05/09/2024 05:15 PM Senate LABOR & COMMERCE

           HB 233-RATES: MOTOR VEHICLE WARRANTY WORK                                                                        
                                                                                                                                
6:16:53 PM                                                                                                                    
CHAIR  BJORKMAN   reconvened  the   meeting  and   announced  the                                                               
consideration  of CS  FOR  HOUSE  BILL NO.  233(TRA)  am "An  Act                                                               
relating to rates and time  allowances for motor vehicle warranty                                                               
work; and relating to unfair practices by manufacturers."                                                                       
                                                                                                                                
6:17:15 PM                                                                                                                    
CHAIR BJORKMAN opened public testimony on HB 233.                                                                               
                                                                                                                                
6:17:39 PM                                                                                                                    
DAVID   BRIGHT,   Senior   Attorney,  Alliance   for   Automotive                                                               
Innovation, Washington, D.C., testified  with concerns on HB 233.                                                               
He  said the  Alliance for  Automotive Innovation  was the  trade                                                               
association representing automobile  manufacturers. He noted that                                                               
he  submitted a  written  statement to  the committee  explaining                                                               
automakers'  concerns with  HB 233  and a  request that  they not                                                               
forward it. Rather  than repeating the content of  the letter, he                                                               
said he  wished to  address testimony  that this  committee heard                                                               
from  the proponents  of the  bill, and  to flag  a problem  that                                                               
amendments  to  HB  233  create, which  is  introduce  a  perhaps                                                               
unintended  level of  ambiguity  into the  bill  relative to  the                                                               
[original] introduced version.                                                                                                  
                                                                                                                                
6:18:25 PM                                                                                                                    
MR. BRIGHT first  addressed the amendments. He  said the original                                                               
version of HB  233 required manufacturers to pay  car dealers the                                                               
number  of  hours  that that  particular  dealer  charged  retail                                                               
customers for similar work. The  [subsequent] B and C versions of                                                               
HB 233  instead required manufacturers  to pay not less  than the                                                               
time  allowances provided  in independent  labor time  guides. He                                                               
explained that the  problem with that is that  there were several                                                               
independent labor time  guides, and they don't  always agree with                                                               
each other  on the amount of  time for repair. So,  he said, what                                                               
this  language  would   do  is  create  a   situation  where  the                                                               
manufacturer doesn't know  even what it's supposed  to pay, which                                                               
he said he suspected, was  an unintended consequence. He referred                                                               
to the aforementioned written statement  and emphasized that none                                                               
of this is even necessary,  because, again, the manufacturer time                                                               
guides are still  the only ones that actually  measure the amount                                                               
of time that's necessary to complete a repair.                                                                                  
                                                                                                                                
6:19:28 PM                                                                                                                    
MR. BRIGHT  commented on a  discussion of an economic  study that                                                               
the Alexa Automobile Dealers pointed  to that came from Illinois,                                                               
looking at  the statute  that Illinois  passed recently.  He said                                                               
that study does,  in fact, not support the assertion  that HB 233                                                               
helps jobs.  He highlighted  two things.  First, figure  four [of                                                               
the  report  from  Illinois],  which   looks  at  the  change  in                                                               
employment  for  applicable number  of  employees  at dealers  in                                                               
Illinois which,  again, passed the  law, compared  to neighboring                                                               
states which  did not. He pointed  out that after two  years, the                                                               
difference in employment is only  0.3 percent. He opined that was                                                               
not much  of a  jobs bill.  He referred to  figure seven  [of the                                                               
report from  Illinois], which  looked at  the change  in earnings                                                               
for  dealer  employees  in  Illinois,   which  passed  the  bill,                                                               
compared to  earnings for dealer employees  in neighboring states                                                               
that did  not pass  [a bill  like HB 233].  He noted  both groups                                                               
enjoyed  wage  increases. He  said  the  [Indisc.] was  only  2.9                                                               
percent and given that the bill  called for a 50 percent increase                                                               
in  the amount  that  manufacturers pay  for  warranty labor  and                                                               
given the amount of such labor  that dealers do, one would expect                                                               
that  quite a  bit  more than  2.9 percent  would  have been  the                                                               
amount of wage increases for dealers working in Illinois.                                                                       
                                                                                                                                
