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Alaska dealers get major legislation

Alaska. It’s the state with the most coast line . . . the most salmon . . . and now, perhaps, the most interesting legislation affecting manufacturer-dealer relationships.

Backed by Alaska’s marine dealers, the “Alaska Marine Products and Motorized Recreational Product Act” has been unanimously passed by the Alaska Legislature and is headed for Gov. Sarah Palin’s signature. The bill (HB 177) is interesting on two fronts: how the dealers succeeded in passing it while vigorously opposed by NMMA; and, of course, the bill’s content.

After examining HB 177, it appears much of it, particularly sections dealing with cancellation/non-renewal as well as the transfer of a dealer agreement, generally reflects what NMMA’s Board unanimously supported back in May, 2005. That was, if you recall, when a Special Task Force on Dealer Agreements issued unprecedented recommendations to everyone’s applause. Indeed, during the task force’s work, dealers and manufacturers had yielded to each other on many points and the finished product was a good one.

MRAA and the marine trade associations (MTAs) also announced strong support for the recommendations. The MTAs even indicated they would no longer seek legislation in their states, expecting the manufacturers to follow through. Major manufacturers (63 initially and more later) pledged to incorporate the recommendations by the summer of 2006 (2007 model year) at the latest. Even task force chairman David Slikkers declared, “It’s a new day” for the industry.

So, with everyone singing Kum Ba Yah, what happened? Clearly, not enough! Sadly, too many of the task force’s recommendations have reportedly never made it into dealer agreements as promised. The resulting breakdown is, obviously, why Alaskan dealers stopped singing and started seeking legislation. I believe they’re the first to do so since the “It’s-a-new-day” proclamation, but they’re likely not the last.

In essence, the Alaskan dealers crafted the legislation as a consumer protection, employment and lemon law issue capitalizing on existing auto lemon law. Consumers gave testimony on problems experienced with warranty procedures. Others cited the challenges in Alaska to fulfill wage demands of employees when dealers receive insufficient reimbursements for warranty claims. The bill was seen as good for consumers and that put it on every lawmaker’s “yes” list.

Just a few of the provisions contained in the HB 177 include:

• Manufacturer cannot unreasonably withhold transfer of a dealer agreement.
• Prohibits cancellation/non-renewal without cause; prohibits coercing dealers by threatening cancellation; requires repurchase of current and previous year’s models (including all transportation costs); requires repurchase of all parts from last 2 years;
• Warranty reimbursement: requires payment of dealer’s customary labor rate; Must include payment for diagnostic time, prep, testing, disassembly, cleanup, one added hour for dealer administration of warranty claim, and any additional time necessary to provide a “quality result and customer satisfaction.”
• Parts: reimbursement for all parts taken from dealer’s inventory at MSRP. Or, if parts are shipped from manufacturer, no freight or handling charges may be imposed.

Clearly while surviving the current economic problems facing the industry grab our focus these days, old issues like improved dealer agreements haven’t disappeared from view.

Comments

17 comments on “Alaska dealers get major legislation

  1. Tom J

    So Alaskan consumers in the future will have fewer choices and pay much higher prices as most medium to small manufacturers & distributors will just stop doing business there. Which in turn will cause the number of dealers & authorized service centers to be reduced.
    Brilliant few choices going forward – I bet they all feel better now in Alaska.
    I wonder how many dealers will be terminated prior to this bills passage?
    I wonder when those manufacturers & distributors who do continue to do business impose a “Sold in Alaska” handling Fee on everything to cover these added cost of doing business there.
    It’s Ying & Yang folks, you get something you definately lose more – the problem here is you don’t know what you are losing yet.
    For you smaller Alaskian dealers & repair centers You are toast! better go talk to the big dealers & beg for a job, go crabing, or get use to living off your oil subsidy ……

  2. JR Goodman

    I disagree. Some of the more forward thinking manufactures have been offering simliar programs already. It is used as a great sales tool for the salesperson. I will not go into specific manufactures, you know who you are and the ones who dont do it, need to worry.

