Manufacturers of automobiles and heavy equipment delivered a one-two punch against the state’s Auto Dealer Bill of Rights just as the new law took effect on Monday.
Three heavy equipment manufacturers, including John Deere, won a preliminary injunction that exempts them from the law, pending the outcome of their lawsuit, while General Motors announced it would no longer offer dealer sales incentives in New Hampshire.
“It makes little business sense for us to invest resources in sales programs for dealers after the state legislature, supported by dealer groups, passed a law that makes it harder and more costly for us to do business with them,” according to a GM statement issued on Monday.
Peter J. McNamara, president of the New Hampshire Auto Dealers Association, characterized the John Deere lawsuit, filed just three weeks ago, as a “sneak attack” that gave the attorney general little time to prepare a defense. He expressed optimism that the law would withstand judicial scrutiny in a full hearing on the merits of the case.
The decision by GM was a form of retaliation, according to McNamara.
“I think it’s GM being vindictive against the dealers for attempting to stand up for their rights,” he said.
The effort to revise the laws governing the relationship between dealers and manufacturers was among the most contentious debates in the last legislative session, as both sides engaged in a costly and protracted lobbying and marketing campaign.
The new law, which took effect Monday, puts in place some of the toughest protections for dealerships in the country. New Hampshire, for example, is now the only state in which manufacturers can only order new construction or remodeling of a dealership every 15 years. The window is 10 years in most other states.
Not only did the law put more power in the hands of dealers, it also embraced heavy equipment retailers, who had previously been covered by separate legislation.
John Deere, AgCo and Case New Holland filed suit in Hillsborough North Superior Court in late August, seeking an injunction to block the new law, claiming that it applies retroactively to existing contracts and is therefore unconstitutional.
Rich Jefferson, director of public relations for the Association of Equipment Manufacturers (AEM), said the concerns of AEM members were well-documented during the legislative debate, and the lawsuit should not have come as a surprise to anyone.
McNamara agrees that the manufacturers lobbied aggressively, but said they were not interested in compromise. “Their message was ’We refuse to negotiate at all when it comes to bringing equipment dealers into RSA 357C (the Auto Dealer Bill of Rights),’” he said. “I think it’s a message that they want to send to the dealers here in this state, but also in the 49 other states, that they’re not going to negotiate when it comes to legislation; they are just going to try and kill it.”
AEM is not a party to the suit, McNamara pointed out, and many of the large manufacturers, such as Kubota, are also not participating and therefore not exempted from the law by virtue of the injunction granted Sept. 19.
Singled out by GM
New Hampshire has been singled out by GM as the only state now excluded from dealer sales incentive programs, in which GM sets dealership sales targets for certain models and rewards dealerships that meet their goals.
Ryndee S. Carney, manager of cross-brand communications at General Motors, said the company briefly suspended incentives in Maryland two years ago because of regulations in that state, but later restored the program when the laws were revised.
“These are programs we put in the market to help the dealers focus on specific brands and models in response to changing market conditions,” she said. “Under the new law, we are required to give 30 days advance notice to dealers when these types of programs are put in place. That defeats the purpose of the program because we lose our competitive advantage if we disclose it ahead of time.”
Dealers use the money they get through the incentive programs at their discretion. “They use those monetary rewards as they see fit,” Carney said. “They can increase their local advertising; provide incentives to sales people; increase trade-in allowances, or discount the price of a vehicle. It’s up to the dealer.”
Manufacturer incentives to the consumer, such as low-interest financing or low lease rates, are not affected by the GM decision, although McNamara said auto dealers could feel the impact if dealerships in neighboring Massachusetts decide to use their incentives to boost trade-in value or reduce sticker price.
“It’s definitely a punishment on the dealers, in that it could put them at a competitive disadvantage with other states,” he said, “and it may wind up hurting consumers as well.”email@example.com