Jun 18, 2009

Dealers Not Happy With Fed-controlled GM

The combination of General Motors and the federal government is proving to be a formidable foe to auto dealers. With the blessing of the Treasury Department auto industry task force, more than a thousand GM dealers have already been given their walking papers. And now those being retained have been asked (some might say forced) to sign a new agreement to remain with GM that has been characterized as one-sided.

John McEleney, chairman of the National Automobile Dealers Association, expressed grave concerns about GM’s plan to require all its surviving dealers to sign an open-ended operating agreement as a condition for remaining a GM dealer. GM delivered the so-called "participation letter," which is actually a 24-page binding legal contract, to all its surviving dealers early this month.

“If I sign it, I will be committing my business to spend hundreds of thousands of dollars that I know about today and committing to millions of dollars of potential financial obligations in the future,” McEleney said.

McEleney said that dealers signing the new agreement will be subjecting their businesses to sales performance standards that are not specified in the contract. He noted that GM can alter the terms of the requirements at any time at its sole discretion and that the agreement called for dealers to waive any right of protest to any action taken by the manufacturer.

“This is a classic example of opportunistic and overreaching behavior by the manufacturers that has prompted the enactment by the legislatures of all 50 states of franchise laws governing the relationship between dealers and their manufacturers,” McEleney said. “No other manufacturer has forced dealers to sign such an onerous agreement. This is not necessary for GM's viability, and federal funds are being used to empower GM to do this.”

McEleney called GM’s efforts a manipulation of the bankruptcy process to eviscerate the state franchise laws. Chrysler and GM have announced plans to terminate 3,400 dealerships, which will affect more than 100,000 employees.