The Truth About Cars » Franchise The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. Tue, 22 Apr 2014 14:37:08 +0000 en-US hourly 1 The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars no The Truth About Cars (The Truth About Cars) 2006-2009 The Truth About Cars The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars » Franchise QOTD: Doing Without Dealers, Part II Tue, 22 Jan 2013 15:45:56 +0000

Last week, a Massachusetts judge sided with Tesla regarding factory-owned stores, in a suit brought by Massachusetts State Automobile Dealers Association and an assortment of dealers. Barring an appeal, the ruling essentially clears the way for Tesla to operate their own outlets – some of which are in non-traditional venues like shopping malls – and offer an online reservation system for vehicles.

The ruling brings into question the very nature of the independent dealer model, the laws that currently protect it, and its sustainability. OEMs have experimented with venues that merely act as showrooms, rather than ones that sell cars, as well as outlets that blur the line between an “experience center” and a factory store – the most recent example being the Chrysler pseudo-factory “Motor Village” in California.

Tesla, for one, uses the online ordering system to skirt the dealer franchise laws in various states, since they are not technically selling cars there. But that didn’t stop dealer groups from suing them anyways. Robert O’Koniewski, the Massachusetts State Automobile Dealers Association Executive Vice-President, claimed that the group did have standing to sue Tesla, because

“If you read the statute, it’s pretty clear: A factory cannot own a store, and a dealer can sue for injunctive relief if they feel the public is being harmed.”

Now, we’re faced with a few questions

1) What constitutes a “factory owned store”, and did Tesla knowingly operate in a manner not consistent with the definition of a “factory  owned store”?

2) Was the public being harmed?

3) What impact will this have on OEMs and their decision to operate outside of the traditional dealer network?

I will leave numbers 1 and 3 up to you, the B&B, because I am not well versed in the intricacies of U.S. franchise law, and many of you have real-world experience at the dealer level. As for number 2, I’d say “probably not”. But O’Koniewski does seem to think that the dealers are being harmed, and sounds rather desperate when discussing the matter just a few months earlier.

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Chrysler In Breach Of Arbitration Law Already, Allege Dealers Mon, 18 Jan 2010 15:11:44 +0000

Even with a government-mandated arbitration process in place, the battle between Chrysler and its 789 culled dealers is a low-down, dirty dogfight. Last week, Chrysler sent out letters to all of its rejected dealers, in its attempt to comply with the arbitration law’s disclosure requirements. But, dealers tell Automotive News [sub], those letters are justifications, but not explanations. Absent concrete evidence for why their franchises were closed (something GM has provided to its culled dealers), lawyers for some 65 rejected dealers are fighting back.

AN [sub] reportedly got its hands on several of the rejection letters, and describes them thusly:

Each Chrysler mailing consists of a four-page form letter that lists criteria used to reject dealerships as a whole, as well as a personal scorecard of how the individual dealership performed in a variety of categories… The form letter lists 22 criteria, including sales volume, market share, customer service and working capital. The scorecard has 13 factors, including minimum sales responsibility, customer satisfaction index and sales satisfaction index.

Crucially, however, “the Chrysler scorecard doesn’t say which score was considered deficient by Chrysler, nor does it say which categories were used to decide that a dealership should be closed.” This issue has dogged Chrysler’s dealer cull since day one, with rejected dealers arguing that testimony from Chrysler’s bankruptcy like the clip above prove that the dealer cull was arbitrary and not performance-based.

Now that the arbitration process is in place, backed by the force of congressional mandate, culled dealers finally have some recourse… as long as federal arbitrators go where the bankruptcy court wouldn’t and make a definitive ruling on Chrysler’s cull process. The new law requires OEMs to provide culled dealers with, “the specific criteria pursuant to which such dealer was terminated, was not renewed or was not assumed and assigned to a covered manufacturer.”

Dealer lawyers tell AN[sub] “we’re going to make an issue of this early on and explain that they’re not in compliance with the law. There are consequences to that. We’ll have to ask the arbitrators to decide what the consequences are.”

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