Legislature(2023 - 2024)BARNES 124
03/06/2024 03:15 PM House LABOR & COMMERCE
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| HB254 | |
| HB204 | |
| HB233 | |
| HB333 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 189 | TELECONFERENCED | |
| += | HB 204 | TELECONFERENCED | |
| *+ | HB 333 | TELECONFERENCED | |
| *+ | HB 233 | TELECONFERENCED | |
| + | HB 226 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 254 | TELECONFERENCED | |
HB 233-RATES: MOTOR VEHICLE WARRANTY WORK
3:48:41 PM
CHAIR SUMNER announced that the next order of business would be
HOUSE BILL NO. 233, "An Act relating to rates and time
allowances for motor vehicle warranty work."
3:48:54 PM
The committee took a brief-ease at 3:48 p.m.
3:49:02 PM
FRANK TOMASZEWSKI, Alaska State Legislature, as prime sponsor,
presented HB 233. He shared the sponsor statement [included in
the committee packet], which read as follows [original
punctuation provided]:
House Bill 233 makes a key change to the auto warranty
statute by adding time allowances to the schedule of
compensation for warranty work. Thousands of Alaskans
benefit from warranty work every year as part of their
agreement with auto manufacturers from whom they've
purchased their car. By agreeing to sell cars on
behalf of certain manufacturers, auto dealers assume
the responsibility of coordinating the time and labor
spent performing warranty repair work on their cars.
Warranty work differs from regular auto work in that
the manufacturer compensates the dealer directly.
Additionally, qualified dealers do not have the
ability to refuse the work. Auto manufacturers
compensate dealers for warranty work using rates and
time allowances that dictate the maximum amount of
time that the dealer may bill for different repairs.
The rates and time allowances that manufacturers use
to reimburse dealers for warranty work are often much
lower than the rates and time allowances that dealers
and independent mechanics bill customers for non-
warranty work. As a result, dealers are often forced
to pay their mechanics more than they are compensated
by the manufacturer or risk losing their mechanics to
independent auto shops. Across the nation, states have
taken varied approaches to addressing how to ensure
fair payment for dealers by manufacturers. Senate Bill
144 takes an approach used by states like Colorado,
Montana, and Illinois by requiring that manufacturers
compensate dealers for warranty work at the same rates
and time allowances that the dealer charges retail
customers for similar, non-warranty work.
3:52:40 PM
DAVID GOFF, Staff, Representative Frank Tomaszewski, Alaska
State Legislature, on behalf of Representative Tomaszewski,
prime sponsor, shared the sectional analysis for HB 233
[included in the committee packet], which read as follows
[original punctuation provided]:
Section 1
AS 45.25.210. Rates for warranty and other work Amends
subsection (b) Page 1 Lines 6-8 to state. "The
compensation for labor must include the rates and time
allowances for warranty work."
Section 2
AS 45.25.210. Rates for warranty and other work Amends
subsection (c) Page 1 Lines 11-12 to include "and time
allowances" in the schedule of compensation.
Section 3
AS 45.25.210. Rates for warranty and other work Adds
new section (j) Page 2 Lines1-4 which defines "rates"
and "time allowance" for the purposes of warranty and
other work.
Section 4
AS 45.25.990. Definitions Page 2 Lines 6-8 Amends the
definition of "schedule of compensation" to include
parts, rates for labor, and time allowances for labor.
3:54:35 PM
CHAIR SUMNER opened invited testimony on HB 233.
3:55:02 PM
LES NICHOLS, General Manager, Fairbanks Nissan, gave a
PowerPoint presentation, entitled "House Bill 233 Relating to
Time Allowances for Warranty Work" [hard copy included in the
committee packet]. He began on slide 2, "Alaska Auto Dealers
Association," which read as follows [original punctuation
provided]:
• The AADA is a statewide association of auto dealers,
both franchise new car dealers and independent used
car dealers. We represent our State's auto dealers by
promoting best practices, providing communication on
the state of the automotive industry in Alaska, and
representing dealers' concerns to our elected
officials.
MR. NICOLS moved to slide 3, "The Problem," which read as
follows [original punctuation provided]:
• Manufacturers help themselves to a massive self-
decided discount on the time they will pay dealers and
our employees for their warranty repairs.
• Automotive News February 27, 2023
• 'Mr. White previously worked as a field
service manager for Ford and stated that
manufacturers aggressively discount labor time
estimates.'
• Technicians are avoiding working for dealerships
because they are paid for more hours for the same work
when they work for an independent repair facility.
• Their discounts shift the expense of warranty
repairs from the manufacturer, directly to Alaskan
consumers, employees, and businesses.
