There was an obscure legal decision made last month by Chief U.S. District Judge M. Casey Rodgers that if upheld, will make it much more difficult for you to have your new vehicle repaired under warranty by Florida car dealers.
In May of 2008 a state law was passed that required manufacturers to reimburse their dealers the same rates for warranty parts and labor that the dealership charges retail customers. Up until this time, only warranty labor was reimbursed to dealers at the same rate as the labor rate charged to customers. Immediately, the powerful lobbying group, Alliance of Automobile Manufacturers, AAM, filed a legal challenge to this law, attacking retail reimbursement for parts and labor. This powerful lobbying group represents 12 manufacturers including GM, Ford, Chrysler, Toyota, and Volkswagen. As you know, money talks and few lobbying groups have more money than AAM. Ironically, a lot of that money, at least from, GM and Chrysler, came from you and me, the taxpayers, when we bailed out these two companies not long ago.
Judge Casey’s decision issued last month said “Automakers’ claims regarding warranty reimbursement have merits and the case should move forward in court.” The AAM lobby charges that “the parts and labor reimbursement provisions violate the due process clause of the Florida Constitution and the contracts clauses of the U.S. and Florida constitutions.” That is legal gobbledygook created because they can’t come up with a real reason why this law isn’t a good and fair one for the car owner, dealer, and manufacturer, so they’ll look for technical loopholes in the law and “creative” interpretations of the Florida and U.S. Constitutions.
As is virtually always the case, legal disputes are about money. For the automakers, warranty reimbursement to auto dealers is measured in billions of dollars annually. These billions of dollars comes out of the pockets of GM, Ford, Chrysler, Toyota, Volkswagen, and all other automakers and go into the pockets of their dealers. Shockingly, the only party that isn’t represented in this legal battle is you, the car owner. But you have a huge financial stake in this because, if the automakers prevail in court, you will find it much more difficult to get your car repaired under warranty by any car dealer in Florida. This doesn’t only apply to repairs but to “free maintenance” which most manufacturers are now touting for their new cars. You may even find yourself paying for warranty repairs and “free maintenance”.
I’ll explain. I’ve been a car dealer for 44 years, since 1968. Back then, there were no laws requiring the automakers to reimburse their dealers for performing warranty work at a fair rate. As a consequence, dealers didn’t want to repair cars under warranty. The reimbursement was so low that they actually lost money or, at best, broke even. The amount of reimbursement by the automaker wasn’t enough to pay the technician for his work and cover the dealers’ overhead expenses. If you’re old enough, you remember that back then you could take your new car back only to the dealer from whom you bought it for warranty work. Your selling dealer had more motivation to do warranty work on y our car even though he made little or no profit because he did make a nice profit when he sold it to you and wanted to sell you your next car. If you were on a trip, far from your selling dealer, it was almost impossible for you to find a dealer who would agree to fix your car under warranty.
Another negative consequence of under-reimbursing dealers for warranty labor and parts is that the dealer is not inclined to tell you that the repairs are covered by your warranty. When you drive in to the service aisle of your dealer, that person who greets you is paid on commission. He doesn’t call himself a service salesman, but that’s what he is. His title will be service “advisor”, service “writer”, or assistant service manager. This person feeds himself and his family by how much commission he can make on the profit he makes repairing your car. If he repairs it under warranty at a very low rate and no profit, he doesn’t make much of a commission. Today, because dealers make the same profit on labor and parts for warranty as the do for non-warranty work, they love to repair your car under warranty. In fact, they will even cajole the manufacturer to stretch and perform repairs under warranty when your car is only slightly out on miles and or time.
There’s still another negative consequence for automakers not fairly reimbursing dealers for warranty labor and parts. The technicians who repair your car and perform maintenance on it also work on commission. Today, they love to repair your car under warranty because they make just as big a commission fixing a car under warranty as they do when it’s not covered under warranty. If the automakers have their way in court, the technicians will not want to work on your car. What happened many years ago before there were laws requiring fair warrant reimbursement is that the lowest paid, least trained and experienced technician in the shop ended up doing your warranty repairs. Usually this was the new apprentice who was learning to fix cars and was paid a low, starting wage. If you were lucky enough to find a dealer to do the warranty repair, you had good reason to fear that the repair wasn’t done in a proper, safe, and timely fashion.
Now, I think you understand why it’s so important to you, the new car owner, that Florida’s law requiring fair reimbursement by automakers to car dealers for warranty repairs and maintenance is upheld. The court battle is being waged between the car dealers lobbying group, the Florida Automobile Dealers Association, FADA, and the automakers, Alliance of Automobile Manufacturers. You, the new car buyers, don’t even have a dog in this fight. This is one of the rare cases where the car buyer and the car dealer on the same side, albeit for different reasons.
It’s unfortunate that we don’t have a powerful consumer lobbying group in Florida like they have in other states like California. This legal fight is all about who has the most money and unfortunately the automakers have the auto dealers outgunned. The Florida Automobile Dealers Association is struggling to raise another $2M on top of what they’ve already spent. That’s “chump change” to GM, Ford, Chrysler, VW, and Toyota. The odds aren’t even 50-50 that the car dealers can win this and all you can do is sit back, watch, and say a prayer.