Holden’s national network of 185 dealers – operating 203 showrooms – have appointed law firm HWL Ebsworth and forensic accountants KPMG to negotiate with US car giant General Motors over compensation offers they claim are “grossly inadequate” and not a fair reflection of the financial impact on their businesses and staff.
Following Holden’s announcement it will pull out of Australia by the end of this year, representatives for General Motors are still in the process of offering compensation packages to every dealership as each discussion is face-to-face.
However, most Holden dealers have already received their offers and the remainder have been able to calculate their likely compensation packages based on figures shared with other showroom owners.
When General Motors announced the shutdown of Holden and its withdrawal from right-hand-drive markets globally last month, the company said it had set aside $US1.1 billion to close its operations in Thailand, Australia and New Zealand.
However, the compensation bill to Holden dealers in Australia alone is estimated by some to cost in excess of $US2 billion.
The Holden Dealer Council estimates General Motors’ initial offer is one-fifth what they are owed.
Among the key arguments is that General Motors encouraged Holden dealers to invest in new showrooms, renovations and signage – and denied numerous applications to take on other brands – even though Detroit knew it was going to pull out of Australia.
Some dealers have just opened – or were about to open – brand new or renovated showrooms that each cost between $3 million and $6.5 million, while others are locked into long term leases on their properties and do not have another car brand to replace Holden.
CarAdvice has learned most of the compensation offers made to Holden dealers so far have ranged from $100,000 to $2.4 million depending on their circumstances.
General Motors has calculated compensation to dealers based on each showroom’s average net profit from all new Holdens sold over three years from 2017 to 2019 – but based volume on the number of vehicles sold in 2019 – and forecast that amount over the remaining term of their franchise agreements which were due to expire at the end of 2022.
However, General Motors says it will also take into account unamortised costs of facilities such as showrooms and signage.
When asked for comment, Holden repeated its earlier statement: “Holden is doing the right thing by its dealers during this difficult time. We believe the offer is fair. In most cases Holden dealers will receive compensation a factor of four times the average Holden new car profit per unit of all dealerships over the 2017-2019 fiscal years.” Holden noted the 2017 fiscal year included higher than average profits from the last of the locally-made Commodores (pictured below).
Meanwhile, Holden dealers have been asked to make submissions to the senate inquiry, announced by the Federal Government last month after both sides of politics vowed to make sure General Motors meets its obligations to customers, dealers and their employees under Australian law.
Holden estimates the number of dealership staff affected by the closure is less than 1000 – five employees per showroom – while the dealer council says the figure is closer to 9000 when all aspects of each dealership is taken into account.
Holden Dealer Council representatives met with Prime Minister Scott Morrison the week after the shutdown announcement mid February.
One of the dealers present in the Canberra meeting room claimed the Prime Minister told them: “I won’t have big overseas corporates destroying Australian family businesses”.
“We just want a fair deal so we can transition our businesses and look after our 9000 workers,” said one of the Holden dealers present in the Canberra meeting, who asked to remain anonymous. “Our employees have done nothing wrong and we need enough compensation to help them into other jobs, or risk making them redundant.”