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N.H. auto dealers bill going to House panel after passing Senate

The fight has moved to the House over legislation that New Hampshire’s auto dealers say would help protect their businesses and big automakers say would interfere with the free market.

Both sides say customers will feel an impact if the bill becomes law – the manufacturers say it’ll drive up costs, while the dealers say it’ll help keep costs down.

All 50 states have laws granting certain legal protections to auto dealers, and the bill that passed the Senate last month on a 21-2 vote would expand New Hampshire’s existing “Dealer Bill of Rights.”

The House Commerce and Consumer Affairs Committee will hold a public hearing on it this afternoon, starting at 1.

Senate Bill 126 is a complicated piece of legislation. In a variety of ways, it would change the terms under which locally owned dealerships interact with the manufacturers – Ford, General Motors, Toyota, Honda and the like – whose products they sell.

The fight is heating up. In full-page newspaper ads, including in the Monitor, the Alliance of Automobile Manufacturers has branded it “a lemon of a law” that’s “wrong for consumers.” The New Hampshire Automobile Dealers Association backs the bill and has put the word out to its members across the state, said President Peter McNamara: “Call your local reps. Tell your story.”

Construction limit

States generally don’t allow auto manufacturers to sell their products directly to consumers, so the companies enter into franchise agreements with local dealers.

But those contracts don’t exist in a vacuum: All states have enacted laws that extend specific legal protections to dealers. New Hampshire’s law was last updated in 2009.

At that time, auto sales were tanking amid the recession and the bankruptcy restructuring of General Motors and Chrysler, two of the Detroit Three domestic automakers. The industry has since rebounded, and U.S. dealerships saw record profits last year, according to the National Automobile Dealers Association.

McNamara said dealers in New Hampshire have also come under increased pressure from manufacturers in recent years to renovate or expand their facilities to bring them up to national standards.

The industry average is for a facility to be upgraded every five to seven years, but that comes at a cost, McNamara said: “It’s usually a couple million dollars on average for either a renovation or new construction.”

The bill now before the House would bar manufacturers from forcing dealers to replace or significantly renovate their facilities except every 15 years, or seven years if the automaker covers the bill.

But Daniel Gage, a spokesman for the Alliance of Automobile Manufacturers, said the automakers have a vested interest in determining how their products are displayed and sold. And, he said, that includes making sure standard designs are in place in all of a brand’s dealerships.

“Franchising 101 tells you that consistency, uniformity, brand identification are all very important,” he said, adding, “We think that the way (SB) 126 is written, it eliminates the balance that had previous existed here.”

In the end, both sides say the economics of facility renovations come down to sales.

“They simply have no proof that is sells any more new vehicles,” McNamara said.

Gage retorted that a dealership’s appearance is certainly a factor in sales: “We have as much data as they do that shows that it is.”

Other protections

Another element of the bill: Manufacturers wouldn’t be able to require dealerships to buy tools or construction material from a specified source, instead giving them the option of buying “goods or services of substantially similar quality” from a vendor of their choice.

Gage said it comes down to manufacturers’ need to protect “franchise and brand consistency,” while McNamara said dealers are now blocked at times from buying furniture and other supplies from local vendors that might be cheaper.

“The costs are either going to be kept the same or lower when you don’t require new facilities every seven years and when you allow dealers to buy local,” McNamara said.

The bill would also require automakers to reimburse dealers for warranty-covered parts based on the retail price charged by the dealer. That’s only fair, McNamara said.

But Gage said dealers would then have an incentive to raise their rates.

“By forcing both parts and labor to go to retail . . . there’s a built-in incentive for dealers to raise their prices for everyone,” he said.

The legislation also contains a provision that would be the first of its kind in the country: a law allowing auto dealers to, once a year, view the manufacturer’s file on them, including any negative information.

McNamara said it’s about transparency. If an automaker changes a dealer’s sales territory, or gives some dealerships preferred access to sale-incentive programs, “we want to see what the rationale (is), why do you treat some dealers differently,” he said.

But Gage said that would go too far.

“Where does a law exist anywhere in a country that allows a private company to demand private information from another company for its own use?” he said.

Gage added: “Does the state of New Hampshire really want to be the very first state in the nation to test the legality of such a mandate?”

(Ben Leubsdorf can be reached at 369-3307 or or on Twitter @BenLeubsdorf.)

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