Mercury Terminations Raise Questions by Dealers and Consumers

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Mercury Owners and Dealers Grapple with What to Expect As Ford Announces Termination of its Mercury Franchises. California attorney Erin Tenner of Tenner Johnson LLP offers advice to auto dealers facing termination.

Ford Motor Company Decides to Shelve its Age Old Mercury Line

Dealers invest a lot of time and money building up and promoting an automotive franchise. To have the franchise terminated deprives them of the return on their investment.

Ford Motor Company will be terminating its Mercury line effective as of the end of this year. California attorney Erin Tenner advises auto dealers who are losing their franchises. “Dealers invest a lot of time and money building up and promoting an automotive franchise,” explains attorney Tenner. “To have the franchise terminated deprives the dealers of their return on investment. In most states the manufacturer has an obligation to compensate the dealers upon termination. The amount of compensation required varies from state to state.”

Although Mercury dealers will no longer be selling new Mercury vehicles once their current inventories are depleted, Ford has announced that it will continue to support them in providing service and warranty repairs. Ford is also offering consumer incentives to retain customer loyalty. Mercury dealers are being offered compensation by Ford for their franchises, but the amount of compensation depends on a number of factors.

According to an article in the June 7th issue of Automotive News, Ford is paying dealers anywhere from a few thousand dollars to about $700,000 for their franchises. The amount paid to a terminating dealer is based in part on Mercury sales as compared to sales of other makes within that dealership. If a dealer sells only Mercury vehicles, that dealer will receive more per vehicle than a dealer who has other makes at the same location as the Mercury franchise.

Attorney Tenner has some advice for auto dealers: “Dealers should not be signing a termination agreement without having it reviewed by legal counsel. Dealers have certain rights under their Dealer Agreements and under state laws. The termination agreement with Ford’s Mercury Division needs to provide each dealer with at least the compensation they are entitled to under their Mercury Sales and Service Agreement and state law. It should also preserve their rights to warranty reimbursement and indemnification for claims arising after termination and provide for the promised warranty reimbursements after termination.”

Dealers have remedies under state statutes that may have very short filing deadlines if the compensation they are being offered is less than the amount to which they are entitled. California statutes, for example, give dealers only 30 days in which to file a protest with the New Motor Vehicle Board to preserve certain rights. Ford provides a separate dispute resolution procedure under its Dealer Agreement that can be followed and has given dealers until December to file disputes, however, failing to file by the shorter state statutory deadline, could cut off some rights.

Mercury owners can find more information about what they can expect at http://www.Mercuryvehicles.com. Erin Tenner is a partner at TennerJohnson LLP and is a member of the National Association of Dealer Counsel. She can be reached at 818-707-8410 or toll free at 888-501-0040.

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Erin Tenner
TennerJohnson LLP
818-707-8410 ext. 202
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