Legislature(2003 - 2004)
05/13/2003 08:09 AM House STA
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 272-MOTOR VEHICLE DEALERS Number 0750 CHAIR WEYHRAUCH announced that the last order of business was HOUSE BILL NO. 272, "An Act relating to motor vehicle dealers." [Before the committee was CSHB 272(L&C).] Number 0730 LINDA SYLVESTER, Staff to Representative Bruce Weyhrauch, Alaska State Legislature, sponsor of HB 272, explained that Sections 2- 8 of CSHB 272(L&C) include technical and grammatical changes to an omnibus bill that passed the legislature last year, which dealt with automobile dealers and manufacturers and contained some consumer protection benefits, as well. MS. SYLVESTER said that Section 1 is the "primary controversial issue involved in the bill." She noted that, currently, Alaska statute prohibits the sale of any current-model used vehicle being sold. She said, "Whatever you do, Section 1 has to be altered, because every used-car ... and new-car dealer is operating outside of the law, currently ...." Ms. Sylvester read highlights of the changes made to Section 1 for the committee. MS. SYLVESTER said that used car fleets, such as Avis, purchase used vehicles, rent them, and often "turn them over within nine months." She indicated that although current statute disallows that, the proposed legislation would allow it. She said that the focus [of this legislation] is on the "grey-market"; "vehicles that are bound for the Canadian market that are being picked up in Canada through fraudulent means and turned over to auctions, or are acquired in other ways in the United States." She explained that these grey-market vehicles are for sale in Alaska and have "different impediments." She revealed the following examples: Many manufacturers don't honor the vehicle warranty. The vehicles also have been modified. The modifications have been standardized over the years. For example, running lights are now dealt with and these vehicles ... are almost interchangeable in the U.S. and Canadian markets; however, the odometer is changed. And that is a very serious consumer protection issue. And the other thing is ... that they ... come into the American market in violation of the franchise agreement ... that the manufacturers have with the franchised dealers of the new vehicles. Number 0421 CHAIR WEYHRAUCH announced that he would now hear public testimony. Number 0400 JIM ARPINO, testifying on behalf of Affordable Used Cars, a company in both Fairbanks and Anchorage, Alaska, told the committee that he caught the last plane out of Fairbanks last night with essentially only the clothes on his back. His impetus for such action, he explained, was to "shed some light on this bill - [HB] 272 - specifically Section 1." He reiterated Ms. Sylvester's notation that there is currently a statute that states that no dealer can sell a current-model used vehicle. He said that everybody understands that this makes no sense. He said that the AG's office has publicly stated that this [law] is not enforceable. He said the question is, "How can it be enforced?" Section 1, he remarked, was drafted to "help, or amend the currant law." If [HB 272] is passed, he opined, the new law will actually be worse. MR. ARPINO explained that the current law is equally unenforceable to everyone. Conversely, he said, the changes proposed in Section 1 would definitely [negatively] impact used- car dealers in the state of Alaska. Mr. Arpino described the difference between new and used vehicles as follows: "If you want a new vehicle, you go to a new car store. If your budget or preference wants a used vehicle, you go to a used-car dealer, or seek it in the newspaper from a private individual, or you go to a used-car department in a new car store." But the one thing that everybody knows, he said, is that the used vehicle is most likely cheaper. The choice of whether to buy new or used - and there is nothing really in between - is up to the customer, he said. He told the committee that he has never had a customer come to a Affordable Used Cars lot thinking he/she was buying a new vehicle. He said the company has zero complaints in that department, a fact to which he said the AG's office could probably attest. Number 0169 MR. ARPINO listed the following sources from which [Affordable Used Cars] purchases used vehicles for resale: auto auctions; trade-ins from individuals; other dealers, including new-car dealers; and banks and credit unions. Of those, he said, the most frequent source is the auto auction, which he noted is for dealers only. At the auctions, he said, "no matter who you are or who we buy from, the vehicles at these auctions are used." He added, "We don't even have new vehicles available to us through the course of doing business, because we're not new-car dealers." To illustrate his point, Mr. Arpino said, "If I'm looking at a 2003 vehicle to purchase it, it's going to be a used one." MR. ARPINO said that Affordable Used Cars in Fairbanks and Anchorage currently has approximately over 800 vehicles on the lot for sale. Out of those, as of yesterday, only five are