AB 635

This bill makes several changes related to motor vehicle manufacturers',

importers', or distributors' (manufacturers') compensation of motor vehicle dealers

(dealers) for certain service work for the manufacturer (covered work).

Under current law, a manufacturer must reasonably compensate a dealer that

performs covered work. Covered work is work to rectify certain product defects,

certain motor vehicle delivery or preparation work, and other work requested or

approved by the manufacturer. The manufacturer must compensate the dealer

based on the dealer's effective nonwarranty labor rate and the average percentage

markup over dealer cost for parts. The effective nonwarranty labor rate is

determined by dividing the total customer labor charges for “qualifying nonwarranty

repairs” by the total number of hours that would be allowed for the repairs if the

repairs were made under the manufacturer's time allowances.

This bill limits qualifying nonwarranty repairs to repairs made to a motor

vehicle of a line make for which the manufacturer provides a warranty. The bill also

excludes several types of motor vehicle work from the definition of qualifying

nonwarranty repair.

Under current law, a claim made by a dealer for compensation for covered work

must be either approved or disapproved within 30 days after the claim is submitted

to the manufacturer, and an approved claim must be paid within 30 days after its

approval. A manufacturer, however, retains the right to audit claims for a period of

one year after the date on which the claim is paid and to charge back any amounts

paid on claims that are false or unsubstantiated.

This bill specifies that a manufacturer may not charge back amounts paid on

claims due to the dealer's failure to comply with requirements of the manufacturer

related to the processing of a warranty claim if the dealer provides reasonable proof

that the work for which the claim is made was actually performed and was covered

work.

This bill also specifies that a manufacturer may not do any of the following for

the purpose of recovering the costs of compensating its dealers for covered work:

1. Increase the price the manufacturer charges its dealers for services or for

vehicles or other goods.

2. Impose a charge or surcharge on its dealers.

3. Reduce a payment that is due from the manufacturer to its dealers.