In a harbinger of what may be a growing power struggle between franchised dealers and automakers, a bipartisan group of Colorado lawmakers Friday introduced legislation that would force automakers to reimburse dealers for warranty work at the higher rates those dealers charge to retail customers.
The Colorado legislation mostly mirrors an Illinois law passed in 2021 that raised the reimbursement rates dealers can charge their factories for covered warranty repairs. That law went into effect in January 2022. In December, Volkswagen Group of America filed a federal suit against the state, claiming the law had cost it over $10 million in additional reimbursements to its network of 28 VW and 12 Audi stores in Illinois in just its first year. There are an additional 664 franchised dealerships in the state, according to the Illinois Automobile Dealers Association.
The Colorado bill would amend the state's existing franchise law, which currently prevents automakers from establishing "unreasonable labor flat rates" for warranty repairs, to mandate that manufacturers "must pay the retail labor rate multiplied by the applicable time allowances prescribed in the labor time guide used by the dealer."