    Protecting the dealer is great , and if there is a agreement to cancel , having to buy back most parts and product will give a second thought to that cancel letter. I think this is great and can’t wait till the next big state adopts it

  3. Scott

    Sounds like a good day for boat owners (and dealers) to me. There is nothing unreasonable about asking a manufacturer to ensure quality is sufficient before their product leaves the factory, and to step up to the plate and pay the real costs for field repairs when it isn’t.

  4. charlie kurth

    The artical indicated both houses passed it overwelmingly because it benefited the retail consumer. However, after reading the artical above it seems to be more about the power struggle between dealers and manufacturers. I would guess the legislature feels the power of the dealers in Alaska is a larger threat to them than from the manufacturers residing and voting in Alaska.

    Really this is not complex at all.

  5. Carlos

    This situation is clearly indicative of a long time, failed marine business model. For too long have the manufacturers called all the shots: sales / warranty / front line operations. As a former dealer I applaud the Alaskan legislation of fairness. The manufacturers had the opportunity to move forward but they held back choosing the same old one sided tactics that favored their interests entirely.

    The old saying” the dealership often becomes the last 70 feet of the assembly line” holds true too often. There has never been a technical -warranty issue that did not have its origin on a manufacturers assembly line-never. Do it right the first time is the right way.

    The NMMA has patnered with the manufacturers (not the industry) with the deep pockets to promote their cause. They do everything accept acknowledge the cold, hard facts but they do recognize how to extract more and more money from our industry/customers with less and less in return.The emphasis shouldn’t have been only on the dealers to improve their in the field service but more so on the manufactureres to get it right and not pass off their problems into the field where they can muscle the single dealer to absorg the losses.

    Many dealers have been pushed to take more product than they should have and then had to blow it out the door to make room for new/current product or risk loosing his dealer agreement to someone just down the street. The dealer takes the line on, does his part to promore it locally and then the maunfacturer comes in and calls the big shots-wrong.

    The proof is in the pudding in 2009. Up front it looks like the floorplan companies have wreaked havoc on the industry but in reality they have acted responsibly and reeled in the manufacturers production tendencies. If they had not taken the action they had, there would be even more product in the field(because the money is there) and things would be much worse-much worse for much longer.

    Sound evidence: GE has take a more active role working directly with dealers and understanding just what is going on in the field in specific markets / situations. Things will be much different as we move forward. The emphasis needs to shift to profitability/economic strength for the manufactureres and dealers rather than “Market share and retails dominance / smoke and mirrors.” Common sense, basic economics.

    The fact of the matter is that the dealership level is where the tread meets the road. The strength of the retail operations dictates the strength of our industry. Without a retail sale there would be no purchase orders at the factory. The saying”The boats sell themselves” is a total crock of **** and everyone knows it. The dealer makes it happen and that’s a fact.

    I applaud the legislative process and look forward to “Alaskan” type of guidelines being established throughout our country. About the fewer choices and that whole bunk- the manufacturer is going to have to share the profits more fairly and will not be able to force feed the dealers-my way or the highway. We are on the right track.

    It seems that all of the high rollers in the manufacturing segment are always asked for their suggestions on how to fix / improve our industry. The dealers have the answers, understand the asituation clearly and no doubt, will be more open to make the changes needed to move forward. They are more apt to do the right thing because they are facing the customer not in some boardroom, on a private ject or with their head in the sand. They make it right for the customer!

  6. Larry Tague

    I would think that if the NMMA held up there end of the bargin ( a dealers agreement that was fair ) Alaskan dealers would not have had to go forward with law. Since a simular law was passed in Missouri in 2004 I have not seen any negative affect on consumers in our state. It is all about having a LEVEL playing field when faced with a ever changing economy. As a dealer everything I own is at stake every day.

  7. Larry G

    For 37 years i have been trying to get manufactures to give there dealers a Franchise not a dealer agreement that is not worth the paper it was written on. No wonder NMMA was fighting so hard against it. now the state of Alaska if passed ,will set the precedence the rest of the country needs to get these manufactures to treat a dealer like they should have many years ago. Tom J, you must work for or own a boat co.To start , some dealers will be dumped, your right, but you guys need dealers and sales. if all states get to pass a law like this ,your going to have to realise that, if you do not start building a GREAT PRODUCTand have good dealers you would not sell anything.

