Legislature(2023 - 2024)BELTZ 105 (TSBldg)

02/19/2024 01:30 PM Senate LABOR & COMMERCE

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Audio Topic
01:30:32 PM Start
01:31:22 PM SB144
02:21:47 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ SB 144 RATES: MOTOR VEHICLE WARRANTY WORK TELECONFERENCED
Heard & Held
-- Invited & Public Testimony --
**Streamed live on AKL.tv**
                    ALASKA STATE LEGISLATURE                                                                                  
          SENATE LABOR AND COMMERCE STANDING COMMITTEE                                                                        
                       February 19, 2024                                                                                        
                           1:30 p.m.                                                                                            
                                                                                                                                
                             DRAFT                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Jesse Bjorkman, Chair                                                                                                   
Senator Click Bishop, Vice Chair                                                                                                
Senator Elvi Gray-Jackson                                                                                                       
Senator Forrest Dunbar                                                                                                          
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Kelly Merrick                                                                                                           
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
SENATE BILL NO. 144                                                                                                             
"An Act relating to rates and time allowances for motor vehicle                                                                 
warranty work."                                                                                                                 
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: SB 144                                                                                                                  
SHORT TITLE: RATES: MOTOR VEHICLE WARRANTY WORK                                                                                 
SPONSOR(s): SENATOR(s) CLAMAN                                                                                                   
                                                                                                                                
05/09/23       (S)       READ THE FIRST TIME - REFERRALS                                                                        
05/09/23       (S)       L&C                                                                                                    
02/19/24       (S)       L&C AT 1:30 PM BELTZ 105 (TSBldg)                                                                      
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
SENATOR MATT CLAMAN, District H                                                                                                 
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Sponsor of SB 144.                                                                                        
                                                                                                                                
CARLY DENNIS, Staff                                                                                                             
Senator Matt Claman                                                                                                             
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Read the sectional analysis for SB 144.                                                                   
                                                                                                                                
LES NICHOLS, President                                                                                                          
Alaska Auto Dealers Association                                                                                                 
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT: Gave a presentation on SB 144.                                                                            
                                                                                                                                
DAVID BRIGHT, Attorney                                                                                                          
Alliance for Automotive Innovation                                                                                              
Washington D.C.                                                                                                                 
POSITION STATEMENT: Testified by invitation on SB 144.                                                                        
                                                                                                                                
AARON SEEKINS, Customer Relations Manager                                                                                       
Seekins Ford Lincoln                                                                                                            
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT: Testified by invitation on SB 144.                                                                        
                                                                                                                                
MARTEN MARTENSEN, Owner and General Manager                                                                                     
Continental Auto Group Anchorage                                                                                                
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Testified by invitation on SB 144.                                                                        
                                                                                                                                
SUSAN HICKS, Service Director                                                                                                   
Gene's Chrysler Dodge Jeep Ram Fairbanks                                                                                        
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT: Testified by invitation on SB 144.                                                                        
                                                                                                                                
LUKE KINCAIDE, Master Technician                                                                                                
Gene's Chrysler Dodge Jeep Ram Fairbanks                                                                                        
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT: Testified by invitation on SB 144.                                                                        
                                                                                                                                
NICOLINA HERNANDEZ, Regional Director of State Government                                                                       
Affairs                                                                                                                         
Toyota Motors North America                                                                                                     
Sacramento, California                                                                                                          
POSITION STATEMENT: Testified in opposition to SB 144.                                                                        
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
1:30:32 PM                                                                                                                    
CHAIR  JESSE  BJORKMAN  called  the  Senate  Labor  and  Commerce                                                             
Standing Committee meeting  to order at 1:30 p.m.  Present at the                                                               
call  to  order were  Senators  Grey-Jackson,  Dunbar, and  Chair                                                               
Bjorkman. Senator Bishop arrived thereafter.                                                                                    
                                                                                                                                
           SB 144-RATES: MOTOR VEHICLE WARRANTY WORK                                                                        
                                                                                                                                
1:31:22 PM                                                                                                                    
CHAIR BJORKMAN announced the consideration of SENATE BILL NO.                                                                   
144, "An Act relating to rates and time allowances for motor                                                                    
vehicle warranty work."                                                                                                         
                                                                                                                                
1:31:31 PM                                                                                                                    
Chair Bjorkman turned the gavel over to Senator Gray-Jackson at                                                                 
1:31 p.m.                                                                                                                       
                                                                                                                                
