Fairness is a basic American value.
We ask for it at all levels of our society, from little leagues to professional sports, in how we are paid and expect to be treated. Government strives for it when it creates laws, and business agreements great and small are tailored around this same basic guiding principle.
When circumstances change and the rules that used to work for both sides no longer maintain balance and favor one side over another, we seek to straighten them out.
Case in point are the franchise protection laws that are supposed to keep things fair between companies and the businesses who represent them through a franchise agreement. When it comes to selling cars and trucks, state governments recognized decades ago that the economic power of the automotive manufacturers can be oppressive without some protection for their franchisees – the locally owned dealers.
These local businesses, and the communities and consumers they serve, depend on franchise laws to bring some balance and equality to this arrangement. Without a franchise law, the big auto companies would only see pins on a map instead of vibrant businesses making huge personal investments, serving local customers and providing steady jobs in their communities.
We know what happens when the rules are not in place. In 2010 when General Motors and Chrysler gained protection in federal bankruptcy court, Minnesota’s franchise laws could no longer protect dealers. Dozens of profitable dealerships were wiped away without cause, over a hundred franchise lines were pulled without reason or compensation, and hundreds of people lost jobs.
If dealers wanted to get back into business, they were forced to sign one-sided agreements that heavily favored the automakers’ positions without any opportunity to negotiate. It was take it or leave it.
When the giant companies emerged from bankruptcy – helped by a taxpayer bailout – the franchise laws went back into force but the balance of power between carmakers and dealers had changed.
This means that in Minnesota many big car companies now do not pay a fair rate to dealers for warranty repair work. When a customer brings a vehicle in for repair under warranty, it’s basically saying that the carmaker goofed something up in the manufacturing process.
It’s not the customer’s fault and the dealer is supposed to fix it and then get paid back at a fair rate for the work they’ve done on behalf of the carmaker.
The outdated rules now allow vehicle makers to not pay their fair share of the repair cost. The dealer still has to pay the technicians and others their full pay, but then has to cover the difference which harms their bottom line and hurts their business. The rules were never intended to let carmakers shift the costs of fixing their mistakes to local dealers.
This is clearly not fair and is why the franchise rules were put in place in the 1970s. Last year legislation to ensure fair warranty reimbursement overwhelmingly passed the Minnesota House by a vote of 114-4.
The changes are similar to what has been enacted in over two dozen other states. This year Minnesota dealers and their employees look forward to working with the Senate to get this bill on Gov. Dayton’s desk in 2018.
Minnesota dealers, the communities they operate in and their consumers just want things to be fair. We expect multinational companies to treat us fairly. When they don’t, we expect the Minnesota Legislature to give us a fair shot at trying to fix this.
Scott Lambert is president of the Minnesota Auto Dealers Association, a statewide trade group representing 370 franchised new car and truck dealers.