Legislature(2023 - 2024)BARNES 124
03/22/2024 03:15 PM House LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| HB378 | |
| SB147 | |
| HB55 | |
| HB150 | |
| HB189 | |
| HB233 | |
| HB189 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 378 | TELECONFERENCED | |
| += | HB 189 | TELECONFERENCED | |
| += | HB 233 | TELECONFERENCED | |
| += | HB 204 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | SB 147 | TELECONFERENCED | |
| + | HB 55 | TELECONFERENCED | |
| += | HB 150 | TELECONFERENCED | |
HB 233-RATES: MOTOR VEHICLE WARRANTY WORK
4:07:34 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."
CHAIR SUMNER opened testimony on HB 233.
4:08:33 PM
CODY RICHARDSON, Managing Partner, Juneau Auto Mall, testified
during the hearing on HB 233. He said dealerships are profit
sharing operations, but when technicians are hamstrung by
unrealistic times, it's unfair and makes it difficult to recruit
and retain these positions. He reported that on average, it
takes $40,000 to recruit technicians in the Lower-48. He said
dealers need the support of their manufacturers to pay these
technicians what they deserve. He believed that the bill would
bring higher paying jobs into Alaska's market and take better
care of both customers and employees.
4:12:45 PM
TODD NOVAC, representing self, testified during the hearing on
HB 223. He claimed that manufacturers use labor times as a
budget item and a means of cutting expenses, which comes at the
expense of technicians. He highlighted the stigma around
warranty pay, which makes it difficult to recruit quality
technicians. He shared his belief that the bill would level the
playing field.
4:15:19 PM
CRAIG ORLIN, Director of State and Local Government Affairs,
American Honda Motor Company, testified in opposition to HB 233.
He said Honda values its partnership with dealers and wants to
make sure that technicians are compensated fairly for warranty
and recall work. He said Honda goes to great lengths to
guarantee fair time guides and calculates the time with hand
tools instead of power tools to ensure that technicians aren't
rushed. However, he said the bill would dramatically overpay
dealers for their work, which would lead to higher vehicle
prices for consumers. Further, he pointed out that dealerships
are independently owned and operated, adding that the dealers,
not the original equipment manufacturers (OEM), pay technicians.
Nothing in the bill would ensure that additional money goes
towards technicians, he said. He urged the committee to defer
the bill and allow dealers and manufacturers to negotiate a
settlement.
4:16:50 PM
REPRESENTATIVE CARRICK asked whether training videos of Honda's
technicians performing the warranty work are regularly shared
with dealerships.
MR. ORLIN answered yes, training videos are available to the
dealers to create a more transparent process.
4:18:59 PM
REPRESENTATIVE SADDLER asked Mr. Orlin to expound on the appeal
process.
MR. ORLIN explained that for a specific vehicle, a time slip can
be submitted to the manufacturer who then reviews and approves
it. If a number of complaints are received in relation to a
specific vehicle, Honda conducts an audit of that repair.
REPRESENTATIVE SADDLER asked whether the manufacturer
automatically approves time slips.
MR. ORLIN confirmed that they are almost universally accepted.
4:21:00 PM
REPRESENTATIVE RUFFRIDGE asked what change needs to occur if
everyone can appeal the process and be awarded more money for
the extra time.
MR. ORLIN reiterated that appeals are almost always universally
accepted. He explained that Honda wants to discuss the concerns
raised by dealers and suggested that instead of using a third-
party time guide, actual time could be granted.
4:22:31 PM
SPENCER ALEXANDER, General Manager, Fairbanks Chevrolet GMC,
testified during the hearing on HB 233. He provided additional
context and clarification to testimony given by Mr. Perry on
3/6/24. He addressed additional labor hours and noted that of
the approximately 10,000 warranty repairs performed at Alaska
dealerships, additional hours were only applied for 197 times
due to the cumbersome process. In short, he said the process
adds more time to the repair than it would give. He further
noted that weather/climate related delays are not covered by
General Motors (GM). He characterized the warranty excess
threshold as a moving target. He acknowledged that dealers pay
their technicians; however, he said he already pays them based
on third-party book times. Lastly, in response to Mr. Perry, he
suggested that state interference is supported when it benefits
the manufacturers, not when it benefits the dealers. He defined
HB 233 as a consumer protection bill, an Alaska business
protection bill, and a worker protection bill.
4:29:35 PM
REPRESENTATIVE SADDLER asked Mr. Alexander to submit written
testimony.
4:29:52 PM
MATTHEW EWIN, General Manager, Mazda North America Operations,
testified in opposition to HB 233. He discussed warranty times
and shared that Mazda technicians frequently beat the time
guides on a regular basis. He addressed Mazda's appeal process,
which on occasion, result in changes to the time guides when the
dealers are correct. He said Mazda doesn't want to see
customers getting gouged because a third-party time guide is
trying to make more money off warranty sales.
4:32:43 PM
REPRESENTATIVE SADDLER asked for the ratio of warranty repairs
to claims filed and the percentage of claims that result in
additional payments to the dealers.
MR. EWIN offered to follow up with the requested information.
4:33:52 PM
REPRESENTATIVE RUFFRIDGE asked how much time Mr. Ewin had spent
in Alaska.
MR. EWIN said he had not spent much time in the state.
4:34:25 PM
REPRESENTATIVE PRAX said it would make more sense to take
feedback from the dealers across the country to reflect
geographical differences in repair times. He asked why averages
of the dealers are not utilized.
MR. EWIN said scientific studies are conducted on how long it
takes to perform a repair. He shared an example and reiterated
that if Mazda sees something taking longer, those times are
addressed.
