Dealer Considerations When a Manufacturer Suspends Operations


Compiled by RVDA staff


Erwin Hymer North America, the company that built Roadtrek- and Erwin Hymer-brand motorhomes in Ontario, Canada, ceased operations on Friday (February 15) when it fired all employees at its two factories, according to news reports from Canada.

This will create challenges for the dealers who sold these units in the past, or who have new products in inventory.  Based on past experience when manufacturers cease production, dealers can easily find themselves owed tens of thousands of dollars from a manufacturer for warranty reimbursements and incentives that become virtually uncollectible once the manufacturer ceases its business operations.

Class B motorhomes built by Erwin Hymer North America carried a six-year warranty, according to CTV of Kitchner, Ontario.  The Canadian TV station interviewed a couple that recently bought a Roadtrek brand Class B which needed minor repairs a few weeks ago.  Concerned about whether their warranty coverage still was in effect, they called Roadtrek and were told to get the repairs completed, keep receipts and to contact Erwin Hymer North America after an audit was completed.  However, calls to the manufacturer by other motorhome owners and the TV station were not returned.

Erwin Hymer North America was audited because Thor Industries Inc. refused to buy the North American portion of Germany's Erwin Hymer Group SE after financial irregularities were reportedly discovered at the Canadian operation a few weeks ago.

So, how can dealers handle sales of existing units, warranty obligations, financing and some other issues when a manufacturer goes under?

RVDA offers the following considerations to dealers:
• Discuss with your dealership’s attorney the possibility of titling the out-of-business manufacturer’s units in your dealership’s name, and selling them used with a limited express warranty, or “as is.”
• Ask your service agreement provider if they provide / sell extended protection for out-of-business manufacturers’ units.  For instance, Protective’s XtraRide offers a 12-month service agreement should the manufacturer's warranty be unavailable.  Dealers may also sell the customer a longer term service agreement in addition to the 12-month term.  XtraRide is exclusively endorsed by RVDA.
• In some states, it may be illegal to sell a new vehicle without a warranty, or to sell a vehicle as new if the manufacturer is no longer licensed to do business in the state.
• If you sell the vehicle as new, there needs to be full disclosure as to the manufacturer’s inability to pay for warranty work, and likely, a prominent disclosure on the vehicle and on the bill of sale.
• Review your contracts with consumers who bought units built by the out-of-business manufacturer to see if you assume responsibility for the warranty work. In some cases, paperwork may indicate that the only warranty is the manufacturer’s warranty, and only the manufacturer is responsible for warranty work.
• For consumer who have already purchased a Roadtrek unit and are bringing it in for repairs, a disclaimer should be signed in which the consumer acknowledges that if the dealership attempts a good-faith repair of any alleged defects, that the dealership is not assuming any express or implied warranties provided by the manufacturer.
• Check with lenders on financing options.  In the recent past, some lenders have told dealers they will not accept financing requests for new or used units built by manufacturers who had gone out of business.
• If a bankruptcy reorganization turns into a liquidation, discuss with your dealership’s attorney whether your good faith effort to repair a customer’s warranty issue, without seeking reimbursement, is inconsistent with your disclaimer of implied warranties, and whether you may be obligated for additional repairs.

RVDA will provide additional details on the Erwin Hymer North America situation as they become available.