1:31:46 PM                                                                                                                    
ACTING CHAIR GRAY-JACKSON took up the gavel and continued the                                                                   
meeting.                                                                                                                        
                                                                                                                                
1:32:04 PM                                                                                                                    
SENATOR MATT CLAMAN, District H, Alaska State Legislature,                                                                      
Juneau, Alaska, sponsor of SB 144. He read the sponsor statement                                                                
for SB 144:                                                                                                                     
                                                                                                                                
[Original punctuation provided.]                                                                                                
                                                                                                                                
                        Senate Bill 144                                                                                       
                  Sponsor Statement  Version A                                                                                
       "An Act relating to rates and time allowances for                                                                        
                 motor vehicle warranty work."                                                                                  
                                                                                                                                
     Senate  Bill  144  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.                                                                                                    
                                                                                                                                
1:33:34 PM                                                                                                                    
SENATOR CLAMAN continued reading the sponsor statement for SB
144:                                                                                                                            
                                                                                                                                
[Original punctuation provided.]                                                                                                
                                                                                                                                
     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.                                                                                                         
                                                                                                                                
1:33:59 PM                                                                                                                    
CARLY DENNIS, Staff, Senator Matt Claman, Alaska State                                                                          
Legislature, Juneau, Alaska, read the sectional analysis for SB
144.                                                                                                                            
                                                                                                                                
[Original punctuation provided.]                                                                                                
                                                                                                                                
                        Senate Bill 144                                                                                       
                 Sectional Analysis  Version A                                                                                
                                                                                                                                
     Section 1                                                                                                                
     AS 45.25.210. Rates for warranty and other work                                                                            
     Amends subsection  (b) to  state that  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)  to include  time allowances  in                                                                    
     the schedule of compensation.                                                                                              
                                                                                                                                
     Section 3                                                                                                                
     AS 45.25.210. Rates for warranty and other work                                                                            
     Adds new  section (j) which  defines "rates"  and "time                                                                    
     allowance"  for the  purposes  for  warranty and  other                                                                    
     work.                                                                                                                      
                                                                                                                                
     Section 4                                                                                                                
     AS 45.25.990. Definitions                                                                                                  
     Amends the definition of  "schedule of compensation" to                                                                    
     include  parts, rates  for labor,  and time  allowances                                                                    
     for labor.                                                                                                                 
                                                                                                                                
1:35:02 PM                                                                                                                    
At ease                                                                                                                         
                                                                                                                                
1:35:58 PM                                                                                                                    
ACTING CHAIR GRAY-JACKSON reconvened the meeting and announced                                                                  
invited testimony.                                                                                                              
                                                                                                                                
1:36:18 PM                                                                                                                    
LES NICHOLS, President, Alaska Auto Dealers Association,                                                                        
Fairbanks, Alaska, gave a presentation on SB 144.                                                                               
                                                                                                                                
1:36:44 PM                                                                                                                    
At ease                                                                                                                         
                                                                                                                                
1:36:51 PM                                                                                                                    
ACTING CHAIR GRAY-JACKSON reconvened the meeting.                                                                               
                                                                                                                                
1:36:54 PM                                                                                                                    
MR.  NICHOLS gave  a  presentation prepared  by  the Alaska  Auto                                                               
Dealers Association on  SB 144 titled, "SENATE  BILL 144 Relating                                                               
to  Time Allowances  for Warranty  Work." He  spoke to  points on                                                               
slide 2:                                                                                                                        
                                                                                                                                
[Original punctuation provided.]                                                                                                
                                                                                                                                
                Alaska Auto Dealers Association                                                                               
                                                                                                                                
     • 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.                                                                                                                 
                                                                                                                                
1:37:18 PM                                                                                                                    
                                                                                                                                
MR. NICHOLS reviewed slide 3:                                                                                                   
                                                                                                                                
[Original punctuation provided.]                                                                                                
                                                                                                                                
                          The Problem                                                                                         
                                                                                                                              
     •  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.                                                                                      
                                                                                                                                
