Feb. 13, 2006 – Dark cloud hovers over the industry
February 13, 2006
Filed under Features
The retail motorcycle business in the United States is better than it has ever been.
New unit sales may have been flat for a couple of years, but they have flattened out at an all-time high. The number of motorcycles in use increases each year. The customer base is broader and the product is more widely accepted than it has ever been. Peripheral income opportunities are better than ever and astute retail dealers are expanding and making more money than any of us could have imagined several years ago.
So with all that good news, where is the dark cloud?
U.S. dealers have franchise protection that is unique in the world. In 1974, many of us worked hard to form the National Motorcycle Dealers Association (NMDA) after the Motorcycle Industry Council (MIC) kicked dealers out. (Yes, the MIC used to be a dealers organization).
The major accomplishment and lasting legacy of the NMDA is that we succeeded in drafting model franchise legislation to protect motorcycle dealers and getting it enacted in nearly every state. We had a crisis and dealers across the country rose to the occasion. Today, those franchise laws are under attack in nearly every state in an effort led by the MIC, who purport to speak for the industry.
How important is the protection accorded by state franchise laws? The best recent example is Honda Motor Company and its desire to have exclusive representation. Honda desires it and has attempted to induce U.S. dealers to represent them exclusively by offering a number of incentives. Fair enough!
In the United Kingdom, where the dealers do not have any form of franchise protection, Honda’s approach in November 2003 was to write a letter to a number of multi-line dealers telling them they were terminating the dealer agreement and that they would no longer be supplied with Honda products.
The only thing that makes you different than any other retail store is the dealer agreement you operate under, and the state motor vehicle and franchise laws. You have protection and you have requirements and obligations. Your state and your OEM dealer agreements require that you have and maintain a dealer license. There are many requirements. You have to have a service department to provide repairs and maintenance on the brands you sell and you have to honor any manufacturer’s warranty on those products.
The manufacturer or distributor has to be registered with the state to supply the products and must, by state and federal law, advise customers directly and through its authorized dealer body of all recalls on the product sold. The manufacturer also must comply with all state regulations regarding the appointment and transfer of dealerships and cannot engage in coercive trade practices to force product or programs on its dealers in the state. As a dealer, you are required to register new vehicles with the OEM and the state and to secure and transfer titles on used vehicles.
What makes the cloud darker is ATVs are not considered motor vehicles in most states. States do not regulate the distribution or sale of this product. Dealers are required to collect state-mandated sales tax, but since there is no registration, consumers are able to cross the state line and avoid paying the tax. And, if the state does not consider ATVs to be motor vehicles, no dealer license is required. Dealers now find themselves competing with mass merchandisers who have simply made shelf space for a trendy item without any of the obligations imposed by the state and the dealer agreements the franchised dealers operate under.
What turns the dark cloud into a storm cloud is the Asian Invasion. A myriad of product, in the form of ATVs, dirt bikes and scooters, is finding its way to our shores and the shelves of mass merchandisers who have no commitment to the industry and very little concern for the well being and safety of the end user. Will our current OEM suppliers feel compelled to follow suit?
The solution is the updating and strengthening of existing state franchise laws to apply dealer franchise laws to cover all retailers of all powersport products. It should be noted this has already been accomplished in several states. The problem is dealers in the majority of states have no active motorcycle dealer association or have allowed the one they have to become dormant.
In November, I hosted a meeting in Dallas of professional managers of five leading and very effective state associations. Those five industry leaders, from California, Texas, Utah, Florida and Virginia, formed the National Council of Motorcycle Dealer Associations. The council was registered under Florida state laws. I was named executive director and Robert Bass legal counsel, both of us on a pro bona basis.
The purpose of the council, which will operate without any funds from individual dealers or the state dealer associations, is to be a resource for all existing associations and to facilitate the resurrection or formation of state motorcycle dealer associations where they do not exist or have become dormant.
To date, financial support has been pledged by GE Franchise Finance, America’s Power Sports and V-Sept. The need is to get the word to every motorcycle dealer in the United States. With the help of these companies, and I hope many others in the industry, this can be accomplished.
The dark cloud is real. The whole landscape of the marketplace could change. There is no intent to restrict trade in any way. The many new Asian manufacturers are welcome, and may have as big an impact as the Japanese manufacturers had 40-pus years ago. We just need to make sure the playing field is level and that we all play by the same rules. The distribution and retailing of powersport product has to be done in a responsible way. A regulated responsible dealer body is very much in the interest of the entire industry, and the consumers.
The National Council of Motorcycle Dealer Associations held its first annual meeting on Jan. 28 in Orlando. An update of that meeting will be posted on my Web site, Edlemco.com, and a report will be printed in the March 13 issue of Powersport Business magazine.
Dealers or anyone in the industry wishing to contact me can reach me at 340-719-8591 or at Edlemco@aol.com. My assistant, Karen Rasmussen, will be able to assist if I am not available. psb
The opinions expressed in this column are not necessarily those of the publisher.