Dealers-boat builders reach monumental accord

Marine dealers finally have what they’ve been asking for.

A contract. Or at least the foundation for one.

A special task force of the National Marine Manufacturers Association announced in early May the creation of guidelines for boat builder manufacturers and their dealers to conduct business. This, after as many as 50 years of dealers asking for such written agreements.

The topic of creating standard agreements has been a hot one of late. In recent years, Missouri and New York have joined other states that have legislated contracts. And in a preemptive strike against additional legislation, David Slikkers, CEO of S2 Yachts, Inc., approached the NMMA Board of Directors with the idea of creating guidelines for such written agreements.

But the matter wasn’t undertaken solely by manufacturers. The task force was comprised of 13 dealers and a Marine Retailers Association of America representative, in addition to 12 manufacturers ranging from Genmar, Brunswick and Yamaha to Grady White, Triton, Godfrey and MasterCraft.

The group gathered, along with a professional facilitator, for a trio of two-day, “intense,” behind-the-scenes meetings. The cooperation between what once were two distinctly differing sides was a notable part of this effort, and to underscore how well they worked together, no subject was ever forced to a vote, and the guidelines were unanimously approved in the end.

“This is a brand new day for the boating industry,” said Slikkers, who was the chairman of the task force. “I am extremely proud of and encouraged by the collaborative and cooperative spirit of the task force as we worked through this process. We have created a foundation for future collaborative efforts to provide consumers with the finest products and the best boating experience.”

Three phases

Many of the issues that dealers have been asking for in a relationship with their manufacturers have been addressed by these guidelines. The contract discusses various areas of operation between the two parties, including warranties, succession and transfer, territory, termination protocol and sharing of financial data.

The contract is a three-year agreement that will identify performance criteria as defined by the manufacturer. At the end of the three years, each party is supposed to review the agreement and come to terms on a new version. If the parties cannot agree on the new performance matrix, both are bound by the original agreement.

Example of the content of a performance matrix would include market share, CSI, a manufacturer or industry-wide dealer certification program, a dedicated line of credit for new boat purchases and trade-ins, specific participation in marketing promotional activities/events and a continuous improvement plan. The list is said to be nonexclusive and that parties are free to negotiate the specific criteria based on what is relevant to meet the competitive environment. While the matrix is not a “buffet menu,” Slikkers says, the details of the performance criteria — the level of CSI to be maintained, for example — will be left to the parties to negotiate.

Among the hottest of topics for dealers of late, warranty reimbursement was also addressed in the contract, saying that the manufacturer shall reimburse the dealer the same rate that he is charging the market for non-warranty work.

The executive summary includes a list of 11 “defaults” that a dealer could commit. Among them are a failure to meet industry or manufacturer certification, marketing products outside their territory, inability to meet minimum stocking requirements and a lack of support of manufacturer marketing/promotional programs. After a default is recognized, the dealer is given a “cure period” to correct the problem: 60 days for line of credit and/or marketing and promotional issues; 30 days for marketing or selling outside the defined territory; 90 days for low CSI scores; and 180 days for market share improvement. For other defaults such as fraud, breaking laws, unauthorized succession or transfer and a failure to respond to successive notices of default, there will be no cure period granted.

The announcement of these contract guidelines ended Phase 1 of the task force’s plan. Phase 2 will include the effort to get the top 100 manufacturers in the NMMA — representative of 98 percent of units sold — on board with the program. And Phase 3, which is scheduled to be in place by Oct. 1, 2006, will include the development of a report card to monitor the program.

Industry response

For the most part, industry response has been quite positive.

The NMMA Boat Manufacturers Division board and the full NMMA board both passed resolutions in early May supporting the premise that all dealer-manufacturer relationships should be documented in a written agreement; supporting the guidelines language developed by the task force; and encouraging all boat manufacturers to adopt these guidelines in the dealer agreements as soon as is practical.

Already, more than 60 brands have embraced the guidelines to take effect in 2006 or 2007. More than 60 percent of the BMD board showed a desire to have them in place by the 2006 model year. This puts the task force on track to accomplish its Phase 2 mission.

Of the marine trade association representatives at the press conference, all showed their support and suggested they would pass information on to their members.

“On behalf of our members,” said Jamy Madeja of the Massachusetts Marine Trade Association, “we appreciate the effort you’ve put into this, and we look forward to presenting the material to our board and giving them an opportunity to use it.”

The dealer response has been somewhat mixed, leaning more toward the positive. While MRAA chairman Glenn Mazzella issued a statement that had hopeful, yet somewhat skeptical remarks —“there still remains work to do to make it a fair and equitable document” — dealers in attendance complemented the results.

“One of the side benefits of this that seems to me to be quite important,” said John Underwood, a Georgia-based dealer and a past chairman of the MRAA, “if you are a new boat manufacturer and you are getting ready to fire up a business, this is a wonderful thing to get your business in order quickly. Most of us dealers who have signed on an occasional start-up boat company, cannot believe some of the weird terms that wind up in some of those contracts. They’re not necessarily detrimental, they’re just strange.

“It seems to me that the commitment to continually discuss the problem is maybe the most important thing that the MRAA has pushed for. It’s a marvelous step forward.”

“I think we have created a foundation,” agreed Slikkers. “And have found a way to exchange thoughts and ideas, and so this just sets the tone for the future.”

“I think,” concluded Phil Keeter, president of the MRAA, “that David and the Boat Manufacturers Division and Thom (Dammrich), need to be commended for helping pick up this flag.”

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