  8. Larry Holcombe

    Having been a warranty administrator for many years I would agree that we should be paid for our time. This has always been an expense that the dealer has been burdened with. I DO NOT agree with charging the manufacturer an hour per claim. This would seem excessive. I know that some manufacturers have online claim processing:) and there are others who can’t seem to grasp that this is 2009 and they are still doing paper claims:(. For those that are online .25 hours would be fair. For those that are paper, .5 hours would be fair. I have worked with some manufacturers that are very fair and others that you have to fight for every nickel. We should demand that the manufacturer be able to supply ( have in stock) any component that would be necessary for the timely repair of a customers boat. We should never have to source a part from a vendor that the manufacturer has chosen. There are a few manufacturers that get it and a few that don’t. I don’t like to see the government come in to force the ones that don’t. But, I don’t like taking it in the wallet to finish building their boats either!

  9. Tom J

    Larry G – very good! I know this is a “Dealer” blog & I shouldn’t comment here but I can’t seem to find the Manufacturer Outlook blog?? Pardon my intrusion.
    FYI:
    We do have dealers & we respect those dealers for all that they bring to us. In fact we look at them as our customer & even our friends. We understand that to satisfy them & treating them with the same respect that they have for us works to both our interests. See over the years we have never forced or enticed(with bigger discounts) dealers to maintain an inventory of duplicity unless they felt comforable to do so. On the other hand our dealers understand we only will build to their orders- we do not build on speculation. They also are aware we will entertain any modifications they would like to sell. Maybe that is why we have never shut down, have maintained a consistant level of production and are ahead of last year through the first quarter.
    I was not trying to dismiss the need for a multi paged contract with tons of legalize when dealing with folks you know or feel are snakes that might bite you. My question always is ” why do business with those folks who’s policies, paratices, & business acumen you find uinacceptable”.
    May be it’s just me but life is to short to go through associating with folks you don’t like or trust.
    I remember years ago talking to a prospective dealer who for an hour spued nothing but vitrial about OMC & there boat line he carried. I told him I ageed & didn’t do as they did so how about stocking 4 boats & we can grow from there. He said he would love to & felt we were building far superior boats but he was staying with them because my prices were 5% higher. Of course they both nolonger exist. It was not an isolated senerio… today I now hear “well that guys going to consign the inventory(boats are free) & pay for the shows, etc.” Nothing is free & the last act of a desperate person or company is to give it away.
    Prices in Alaska will go up as a result of this & some manufactures will either pull completely out or dramatically change how & at what price they do business there, that is all I’m saying.

  10. Clay Peltier, Jr.

    The Marine Dealers in the State of Louisiana passed a similiar law almost 15 years ago. When
    the law hit the books, we were bombarded with phone calls from manafacturers claiming they
    would cease doing business with dealers in the state. That never happened. The truth is that
    there are too many greedy SOB’s out there. They want your MONEY.
    Let the smoke clear, go on with your business and things will fall into place.
    One things as dealers you need to watch. If the law is written heavly in your favor, you need to
    police your dealers to prevent abuse. That gives the manufactures some ammo to challenge
    the law. Oh, and it will be challenged in the future. Keep your eyes open.

  11. Brian R

    Like Mr. Holcombe, I don’t like to see the government regulating such behaviour, however as a servicing dealer, I fully appreciate the intent of the Alaskan bill. Most of the manufacturers I work with only reimburse our exact cost on items used in the warranty repair of their products. As we try to keep much of the service parts in stock, when these parts are used for a warranty repair, not only do we lose the opportunity to make a profit on the investment we made, we don’t even recover our shipping costs (although we can order a replacement with the claim and avoid a new shipping charge). We also have to pay our state a “Business and Occupation” tax computed as a percentage of our sales (in addition to sales tax), which means we actually lose money when we are reimbursed for product at our “cost.” This becomes particularly annoying when we have bought a part or finished goods under special discount circumstances (e.g. boat show) and we end up paying more for the replacement than we’re reimbursed. Asking the manufacturer to pay MSRP sounds great, although I’d settle for the dealer’s regular retail price, or at least MAP.

