Your Due Diligence Checklist

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Dealers often assume that any company producing a powersports machine is an "original equipment manufacturer." Not so. A true OEM controls its production and distribution, from initial product development, to component sourcing and production, through assembly and then distribution to the dealer. A true OEM, as we know it in North America, offers dealer training, helps dealers with marketing and promotion, warehouses parts and provides warranties.

At the other end are manufacturers that produce products for others to market and distribute. They do not generally handle product development; rather, they simply build to a buyer's specfications. Many such manufacturers are based in China and are using importers to distribute and manage product here.

We welcome dealers to use the following checklist when considering a new vehicle line. Many of the items on the list are routinely provided by an established OEM but often are not available from an offshore manufacturer that is working through a U.S. distributor.

BUSINESS STRUCTURE:

– How is the company organized? Who are the owners? Is it owned, for example, by the Chinese government, private investors, or a combination of the two?

– Does the company have a plan in place to build its brand in the United States (or Canada), or is it simply selling products?

– Is the company registered to do business in your state? Obtain a copy of the company's business license to be sure.

– How long have the manufacturer and its distributor/importer been in business in the United States, and do they list an active U.S. address?

– Is there a U.S.-based test site you can visit?

– Obtain an employee contact list, and determine how many U.S.-educated engineers are on the payroll.

WARRANTY POLICIES:

– How would you, as a dealer, file a warranty claim?

– How long does it take for dealers to get paid for warranty work?

– How does the manufacturer/importer/distributor reimburse the dealer for warranty work? Does it issue payment, or does it apply the amount as dealer credit toward future purchases?

PARTS AVAILABILITY:

– Are parts stocked in the U.S.? If so, how much inventory do they have? Or are they just pulling parts off of other vehicles to fill orders?

– What is the fill rate for key parts? You might want to make a warehouse site visit to verify for yourself.

CUSTOMER SERVICE:

– How extensive is their customer service function, and where are the CSRs located?

– How do dealers contact customer service?

– How do end users contact customer service?

– Does the company have a manned toll-free number? Are service technicians available via phone?

– Will a technician come to your dealership if needed?

TRAINING:

– How does the company train personnel when it comes to service, parts, sales and merchandising?

– How often is training provided, and how extensive are the training programs?

PRODUCT LIABILITY AND CERTIFICATION:

– What is their insurance coverage? It should be at least $5 million. Make certain that you see the actual insurance rider; don't accept the distributor's word for it. Also, make sure the coverage is with a U.S. insurance company.

– How many product liability cases has the company had to face in the last 12 months, and how were these cases settled?

– Have there been any recalls involving the product in the last 24 months?

– Do all machines meet U.S. emissions, homologation and safety standards? Ask for certification paperwork.

CONTACTS/REPRESENTATIVES:

– Who are the manufacturer's contacts, especially its legal representatives, in the United States?

– Who will be your rep(s)? How many reps will be calling on your store?

DEALER TERRITORY:

– What is your territory?

– What are the company's rules — and history — regarding placement of other dealerships in proximity to your store?

– Is the company in compliance with your state's applicable regulations?

– Does the company sell similar products to big-box retailers?

– Does it sell consumer-direct through other stores or via the Internet?

– Does it sell the same basic models under other labels? If it does, why?

INDUSTRY INVOLVEMENT:

– Is the company a member of the Motorcycle Industry Council, the Specialty Vehicle Industry Association, or another industry group?

– Does the company or its affiliates provide rider training, and how? (If the company doesn't provide, for example, ATV rider training, the dealer may be held responsible for meeting the standard.)

– What is the company doing to support the industry and advance the sport in the United States?