1:38:25 PM                                                                                                                    
MR.  NICHOLS  advanced  to  slide 4,  depicting  data  from  J.D.                                                               
Power's U.S.  Initial Quality Study, Brand  Ranking, Problems per                                                               
100  Vehicles (PP100),  for the  years  2019 and  2023. He  noted                                                               
that, in 2019,  the best in the industry was  Genesis (63 PP100),                                                               
followed  by  Kia (70  PP100).  Contrasting  this with  2023,  he                                                               
pointed out that the best in  the industry was Dodge (140 PP100).                                                               
He noted  that this data shows  that vehicles are coming  off the                                                               
assembly  line  with  issues  that   need  to  be  addressed.  He                                                               
explained  that it  is not  uncommon for  his company  to receive                                                               
vehicles  from the  manufacturer that  require warranty  work. He                                                               
also pointed out  that in 2019, the highest number  was 130 PP100                                                               
and contrasted this  with the lowest number (140  PP100) in 2023.                                                               
He commented  that this  increase results  in more  warranty work                                                               
being done by automotive shops.                                                                                                 
                                                                                                                                
1:39:35 PM                                                                                                                    
MR. NICHOLS spoke to points on slide 5:                                                                                         
                                                                                                                                
[Original punctuation provided.]                                                                                                
                                                                                                                                
                        Who Is Affected                                                                                       
                                                                                                                              
     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.                                                                                                                
                                                                                                                                
        Alaskan  Consumers    The  burden  of  manufactures'                                                                  
     discounts   directly  raise   prices  on   the  Alaskan                                                                    
     consumer.                                                                                                                  
                                                                                                                                
1:41:32 PM                                                                                                                    
MR. NICHOLS reviewed slide 6:                                                                                                   
                                                                                                                                
[Original punctuation provided.]                                                                                                
                                                                                                                                
                          The Solution                                                                                        
                                                                                                                              
     •  This bill  would  require manufacturers  to pay  the                                                                  
     same  number of  hours  for a  repair  that a  customer                                                                  
     would  be charged  for non-warranty  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.                                                                                                                 
                                                                                                                                
1:42:29 PM                                                                                                                    
MR. NICHOLS spoke to points on slide 7:                                                                                         
                                                                                                                                
[Original punctuation provided.]                                                                                                
                                                                                                                                
                        Important Points                                                                                      
                                                                                                                              
     •  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.                                                                                                               
                                                                                                                                
1:44:21 PM                                                                                                                    
DAVID  BRIGHT,  Attorney,  Alliance  for  Automotive  Innovation,                                                               
Washington D.C., testified  by invitation on SB 144.  He began by                                                               
explaining that  dealers and manufacturers  depend on  each other                                                               
for mutual success. He commented  that this has been a successful                                                               
partnership  for generations  and added  that today,  dealerships                                                               
are  strong and  profitable.  He  stated that  SB  144 would  not                                                               
support long-term success. He explained  that when a consumer has                                                               
an issue that is covered by  a warranty, the dealerships make the                                                               
repair and  bill the  manufacturer. This  process is  detailed in                                                               
existing statute  and specifies  the markup rate  as well  as how                                                               
much the  manufacturer pays the  dealership. He said that  SB 144                                                               
would  require manufacturers  to purchase  more labor  hours from                                                               
dealerships than  the dealerships are actually  performing on the                                                               
vehicles when doing warranty work.                                                                                              
                                                                                                                                
1:45:45 PM                                                                                                                    
MR.  BRIGHT  explained  that,  under  the  current  statute,  the                                                               
manufacturer pays  the same  hourly rate that  is charged  to the                                                               
public  for labor.  He  stated that  the  manufacturer knows  the                                                               
precise number of labor hours  they need to purchase because they                                                               
have  timed each  repair that  is covered  by warranty.  He noted                                                               
that these  times are  included in a  "time guide".  He explained                                                               
that this is  then multiplied by the dealers hourly  rate and the                                                               
resulting amount  is paid to  the dealership. He stated  that, by                                                               
allowing  dealerships to  be compensated  using third-party  time                                                               
guides - which  are labor time guides used  by independent repair                                                               
shops. He  pointed out that  these guides provide  time estimates                                                               
and  do not  actually  time  the procedures.  He  added that  the                                                               
repair shops that  use third-party time guides  do not specialize                                                               
in  a particular  brand, do  not have  the specialized  tools for                                                               
particular brands (which  can speed up the repairs),  and tend to                                                               
work on older, higher mileage cars that take longer to repair.                                                                  
                                                                                                                                
