btm
27th May 2008, 02:07 PM
Car makers feel the 'lemon law' squeeze
http://www.drive.com.au/Editorial/ArticleDetail.aspx?ArticleID=52830&s_rid=smh:ClassiePuff
The car industry is taking a cautious approach to plans to give new-car buyers more consumer-style protection, writes IAN PORTER.
If the experiences of US motorists is anything to go by, each year Australians buy up to 15,000 new-car "lemons" - cars that dealers repeatedly fail to properly repair and manufacturers refuse to replace.
Worryingly for us, as many as 1.5% of cars sold in the US - and many of our imported cars come from the same factories - are classed as duds under US consumer laws.
Each problem car brings with it disruption to personal lives, anxiety, frustration and family stress that customers can well do without.
It may also bring financial hardship if it's a tool of trade such as a salesman's office or a delivery vehicle. A lemon's effect spreads far and wide.
It may be only a small proportion of the approximately 1 million vehicles sold each year but the impact is heavy on those involved and that is why the Victorian Government is examining "lemon laws" later this year.
The Minister for Consumer Affairs, Tony Robinson, has commissioned an inquiry and consultation with the public and the industry to determine the extent of the problem.
The inquiry, to be led by the MP for Mordialloc, Janice Munt, aims to have a draft report ready for scrutiny by respondents to the consultations by the end of March. A revised draft will go to the minister, with the aim that legislation can be ready for passage before year's end.
But the industry is concerned that the inquiry is not about determining whether laws should be passed but which laws should be passed. It fears the decision to legislate has already been made, regardless of the recent quality track record, which suggests things have improved markedly over the past decade.
It is even disturbed by the use of the term "lemon laws", said the chief executive of the Federal Chamber of Automotive Industries, Andrew McKellar."
It is worth noting that the term 'lemon laws' is somewhat pejorative and I think - for an industry that is so important to Victoria - to be characterising a legal reform targeted at the automotive industry in those terms is not necessarily putting the best spin on it," Mr McKellar said.
Ms Munt sounds conciliatory, but also like she is following a course that leads to legislation."
Ideally, what we want is to come to a position that is fairly comfortable for everyone. We want to bring everyone along with us. We think that would be absolutely best. At the moment I think we are looking at an amendment to the Fair Trading Act," she said.
But how will the State Government define what is a lemon?
Ms Munt went to the US, where many states have had lemon laws for 20 years or more."
The strictest lemon laws in the world are in the US and have been in place since around 1980," she said.
She visited Washington to speak to the US Federal Fair Trade Commissioner before moving to California, generally considered the leader in consumer affairs issues.
And she spoke to senior people from the Ford Motor Company to see how the laws worked for the industry. She says there's no definition of a lemon: "It varies in the US from state to state. There are different laws in different states, some have been changed over time."
It seems the one criterion that appears in almost every act is that a car becomes a lemon when it is undriveable and there have been three failed attempts to get it working.
Ms Munt said that some states say the three repair attempts should happen inside 12 months, others say 24 months. The most common issues are electronics and gearboxes, she said.
So how big is the problem?
"Only a very small percentage of cars meet the criteria," Ms Munt said.
"It was about 1-1 1/2% in the US but, because there are so many cars sold there, it's a big number."
A very big number. On annual sales of 16 million, that percentage indicates that up to 240,000 cars sold in the US each year are lemons.
Ms Munt said remedies in the US included a replacement car or, in some states, a full refund of the purchase price.
Using the same percentage in Australia, as many as 15,000 vehicles each year may qualify as lemons, although direct comparisons can't be made because a relatively big proportion of cars sold in the US are domestic, while here the proportion is only 20%. Imports in both countries, by and large, come from the same plants.
The chamber's Mr McKellar said the industry was not convinced about that figure.
"I would be surprised if it was as high as that. Our figures show that it is extremely low." But he would not say what it was. "It is a very small problem in terms of a genuine instance of defect. And these days manufacturers provide extensive warranty cover, in any event, so consumers are well protected."
He said that Australia is not the same as the US in 1980, when industries were barely constrained by legislation and consumers were forced to take individual legal action.
"Lemon laws have a heritage going back to the 1970s in the US. They come from a different time and context, where consumers had very little other protection."
In Australia, apart from the warranties, consumers here could rely on the Trade Practices Act.
"We already have effective legal protections in Victoria," Mr McKellar said.
He said the industry was not opposed to laws governing the performance of new cars but it was concerned that Victoria did not follow some of the US states in certain areas.
"The industry will do all it can to co-operate if the Government wants to ensure there is adequate consumer protection." But there were some things which it would oppose. "We need to make sure that any new laws cannot be abused."
New laws should not allow car buyers to legally pull out of a sale because their personal circumstances change, he said.
He added there also has to be a limit on the time the car had been owned before the laws can apply. The chamber wants any law restricted to private owners.
"Equally, we do not want to see refunds included in any laws," Mr McKellar said.
That would prevent people who have got into financial difficulties backing away from a deal and leaving the maker with the burden.
Ms Munt did not detect much angst among the manufacturers in the US.
"They are not agitated about it. The fact is that build quality in the US and here has progressed so far that there are not a lot of defective cars that actually would hit the market," she said.
She said that there would be no ability for dealers and car makers to give people the run-around, a common way to deflect complaints and wear down disappointed buyers.
"The US laws effectively put the onus on the manufacturer. The manufacturer is the one who says this is the product and this is how it should work."
If the dealer was providing substandard service to the car owner, that was the maker's problem, Ms Munt said.
