Auto Dealers Taste Victory with Arbitration Bill in House
Senate may vote on bill early next week, approval there is expected
By Brendan Moore
In a development cheered by some American automotive dealers, the U.S. House of Representatives passed legislation that would guarantee as many as 2,150 terminated General Motors and Chrysler dealers the right to “neutral” arbitration hearings under rules defined by those dealers as more advantageous than the current criteria used by the two manufacturers.
Groups representing the terminated dealers, including the NADA (National Automobile Dealers Association) have ratcheted up the pressure on their state lawmakers to act on their behalf since GM and Chrysler sent out the notices of dealer closings.
GM and Chrysler were able to nullify the restrictive dealer agreements they had with the dealers as a result of their federal bankruptcies, but the affected dealers have since mounted a fierce effort to convince their local representatives that their franchise agreements should not be superseded by federal law, that GM and Chrysler should still have to abide by their dealer agreements.
GM and Chrysler wish to reduce their dealer ranks, arguing that more dealers cost them more money to support, and that too many dealers led to devaluing of their vehicles through price-cutting and incentives as a result of inter-brand competition.
The dealers do not see it that way; of course, they argue that they don’t cost the manufacturer anything, and that aside, that they have special “dealer rights” bestowed upon them by their respective state dealer franchise laws, which these manufacturers should not be allowed to trample on. They will also tell you that their dealership is beloved in their local community, that they represent the American ideal of the honest, hard-working independent small business, and, that most of their particular manufacturer’s problems could be solved through the simple act of reinstatement of the terminated dealers. For these dealers, the termination of their dealer franchise is a both a financial cataclysm and a highly-charged emotional issue, and their rhetoric on the subject tends to become heated. At this point, many of these dealers not only want to be reinstated, but also wish for some measure of retribution regarding their manufacturer.
Automobile dealers have been extremely successful in the past in getting state legislators to see things their way; the state laws on the books that regulate dealer franchise agreements were shaped and written by the dealers themselves, and effectively provide a monopoly on new vehicle sales, enforced by state statue. Years of unflagging campaign contributions and tax receipt income from vehicle sales have given automobile dealers in every state a tremendous amount of political muscle.
This current campaign for the arbitration bill is no different. The dealers flexed their political muscle in the name of fairness, and, here we are.
The Senate is expected to pass the bill, which is included as a provision in a piece of legislation containing six large spending bills. This arbitration provision will not be considered important enough or controversial enough to be singled out for scrutiny as the real lawmaker energy will be reserved for the main bills in the legislation. The bill would then proceed to President Obama for his signature, where the same logic in terms of relative importance will probably prevail.
After the president signs the bill, GM and Chrysler will then have 30 days to contact the affected dealerships, inform them of their rights under the new arbitration rules, and disclose to them the criteria used to identify their dealership for closure.
Many of the terminated dealerships are hoping for a positive outcome through the new arbitration process; some are of the opinion that the new process will again produce the old result, that is, closure of their dealership. Additionally, some of the terminated dealerships have already taken “wind-down” financial assistance from the manufacturer, ceased business entirely, and given up their physical locations, making potential reinstatement problematic – more or less like trying to put toothpaste back in the tube. It is not yet known what GM or Chrysler would do in these types of situations where the affected dealer has already packed it in and ceased business operations.
COPYRIGHT Autosavant – All Rights Reserved