1:46:50 PM                                                                                                                    
MR. BRIGHT emphasized that the  manufacturers have no interest in                                                               
undercompensating dealerships  for warranty work. He  pointed out                                                               
that  manufacturers have  a system  in place  for dealerships  to                                                               
request additional  time if  the work is  taking longer  than the                                                               
time  indicated in  the guide.  Additionally,  he explained  that                                                               
dealerships can  request a  review of the  labor entries  if they                                                               
feel that the  guide is wrong. He opined that  the current system                                                               
is working well  and added that in the previous  year, they hired                                                               
a  private   firm  to  conduct   a  study  of   dealer  financial                                                               
statements. This  study found that, on  average, dealerships make                                                               
a  78 percent  gross profit  margin  on warranty  labor work.  He                                                               
stated  that this  finding was  unsurprising,  as warranty  labor                                                               
work  provides a  guaranteed  source of  business  that pays  the                                                               
dealer its retail rate and  has no associated marketing costs. He                                                               
clarified  that manufacturers  do not  pay technicians  directly;                                                               
rather  they  pay  dealers  and  have no  control  over  how  the                                                               
dealerships  then pay  their employees.  He  emphasized that  the                                                               
manufacturers do  not want  to pay for  unworked labor  hours. He                                                               
pointed  out  that SB  144  is  not  reflective of  the  national                                                               
industry norm, with  only four other states  having similar laws.                                                               
He added that  the law in one of these  states is currently being                                                               
challenged as unconstitutional in federal  court. He said that in                                                               
2023, 11 states considered the time  guide issue and ten chose to                                                               
leave it as  is. He opined that  SB 144 is not  necessary for the                                                               
profitability  of manufacturers  and  dealerships -  who rely  on                                                               
each other for success.                                                                                                         
                                                                                                                                
1:47:00 PM                                                                                                                    
SENATOR BISHOP joined the meeting                                                                                               
                                                                                                                                
1:48:38 PM                                                                                                                    
ACTING CHAIR  GRAY-JACKSON noted  that Senator Bishop  joined the                                                               
meeting at 1:47 p.m.                                                                                                            
                                                                                                                                
1:48:48 PM                                                                                                                    
SENATOR DUNBAR referenced  the J.D. Power data  included on slide                                                               
4 of  Mr. Nichol's  presentation. He pointed  out that  the worst                                                               
brand in 2019 had a better score  than the best brand in 2023. He                                                               
asked how Mr.  Bright would explain the dramatic  increase in the                                                               
number of problems per vehicle.                                                                                                 
                                                                                                                                
1:49:39 PM                                                                                                                    
MR.  BRIGHT  replied  that  he   had  not  seen  this  study  and                                                               
speculated  that the  increase  was related  to  the roll-out  of                                                               
electric vehicles  and the microchip  shortage. He  stressed that                                                               
the manufacturer  still pays the  dealership based on  the number                                                               
of hours  it takes  to make  repairs -  even if  there is  a high                                                               
number of warranty repairs per vehicle.                                                                                         
                                                                                                                                
1:50:21 PM                                                                                                                    
SENATOR  DUNBAR  asked  if the  manufacturer  offers  specialized                                                               
tools and software to independent mechanics.                                                                                    
                                                                                                                                
1:50:45 PM                                                                                                                    
MR. BRIGHT replied  that independent repair shops  have access to                                                               
the  same repair  information  that dealerships  do.  He said  he                                                               
would  have  to  get  back  to  the  committee  with  information                                                               
regarding tools.                                                                                                                
                                                                                                                                
1:51:06 PM                                                                                                                    
SENATOR BISHOP asked if Mr. Bright has visited Alaska.                                                                          
                                                                                                                                
1:51:25 PM                                                                                                                    
MR.  BRIGHT  replied  that  he   has  been  to  both  Juneau  and                                                               
Anchorage.                                                                                                                      
                                                                                                                                
1:51:30 PM                                                                                                                    
SENATOR BISHOP  asked if  Mr. Bright  has visited  when it  is 50                                                               
below.                                                                                                                          
                                                                                                                                
1:51:38 PM                                                                                                                    
MR. BRIGHT replied that he visited in January or February.                                                                      
                                                                                                                                
1:51:46 PM                                                                                                                    
SENATOR BISHOP  asked if  Mr. Bright would  agree that  Alaska is                                                               
different than the lower 48.                                                                                                    
                                                                                                                                
1:51:50 PM                                                                                                                    
MR.  BRIGHT acknowledged  that Alaska  is unique  but noted  that                                                               
other states also experience extreme low temperatures.                                                                          
                                                                                                                                
1:52:09 PM                                                                                                                    
SENATOR BISHOP  shared his  belief that  Alaska is  different and                                                               
asked  if  the  manufacturers  that Mr.  Bright  represents  have                                                               
considered having an exclusion for Alaska.                                                                                      
                                                                                                                                