6:21:11 PM                                                                                                                    
NICOLINA  HERNANDEZ,   Regional  Director,   Government  Affairs,                                                               
Toyota   Motors  NA,   Sacramento,  California,   testified  with                                                               
concerns  on HB  233. She  said Toyota  would always  value their                                                               
Toyota  and Lexus  dealers in  Alaska.  She said  the Toyota  and                                                               
Lexus dealers in Alaska seemed  satisfied with Toyota's [warranty                                                               
repair] time allowances. She reported  that in 2022 and 2023 zero                                                               
Alaska dealers  requested flat time adjustments.  Nationally, she                                                               
said,  Toyota  did receive  24  requests  in  2022 and  about  50                                                               
percent of  that last year.  She said  it was with  this feedback                                                               
that Toyota  makes adjustments to increase  the [warranty repair]                                                               
time  allowances. She  said that  last year,  11 states  reviewed                                                               
warranty rate  legislation, and  all but  one were  rejected. She                                                               
said that now, only four states  total in the US have third party                                                               
time guides in the books. She  said Toyota had come to understand                                                               
that technician  pay specifically had not  increased commensurate                                                               
with the increases in the  rates charged. She sought to emphasize                                                               
that it was  in Toyota's best interest to make  sure that dealers                                                               
are  profitable,  that  they're  fully  reimbursed  in  a  timely                                                               
manner, and if for any  reason they need additional compensation,                                                               
Toyota works  with their field  technicians hand in hand  to make                                                               
sure  that they're  paid that  additional time.  She said  Toyota                                                               
continues to have  concerns, however, with the HB  233, even with                                                               
the third-party  time guide language.  She said third  party time                                                               
guides were not intended for  franchise dealers. Third Party time                                                               
guides use  multipliers on Toyota's time  allowances to determine                                                               
their rates,  which meant  they would  inherently be  higher. She                                                               
said that meant  it would cost more when  customers service their                                                               
cars and  trucks [through  third parties].  She said  third party                                                               
time guides would  also affect the cost of  selling vehicles, and                                                               
importantly,  the cost  of ownership  and the  cost of  long-term                                                               
loyalty to Toyota's Alaska dealers.                                                                                             
                                                                                                                                
6:23:15 PM                                                                                                                    
MS. HERNANDEZ  concluded that Toyota remained  sympathetic to the                                                               
workforce  challenges.  She  emphasized that  nothing  explicitly                                                               
linked the additional charges to  technician pay. She said Toyota                                                               
wanted  all dealers  to  have the  best  [employees] selling  and                                                               
servicing their  cars; and wanted  folks to drive away  happy and                                                               
feel good about coming back to  them. She said Toyota was engaged                                                               
on this  issue and wanted  to continue  the discussion to  find a                                                               
solution that would put customers first.                                                                                        
                                                                                                                                
6:23:54 PM                                                                                                                    
CHAIR BJORKMAN [closed public testimony on HB 233.]                                                                             
                                                                                                                                
6:24:15 PM                                                                                                                    
CHAIR BJORKMAN solicited the will of the committee.                                                                             
                                                                                                                                
6:24:16 PM                                                                                                                    
SENATOR  GRAY-JACKSON  moved  to  report CSHB  233(TRA)  am  from                                                               
committee  with individual  recommendations  and attached  fiscal                                                               
note(s).                                                                                                                        
                                                                                                                                
6:24:34 PM                                                                                                                    
CHAIR  BJORKMAN  found no  objection  and  CSHB 233(TRA)  am  was                                                               
reported from the Senate Labor and Commerce Standing Committee.