Pub. 1 2021 Issue 1

49 ANNUAL WARRANTY LABOR RATE INCREASE: STATUTORY OR FACTORY SUBMISSION? By Jordan Jankowski, Armatus Dealer Uplift E very year, as dealers begin to work on their annual labor rate submissions, many are quick to grab their policies and procedures manuals to get started. For most, it’s a process that may involve filling out a competitive survey, producing a certain amount of consec- utive qualified repair orders, or a combination of the two. Does this process yield as much of an increase as the dealer- ship wants or is entitled to? Many times, the answer is no. Most dealers are surprised to learn that a factory submis- sion isn’t their only choice. In fact, 48 states have some type of legislation in place that allows dealers to perform a statutory labor submission. The purpose of a statutory sub- mission is for a dealer to achieve warranty labor compen- sation at its retail rate, which is a market-driven rate based on its warranty-like customer-pay repair transactions. Any dealer who is submitting for a labor rate increase should be evaluating its factory protocol and its statutory protocol to determine which is most advantageous. Factory Submissions The guidelines for a factory labor submission are differ- ent for each manufacturer and can typically be found in your policies and procedures manual. The process can be as simple as filling out a competitive survey or as arduous as producing 100 sequential qualified repair orders; most manufacturers will require a combination of a survey and a certain amount of qualified repair orders. In some cases, it’s a quick and simple process to request your rate and wait for a response. While this process may seem enticing, there are some pitfalls to filing a factory submission. First, your manufacturer is not required to respond in a certain time frame; many dealers have told us they have waited months for a response, only to receive a significantly reduced offer. If this occurs, it is typically a “take it or it leave it” proposi - tion. It is also possible that you’ll be afforded no increase, as to which you’ll likewise have no recourse. Although some factory protocols allow you to submit fewer total ROs than a statutory submission, following your state law may yield a greater increase for a variety of reasons. Statutory Submissions A statutory submission will give the dealer more control over the process and possible outcomes. Although a statutory submission involves more complicated protocols and can be more work than a factory submission, the benefits usually make the additional work worth it. Most states require 100 sequential qualifying ROs that have been closed in the last 180 days and prescribe how the rate is to be calculated and what type of services can be excluded from the sample. Once the submission is complete, the manufacturer must respond within a specific time frame (usually 30 days), and most statutes will outline a rebuttal process if the manufac- turer approves a reduced rate or offers no increase at all. To further expound on the benefits, let’s focus on three reasons why a statutory submission may be more advantageous than your factory protocol and what services are available to help dealers through what might be an unfamiliar process. 1. Dealers Are Better Protected One of the biggest benefits of a statutory submission is the state laws in place that protect dealers from their manufac- turers having unilateral control over the resulting labor rate. Although the factory protocols often require less work, it’s often advantageous to submit statutorily to put the dealer in control of the outcome, not the manufacturer. If you disagree with the outcome of your submission, most statutes have a rebuttal process in place that allows a dealer to dispute a rejection or reduction of its rate-increase submission. Simply put, a factory submission is controlled completely by the manufacturer and ultimately gives them the upper hand, while a statutory submission is controlled by state law to help dealers obtain a fair market rate from their labor submissions. 2. States Exclude Certain Repairs Many state laws have specific excluded repairs that are designed to eliminate from the sample non-repairs and non-warranty-like repairs to help you achieve your “true” CONTINUED ON PAGE 50