1:52:28 PM                                                                                                                    
MR. BRIGHT  replied that he did  not know what type  of exclusion                                                               
was being referenced.                                                                                                           
                                                                                                                                
SENATOR BISHOP  said that a  potential exclusion could  include a                                                               
handicap for  Alaska's harsh climate and/or  increasing the hours                                                               
for jobs.                                                                                                                       
                                                                                                                                
1:53:01 PM                                                                                                                    
MR.  BRIGHT  shared his  understanding  that  this has  not  been                                                               
considered. He explained that there  is no evidence that the time                                                               
guides are  wrong - or that  there is any issue  with the process                                                               
by which dealerships can request additional time when needed.                                                                   
                                                                                                                                
1:53:17 PM                                                                                                                    
SENATOR  DUNBAR asked  if the  manufacturer  pays for  diagnostic                                                               
time and  questioned how  the time guides  take into  account the                                                               
variable  time it  can take  to determine  what is  wrong with  a                                                               
particular vehicle.                                                                                                             
                                                                                                                                
1:54:19 PM                                                                                                                    
MR.  BRIGHT replied  that the  time guide  takes everything  into                                                               
account. This includes  pulling the car into the  lot, setting it                                                               
up, figuring  out the problems,  and technician  bathroom breaks.                                                               
He noted  that the  guide is formulated  using hand  tools rather                                                               
than  air  tools.  He  explained   that  any  technician  who  is                                                               
qualified to  work on the  vehicle should  be able to  meet these                                                               
times - and  in some instances they may beat  them. He noted that                                                               
the manufacturer pays for the time  listed in the time guide even                                                               
if it  does not take  this long to  complete the work.  He stated                                                               
that this is  an objective, measured process  and reiterated that                                                               
no other time guide repair times are actually timed.                                                                            
                                                                                                                                
1:55:34 PM                                                                                                                    
AARON SEEKINS, Customer Relations  Manager, Seekins Ford Lincoln,                                                               
Fairbanks, Alaska,  testified by  invitation on  SB 144.  He said                                                               
that  Fairbanks  experiences  extreme  weather  that  results  in                                                               
special requirements  when doing vehicle repairs.  He pointed out                                                               
that the  manufacturer's time  guide does  not take  into account                                                               
the time it takes to thaw a  vehicle out before work can be done.                                                               
He  said that  the manufacturer  does not  compensate dealerships                                                               
for training  technicians. He explained that  sending technicians                                                               
to attend  training costs  thousands of  dollars. He  pointed out                                                               
that the  warranty labor rate  received from the  manufacturer is                                                               
less than the  labor rate received by independent  repair shops -                                                               
even though their technicians are  not trained or certified. This                                                               
makes it difficult to offer  technicians competitive pay. He said                                                               
that  his  business  has  a  great  relationship  with  the  Ford                                                               
manufacturer - and both dealership  and manufacturer are making a                                                               
profit. He emphasized that this is  not a profit grab; rather, it                                                               
is  an attempt  to hire  certified technicians  at a  competitive                                                               
rate  - and  be  able  to compete  with  independent auto  repair                                                               
shops.  He said  more technicians  in  his facility  means he  is                                                               
better able to take care of Alaskan consumers.                                                                                  
                                                                                                                                
1:58:46 PM                                                                                                                    
SENATOR BISHOP asked if Mr. Seekins supports SB 144.                                                                            
                                                                                                                                
1:58:51 PM                                                                                                                    
MR. SEEKINS replied yes.                                                                                                        
                                                                                                                                
1:59:06 PM                                                                                                                    
MARTEN  MARTENSEN, Owner  and General  Manager, Continental  Auto                                                               
Group Anchorage,  Anchorage, Alaska,  testified by  invitation on                                                               
SB 144.  He said that Alaska  is unique - with  cold temperatures                                                               
resulting  in  more warranty  work  than  any other  state.  With                                                               
respect  to  technicians and  warranty  work,  he explained  that                                                               
technicians  lose money  when they  do warranty  work. He  stated                                                               
that technicians  are needed by  many different industries  - and                                                               
manufacturers  are  aware  of  the   issue.  He  emphasized  that                                                               
technicians need to be paid  a competitive rate and asserted that                                                               
the  way to  keep  technicians  is to  compensate  them more  for                                                               
warranty work. He  questioned what manufacturers would  do if the                                                               
dealerships  lost  all  of  the  certified  technicians  able  to                                                               
perform  warranty  labor.  He suggested  that  other  states  are                                                               
working toward  similar changes  and there  are many  reasons why                                                               
they have not been successful.                                                                                                  
                                                                                                                                