current-year, or "2003-used vehicles." He said a person could question why he is before the committee if such a small percentage of the business [would be affected]. The answer, he offered, is that as the year goes on, those 2003 vehicles will become available to his company in large numbers. He stated that he wants to buy those vehicles, resell them to the public, and attempt to make a profit, because "that's what we do." TAPE 03-62, SIDE A Number 0001 MR. ARPINO [noted that the amended Section 1 would allow dealers to buy used vehicles from individuals]. He said that that helps a little, but suggested that it's just common sense. He reiterated, "That's what we do." He pointed out that Section 1 also states that dealers can buy rental cars that have been in service for six months, which sounds generous, but in most cases, the rental cars in Alaska show up in May and are sold in September after the tourists leave. Some of those vehicles will be sold directly to dealers, but most of them will be sold at auto auctions. He asked, "At that point, how are we supposed to know how long they've been in service?" MR. ARPINO posited that an auto auction is a great place to buy a vehicle for resale, and is "a great place to see American capitalism at work." He continued as follows: When you purchase a vehicle at these dealer-only auto auctions, you get a title for that vehicle when you pay for it. It's that simple. You ship these vehicles to Alaska for resale on our lots in hopes of a profit. MR. ARPINO stated that he doesn't want to be an Alaskan dealer at these auctions and see good used vehicles go by that could be sold due to an "Alaskan-only law" forbidding [dealers] from buying and selling these vehicles. Number 0158 MR. ARPINO remarked that Section 1 is really about selling imported vehicles in Alaska. He noted that it is currently legal to buy a vehicle that has been imported from another country, as long as it's done properly. He said that dealers have nothing to do with the actual process of importation. Dealers receive the U.S. titles from the auction companies, and at that point, the vehicles have already been imported and are already "American vehicles with U.S. clean titles." He told the committee that the registered import agents handle the paperwork and the "speedo" (ph) changeover. Those agents are regulated by [U.S.] Customs and the [National Highway Traffic Safety Administration (NHTSA)]. Mr. Arpino indicated that [NHTSA] is part of the [U.S.] Department of Transportation, in Washington, D.C. He said, "They seem to have no problem with this activity. Any questions pertaining to imported vehicles should be directed to them, for I am not an authority on this matter, nor is anyone who is not a registered import agent or working or administering the process." MR. ARPINO asked the committee members for their help in keeping the free trade of used vehicles, "regardless of (indisc.) in Alaska," by deleting Section 1, or at least holding the bill until all the facts are before the committee. He continued as follows: This bill says nothing about Canadian vehicles - not a peep. It's only about restriction, and this is not a state issue. This is a federal trade issue. ... Dealers are not importers, and I think that might have a lot to do with the complications. MR. ARPINO distributed a handout [labeled, "The Detailed Registered Importer Process" and available in the committee packet], which shows the lengthy process involved. He emphasized that the chance of odometer fraud "appears very, very unlikely." He indicated that questions in regard to the importer process should be directed to those involved in that process. He concluded, "So, the vehicles that we're buying currently are good used vehicles for the Alaskan public." Number 0447 REPRESENTATIVE HOLM asked Mr. Arpino how he relates to the dealers in "our area," with regard to "the accusation of predatory pricing, et cetera." Number 0490 MR. ARPINO replied that the accusation of predatory pricing is not accurate, because the vehicles are not "apples to apples," but are instead "apples to oranges." He reiterated that there is no misunderstanding between dealers and consumers that the vehicles are used. He noted that people don't get certain things when buying a used vehicle from a dealership, for example, a nice show room, a parts department, and a service department. He said that that is the risk that [consumers] take. MR. ARPINO said that if those consumers were to have a legitimate problem, they would contact the AG's office, which he said has "no bones about straightening businesses out." He praised the Anchorage attorney general's office, in particular noting that Ed Sniffen has been helpful in "getting everybody on the same sheet of paper, with the exception of this Canadian issue." He reiterated that that issue is not a state issue, but a federal one. He noted that, at this point, the bill states that "this particular vehicle" cannot be imported, because it's coming from Canada. He asked, "Are we going to then stop importing vehicles from Germany? Are we going to stop