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Sunday, October 26, 2014

Crony Capitalism at Work in Michigan

Lawmakers and the Governor of Michigan last week bowed to the crony capitalism interests of franchised car dealerships in the state by enacting legislation specifically aimed at blocking rival competitor Tesla Motors, the new kid on the block, from doing business there.

The sneaky bastards accomplished a back door deal to amend existing law governing relationships between car manufacturers and their associated franchised dealers to include Tesla Motors which does not operate its business with car dealerships. Tesla’s business model is to sell cars directly to individual buyers thereby benefitting consumers by cutting out the costly dealership middleman.

But by colluding with the governor to remove the single word “its” from the existing law, they effectively changed the law to require any new car manufacturer, e.g. Tesla, which doesn’t operate with associated dealers, to sell cars only through a franchised car dealership.

Existing Michigan law provides that a manufacturer cannot: "Sell any new motor vehicle directly to a retail customer other than through its franchised dealers, unless the retail customer is a nonprofit organization or a federal, state, or local government or agency."

That plainly pertains only to the business relationship between a car manufacturer, such as Ford or GM, and its associated franchised dealers. But by amending the law to delete the word “its,” suddenly the law also applies to any and all manufacturers whose business model does not include relationships with dealerships.
So the political cronies have given Tesla Motors the shaft. Either the company starts franchising car dealerships in Michigan or they can forget about doing business in the state. They can’t even communicate with customers by showing their product in stores or galleries much less sell their cars directly. Now all automakers are explicitly required to sell only through a network of franchised dealers whether they like it or not. 
Last month, the Supreme Judicial Court of Massachusetts ruled that Tesla can keep selling from a shopping mall in the Boston suburb of Natick.

"This is an embarrassment for the State of Michigan and democracy," explains Daniel Crane, a law professor at the University of Michigan. "When no one was looking, the car dealers slipped language into the bill that would strengthen their case against Tesla. They went to the Governor's office and told his staff they needed this change in order to avoid the result in Massachusetts, where the Supreme Court ruled against them and in favor of Tesla."

Michigan state senator, Joe Hune, R-Hamburg Township, is the despicable shill who went to bat for his car dealership cronies by amending the law for the sole purpose of putting the screws to competitor Tesla Motors. "Unsurprisingly, Senator Hune counts the Michigan Automobile Dealers Association as one of his top financial contributors, and his wife's firm lobbies for the dealers," claims a spokesman for Tesla.

The Democrats do it; in this case the Republicans are doing it. They ought to be in jail.

It’s old fashioned political corruption -- crony capitalism hard at work in Michigan. 

1 comment:

  1. It's simply cronyism. This has nothing to do with capitalism.