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According to a recent article in the New York Times:
Chrysler Group said Monday it has not yet accounted for the tens of thousands of cars in its inventory numbers, which are already considered high by industry standards. Chrysler said it regularly excluded these billions of dollars worth of vehicles from its unsold cars and trucks count because they had not yet been assigned to a specific dealer or ordered by a customer. (The New York Times, 24 October 2006)
When I started learning about the automotive industry, dealers and manufacturers had a name for built, but unbuilt vehicles. That name was: “Sales Bank.” “Sales banks” is a practice that manufacturers are alleged to have abandoned after the system was ravaged during the 1970s oil crisis.
In the early 1980s, when the dust had settled, Automotive News ran stories like this:
Ernest D’Agostino of Rhode Island filed a lawsuit against Chrysler Corporation in U.S. district court, alleging that Chrysler terminated his franchise because he refused to buy “gas guzzlers” – large cars with low gas mileage. cars. Chrysler and a federal court jury against Chrysler appealed in an unreported case. Chrysler agreed to drop its appeal and made a settlement payment to D’Agostino (Automotive News, October 1982); And
Drendl Lincoln-Mercury/Pontiac’s Fred Drendl sued Ford Motor Company, alleging that he was intimidated by Ford spokesmen when he tried to cancel orders and that he succumbed to pressure when ordering vehicles , the high cost of flooring forced him to refinance his dealership. , He was eventually eliminated and suffered a heart attack. (Automotive News, December 1982).
Those were tough times in the car business.
Today, most sales and service contracts contain provisions such as the following:
2. (d) Stock. Dealer shall maintain a stock of current models of such line or series of vehicles in an assortment and quantity that is in accordance with Company Guide, or sufficient to meet Dealer’s share of current and anticipated demand for vehicles in Dealer’s territory Is. The maintenance of the stock of vehicle by the dealer will be subject to the dealer’s orders being filled by the company. (Ford Motor Company, Mercury Sales and Service Agreement, Standard Provisions.)
However, most states have provisions in the Dealer’s Day in Court Acts such as:
Art. 4413(36), sub-chapter E. Prohibition. Section 5.02. the creator; distributors; Representative. (b) It is unlawful for any manufacturer, distributor, or representative to: (1) order, accept delivery of, or pay the price, directly or indirectly, to any dealer for any motor vehicle, equipment, or part There is a need for or effort to be made. accessory or any other item unless voluntarily ordered or contracted by such dealer. (Texas Motor Vehicle Commission Code)
It shall be unlawful and a violation of this Code for any manufacturer, manufacturer branch, distributor, or distributor branch to obtain a license under this Code, to compel or attempt to compel any dealer in this State to: , part or its accessories, tools, equipment or any other item not required by law, which would not have been voluntarily ordered by the dealer. (Section 11713.2 California Vehicle Code)
In addition to state laws, the National Dealer Day in Court Act also compels manufacturers and distributors to accept a dealer “automobiles, parts, accessories, or supplies that the dealer does not need, want, or feel does that the market is capable of absorbing.” 1956 UScode.Cong. & Admin.News, page 4603.
But, the law is always a double-edged sword and there is usually a fine line drawn between proper and improper actions. For example, it has long been settled that a dealer’s refusal to take all of a manufacturer’s vehicles, choosing instead to sell a competitor’s model, is grounds for termination. See for example: Randy’s Studebaker Sales, Inc. v. Nissan Motor Corporation, 533 F.2d 510 (10th Cir. 1976), at 515.
Consequently, before making a decision to accept or decline delivery of vehicles, a dealer should consult with a competent automotive attorney, who is familiar with the laws of the jurisdiction where the vehicles are to be delivered, with respect to the particular circumstances thereof. In.
Note: This article is not intended to provide legal advice, nor should it be construed as doing so.
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