under-inflated, but it only applies to original-equipment tires, not replacements.  The Public Citizen Group and manufacturers maintain that the 25 percent standard could result in tire failures without the driver ever seeing a warning light. 

IRS Will Revisit LIFO Rules

On February 22, 2007, the IRS and Treasury Department announced that they would work to publish guidance for automobile wholesalers, manufacturers and dealers regarding the proper treatment of the dollar-value, last-in, first out (LIFO) inventory method for pooling purposes of crossover vehicles.  The issue has been selected for the Industry Issue Resolution (IIR) Program, which provides guidance to help clarify complex tax issues.  Back in the 1980s, Federal Courts ruled that LIFO pooling rules require taxpayers to account for cars and trucks in different pools.  Since the rulings were issued, however, the distinction between trucks and cars offered for sale has become less clear.

· Other Activity of Interest

Battle Over Tailpipe Emissions Takes Center Stage

The automobile industry's battle to overturn California's Greenhouse Gas Emissions Rule on cars and trucks shifts to a new venue - a Vermont courtroom.  The Automobile Industry began its Federal lawsuit challenging the adoption of strict limits on vehicle emissions of carbon dioxide, a main greenhouse gas.  Vermont is one of 9 states that followed California's lead in mandating that automakers meet tailpipe emissions limits beginning in 2009 that increase annually to cut emissions up to 40 percent by 2016. The central issue in this case is whether states have the power to regulate carbon dioxide emissions in motor vehicles or whether they can only be regulated on a federal level.  The entire industry will be keeping a close eye on this case as it progresses.

Alternative Energy Sources for Vehicles

There are currently 10.5 million alternative fuel vehicles on the road today compared to 9 million in 2006.  These vehicles vary by the alternative fuel source that powers them.  The most popular being hybrid electric technology, ethanol-blended fuels and biodiesel. Hybrid car sales alone are up 86 % nationally.

The rational behind the Bush Administration's push for flex fuel vehicles is their goal to cut gas consumption by 20% in the next 10 years.  To accomplish this, there must be sufficient distribution and availability of E85.  At present, however, only 1,100 of the nations 170,000 fueling stations offer E85.  Ethanol production has been on the rise, however, and the Energy Department's recent announcement that it plans to spend 385 million dollars on six biorefineries that will produce cellulosic ethanol from biomass sources indicates that ethanol may become more widely available.  While production of ethanol, the nations No. 1 alternative fuel, has exceeded previous expectations, it also has hit a roadblock, conveyance. Many feel the need to lay pipelines dedicated exclusively to ethanol is key to reducing U.S. oil dependency.