DEALERS aren’t adequately reimbursed for all of the recall and warranty work they’re completing, according to the results of the latest Dealernews poll.
Dealers claim that flat rates and parts pricing are too low and that reimbursements don’t account for extra work involved with warranty and recall repairs. They also said they should be reimbursed for the related paperwork, phone calls and parts returns they must complete.
An overwhelming majority - more than 90 percent – of Dealers responding to the survey want their vehicle manufacturers to establish an administrative allowance of at least 15 to 30 minutes per claim.
Should your OEM provide an admin allowance for warranty/recall work?
Yes (93.12%) – 15 minutes (37.99%, 30 minutes (51.96%), 60 minutes (10.06%)
An administrative allowance of 30 minutes “should average out [time reimbursed] over the course of a year,” one Dealer suggested. Another Dealer said 30 minutes “would include the time it would take to create a repair order, ensure all necessary parts are available, store the old parts for the appropriate number of days and return any requested parts.”
“We had to hire a warranty administrator for paperwork, pictures and to start cases or communicate with the manufacturer,” one Dealer added.
Three out of four Dealers said their OEMs do not reimburse them adequately for recall and warranty work. Many respondents complained of low parts reimbursement rates and the failure of the OEM to account for related work, like the time spent cleaning up a vehicle or removing accessories before the repair work can be initiated – more common in off-road vehicle (ORV) recall situations.
“I believe the labor times are somewhat thin, considering recalled units have been in the field for quite some time and require more cleaning and prep to complete the job,” an Arctic Cat Dealer said.
“Off-road vehicles are rarely in the pristine condition required to come close to FRT allowances,” a Honda Dealer stated.
Still others complained that the flat rates established by the OEMs are not realistic. “When my best tech, after performing the same recall job many times, can’t even come close to the time for which we are paid, [the discrepancy in rates] is very evident. Also, the recall times are usually MUCH lower than the OEM’s own flat rate schedule for that same work,” one Dealer said.
Others said the OEMs fail to reimburse when a backup technician is required to review and sign off on the job, or when extra training time is involved. “Pay us for our time to watch [training] videos, take tests, etc. to work on their mistakes. Also, pay us for the second tech who has to sign off on the job,” a Polaris Dealer suggested.
Specifically, 77 percent of respondents said their OEMs do not reimburse adequately for warranty/recall work; of these, they were more likely respondents representing Arctic Cat/Textron, Polaris and BRP/Can-Am dealerships. But 23 percent of respondents said they were reimbursed sufficiently, and these responses were more commonly received from Harley-Davidson, KTM/Husqvarna, BMW Motorrad and Yamaha Dealers.
“I think that the OEMs and the Dealers need to agree on the overall importance of quality warranty repairs,” said Dealernews adviser Jim Boltz of Cycle Barn in Washington State after reviewing the survey findings. “For the Dealer, warranty/recall work should be his highest repair priority – moving that work to the front of the line. Supporting the Dealer in this regard should be the highest priority of the OEM. This would include having a program that makes it worthwhile to do warranty repairs while setting aside profitable retail work.”
THE OEM REPORT CARD
When it comes to the overall relationship a Dealer has with its OEM for warranty and recall work, survey respondents rated their vehicle manufacturers 55.7 on a point scale of 1 (poor) to 100 (excellent). Dealers gave lowest ratings for repair time allowance and labor rates, but acknowledged many OEMs for timely payments and satisfactory repair instructions.
ALL BRANDS average score, based on a 100 pt. scale: 1=poor, 100=excellent
OEM communication (65)
Replacement parts availability (57)
Repair instruction (73)
Repair time allowance (27)
Additional documentation requirements (50)
OEM vs. retail labor rate (48)
Timely payments to Dealers (70)
OVERALL AVERAGE RATING, ALL BRANDS: 55.7
Several Dealers complained over a discrepancy in rates not only for labor but also for parts reimbursement. One Dealer offered this example: “Our local law requires OEMs to pay MSRP for parts; however, it seems that recall parts are much less expensive than others. Example: a voltage rec/reg assembly has an MSRP of $231.70, but the replacement ‘recall part’ retails for $88.74?”
No OEM rated in the survey received an overall average score higher than 70. The highest rated brands were Kawasaki, Suzuki and Yamaha; these three OEMs received best marks for overall communication, timely payments to Dealers and quality of repair instructions; Suzuki also received kudos for replacement parts availability. However, like other OEMs, all three stumbled when it came to repair time allowances, with no one getting a score above 37 out of 100.
In addition to right-sizing labor rates, labor times and parts reimbursement, Dealers offered several suggestions for how to improve the warranty/recall process: “Recall kits should include the necessary hardware so we don’t have to waste time reusing fasteners designed as one-use,” one Dealer noted. “If parts return is an upfront requirement, they should include an appropriate shipping carton for the return parts with the kit,” another said.
“I suggest 15 minutes [admin processing fee] if the claim doesn’t require a phone call to the OEM, 30 minutes if the claim requires contact via phone,” a Kawasaki Dealer suggested.
“Reimbursement should be MSRP on parts and posted shop rate at the OEM flat rate time,” said a Honda Dealer. “This needs to apply to both recall and warranty work. If handled well at the Dealer level, warranty-recall work can be turned into a positive with the customer."
“The OEMs design, engineer and build motorsports vehicles, while Dealers have the responsibility to repair things when they go wrong,” DN adviser Jim Boltz observed. “OEMs deal at wholesale, while Dealers function at retail. Continually burdening Dealers with repairing OEM mistakes at wholesale prices is detrimental to the Dealer’s financial health, customer satisfaction and overall goodwill in the industry.
“I hope all OEMs will take the results of this survey to heart and put in the work and effort to make Dealer warranty work fair and even-handed,” Boltz said.
ABOUT THE SURVEY
Dealernews conducted the Warranty/Recall Reimbursement survey in December 2017. Survey questions were developed in partnership with the DN Advisory Board; we acknowledge the special participation of advisory board member Jim Boltz. The survey includes responses and scores from 191 powersports retailers.
For the OEM Report Card portion of the survey, Dealers were asked to rate the OEMs they represent at retail on a scale of 1 (poor) to 100 (excellent) according to seven categories related to warranty and recall work. Scores were averaged for each brand and across all brands.
Of the retailers responding to the survey, 20.4 percent represented Polaris brands, 15.7 percent were Honda dealerships, and Kawasaki and Yamaha dealerships accounted for 10.5 percent of respondents each. Additional surveys were received from Arctic Cat/Textron dealerships (5.8 percent of respondents), BMW Motorrad (3.7 percent), BRP/Can-Am (6.3 percent), Ducati (3.1 percent), Harley-Davidson (4.1 percent), KTM/Husqvarna (5.2 percent) and Suzuki (4.2 percent). Also included in the overall results were responses for CFMoto, SSR, Kymco, Piaggio brands, Triumph, Ural and Zero.