Ford Motor Co. will not appeal a Virginia court decision requiring the company to pay dealers higher prices for rebuilt transmissions and engines used in warranty repairs.
But the issue of how to reimburse dealers for the rebuilds is still not resolved, and Ford might land back in court if it fails to address dealer concerns.
Last year, Farrell Ford Inc. of Salem, Va., challenged the $210 handling fee Ford pays dealers on rebuilt engines and transmissions. The dealership convinced the Virginia Department of Motor Vehicles that Ford should pay its traditional cost plus 40 percent warranty parts markup, and not a handling fee.
The $210 handling allowance is far less than the retail parts markup manufacturers are required to pay dealers under the Virginia franchise law, Farrell Ford argued.
The motor vehicle department sided with the dealership, and Ford appealed the decision to the Circuit Court of Fairfax County, Va. In May, the Fairfax court dismissed the case.
Ford decided against further appeals, says Tom Curvin, an Atlanta attorney representing Ford.
While the lawsuit was pending, the Virginia Legislature passed a dealer-supported bill that requires manufacturers to pay dealers either retail prices for warranty parts or a uniform percentage markup. The statute, which takes effect July 1, would make it difficult to win the case, Curvin admits.
Instead of appealing, Ford has told dealers that they would have to overhaul engines and transmissions to get the cost plus 40 percent markup. To install rebuilds, dealers have to sign an agreement accepting the $210 handling fee.
Ford believes this policy complies with state law, but dealers disagree.
'Ford is asking dealers to waive their rights to be paid a uniform markup' when they make dealers agree to a handling fee on rebuilt engines and transmissions, says Bill Lehner, attorney for the Virginia Automobile Dealers Association.
The group last week wrote the Virginia Department of Motor Vehicles about Ford's policy on rebuilds and is waiting for the state to make the next move.
According to legal documents, Ford's transmission exchange program has been around for at least four years and the company introduced a similar program for rebuilt engines in 1995.