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* This background info is from a newspaper column I wrote more than a year ago…
Volkswagen filed a federal lawsuit in December [of 2022] describing a bill that overwhelmingly passed both Illinois legislative chambers and was signed into law in 2021 as “crony capitalism at work: redistributive legislation that takes hundreds of millions of dollars from some (but not all) motor vehicle manufacturers and, for no public purpose, deposits that money directly into the pockets of politically favored Illinois [car] dealers.” The automaker claims the law is costing it an extra $10 million a year.
The bill in question (HB3940) was hotly opposed by automotive manufacturers. The law forces manufacturers to reimburse car dealers at a much higher rate (the auto industry says it’s a 50% higher rate) for warranty repairs. The bill came about after a labor dispute between dealerships and a mechanics union. They apparently decided to let the carmakers pay to resolve their monetary dispute, although the mechanics ended up on strike anyway because the dealers allegedly kept the new windfall initially instead of passing it through.
Just about every state legislator has multiple auto dealers in their districts, and Democrats have been eagerly allying themselves ever closer with organized labor in past years, so the bill hit a sweet spot with both parties and cleared the House 85-24 and then passed the Senate without a single dissenting vote a few weeks later.
The manufacturers say the law is costing the industry $240 million a year. Yes, you read that right. $240 million. Per year. They claim Illinois has the highest warranty repair costs in the nation. By far.
Volkswagen Group of America, the stateside subsidiary of German auto giant Volkswagen, lost its year-and-a-half old lawsuit against the Illinois state government on Monday after a federal judge in Chicago decided it failed to properly state some of its claims and lacked standing to pursue others. […]
Deflating Volkswagen’s equal protection claim, [U.S. District Judge John Tharp Jr.] concluded newer electric vehicle manufacturers like Tesla, Lucid and Rivian are not bound by the Motor Vehicle Franchise Act or Multiplier Act amendment in the same way as the older company — in part because the younger businesses don’t make use of a traditional network of franchise dealerships like Volkswagen has for decades. […]
Tharp ruled that Volkswagen lacks standing to bring its First Amendment claims. He found the Multiplier Act doesn’t prohibit the company from raising prices in Illinois to cover its new expenses, nor does the law bar Volkswagen from telling customers that the Multiplier Act is the reason for the increased prices.
The opinion is here.
posted by Rich Miller
Friday, May 10, 24 @ 11:46 am
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I can understand VW suing. While not that unreliable (generally ranked about 12th out the 35 or so manufacturers), they have had their share of issues.
Electrical gremlins are one problem they are known for, but that is true of every car manufacturer as the newer cars are more computer than mechanical.
VW has also had some issues with their plastic water pumps. Just about every one of them on their ubiquitous 2.0 turbo engine will fail between 60,000 and 100,000 miles. They were forced to issue an extended factory warranty for that.
So, in the aggregate, it’s big money for VW.
And not just VW; my son had a 2023 Chevy with electrical glitches the dealer never did get fixed. And a close friend had similar electrical issues with hew Volvo. These new cars are really just a network of computer systems on wheels. The wife’s current VW has 47 different subsystems on the CANBUS that connects them all together.
Disclosure: my wife has owned a VW for most of the past 40 years, so we’re intimate with their ups and downs. We’ve mostly had good ones.
Comment by RNUG Friday, May 10, 24 @ 12:21 pm
I tried reading this again but there is one thing I’m still not clear on. In Illinois, would this law make it so that a warranty from the manufacturer/dealership is better than from a third party? (I understand that the answer to this in general is yes, but I was trying to figure out if this law changes it for Illinois vs other states.)
Comment by Lurker Friday, May 10, 24 @ 12:32 pm
To RNUG’s point, I once asked a tow truck driver who responds to road-side issues for AAA which cars he most often sees broken down on the road. He didn’t hesitate: VWs and Jeeps.
Comment by 47th Ward Friday, May 10, 24 @ 1:21 pm
I had a VW at the dealership for repairs that took nearly a month because the onsite mechanics couldn’t figure out how or why the engine was assembled the way it was. The long wait was so that VW could send someone from the factory in Germany to take a look. It turns out they installed upside down or something. I just remember them being surprised the car drove as long as it did before having problems. I still have the car. Over 7 years old.
Comment by CLJ Friday, May 10, 24 @ 1:41 pm
The strike was 6 months before the law took effect. There wasn’t anything for the dealers to keep.
Comment by SAP Friday, May 10, 24 @ 2:46 pm