2:01:47 PM                                                                                                                    
At ease                                                                                                                         
                                                                                                                                
2:02:14 PM                                                                                                                    
ACTING CHAIR GRAY-JACKSON reconvened the meeting.                                                                               
                                                                                                                                
2:02:32 PM                                                                                                                    
SUSAN  HICKS, Service  Director, Gene's  Chrysler Dodge  Jeep Ram                                                               
Fairbanks, Fairbanks, Alaska, testified  by invitation on SB 144.                                                               
With respect to  compensation for diagnostic work,  she said that                                                               
the dealership is given  a set amount of time -  30 hours per day                                                               
-  for warranty  work. She  emphasized that  the dealership  uses                                                               
this  time  up  quickly,  and  anything  above  and  beyond  this                                                               
requires  manufacturer  approval.  She suggested  that  the  time                                                               
spent doing diagnostic work is not  paid for once the daily limit                                                               
is reached. She  said that the manufacturer's time  guides do not                                                               
compensate for  the time it takes  to warm up vehicles  that have                                                               
been outside in  -50 degree weather. Until the  vehicle warms up,                                                               
no work can be done. She pointed  out that the time guides do not                                                               
compensate  for the  removal  and replacement  of  parts that  is                                                               
required in order to reach the  spot where the work that needs to                                                               
be done. She gave an example  of a warranty repair job that would                                                               
take 9.5  hours and contrasted that  with the 29.5 hours  paid by                                                               
independent  repair shops  and questioned  the  fairness of  this                                                               
disparity. She pointed  out that, if the  independent repair shop                                                               
makes a  repair with a part  that has a warranty,  and the repair                                                               
fails,  the dealership  must then  perform work  at a  discounted                                                               
rate.                                                                                                                           
                                                                                                                                
2:04:52 PM                                                                                                                    
MS. HICKS  agreed that the manufacturer  supplies specialty tools                                                               
for  warranty work.  However, she  explained that  the dealership                                                               
must  pay for  all specialty  tools received.  She said  that her                                                               
dealership was recently required to  replace a battery lift table                                                               
-  even though  their previous  table was  fully functional.  She                                                               
indicated  that this  was an  unnecessary $16  thousand purchase.                                                               
She emphasized  that they have spent  a large amount of  money on                                                               
special tools  - and they  do not have the  option to opt  out of                                                               
these purchases.  The tools  are sent  from the  manufacturer and                                                               
the  dealership  is  billed for  them.  In  addition,  technician                                                               
training is  paid for by the  dealership. She stated that  all of                                                               
these - plus advisor and support staff  pay and the fee to have a                                                               
warranty agency look over all documentation  - come out of the 78                                                               
percent profit  margin. She questioned how  the manufacturer time                                                               
guides can  be considered  correct when they  do not  account for                                                               
these costs.                                                                                                                    
                                                                                                                                
2:06:37 PM                                                                                                                    
ACTING  CHAIR   GRAY-JACKSON  asked  how  often   the  dealership                                                               
receives reports on how long it takes to inspect vehicles.                                                                      
                                                                                                                                
2:06:46 PM                                                                                                                    
MS. HICKS replied  that it is not a matter  of receiving reports;                                                               
she explained that  each repair has a  labor operation associated                                                               
with it - the labor operation  specifies the amount of labor time                                                               
the manufacturer  will pay  for. She said  that these  can change                                                               
day  to day  and  month to  month  - and  the  dealership is  not                                                               
notified  about these  changes. Changes  are discovered  when the                                                               
report is run.                                                                                                                  
                                                                                                                                
2:07:32 PM                                                                                                                    
ACTING CHAIR GRAY-JACKSON commented that  she is learning a great                                                               
deal about warranty work.                                                                                                       
                                                                                                                                
