Car Dealers in Capitol’s Fast Lane
While Gov. Arnold Schwarzenegger has declared war on Sacramento’s “special interests,” he has helped one of California’s most effective business lobbies -- car dealers -- accelerate to new levels of influence in the Capitol. Dealerships are among the most regulated sales industries in the state, with lemon laws that dictate precisely how they may market their products and a state board that can ban dealers from moving within 10 miles of another showroom peddling the same make of car.
Still, they have always made good mileage in Sacramento, going back to when Los Angeles dealer Holmes Tuttle was one of Ronald Reagan’s earliest boosters and closest confidants. And in the last year, their political machine has been souped up.
After the dealers and the rest of the auto industry helped underwrite Schwarzenegger’s 2003 gubernatorial campaign, giving him more than $1 million through his first year in office, the Republican sided with dealers last year by killing their most hated piece of legislation, which would have restricted their loan practices.
The dealers played a central role in the passage of Proposition 64, which limits lawsuits against businesses. Dealers financed a third of the campaign’s $12-million cost, and Schwarzenegger stumped for it in the final weeks of the fall election.
“We’ve changed pretty dramatically in our approach to things,” said Peter Hoffman, president of Sierra Autocars in Monrovia. “I am a Democrat, but as the Legislature just started to act like they hated business, and as they started to persecute all business in the state, we decided to get active in all issues.”
This month, Schwarzenegger again delivered for the dealers when he rebuffed his own task force’s recommendation that the New Motor Vehicle Board be abolished. The dealers value the panel for settling disputes with manufacturers that otherwise would end up in court, though the task force concluded “there is no need for a governmental body to take on this work.”
“I’ve never seen the car dealers show up as prominently as they have in the last year,” said Doug Heller, executive director of the Foundation for Taxpayer and Consumer Rights, a Santa Monica advocacy group. “I think what’s happened is they’ve seen their potential power grow with Schwarzenegger. I’ve been shocked by how much money they’re putting into the political process.”
The dealers’ power will be tested further in coming months, as Democratic lawmakers and consumer groups revive last year’s proposal to allow buyers to return vehicles within three days of purchase. The measure, which backers have dubbed the “Car Buyers’ Bill of Rights,” is again sure to be one of the most contested pieces of consumer legislation. It is also being readied as a possible ballot initiative.
The tipping point, dealers say, was lawmakers’ refusal to alter California’s business competition laws, which allowed private individuals and attorneys to bring lawsuits against dealers for violations of often minor laws, even if they had sustained no harm. The law was considered more than a nuisance for the state’s 1,500 dealerships, which sold $98 billion worth of cars in 2003.
“Many, if not all, of us got sued for advertising violations, such as printing something in eight-point instead of nine-point type,” said Sen. John Campbell (R-Irvine), a former car dealer in Orange County.
The dealers found a kindred spirit in Schwarzenegger, the Hummer-driving candidate who made repeal of the increase in the state vehicle license fee a campaign theme. Led by the dealers, the auto industry contributed $656,535 to his campaign and financed ads in favor of changing the fee.
The governor proved to be a valuable friend. In his first day in office, he fired Department of Motor Vehicles chief Steve Gourley, who had been aggressively investigating auto financing schemes. The governor also replaced the head of the DMV bureau that had been forcefully regulating auto repair shops.
As Schwarzenegger moved to repeal the car fee, he made an early stop at a San Fernando Valley Ford dealership owned by one of his donors, and urged Californians to “go out there and buy cars.”
Though Schwarzenegger complained in his annual legislative address that Sacramento “is in the grip of the special interests,” his aides deny that the governor has shown favoritism toward car dealers.
“The people of California know that this governor can’t be bought,” said spokeswoman Ashley Snee Giovannettone. She defined “special interests” as “those interests that separate elected officials from the will of the people. The mandate of the recall was to make government more responsive to the people of the state.”
Schwarzenegger has not agreed with the dealers on every proposal. Last year, over their objections, he raised state fees on tires by 75 cents and supported tougher greenhouse gas regulations.
“There are probably more policy issues that we don’t see eye to eye on with this administration than we do,” said Peter Welch, president of the California Motor Car Dealers Assn., based in Sacramento and Playa del Rey.
But the governor and the dealers opposed last year’s bill by Assemblywoman Cindy Montanez (D-San Fernando) that would have allowed car buyers to return their vehicles within three days for a refund. The bill also capped the amount dealers could charge in financing cars, and required that they disclose to buyers how dealer rates compared with what they could get elsewhere.
In late July, as the proposal seemed likely to win legislative approval, the Department of Motor Vehicles condemned it in a strongly worded letter to lawmakers. Among other criticisms, the DMV faulted the bill’s loan rules for placing “an unfair limitation on car dealers.”
Even before the bill reached Schwarzenegger’s desk, the dealers nearly persuaded Democratic senators to scuttle it.
“We heard from lawmakers that they were just being barraged,” said Rosemary Shahan, president of Consumers for Auto Reliability and Safety, a Sacramento group that’s often at odds with the dealers. “They’re in everybody’s district. They’re more powerful than the auto manufacturers are for that reason, because they’re in everybody’s face.”
The Senate ultimately passed it after removing the three-day cooling-off period, but Schwarzenegger vetoed it in September.
Montanez resurrected her bill this month with the cooling-off period restored.
Meanwhile, on behalf of an anonymous client, a San Leandro law firm with Democratic ties has filed paperwork with the state to begin collecting signatures for a “Car Buyers’ Bill of Rights” initiative.
If enough signatures are collected, the measure could go before voters if Schwarzenegger calls a special election. The proposal would allow car returns within three days, prohibit dealers from charging more than $150 for arranging a loan, require dealers to itemize the monthly costs “of certain commonly overpriced add-on items” such as antitheft devices, and require that certified used cars come with “significant” warranties.
Welch, of the California Motor Car Dealers Assn., said dealers oppose a three-day return policy, as well as itemizations that would “probably add another foot and a half of disclosures” to sales documents that are “like 2 1/2 feet long right now.”
But he noted that the group supported legislation last year to restrict unscrupulous dealers from adding unwanted charges to a contract, a tactic known as payment packing. Welch said dealers want to find agreement with legislators on financing rules and on what kinds of cars can be advertised as certified, but that they do not plan to launch any campaigns on the level of Proposition 64.
“Now that [Proposition 64] is fixed, we’re more than willing to go back under the radar screen and just get down to business, selling cars,” he said.
Others believe the dealers’ heightened influence will continue.
“I think they’ve seen that, ‘Wow, if we become mobilized and energized, we can become effective,’ ” said Campbell, the Republican senator. “I don’t think they’re going to go away.”
