Warranty Retail Parts & Labor Reimbursement

[ToyotaFixedOpsGuy]

Finally recieved my response from GM on the parts & labor at retail pricing on warranty jobs! Yeah, even though they still haven't changed thier stance, I think they understand they really can't do anything about it. See Below.

"Mr. XXXXXXXXXXX

GM acknowledges receipt of your e-mail below inquiring about increased reimbursement for parts and labor utilized in warranty repairs in light of the recent amendment to Section 320.696 of the Florida Statutes.

GM believes that initiated increases in warranty costs will have unfavorable consequences for all concerned. As we have indicated previously, adding economically unwarranted cost into the distribution system will ultimately disadvantage both GM and its dealers, diverting resources from mutually beneficial activities like developing and marketing great products and services. Moreover, because Florida law now limits manufacturers ability to recover costs incurred in supporting product warranties, GM will have no choice but to consider taking steps to control those costs in the first instance. We will all be wrestling with those issues in the days ahead. Nevertheless, GM will, of course, comply with the law as amended.

As a preliminary matter, under the provisions of the statute it may be necessary for GM to review data regarding your recent pricing practices. However, GM would prefer to reach a voluntary agreement with your dealership. Section 320.696 now provides that manufacturers and dealers may agree upon warranty parts and labor rates.

Please submit your application in writing to Fred Broadnax Regional Warranty Manager at the address listed below. Please make sure to include your current "retail" parts and labor charges and the method used in the calculations. Mr Broadnax will contact you after these are received.

We trust this is responsive to your inquiry."


Ricardo La Costa IV
Regional Service Manager
General Motors Corporation
Vehicle Sales Service and Marketing
Southeast Region
11700 Great Oaks Way
Alpharetta, GA 30022

[ToyotaFixedOpsGuy]

Here is a great interpetation of this law! For you skeptics... read the bottom closely!

To:XXXXXXXXXXXX May 29, 2008
From: XXXXXXXXXXXX

This month the Florida Legislature passed a bill amending Florida Statute 320.696 (Warranty Responsibility) addressing retail pricing for warranty parts and labor and clarifying last years bill after manufacturers refused to pay dealers a legitimate retail rate and created procedures which were virtually impossible for dealers to satisfy.

Our firm worked with the Dealer Associations and automotive groups in this legislative effort to further revise the statute creating a more detailed statute providing specific procedures to calculate retail pricing for warranty parts and labor and establishing manufacturer prohibitions which address the manufacturers abusive conduct regarding the 2007 statutory revisions.

On May 28, 2008, Governor Crist signed the bill into law and therefore dealers may now request compensation pursuant to the new statute. The new law has additional important franchise protections, which include issues regarding vehicle exporting and limitations on a manufacturers ability to require facility improvements or renovations or use incentive programs to require or induce a dealer to improve its facilities or relocate. If you are currently addressing the issue of facility improvements or renovations with your manufacturer, please call me and I can explain the application and impact of this new law regarding these issues.

Regarding the procedure for requesting retail compensation for warranty parts and requesting retail labor rates, I have set forth below the procedures provided in the new statute. Please call me if you have any questions regarding the below procedures. I can also assist you in preparing your written compensation request, including your request letter to your manufacturer.

PROCEDURE FOR REQUESTING RETAIL PRICING FOR WARRANTY PARTS

The new Florida Statute provides a procedure for requesting compensation and three methods to determine the retail price for warranty parts. The new statute states that the compensation may be an agreed percentage markup over the manufacturers dealer cost. If an agreement is not reached within thirty (30) days after a dealers written request, compensation for the parts is the greater of the following 3 methods. Note: The statute provides a 30 day period to reach an agreement. In order to avoid losing compensation time, we recommend that you choose one of the following 3 methods in your initial written request, then if no agreement is reached after 30 days, you have already made a written request pursuant to one of the statutory methods and should be compensated at least for all claims filed by the dealer 15 days after the date the manufacturer received the dealers initial written request.

METHOD NUMBER 1
(Arithmetical Mean Percentage Markup)

The statutory formula for Method 1 is as follows: The dealers arithmetical mean percentage markup over dealer cost for all parts charged by the dealer in 50 consecutive retail customer repairs made by the dealer within a 3-month period before the dealers written request for a change in reimbursement [or all of the retail customer repair orders over that 3-month period if there are fewer than 50 retail customer repair orders in that period]. Under this method, the dealer must give the manufacturer 10 days written notice that the dealer intends to make a written request to the manufacturer for a warranty parts reimbursement increase and then permit the manufacturer, within that 10-day period, to select the initial retail customer repair for the consecutive repair orders that will be attached to the written request used for the markup computation. If the manufacturer fails to provide a timely selection, the dealer may make that selection.

