OPINION: Governor should veto Alaska’s auto dealer windfall

Alaska lawmakers just approved a plan to hike costs for automakers. It’s a decision that will ultimately raise prices for Alaska’s drivers and direct millions of additional dollars to the state’s franchised auto dealers.

Have you ever needed your vehicle repaired under warranty?

I know what runs through your mind. “How fast can I get an appointment?” Followed by: “I’m glad it’s covered.”

Drivers don’t pay for vehicle warranty repairs. Or recalls, either.

Here’s how it works: Automakers direct all warranty repair work to auto dealers.

The vehicle manufacturer pays the cost of the repair directly to an auto dealer using a reimbursement formula established in a lengthy labor time guide that outlines how many hours it takes to complete a specific warranty repair.

Under Alaska law, automakers pay the hourly labor rate normally charged by that same dealer. That’s also the same rate the dealer charges you, the retail customer. It’s a system that generally works.

House Bill 233 on Gov. Mike Dunleavy’s desk will disrupt the auto warranty repair system — and shift millions of dollars of added costs to Alaska’s drivers.

What’s the issue? HB 233 requires Alaska’s auto dealers to get paid for vehicle warranty work under a new system using a different labor time guide originally produced for independent auto repairers.

So what?

The time guides for independent repairers were written for all types of auto repair work — not warranty repairs. This matters because the independent labor time guides, sometimes called third-party time guides, are based on certain assumptions.

They assume, for example, it will take additional time and labor to complete a repair because an independent repairer might be less familiar with the vehicle system than a franchised dealer that works on the same make and model day after day.

Independent repair labor time guides account for other variables like older-model vehicles and the absence of time-saving special tools and equipment.

Again, so what?

Alaska auto dealers made an average 74% gross profit on warranty labor payments from automakers in 2023. Enacting HB 233 and turning away from the unbroken system will force automakers to reimburse Alaska auto dealers another $8 million annually.

If every state had this kind of law on the books, it would add more than $5 billion in costs to the repair system annually — or $323 per car.

That’s a lot of money for dealers already earning record profits and with a monopoly on auto warranty repair work.

By the way, that $8 million windfall goes to auto dealers — not auto technicians — because there’s nothing in HB 233 that requires any extra compensation to technicians. Not a dime.

Why did the Legislature get in the middle of a business relationship between auto manufacturers and auto dealers? Twelve states have already considered — and rejected — similar proposals.

The current warranty labor time guides for Alaska auto dealers are accurate. And fair. And working fine. There’s no problem that needs fixing.

Gov. Dunleavy should veto HB 233.

John Bozzella is president and CEO of Alliance for Automotive Innovation.

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