4:37:43 PM
DAVID BRIGHT, Senior Attorney, Alliance for Automatic
Innovation, testified in opposition to HB 233. He said the bill
would not help the relationship between dealers and
manufacturers. He explained that HB 233 would require
manufacturers to purchase up to 50 percent more hours of labor
than what is actually being performed on warranty work, which
would result in higher costs to consumers. If every state
passed a similar bill, he reported that an additional $5 billion
in unecessary costs would be created. Further, he said only
four states have a similar law, one of which is being challenged
in federal district court. He stressed that there is no problem
to fix, and that the average dealer in Alaska is making 74
percent gross profit margin on warranty work under the current
system. He opined that overcompensating dealers for hours not
worked is not a policy that Alaska should pursue. He urged the
committee not to pass HB 233.
4:40:20 PM
REPRESENTATIVE SADDLER asked why dealers are complaining if the
profit margin is 74 percent on warranty work.
MR. BRIGHT noted that the 74 percent figure came from Alaska
dealers' financial statements, which is consistent with the rest
of the country. He said the high profit margin that dealers are
enjoying is indicative of why there is no problem to fix.
4:41:26 PM
REPRESENTATIVE RUFFRIDGE asked how much time Mr. Bright had
spent in Alaska.
MR. BRIGHT said he had been to Alaska twice.
REPRESENTATIVE RUFFRIDGE asked whether there was any sort of
arctic consideration for vehicle warranty work in Alaska.
MR. BRIGHT said there is no special allotment for different
states. He suggested that the solution [for weather delays]
would be a request for additional time, as opposed to creating
different time guides for different parts of the country.
REPRESENTATIVE RUFFRIDGE asked Mr. Bright to speak to warranty
excess and how often that is triggered in Alaska auto dealers.
MR. BRIGHT said he did not have specific data. Nonetheless, he
pointed out that it's not an adversarial process. He opined
that the process for requesting additional labor hours works now
and it works fairly.
REPRESENTATIVE RUFFRIDGE theorized that Alaska dealers may
trigger warranty excess more often due to arctic conditions,
which may result in a financial penalty through the audit
process. He opined that there is a disconnect between what that
warranty excess looks like and how it's compensated, which may
not be easily rectified.
MR. BRIGHT pointed out that current statutes in Alaska regulate
the audit process, so dealers are not defenseless.
4:48:19 PM
NATE MORAN, General Manager, Toyota Motor North America,
testified in opposition to HB 233. He expressed concern that
the bill ignores the time it takes to repair cars and
establishes an incentive for dealers to increase prices for
Alaskan drivers. He shared the following three key points to
support those concerns: Toyota time allowances are based on
expert studies; additional time can be requested for individual
repairs through the warranty department; and there is a
standardized process for updating time guides when a concern is
raised about a particular repair type. He opined that HB 233 is
not needed and if passed, would impose a 40-50 percent increase
in costs on Alaskan customers.
4:49:58 PM
REPRESENTATIVE RUFFRIDGE asked whether Toyota takes into account
artic repairs.
MR. MORAN answered no, arctic temperatures are not considered.
However, he said initial time studies are performed with manual
tools and multiple technicians with varying skill levels.
4:50:46 PM
REPRESENTATIVE CARRICK asked whether expert studies are provided
to dealers upon request.
MR. MORAN answered no, the time guides are made available for
all new models but not the full studies.
4:51:23 PM
REPRESENTATIVE SADDLER asked why there's no special provision
for arctic temperatures.
MR. MORAN posited that the vehicle's performance should be no
different in Alaska than Texas.
REPRESENTATIVE SADDLER asked why Toyota provides no
accommodation for the time it takes to thaw a car in Alaska.
MR. MORAN reiterated that dealers can submit a request for
additional time in a repair order for review.
REPRESENTATIVE SADDLER emphasized that it's not a matter of the
individual car. Every car that comes into the dealer in
Fairbanks will be cold, he said.
4:54:22 PM
LAUREN BAILEY, Director, Franchising and State Law, National
Automobile Dealers Association, testified in opposition to HB
233. She said these laws would protect local economies and
safeguard consumers. She added that these laws are a direct
investment in every community with a dealership, particularly
rural ones. She said dealer franchise laws are about ensuring a
competitive, fair, and sage automotive market for everyone
involved, including local communities that benefit economically
to the consumers who rely on local dealerships for fair prices
and reliable services.
4:56:19 PM
REPRESENTATIVE RUFFRIDGE asked whether Ms. Bailey had any data
on the geo-location of warranty excess claims and how that could
be tracked.
MS. BAILEY offered to follow up with the requested information.
4:57:02 PM
THOMAS LAWSON, Government Affairs Manager, Ford Motor Company,
testified in opposition to HB 233 and aligned his comments with
those of his OEM peers. He shared his belief that third-party
time guides are inappropriate for warranty work and reiterated
his opposition to the bill.
4:58:05 PM
REPRESENTATIVE RUFFRIDGE sought to confirm that Mr. Lawson had
stated that Ford does not create its own expert time guides and
instead works with dealers to come up with them.
MR. LAWSON answered yes to both of those things.
4:58:42 PM
JOSEPH MCARTHUR, Service Manager, Fairbanks Nissan, testified in
support of HB 233. He discussed battery tests, noting that to
do so, the battery must be above 32 degrees Fahrenheit and
tested every month. Essentially, he said technicians are asked
to test a battery that will fail due to harsh conditions without
compensation. In addition, he shared that it takes 90 minutes
to complete an evacuation and recharge on an A/C system with the
manufacturer's machine, for which the manufacturer pays .9 of an
hour. He added that his master technician has over 35 years'
experience and can rarely beat the manufacturer's' recommended
time.
5:00:59 PM
CHAIR SUMNER closed public testimony on HB 233 and announced
that the bill was held over.