MR. NICOLS offered a comparison of J.D. Power Initial Quality
Studies (IQS) from 2019 and 2023 on slide 4.
4:04:16 PM
MR. NICHOLS advanced to slide 5, "Who is Affected," which read
as follows [original punctuation provided]:
Automobile Manufacturers take these discounts out of
the hands of Alaskan employees, Alaskan businesses,
and the Alaskan economy to unfairly pad their bottom
line.
• Alaskan Employees technicians are unable to bill
full hours for their work, resulting in lower pay for
them and their support staff, including service
writers and service managers.
• Alaskan Businesses Fairbanks lost Buick, Cadillac,
Daewoo, Hyundai, Kia (twice), Mazda, Mercedes, and VW.
Juneau lost Chevy(once) Ford, Mazda, VW. Ketchikan
lost Subaru, Ford, and Chevrolet. Kenai lost
Chevrolet, Kodiak lost Ford. Anchorage lost Mitsubishi
and Volvo.
• Alaskan Consumers The burden of manufactures'
discounts directly raise prices on the Alaskan
consumer.
MR. NICHOLS proceeded to slide 6, "The Solution," which read as
follows [original punctuation provided]:
• This bill would require manufacturers to pay the
same number of hours for a repair that a customer
would be charged for nonwarranty [sic] work by using
an industry-wide time guide rather than their
discounted time guide.
• This bill would provide protection to Alaskans by
requiring manufacturers to pay equal compensation to
technicians for doing warranty work versus non-
warranty customer work.
• This bill would create a level playing field for the
Alaskan consumer by preventing the manufacturer from
inflating the cost of repairs on consumers by
discounting time from dealers and our service
employees.
MR. NICHOLS concluded on slide 7, "Important Points," which read
as follows [original punctuation provided]:
• Manufacturers believe they deserve a discount for
volume work.
• They have very sophisticated methods to extract
discounts
• They are not our biggest customers, the Alaskan
consumers are.
• They claim this is a "money grab" by Dealers when we
try and level the playing field, but not so when they
are taking money from Alaskan workers, businesses, and
consumers.
• Manufacturers know that the contracts they offer are
contracts of adhesion where the parties are of such
disproportionate bargaining power that the party of
weaker bargaining power could not have negotiated for
variation in the terms of the contract.
• Manufacturers know their contracts have to be
addressed by State Legislatures in order to be
compliant with federal anti-trust laws.
They know these protections can only be provided by
state law.
4:10:17 PM
REPRESENTATIVE PRAX inquired about a previously mentioned
"industry standard" for time allowances.
MR. NICHOLS said the four guides that are commonly used are all
within 10-12 percent of each other.
REPRESENTATIVE PRAX asked about comparable warranty work on new
versus old vehicles and questioned whether companies are setting
time standards on new cars.
MR. NICHOLS said not necessarily; however, he acknowledged that
the age of the vehicle may be a factor in some instances. He
said he had observed discrepancies in the labor time for two
different model year vehicles with the same parts and repair,
which is not logical. He explained that certain things may be
easier with a new car while other things may be more difficult.
4:12:50 PM
REPRESENTATIVE WRIGHT asked Mr. Nichols to review the pay
structure for technicians.
MR. NICHOLS explained that technicians receive an hourly rate
multiplied by the book time for each job. He shared an anecdote
to illustrate the need for fairness.
4:15:13 PM
MARTEN MARTENSEN, Owner & General Manager, Continental Auto
Group; Alaska Auto Dealers Association, gave invited testimony
in support of HB 233, explaining that this bill is meant to
address the lack of technicians in Alaska, which results in a
struggle to fix customers' cars in a timely manner. He
discussed the shortage of technicians all throughout the U.S.
and the inability to pay them a decent wage because they're
doing warranty work for which they're underpaid.
4:16:56 PM
REPRESENTATIVE PRAX sought to confirm that the agreement between
dealers and manufacturers sets the rates as well as the time
limits.
MR. MARTENSEN said the dollar amount is an average among repair
workers and the time allowance is determined by the manufacturer
with zero input from the dealers.
REPRESENTATIVE PRAX asked whether dealers in different states
charge the same rate.
MR. MARTENSEN answered no. He said rates may vary between
states and even cities that are reflective, in part, by
different markets and labor costs.
REPRESENTATIVE PRAX asked whether those rates are determined by
the legislature.
MR. MARTENSEN said repair orders are analyzed to calculate the
average charge to customers, which sets the rate for warranty
reimbursement.
