Legislature(2017 - 2018)BARNES 124
03/27/2018 01:15 PM House TRANSPORTATION
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| Audio | Topic |
|---|---|
| Start | |
| SB163 | |
| HB136 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 163 | TELECONFERENCED | |
| += | HB 136 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 136-MOTOR VEHICLE DEALER FRANCHISES
1:28:45 PM
CO-CHAIR WOOL announced that the final order of business would
be HOUSE BILL NO. 136, "An Act relating to motor vehicle
franchises, motor vehicle transactions, motor vehicle dealers,
motor vehicle manufacturers, and motor vehicle distributors."
1:29:00 PM
CO-CHAIR STUTES moved to adopt the proposed committee substitute
(CS) for HB 136, Version 30-LS0561\R, Bannister, 3/21/18, as the
working document. There being no objection, Version R was
before the committee.
1:29:28 PM
REPRESENTATIVE CLAMAN, as prime sponsor, presented HB 136. He
explained the impetus to introduce HB 136 stemmed from
conversations about the need to make updates to Alaska Statutes
relating to franchise agreements between automobile dealers and
automobile manufacturers. He said much of the discussion
centered around warranty practices and franchise termination.
After HB 136 was heard in 2017, there was significant pushback
from the automobile manufacturers. The bill sponsor's office
brought together dealers and manufacturers in January 2018 to
work on an acceptable revision, which is the revision before the
committee today in Version R.
REPRESENTATIVE CLAMAN said Version R would update warranty
policy to be more consumer friendly; it would provide customers
who live in remote locations, either off the road system or more
than 100 miles from a dealer, with a reasonable option for
warranty coverage. Currently, customers often must pay to get
their vehicles to and from an authorized dealer for warranty
repairs. Under HB 136, the manufacturer would be responsible
for warranty repairs in the remote locations or shipping the
vehicles to and from remote locations to authorized locations at
no cost to the consumers. He said HB 136 would also update the
rates that manufacturers will pay dealers for warranty work.
The updated rates may not be less than the rates that an auto
dealer charges customers for similar non-warranty retail work.
He stated, "This equalizes the rate for repair work and warranty
work across the board.
REPRESENTATIVE CLAMAN said HB 136 would amend statutes
concerning termination and succession of franchises.
Manufacturers must have a good cause for terminating franchises
and must provide dealers with notice and allow dealers the
chance to fix any areas that are out of compliance with
agreements before the dealers can be terminated. During the
sale of a franchise, the dealer must also take into
consideration whether the potential buyer is "an immediate
family member, partial owner, and meets the standard
requirements for approving the sale." He said manufacturers and
dealers have a common interest in selling cars; however,
manufacturers nationwide often have requirements that can be a
burden on dealers. The goal is for both dealers and
manufacturers to succeed and work well together in a balanced
manner.
REPRESENTATIVE CLAMAN said the core of HB 136 is consumer
interest and ensuring that consumers buying vehicles and
bringing those vehicles to dealers for warranty repairs are
satisfied with the service they receive. There is also an
interest in maintaining a stable workforce of those who do the
work on vehicles. He brought attention to a page included in
the committee packet entitled "Driving Alaska's Economy," which
shows the jobs in the automobile industry. He further noted
that a detailed sectional summary is available in the committee
packet.
1:34:16 PM
REPRESENTATIVE NEUMAN commented that he had sponsored a similar
bill regarding all-terrain vehicles (ATVs), outboard motors, and
warranties. He said he would like to hear the sectional
[summary], at the least the major changes.
1:35:48 PM
REPRESENTATIVE CLAMAN addressed the major changes in the
sectional summary. He directed attention to Sections 3 and 4,
which read as follows in the Sectional Summary [original
punctuation provided]:
Section 3
Amends AS 45.25.110(a): Manufacturers may not
terminate an auto dealer unless they have complied
with notice requirements and shown good cause for
termination. Auto dealers have up to 120 days to
correct areas out of compliance with the franchise
agreement. The manufacturer may terminate a franchise
if the dealer has systemically engaged in fraud.
Section 4
Adds new subsection to AS 45.25.110: Good cause to
terminate a franchise does not include the failure of
an auto dealer to meet sales or service goals due to
factors beyond the control of the dealer including
market conditions or insufficient supply of new motor
vehicles.
REPRESENTATIVE CLAMAN said sometimes dealers have a quota to
meet for a certain model vehicle, but they don't receive enough
inventory to meet that quota. Conversely, sometimes those
quotas are unrealistic in terms of conditions in Alaska. For
example, all-wheel drive vehicles are popular [in Alaska], so if
a quota demands the sale of more 2-wheel drive vehicles than
all-wheel drive vehicles, then the dealer may have a difficult
time selling the 2-wheel drive vehicles but could sell more all-
wheel drive vehicles if he/she received them. He emphasized the
importance of looking at local market conditions.
1:37:49 PM
CO-CHAIR WOOL remarked that the committee would discuss HB 136
in more detail when the dealers and manufacturers are able to
take part in the discussion.
REPRESENTATIVE CLAMAN noted that an attorney for the dealers was
available via teleconference.
1:38:18 PM
REPRESENTATIVE NEUMAN said he understands the priority of
ensuring public testimony.
1:38:28 PM
REPRESENTATIVE CLAMAN next brought attention to Sections 6 and 7
of the sectional summary, which read as follows [original
punctuation provided]:
Section 6
Amends AS 45.25.150(b) If a franchise termination
occurs, auto dealers have an obligation to mitigate
damages under a lease and mitigate the costs of
facility relocations, alterations or remodels.
Section 7
Adds new subsection to AS 45.25.150: If a franchise
termination occurs, manufacturers must pay the costs
of relocation, alteration or remodeling of an auto
dealers facilities if they were required by the
manufacturer and were completed within three years of
termination.
