Pub. 1 2019-2020 Issue 1

16 Unfortunately, AB 2107 was vetoed by Governor Jerry Brown in the final hours before the constitutional deadline to sign legislation. The veto was a surprise and a true dis- appointment. Governor Brown’s veto message focused entirely on retail warranty reimbursement rates while sug- gesting that the bill’s complexity and unintended conse- quences were his reasons for vetoing the bill. Governor Brown simply ignored similar franchise laws and warranty reimbursement models across the country and that these factors were proactively addressed in the bill’s language. In sum, we believe that Governor Brown simply got this one wrong. But rest assured, the fight is not over! This year, CNCDA and Assemblywoman Reyes will be reintroducing AB 2107 and we both remain committed to getting this legislation across Governor Newsom’s desk. CNCDA’s 2019 franchise bill will start where AB 2107 left off, including the following topics: Retail Warranty Reimbursement Manufacturers reimburse dealers and their employees for warranty work, including parts and labor, according to their own compensation and time formulas. Although California franchise law requires manufacturers to provide reasonable compensation to dealers for their warranty work and to consider the customer retail payment rates, almost no manufacturer considers the retail rates that dealers receive from their paying customers in calculating such compensation to dealers for warranty repairs. This bill clarifies that warranty reimbursement compensa- tion shall reflect the customer retail rates for parts and labor similar to the enactments of over 40 other states. This bill further specifies the process for determining each dealer’s retail rates by using a methodology that is currently used in 30 states. This methodology includes important protections against manufacturer retaliation, penalties and discriminatory action. Manufacturers raised concerns that this methodology would bring about the potential for dramatic and sudden increases in reimburse- ment rates since their current compensation to dealers is well below the retail rates now paid in many states across the country. In response, this bill establishes an annual 10 percent cap on the labor rate increase a dealer can receive over the previous year’s rate. While this bill ensures that a dealer can reach retail reimbursement for warranty work, other states have seen some dealers voluntarily agree to other warranty reimbursement rates. This bill provides the ability for the dealer to choose. A dealer can either elect to submit Governor Brown’s vetomessage focused entirely on retail warranty reimbursement rates while suggesting that the bill’s complexity and unintended consequences were his reasons for vetoing the bill. Governor Brown simply ignored similar franchise laws and warranty reimbursement models across the country and that these factors were proactively addressed in the bill’s language. In sum, we believe that Governor Brown simply got this one wrong. But rest assured, the fight is not over! This year, CNCDA and Assemblywoman Reyes will be reintroducing AB 2107 and we both remain committed to getting this legislation across Governor Newsom’s desk.