The future of farm equipment distribution in North America is being reshaped in ways and by means that many dealers could not have imagined a decade ago.”

This was the introduction to a special report that was entitled “Contract Approval: The 'Big Hammer' in Dealer Consolidation,” which appeared in Farm Equipment a little over 6 years ago. 

One dealer comment from that report pretty much summarized the situation between farm equipment manufacturers and farm equipment dealers at the time. It was that the major equipment companies wanted company stores without having company stores.

He said, “They want to own the distribution channel without having the expense of brick and mortar or operational expenses. They want to control it all the way. They use contract approvals as a ‘carrot’ and dangle it in front of you to get other non-value things accomplished.”

It would seem that CNH’s issuing a new dealer agreement “with a lot more teeth,” as well as Deere and other’s challenge to New Hampshire’s Dealer Bill of Rights would bear this out.

The Kansas City law firm of Seigfreid Bingham, which reviewed CNH’s new dealer agreement, says several changes in the new contracts are significant for its dealers, both on the ag and construction sides. Some of these were outlined in Ag Equipment Intelligence’sOn the Record” broadcast last Friday.

For example, a new provision may give CNH the right to require dealers to sign any new form of dealer agreement introduced in the future. Refusal to do so could result in termination.

In another provision, CNH reserves the right to require separate facilities and/or personnel if a dealer engages in another business that requires “considerable commitment” of a dealer’s resources. In other words, dealers carrying shortline equipment deemed competitive cannot sell them in the same facility that features the Case IH or New Holland brands.

The new agreement would also require dealers to maintain an inventory “at the level deemed necessary to meet dealers’ sales obligations.” CNH also reserves the right to require dealers to order inventory in minimum specified quantities.

And what may be the shrewdest provision in the new dealer agreement, Case IH and Case Construction could possibly terminate a single dealer location vs. all a dealer’s locations for what they consider violations of the contract. In some cases, according to Seigfreid Bingham, “dealers may not be able to use the dealer protection laws to protect against termination.”

With all this said, what’s there for a dealer to do? At the very least, read the new agreement thoroughly, which we’ve been told by some dealers they have not done. Whether or not CNH might be willing to make any modifications to it after hearing from its dealers is a question better left to the parties involved, but the chances of changes probably aren’t very good.

Which brings us to the New Hampshire situation

In 2013, the New Hampshire legislature passed the Dealer Bill of Rights. Generally, the law gave local auto, construction and farm equipment dealers more flexibility to run their franchises. This would include resisting manufacturers demands that dealers upgrade their facilities to certain specifications. The bill would also require manufacturers to pay dealers retail rates for labor and parts when they perform warranty work and requires manufacturers to open their inventory and sales files to dealers.

According to an Associated Press report, New Hampshire’s assistant attorney general said, “The new law bars manufacturers from terminating contracts with dealers without just cause and places the burden on the manufacturers to justify any terminations.”

A Deere spokesman said, “It represents an unprecedented level of regulation for our industry and jeopardizes Deere's ability to do business in New Hampshire by voiding many of the provisions of our dealer agreements.”

Peter McNamara, president of the New Hampshire Auto Dealers Assn., added that some dealers were paying millions for manufacturer-mandated upgrades every 5-7 years. He said his 500 members, including 180 franchisees, argued that the upgrades didn't automatically equal more sales. "Look, I’d like a cappuccino maker at a dealer, but it's not going to make me buy a car," he says.

An attorney representing Kubota said, the law amounts to “a hostile takeover of the industry.”

The Alliance of Auto Manufacturers also opposed the bill, saying a provision determining warranty reimbursement would simply boost dealer profits and was a “money grab by New Hampshire dealers.”

In Farm Equipment’s 2009 special report mentioned earlier, another dealer put it this way: “It's all about control of market share and purity within the stores. It gives the majors the opportunity to exercise more control.”

In other words, they want company stores without having company stores.