"It sounds simple. It's a rather tedious and time-consuming process," said Len Bellavia, founding partner of Bellavia Blatt PC, a law firm based in Mineola, N.Y., that represents franchised auto dealers in all 50 states.
Bellavia said at least 30 states have clearly defined reimbursement formulas in state law, similar to California's. The change could mean an extra $10,000 a month in revenue for an average franchised dealer, he said. Dealers will have to formally apply to their manufacturers to make the change.
"It's a staggering amount of money, and once dealers become educated as to how the process works, most of them jump on board," Bellavia told Automotive News.
Tully Williams, fixed ops director for the Niello Co. in Sacramento, Calif., estimated that the new warranty reimbursement rates could bring in an additional $5,000 to $10,000 per month at each of the group's 10 stores.
That revenue likely will help the fixed ops departments boost profit margins, which is needed because service technicians are scarce and salaries are rising to attract and retain them, Williams said.
"We might feel a little more comfortable" with the extra cushion, he said.
"I would hope [the manufacturers] realize that this is not greed that we're asking for," Williams added. "This is just help running our day-to-day store, and we are reinvesting that into our people and our facilities."
The Alliance of Automobile Manufacturers and the Association of Global Automakers, trade groups that represent automakers, opposed the franchise law revisions. The alliance wrote in a letter to the bill's sponsor this summer that the legislation "changes this proven method of reimbursement by allowing dealers to self-select warranty claims to be used as the cost basis of all future warranty compensation."
The alliance declined to comment to Automotive News. The Association of Global Automakers did not respond to a request for comment.
The statute exempts manufacturer service promotions, routine maintenance and certain other jobs from counting toward the dealership's retail rate.