    Furthermore, the manufacturers for whom we primarily provide warranty service do not normally cover our time to actually file the claim. However, we usually try to ask for half an hour, which I think is a reasonable amount. Besides, there is a lot more time required than just to complete a warranty form; there’s the time interacting with the customer (frequently not even our original sale), creating a purchase order for any parts, receiving those items, generating the warranty invoice, receiving the credit, filing all the above, etc. All told, I think this can easily average more than an hour per case.

    Finally, most manufacturers (perhaps all) have time or dollar limits to the amount they will cover for warranty service, sometimes varying with the type of product. On average, I believe these limits are too low, and in some cases unrealistically so. Requiring more reasonable coverage would meet with my approval.

    The customer and manufacturer benefit the most from our warranty service; it is rarely a money-making proposition for us as a dealer. Why should a dealer spend resources to solve a problem for the customer/manufacturer for which they will be compensated far below their non-warranty service rates, if at all? The customer wants his problem fixed at no charge and the manufacturer wants it fixed at as low a cost as possible, leaving the dealer, caught in the middle, to make up the difference from his own pocket.

  12. Larry Tague

    Tom J.
    well as you state not all manufacturers are Snakes !!! Over the last 40 years I have dealt with a lot of Great people in this industry. That beening said, today we are surrounded by manufacturers that do NOT have the dealers/customers well being at heart. The reason we have HAD to push for legislation is simple. When times get tough or the factory gets a little slow OR A BIGGER ORDER is presented to the Reps. all the sudden the old dealer is not as important. As for our ( Missouri ) legislation we were forced into action ! In 2002 My major manufacturer called us up a week before dealer meeting and CANCELLED all of there dealers in the State so they could give ONE DEALER the entire state. Yes our CSI was Very high, Yes we had meet every program requirement, Yes we had orders in house, Yes we had went to all required sales & service schools. AND Last but not Least when we were called that morning we were told NO YOU CAN DO NOTHING TO CHANGE OUR MINDS THIS IS A DONE DEAL. !!! Mine is not the only story out there so I would ask the manufacturers to look deep into there own business practices before they cry foul.