motorcycles, refrigerators? Where does it stop?" MR. ARPINO revealed that his current relationship with dealers is a good one. He noted that he is currently on "the board" with Mr. Allwine, and he sees many things eye-to-eye; however, on this particular issue, he said his view differs from Mr. Allwine's. Overall, he said, the relationship between used- and new- [car] dealers is a good one. Number 0677 REPRESENTATIVE CRAWFORD asked if the bill, as currently written, makes it illegal for everybody to sell current-model Canadian cars. MR. ARPINO stated his belief that there are not a lot of new-car franchises buying previously imported vehicles, although he noted that there used to be a lot in the past, but now "they're staying away from it, because it helps this bill process, I believe, pass." He said his interpretation of the bill is that "it would limit the ability for us to go to auctions, because it doesn't specifically say in there." He noted that imported vehicles from Canada are "running through" auctions. He added, "We are not involved in the importation of those vehicles; they are just available for us to purchase." The only way to determine if a vehicle has been imported, he said, is to look for an authorized import sticker on the door. He explained that it is important to make certain that sticker is there, because that shows that the vehicle was imported properly [into] the U.S., and it provides information regarding who imported the vehicle, when it was imported, and whether it meets all the requirements. At that point, he said, the seller provides the free-and-clear title. Number 0876 TERI PETRAM, testifying on behalf of Lyberger's Car & Truck Sales, LLC, paraphrased her written testimony as follows: In testimony heard by those supporting HB 272, Section 1, several concerns were mentioned in regard to the importation of Canadian vehicles for resale. It's odd, though, that the word Canadian is not in the bill, except debate from supporting parties always leads there. So, while Lyberger's isn't actually importing the vehicles themselves, I'm going to go ahead and address a few of those issues for you: One was odometer discrepancies; two was voided manufacturers warranties; three was the availability of independent mechanics and technology to repair newer vehicles; four was recall notifications sent to subsequent owners; and five was the selling of [vehicles damaged by flood, for example] .... Let me point out that these are all legitimate issues facing consumers today, on both U.S. and Canadian vehicles - they're not characteristics of only Canadian imports - and we agree that the enforcement of the existing laws - that are already on the books - that address them should be made. None of these "Canadian vehicle issues" - and I say that in quotes because they're not just Canadian vehicle issues - are being addressed or put to rest by allowing section one to pass as written. Importation of Canadian vehicles will continue. Used-car dealers will still buy 2001 and 2002 Canadian vehicles and resell them in Alaska. Why?, because it is legal, and it makes good business sense, and the supply and demand is there to support it. New car dealers will still buy current-model Canadian vehicles when they can't get a particular type of vehicle from their manufacturer, and they'll still sell them here in Alaska. So, the fact is, each of those issues that were brought up are already addressed in Alaska Statutes - it's Section 3, [AS] 45.50.147, I believe - and [in] business advisories from the Attorney General's office, and they're already regulated by the National Highway Transportation Safety Administration, the U.S. Department of Transportation, the U.S. Environmental Protection Agency, [and] U.S. Customs, and they must comply with federal motor vehicle safety standards. The issues are already handled in other areas. Apparently, there seems to be a sympathetic attitude towards local franchised dealers and the investment they have made with their respective franchises. The picture being painted is that there's no way of competing with the prices of Canadian vehicles, aside from having a showroom, ... [a] parts department, ... and other convenient factors that customers can appreciate. The exchange rate from Canada to the US is favorable, but franchised dealers have access to: factory subsidized interest rates - you see zero percent advertised all the time, [and] it's very difficult for us to compete with that, because we have local lenders; factory rebates - in excess of ... $3000-$4,000 on some vehicles; holdback and dealer only incentives for moving specific vehicles; and ... factory-backed advertising - you see Ford, [Chevrolet], [or] Dodge commercials on television all the time that your local dealer didn't necessarily pay for. Once you compare the facts, new-car dealers have as good a bottom-line price as used-car dealers, but are unwilling to accept the same smaller profit margin. The only objective Section 1 will meet is the elimination of competition from used-car dealers with new-car dealers. We, used-car dealers, will no longer be able to bid