Automotive Blog


AT Ossification

The Merriam-Webster online dictionary defines ‘ossification’ as “a tendency toward, or state of, being moulded into a rigid, conventional, sterile, or unimaginative condition”.  The US dictionary giant is based in Springfield, Massachusetts, but maybe some of their editors live over the state border in neighbouring New Hampshire.  If they do, then they might be forgiven for having their most recent car purchase in mind when reviewing the everyday usage of this medical word …

In a country where state-level franchise protections for dealerships are legendary, but also increasingly coming under challenge from consumers and new-economy upstarts like Tesla alike, the New Hampshire Supreme Court has recently pulled up the drawbridge even tighter, by finally rejecting a 2-year legal challenge to the state’s ‘Dealer Bill of Rights’.  This piece of legislation, passed with a strong majority from state lawmakers in 2013, is intended to protect the state’s car, truck, and agricultural equipment dealers from attempts by their suppliers to squeeze competition and drive them out of business, but in doing so it also fairly comprehensively insulates them from the winds of change blowing through the automotive distribution sector.

Amongst the more common sense protections such as ‘good cause’ for terminations and proper reimbursement for warranty work are such gems as suppliers only being able to require dealership real-estate upgrades every 15 years, and dealers having a ‘buy local’ protection which prohibits suppliers from hiring contractors from outside the area to perform jobs at New Hampshire dealerships.  When the law was enacted in 2013, GM cut all of its dealer incentive programmes in the state because of the requirement to give advance, written details of the programmes, including how each dealer’s sales target was calculated, plus the targets of all other dealers in the state.  The farm equipment suppliers, led by John Deere, Husqvarna and others went further, launching a legal challenge to the law’s retrospective application to their sector and its dealer agreements.

The New Hampshire situation illustrates the paradox facing the sector in the USA at the moment.  On the one hand, many of its dealers have embraced the digital world with relish, and can teach their colleagues in other countries how to deploy data-driven tools and techniques successfully.  The manufacturers, too, are forging into the connected, omni-channel, mobility-based future.  But, on the other, their distribution model remains resolutely stock-push, and their franchise laws a huge obstacle to innovation and progress.  In ossifying the status quo, lawmakers risk doing a disservice not only to consumers, but also to the very businesses they are trying to protect.

Written by Andrew Tongue

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