4:19:42 PM
SUSAN HICKS, Service Director, Gene's Chrysler Dodge Jeep Ram,
gave invited testimony in support of HB 233 and explained how
warranty repair costs and pay rates are calculated. She said
warranty repairs times are not based on real world scenarios and
do not include time for diagnostics. She said the passage of HB
233 would bridge the gap between what manufacturer-allowed times
pay technicians and how long it actually takes to diagnose and
repair a vehicle. The discrepancy between warranty and retail
labor times negatively impact the dealer's ability to attract
and maintain skilled technicians, she said. She reported that
the annual turnover rate for technicians is 30 percent
nationwide. Passage of the bill would allow Alaska dealers to
be more competitive when it comes to hiring and maintaining
skilled technicians.
4:23:45 PM
REPRESENTATIVE WRIGHT asked about the turnover rate for the
service writers.
MS. HICKS cited national statistics that ranked service writers
in the top 10 most stressful jobs with the highest rates of
turnover in the dealership.
REPRESENTATIVE WRIGHT asked whether the bill would help retain
service writers.
MS. HICKS answered yes, it would help with retention.
4:25:25 PM
REPRESENTATIVE PRAX shared his understanding that dealers are
not paid for diagnostic time per vehicle.
MS. HICKS confirmed. She explained that Gene's Chrysler Dodge
Jeep Ram's manufacturers award dealers a bucket of time per
quarter; however, some manufacturers grant zero diagnostic time
at all.
REPRESENTATIVE PRAX surmised that the dealer does not pass the
diagnostic time onto the customer for warranty work.
MS HICKS said they do not.
REPRESENTATIVE PRAX asked whether non-warranty work is passed
onto customers.
MS. HICKS answered explained that service advisors authorize a
certain amount of diagnostic time for technicians for non-
warranty work which can be extended if authorized by the
customer.
REPRESENTATIVE PRAX inquired about extended warranties.
MS. HICKS said they are available through both the manufacturer
and independent entities.
REPRESENTATIVE PRAX asked whether the customer pays a flat rate
for diagnostic and repair time.
MS. HICKS confirmed that the third party pays a flat rate
similar to the manufacturers for the approved diagnostic rate.
4:28:40 PM
LUKE KINCAIDE, Master Technician, Gene's Chrysler Dodge Jeep
Ram, gave invited testimony in support of HB 233. He reported
that out of 25 warranty repaid orders, master technicians failed
to meet the manufacturer's allotted time 50 percent of the time.
At Gene's Chrysler Dodge Jeep Ram dealership, only 2 out of 25
warranty repair orders were completed in the time set forth by
the manufacturer. He continued to share anecdotes that
exemplified his experience working under current warranty time
allotments.
4:32:52 PM
REPRESENTATIVE PRAX asked where Mr. Kincade received his master
certification.
MR. KINKAIDE said he attended the manufacturer's training, which
was paid for by his dealership.
REPRESENTATIVE PRAX asked how long it takes to become reasonably
proficient.
MR. KINKAIDE said testing can be completed within one year, but
it doesn't provide the hands-on experience that comes with time.
He added that he had worked at his dealership for 13 years, and
even with that amount of experience, he only completed the
warranty repair orders twice within the manufacturer's time
limit.
REPRESENTATIVE WRIGHT asked whether these timing exercises
factor in time for snow.
MR. KINKAIDE answered no.
4:34:43 PM
RICH SWENSON, Fixed Operations Director, Continental Auto Group,
gave invited testimony in support of HB 233. He said auto
manufacturers do not value technicians, which is proven by the
low rates of pay for warranty labor. He addressed the high
rates of turnover, which the dealership has tried to combat with
seniority bonuses and retirement bonuses. He said passing the
bill would level the playing field and improve the pay for
warranty work.
4:37:14 PM
JERRY HEADSTROM, Master Technician, Honda & Acura, gave invited
testimony in support of HB 233. He emphasized that the labor
times are not attainable for warranty repairs. He shared
specific examples. Further, he said manufacturers continue to
add requirements, such as the multi-point inspection, which
technicians are not compensated for. He concluded that
technicians are trying to get the manufacturer's warranty time
to match the "normal" labor rate.
4:41:52 PM
REPRESENTATIVE SADDLER asked who sets the manual rates.
MR. HEADSTROM said he did not know the answer.
