We have all heard the term, “It’s a buyer’s market.” Well I think we are currently in what I would call a “dealer’s market,” especially as regards dealer agreements. Very soon most manufacturers will be starting their annual re-signing process. But this year things can be a bit different for dealers.
I never used to give too much thought to dealer agreements and the impact they had on marine dealers. But that changed when I retired from 30 years in the outboard motor business and bought a Chevrolet dealership. When my lawyer and I read the dealer agreement, it was fairly obvious that it was fair to both parties.
There were some definite requirements that I had to meet as a Chevy dealer. The premises had to meet certain standards, and I was required to put up adequate signage. My dealership had to have a trained sales force; sufficient advertising that was ethical; trained service technicians; and an adequate parts inventory and more. These are all requirements that you would expect of any new car dealer.
The dealer agreement also stated: “Dealer’s sales performance will be evaluated by the Division on the basis of Dealer’s sales and registration effectiveness. Sales evaluation reports will be furnished to the Dealer at least annually so the Dealer may take prompt action if necessary to achieve satisfactory sales performance.”
Furthermore, the dealer agreement noted, “If General Motors determines that the Dealer has failed to provide adequate premises or to adequately perform its sales or service responsibilities, General Motors will review such failure with the Dealer. As soon as practicable thereafter, General Motors will notify Dealer in writing of the nature of Dealer’s failure of performance and of the period of time (which shall not be less than six months) during which Dealer will be expected to remedy such failure. If such failure has not been substantially remedied at the expiration of the period, General Motors may terminate this agreement by giving Dealer three months advance written notice.”
There is a lot more “legalese” in the agreement but the above quotes support the points I want to make. It was a fair agreement that prevented what I call “frivolous” terminations like what I have seen so often over the years in the marine industry.
I never got a letter from GM about any performance issues, but wasn’t it nice to know that dealers who encountered performance problems for whatever reasons were given at least six months to correct them. Further to this, GM made key sales, service, and business advisers available to dealers who experience performance problems.
Boat and motor dealer agreements
We definitely need fair dealer agreements like this in the marine industry. And I think this year, 2009, dealers have a better opportunity than ever before to insist on boat builders giving them a more balanced dealer agreement. Call it a year when we have a “dealers market.”
We are in a very tough economic time with many retailers in most industries closing stores, cutting prices dramatically or scaling back, and making cuts in expenses and the number of employees. With the boating market the way it is, with a shrinking dealer population, the odds are much improved that many manufacturers can be convinced by their dealers to consider offering a dealer agreement that is fair to both parties.
In today’s market, not many manufacturers will be willing to lose a good dealer to another boat brand over such an issue. Another factor that gives dealers more leverage is that many boat builders are out looking for new dealers as some of their retailers have already dropped out of business. So if your present suppliers don’t want to offer you a fair and equitable dealer agreement, just remember that there are other good brands out there anxious to sign good dealers.
Fair agreements needed
This industry needs dealer agreements that are fair to both parties, like the auto industry offers. The outboard manufacturers generally have fair dealer agreements. And some boat builders do also. But far, far too many builders do not. And this must be corrected. Marine dealers are the lifeblood of this very service oriented industry, and it is incumbent on the industry to see to their well-being.
Recently Boat and Motor Dealer magazine did a survey of marine dealers that asked the question, “What is your view of the status of Dealer-Manufacturer Agreements?” I was saddened by the multitude of negative responses to the question.
Here are just a few of the responses that typify what most dealers had to say:
- “They are one-way streets, contrived and assembled by the manufacturers, for the manufacturers, with little to no tangible benefit to the dealers. Until this is rectified, there cannot be a truly good relationship that benefits the industry as a whole.”
- “Severely one-sided in favor of the manufacturers. Many independent builders who initially adopted the proposed dealer agreement have since retreated from it.”
- “They are terrible. Manufacturers continue to stuff product down our throats far too early in the season and interest rates kill us because we have to start paying for product way too early.
- “They’re very weighted towards the manufacturer.”
- “It is the golden rule. Those who have the gold make the rules. We have a three-year contract that is cancelable in 30 days. Wow.”
- “There has been some progress made, but we have a long way to go.”
- “The relationship needs continued improvements. We are in this together. It is not a one sided equation to either parties benefit.”