2:08:05 PM                                                                                                                    
LUKE KINCAIDE, Master Technician,  Gene's Chrysler Dodge Jeep Ram                                                               
Fairbanks, Fairbanks, Alaska, testified  by invitation on SB 144.                                                               
He  gave  several examples  of  how  Alaska's unique  environment                                                               
impacts  the   warranty  work  being  done.   This  includes  the                                                               
manufacturer paying  for 42  minutes of work  (from the  time the                                                               
vehicle is  brought in  off the lot  to completion).  However, in                                                               
some cases,  it may take hours  for vehicles to thaw  in order to                                                               
get to  the part in question.  This extra time is  not taken into                                                               
account.  He   explained  that  cold  temperatures   also  impact                                                               
software updates. He  added that there are  different times given                                                               
for different vehicle  models, despite the parts  being the same.                                                               
He questioned  the reasoning behind  these differences.  He noted                                                               
that those who  have been through the training  and are qualified                                                               
are expected to be able to meet the lower time standards.                                                                       
                                                                                                                                
2:10:42 PM                                                                                                                    
SENATOR  DUNBAR   asked  if  the   software  received   from  the                                                               
manufacturer is a physical product or if it is cloud-based.                                                                     
                                                                                                                                
MR.  KINCAIDE  replied  that  it is  partially  cloud  based.  He                                                               
explained that they  connect the vehicle to the  computer via the                                                               
internet and can  access the proprietary software  for the update                                                               
that they then program into the vehicle.                                                                                        
                                                                                                                                
SENATOR DUNBAR asked if slower internet speeds are an issue.                                                                    
                                                                                                                                
MR. KINCAIDE  replied that the  software updates download  at the                                                               
current internet speed.                                                                                                         
                                                                                                                                
SENATOR  DUNBAR commented  that Alaska  most likely  takes longer                                                               
than other states to download these updates.                                                                                    
                                                                                                                                
2:11:42 PM                                                                                                                    
ACTING CHAIR GRAY-JACKSON opened public testimony on SB 144.                                                                    
                                                                                                                                
2:12:01 PM                                                                                                                    
NICOLINA  HERNANDEZ,   Regional  Director  of   State  Government                                                               
Affairs,  Toyota Motors  North  America, Sacramento,  California,                                                               
testified in opposition to SB  144. She said that dealerships are                                                               
considered partners  and proper  reimbursement for  warranty work                                                               
is a priority.  She added that this work is  important for driver                                                               
safety and builds trust in  the brand. She offered information on                                                               
what  is included  in  the labor  reimbursement  for Toyota.  She                                                               
expressed concern that SB 144  ignores the time it actually takes                                                               
to make repairs  by establishing an incentive  for dealerships to                                                               
increase prices.  She commented that  SB 144 addresses  a problem                                                               
that does  not exist. She  explained that Toyota  time allowances                                                               
approximate the amount of time a  repair should take while SB 144                                                               
ignores the  actual time  the technician  spends on  repairs. She                                                               
said that  this would result  in higher prices for  drivers. With                                                               
respect to  work that takes longer  to perform due to  weather or                                                               
for  other  reasons, she  explained  the  process for  requesting                                                               
additional  time.  She  reiterated   that  it  is  important  for                                                               
technicians to  be properly reimbursed  for their time.  She said                                                               
that  while the  manufacturer is  sympathetic to  the competitive                                                               
pay  concerns, technician  pay is  a  dealership human  resources                                                               
issue not a manufacturer mandate.  She surmised that SB 144 would                                                               
increase  costs  to  the  industry  and  the  consumer  by  40-50                                                               
percent.  She said  that Toyota  is committed  to supporting  its                                                               
dealer  partners  and  would  like to  find  solutions  that  put                                                               
Alaskan consumers first.                                                                                                        
                                                                                                                                
2:14:58 PM                                                                                                                    
SENATOR BISHOP asked what Toyota's net  profit was in 2023 in the                                                               
United States.                                                                                                                  
                                                                                                                                
2:15:05 PM                                                                                                                    
MS. HERNANDEZ replied that she  does not have this information to                                                               
hand.                                                                                                                           
                                                                                                                                
2:15:12 PM                                                                                                                    
SENATOR BISHOP asked if Toyota  has sent test mechanics to Alaska                                                               
and attempted  to perform work  in the winter  weather conditions                                                               
in order to time how long it  would take - and then compared this                                                               
data with what Alaskan technicians are reporting.                                                                               
                                                                                                                                
2:15:51 PM                                                                                                                    
MS. HERNANDEZ  replied that  she does  not have  this information                                                               
and offered  to supply it to  the committee at a  later time. She                                                               
reiterated  that,  if  the  repair took  longer  due  to  weather                                                               
conditions, this would  be paid for by going  through the appeals                                                               
process.                                                                                                                        
                                                                                                                                
SENATOR BISHOP  requested that  the answers  to his  questions be                                                               
submitted to the committee once they become available.                                                                          
                                                                                                                                