REPRESENTATIVE CLAMAN summarized that Section 8 would provide a
detailed process for the transfer of dealerships. He explained
that it is common that dealers are interested in either selling
the dealership to family members or to people who have been
involved in the business for a long time. The section would
provide protection so that manufacturers cannot prohibit that.
He said manufacturers nationally are trying to get a more
diverse group of owners of dealerships, so Section 8 would also
support that "to the extent that that doesn't conflict with
existing ownership rights and moving on to folks that have that
ownership share."
REPRESENTATIVE CLAMAN addressed Sections 9 and 10 in the
Sectional Summary, which read as follows [original punctuation
provided]:
Section 9
Amends AS 45.25.180(d) Expands the factors that the
superior court must consider in a lawsuit addressing
whether good cause exists to establish or relocate a
dealership.
Section 10
Adds new subsection to AS 45.25.180 Establishes the
burden of proof in a franchise lawsuit. A manufacturer
has the burden of proof to establish good cause for
establishing or relocating a dealership that the
manufacturer has proposed. An auto dealer must
establish good cause for any establishment or
relocation that the auto dealer proposes.
REPRESENTATIVE CLAMAN said Section 12 provides more detail about
rates that are paid for warranty work and how the warranty work
is provided. He said one issue identified by dealers is that
the warranty rate agreed upon by manufacturers is sometimes
lower than the retail rate charged in Alaska. That differential
does not help dealers provide effective customer service. He
said under Section 12, a framework would be created in statute
for dealers to be able to establish an average retail rate and
then have that rate apply to the warranty work. The result, he
explained, is that dealers essentially would be charging the
same for warranty and non-warranty work. Another aspect of
Section 12 would be to ensure that manufacturers are responsible
for returning a repaired vehicle to the remote location of its
owner.
1:42:18 PM
CO-CHAIR WOOL observed that under HB 136, a non-dealer can be
authorized to work on a vehicle so that the vehicle does not
have to be moved from its remote location.
REPRESENTATIVE CLAMAN said there were two things he learned [in
working on HB 136]. One was that a person living in a remote
area might be better served by purchasing an older car no longer
under warranty. The second thing is that manufacturers have
strict requirements that certified mechanics do warranty repair
work, because if a non-certified mechanic works on the vehicle,
the warranty is voided. He said it is interesting that the
certification to do the work is through the Society for
Automotive Engineers. The manufacturers do not insist on a Ford
dealer working on a Ford vehicle, for example, but rather that
the person working on the vehicle is a certified mechanic. He
expressed the need to broaden the area through the state where
these certified mechanics can be found.
1:44:35 PM
REPRESENTATIVE KOPP commended the bill sponsor on the work that
had been done since the last hearing in 2017. He asked if there
is a consensus between the manufacturers and dealers in terms of
Version R.
REPRESENTATIVE CLAMAN answered that is his understanding. He
proffered that from a national level, these types of requests
for change typically come from the dealers; the manufacturers do
not endorse these types of bills but do communicate when they
have no opposition to a bill.
REPRESENTATIVE KOPP surmised that HB 136 would make it easier
for dealers to do business with customers in remote locations by
having some guarantee of price reimbursement and perhaps
expanding opportunities to partner with mechanics.
REPRESENTATIVE CLAMAN answered that is correct. Further, he
said there would be a benefit in having certified mechanics in
remote locations, because if a dealer sends a mechanic from
Juneau to Sitka, the complication is in figuring out who pays
for the travel time, because a mechanic is typically paid for
mechanical work, not for travel time.
1:46:35 PM
REPRESENTATIVE STUTES said that coming from a rural area, she
appreciates [HB 136]. She said in Kodiak, Alaska, "most people
drove a Ford, because that was the only dealership we had
there." She said she bought a Toyota and sat on the plane next
to the West Coast representative from Toyota, to whom she
remarked that she wished she had not bought a Toyota, because
she could not get it worked on under warranty in Kodiak.
Subsequently, Toyota "associated one of the repair shops in
Kodiak" so that now there is a certified mechanic for Toyota as
well as Ford in that community, where Representative Stutes said
now everyone drives either a Ford or a Toyota.
1:47:26 PM
CO-CHAIR WOOL announced that HB 136 was held over.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB0163B.PDF |
HTRA 3/27/2018 1:15:00 PM |
SB 163 |
| SB163 Fiscal Note DOT-MSCVE 1.29.18.pdf |
HTRA 3/27/2018 1:15:00 PM |
SB 163 |
| SB163 Fiscal Note DOT-MSCVE 3.7.18.pdf |
HTRA 3/27/2018 1:15:00 PM |
SB 163 |
| HB314 Sponsor Statement 1.29.18.pdf |
HTRA 3/27/2018 1:15:00 PM |
HB 314 |
| HB314 ver A 1.29.18.pdf |
HTRA 3/27/2018 1:15:00 PM |
HB 314 |
| SB163 Sponsor Statement 1.29.18.pdf |
HTRA 3/27/2018 1:15:00 PM |
SB 163 |
| CSHB136 Sponsor Statement 3.23.18.pdf |
HTRA 3/27/2018 1:15:00 PM |
HB 136 |
| CSHB136 Sectional Analysis 03.23.18.pdf |
HTRA 3/27/2018 1:15:00 PM |
HB 136 |
| CSHB136 Ver. R 3.23.18.pdf |
HTRA 3/27/2018 1:15:00 PM |
HB 136 |
| HB136 Additional Documents-NADA Alaska 2016 Annual Contribution 3.23.18.pdf |
HTRA 3/27/2018 1:15:00 PM |
HB 136 |