DaimlerChrysler Corp.’s Big Three counterparts share the same concerns over gray market losses, but they’re not following the auto maker’s lead in combating the problem.
Motor Co. will continue targeting rogue brokers and the Canadian dealers who sell to them. And Corp. is undecided about the path to pursue.
"We’re looking at a number of options," a GM spokeswoman says, adding "it’s a big problem."
is maintaining its strategy of leveling chargebacks, which hit offending Canadian dealers with bills for the difference between Canadian and American stickers. The disparity is created by Canada’s lower dollar and price breaks awarded by auto makers to compensate for the smaller market, higher taxes and lower average income.
Chargebacks have met with mixed success because of Canadian court rulings that favored dealers. But Ford presses the point further by limiting vehicle allocations to offending dealers and gathering intelligence on suspect brokers.
Meanwhile, Canadian Ford dealers who do business with brokers on its hit list will come under intense scrutiny, a spokeswoman says.
TheGroup is taking the shotgun approach, saying its U.S. entity will not honor warranties on ’03-model cars and trucks originally intended for sale in Canada. This puts U.S. dealers and consumers on alert, warning both to determine a vehicle’s origin before entering into any transactions.
Vehicle owners who have relocated to the U.S. from Canada are exceptions to that rule.
The gray market’s steady upward trend forced’s hand, a spokesman says. The influx of new, off-lease and used Canadian vehicles has risen about 15% in recent years.
Of the current estimated annual volume of 200,000 Canadian vehicles, about 25,000 are new. And Chrysler says the total could increase up to 40% within five years.
Importation is legal, and once in the U.S., Canadian vehicles can be sold for considerably less than the price on an American dealer’s sticker.
But the problem isn’t unique to North America. China has wrestled with a gray market involving vehicles intended for sale in Japan; and Germany has had similar disputes with dealers in Italy.
A possible resolution is under consideration in Europe where the European Union may abolish geographic limits on sales franchises. Supporters say this measure, plus the common currency, would foster competition on a more level playing field.
But the European automobile manufacturers association favors location restrictions and warns of dire consequences if the market is allowed to open up.