The Day Before the Brand New Day

As the work of the Dealer-Manufacturer Task Force on contracts was rolled out, it was billed as a “brand-new day.” I still don’t have cause to denigrate this description. It looks like it can still make it. The precise amount of progress is obscure — but there is progress. NMMA says that currently 70 percent of its boatbuilder group has used at least some provisions of the task force model. (How much is “some”?) The mere fact that major manufacturers have dropped belief in their own legal counsel as the only source of a good contract is worthwhile.
The task force model is open to huge amounts of variation, and it can spawn contracts wonderful, not so nice, or worse. It does reign-in the very worst practices and direct attention to areas needing consideration. It also focuses attention on attempts at abuse in the “Exhibits” section. The reader is treading on a bit more familiar ground and has a better chance of seeing the pitfalls. Of course, some manufacturers pick and choose a skimpy selection of parts to use. This is not exactly like picking and choosing among the Ten Commandments, but it does open the door for skullduggery where principle is lacking.
I maintain that a dealer-manufacturer agreement is, first, a marketing document, and as such cannot be first entrusted to lawyers. Unless you (Mr. Manufacturer) are fortunate enough to have an attorney with an MBA in marketing along side his JD, you need to stay in control. The legal folks should be the last approver, not the first. Language that insinuates the dealer is an incipient deadbeat is out of place.
While things are still up in the air, manufacturers and dealers both should keep the discussions going. If you (Mr. Dealer) don’t like a provision in your new contract, now is the best time you will ever have to express your concerns. I don’t recommend starting phone calls with a string of creative profanity. A reasonable approach to the negotiation is required. Before finger meets phone, put yourself in the manufacturer’s shoes and make sure you would not feel threatened in the reverse situation. Make no mistake, though, now is a time for negotiation. “My way or the highway” is not so likely to rule the day — except as a last resort to an unreasonable request.
During Norm Schultz’s Dealer Issues forum at the recent MRAA convention, I was pleased to hear my dealer friend and panelist Ed Lofgren describe our agreements properly as being a negotiation. I was even more pleased to hear my manufacturing friend J.J. Marie, of Zodiac, pipe up from the audience to agree with him.
In maintaining that contract terms should be between a manufacturer and its dealers, without outside interference, the manufacturing community has acknowledged that the door is one that swings both ways. There is absolutely no reason not to calmly and pleasantly voice your concerns and even displeasure as a dealer. I don’t see how your supplier can refuse to consider your needs if he feels his dealer contract has unique requirements to meet his needs in other areas. Try offering some substitute language that isn’t too partisan. For me it works better to put it in a letter, so I can examine it carefully and not put the other guy on the spot, garnering an adverse knee jerk.
I am certain from several recent conversations that most manufacturers really want to work out win-win documents. I am equally certain that there are no manufacturers (or dealers) who want to adopt a significant danger of financial disaster. Dealers, once the bluster and bombast is pushed aside, are certainly as knowledgeable as anyone on the planet as to what will make a good, marketing-oriented agreement. That’s what everybody wants, isn’t it? Make your needs known, and justify them. Expect manufacturers to do the same.
I am sure manufacturers feel that they are trying to hit a moving target in serial dealer discussions. Even I can tell that not all dealers place the same weight on various ideas. As an example, I was interested to hear the MRAA Legal Counsel Leonard Bellavia opine that three-year contracts weren’t nearly as important as the continuing presumption of renewal. I agree. When mutual affection departs, the agreement has got to allow for a split eventually — for me, the sooner the better. I am more concerned about getting out as painlessly as possible, cutting my losses and announcing my need for new affection in the market place.
I confess that I fail to understand the lack of enthusiasm my boat-manufacturing friends have for working out inventory replacement. I would think they would want to protect their brands and grab the leftovers if there is any financially practical way. The engine-building folks certainly feel that way. It would be nice if boat builders joined their departing dealer in one last bit of teamwork to get the unsold inventory spread quickly to dealers still carrying the line. I know this frequently happens in practice. It ought to happen contractually, for everybody’s protection.
Manufacturers must forget the pseudo profits they think they have made on boats that have not found a consumer home, just as dealers must forget what they spent on interest, handling and warehousing unsold products. Both lines of thought are barriers to reasonable agreement. The contract, preferably as constructed from the task-force tools, must reflect enough needs of each party to work well — especially in the stress of dissolution.
The acid test I use in reviewing all contracts (yes, I read every word) is: Is this document better for both parties than no agreement at all?
If the answer is NO, my hackles go up and so should yours, whether you are a dealer, manufacturer or whatever. Neither party should expect everything they want, but both should get enough to entice them.
Now is a time of flux in the contract arena. The glass is definitely half full, not half empty. I hope we can all exercise a spirit of give and take to fill the other half. We especially need to communicate on what is to be given and taken. It’s time for the “brand-new day.” I really believe it could be tomorrow if we work together. Most of us can even live with next week, but don’t keep us in suspense too long.