US car giant issues a May deadline for Holden dealer compensation agreements, though both sides are still at a stand-off.
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EXCLUSIVE

US car giant General Motors has issued a deadline to reach an agreement with Holden dealers over compensation for ending their franchise agreements almost three years early – following a high level meeting of lawyers and executives representing both parties last week.

A confidential email – issued after the meeting – from Holden to its network of 185 dealers who operate 203 showrooms, also warned the settlements will come in three separate payments rather than a lump sum.

The email from Holden to dealers, a copy of which has been obtained by CarAdvice, says that due to “the many significant impacts of COVID-19” lockdowns around the world and a global slump in car sales “it will be necessary to extend the payment dates”.

Dealers would initially receive 30 per cent of their settlement within the first two weeks of signing an agreement, a further 30 per cent within three months and the balance paid from October onwards.

The letter to dealers warned that all General Motors factories in the US, Canada, Mexico, and South America have closed during COVID-19 lockdowns and sales are at “historically low levels on a global basis” which has prompted “a need to review all costs across the global business”.

However, the letter said senior General Motors management was reviewing the counter-claim put forward by dealers and “intends to respond” at the earliest opportunity.

At the centre of the dispute is GM’s initial compensation to dealers which amounted to an average profit of $1500 per new car sold over a set period, among other provisions for outlets that had recently invested in new showrooms or facilities.

The Holden dealer group appointed forensic accounting firm KPMG to review the numbers. KPMG calculated the compensation offer should have amounted to approximately $6100 per new car sold over a set period, plus other provisions.

During the dispute, lawyers representing Holden dealers wrote to General Motors in the US requesting all documents relating to the closure of the brand be retained in case of any future legal action.

Holden dealers claim they were blindsided by the closure as they were promised a raft of new models and encouraged to invest in showrooms and facilities because they were assured by General Motors the brand had a long term future.

The Australian Competition and Consumer Commission (ACCC), the peak watchdog for consumers and businesses, has also taken an interest in the negotiations after lobbying from Holden dealers and senior politicians.

Last week, Mr Sims said the ACCC has not “formed any views, but we most certainly will look at (the Holden closure) in relation to any potential breaches of Australian Consumer Law and the franchising code”.

The letter issued last week – the most recent statement to come from Holden about the matter – said General Motors “remains of the view that the Transition Support Program offered to dealers since late February is fair and reasonable, but is considering what HWL Ebsworth (lawyers representing Holden dealers) has put forward.”

The Holden letter to dealers said: “Future financial circumstances are very uncertain, and very careful financial planning is required. GM Holden also needs to assess and plan for how it will resource its … network to meet ongoing service, repair, warranty and related obligations to customers”.

The letter continued: “GM Holden will therefore need to understand from each dealer by the end of May whether they accept our offer.”

In the meantime, most Holden dealers are almost sold out of stock. Some dealerships are stockpiling to try to trade for as long as possible if they don't have another brand to take Holden's showroom space.