Car dealers money grab

The so-called “Don Hall” bill (SB1410 and HB1778) has sailed through the General Assembly and now awaits the governor’s signature. Similar bills are being pursued in 13 states, which would allow car dealers more compensation if the manufacturers kill a brand. It seems that the dealers are trying to get a piece of the bailout money directed at the manufacturers.

According to an article in Automotive News (behind a firewall):

In eight states, including Virginia and Indiana, dealers have a strong chance to get legislation that would give them more compensation if an automaker kills a brand. The state proposals, which share key provisions, seek higher factory payments to dealers for:

— Vehicle inventory buybacks.
— Reimbursement for dealership rent.
— Other damages when a car company kills a brand.

In the article, Virginia is specifically mentioned as a battleground.

“It’s a dogfight,” says Don Hall, president of the Virginia Automobile Dealers Association.

The Virginia legislation would require an automaker to pay as much as three years’ rent on a dealership closed by a brand termination if the dealer can’t find a new tenant.

That is excessive, says Charles Territo, a spokesman for the automakers’ alliance. One year of rent reimbursement is adequate, Territo says.

In this Mother Jones article, one gets a sense of the strength of the auto dealers lobby:

Since the late 1990s, car dealers have used their considerable political clout to pass or better enforce state franchise laws that in many cases make it a criminal offense for an auto manufacturer to sell a new car to anyone but a state-licensed car dealer. The laws governing who can sell new cars are among the most anti-competitive of any domestic industry. By creating local monopolies for dealerships and prohibiting online sales for new cars, they constitute a major restraint on interstate commerce; in 2001, the Consumer Federation of America estimated [pdf] that the laws added at least $1,500 to the price of every new car.

These parochial state laws also make the distribution system for new cars incredibly inefficient and expensive, one factor in the financial problems facing the Big Three in Detroit.

And where does that strength come from? Once again, just follow the money. In Virginia, the Senate bill is sponsored by Tommy Norment, who himself is a partner in an auto dealership – the very group this bill seeks to enrich – and who has been the beneficiary of $11,000 in contributions from the VA Auto Dealers Association. The House version was patroned by Clay Athey, who has received over $9,000 in contributions.

But it’s not just these guys. When I discussed this bill with several members of the General Assembly last week during my trip there, one told me that the auto dealers have been “very good” to the legislators. Um, yeah – to the tune of over $620,000 in just the last two years.

The only hope for killing this bill is a gubernatorial veto. The Automotive News article, which was published February 23, says that Governor Tim Kaine “has not taken a position on the legislation.” Now would be a good time to do so, Governor.  With the economy in the tank and cars not selling, anyway, why add to the troubles of the manufacturers by passing this bill? (Not to mention the fact that my understanding of the bankruptcy laws would make such a bill moot, anyway.)

Go ahead and veto it.