A group of car dealers from across Ontario is claiming that the giant automaker’s method of review of Canadian car dealerships was a sham and dictated by company conflicts and was interfered with by its American interests.
Twenty dealers from across Ontario are now in a legal battle against GM of Canada Limited (GMCL) for its actions in ending their sales and service agreements in May 2009.
Cindy Robinson, of Robinson Pontiac Buick GMC is among those who sued the Canadian division of GM for what they believe was an arbitrary decision to end the dealers’ sales and service agreement.
She said in an interview on Monday one of the important parts of the case was the 20 dealers won the right to act as a group, instead of having to deal piecemeal with the auto giant through the courts. “They wanted single arbitration.”
The dealers stated a top GM official has already admitted the American parent company prevented the the Canadian manufacturer from reversing any termination decisions.
The dealers stated the company’s “management review process was a sham,” in their latest court filing in reply to the company statement of defence in the case. “Not a single dealer has been reinstated.”
That court statement came after pre-trial testimony from Marc Comeau, GM’s vice-president of sales, service, and marketing, who said reinstating dealers “was not in the plan.”
The company had to cut its dealership network by 40 per cent or about 250 retailers in Canada to cut costs under a survival plan that needed the approval of the Ottawa and Ontario governments so GM and Chrysler could obtain billions of dollars in public loans and equity investments.
The dealers are charging that the federal and provincial governments never asked or told the company to terminate dealers.
“The purported terminations were issued by GMCL in compliance with a directive from its parent company in the U.S.,” the dealers said, adding that it was “Made without consultation with or notice” to the GMCL, the dealers added.
The group also rejected the claim that the company’s original criteria for closures – including sales effectiveness, customer satisfaction, market share, location, facilities – was fair. In the U.S. the automaker used similar criteria in dropping dealership but then it changed that decision after admitting there were flaws – and it reinstated some dealers.
The dealers also charge the Canadian division had conflicts of interest because it kept several under performing dealerships where the company had a stake or control, at the expense of profitable retailers in the same or nearby markets who lost their stores.
“As a result of these economic interests, GMCL did not design and implement a fair evaluation process nor did it apply proper business judgment,” the dealers group said.
GM announced the decisions on closures in May last year. It offered payments ranging from $115,000 to $1-million for dealers being dropped. About 85 per cent of those dealers accepted that proposal.
The company said in its defence that it came close to applying for bankruptcy court protection and that the objecting dealers would have probably received nothing as unsecured creditors.
When the dealer group sued GM, it sought an injunction to remain open for at least another five years after expiry of their current contracts, which is at the end of October.
GM offered to extend the agreements until the end of January. A trial is scheduled to start in November.
Robinson is hoping her company will be reinstated as a GM dealership. It currently deals with GM representatives and, “We have a wonderful relationship with them … It’s business as usual. We’ve been in business 45 years and we don’t want to change now.”
