Pub. 12 2013-2014 Issue 3

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S F A L L 2 0 1 3 32 new jersey auto retailer or bankruptcy. Notwithstanding poor economic times, the manufacturers rarely, if never, allow divergences from their grand plans and their desire to have the dealersmeet themanufacturer requirements regarding facilities and capital. In good times, dealers oftenacquiesce; inbad times, dealers resort to cost cutting. One of the most significant forms of cost cutting is through con- solidationof operations, i.e., dualing franchises at one facility, something today prohibited bymost dealer sales and service agreements. B. Dualing In response to a contracting economy, many dealers sought to cut costs to weather the economic firestorm. One solutionmany dealers consideredwas consolidating, or dualing, their franchisedmotor ve- hicle dealershipoperations.However, after a reviewof their franchise agreements, most dealers recognized that while the manufacturer only required the dealer provide a facility which was sized in accor- dancewith thatmanufacturer’s requirements, it absolutelyprohibited the dealer from dualing competing brands in the facility. Therefore, even if the Dealer’s facility was large enough to satisfy the facility requirements of two (2) manufacturers, it was still a violation of the dealer sales and service agreement to dual two (2) brands of motor vehicles in one facility. The 2011 amendments to the FPA recognize that dealers have an absolute right to determine how they will utilize their property. Sec- tion 7.4(j) of the FPA prohibits the manufacturer from “imposing any requirement, limitation or regulation on, or interfere or attempt to interfere with, the manner in which a motor vehicle franchisee utilizes the facilities at which a motor vehicle franchise is operated, including, but not limited to, requirements, limitations or regulations as to the line makes of motor vehicles that may be sold or offered for sale at the facility.” Section 7.4(j) also forbids the manufacturer from taking or withholding, or threatening “to take or withhold any action, impose or threaten to impose any penalty, or deny or threaten to deny any benefit, as a result of the manner in which the motor vehicle franchisee utilizes his facilities.” Under Section 7.4(j), so long as the dealer continues to provide the manufacturer with facilities which meet the manufacturer’s “reasonable, written space and volume requirements as uniformly applied by the motor vehicle franchisor,” the dealer is free to utilize the remainder of his facility in the manner he deems appropriate. Finally, in recognition of the rights vested in the dealer to use his facility, Section 7.4(j) permits the dealer the freedomto relinquishhis right todual bywayof a voluntary agreementwith themanufacturer andupon receipt of a “separate and valuable consideration” paid from the manufacturer. Therefore, the dealer may be bound to exclusivity if the dealer accepts financial or other valuable payments from the manufacturer. C. Site Control Recently, General Motors (“GM”) and Chrysler employed the bankruptcy courts as a means to effect a reduction and realignment of their franchised dealership body. As many dealers will recall, GM terminated countless dealers through “wind-down” agreements and realigned their brands with “channel agreements” which were often conditioned upon the dealer granting GM site control for a period of 25 years. Dealers will also recall that Chrysler terminated ap- SITE CONTROL  continued from page 31 Remember that our FPA overrides any provisions in your Dealer Sales and Service Agreement which are not consistent with the FPA. It is important that you consult with your attorney before executing any documents with the manufacturer, facility related or otherwise.