BIRMINGHAM, Ala. — On behalf of terminated and soon-to-be-terminated GM auto dealerships, former U.S. Attorney G. Douglas Jones dispatched a letter Tuesday to General Motors bankruptcy trustee Diana G. Adams asking that a special committee be established to protect the interests of terminated GM auto dealerships that operate as separate operating entities and have provided hundreds of millions in tax revenues to state and local governments.
"The best way to at least create a seat at the table for the affected dealers and the claims they represent in the bankruptcy is the appointment of a Terminated Dealers Committee," wrote Jones. "The significant interest these dealers have in the orderly bankruptcy process and the interplay of the dealers’ rights under both bankruptcy law and applicable state laws is vital. The appointment of such a committee is crucial in these opening days as important decisions concerning the future of General Motors are being reached."
GM announced last month that they intended to slash auto dealerships by 42 percent from 2008 to 2010 levels. Dealerships will be reduced by 2,641 locations, from 6,246 to 3,605.
The proposal came in reaction to auto dealerships being left out of the restructuring.
"Unlike many of the major affected players, including the United States government, United Auto Workers, major suppliers, bond holders and multi-million dollar pension funds, these small town dealerships risk having no voice in the General Motors bankruptcy," Jones wrote.
Jones added, "It is important to note that these dealerships are wholly-owned and separate operating entities apart from General Motors. In fact, many of these dealerships are operating companies that have successfully been in existence and turning a profit for years. For example, our client, Abercrombie Chevrolet has been in existence for over 52 years and has been a family owned General Motors dealership operating in Hartselle, Ala. The Abercrombie family, along with owners and families throughout this country, are being severely impacted by the General Motors bankruptcy."
John McEleney, chairman of the National Automobile Dealers Association (NADA) commended a Senate committee yesterday for focusing on the unfair treatment of the General Motors and Chrysler dealers. Also, McEleney expressed grave concerns about GM’s plan to require all of its surviving dealers to sign a one-sided, open-ended operating agreement as a condition for remaining a GM dealer.
GM delivered the so-called "Participation Letter," actually a 24-page binding, legal contract, to all of its surviving dealers on June 2.
"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.
"Also, I will be subjecting my business to sales performance standards that are not specified in the contract. Even worse, GM can alter the terms of these requirements at any time at its sole discretion. The final blow: I must waive any right of protest to any action taken by the manufacturer," he added.
"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 added. "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.
"State franchise laws inject balance in the inherently one-sided economic relationship between a dealer and the manufacturer and provide consumers a reliable, convenient, and competitive auto retail network," McEleney added. "The terms of the GM ‘go-forward’ Agreements must be changed. No manufacturer has ever imposed such outrageous terms in dealer operator agreements."
Chrysler and GM have announced plans to terminate 3,400 dealerships, which will affect more than 100,000 employees.
