Cobalt Boat Manufacturer Article

'It looks like the boating industry's need to grow has finally overcome its resistance to change.'

These words, spoken by a Wisconsin boat dealer and quoted on the editorial page of a recent marine industry trade publication, are the equivalent of Pogo's famous declaration, "We have met the enemy and he is us."

Vigorous lobbying by the National Marine Manufacturers Association against legislated dealer agreements did not stop dealers from scoring some major points in the past year with the passage of three new state boat dealer laws in Missouri, New York and Georgia.

These laws define the business relationships between manufacturers of boats and engines and the retailers who sell them. Among other things, boat dealer laws:

* Define sales territories;

* Require written cancellation notices, usually 90 to 120 days before contracts are terminated by either party;

* Establish a procedure that allows dealers to pass existing boat lines on to future owners of the business;

* Establish equitable arrangements for buying back inventory;

* Require warranty compensation that is close or equal to shop rates.

Why should boating consumers care what deals the industry makes with itself? Well, the rationale is that stable dealers with confidence in their product and their investment are more likely to be able to give the level of service consumers have come to expect from other industries. Like it or not, marine customer service is frequently compared to that of the automotive industry--and just as frequently comes up short.

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State laws addressing dealer agreements have long been a staple for sellers of RVs, automobiles, all-terrain vehicles, farm equipment and motorcycles, but marine manufacturers have lobbied state by state to prevent their passage. The National Marine Manufacturers Association contends that state dealer agreements stifle competition and will be bad for consumers. The industry trade group favors non-mandatory agreements but marine retailers insist that the current system of relying upon dealer agreements written by manufacturers is one-sided.

Boat dealer agreements are already on the books in Oklahoma, Louisiana, Texas, Maine and Michigan. Lawmakers in at least five other states, including California and Ohio, will be actively considering dealer agreement proposals during their 2005 legislative sessions and Florida is expected to jump on board in 2006.

In all other states, marine dealers and manufacturers rely upon agreements written by the manufacturer. Some manufacturers have no written contracts, but rely instead on handshake agreements that dealers say are worthless.

A lawsuit filed in 2002 by Sportsman's Cove, Inc., a dealership in Boutte, LA, against Brunswick Corp. demonstrates what dealers say they're up against. The dealer alleged that the industry titan, parent company of Bayliner, Sea Ray, Mercury and others, offered him incentives to shift his company's focus solely to Brunswick's products. Unbeknownst to him, at the same time they were offering even better incentives to a larger, rival dealer in the area. The dealer contended that this amounted to restraint of trade, attempted monopolization and discriminatory pricing but he lost his case because the courts found that Brunswick hadn't violated any of Louisiana's existing unfair trade laws.

At the time of the lawsuit, Louisiana's marine dealer agreement law didn't define sales territories or prohibit manufacturers from this kind of wheeling and dealing. Those changes were added to Louisiana law in 2004.

In another example, a dealer agreement law that passed in Missouri last year came about because dealers in that state, irate about a decision by Genmar Industries to cancel four Four Winns dealerships, wanted to make sure they had some protection before it happened again.

The new law requires a manufacturer to give a dealer a 120-day written notice before canceling a contract and to provide reasons for the cancellation. Dealers must also be given the opportunity to correct problems that may lead to cancellations. In other words, they can't summarily lose a product line--good news for boat owners who could find themselves without recourse to warranty service.

That the times are a-changing recently became clear when industry leader Cobalt Boats of Neodesha, KS, broke its 35-year tradition of relying on a handshake agreement with its dealers. Cobalt recently switched to a written agreement.

Cobalt President Pack St. Clair said his company conferred with dealers when they wrote the agreement. "The single thing that will grow the sport is dealers and manufacturers truly working together with a single purpose and with trust that doesn't always put the customer in the middle."

Most state dealer laws ensure that retailers receive equitable compensation for warranty work. The reasoning is that if dealers are paid their shop rate for making warranty repairs--some would say this amounts to correcting factory defects in the field--they are more likely to tackle these jobs quickly. The tradition of paying dealers 25% to 35% less than shop rates for warranty work is outdated, dealers say.

Non-mandatory dealer agreements written by manufacturers often base warranty reimbursement on sales levels and customer service index scores that only large dealers can achieve. Owners of small companies say they can't compete.

The . Consumer Protection Bureau consumer complaint database, which is due to go online later this year, is rife with reports about consumers who get caught in the crossfire as dealers and manufacturers blame each other for poor service and product defects.

"The basic idea is that protecting the dealer's investment will, in turn, run right back to the consumer," said Phil Keeter, executive director of the Marine Retailers Association of America. With a dealer agreement law in place, the dealer doesn't have "nearly as much trepidation in investing in his business" and that allows him to spend more time focusing on customer service. Without this protection, Keeter explains, dealers wind up having to choose between self-preservation and going the extra mile for the customer. It's not hard to guess who loses out, especially when the economic climate is poor.