- “Dealer agreements don’t mean much if they want to get rid of you. You are gone. They just make it hard for you to get product and to collect warranty.”
- “I was on the NMMA task force about 10 years ago and sat in on the engine committee as well as the pre-owned boats committee. Everything boils down to the manufacturer vs. the dealer. Since the dealer doesn’t hold the poker hand with the good cards, it is up to the manufacturer to take the lead in improving the agreements so they are a two-way street. Our customer (the boat buyer) is who we should be concerned about, and the manufacturers and dealers must work together to see that the consumer’s needs are met fully.”
Now is the time
These comments represented what 95 percent of the respondents to the survey had to say about dealer agreements. Pretty sad commentary eh? And the manufacturers wonder why eight or more states, most recently Alaska, have passed legislation that protects dealers. And several more are considering it. Much of this legislation would never have come up if all boat builders had been offering dealer agreements that were fair to both parties. As one survey respondent wrote, “I believe there should be a dealer/manufacturer agreement that is fair to both. The Michigan Boating Industry Association has been working on an agreement for a few years that is fair to both but has run into great resistance from the manufacturers. It is time for both sides to come together and meet in the middle.” I agree. It’s time!
Another dealer wrote, “While some manufacturers have taken fair agreements seriously, too many still are not willing to help a loyal dealer grow by staying with them. They would rather cancel.”
This is the year for dealers to push manufacturers harder for fair dealer agreements that should have been offered a long time ago. It is a dealer’s market and a great time to get this fixed!
27 thoughts on “It’s a dealer’s market now, especially with 2010 dealer agreements”
We own and operate a boat manufactuing company in Washington State. My question to you is this, how does a manufacturer reach out and expand his dealer network in today’s market? We would like to expand to the upper mid-west and east coast but are having difficulty getting dealers to talk with us. Your thoughts would be appreciated.
All the Best,
I am not familiar with your company or boats. I have heard that you have a company owned dealership also which is usually not well received by most dealers. But if you build quality boats with good styling and features that perform well, proper pricing, fair service and warranty policies, a good company reputation and treat your dealers fairly, then you should have no problem entering the Midwest market. All of these factors are important. Then find a good sales rep and have him trail a boat around to dealers and do demos.
I JUST RECIEVED YOUR ARTICLE. SOMETIMES TIMING IS EVERYTHING AS I JUST RECIEVED A CALL FROM LODDERS MARINE IN HAMILTON, OH.THEY WERE INFORMED THIS MORNING THAT THEY WERE IN A NON-RENEWAL STATIS FOR 2010 FOR NON-PREFORMANCE FROM BAYLINER(US MARINE). HOW CAN ANYONE BE PENELIZED UNDER OUR CURRENT ECONOMIC CIRCUMSTANCES FOR NON-PREFORMANCE WHEN WE ARE ALL FIGHTING FOR SURVIVAL?? YES WE DO NEED MORE DEFINATIVE DEALER AGREEMENTS.
It is hard for me to understand why a top drawer, quality dealer like Sonny Lodder, Lodders Marine, would not be renewed by Bayliner or any other brand for non-performance in this economy. As you say, it is a fight for survival.
Lodders’ is probably being dropped by Bayliner for the same reason that Brunswick does everything that they do. Brunswick has a bunch of numbskulls running their boat companies. They ruined the best saltwater boat company in the country (Sea Pro) in three years, losing about $140 million while driving it into the ground.
Every quarter Brunswick loses more money thatn most dealers make in several years. Sonny Lodder is better off without Bayliner. Now he can sell some boats that will make him some money and make his dealership a better business.
Knowing Sonny Lodder, I feel confident he will do very well with what ever brands of boats he handles. I am also sure there are several quality boat companies that will be wanting to sign Lodders.
Ben: You have always been the Dealers’ advocate and always will be and may i thank you in behalf of Dealers everywhere.
This is indeed a good time to consider “fair and balanced” Dealer – Manufacturer Agreements.
We (manufacturers & dealers) need each other (for survival) like never before, at least in my time in industry (goes back to the 1960s !). It’s crazy not to work real closely together for a productive industry future.
I believe manufacturers & dealers need to begin a discussion immediately on the subject, perhaps spearheaded by NMMA & MRAA.
