Here We Go Again

I could hardly believe it when Phil Keeter, president of the Marine Retailers Association of America, recently told me a story about another good dealer being mistreated by a boat company. My first thoughts were, “Here we go again. When is this going to stop? How many states will have to pass legislation to protect dealers from such abuse by manufacturers before this kind of treatment ends?”
Here’s the story. A successful, very good and well-established dealer in the Great Lakes area was recently informed that one of his main boat suppliers, part of a large corporation, was setting up another dealer nearby. The dealer was told that he would not be cancelled this year, but that his dealer agreement would not be renewed for 2006. He learned all of this right before the big boat show in his market. So, now he will be exhibiting in this show while facing a new competitor who will also be showing the same line of boats. You can imagine what will happen to the margins on these boats as these two dealers slug it out at this show.
“What this boat company did to me is absolutely unethical, immoral and if it is not illegal, it should be,” the dealer said. “We dealers risk our life savings, if not our entire family’s fortune, every day with boat manufacturers that give us 90-day contracts that say they can do anything they want. It’s absolutely insane. We dealers think that if we give them good market share, good CSI and maintain a good personal relationship, it won’t happen to us. Guess what, we are all wrong. If I ever thought that a boat builder would do this, I wouldn’t take them on.”
Why is this happening? We would all like some answers to that question. This dealer has been doing a good sales job with the boat line and has sold a decent quantity of their boats each year. And at no time did they warn him that he was not doing a good job. There has been no legitimate reason given to him to justify setting up a new dealer in his backyard or not renewing his dealer agreement in 2006.
It is this kind of treatment of dealers that has caused legislation to be passed in several states. For example, after several dealers of another boat brand were similarly mistreated in Missouri, state representatives sponsored and had a dealer bill passed in 2004, which should bring equality in dealer/manufacturer relationships. An assemblyman and a senator in New York sponsored a similar bill that was also passed in 2004. As bill sponsor Senator Dean Skelos said, “Dealers surely needed this legislation to protect a lifetime of effort and equity, and to promote the future profitability of their marine business.”
I know from experience that there are situations in which a dealer’s agreement with a boat builder needs to be terminated because of lack of performance or service, or both. But boat manufacturers need to treat their dealers more like the car manufacturers treat their retailers. I recently dug out my General Motors Dealer Agreement to review some of the language. It states that every dealer’s sales performance and registration effectiveness is evaluated annually. GM then lets dealers know if they feel there is a sales or service performance problem or not — and if there is a problem, the dealers can start taking prompt action to get sales or service up to a satisfactory level.
General Motors reviews with dealer issues like inadequate facilities or sales or service that’s not up to par. Then dealers who have problems are given at least 6 months to make corrections. GM gives dealers ample warning, and sends in trained factory people to help correct their problems. In other words, there are no frivolous terminations.
In the marine industry, there are still too many boat builders that don’t even have formal dealer agreements. They just try to do business with a handshake.
And many of the manufacturers who do have dealer agreements offer contracts that are very one sided in their favor — with little or no protection for the dealers. No territory protection. No buyback protection if dealers are cancelled. No protection from frivolous termination of the dealer agreement. Now, I have no problem with wording that gives the manufacturer some protection. But all dealer agreements need to be fair to both parties. If not, I think we will likely see more legislation akin to what was passed in Missouri and New York.