Dealerships in Pennsylvania that do warranty work can contractually negotiate with automakers to get more favorable labor reimbursement rates than those required by state law, the Pennsylvania Supreme Court ruled.
But the court invalidated a "cost recovery" surcharge of $122 per vehicle that General Motors had added to all its new-vehicle invoices in Pennsylvania. The surcharge was intended to help manufacturers recoup their costs for warranty repairs, the decision said.
GM had offered its dealerships two options for labor reimbursement rates, but changed its policy in 2012 so that stores that chose to be reimbursed at the state rate for warranty parts would receive lower labor reimbursements. Budd Baer Buick-GMC in Washington, Pa., and Grata Chevrolet in Hermitage, Pa., filed a protest with the state dealer board and later went to court on the issue.
In its majority opinion, the Supreme Court said GM has the contractual right to offer more favorable labor reimbursement rates exclusively to dealers who are willing to accept the company's "standard parts reimbursement protocol."
Although the high court struck down GM's surcharge on new vehicles, it did not prohibit surcharges altogether. Instead, it left the door open for manufacturers and dealers to write warranty cost recovery into their future sales and service agreements.
Chad Marsar, vice president for legal and regulatory affairs at the Pennsylvania Automobile Association, said Nissan Motor Co. eliminated its surcharges on dealerships in the state after the court ruling. Nissan was the only other automaker to impose such surcharges in the state.
A GM spokesman declined to comment on the court ruling.