against our fellow dealers for current- model vehicles at various auctions, or in any situation that's not a private owner or rental vehicle, because we won't be able to sell them. In the last four to five years, used-car dealers in Alaska have evolved from the dirt lot with 20-30 cars for under $10,000, to paved, well-lit lots with 100 or 200 high-quality vehicles. We've sliced out a chunk of the new-car dealers' pie, and that's why they support ... Section [1]. If their past customers had been treated well the last few decades, maybe we wouldn't be so successful. So you might wonder why ... [we aren't] happy with cars from rental fleets, also. Well, let's look at the type of inventory that a rental fleet carries: ... sedans, minivans, and a few sport [utility vehicles]. When was the last time you saw a rental fleet of Eddie Bauer Ford Expeditions, or three- quarter-ton crew cab diesels? CHAIR WEYHRAUCH informed Ms. Petram that the bells calling the representatives onto the House floor had just rung. He stated his desire to hear Mr. Lyberger's testimony, as well. MS. PETRAM continued paraphrasing her written testimony, as follows: Those are the vehicles Alaskan buyers are looking for - they want the trucks and the bigger sport [utility vehicles], not the sedans and minivans. [Used-car] dealers also use local lenders. Ninety percent of the time we use Alaska USA [Federal Credit Union], Denali [Alaskan Federal Credit Union], Credit Union 1, [or] Alaska State Employees [Federal Credit Union]. New-car dealers, when they sell a new vehicle, ... primarily use ... out-of-state factory- lending institutions - like [General Motors Acceptance Corporation], Ford Motor [Company] Credit, [or] Chrysler Credit - with subsidized rates [of] zero percent [or] 2.9 percent, [for example]. Again, a "2003" is obviously a more expensive vehicle than a "2001." When you limit the used-car dealers to just a few current-model vehicles that they can sell and arrange financing for, you're also hurting Alaskan banks and credit unions' portfolios. They're missing out on the high-dollar 2003 loans. Right now, Alaska's credit unions have some of the lowest rates in the country, like 4.99 percent with Alaska USA [Federal Credit Union], and support from their local dealers is a big factor in keeping the rates low. Just this year - January ... [through] ... [part of] May - our dealership alone sent the local banks $12,925,991 in high-quality loans. And I say high quality, because usually you have to have good credit to buy a $30,000 truck. Since the "2003s" cost more than the older models, it is safe to say ... that about 50 percent of that money was on current models. So, that's [$6,500,000] of lending money that went to local institutions that won't be there. CHAIR WEYHRAUCH ascertained that Mr. Lyberger was able to come back later in the day to give his testimony. He then asked Ms. Petram to wrap up her testimony. MS. PETRAM continued paraphrasing her written testimony as follows: It's not just us. There's also other dealers: Affordable, Quality, Budget, Phil Hawes, [and] Variety - that's just to name a few. So, there's that chunk of money that [is] coming from those dealers, also. Also, when an Alaskan bank has a current-model repossession that they want to recoup some of their losses on - like a first-payment default ... - how many dealers will they be able to ask to bid on that vehicle? Say, for example, a Cadillac or a Mazda - there's only one in Anchorage. So, basically, they have to take what that dealer gives them for the vehicle; they can't send it out to bid and get the most money back on their loss. Used dealers also spend millions of dollars with local independent mechanics and parts suppliers. New car dealers get all their parts from the factory, or ... [a] large portion of ... [them]. So, how exactly does Section 1 help the State of Alaska or its people? Aside from taking a huge chunk of money away from local Alaskan businesses [and] lending institutions, it ensures the $1,995 and the $2,995 additional dealer mark-up ... or addendum sticker ... on new vehicles will stay. It also forces any intelligent car buyer looking for a good deal on a late-model vehicle to spend their money out of state and have the vehicle shipped from Washington or Idaho, or any other state without a law prohibiting competition. Every $1,000 that a customer saves on a vehicle is $20 disposable income - every month, in their pocket - to spend on whatever else they choose .... So, I thought we were trying to stimulate the economy and increase consumer spending in Alaska, not stifle it. So, in conclusion, after browsing through the already existing Alaska Statutes in the handout that Jim gave you, you have to ask yourself what the real intent of Section 1 is, and [if it's] fair and just. And wouldn't your constituents appreciate the chance to make their own decision on where they'll buy a current-model vehicle? I would submit that Section 1 needs to be removed from HB 272 or rewritten without the words "current model". [HB 272 was held over.]
| Document Name | Date/Time | Subjects |
|---|