Nissan to Keep Closer Tabs on Dealerships in 2021, Retailers Annoyed

After enduring a series of rough years resulting in some unsettling financial reports, Nissan is doing its utmost to turn things around. Following its first annual loss in 11 years, the company announced a plan that would include cutting 20 percent of its global lineup to make way for newer models, eliminating unnecessary production capacity, and cutting corners (and jobs) just about everywhere in order to save $2.8 billion off of fixed costs. This is also being done to make way for a leaner, meaner Nissan, and make room for newer vehicles it believes will be essential to remain competitive.

It’s also hoping to spruce up dealerships to make them more desirable locales for customers ready to do their business. That includes an increased number of factory audits moving into 2021 — partly as a way to make up for the limited number that were conducted this year thanks to the pandemic and partly as a way to make sure nobody is doing anything financially untoward. But there are some concerns among owners that Nissan may end up bullying shops unnecessarily.

In a normal year, automakers typically audit around 3 percent of its dealer network. But a retailer who was briefed by the automaker recently told Automotive News Nissan would be checking around 10 percent of its dealerships next year. While a company spokesman has confirmed that the automaker would be increasing the amount of audits in 2021, he declined to give a specific number — noting that Nissan’s validity checks on warranty claims were already below the industry average and should be remedied.

There are claims that it has been ramping up factory audits already, however. Nissan’s National Dealer Advisory Board has received complaints from members stating that they’ve been issued demands from the manufacturer to repay amounts of up to $140,000. Many have also said the audits are not triggered by suspicious sales or warranty claim activity and appear predatory in nature.

From Automotive News:

The clawback unfolds as parent company Nissan Motor Co. of Yokohama, Japan, is in financial turmoil. The company has forecast an operating loss of $4.5 billion for the fiscal year, ending March 31, 2021. Nissan executives are scrambling to find ways to tighten up company finances.

“Nissan has lost more money than they’ve ever lost in 20 years,” said one dealer who said he was recently charged back about $60,000 in warranty claims. “It’s an easy way for them to get cash.”

Some of the dealers, who spoke with Automotive News on condition that they not be identified, said the new audits are tending toward nitpicking, calling for repayment for infractions such as incomplete paperwork.

“They certainly don’t seem to be accommodating with a reasonable man’s approach to doing a warranty audit at a dealership,” said one retailer, who is facing a $40,000 chargeback. “Typically, warranty audits are looking for fraud. They’re not looking for ‘Did you time-punch everything to perfection?’?”

To its credit, Nissan has recently upgraded dealer education protocols to help employees avoid minor infractions or major safety violations that could result in a fine. But dealers continue to suggest recent audits aren’t based on concerning warranty claims, safety concerns, or evidence of fraud — with some claiming the factory is abusing the system to find excuses to fine their shop. Nissan said a lot of checks are made at random but that it will also look into any retailer with suspect paperwork or a string of customer complaints.

The truth of the matter probably lies in the automaker having a real desire to make sure dealerships are in tip-top shape, with the ability to pad its revenue via audits being an added bonus. This has not stopped shop owners from accusing Nissan of taking advantage, however, and plenty intend on using the law to combat fines. Dealer attorney Richard Sox, managing partner at Bass Sox Mercer of Tallahassee, FL, told AN such practices can become revenue centers for automakers in their times of need.

“It’s a tremendous transfer of wealth from dealers to the manufacturer,” he said. “Auditors have admitted their instructions are to make sure they pay for themselves in regards to their findings. So they have to dig things up.”

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