  13. Dudley

    As the Vice President and a Board of Directors member of The Alaskan Marine Dealers Association, I would like to add my 2 cents worth and comment on why our association and so many others in Alaska felt that we needed to get the recent legislation passed. The one sided and heavily skewed nature of the vast majority of dealer agreements to the benefit of the manufacturer has and continues to be one of the most serious challenges our industry faces. The average dealer agreement is what is called an Adhesion Contract and is not subject to negotiation or change and is crafted and designed to give the manufacturer all of the control and power in the relationship. Most dealers have no say in these agreements or ability to effect changes in them. They are designed to be one sided and that is understandable since they are written by the manufacturer for the manufacturers benefit. My dealership has been in business since 1976 and there has been incredible changes in our industry during these 33 years. The days of the handshake deal and people and companies adhering to and keeping their promises and commitments are becoming less common. A lot of manufacturers ownerships have changed with consolidations, buyouts, and shutdowns. The average dealership has changed with much more investment in training, special tools, facilities and equipment required to properly service the more advanced technology products being sold today. In many ways this is comparable to the Automotive industry and the changes it has gone through in the last 20 years. HB 177 was designed and crafted to address several serious problems within our industry that the manufacturers and their Adhesion Dealer agreements refuse to do. Simply put HB177 will require a manufacturer to be more responsible for their mistakes in manufacturing and disgning their products. HB 177 will help to prevent a manufcaturer from offloading their repair and warranty cost burden onto the dealer or the consumer in the form of lowball or unrealistic allowable shop labor rates or times for doing warranty work, not paying a dealer for the manufactruers impoosed burden of warranty administration and claims handling and tracking requirements, and helps to ensure that a dealer is fairly compensated for their investment in their parts derpartment for any parts used in warranty repairs out of a dealers inventory. What HB 177 does is make the manufacturer a customer of their authorized dealer when they need to have the manufacturers mistake fixed by the dealer. This change should help and result in true Warranty Portability as is commen in the automotive industry. Warranty repairs will be more on par with regular retail service work and since dealers will most likely not be losing money on warranty work as is common now, consumers will be able to get service at their authorized dealer of choice resulting in happier customers. HB 177 does not impair a manufacturers decision on who they choose to have as their authorized dealer, though if they do not renew or decide to terminate a dealer, then the manufacturer has to repurchase the dealers product and parts inventory at the dealers cost which is fair. If the manufacturer builds a product that is unrepairable due to serious design defect issues, during the first year of a customers ownership and if after many repeated opportunities to make the product non defective are ineffective, then the manufacturer can be held accountable to replace the product with a non defective design replacement or customer reimbursement. Again, how is holding the manufacturer accountable for their mistake be considered unfair. The desire and hope of everyone involved in the process of getting this groundbreaking legislation passed is to change the industry by incentivizing manufacturers to build better quality, safer and more reliable product and when or if they make a mistake, which can happen, then the manufacturer will pay the costs to take care of it as they have promised by their factory waaranty that they give the purchaser of the product. I have had numerous discussions with various manufacturers management, and I think that one very high level executive of a major Marine Manufacturer said it best after my briefing him on HB 177, he stated that “It seems to be just commen sense”. I agree and anyone who thinks that it is unreasonable to hold the manufacturers accountable for their mistakes and product defect costs probably works for a manufacturer that produce lower qaulity product that may have a lot of warranty issues. Manufacturers that produce quality product and treat the dealer and consumer fairly and equitably will actually benefit as their competitors that produce problematic prodct will have to step up their support to the higher levels of the better manufacturers. I would hope that the marine industry views HB 177 as a much needed change and tool for our industry to produce better product with happier customers. There will be adjustments and some manufacturers may not want to change their abusive policies, but can our industry continue to survive with the status quo that many of the current dealer agreements and warranty policies allow. I think not. It would be best if the NMMA and its members stepped up and finally kept their commitment to produce equitable dealer agreements and fair warranty policies and build their dealer relationships in a productive and mutually respectful manner. If anyone wants to review HB 177 you can go to the Alaska Legislature website and use the Bill Tracking Feature and then click on the button that says “Full Text’. Print off a copy and if you want to discuss it further, my e mail is dudley@akmining.com. It would certainly have been preferred by everyone that the manufacturers accomplish the needed changes on their own without having to pass legislation, but the cold reality is that the NMMA and its members do not seem committed to anything more than “Lip Service” with the result that nothing will change until the dealers take the initiative on the critical issues and inequities addressed by HB 177.

  14. John Shannahan

    Nice reporting on this important issue. The dealer agreement vs franchise argument has been around for a long time. When Mom and Pop work thirty or more years to help make a brand sucessful and get displaced by a few fresh MBA’s who have no cultural ties to the Marine Industry everyone in the community wonders why such a brutal thing happened to caring people. Well,look around! You are about to see thousands of examples as there are many similar examples in the Car industry. But,don’t forget in the Marine Business we are half automotive and half housing contractors so the Auto model does not fit correctly.Bottom line is the NMMA got it right but they couldn’t force the MFG’s to follow their example

  15. Dudley

    Alaska Governor Sarah Palin signed into law HB 177 in Fairbanks, Alaska at 1:30 PM Monday May 26th. The event was attended by numerous Alaska Legislators who had worked on getting HB 177 passed unanimously by all committees and all votes in the House and Senate. Representative Coghill was the Prime Sponsor and spoke to how HB 177 will help to ensure fair treatment for consumers and the servicing dealers regarding warranty and defect issues. Also attending were Senator Joe Paskvan and Senator Joe Thomas of Fairbanks who both were strong advocates and co sponsors of HB 177 in the Senate. HB 177 takes effect immediately. The Alaskan Marine Dealers Association looks forward to working with all Alaska dealers and their suppiers to help answer any questions regarding HB 177. For a copy of HB 177 you can go to the Alaska Legislature website and go to Bill Tracking and click on the button for a FULL TEXT and then Print.

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