BMW of North America Inc.'s X5 sport-utility has hit legal snags that could temporarily keep it off the market in Texas.
Dealers in Texas and Illinois have challenged BMW's right to market the X5 under a separate franchise agreement. The agreement requires dealers to meet stiff, open-ended qualifications to sell the vehicle.
The X5 fight is part of a larger struggle in which factories are trying to exert more control over their retailers. Both sides vow to continue the fight. But unless BMW yields in Texas, it could be prohibited, at least temporarily, from selling the vehicle there.
Beginning with Oldsmobile's introduction of the Aurora in 1994, manufacturers have tightened the reins on dealers by making them meet stiff standards to receive new models. Those standards include high customer satisfaction scores, beefed-up advertising, facilities upgrades and extensive employee training. Models affected have included the Cadillac Catera, Lincoln Navigator and Mercedes-Benz M class.
When the Lincoln Navigator was launched in 1997, Lincoln Mercury Division sought to withhold it from low-volume dealers. Texas passed a dealer-supported bill that required vehicle makers to give dealers every vehicle produced for their make. Other states - including North Carolina and Virginia - copied the Texas law. Lincoln Mercury backed down.
But BMW believes it can overcome the law by making the X5 a separate franchise. In legal documents filed with the Texas Motor Vehicle Division, BMW argues the X5 is a light truck and as such requires its own dealer agreement, similar to the separate agreements the manufacturer has for motorcycle dealers. The original BMW dealer agreements apply only to cars, BMW says.
If the X5 agreement passes muster in Texas, it will be a defeat for dealers, who charge the agreement is a sham BMW is using to force stiff performance standards on dealers.
BMW says it wants to give all its dealers the X5 and is counseling 'unqualified' dealers on how they can meet the X5 requirements. The overwhelming majority of BMW dealers support the marketing plans for the X5, said Jack Pitney, BMW spokesman.
But two dealers have challenged the X5 agreement in Illinois and Texas.
Motor Werks Partners, a multifranchise dealership in Barrington, Ill., filed a federal antitrust suit against BMW Sept. 7 in Chicago. The suit claims BMW illegally tied the X5 to unrelated products. For example, BMW X5 dealers have to meet a sales quota for certified used BMWs, which Motor Werks claims is unrelated to a new vehicle. BMW denies that.
The suit also argues that the X5 is built on a car platform and falls under the original dealer agreement.
The court temporarily ordered BMW to give Motor Werks the X5 until a separate, pending termination case is resolved. Motor Werks is protesting an attempt by BMW to terminate its BMW franchise for alleged fraud involving certified used cars.
In Texas, Autobahn Imports Inc. of Fort Worth has filed a complaint against BMW with the Texas Motor Vehicle Division. Autobahn claims BMW violated a state law that requires automakers to give dealers all models manufactured for their make.
APPLICATION ON HOLD
Texas has put BMW's license application for the X5 on hold until the Autobahn protest is resolved. Until then, BMW must give all BMW dealers the X5 if it wants to sell the vehicle in Texas, said Molly Singletary, the administrative law judge handling the case.
Autobahn has been granted the X5 franchise, according to BMW's Pitney. The dealership would not comment on the case or the possibility of settlement. But even if Autobahn drops its protest, other Texas dealers will not give up on the issue.
Gene Fondren, president of the Texas Automobile Dealers Associa-tion, believes BMW is circumventing the law. 'If manufacturers can come up with a new model and claim it is a separate franchise, that defeats the purpose of the statute,' said Fondren. 'If we have to go back and tighten up the law, we will.'