Protections for ATV dealers buried at legislature

BY Jon Collins
Legislative Correspondent
Published: April 8, 2009

Source: Mesabi Daily News

For 15 years Steve Vandeputte sold Polaris snowmobiles and ATVs through his shop, Brothers Motor Sports in Baxter, Minn.

In April 2004 he received a letter from Polaris informing him that the company had cancelled his contract to sell its machines.

Vandeputte paid attorney fees of around $20,000 in attempts to reconcile with the company.

“I finally basically had to throw in the towel, I didn’t have a choice,” Vandeputte said. “They basically just ran me out of business — I don’t know how else to put it.”

The loss of the contract left Vandeputte with around $50,000 in Polaris signage and tools, around $100,000 in parts and accessories and $1 million in Polaris machines.

“I said, ‘Well, if you’re not going to renew my dealer agreement and you don’t want me to be a Polaris dealer anymore, than buy my inventory back,’” he said.

According to Vandeputte, the company responded that they “don’t do that in Minnesota because there’s no law that says we have to.”

For the past three years, Vandeputte and a handful of other snowmobile, boat and ATV dealers have been trying to put Minnesota law in line with around 37 other states by forcing manufacturers to buy back products from dealers dropped from contracts without good cause.

The proposed law is currently buried in the state House without a scheduled hearing and faces a deadline of this week to be heard in the Senate Judicial Committee.

The law’s advocates say it will bring balance to the relationship between dealers and manufacturers, while those in the industry say it’s unnecessary government interference during harsh economic times.

“Good Cause”

The proposed law has three main components, according to Buzz Anderson, president of the Minnesota Retailers Association.

It would force manufacturers to take back merchandise if a dealer’s contract was terminated without “good cause,” which is defined as a breach of contract or transfer of dealership without the manufacturer’s approval.

The bill also allows dealers to appoint successors with the “reasonable consent” of the manufacturer.

“If I want to sell it to my drunken brother in law, no,” Anderson said. “But if I want to designate one of my kids or someone else, than that person can be the successor.”

The third part of the bill designates the set shop rate as the standard for warranty repairs, but also forces dealers to work on machines they didn’t originally sell.

Polaris spokesman Marlys Knutson said the bill “would not be a good piece of legislation to pass.”

It originated at a time when Polaris and other companies were suffering from too much inventory, she said.

“Two years ago, this legislation was proposed and at that point in time, inventories were building at the dealerships,” Knutson said. “That situation has corrected itself and inventories are going down.”

It would also harm dealers financially, she said.

Since 2006, Polaris attempted to build better relationships with dealers, according to Knutson.

“Our relationships with the dealers are probably the best they’ve ever been,” she said. “Dealers can see that we’re trying very, very hard to work together with them, just help them be better businessmen over all.”

The company takes suggestions through a dealer advisory committee, Knutson said, and has created a number of programs that help train dealers.

“We’re doing everything we can to help them with programs, and process improvements, and business improvements, to help them be better business people and help work themselves through this economic downturn.”

“They Need Us, We Need Them”

Bob Hernesman has sold ATV’s and snowmobiles for 40 years. He currently owns Ray’s Sport and Cycle in Grand Rapids.

When the industry was younger, he said, deals were done with a handshake.

“You trusted the people you talked to, nowadays if you don’t have three lawyers look at it you’re still kind of behind the ball,” he said. “You just hope and pray that you’re going to do things as efficiently as (manufacturers) want.”

In the last five years, Hernesman said, the business for dealers became more risky as initial overhead increased and companies pursued greater profits — often at the expense of contracts at mom-and-pop dealerships.

“You’re investing lots of time and lots of money and signing your life away to go into business,” he said. “Doing it without any guarantee is a hard thing to do in this day and age.”

The typical dealer probably has more than $150,000 invested in tools and signage after five years of dealership, Hernesman said.

“The only thing it affects is if they cancel us without cause,” Hernesman said. “If you ask them straight out, they’ll sit there and tell you they don’t cancel dealers — so then what have they got to worry about?”

Most surrounding states have similar or more stringent laws than the one proposed in the Minnesota legislature. In Minnesota, car and motorcycle dealerships currently enjoy protections.

“(Under this law), if we decided we didn’t want it anymore, we’d have to dispose of all of our products,” Hernesman said. “In Wisconsin they’d have to come back to buy it no matter what.”

The proposed law would also level the playing field to prevent manufacturers from forcing inventory received from states with more stringent laws on Minnesota dealers, Hernesman said.

“This just makes it equal for everybody, manufacturer and dealer,” he said. “God knows we don’t want our manufacturers going away; They need us, we need them, and we need our customer base.”

Many dealers are reluctant to openly support the legislation for fear of “retribution” from manufacturers, Hernesman said.

“I basically do (this) because I’ve had enough, I really have. My store, my people, they do one hell of a job for the manufacturers,” he said. “I can’t continue to watch this happen to good people.”

Polaris spokesman Marlys Knutson said she was “not familiar” with contract cancellations, and doesn’t know about excessive products being forced on Minnesota dealerships.

“Nothing’s Ever Dead”

Despite the fact that the bill passed the Senate last year by a margin of 52-12, the bill is struggling in the legislature this year, said Buzz Anderson.

It’s being carried by Rep. David Dill, DFL-Crane Lake, in the House and Sen. Tom Bakk, DFL-Cook, in the Senate.
In the House, it’s yet to have a hearing, while in the Senate it faces a deadline at the end of this week to be heard in the judicial committee.

Dill said it’s not always clear why bills don’t get hearings.

“The committee chair decides that and sometimes it goes all the way to the speaker’s office,” he said. “(This bill) has a large and wide reaching impact and certainly could affect people in many districts.”

Although it’s not likely to move in the House at this point, it’s possible that it could show up in a conference bill from the Senate at the end of session, Dill said.

“What happens is in the legislative process you push on things,” he said. “Things that move to the top are the things that you’re actively pursuing every day.”

Bakk, who authored 45 other bills this session, said the bill could still possibly be heard in the Senate after this week’s deadline.

“It just has to be sent to the Rules Committee before it goes to the floor,” Bakk said. “I would just remind people that nothing’s ever dead, it’s alive like anything’s alive.”

The bill’s supporters, including lobbyist Buzz Anderson, suspect that the bill is being hindered by the opposition of powerful Minnesota manufacturers.

A Polaris lobbyist declined to speak on the record about the bill. Knutson said she was not aware of what legislative role the company had played or who their supporters in the legislature are.

Dill said he’s been approached by both Medina-based Polaris and Thief River Falls-based Arctic Cat about the legislation.

“Manufacturers tell me that in light of the bill, that they’ve been doing a lot better job of working with these dealers to figure things out,” Dill said. “I still think there’s a sound reason to provide some guidelines in how this relationship should be handled.”

For Steve Vandeputte, who’s spent the last five years rebuilding his business after the loss of Polaris, it isn’t just about losing his contract anymore.

“At first I was pissed, I wanted to change that; I wanted to protect the industry; I wanted to protect the constituents; I wanted to right a wrong,” he said. “I wanted to make Polaris be accountable for terminating dealers and not renewing.”

Despite the enthusiastic support of the entire Iron Range delegation, three years of watching the legislation disappear without a floor vote in the House changed Vandeputte’s focus.

“It’s always about the big business, the big corporation, the big companies that have got the money to lobby and make political contributions — it’s never about the small main street man,” he said. “Now it’s more that I’m losing faith in the political system.”