Dealers have scored a resounding victory in their fight to keep automakers out of retailing.
This year, 20 state legislatures passed dealer-supported bills placing restrictions on factory stores or tightening existing constraints, according to an Automotive News study.
That leaves only six states - Alaska, Hawaii, Mississippi, Missouri, North Dakota and New York - without restrictions.
The intensity of the dealers' efforts this year is unprecedented. Growing mistrust of the factories and concerns that automakers might use the Internet to compete with dealers in the future kept the dealers' lobbying machines going. The flurry of legislation is expected to continue next year.
'The factory stores' initiatives broke a fundamental trust between dealers and manufacturers and directly threatened the franchise system,' said National Automobile Dealers Association Chairman Harold Wells.
The 20 bills passed this year is double the number of similar bills passed last year when factory stores were more of a threat. Ford Motor Co. and General Motors still had big plans to buy dealerships in 1999, and it was only last January at the NADA convention that the companies said they would back off.
In Arizona alone - a key battleground with some of the toughest provisions against automakers - 60 to 100 dealers showed up for legislative committee meetings, some driving three-and-a-half hours. 'We made minor changes to the franchise law last year and nobody showed,' said Bobbi Sparrow, government relations director for the Arizona Automobile Dealers Association. 'This year was unbelievable. Dealers were standing out in the halls.'
DEALERS NOT CONVINCED
Dealers are not convinced that manufacturers have given up efforts to control retailing.
'Even though the manufacturers say they are the dealers' partners, they have said that in the past,' said Loula Fuller, a Tallahassee, Fla., dealer attorney who helped draft some laws in several states.
The Alliance of Automobile Manufacturers called this year a record. A total of 223 franchise bills on all issues - including factory ownership - was introduced last session in 30 legislatures.
'We are anticipating another full year of franchise activity,' said Kris Kiser, vice president of state affairs for the alliance. 'Dealers are responding to changing times and trying to protect their sales position.'
Uncertainty over how factories will use the Internet could send dealers back to state legislatures next year. Factories continue to fight for the right to sell vehicles and other products, such as financing, directly to consumers online.
Ford is fighting in the federal courts to merchandise and price used vehicles online after Texas shut down its Houston used-car Web site.
Ford was offering Houston consumers a selection of off-lease vehicles at no-haggle prices. But the Texas Department of Motor Vehicles said Ford was retailing vehicles without a dealer's license and breaking a state law barring factories from acting in the capacity of a dealer.
Before selling online lender giggo.com this past summer, DaimlerChrysler had been providing direct auto loans to Internet shoppers. Direct financing was one of the primary reasons Arizona passed a law that also restricts how factories farm out new-vehicle sales leads from the Internet to dealerships they choose. A federal lawsuit by the manufacturers alliance challenging the law is pending.
'We think the Arizona bill is being shopped as a model bill to other states,' said Kiser, of the alliance.
State dealer associations are convinced that joint ventures Ford and GM plan with their dealers online could pose a threat to the franchise system.
Fuller, the pro-dealer attorney, sees these ventures as the online version of the bricks-and-mortar factory-owned dealerships, where dealers ran the operation and had a majority stake in the business.
'I think the manufacturers can be very creative in the way they will compete with dealers,' she said.
But GM spokesman Terry Sullivan said: 'That's unequivocally wrong. We will be working with our dealers as partners.'
Factory-ownership provisions have become a must. Twenty-seven states now prohibit factory ownership in all but a few circumstances, though even the strictest states allow temporary factory ownership when there are no independent dealers to take over a location.
State dealer associations that lost battles in Massachusetts, Mississippi, Missouri, New York and Pennsylvania are likely to revive proposed restrictions on factory-owned dealerships next year.
North Dakota also could bring the issue up next session, said Bob Lamp, executive vice president of the Automobile Dealers Association of North Dakota. He said his state could use legislation to protect dealers from the factories' efforts to sell vehicles directly to consumers over the Internet.
Said Lamp: 'Dealers need to be involved in the process.'