Lawmaker aims to ‘level the playing field’ for auto dealerships performing warranty repairs

If your driveshaft fails when your vehicle is still under warranty, you take it to your brand’s dealership to get it fixed at no charge to you.

But dealership leaders say they are getting the shaft from manufacturers that underpay them for doing warrantied repairs.

Rep. Brad Tabke (DFL-Shakopee) sponsors HF797, which he said “levels out that playing field” and would hike the reimbursements dealerships receive from manufacturers.

The House Commerce Finance and Policy Committee laid the bill over Monday for future consideration.

At issue is who gets to decide how many labor hours are needed to make specific repairs and hence how much money a manufacturer reimburses a dealership for doing those repairs under warranty.

Current law states that manufacturers decide how many hours of labor it takes to make a warranty repair.

The bill would require manufacturers to reimburse dealers based the same rate they use for non-warranty, customer-paid service repairs.

David Bright, an attorney representing the Alliance for Automotive Innovation, said manufacturers have established fair labor rates that are based on objective time studies.

Manufacturers have no desire to undercompensate dealers for their work, he said, noting that automakers make processes available for dealers to request additional time if a repair takes longer than authorized.

Amber Backhaus, vice president of public affairs of the Minnesota Automobile Dealers Association, presented several examples of how she said manufactures undercut dealerships. “We’ve seen the automakers trying to limit their financial exposure by reducing the amount of labor they will pay for.”

For example, she said a cylinder head replacement for a non-warranty customer would typically be billed at 21.5 hours, while a manufacture would reimburse a dealership for just 10.5 hours of labor for the same work under warranty.

Rep. Tim O'Driscoll (R-Sartell) questions why the Legislature would get involved in modifying state statutes in what seems to be a contractual issue between manufacturers and their franchisee dealerships.

He suggested a different way for the bill to move forward and that the parties involved get busy negotiating with each other while the bill is laid over.

“If a deal can be had, work it out yourselves, bring it back to the committee,” he said.