Pub. 1 2019-2020 Issue 3

delivery and service centers? This is certainly not what dealers have bargained for in entering into a franchise relationship and making huge investments to be the retail seller of the OEMs products. Florida law does prevent OEMs from selling a motor vehicle to any retail consumer except through a franchised motor vehicle dealer. “Selling” is defined as “any transac - tion where the title of motor vehicle is transferred to a retail consumer.” Arguably, an OEM receiving vehicle orders and deposits directly from the retail consumer is part of the “transaction” which leads to the transfer of title to the motor vehicle to the consumer. Dealers must be on heightened alert for further moves by their OEM to insert themselves into the retail customer relationship which is fundamental to the franchised motor vehicle dealer’s business. Changes to Dealer Sales and Service Agreements From time to time, the OEMs will issue new Dealer Sales and Ser- vice Agreements to their dealers. Some, like General Motors, have all of their Dealer Agreements reflect the same expiration date which allows GM to issue a new Agree- ment to all of their dealers at one time while others will issue a new Agreement sometime prior to the individual dealer’s Sales and Ser- vice Agreement’s expiration date. GM recently issued its proposed new Dealer Agreement to become effective November 1, 2020, for a five year term. Florida law allows dealers to pro- test any adverse change to their franchise, which includes changes to the Dealer Sales and Service, a proposed new EV agreement or the like. Such a protest will stay the enforcement of the adverse change until such time as the protest is resolved. We encourage dealers to study the terms of any new agree- ment provided by the OEM and, with regard to new Dealer Sales and Service Agreements, to closely study your individual dealership ad- dendum (ownership, management, assigned territory, facility, working capital, etc.). Once a new Agreement and deal- ership-specific addenda are agreed to by the dealership, it is that much more difficult to argue against those terms later. It is much more effective to challenge adverse changes and insist on correcting inaccurate information before signing off on the new Agreement. Any adverse change or incorrect information listed in the individual dealership addendum should be addressed with your legal counsel and ultimately with the OEM. Vehicle Allocation and Sales Performance With the supply line for new vehicle assembly parts continuing to be strained due to the Coronavirus pandemic across the world, the supply of new vehicles to dealers has dwindled. At the onset of the pandemic, dealers were concerned about having too much vehicle inventory and now dealers cannot obtain enough of the most popular models to meet customer demand. As mentioned above, in Florida dealers have a right to a fair and adequate number and mix of new vehicles from their OEMs. As we all know, however, the manufacturer’s allocation systems are not always fair and can be easily manipulated. As but one example, most OEMs have a discretionary pool of vehicles which can be distributed by regional personnel as needed. This pool of vehicles is outside of the automated allocation ordering system. Impor- tantly, all it takes is one good boost of vehicles from the discretionary pool for a dealer to get ahead of other same line-make dealers for future vehicle allocation. This is because the vehicles provided from the discretionary pool still count to- ward the “vehicles sold” component within the turn and earn/balanced day supply calculation. Almost all manufacturers allocate vehicles based upon a calculation which includes historic sales and expected future sales. The more vehicles you sell, the greater both the historic sales number and the expected future sales number. This will result in a higher allocation of vehicles through the automated system. It is a best practice for dealers to continually correspond in writing with the OEM zone or regional of- fice regarding your specific vehicle inventory needs and requests for discretionary vehicles. This cor- respondence may cause the OEM field personnel enough discomfort to provide the complaining dealer with needed vehicle inventory. At the very least, these communica- tions will document the OEMs fail- ure to provide an adequate quantity and mix of new vehicles and enable you to enforce your rights under Florida law if you choose to do so. A lack of adequate product can, in turn, lead to the appearance of poor sales performance. It is a best practice for dealers to respond to any negative sales performance reports from the OEM in writing by emphasizing the need for additional product. Dealers should document the number of customers who ask about a vehicle which is not avail- able in your inventory and who ultimately go to a competing same line-make dealer to find the vehicle in stock. In these circumstances, the OEM should be reminded that Florida law prohibits the use of any sales performance measurement which is unfair, unreasonable, arbi- trary and inequitable. The information in this article is provided for educational purposes only and should not be interpreted as legal advice. Richard Sox is a shareholder with Bass Sox Mercer law firm’s Tallahassee office. The Firm is a leading advocate for motor vehicle dealers and specializes in providing a full range of legal services to dealers and their associations including representation in franchise disputes with the manufacturer, mergers and acquisitions as well consumer and employment matters. Mr. Sox can be reached at rsox@dealerlawyer.com or (850) 878-6404. Pub Yr 1 2019-2020 | Issue 3 15 CFADA.ORG