Nissan dealers are fed up with NNA’s abusive tactics and are creating an alliance of Nissan dealers in hopes of negotiating favorable changes to NNA policies. These NNA practices include:
- Constant changes to incentive programs;
- Unreasonable and unattainable objectives under the Sales Growth Program;
- Efforts by Nissan to force changes in dealer operators;
- Unfair distribution of financial intervention funds;
- Lack of transparency in Tier 2 advertising expenditures;
- Arbitrary or abusive audits of dealer activities; and
- Actions which depress the return-on-sales to levels below industry average.
Nissan dealers believe that these practices do harm to the brand, devalue the franchise, and negatively impact dealers. Dealers believe that actions on the part of NNA contribute to a poor culture for the Nissan dealer body, as reflected in Dealer Attitude Survey results.
GM Tightens the Screws on Dealership Sale of Non-GM Parts and Service Contracts
On August 10, 2017, General Motors sent out bulletins 17-12 and 17-13 addressing the use of non-GM parts and non-GM service contracts. The concerns which have been raised by dealers include (i) that the required customer disclosure related to non-GM parts and non-GM service contracts will have the effect of causing customers to avoid the non-GM product which, in many cases, is a better product for both the customer and the dealership; and (ii) that the penalties proposed for violating the disclosure requirements are significant.
The good news is that the GM Sales and Service Agreement does not allow GM to require a separate disclosure including the type of language GM is asking dealers to convey to the customer as it relates to both the non-GM parts and service contracts. Instead, section 5.1.1 of the Dealer Agreement appears to only require that the customer be informed “in the purchase order or bill of sale” that the product is not a GM product.
If the proposed new disclosures are considered to be a unilateral expansion of the existing franchise requirements, dealers in some states have a right to protest the new procedures as an “adverse modification” of the franchise. A modification will be prohibited if it adversely and substantially alters the dealer’s rights, obligations and investment in the franchise. Dealers are required to file a protest within a certain period of time from receipt of notice of the proposed franchise modification. The proposed modification is then stayed until there is a final determination by the court.
As it relates to non-GM parts, the required disclosure language which states “GM reserves the right to invalidate the affected portions of the GM “Bumper-to-Bumper” New Vehicle Limited Warranty . . . for any vehicle . . . that is equipped with non-GM equipment, parts or accessories” also runs contrary to the federal Magnuson-Moss Warranty Act, 15 USC 2301 et seq. The Act prohibits a manufacturer from voiding a vehicle warranty or denying coverage under a warranty simply because non-OEM parts are installed or used on the vehicle. The only exception to this prohibition under the Act is if the non-OEM part causes damage to a warranted part on the vehicle. Instead of a broad reservation of rights to invalidate a customer’s vehicle warranty, any disclosure sought by GM should be limited to the language utilized in the Magnuson-Moss Warranty Act.
The penalties listed for failing to provide the customer disclosure include a $500 surcharge per incident, rendering the dealer ineligible for GM dealership opportunities, suspension from various current and future sales programs, including SFE and EBE and termination of the Dealer Agreement. The legality of these proposed penalties is questionable in that, as provided above, the Dealer Agreement only requires a simple disclosure in the purchase order or bill of sale. If the dealership is including the required disclosure on those documents then a penalty for failing to include a more expanded disclosure may not have any legal basis.
As relates to suspension from existing programs, we are told that there is no requirement in the SFE, EBE or Pinnacle programs, addressing disclosure of non-GM parts or service contracts. If so, there would be no basis in the program rules for a suspension from those programs. Moreover, to the extent that any penalty for failing to provide the required disclosures would be considered a chargeback, most state motor vehicle franchise laws prohibit any chargeback of incentives monies unless the claim made for those incentive monies is materially false or fraudulent or the dealer failed to reasonably substantiate the claim. Under the circumstances, there would appear to be a strong argument that any chargeback based upon these new and expanded disclosure requirements would fail under this requirement.
Author: Richard Sox
Richard Sox is a lawyer with the firm of Bass Sox Mercer PA (formerly known as Myers & Fuller PA).