Governor Spares Auto Dealers' Favorite Agency

Los Angeles Times, January 20, 2005


Obscure Board Is Behind the Wheel
By Michael Hiltzik

One of the more peculiar manifestations of California car culture isn't the grip exerted on our imagination by the automobile; it's the grip exerted on our economy by the automobile dealer.

What else could explain the extraordinary authority of an entity known as the state New Motor Vehicle Board?

The board, which dates to 1967, holds the power to overrule any disciplinary action taken by the Department of Motor Vehicles against dealers of new cars.

DMV directors have long bridled at this check on their power."I was shocked to see it when I got to the DMV," says Steven Gourley, a veteran regulator who served as director under Gov. Gray Davis. "It was like giving Realtors a board to review decisions by the Department of Real Estate."

Gourley says the board never reversed any of his decisions, but it cast a menacing shadow.

"Every time the DMV brought or even mentioned an action for fraud against a new-car dealer," he told the Legislature last year, the dealer threatened to tie up the agency before the board.

It wasn't an empty threat. In 1997, the board effectively quashed a landmark sanction of Chrysler Corp. (now DaimlerChrysler) by then-DMV Director Sally R. Reed.

The DMV had accused the carmaker of 116 violations of the state's lemon law by reselling cars that had been returned as defective without disclosing their history. It proposed to forbid Chrysler from shipping new cars to its California dealerships for 45 days, which would have cost the company more than $14 million. The New Motor Vehicle Board, arguing that the sanction would fall too heavily on the dealers, reversed it. The DMV struggled with the case for five more years before assessing Chrysler a nominal $325,000 penalty in 2002.

For the record, a spokesman for current DMV Director Joan Borucki says she has "a good working relationship" with the board.

The details of how this board got created are murky, but the general picture is clear. It was born during the governorship of Ronald Reagan, who counted Holmes Tuttle, the big Ford and Lincoln dealer, among his closest friends and financial backers. Tuttle was one of the first members named to the new body.

The dealers have defeated several efforts to abolish the board.

Last year, Gov. Arnold Schwarzenegger's California Performance Review listed it among the state boards and commissions proposed for extinction. Yet it was mysteriously absent from the list of boxes to be blown up that the governor submitted to the Legislature this month, an omission that less charitable observers than I might connect with the lavish financial support the state's car dealers have showered upon Schwarzenegger.