NEW YORK - Volvo Cars of North America Inc. has scheduled tough new franchise requirements to take effect Jan. 1, 2000, but some dealers have vowed to fight the policy.
In step with luxury competitors such as Mercedes and Lexus, Volvo will demand exclusive dealerships in its biggest markets.
Tom Nemet, a Queens, N.Y., Volvo dealer, said he and three other dealers plan to fight the new franchise requirements. Nemet owns Nemet Motors, which has Chevrolet, Nissan, Hyundai and Volvo franchises in Jamaica, Queens. In Nemet's view, Volvo already unfairly favors exclusive dealers.
'They've created two classes of retailers,' Nemet said in a phone interview last week.
Leonard Weber, an attorney in Westbury, N.Y., said he represents Nemet and three other dealers in their dispute with Volvo. But no complaint has been filed, Weber said last week.
Besides exclusive Volvo stores, the automaker also will require a more uniform look, more training for dealership employees, uniform reporting of dealership financial results and strict rules for customer handling.
Brad Bowers, vice president of franchise development, said Volvo has 235 dealers in its major markets. Of those, 135 already offer what Volvo calls an 'exclusive customer experience,' he said.
By that, Volvo means that some out-of-sight functions may be shared with other brands, but Volvo gets an exclusive showroom with its own entrance, a Volvo customer lounge, and dedicated space and technicians in the service area.
That leaves around 100 dealers in major Volvo markets who must make significant changes, Bowers said in a phone interview last week. There also will be new, less stringent standards for 115 Volvo dealers in its smaller markets, he said.
PAYING THE PIPER
Volvo has been laying the groundwork for the new requirements for years, but it has stopped short of requiring exclusive stores.
The company has paid higher dealer incentives for exclusive dealerships since 1996. Volvo started paying dealers a bonus for high customer satisfaction scores beginning in 1992.
Between the two programs, Volvo has paid its U.S. dealers bonuses totaling more than $300 million, according to a Nov. 24 Bowers letter to dealers.
From Volvo's viewpoint, Volvo has been paying the piper, so it is entitled to call the tune.
'There's no question - dealers who offer an exclusive customer experience have higher customer satisfaction, and they make more money, too,' Bowers said.
Dealers such as Nemet who have missed out on the bonuses see it differently.
Nemet said that even before the new standards take effect, Volvo is withholding the recently introduced S80 model from dealers unless they furnish their dealerships with Volvo-approved, Scandinavian-look furniture.
'Training, they're entitled to. Computers, they're entitled to. Furniture? That's ridiculous,' Nemet said.
Bowers said last week that about 10 U.S. dealers still do not qualify to sell the S80, which went on sale in October, because they do not meet factory standards for signs, displays, tools and training.
Nemet's Volvo franchise has its own showroom, but the service area is shared with another franchise. That would be enough for Volvo to terminate him when the new rules take effect, Nemet said.
FORK IN THE ROAD
Bowers said in a separate interview that Volvo executives will have a one-on-one meeting with every dealer in the next three months, to see whether the dealer intends to meet the new standards. Volvo will offer financial assistance to dealers who sign on, he said.
For dealers who opt out, Volvo will try to broker a buy-sell with a neighboring dealer. Volvo may itself buy out some dealers, Bowers said.
'But come Jan. 1, 2000, if they are in violation of their dealer agreement, we will serve them with the proper notice and give them time to remedy it,' Bowers said.
In other words, Volvo will terminate those dealers.
'They've been trying to get me to move for years,' Nemet said. 'They don't like my customer base.'