Repairmen Go for Broke : Group Sues Electronics Makers Over Amounts Paid for Warranty Repairs
Is Stanley Auerbach, a veteran TV repairman in Malibu, a victim of stingy electronic equipment makers? Or is he an anachronism in an age where people throw broken sets away rather than have them fixed?
It may take a court to decide.
Auerbach is president of the California State Electronics Assn., which represents the state’s 8,000 electronics and appliance repair shops. It is suing 28 of the world’s largest makers of electronic goods and appliances for failing to pay what it considers a fair price for warranty repairs.
Auerbach’s group contends that such giants as Sony, Matsushita and Mitsubishi have bullied California servicers into taking losses totaling $50 million a year on warranty jobs at a time when hundreds of servicers nationwide are going out of business each year. The servicers claim that they have no choice but to take whatever price manufacturers give them, because the giant electronics firms control access to all-important spare parts and repair manuals.
But the Electronic Industries Assn., a powerful organization that represents manufacturers, said Auerbach’s group is wrongly blaming the industry for a plunge in business caused by consumers’ tendency to replace broken TVs and VCRs. The repair shops are looking to manufacturers to shore up what is rapidly becoming an unneeded service for many consumers, argues Gary Shapiro, EIA vice president and general counsel. Asks Shapiro: “Should we be supporting the buggy whip industry?”
The suit, which seeks $200 million in damages, is being closely watched within the electronics industry because the amount manufacturers pay for warranty work is a sore spot with servicers everywhere. National Electronic Sales & Service Dealers Assn. spokesman Wallace Harrison said losses on warranty work figured in several of the hundreds of repair shop failures last year.
“It is a nationwide problem,” he said.
The suit also has implications for consumers, who may be paying more than they should for repairs. In interviews, servicers said they inflate charges to consumers for non-warranty work by 10% to 20% to compensate for losses on warranty jobs. “We have no choice,” said Auerbach, owner of Malibu Video Systems. “We have to cover our overhead.”
The lawsuit, filed in Los Angeles Superior Court last month, is against a parade of Japanese, Korean, Dutch, French and American firms that produce everything from televisions to washing machines. The suit contends that manufacturers refuse to negotiate repair contracts with servicers in violation of the California Song-Beverly Act of 1977. The services also contend that manufacturers’ tactics violate the state’s Unfair Labor Practices Act.
The suit concerns repairs performed under manufacturers’ warranties by independent service shops. Rather than set up a network of company-owned service centers, electronics manufacturers sign up independent shops as “authorized service dealers.” These authorized servicers often obtain spare parts and repair manuals at discount prices and perform warranty repairs for manufacturers at predetermined prices.
The California servicers contend that manufacturers dictate prices that are 20% to 50% below fair market rates. “Negotiations to them mean ‘take it or leave it.’ They are dictators,” Auerbach said.
Representatives of most firms named in the suit could not be reached or would not comment. The EIA’s Shapiro called the suit absurd. “No one forces servicers to sign these contracts,” he said.
The suit comes at a time when the economics of the repair business is changing. Televisions, washing machines, video cameras and other home electronics and appliances don’t break down often, manufacturers and servicers say. EIA statistics show TVs last for 14 years. When a set breaks down, it can be cheaper to replace than fix it.
Take a VCR with a broken microprocessor. Auerbach said the labor charge alone for such a repair would come to $135 at his shop. Meanwhile, Sharp Electronics, one of the firms being sued, sells a basic VCR for $199.
“I understand the servicers’ frustration,” said Donald Mossman, vice president and general counsel of Sharp. “They operate on thin margins. We all do.”
The economic recession has made matters worse for servicers and manufacturers. When a television breaks down these days, consumers don’t replace it or fix it. “They take the second TV out of the bedroom, and put it in the den,” said Paul Goveia, an Ontario repairman who is one of the plaintiffs in the suit. The number of people employed at his shop has dropped to five from 11 four years ago, he said, because of the lower overall demand for repairs.
The slump in the repair business has a good deal to do with the dissatisfaction servicers feel over what they are paid for warranty repairs.
Al Pruess, a San Diego appliance repairman and a plaintiff in the suit, said servicers took losses on warranty work in the past because it gave them a chance to meet prospective customers. Warranty work no longer pays off for servicers, he said, because consumers don’t return for non-warranty repairs.
The dispute over warranty payments has cropped up in hearings before the state Bureau of Electronic and Appliance Repair, which regulates the repair industry but lacks authority over warranty prices. George Bussman, an official with the bureau, said manufacturers contend that it would be cheaper to operate company-owned service centers than to pay independent repair shops more. “The manufacturer has the upper hand,” Bussman said. “The servicers’ back is to the wall.”
California’s repair shop owners are gambling that manufacturers will ultimately find it cheaper to pay more to independent servicers than to open their own repair centers.
“When I see Sony plunk down millions for Michael Jackson and they can’t pay me a profit, they’re sort of rubbing my nose in it,” said Ontario servicer Goveia, referring to Sony’s recording contract with the pop music star. “They should be able to pay me enough to make a living.”