Notes:
1. No repair order shall be excluded from the markup computation because it contains warranty, extended warranty, certified pre-owned warranty, maintenance, recall, campaign service, or authorized goodwill work and a retail customer repair.

2. Retail customer repair is defined as work, including parts and labor, performed by a dealer which does not come within the provisions of a manufacturers or its common entitys warranty, extended warranty, certified pre-owned warranty, service contract, or maintenance plan, and excludes: parts discounted by a dealer for repairs made in group, fleet, insurance, or other third-party payer service work; parts used in repairs of government agencies' repairs for which volume discounts have been negotiated; parts used in special event, specials, or promotional discounts for retail customer repairs; parts sold at wholesale; parts used for internal repairs; engine assemblies and transmission assemblies; parts used in retail customer repairs for routine maintenance, such as fluids, filters and belts; nuts, bolts, fasteners, and similar items that do not have an individual part number; and tires.

3. Only the retail customer repair portion of the repair order shall be included in the computation and the parts identified in the excluded parts definition shall be excluded from the computation.

4. If a manufacturer furnishes a part or component to a dealer at no cost to use in performing repairs under a recall, campaign service action, or warranty repair, the manufacturer shall compensate the dealer for the part or component in the same manner as warranty parts compensation, less the dealer cost for the part or component as listed in the manufacturers price schedule.

5. The manufacturer is prohibited from establishing a special part or component number for parts used in predelivery, dealer preparation, warranty, extended warranty, certified pre-owned warranty, recall, campaign service, authorized goodwill, or maintenance-only applications if that results in lower compensation to the dealer than as calculated in this statute.

METHOD NUMBER 2
(Suggested List Price)

The second statutory method provided to compensate a dealer for parts used in warranty work is as follows: The manufacturers highest suggested retail or list price for the parts.

Note:
1. If a manufacturer reduces the suggested retail or list price for any replacement part or accessory, it shall reduce, by at least the same percentage, the cost to the dealer for the part or accessory.

METHOD NUMBER 3
(Dealers Gross Profit Percentage in Financial Statements)

The third statutory method for compensating dealers for parts used in warranty work is as follows: As evidenced by the average of the dealers gross profit percentage reflected in the dealers financial statements for the two months preceding the dealers written request for reimbursement, an amount equal to the dealers markup over dealer cost that results in the same gross profit percentage for parts used in warranty work as the dealer receives for parts used in the customer retail repairs.

Notes:
1. A dealer may make written requests for changes in compensation for parts not more than semiannually. Reference to financial statements is intended to mean the statements published to the manufacturer. See definition of warranty work on next page. A manufacturer is prohibited from conducting any warranty, retail customer repair, or other service-related audit more frequently than once each calendar year.

PROCEDURE FOR REQUESTING RETAIL LABOR RATES FOR WARRANTY REPAIRS

The new Florida statute provides a procedure for requesting and determining the retail labor rate for warranty repairs. The new statute states that compensation paid by a manufacturer to a dealer may be an agreed hourly labor rate. However, if an agreement is not reached within thirty (30) days after the dealers written request, the dealer may choose to be paid the greater of the following two methods. Note: We recommend you choose one of the following methods in your initial written request, then if no agreement is reached within 30 days, you have already made a written request pursuant to one of the statutory methods.

LABOR METHOD NUMBER 1

The dealers hourly labor rate for retail customer repairs (defined below), determined by dividing the amount of the dealers total labor sales for retail customer repairs by the number of total labor hours that generated those sales for the month preceding the dealers written compensation request, excluding: a dealer's labor charges for internal vehicle repairs; vehicle reconditioning; repairs performed for group, fleet, insurance, or other third-party payers; discounted repairs of motor vehicles for government agencies; labor used in special events, specials, or express service; and promotional discounts.

Notes:
1. Retail customer repair is defined as work, including parts and labor, performed by a dealer which does not come within the provisions of a manufacturers or its common entitys warranty, extended warranty, certified pre-owned warranty, service contract, or maintenance plan.

2. A dealer may make written requests for changes in compensation for labor not more than semiannually and a manufacturer is prohibited from conducting any warranty, retail customer repair, or other service-related audit more frequently than once each calendar year.


