Looking Back at 2020 and Expectations for 2021

As we begin the New Year, the team at BSM looks back at 2020 and forward to 2021 for what we might expect as dealer advocates this year.

2020 Review

Just when 2020 was getting off to a good start, the entire economy was put on pause due to the spread of Coronavirus. Thankfully, your state and metro dealer associations, along with dealer advocates like BSM, successfully lobbied state and local officials to allow new motor vehicle dealers to remain open as essential businesses.

Despite the inclusion as an essential business, it was tough sledding for most dealers in February, March and into April, until Congress passed the CARES Act. The CARES Act not only provided many citizens with disposable income through enhanced unemployment and related payments, but it also provided vital capital to dealerships through the Paycheck Protection loan program (“PPP”). BSM assisted its dealer clients in jumping through the legal hoops associated with submission of PPP loan paperwork, understanding the myriad rules issued after-the-fact by the SBA, and strategizing the best way for dealers to position themselves to obtain forgiveness of the PPP loan.

The CARES Act funds also seemed to assist consumers with the purchase of new vehicles, such that dealerships ended 2020 in as good, if not better, financial shape as at the close of 2019.

Unfortunately, as dealerships’ financial performance improved through the course of 2020, the OEMs began to revert back to their usual tactics of (i) pressuring dealers for improved sales effectiveness, even though many dealerships could not obtain the product necessary to meet customer demand; (ii) conducting sales incentive and warranty audits resulting in large and unwarranted chargebacks; (iii) administering unfair two-tier incentive programs; (iv) pursuing facility expansion programs; and (v) demanding dealers sign separate EV agreements in order to sell new electric vehicles.

In 2020, the attorneys at BSM represented dealers across the United States in pushing back on sales performance pressure based upon the OEMs’ faulty measurement, protesting dealership terminations resulting from alleged poor sales performance, challenging excessive and unfair audit chargebacks, litigating the legality of two-tier incentive programs, litigating with OEMs that refused to pay warranty reimbursement at retail, negotiating more reasonable facility requirements and challenging the need for a separate agreement in order to sell electric vehicles.

In addition to defending dealers’ franchise rights, the attorneys at BSM assisted clients across the country in various regulatory and consumer matters, in successfully completing 49 dealership buy-sell transactions, involving 60 rooftops in 18 different states, and in obtaining millions of dollars for dealerships through increased warranty reimbursement rates.

2021 Look Forward

In 2021, we expect to continue to defend dealerships in consumer matters, to efficiently resolve regulatory issues and to fight OEM adverse action against individual dealers, as well as OEM programs which are unfair and discriminatory. The attorneys at BSM will also be working with our state and metro dealers associations to protect the franchise system on issues ranging from changes to an OEM’s distribution system to direct sales by manufacturers, both those with and without motor vehicle franchisees. As part of these efforts, BSM is in the process of assisting several dealer associations with enhancing their state motor vehicle franchise laws for 2021.

The BSM team will also continue to assist dealers as they successfully complete the sale and purchase of dealerships, whether a single rooftop or multi-platform transaction. We also expect to continue to work with our clients to obtain approval from the manufacturers to increase dealership warranty reimbursement rates.

Lastly, in 2021 the Small Business Administration is projected to audit hundreds of new motor vehicle dealership entities with PPP loans in excess of $2,000,000. BSM will be prepared to assist dealers with any government overreach as it relates to an attempt to clawback loan proceeds for which the dealership was otherwise eligible under the applicable CARES Act provisions.

On behalf of the entire team at BSM, we thank you for trusting us to provide you with counsel and legal advocacy in a tumultuous 2020 and we look forward to assisting our dealership clients through a prosperous 2021.