JUL 26, 2021
Manufacturers call for Pritzker to veto bill upping reimbursement requirements for auto warranty repairs
Gov. JB Pritzker announced the return of the Chicago Auto Show in early May. [Twitter]
In the weeks since the General Assembly sent more than 600 bills to Gov. JB Pritzker’s desk, he has faced a swell of calls for him to veto an omnibus ethics proposal (SB 539). But that’s not the only measure some are looking for him to reject.
The Illinois Manufacturers’ Association is calling for Pritzker to veto HB 3940, which changes the way certain vehicle repair work is paid in Illinois. Proponents of the measure say it will protect car dealerships and technicians from being squeezed by manufacturers. But an industry advocate calls the bill a “money grab” that could pass hundreds of millions of dollars in costs to consumers.
The bill would require vehicle manufactures to “adequately and fairly” compensate auto dealerships for labor and parts associated with warranty work. The legislation requires manufacturers to pay dealers for warranty work in the same way customers pay dealerships for retail work.
Proponents of the bill, including members of the Illinois Automobile Dealers Association and the Chicago Automobile Trade Association, say the current warranty repair system has resulted in dealerships not being paid enough for the amount of time spent on warranty work, which ultimately leads to technicians being underpaid.
Existing rules allow auto manufacturers to produce time guides with established reimbursement rates that dealers use for warranty work.
In an interview with The Daily Line, Illinois Manufacturers’ Association president Mark Denzler said HB 3940 would change that system.
“What this bill does is say we’re going to use a third-party time guide, which increases the cost by about 50 percent, that then provides more money to the car dealers,” he said, noting that the publishers of third-party time guides have said in court that the guides should not be used for warranty work.
Additionally, Denzler said nothing in the legislation requires the car dealers to pay more money to their technicians.
“This would put state government in the middle of contractual relationships between car manufacturers and car dealers and then subsequently between car dealers and their technicians,” he said.
Denzler said the bill comes several years after Chicago auto dealers and technicians had a stalemate that ultimately led to a strike that in part centered on compensation. “What they decided to do this year, they joined forces in kind of this unholy effort to try to get the General Assembly to chime in” to get manufacturers to pick up a bigger piece of the tab, he said.
The bill was introduced in February by Rep. Larry Walsh (D-Elwood), a member of the International Association of Machinists and Aerospace Workers.
Denzler said Illinois would be unique if HB 3940 became law.
“Illinois would once again be an outlier and have a law that no other state in the country would have,” he said, noting lawmakers introduced a similar measure in California in recent years.
In 2018, after California lawmakers approved a bill that changed the way auto manufacturers reimburse dealers for warranty and recall repairs, then Gov. Jerry Brown vetoed the measure. At the time, Brown said the current system required manufacturers to reimburse dealers at a “reasonable rate” that was negotiated between the two parties.
“This framework appears to be working reasonably well and I see no reason to adopt the rather complicated formula authorized in this bill — with perhaps unintended consequences,” Brown wrote in a letter.
After HB 3940 was passed in May, representatives from the International Association of Machinists and Aerospace Workers said it would be a “game-changer” that they hoped could serve as a model for other states, according to a June update on the union’s website.
But Denzler argued if the governor signs the measure into law, it will ultimately lead to higher costs for consumers.
“Ultimately at the end of the day this is going to add about $250 million in higher costs for auto repair for Illinois consumers. It’s going to increase the cost of repairs, it’s going to increase the cost of vehicles purchased in the state of Illinois and so we’re encouraging the governor to veto the bill.”
Last week, when Pritzker announced his reelection bid, he declined to weigh in on the bill in an interview with The Daily Line.
“I don’t know about [that bill],” he said, noting lawmakers approved 660 bills this year. “My apologies for not knowing every detail of that one.”
Emily Bittner, a spokesperson for Pritzker’s office, said in a statement on Friday the administration was "reviewing" the bill.
Although Pritzker’s plans for the bill are unclear, a veto would be somewhat surprising, given the legislation received bipartisan support. The House approved the measure with an 85-24 vote in April, with several Republican lawmakers signing on as co-sponsors. The Senate nearly unanimously approved the legislation, with Sen. John Curran (R-Downers Grove) casting a “present” vote when the chamber voted on it on May 30.
Pritzker, however, vetoed a bill (HB 3360) earlier this year supported by many in his own party that would have changed the prejudgment interest is paid on personal injury and wrongful death claims, citing financial concerns. Lawmakers later changed their proposal (SB 72), which was ultimately approved by the governor.
After the auto repair reimbursement bill was approved in late May, Sen. Christopher Belt (D-Cahokia) said in a statement the legislation “comes down to a David and Goliath narrative.”
“Manufacturers take advantage of the technicians who are doing the hard work, yet pay them less,” he said. “We should not allow larger companies to use their positions to demand discounted work.”
But Denzler disagrees, saying the legislation was little more than a “money grab” by the state’s car dealers that would provide them a windfall and no guaranteed pay increases for technicians.
“At the end of the day, it’s state government getting involved in contractual relationships,” he said.
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