Starting Jan. 1, Illinois motor vehicle dealers have been able to claim “Fair and Adequate Compensation” for warranty and recall repairs. Pursuant to the changes made to Section 6 of the Motor Vehicle Franchise Act (815 ILCS 710/6) by Public Act 102-232 (https://bit.ly/3LBHSZt), manufacturers must reimburse their dealers for parts and labor in warranty and recall repairs at the same rate as those dealers charge when making repairs that are not covered by warranty. Importantly, P.A. 102-232 now prohibits manufacturers from imposing cost recovery surcharges on dealers who claim their “retail rate” for warranty and recall repairs. The parts and labor increases are similar to the reimbursement authorized under several other state statutes but represent a significant increase for Illinois dealers. Time Allowances Increased Public Act 102-232 creates new time allowances for warranty and recall repairs that are the first in the nation. While setting a new bar for warranty time allowances is indisputably good news for Illinois dealers, it creates a bit of uncertainty as dealers and manufacturers implement the new time allowances. Until Jan. 1, 2022, the warranty time allowance merely had to be “reasonable and adequate” and was often based on the manufacturer’s time guide. Under the new warranty reimbursement statute, dealers can request reimbursement based on an extended warranty agreement agreed to by the Warranty Reimbursement — Blazing a New Trail manufacturer and dealer or based on the manufacturer’s time guide multiplied 1.5. More specifically, Section 6(b) provides in part as follows: Any time guide previously agreed to by the manufacturer and the dealer for extended warranty repairs may be used in lieu of actual time expended. In the event that a time guide has not been agreed to for warranty repairs, or said time guide does not define time for an applicable warranty repair, the manufacturer’s time guide shall be used, multiplied by 1.5. From what IADA has learned from dealers, it seems that the majority of manufacturers have elected to use their own warranty time guide multiplied by 1.5. However, at least one manufacturer interprets Section 6(b) as mandatory rather than permissive and insists on reimbursing dealers based on the time allowances used under their extended warranty guide. IADA believes that this is a misinterpretation of Section 6(b) and that an extended warranty time guide is to be used only when both the manufacturer and dealer agree to it. Under our interpretation, if either party refuses an extended warranty time guide, then warranty reimbursement time allowances are based on the manufacturer’s times allowance multiplied by 1.5. Because the warranty time allowance guidelines are brand new, our analysis is based on our interpretation of P.A. 102-232 rather than settled case law. Depending on how hard manufacturers dig in, a possible 22
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