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State bill would reduce allowance for carmakers to close a franchise; auto luxury tax mulled

November 15, 2010

Dealers would have added protection against what constitutes good cause for a manufacturer to cancel or fail to renew a franchise or selling agreement, under Illinois Senate Bill 1417, introduced last month in Springfield.


The action appears aimed squarely at the solvency of some manufacturers.


Another proposal, House Bill 451, would add a 5 percent luxury tax on cars that sell for more than $60,000; plus additional taxes on expensive boats, aircraft, jewelry, fur clothing and footwear. That bill, sponsored Feb. 9 by Rep. LaShawn Ford (D-Chicago), has not yet attracted a cosponsor.


Among other things, SB1417 would strike language currently in the state’s Motor Vehicle Franchise Act which states "Good cause shall exist to cancel, terminate or fail to offer a renewal or replacement franchise or selling agreement to all franchisees of a line make if the manufacturer permanently discontinues the manufacture or assembly of motor vehicles of such line make."


Senate Bill 1417 also would make it a violation for a manufacturer to require or coerce a dealer to underutilize the dealer’s facilities by requiring or coercing the dealer to cease operations for the selling or servicing of any vehicles that fall under a franchise agreement with another manufacturer. And, the bill provides an itemized list of what is considered reasonable compensation to a dealer for the value of the franchise and business premises, as well as a payment scheme for such compensation.


Following a first reading in the Senate, the bill has been assigned to chamber’s Transportation Committee.