A good starting point for discussion would be the Model Dealer Agreement hammered out a few short years ago.
Thanks Ed for your nice comments. There are a lot of manufacturers with good dealer agreements – but unfortunately too many still don’t. I really can’t understand why all boat builders don’t adopt the Model Dealer Agreement. If they would do this, there would no doubt be fewer states passing dealer protection legislation that the NMMA opposes.
Certainly in today’s environment it is important for dealers and manufacturers to work as a team to promote the brand of boat represented. Manufacturers must participate in inventory management not only on a dealer-by-dealer basis but nationwide. It is harmful to the industry as a whole for one dealer to have all new product while another dealer in another state is sitting on old inventory being sold at rock bottom prices. Perhaps manufacturers need to cooperate with floorplan companies on moving old product (on a consignment basis) from a stagnant market to a dealer with low inventory that is located in a market with more demand. Chain stores for retail consumer goods do this all the time.
If a dealer can sell some boats while preventing the manufacturer from a buy-back situation, and prevent another dealer from drowning in old product everyone will win.
We have all worked hard for many years to build our businesses and reputations. Dealers selling the same brands need to cooperate along with the manufacturers to manage inventory according to demand.
Supply and demand is very simple folks!
Good points for sure. Thanks for your comments. I agree with you completely.
This is an issue beyond just the marine business. We are in the power sports/marine business and dealer agreements have been totally one sided forever. Manufacturers dictate terms, inventory, related programs and kickbacks in the form of rebates for dealers who perform to the level they want. If you don’t play the game you can’t be competive, if you do play the game you risk losing it all in a down economy because you’re stuffed full of non-current inventory and paying insane floor plan costs.
I would be interested in knowing which are the eight states that do protect dealers? And which states are looking at such protection?
The states that have passed laws that protect dealers are Oklahoma, Texas, Missouri, Michigan, Georgia, Maine, Alaska, New York and Louisiana. So with Alaska just now getting legislation passed, the count is 9. I don’t know specifically which states are working on legislation. Check with the MRAA. They would know.
Minnesota has been tring for years to get protection laws and the dealers just can’t compete against the manufacturers as they can afford much more for lobbing. Again this year it didn’t make it to a vote as the speaker of the house wouldn’t bring it to the floor. We need help
Butch: I suggest you contact Dudley Benesch of Alaska Mining and Diving, a large marine dealer in Anchorage. They just passed a dealer/consumer protection law in that state and Dudley can give you some tips on how they got it done. Call Dudley at 907-277-1741 or email email@example.com. Good luck.
As a board member of the Boating Associations of Ohio..I/we have visited this issue many times over the last 7 or 8 years…and I was just talking about this very thing with one of our ex-presidents. (Just forwarded your article to him).
I will be bringing this up with our current Director, Mr. Ken Alvey and Director Emeritus, Mr. Norm Schultz…..Maybe you
can twist Norm’s arm to blog this in his comentaries every now and then as well!!!
Thanks for your committment to our industry…..
Thanks for your supportive comments Jay.
I see both sides of these things because I am a Rep working for boat builders and also calling on my dealer base throughout my territory. I think you will see a cleansing of the business through builders and dealers alike. Margins will come back here in the next 15-18 months will quite possibly be a supply demand issue. There does need to be a two way street for both dealers and builders though. As a rep sometimes I might sell a dealer 3 of my boat lines and whenever I do make a change with a dealer 99% of time it is mutual in person and I will always offer to help move the product. On my dime not the builders. But there are times when I will help dealers move product to another dealer and some try to rip the other dealers heads off with B.S. charges and they end up with the boat singing Happy Birthday to it the next year. Some dealers have a selling season and then they have warranty season when interest payments start. Also builders get desperate because one dealer has been stagnant for a little while and they jump ship on him or stack him with another dealer. These are examples of the Bad Apples on both sides of the business and they will be gone. I have also quit builders that treat my dealers like crap and the dealer agrees he cannot take it anymore from the builder and then over a 200.00 dollars per boat that same dealer out of greed stays and takes the abuse. If the dealers would quit buying from the crooked builders out there , and the builders would quit selling to price cutting in one day out the next day dealers we can purge this business get it healthy again so that we can all make money. But now is time to come together and have some type of fairness and one sided state laws that favor 100% for the dealer side I promise you will not be the answer. Remember check the builder out know your Rep, due your due diligence. Relationship Relationship Relationship!
