Senate Bill Could Have Ramifications for Car Consumers, Wisconsin Auto Industry

Committee to Review Senate Bill 304

(OnFocus) A Wisconsin car dealer franchise bill could mean inflated costs for the consumer.

The proposed Senate Bill 304 would prohibit motor vehicle manufacturers, importers, and distributors from taking an “adverse action” against its dealers to recover reimbursement costs, actions which include surcharges, withholding incentives, and limiting the allocation of parts and vehicles.

A public hearing for the bill will take place Wednesday at 9:30 a.m. following the session. The full bill can be read here.

The bill, assisted by the Wisconsin Automobile & Truck Dealers Association (WATDA), follows a failed 2018 lawsuit in which 13 General Motors dealers challenged the manufacturer for imposing a vehicle surcharge on their dealerships in order to recoup compensation costs. Those dealerships had charged GM higher reimbursement rates for warranty labor and parts than is currently provided in the contract.

“If you came in as consumer to our service department and you blew an engine on a truck, we would charge you regular retail for those parts. Now, if the engine blew on your truck and it was under factory warranty and you brought it us, we can only charge GM a 40 percent markup on those parts, which has been the standard for a lot of years,” said Mary Jo Wheeler-Schueller, owner of Wheelers Chevrolet GMC. “We can’t charge retail because they’re our manufacturer.”

General Motors has offered compromises to dealers, which include allowing dealers to go to retail like a customer for parts, granting extra time for warranty claims, and banning surcharges.

Wheeler-Schueller has spoken out against the bill on ethical grounds, saying that it doesn’t represent the majority of GM dealers in the state and that the consumers in the state of Wisconsin will be the on the losing end if it succeeds. If the bill passes, General Motors has said it will pull out rebates. And because car sales are based on the buyer’s zip code, consumers can’t shop for lower prices by buying vehicles out of state.

Wisconsin Act 91, passed in 2011, provided a compensation formula to reimburse the dealers for repairs done under warranty, which included language that the cost of parts could be “multiplied by the sum of 1 and the dealer’s average percentage markup.”

The multiplier allowed dealers to charge General Motors the retail rate, leading the manufacturer to notice a large increase in its warranty claims. Many dealers were not aware of the multiplier or who put it there, and therefore couldn’t take advantage of it, Wheeler-Schueller said.

The few dealers that participated in the retail mark-up on parts and labor could surcharge invoices and pass off those costs to the consumer, for example, by charging the customer for 1.5 hours of work instead of a half hour to replace a headlight.

“[The dealers] get surcharged on their invoices and in turn they have to pass on that cost to the consumers,” said Wheeler-Schueller. “Those dealerships — their cars cost more money. At the end of the day, the customer is going to have to pay for this one way or another.”

She is also concerned that the bill would prevent the manufacturer from “conducting or threatening to conduct a nonroutine or nonrandom audit.”

“What happens if a dealer is truly doing something wrong, fraudulently, to a customer? That dealership can’t get audited by GM?” she said. “That’s what they want to do. There’s no check and balance.”

Ultimately, all manufacturers and state consumers would be affected by the ruling. “I would encourage the members of the public, anybody who drives an automobile, to call the state legislature to vote against this bill,” Wheeler-Schueller said. “These dealers are trying to take advantage of consumers and their manufacturers. They don’t represent Wheelers and they don’t represent the majority of the dealer body. At the end of day, it’s price-bulging the consumer.”

A message left for Senator Jerry Petrowski, Chair of the Committee on Transportation, Veterans and Military Affairs which is reviewing the bill, was not immediately returned.

Wheeler expressed further concern about the bill’s impact on dealerships in the state. “If we continue down this path of antagonizing our manufacturer and partner in business, we could all lose as GM dealers. These dealers are playing with my livelihood,” she said. “GM could pull programs out of our state — programs we depend on, reasons why we remodeled our buildings and invested in our communities.”

She said that the compromises proposed by General Motors should be discussed and worked through without interference from the state.

“Our relationship with GM is not perfect, nor should it be. Nothing in life is perfect. Relationships have give and take. It can’t be all GM’s way, and it can’t be all the dealers way—we have to find a way to meet in the middle,” she said. “We need good relationships with our manufacturer, our partner in business, not contentious ones. And the last thing we need is our legislature dictating to us our relationship with our manufacturer.”