Protecting auto dealers

Preventing auto dealerships from being unfairly shut down by auto manufacturers is the goal of a new law.

Sponsored by Rep. Joe Atkins (DFL-Inver Grove Heights) and Sen. Linda Scheid (DFL-Brooklyn Park), the law is a response to conditions that led to the closure of some 60 car dealerships in Minnesota last year. Chrysler and General Motors terminated the dealers’ franchise agreements after they went bankrupt. The companies were allowed to do so because their bankruptcy deals allowed them to bypass state franchise laws.

“Whether you care about the dealers themselves or the 3,600 employees that work there, this is a big deal,” Atkins said.

Generally, the law will limit the type of requirements that manufacturers can place on dealers, and also add to the list of unfair practices manufacturers are prohibited from using. One provision will require manufacturers who terminate a dealer’s franchise agreement and then open a new dealership in the same area to give the previous dealer the opportunity to run the new dealership.

Rep. Greg Davids (R-Preston), expressing support for the bill, called the auto manufacturers’ actions “unconscionable.” Their decision to close down otherwise profitable dealerships cost many hard-working business owners their life’s savings, he said.

The law is effective May 14, 2010

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