Pub. 15 2016-2017 Issue 1

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 I S S U E N O . 2 , 2 0 1 6 6 new jersey auto retailer Chairman’s MESSAGE | BY LAWRENCE W. KULL Recalls Are Not ONLY About The Repairs Dealers are overwhelmed by the flood of recalled vehicles coming through their Service Departments with nearly 100 mil- lion recalled in the past two years alone. In past columns, both Jim Appleton and I have written about the opportunity these recalls have presented for dealers to demonstrate the value of the franchise system. We’ve also discussed the misguided legislative and regulatory proposals to address the recalls. But that’s not the WHOLE story. Recalls are not JUST about the repair itself. Manufacturers build vehicles and offer a warranty that gives con- sumers confidence when making their purchase. The vast network of franchised dealers are available to fix automakers’ errors when the time arises. But dealers are so focused on making the repairs in a timely manner (when the manufacturer actually has parts available), they miss the cascading impact a massive recall can have on their business and customers. Customers and dealers are both harmed when a manufacturer drags its feet on a recall. A recent J.D. Power study found that if unrepaired recalled vehicles could not be sold or traded-in, their value fell an average of $1,210 per vehicle. That’s real dollars to customers, where the vast majority of recalled vehicles sit in drive- ways across the country. Recalls hurt dealers too. CSI scores take a hit when a manufacturer is slow to identify a repair, to supply needed parts, or otherwise mishandles its response to a recall. Dealers also shoulder many direct and indirect costs that go far beyond the actual repair. Loaner vehicles, floorplan expense, inventory they are unable to sell, loss of brand value and loss of incentive money (that may be tied to CSI scores) are all incurred by dealers and not always covered by the manufacturers who are at fault. So what should dealers do to deal with the cascading series of problems that BEGINwhen a recall is issued? We need to come to grips with the actions of our manufacturers. When a recall occurs, some manufacturers OVERSTATE the dealers’ legal obligations and UNDERSTATE their own legal and financial obligations to dealers AND consumers. Keep in mind, the National Traffic and Motor Vehicle Safety Act requires automakers to buy back affected new vehicle inventory if a fix is not available or compensates dealers in some way. The New Jersey Franchise Practices Act also requires automakers to reimburse dealers “for all reasonable costs incurred” in connection with a recall and reasonable costs can be interpreted many ways. Do they include the cost of holding “stop-sale” inventory, or loss of incentives tied to sales volume, or the loss of value to the franchise? Some manufacturers have stepped up to offer assistance to deal- ers. Others have ignored their franchisees. Dealers have the most direct contact with consumers, but HOW a recall is handled is completely controlled by the manufacturers. Automakers control how quickly a fix is identified and how quickly parts are allocated to dealers. Dealerships go to bat for their customers and work to ensure pub- lic and highway safety. They stand ready to fix the manufactur- ers’ mistakes and deserve to be fairly compensated. Dealers can insert themselves into the process to combat the manufacturers’ deficiencies. Dealerships face the brunt of criticism when a recall inconve- niences their customers’ lives. That’s why it is critical to keep customers informed about recalls — from the time the recall is announced, through any developments or delays in identifying a fix or supplying parts, and finally to scheduling and completing the repair. Communication is critical if dealers hope to limit the negative impact of a recall on their dealership.