Canadian Automobile Dealers Association

The country's auto dealers association says General Motors of Canada should admit its mistakes and reverse plans to close many of its retailers after the company's parent suggested it erred in more than half of the decisions to shut down U.S. stores under a restructuring plan.

Rick Gauthier, president of the Canadian Automobile Dealers Association, said Friday it's hard to believe that GM made the right decision here in terminating the 240 retailers it targeted for nonrenewal of franchise agreements, in view of a major shift by parent GM.

"They (GM Canada) are not infallible," Gauthier said. "But they have seen fit not to admit they made one mistake regarding a closure here. Yet, the parent company, which dictates policy on the Canadian arm, is admitting it probably got it wrong 50 per cent of the time."

Parent GM announced earlier in the day it will reinstate 661 dealers out of 1,100 it slated for closing in the U.S. last year as part of a survival plan to become profitable again.

The move came after the U.S. government mandated arbitration in December for GM dealers the company had pegged for closing. But Mark Reuss, president of GM North America, said GM planned to contact dealers to discuss settling outside of arbitration to avoid the time and cost.

The company will start sending letters of intent to dealers and if they meet requirements, factory deliveries would resume.

In Canada, GM offered "wind-down" agreements for a short time to targeted dealers that partly compensated them for the loss of franchises. If they didn't accept the terms and close their stores by the end of 2009, the company said it would not renew agreements when they expire this October.

GM said it needed to slash its dealer networks in both countries as part of restructuring plans so the struggling automaker could qualify for government aid.

Most dealers accepted the wind-down agreements, but two groups have sued GM for damages and renewal of their franchises.

GM of Canada says 26 dealers sought and received management reviews, but the company still needs to finish assessments.

"There have been no reversals to date," said GM communications director Tony LaRocca.

He noted processes to resolve disputes in the two countries are like "comparing apples to oranges."

Gauthier said the association is critical of the management reviews for lack of transparency and fairness. The arbitration process also limits what dealers can gain and forces them to individually contest a major corporation with vast financial resources, he added.

In the U.S., GM gained court protection from creditors, which lifted many obligations to dealers, but Gauthier said the company is now honouring them. In Canada, dealers helped GM avert court protection but they now can't get fair treatment, he noted.

"GM owes it to its dealers to inject some element of fairness in its review process," said Gauthier, who represents about 3,400 dealers with numerous manufacturers.

He said GM Canada should also give dealers who accepted wind-down agreements a "fair hearing."

A group of 19 dealers that didn't sign the wind-down agreements sued GM of Canada last November for millions of dollars in damages and an injunction to remain open for at least another five years. They alleged GM effectively ended their franchise agreements in a "high-handed, oppressive and patently unfair" manner.

GM, which is asking the Ontario Superior Court of Justice to move the case to the dealer arbitration program, said in its statement of defence it dealt with store owners "in good faith and has made significant efforts to ensure the smoothest transition and wind-down of operations possible for them under difficult circumstances."