Automakers might have to pay dealerships an estimated $2 billion more each year for parts used in warranty repairs if the effects of two recent federal court rulings spread nationwide.
The decisions upheld laws in New Jersey and Maine that require car companies to pay the same rate as retail customers when they reimburse dealerships for warranty parts.
Several automakers slap surcharges on new-vehicle invoice prices to offset the higher retail rates they are required to pay in most states.
Maine's law, passed in 2003 and upheld by a U.S. appeals court last November, prohibits the surcharges. In the New Jersey case, a district court ruled in March that such surcharges imposed by Ford Motor Co. are illegal.
In May, the U.S. Supreme Court refused to hear an appeal of the ruling in the Maine case brought by the Alliance of Automobile Manufacturers. Ford is appealing the decision in the New Jersey case.
The average dealership loses $118,000 a year because of factory discounts on reimbursements for warranty parts, according to a study by NCM, a dealer consulting firm in Overland Park, Kan. The annual Automotive News dealership census counted 22,089 U.S. dealerships at the end of 2005.
If all other states enact warranty-reimbursement laws similar to Maine's, the additional tab to automakers could exceed $2 billion a year, says Scott Ross, a parts and service specialist with NCM.