Thanks for your comments. You make good points. I wish more boat reps helped dealers like you apparently do. I really like that you help dealers move product to other dealers. Whenever a manufacturer terminates a dealer agreement they should help the dealer move the product to other dealers.
If manufacturers expect to stay in business they are going to have to treat dealers as customers rather than tools. With continued arrogance they are going to go down. And in many cases good riddance. Been there, done that, watching from the sideline in my comfortable niche.
Hey Old timer – I think I am a member of that club. Manufacturers need to treat dealers with the same consideration that dealers treat consumers.
I define winning this way, all parties involved must gain adequate value having their needs met or you really did not win……at least not long term. Suppliers must win, manufactures must win, dealers must win, employees must win, customers must win and anyone involved with the process, yes……must win. As soon as one of the individuals loses…….in time the whole group will lose. Much of society does not understand this very basic concept. They put self needs and interests first and wonder why they find themselves loosing in the end. Manufactures must keep the bar high to protect the image and integrity of a brand. However that does not mean if a dealer is meeting market share goals along with other goals manufactures do not need to be concerned about dealer profitability, annual turns and other dealer needs.
We all must be concerned that everyone in our chain of business is having their needs met. Hopefully the mess we are in will help everyone more clearly understand others needs. Winning by the quarter but loosing the game is losing. Dealers must be able to win if manufactures have any hope of winning; hopefully the manufactures that violate this concept will understand this going forward.
I agree that the best scenario is when everyone wins. If dealers aren’t winning – then ultimately the manufacturers lose.
While I appreciate your comments about dealer agreements needing to be fair, let me ask you a question. When you were a Chevrolet dealer how many other automobile brands were you allowed to carry by GM? Were you allowed to carry any brand that was not a division of GM? I doubt it.
Dealers need to remember that exclusivity is a two way street. Too often a dealer wants to handle your line of boats but also handle up to fifteen other brands. Is that fair to any of the fifteen boat manufacturers. Why should a boat manufacturer be willing to buy back boats, and move them to another dealer, for a guy that is not selling his boats exclusively, but also handles an average of 7 or 8 other brands of boats? If that same dealer really wants to represent a product in a market and have the full backing of the manufacturer, then don’t handle so many lines of boats. Stock what you can sell and sell what you stock.
I am not a boat manufacturer, but a manufacturer’s rep that covers three of the states that have laws to protect dealers, TX, OK, and LA. The TX and OK laws are pretty fair to both sides, but the LA law is so one sided in favor of the dealers that several boat manufacturer’s would just as soon not do business in the state of LA.
As a commissioned I rep I can see both sides of the argument. I try to treat my dealers fairly, but in turn I expect them to treat me fairly as well. Sometimes this puts me at odds with a manufacturer who is signing my commission check. But, I think it is important for both sides to be fair to one another. Dealers need to show a little loyalty to manufacturer’s and their reps during these tough times.
This attitude of trying to be fair to both sides has allowed me to prosper in this business for over 30 years. I hope it will be enough to get me through this latest challenge to the marine industry.
Actually I never asked Chevrolet if I could add another franchise. But I am sure that they would have wanted me to have a separate building next door if I added another non-GM brand. I agree that both sides need to be considerate of the other and also be loyal when loyalty is earned. Sounds like you are a good boat rep.
Up until last week I would have agreed 100% with your article. As boat manufacturers competed for fewer quality marine retailers it seemed to me like dealers were in the drivers seat. With the annonucements last week that thousands of auto dealers were losing their lines is this a game changer? Will the auto dealers be looking for other products to sell? Will boat manufacturers see this as an opportunity to replensih their depleted dealer organizations?
I can see your concern and no doubt some builders will investigate signing some auto dealers who have lost their major car franchise. But I really doubt they will have more than minimal success at best. I don’t think marine dealers should feel threatened by this possibility. If the cancelled car dealers are well run businesses then they will no doubt look for other car brands to take on. Others might just close the doors or become used car dealers.
I also think it is stupid for the government to insist that GM and Chrysler cancel so many dealers. No doubt some are very marginal but many are not.
As can help what are the formality requires for 1 to enter in the company manufacturing dealership