GM Joins H.R. 1415 Fight

Another major shot has been fired in the continuing battle over H.R. 1415, the bill seeking to ban fleet incentives. Recently General Motors joined the ranks of bill opponents alongside Chrysler, AALA, ACRA, AFLA, and Automotive Fleet.

In his letter of February 9, GM President James McDonald told GM dealers: "I'm sure you are aware a bill is pending in Congress which proponents contend will outlaw what they call 'fleet subsidies.' That bill, H.R. 1415 is, in reality, a very anti-competitive proposal which could hamper our efforts to provide all GM dealers with innovative marketing programs.

"The bill's sponsors say fleet incentives we make available to dealers are unfair and cause higher consumer prices. Nothing could be further from the truth. Prices to dealers are not increased to cover the cost of these incentives. In fact, the production uniformity which is made possible by major fleet orders helps keep factory cost down.

"H.R. 1415 requires all incentives paid to customers or dealers for individual (i.e., retail) sales must also be paid to fleet customers or dealers selling to fleets. If this had been the law in 1981, 1982, and 1983, many of the retail incentives we funded would have been prohibitively expensive and probably would have been eliminated or reduced.

"H.R. 1415 is contrary to the free enterprise system, and we firmly believe we should have the freedom to price our products competitively and to provide whatever marketing incentives we find effective to help sell our products. It is not in the best interest of our industry to have government dictate pricing policy at any level - wholesale or retail - and efforts to control prices in other industries have been counterproductive. I'm sure you would strongly object to any attempt by the government to tell you the price you must charge your customers. Likewise, we think it is inappropriate to limit our pricing flexibility.

"Additionally, certain other provisions of H.R. 1415 are not in the best interest of General Motors or its dealers since they reduce our ability to compete and could undermine the strength of the GM franchise system. For example, one provision of the bill would severely limit GM's discretion to reject unacceptable franchise applications.

"I wanted to tell you personally that we take seriously our responsibilities to all of our customers, but we cannot support legislation that would reduce our flexibility in developing marketing programs responsive to changing market conditions. I trust you will understand our firm opposition to additional government intervention into our and your business."

Following McDonald's letter, NADA took the counterpoint in its letter to NADA dealer members under the signatures of area directors. "There is no justification," the letter says, "for current practices which allow fleet operators to purchase vehicles for hundreds of dollars less than the price charged to dealers. A fleet operator which registers only 10 vehicles in any combination of brands can generally receive subsidies if only a single unit is purchased from an individual manufacturer."

The NADA letter went on to say: "GM and others have claimed that the bill would prohibit them from using innovative marketing programs to stimulate sales of new cars and trucks. This is not true. The bill would only require that incentive programs be made available to all customers on an equal basis. Fleets could not be favored, but the manufacturer would be free to use whatever marketing incentives it might deem most effective.

"It has been asserted that all retail incentives would have to be paid to fleet operators and that this would be prohibitive in cost. It is true that all incentives would have to be equal; however, fleets today receive a disproportionate share of incentive money."

While proponents and opponents of H.R. 1415 continue to take sides, the bill remains at the subcommittee level, and it will be many months before its outcome is known.