The battle lines are being drawn across the nation in the ongoing kerfuffle between the OEMs and the dealer body over the use of the dealer’s retail labor time guide for warranty work. “The bill is going to create hundreds of millions of dollars in costs every single year. That cost is going to get passed on to consumers.” — David Bright, Alliance For Automotive Innovation, is quoted in a March 29, 2024, New York Focus article by Chris Bragg and Julia Rock about a pending bill allowing the use of the dealer’s retail LTG for warranty work in New York. At the outset, it’s important to keep in mind who designs, engineers, produces and controls the quality of the motor vehicles in question, who sets the MSRP and who extends the warranty to the customer. In each case, it is the OEM. Warranty repairs and recalls arise from flaws in the design, engineering and manufacturing processes — all controlled by the OEMs. It’s their problem, not the dealer and not the dealer’s technicians. Yet by David Bright’s own estimation, the OEMs are happy to shift “... hundreds of millions of dollars in costs every single year ...” onto the backs of the dealers and their technicians to fix the shortcomings they themselves created and which they agreed by warranty to the customer to stand behind. The retail service customer should not be called upon to subsidize the OEM’s warranty expense because prices have to be increased to cover the shortfall in warranty reimbursement from the OEMs. Every cost item in the manufacturing process is passed on to the consumer in the price of the goods. It’s no different with motor vehicles. If tires go up, the price goes up; if steel goes up, the price goes up; if manufacturing labor goes up, the price goes up. Here in Montana, the OEMs are required to pay the same for warranty work, both parts and labor, as a retail customer would pay for the same job, including the use of the dealer’s retail labor time guide, and the debate has moved on to implementation. At least one OEM has accepted requests from dealers to use their retail labor time guide while at the same time advising the dealers that “nobody” is getting their request approved. At this point, that OEM appears to be as good as its word because none of its Montana dealers have received approval. Some others, notably GM and Ford, have begun to recognize their obligations and begrudgingly taken steps to allow dealers to use their retail labor time guide for warranty repairs while at the same time designing strategies to parse every word and phrase of the statute into the narrowest narrative possible. A few areas of contention have recently popped up, including “proof” by the dealer that the dealership uses only one retail labor time guide for all retail customers. Some OEMs have requested 100 sequential retail ROs demonstrating the use of only one retail LTG. One OEM, while initially requiring the 100 sequential ROs, will apparently now take a “certification” from the dealer concerning the LTG used instead of requiring the sequential ROs. It’s too early to tell whether such a “certification” will lead to more frequent warranty audits and what those audits might entail. We also see evidence that OEMs are using different “workarounds” to avoid paying the dealer the required parts markup by purportedly using a third-party supplier or shipping the parts, particularly EV batteries, to the dealer at no cost. We believe 11 MONTANA AUTO DEALER
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