4:42:36 PM
JEFF PERRY, Director of State & Local Public Policy, General
Motors Company (GM), gave invited testimony in opposition to HB
233, opining that it would strip one party of its rights to a
fair contract while enriching the other's. He said the bill is
based on the false premise that franchise dealers in Alaska need
protection from manufacturers' oppressive contracts of adhesion
that are forced upon them. He said manufacturers are obligated
by state law to treat all dealers equally. He emphasized that
dealers set compensation programs, not the manufacturers. He
reported that dealers across the country support their
technicians with salary pay, instead of flat rate or hourly pay,
which leads to significantly lower turnover rates. He stressed
that GM values their technicians as evidenced by their
technician excellence program and encouraged Alaska dealerships
to follow suit. He discussed the sample of 25 repair orders,
which showed that 50 percent of technicians were meeting the
original equipment manufacturers (OEM) time guides. He asserted
that GM's time studies are, in practice, much different than
previous testimony had alleged. He said times are studied by a
technician in every circumstance with hand tools. He stated
that HB 233 would have a severe and significant impact on
consumers in Alaska. If the bill is enacted and manufacturers
are forced to use the aftermarket time guides, the increase in
warranty would ultimately be borne by consumers in higher
vehicle prices and increased repair costs. He estimated that
the cost to consumers would increase by $600 to $1,000 per
vehicle. He urged the legislature not to pass the bill, adding
that GM had proposed two alternative approaches to HB 233 that
would fairly compensate technicians.
4:53:09 PM
REPRESENTATIVE PRAX sought to confirm that time allowances are
the same in every state.
MR. PERRY answered yes, "the book is the book." However, he
said manufacturers can submit a request for more time through
the warranty system.
REPRESENTATIVE PRAX imagined that it would be more difficult for
dealers to take a car in Alaska versus Florida. He sought to
verify that Mr. Perry had stated that GM would make regional
allowances for that.
MR. PERRY said yes, if a technician needed more repair time and
the request was properly documented, GM would approve the
request.
4:54:53 PM
REPRESENTATIVE SADDLER asked whether Mr. Perry is asserting that
the manufacturers' warranty time is sufficient to do the work,
despite all the testimony in contradiction to that.
MR. PERRY said the times that were studied by GM can be
completed by a technician because they've seen it be done.
REPRESENTATIVE SADDLER asked whether the manufacturer's warranty
time should be a reasonable standard that's consistently met by
the dealership.
MR. PERRY answered yes, he believed the times are reasonable and
should be met on a consistent basis.
REPRESENTATIVE SADDLER asked how Mr. Perry would respond to the
contradictory testimony.
MR. PERRY said he recognized that things happen and that every
circumstance cannot be accounted for. He encouraged technicians
to request additional time when they need it.
REPRESENTATIVE SADDLER asked how often the appeal process is
executed.
MR. PERRY recalled that in 2023, GM received 190 requests [for
additional time] out of 10,000 annual repairs at GM dealerships
in Alaska.
REPRESENTATIVE SADDLER asked how often dealers can request
additional payment.
MR. PERRY estimated under 1 percent of the time.
4:58:32 PM
REPRESENTATIVE RUFFRIDGE asked whether the rate and time
allowances for warranty work are published by GM.
MR. PERRY answered yes.
REPRESENTATIVE RUFFRIDGE asked why GM is opposed to the bill, if
the company already publishes time allowances and rates.
MR. PERRY clarified that he opposes the bill because it states
that rates, times, and parts are all based on what the dealer
has charged retail customers. He explained that current law
"puts a period" after rates, whereas HB 233 would add the
element of time charged to retail customers. In addition, he
shared his belief that charging customers based on a flat book
rate that does not actually reflect the time spent working on
their car would potentially violate the existing truth and
repair law under the Alaska Automobile Repair Act.
REPRESENTATIVE RUFFRIDGE sought to confirm that GM is in
opposition to Section 2.
Mr. PERRY answered yes. More specifically, GM is opposed to the
addition of the word "time."
REPRESENTATIVE RUFFRIDGE asked whether a middle ground could be
reached between technicians and manufacturers to ensure that
workers are being compensated for their time.
MR. PERRY answered yes, there is a form of middle ground, but
it's not on the third-party time. He reiterated that GM had
offered two alternatives to the language in HB 233. The first
would require all manufacturers to implement a process that
allows technicians to request additional time, which cannot be
unreasonably denied. The second would require manufacturers to
pay for actual time worked, as supported by the documentation of
the technicians' time stamps.
REPRESENTATIVE SADDLLER asked Mr. Perry to share his
interpretation of the dealers' motivation for coming forward
with these concerns.
MR. PERRY opined that the dealers are making a lucrative profit
from the times billed for repairs, which do not accurately
reflect the times spent working on the car. He shared his
belief that the dealers would like to extend that profitability
to the manufacturers and for the state to endorse it.
REPRESENTATIVE SADDLER shared his understanding that it's Mr.
Perry's contention that dealers want the same rate of return for
the warranty work that they receive for non-warranty work. He
asked whether that is accurate.
MR. PERRY answered yes.
5:05:43 PM
CHAIR SUMNER announced that HB 233 would be held over.