Should follow U.S. parent's lead, dealers association says, but with two lawsuits pending company is sticking to its termination plan
Greg Keenan
Globe and Mail Update
Published on Friday, Mar. 05, 2010 6:26PM EST
Last updated on Saturday, Mar. 06, 2010 3:33AM EST
General Motors of Canada Ltd. should match its parent company and reinstate some of the 240 dealerships that were terminated last year when the auto maker was struggling to stay out of bankruptcy protection in Canada, the Canadian Automobile Dealers Association (CADA) says.
General Motors Co. (GM-T) offered Friday to permit as many as 660 of the 2,000 U.S. dealers it terminated last year to set up shop again and its Canadian unit should follow suit, says CADA, which represents a total of about 3,000 new vehicle dealers in Canada.
"The Canadian dealers are the dealers that allowed General Motors Canada to avoid bankruptcy," CADA president Rick Gauthier said Friday. "It's because they worked with General Motors and trusted General Motors and had faith in GM, it is because they [helped] General Motors avoid filing for CCAA here in Canada and because of that GM doesn't have the stigma of having gone bankrupt."
The restoration of U.S. dealers could affect the outcome of two lawsuits filed by Canadian dealers who received termination notices last May. One of those suits was filed by a group of 20 dealers who rejected termination and are seeking reinstatement, a move that would bring them back into the GM fold at a time when the auto maker is seeking to reduce a network that is far larger than its market share in Canada requires.
The battles by dealers in the U.S. and Canada to remain part of the GM family underscore the difficulties some auto makers face in making drastic cuts to distribution networks built up over decades.
Another group of dealers who signed wind-down agreements is suing GM Canada and the law firm that advised CADA when the Canadian unit announced last April that it was matching its parent company by slashing its dealership network by 42 per cent.
"I think what they do is follow the lead of the parent company, the one that's been calling the shots on the whole reorganization process from the beginning," Mr. Gauthier said.
Mark Reuss, president of North American operations for GM, described the restoration of the U.S. dealers as "a great day for the rebirth of General Motors."
GM will still be operating a slimmed-down dealership network in the U.S. because it originally slashed 2,000 outlets and it's still cutting more than 1,300, Mr. Reuss and other officials insisted yesterday.
GM Canada spokesman Tony LaRocca said the Canadian unit will not simply match what its parent company has done.
The court case involving the 20 dealers who rejected termination notices will determine whether any of those dealers in Canada will be reinstated, Mr. LaRocca said.
GM Canada is arguing that they should be heard individually through a process known as the National Automobile Dealer Arbitration Program and not in a court case that would apply to all 20 dealers.
The company is sticking to its plan to have a smaller distribution network in Canada, Mr. LaRocca said. It will fall to about 465 if the 240 terminations stick.
"If anybody's got the illusion that we are suddenly back in a completely different scenario and everything's back to the point where we totally change that [new] business model, they're definitely mistaken," he said.
The auto maker will have a network of about 4,900 outlets in the United States if all 660 dealers are reinstated.