2:16:38 PM                                                                                                                    
SENATOR DUNBAR asked if warranties are  set based on state law or                                                               
if they are standard across the  nation. He also asked if vehicle                                                               
prices are the same nationwide.                                                                                                 
                                                                                                                                
2:17:13 PM                                                                                                                    
MS. HERNANDEZ  replied that  she does  not have  this information                                                               
and  deferred to  Mr. Bright.  She also  offered to  provide this                                                               
information at a later time.                                                                                                    
                                                                                                                                
2:18:21 PM                                                                                                                    
SENATOR DUNBAR reiterated his question for Mr. Bright.                                                                          
                                                                                                                                
MR. BRIGHT answered that the  industry norm is a single wholesale                                                               
price for all dealers nationwide.                                                                                               
                                                                                                                                
SENATOR  DUNBAR  noted  that Ms.  Hernandez  covers  the  western                                                               
United States and asked if this includes Colorado and Montana.                                                                  
                                                                                                                                
MS. HERNANDEZ replied no.                                                                                                       
                                                                                                                                
SENATOR  DUNBAR  asked if  Toyota  has  stopped selling  cars  in                                                               
Colorado or Montana.                                                                                                            
                                                                                                                                
MS. HERNANDEZ replied not to her knowledge.                                                                                     
                                                                                                                                
SENATOR  DUNBAR  asked  for clarification  that  the  dealers  in                                                               
Colorado and Montana receive the  same wholesale price as dealers                                                               
in other states.                                                                                                                
                                                                                                                                
MS. HERNANDEZ replied that this is her understanding.                                                                           
                                                                                                                                
2:19:33 PM                                                                                                                    
LUKE  KINCAIDE  returned  to  offer   a  comparison  of  industry                                                               
standard  and   manufacturer  time  guides.  He   explained  that                                                               
industry standard  time guides are  within 10-12 percent  of each                                                               
other with  respect to the  time allotted for job  completion. He                                                               
pointed out  that the times  in the industry standard  guides are                                                               
substantially more than those set  forth in the manufacturer time                                                               
guides. He said  that he is aware of  multiple master technicians                                                               
who  have attempted  to complete  jobs within  the manufacturer's                                                               
time  guide limits  and  were not  successful.  He explained  the                                                               
process of diagnosing  an engine issue, which  often requires the                                                               
technician to remove various parts  in order to discover the root                                                               
cause  of the  failure. As  a result,  the actual  time spent  to                                                               
complete a repair might be  12 hours (including the time required                                                               
to  remove and  replace  overlying parts),  but the  manufacturer                                                               
only authorizes  9 hours of work  (for the work done  on the root                                                               
of the problem).                                                                                                                
                                                                                                                                
2:21:24 PM                                                                                                                    
ACTING  CHAIR GRAY-JACKSON  closed public  testimony and  held SB
144 in committee.                                                                                                               
                                                                                                                                
2:21:47 PM                                                                                                                    
There being  no further  business to  come before  the committee,                                                               
Acting  Chair   Gray-Jackson  adjourned  the  Senate   Labor  and                                                               
Commerce Standing Committee meeting at 2:21 p.m.                                                                                

Document Name Date/Time Subjects
SB144 ver A.PDF SL&C 2/19/2024 1:30:00 PM
SL&C 2/26/2024 1:30:00 PM
SB 144
SB144 Sponsor Statement v. A.pdf SL&C 2/19/2024 1:30:00 PM
SL&C 2/26/2024 1:30:00 PM
SB 144
SB144 Sectional Analysis ver A.pdf SL&C 2/19/2024 1:30:00 PM
SL&C 2/26/2024 1:30:00 PM
SB 144
SB144 Fiscal Note-VAR-EXE 02.16.24.pdf SL&C 2/19/2024 1:30:00 PM
SL&C 2/26/2024 1:30:00 PM
SB 144
SB144 Supporting Documents- AADA Presentation-Service Times 02.19.24.pdf SL&C 2/19/2024 1:30:00 PM
SL&C 2/26/2024 1:30:00 PM
SB 144
SB144 Public Testimony Received as of 2.15.24.pdf SL&C 2/19/2024 1:30:00 PM
SL&C 2/26/2024 1:30:00 PM
SB 144
SB144 Supporting Documents-Alaska_NADA Auto Retailing State Data Sheet.pdf SL&C 2/19/2024 1:30:00 PM
SL&C 2/26/2024 1:30:00 PM
SB 144