Put simply, car manufacturers don’t normally pay as much for warranty work as a customer with an out-of-warranty car would pay for repairs, and Illinois attempted to put a stop to that with a piece of legislation called the Multiplier Act which came into effect in 2022. We’ll delve more into this later, but those are the basics. As a result of having to pay more money to dealerships because of this legislation, Volkswagen of America is suing several state officials with the goal of having the Multiplier Act declared unconstitutional. The automaker makes some pretty crazy claims in its lawsuit, such as the following: Yikes. It’s almost as if the person who wrote that has never spent time in a dealership. Here’s how things actually work in most states. Basically, factory warranties work like this: when you get something fixed at your local dealership or shop under the warranty, the automaker is the one footing the bill, not you. But automakers hate paying out for warranty work, so warranty labor jobs are usually rated at fewer hours compared to regular jobs coming in the door. This can directly impact technician earnings, as technicians at flat-rate shops get paid less for jobs with fewer book hours. Let’s use the hypothetical example of an unspecified job that’s normally billed at 10 hours. Under warranty rates, a manufacturer could pay for just eight or nine of those hours, regardless of how long it actually takes a technician to complete the repair. In addition, warranty labor rates are sometimes lower than the labor rates that normal customers pay. In this arrangement, the franchisee gets shafted, the technicians get shafted, but the automaker saves a lot of money. For the record, I’m a fan of paying technicians hourly rather than flat-rate. It can incentivize care and precision, make up for time lost due to rust, and help put food on technicians’ tables if a shop is ever slow. The downside is those really fast technicians who can beat flat rates lose out on some earnings, but the safety net afforded by hourly pay is generally worth it. Anyway, mini-rant over; let’s get back to the subject at hand. Illinois’ Multiplier Act forces automakers to pay as much per warranty repair as the average person walking in off the street has to pay on an out-of-warranty car, which brings more money down the food chain and gives technician unions a new bargaining chip. Mind you, the legislation isn’t perfect. Under state law, dealers aren’t required to pass the extra money on to technicians, and direct-to-consumer manufacturer-owned repair facilities are exempt as the legislation only amends franchise law. However, good technicians are hard to find, and non-union technicians at dealers that don’t receive a pay bump thanks to this legislation can certainly jump ship for a dealer that passes on a share of the cash.
Perhaps the craziest part of this whole saga is that the Multiplier Act has its pros for just about everyone regardless of partisan affiliation. Requiring manufacturers to pay at least retail labor rates and hours for warranty work boosts income for local dealers, can put more money into workers’ pockets under union agreements and closes a door through which global mega-corporations could rip off both the dealers taking on the risk of running a franchise and the workers earning an honest blue-collar paycheck. Supporting this notion, Automotive News reports that the bill was backed by both franchisee and union lobbyists and passed into law with bipartisan support. It’s worth noting that Volkswagen of America is the only automaker to file suit over this legislation—not a good look by any means. In a time when cost-of-living is high, another bargaining chip for workers sounds like a good idea, so the Multiplier Act ought to stay in place. (Photo credits: Volkswagen, Audi)
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Got a hot tip? Send it to us here. Or check out the stories on our homepage. Support our mission of championing car culture by becoming an Official Autopian Member. I don’t know what the dollar spread is between the same job for warranty and retail, after accounting for rate and hour differences, but expecting it to be equal is screwing over the mfgr. I would expect the mfgr to pay 20-30% less than me as a retail customer. On the other hand, why is the government involved with dealer technician pay as long as it’s over the minimum wage? If warranty work is so egregious, wouldn’t we hear from a technician’s union, lobby or social media group? I suspect this Multiplier Act was more the doing of a dealership lobby than any sort of concern for technician’s welfare. The point behind book rate for a job is that every customer gets charged for the same amount of time to fix the same problem, regardless of how slow or fast the technician is. Novice technicians might take longer than the book rate because they’re unfamiliar with the job. Skilled technicians might be able to do the job in significantly less time due to experience, clever thinking and investing in specialized tools.
