More than 20 Fiat and Alfa Romeo dealers in California have filed protests against Fiat Chrysler after the automaker substantially rewrote their franchise agreements in December.
Among those filing protests are the dealerships owned by the chairman of the FCA National Dealer Council.
Not all of the protests are identical, but they do contain common themes. Primarily, dealers objected to changes:
In the facility requirements
In the obligation of FCA to provide vehicles to the franchisees
To the legal standard dealers must meet to sell vehicles
To the definition of products beyond vehicles, such as accessories and parts, which could open the door to third-party distributors
That shift many dealer obligations from being spelled out in their franchise agreements to easier-to-amend manuals, maintained exclusively by FCA.
“At this point, the new agreement is going to put additional burdens and additional risks on the dealer,” said Gavin Hughes, an attorney in Sacramento, Calif., who filed nearly half of the protests in the state. “It’s unreasonable for the manufacturer to unilaterally be able to change the terms of a contract.”
An FCA spokesman declined to comment on the protests. California is the largest market for the Fiat brand, and the linchpin of FCA’s plans to resurrect the Alfa Romeo brand in the United States.
The marked-up franchise agreements were filed with state regulators in California as part of dealer protests. Some of the changes made to the documents seem almost personal. For example, in several instances, the new agreement would now obligate dealers to “energetically, actively, aggressively and effectively” promote, display, sell and lease the vehicles in question.
Other changes take a more direct attack at dealer operations, including the sale of branded merchandise “through any channel of distribution that FCA US may select in its sole discretion” including “persons who are not authorized dealers” of Fiat or Alfa Romeo vehicles.
“That opens the door to Pep Boys and others,” Hughes explained. “If dealers make money on parts, they can be a little more competitive in a price war to capture more [new car] business. This is going to weaken the profit center for the parts department, and it’s going to weaken the whole dealer network.”
By far the most far-reaching proposed changes in the Fiat and Alfa Romeo franchise agreements are new requirements that dealers follow rules and procedures laid out in “manuals.” The manuals, maintained solely by FCA, would govern facility requirements, net working capital requirements, training and other traditional dealer operations, and could be amended with little advance notice, Hughes said.
“This is shifting the burden away from FCA and to the dealers to be up-to-date on any changes that may be posted,” he said. “Most dealer concerns are that they’re going to start posting changes whenever they like.”
The cases in California were filed in late December and in January. It is not yet clear whether the state’s New Motor Vehicle Board will consolidate the cases or hold hearings on them individually.
It was also unclear how many Fiat or Alfa Romeo franchisees had filed protests outside of California. Fiat has over 200 dealers in the U.S., and Alfa Romeo has more than 100 franchisees.
“By filing a protest, the dealers are protecting their rights,” Hughes said. “If you don’t file, then you don’t have a say in what happens.”