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RVDA Guidance: When a Manufacturer Suspends Operations

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For a variety of reasons, the cessation of EverGreen RVs late last week, may have caught many dealers off-guard.

On Wednesday, the RV Dealers Association released some considerations dealers should keep in mind when a manufacturer ceases operations.

According to RVDA President Phil Ingrassia, how dealers use or follow the guidance will vary from business to business and also be guided by state laws in some cases. In general, dealers should be aware of local dealership laws, and as always, give the customers all the information you know about the product and the company.

“Some of it (the guidance) may or may not apply, depending on the situation of the company,” Ingrassia said. “But overall, you’ve got to be up-front.”

The guidance follows:

“The closure will create challenges for the dealers who sold these units in the past or who have new products in inventory.  EverGreen was advertising “3-year factory protection” in its promotional materials.

“Unfortunately, based on past experience when manufacturers cease production, dealers can easily find themselves owed tens of thousands of dollars, or more, from manufacturers for warranty reimbursements and incentives that become virtually uncollectible once the manufacturer ceases its business operations.

“So, how can dealers handle sales of existing units, warranty obligations, financing and some other issues when a manufacturer goes under?

RVDA offers the following considerations to dealers:

  • Discuss with your dealership’s attorney the possibility of titling the out-of-business manufacturer’s units in your dealership’s name, and selling them used with a limited express warranty, or “as is.”
  • Ask your service agreement provider if they provide / sell extended protection for out-of-business manufacturers’ units.  For instance, Protective’s XtraRide offers a 12-month service agreement should the manufacturer’s warranty be unavailable.  Dealers may also sell the customer a longer term service agreement in addition to the 12-month term.  XtraRide is exclusively endorsed by RVDA.
  • In some states, it may be illegal to sell a new vehicle without a warranty, or to sell a vehicle as new if the manufacturer is no longer licensed to do business in the state.
  • If you sell the vehicle as new, there needs to be full disclosure as to the manufacturer’s inability to pay for warranty work, and likely, a prominent disclosure on the vehicle and on the bill of sale.
  • Review your contracts with consumers who bought units built by the out-of-business manufacturer to see if you assume responsibility for the warranty work. In some cases, paperwork may indicate that the only warranty is the manufacturer’s warranty, and only the manufacturer is responsible for warranty work.
  • For consumer who have already purchased an EverGreen unit and are bringing it in for repairs, a disclaimer should be signed in which the consumer acknowledges that if the dealership attempts a good-faith repair of any alleged defects, that the dealership is not assuming any express or implied warranties provided by the manufacturer.
  • Check with lenders on financing options.  In the recent past, some lenders have told dealers they will not accept financing requests for new or used units built by manufacturers who had gone out of business.
  • If a bankruptcy reorganization turns into a liquidation, discuss with your dealership’s attorney whether your good faith effort to repair a customer’s warranty issue, without seeking reimbursement, is inconsistent with your disclaimer of implied warranties, and whether you may be obligated for additional repairs.

RVDA will provide additional details on the EverGreen situation as they become available.”

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