Sterling Truck Corp. has told its dealers they can sell the company's new Acterra line of medium and heavy trucks only at stand-alone stores dedicated to Sterling vehicles.
Dealers are being asked to sign a new sales and service agreement that calls for exclusive dealerships, 24-hour service and parts operations and financial commitments of up to $400,000.
The Acterra line goes on sale in April 2000.
A new franchise-within-a-franchise is required to 'support the needs of heavy-duty truck customers,' said James Hebe, president of Sterling's parent company, Freightliner Corp.
The requirements have ruffled feathers among dealers and have prompted at least one Sterling dealer to resign the franchise.
Wes Goodell, who sells light-and medium-duty Ford trucks at Sea-Tac Ford in Seattle, told Sterling on Oct. 12 he would no longer carry its trucks.
'A lot of dealers are scared to death of Hebe. But with the light-duty (Ford) franchise, I can run a successful business and not have to worry about him,' Goodell said.
Franchise lawyers familiar with Sterling's proposal say the company may run into problems implementing the new agreement. Many states have tight franchise laws that limit a manufacturer's ability to amend existing agreements with its dealers.
'New Jersey franchise law prohibits a franchise within a franchise, and it prohibits unreasonable facilities to accommodate a new model,' said Jim Appleton, a lawyer and president of the New Jersey Coalition of Automotive Retailers.
Sterling has dealers in every state except Hawaii and Alaska.
In Florida, new franchise agreements have to be cleared through the Florida Department of Highway Safety and Motor Vehicles. Dealers are offered a chance to comment on the proposal, said Walter Forehand, a franchise lawyer in Tallahassee.
'In Florida, Sterling would be on shaky ground. I'd take them on in a heartbeat,' Forehand said.
When Freightliner bought Ford's medium- and heavy-duty business, it inherited many dealers who carried Ford light trucks as well. That splits their focus away from heavy trucks, Hebe said.
Sterling now makes Class 7 and Class 8 trucks. The Acterra will expand the line to include Class 5 and Class 6. The new trucks will be assembled in the company's plant in St. Thomas, Ontario.
Through August, Sterling had sold 3,414 Class 7 trucks, or 3.4 percent of all Class 7 trucks. In the Class 8 market, Sterling had a share of 5.7 percent with 9,811 sales through August.
The new Acterra models are geared toward the so-called vocational market: dump trucks, garbage haulers and heavy-duty delivery trucks.
One requirement in the Acterra sales agreement is a 24-hour, seven-days-a-week service and parts operation. To an East Coast Sterling dealer, who declined to be named, that seems impractical. Most vocational truck users work during the day. Keeping his store open in the middle of the night will place an undue burden on him. And building a new store to house only Sterling brands is financially daunting.
'Requiring us to build this mausoleum puts at risk everything I and my family have put at risk developing our dealership over the past 10 years,' he said.
For Hebe, the purpose is clear: 'We are asking Sterling dealers to broaden their market coverage and focus on the heavy-truck business.'