A new Colorado law puts limits on how often automakers can require dealers to renovate their stores.
The bill, signed by Gov. John Hickenlooper Friday, prohibits automakers from forcing dealers to make improvements costing $250,000 or more to their stores more than once every seven years.
"This bill is driven entirely by the trend of the manufacturers to demand costly and unwarranted and excessive facility upgrades," Tim Jackson, president of the Colorado Automobile Dealers Association, told Automotive News.
Some improvements not covered
Voluntary renovations, safety improvements and technological enhancements are not included under the seven-year limit.
Other provisions in the bill require manufacturers to give dealers at least 90 days' notice before they terminate or alter their franchise agreement.
Jackson said dealers believe that dealership appearance is less important to customers than price and service.
"What's more important to the consumer is an affordable car," Jackson said, adding that costly aesthetic renovations required by automakers make vehicles more expensive.
State Rep. Larry Liston, R-Colorado Springs, a co-sponsor of the bill, said he introduced the legislation after numerous discussions with CADA.
Liston said some dealers were unhappy that automakers required improvements when the dealers couldn't afford them. "There were some onerous agreements that the dealers were being forced to sign," Liston said in a telephone interview.
Still, the Alliance of Automobile Manufacturers, an industry lobbying group that represents the Detroit 3, Toyota Motor Corp. and eight other automakers, said the bill was unnecessary, spokesman Wade Newton wrote in an e-mail.
Liston introduced the bill in February in the House, where the measure passed easily. In the Senate, though, Sen. Lois Tochtrop, D-Thornton, chairwoman of the Senate Business, Labor and Technology committee, opposed the legislation and forced several changes.
Seven years, not 10
Tochtrop didn't respond to several interview requests, but Jackson said Tochtrop shared the automakers' view that the measure could hurt their profitability.
The House-passed version of the bill prohibited automakers from demanding improvements more than once every 10 years, but that was changed to seven years in the Senate.
Other changes included removing a clause that would have replaced existing contracts between dealers and automakers with the new legislation. Also, a section was added to the bill in the Senate that would enable manufacturers who have terminated their franchise agreement with a dealership to keep the land the dealership is on if the automaker funded the real-estate purchase for the dealer.
"We believe the legislature fixed the legislation's biggest problems because they're weary of playing referee for CADA every year on things that should be worked out privately among business partners," AAM spokesman Newton wrote.
The bill ultimately passed the Senate on a 33-1 vote. Tochtrop cast the lone dissenting vote.
In a similar standoff in March, General Motors and the Virginia Automobile Dealers Association locked horns, then agreed on changes to a state bill that would shield dealers from making factory-directed store overhauls. The bill later was signed into law.
Earlier, GM had said the proposed law threatened to undercut its Essential Brand Elements program, which pays quarterly bonuses to dealers who overhaul their stores. GM told its Virginia dealers that it would terminate the program in Virginia as of March 31, citing the bill.
Under the bill, dealers who have made store improvements within the past 10 years would automatically comply with the facility portion of a manufacturer's standards program.
The two sides agreed to new wording in the bill, which clarified that the measure would apply only to facility programs started after July 1, 2010, essentially grandfathering GM's Essential Brand Elements program.
Mike Colias contributed to this report