LABOR METHOD NUMBER 2
(Dealers Gross Profit Percentage in Financial Statements)

As evidenced by the average of the dealers gross profit percentage in the dealers financial statements provided to the manufacturer for the two months preceding the dealers written compensation request, an amount equal to the dealers markup over dealer cost that results in the same gross profit percentage for labor hours performed in warranty work (defined below) as the dealer receives for labor performed in its customer retail repairs. The dealer must provide in the written request the arithmetical mean of the hourly wage paid to all of its technicians during the preceding month. The arithmetical mean shall be the dealer cost used in this compensation calculation.

Notes:
1. After an hourly labor rate is agreed or determined, the manufacturer shall uniformly apply and pay that hourly labor rate for all labor used by the dealer in performing warranty work. Warranty work includes work to maintain or repair a manufacturers product under a warranty or maintenance plan, extended warranty, certified pre-owned warranty, or a service contract, issued by the manufacturer or its common entity (unless issued by a common entity that is not a manufacturer) and including work to fulfill a manufacturers delivery or preparation procedures or to repair a motor vehicle as a result of the manufacturers or common entitys recall, campaign service, authorized goodwill, directive, or bulletin.

2. A manufacturer shall not pay an hourly labor rate less than the hourly rate it was paying to the dealer for warranty work on January 2, 2008.

3. A manufacturer shall not eliminate flat-rate times from, or establish an unreasonable flat-rate time in its warranty repair manual, warranty time guide, or any other similarly named document.

4. A manufacturer shall establish reasonable flat-rate labor times in its warranty repair manuals and warranty time guides for newly introduced model motor vehicles which are at least consistent with its existing documents.

5. For purposes of application of the statute, the terms retail customer repairs and similar work are not limited to a repair to the same model vehicle or model year, but include prior repairs that resemble but are not identical to the repair for which the dealer is making a claim for compensation.

ADDITIONAL PROVISIONS

Some of the additional provisions in the new statute include the following:

1. A manufacturer shall not establish or implement a term, policy, or procedure different than those described in this section for any motor vehicle dealer to obtain compensation under the new statute.

2. A manufacturer shall not take or threaten to take any adverse action against a dealer who obtains compensation pursuant to this new law, including acting or failing to act other than in good faith, creating or implementing an obstacle or process inconsistent with the manufacturers obligations under the statute, delaying or rejecting the proper and timely payment of compensation, establishing or applying any policy regarding compensation due under the new statute other than in a uniform and nondisparate manner among the manufacturers dealers in this state and a manufacturer is prohibited from denying or charging back a warranty claim because of a dealers failure to comply with all the manufacturers requirements for describing or processing a claim (i.e. substantial compliance with processing a claim should suffice).

3. A manufacturer shall not recover or attempt to recover, directly or indirectly any of its costs for compensating a dealer under the new statute, including by decreasing or eliminating solely in this state or as it relates to any of its dealers, any bonuses or other incentive that the manufacturer has in effect nationally, regionally or in a territory by any other designation or by reducing the dealers gross margin for any of the manufacturers products or services where the wholesale price charged to the dealer is determined by the manufacturer and the reduction is not in effect nationally or regionally. Further, the manufacturer is prohibited from imposing a separate charge or surcharge to the wholesale price paid by a dealer in this state for any product or service offered to or supplied by the manufacturer under a franchise agreement with the dealer or by passing on to the dealer any charge or surcharge of a common entity of a manufacturer in an attempt to directly or indirectly recover any of its costs for compensating dealers under the new law. Any change in process or benefits to dealers invoked by manufacturers after the implementation of this new law should be scrutinized to determine whether it violates this section of the law and thereby is prohibited.

4. The dealer shall attach supporting documentation to each written compensation request.

[MikeK]

Hello All: I see this topic has not exactly remained on your radar screens. Le me just say that, since the last post here, My company has successfully completed over 150 Warranty Parts Reimbursement Increase Submissions as well as Many Warranty Labor Reimbursement Increase Submissions. You are right - they are not easy to perform at the dealership level. The process is convoluted to say the least... between the statutes and factory protocols... variations from stat to state and brand to brand - it overwhelms many who try. Especially for dealers located in "difficult" states that have weak statutes. We have actually had to establish factory protocols in quite a few states on behalf of dealers in order to achieve profit uplifts in states where it has never been done before, but the resulting dealer profits make it a worthwhile effort.

The average Parts related uplift for dealers is THOUSANDS per month - and in some cases, depending on the store's volume - could be TENS of THOUSANDS per month.



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[Johan]

good as your prework. Have everything as cleaned up as possible; no old RO, parts invoices, ect.