With the growing problems which manufacturers are facing, they have become much more heavy-handed with dealers in their practices. We have seen manufacturers delaying payments, taking money from dealer accounts, denying them incentives, and much more.

As a result, VADA is seeking ways to help protect dealers from these unfair practices. VADA has proposed some amendments to the VA franchise laws to address several issues of concerns for dealers. A short description of the major items we are focusing on is included below.

Manufacturer Price Fixing Programs

This change will prohibit a manufacturer from dictating terms and conditions of a sale, other than the price of the vehicle. Under recent Supreme Court decisions, the manufacturer can impose resale price restrictions on the products they supply. However, that does not extend to products and services they don’t supply. The manufacturers try to control much more than the price of the product they supply, the vehicle. For instance, they may dictate that only a particular service contract may be added to the transaction.

Evidentiary Standard for Establishment of an Additional Franchise

This change will increase the evidence required to prove a market area can support a new franchise before that franchise could be approved by DMV.

Dealer Termination Issues

This change will provide for additional compensation to a dealer for value of the franchise and real estate expenses if a manufacturer discontinues a line make. It also amends the Code to require the manufacturer to repurchase all vehicles of the current and one prior model years for any termination. (Current Code only requires a manufacturer to repurchase vehicles of a previous model year which were purchased by the dealer within 120 days of the termination.)

Dualing

This change simplifies Virginia Code to clearly state that a dealer is allowed to operate multiple franchises from one location. It will clarify that a manufacturer may not prevent a dealer from adding another vehicle line make to its premises. (Current Virginia Code language prohibits a manufacturer from requiring a dealer to “underutilize” its facilities.)

Warranty

This change will amend the warranty statute to require manufacturers to pay for repairs covered by the warranty which are discovered by the dealer and not the customer. Many dealers have reported their manufacturers have refused to pay for needed repairs the dealership identified in the course of a separate repair requested by the customer.

Exports

This tightens the existing Virginia language to prevent manufacturers from penalizing dealers for vehicles that are exported by the buyer after the sale. (Most franchise agreements prohibit dealers from selling vehicles they know will be exported by the customer.)

Current Virginia language puts the burden on the dealer to prove it did not know of the intent to export. This legislation will correct that burden and will put that burden on the manufacturer to prove by as preponderance of evidence that the dealer did not know the vehicle would be exported.

Join us in Richmond on Wednesday, January 28, 2009 for our “Assault The Hill” Dealer Day at the Virginia Capitol!