"The relationship between the dealer and the manufacturer is up to them. That is not our business."
http://www.drive.com.au/Editorial/ArticleDetail.aspx?ArticleID=52830&s_rid=smh:ClassiePuff
The car industry is taking a cautious approach to plans to give new-car buyers more consumer-style protection, writes IAN PORTER.
If the experiences of US motorists is anything to go by, each year Australians buy up to 15,000 new-car "lemons" - cars that dealers repeatedly fail to properly repair and manufacturers refuse to replace.
Worryingly for us, as many as 1.5% of cars sold in the US - and many of our imported cars come from the same factories - are classed as duds under US consumer laws.
Each problem car brings with it disruption to personal lives, anxiety, frustration and family stress that customers can well do without.
It may also bring financial hardship if it's a tool of trade such as a salesman's office or a delivery vehicle. A lemon's effect spreads far and wide.
It may be only a small proportion of the approximately 1 million vehicles sold each year but the impact is heavy on those involved and that is why the Victorian Government is examining "lemon laws" later this year.
The Minister for Consumer Affairs, Tony Robinson, has commissioned an inquiry and consultation with the public and the industry to determine the extent of the problem.
The inquiry, to be led by the MP for Mordialloc, Janice Munt, aims to have a draft report ready for scrutiny by respondents to the consultations by the end of March. A revised draft will go to the minister, with the aim that legislation can be ready for passage before year's end.
But the industry is concerned that the inquiry is not about determining whether laws should be passed but which laws should be passed. It fears the decision to legislate has already been made, regardless of the recent quality track record, which suggests things have improved markedly over the past decade.
It is even disturbed by the use of the term "lemon laws", said the chief executive of the Federal Chamber of Automotive Industries, Andrew McKellar."
It is worth noting that the term 'lemon laws' is somewhat pejorative and I think - for an industry that is so important to Victoria - to be characterising a legal reform targeted at the automotive industry in those terms is not necessarily putting the best spin on it," Mr McKellar said.
Ms Munt sounds conciliatory, but also like she is following a course that leads to legislation."
Ideally, what we want is to come to a position that is fairly comfortable for everyone. We want to bring everyone along with us. We think that would be absolutely best. At the moment I think we are looking at an amendment to the Fair Trading Act," she said.
But how will the State Government define what is a lemon?
Ms Munt went to the US, where many states have had lemon laws for 20 years or more."
The strictest lemon laws in the world are in the US and have been in place since around 1980," she said.
She visited Washington to speak to the US Federal Fair Trade Commissioner before moving to California, generally considered the leader in consumer affairs issues.
And she spoke to senior people from the Ford Motor Company to see how the laws worked for the industry. She says there's no definition of a lemon: "It varies in the US from state to state. There are different laws in different states, some have been changed over time."
It seems the one criterion that appears in almost every act is that a car becomes a lemon when it is undriveable and there have been three failed attempts to get it working.
Ms Munt said that some states say the three repair attempts should happen inside 12 months, others say 24 months. The most common issues are electronics and gearboxes, she said.
So how big is the problem?
"Only a very small percentage of cars meet the criteria," Ms Munt said.
"It was about 1-1 1/2% in the US but, because there are so many cars sold there, it's a big number."
A very big number. On annual sales of 16 million, that percentage indicates that up to 240,000 cars sold in the US each year are lemons.
Ms Munt said remedies in the US included a replacement car or, in some states, a full refund of the purchase price.
Using the same percentage in Australia, as many as 15,000 vehicles each year may qualify as lemons, although direct comparisons can't be made because a relatively big proportion of cars sold in the US are domestic, while here the proportion is only 20%. Imports in both countries, by and large, come from the same plants.
The chamber's Mr McKellar said the industry was not convinced about that figure.
"I would be surprised if it was as high as that. Our figures show that it is extremely low." But he would not say what it was. "It is a very small problem in terms of a genuine instance of defect. And these days manufacturers provide extensive warranty cover, in any event, so consumers are well protected."
He said that Australia is not the same as the US in 1980, when industries were barely constrained by legislation and consumers were forced to take individual legal action.
"Lemon laws have a heritage going back to the 1970s in the US. They come from a different time and context, where consumers had very little other protection."
In Australia, apart from the warranties, consumers here could rely on the Trade Practices Act.
"We already have effective legal protections in Victoria," Mr McKellar said.
He said the industry was not opposed to laws governing the performance of new cars but it was concerned that Victoria did not follow some of the US states in certain areas.
"The industry will do all it can to co-operate if the Government wants to ensure there is adequate consumer protection." But there were some things which it would oppose. "We need to make sure that any new laws cannot be abused."
New laws should not allow car buyers to legally pull out of a sale because their personal circumstances change, he said.
He added there also has to be a limit on the time the car had been owned before the laws can apply. The chamber wants any law restricted to private owners.
"Equally, we do not want to see refunds included in any laws," Mr McKellar said.
That would prevent people who have got into financial difficulties backing away from a deal and leaving the maker with the burden.
Ms Munt did not detect much angst among the manufacturers in the US.
"They are not agitated about it. The fact is that build quality in the US and here has progressed so far that there are not a lot of defective cars that actually would hit the market," she said.
She said that there would be no ability for dealers and car makers to give people the run-around, a common way to deflect complaints and wear down disappointed buyers.
"The US laws effectively put the onus on the manufacturer. The manufacturer is the one who says this is the product and this is how it should work."
If the dealer was providing substandard service to the car owner, that was the maker's problem, Ms Munt said.
"The relationship between the dealer and the manufacturer is up to them. That is not our business."