Connecticut Automotive Retailers (CAR) is actively involved in presenting legislation that could radically change Connecticut’s automotive franchise laws. Among your proposals is having manufacturers pick up a lot of the costs associated with owners giving up their dealerships (as opposed to having them taken away). Why should manufacturers be penalized for bad business decisions beyond their control?
The proposal does not penalize manufacturers — it levels the playing field between large multi-national corporations and small business owners. It mandates compensation be paid to a dealer forced by economic conditions to voluntarily terminate a franchise.
Under the new law, the manufacturer will pay for such items as the new cars on the lot, special tools, and building modification required by the manufacturers to meet corporate standards. All of these items are dealer financed.
Nationwide dealers finance more than $100 million in inventory, real estate and other capital costs for manufacturers.
Another part of your legislation would require manufacturers to pay fair market value for dealerships when they announce they are getting rid of a line (i.e. GM with Saab). How much do public pronouncements like that affect a dealership’s value? Does it go to zero overnight?
The new law would require that the manufacturer pay a dealer the fair market price for a dealership based on its value BEFORE the manufacturer makes a public announcement they intend to stop producing line-make brands (i.e. Hummer, Saab and Saturn).
The value after such announcement is “zero.” Under existing law if a manufacturer wants to end a franchisee’s/dealer’s right to sell a car brand they are suppose to fairly compensate the dealer.
When, for example, GM unilaterally states that it will stop making a car, such as Saturn, it destroys the value of the dealer’s franchise. While the new law preserves the manufacturer’s ability to make an economic decision to stop making a brand, it will also require a dealer be treated fairly and paid the value of the franchise before the announcement.
Another part of your proposed legislation would require manufacturers to pay fair market value for warranty work being performed as opposed to mandating what reimbursements will be. What’s the practical effect of this legislation? Can manufacturers stop providing warranty work in Connecticut?
Manufacturers are obligated to provide warranty service on the vehicles they sell in Connecticut. That work is done through locally owned licensed and franchised new car dealers.
This bill will mandate that manufacturers treat existing dealers fairly when they reimburse a dealer for warranty parts and labor work.
Under existing laws manufacturers can arbitrarily set these reimbursement rates often below what it costs a dealer to perform the work.
The new law will set the rate based on what a dealer would normally receive for the exact same type of work paid at the retail level by regular customers.
