Dealers of 'power toys' battle suppliersby Martin Moylan, Minnesota Public Radio
We Minnesotans love our power toys. All told, we have 1.4 million snowmobiles, ATVs and boats. But lately, sales have been slipping. And that's helped spark a battle between snowmobile, boat and ATV dealers and big Minnesota companies that make power sports equipment.
St. Paul, Minn. — There are still a lot of snowmobiles at Century Power Sports here in Stillwater.
The machines go for as much as $12,000. And it's hard to sell them when it hardly snows, like this past winter.
Owner Roger Tuckner has 75 sleds left.
But Tuckner says manufacturers are pushing him to order more snowmobiles than he wants for next winter. And he says other dealers face the same crunch.
"Our inventories are high and manufacturers are pushing us to order a lot to meet criteria to get rebates," says Tuckner. "They're asking us really to over-inventory, instead of cutting back our inventories."
Tuckner doesn't want to buy more sleds than he needs, but he can't afford not to.
Buying more means a lower cost per sled--a must for competing with other dealers on price. So, dealers take more sleds than they really want -- and pray for snow.
Boat, ATV and snowmobile dealers say the alleged inventory squeezes illustrate a problem with Minnesota law. Dealers say manufacturers are pretty much free to dictate terms to dealers here.
Dealers complain that manufacturers have the upper hand in everything from setting dealership locations to controlling the sale of a dealer's business.
The fight has implications not only for the cost of popular products, but for industries that account for thousands of jobs in Minnesota. Some of the biggest makers of boats, snowmobiles and ATVs are based in the state.
The Minnesota Retailers Association says most other states have laws that balance the interests of power sports dealers and manufacturers. But Buzz Anderson, head of the Association, says manufacturers can bully boat, ATV and snowmobile dealers in Minnesota.
"At any time, they can have the dealership taken away. The manufacturers can also say to the dealer you will take another 160 snowmobiles, another 150 ATVs. If you don't, we will cancel your dealership."
Snowmobile, boat and other power sports dealers are pushing for a state law they say would protect them from manufacturer pressure to buy more equipment than the dealers want. The law would also limit a manufacturer's ability to terminate a relationship with a dealer. And a manufacturer who does terminate a relationship would generally have to buy back the dealer's inventory.
The recent Sportsman show at the Minneapolis Convention Center featured a lot of very big--and successful--boat dealers. Even dealers who don't feel bullied by manufacturers still feel vulnerable under state law.
"The dealer agreements are written by the manufacturers, and the dealers are forced to sign them," says Luke Kujawa, president of Crystal-Pierz Marine. He has ten locations in the region. Kujawa says the size of his business protects him, but he still thinks boat dealers should get protections like territory guarantees that are typical for other businesses.
"The best thing for the industry is to continue to move toward a franchise agreement like we have in the auto and other industries," says Kujawa. "But there are a lot of obstacles and hurdles and the manufacturers are going to fight real hard against that."
Kent Anderson, owner of Tri-K Sports of Maple Plain, has sold boats, ATVs and snowmobiles for over 25 years. And his experience tells him manufacturers have too much power.
"Whatever they decide is what happens," says Anderson. "We don't have any pull at all in any of the businesses I deal with. We just need a little more even playing field with the manufacturer."
Anderson complains that industry lobbyists thwarted past dealer efforts to win help from the legislature.
Thief River Falls-based Arctic Cat argues there's no reason for the state to get involved in its business relations with dealers. He says dealers can buy only what they want already.
"Dealers make their own decisions about how many machines they want to order. There are no threats," Arctic Cat regional sales manger Rick Stokke told a Legislative committee.
"Sales forecasts may or may not turn out to be accurate," Stokke says, "but forced repurchase of old inventory by government intervention is wrong."
Medina-based Polaris contends the proposed bill would protect weaker dealers at the expense of the manufacturers and could drive up the prices consumers pay.
Minneapolis-based Genmar is also out to torpedo the proposed law. The boat maker's general counsel, Keith Carpenter, says the company offers dealers three-year agreements that provide dealers with more rights than the typical one-year contract.
"The truth of the matter is dealers don't want it now. They like the way things are operating," Carpenter says. "They do not want the increased accountability that goes along with the new agreement."
Minnesota does lack provisions found elsewhere.
Bob Steinway has seen the boating business as both a dealer and manufacturer. He now owns Link Recreational, which sells boats both in Minnesota and Wisconsin.
In Wisconsin, Steinway says boat dealers are on a more level playing field with manufacturers.
"Wisconsin has more protection," says Steinway. "A manufacturer can't just come in and pull your dealership. He has to put you on notice. You have to have time to remedy the situation, whereas in Minnesota, there is none of that."
Even if lawmakers enact some protections for dealers, a spike in sales may be the only sure way to end the acrimony between dealers and manufacturers in the power sports business.
- Morning Edition, 04/03/2007, 7:55 a.m.