US car giant General Motors has broken its silence and hit back at claims its compensation offer to Holden dealers over the shutdown of the brand is unfair – and says accusations of unconscionable and misleading conduct are “baseless”, “plainly wrong”, and “unsupported by fact or law”.
Holden dealers were initially offered by General Motors compensation equivalent to $1500 per new car sold over a set period of time – in addition to funding for recent showroom upgrades and other associated costs.
CarAdvice understands the compensation packages generally ranged from $100,000 to $3.2 million per Holden dealer – depending on individual circumstances – after General Motors announced the end of their franchise agreements almost three years before they were due to expire.
After seeking advice from an independent accounting firm, Holden dealers claimed they were owed close to $6100 per new car sold over the set period, in addition to extra costs associated with recent showroom upgrades.
Furthermore, after weeks of legal wrangling between Holden dealers and General Motors, the US car giant says the allegations of unconscionable and misleading conduct “are plainly wrong and unsupported by fact or law” and “are categorically rejected by GM Holden”.
A media statement issued by General Motors says it considers Holden’s offer of compensation and “transition support” to be “more than fair and reasonable, even before the devastating impact of COVID-19 on the economy and industry”.
General Motors says the compensation offer of $1500 per new car sold over a set period is more than “four times what the average dealer made in the new vehicle department over this same timeframe”.
Calculations made on behalf of Holden dealers said a more accurate compensation figure was closer to $6100 per new car sold over the set period.
However, General Motors claims the calculations made “a number of inaccurate assumptions and cost allocations”.
“For example,” the General Motors media bulletin says, “it omitted to factor in dealers’ opportunity to continue the service, repair, warranty and parts activities. Aftersales is typically one of the most profitable parts of a dealer’s business.”
General Motors also claims the calculations were wrongly based on 7.7 years of compensation when there is approximately 2.5 years remaining on the current agreement for service, parts and repairs after the wind down of Holden new vehicle sales.
“Dealers can continue to service and repair vehicles through to the end of the current agreement,” the General Motors bulletin says. “If they accept the compensation offer, dealers are also given the opportunity to continue as Holden authorised service operations beyond the current agreement.”
General Motors said calculations by its accounting experts claim the “range of compensation is actually $350-1409 per vehicle” after “making appropriate corrections and adjustments”.
Translation: Holden dealers want four times as much compensation as General Motors initially offered. Now the US car giant says its initial calculations were generous and in fact the compensation offer could have been a fraction of the nominal $1500 amount, based on its latest assessment.
When asked to respond to the General Motors’ bulletin, Holden Dealer Council secretary David Nicholson said: “It’s nothing we didn’t expect. We are moving to the next step in the process immediately. The dealers have all rallied and are incensed by the lack of respect and dignity that Holden (is) showing the network that has stood by them for 80 years”.
As for the accusations of ‘Unconscionable and Misleading Conduct’, General Motors says it “flatly rejects” the allegations by Holden dealers, and that the claims are based on “a bizarre and illogical argument that GM has secretly planned to shut down Holden since at least 2015, but made various significant investments in programs, plans and strategies to support and promote Holden in order to mislead dealers into thinking that there was no secret plan to shut down Holden”.
The General Motors bulletin continued: “It defies logic to believe that GM intended to close Holden while investing heavily in new or updated right-hand drive models for the Australian market.”
General Motors listed as examples the Holden Equinox and Holden Acadia SUVs, launched new in Australia in 2017 and 2018 respectively, and “significantly updated” versions of the Trailblazer 4WD, Trax city SUV and Colorado ute “introduced across a similar period”.
“In that timeframe GM also launched in Australia its mobility business Maven, its captive finance company Holden Financial Services, and invested heavily in the new (right-hand drive) Corvette to ensure its availability in Australia,” the General Motors bulletin said.
“There were also large investments made in marketing campaigns to improve Holden’s brand image and sales, ongoing spending on motorsport and other sponsorships, and significant investments in engineering staff and major upgrades to facilities at the company’s proving ground at Lang Lang in Victoria,” the statement said.
“Investments such as these cannot by any logic be held to be the actions of a company that allegedly intended to close through that time,” said General Motors.
In conclusion, General Motors wrote: “As the company stated on 17 February 2020, ultimately GM came to the very difficult decision that it could not support further investment in growing the Holden business into the future, because it could not meet GM’s investment thresholds.”
The General Motors bulletin also outlined two case studies to support its arguments and to show “the excessive nature of the dealers’ claims”.
Medium-sized Holden dealership:
“For a medium-sized Holden dealership which sold 190 cars in 2019, GM Holden’s per vehicle compensation offer totals $712,500. This significantly exceeds the average medium-sized dealer’s total net profit in 2019 across its business of (approximately) $200,000. It should be noted the $200,000 figure includes the very profitable service and parts business which dealers will continue to benefit from going forward,” the General Motors bulletin said. Under the formula used by Holden dealers, the compensation for that dealer would be $8,936,930, the General Motors bulletin claimed.
Large-sized Holden dealership:
“In the case of a large Holden dealer who sold 466 cars in 2019, the per vehicle compensation offered by GM Holden totals $1,747,500. This significantly exceeds the average large-sized dealer’s total net profit in 2019 across its business of (approxiately) $330,000. It should be noted the $330,000 figure includes the very profitable service and parts business which dealers will continue to benefit from going forward,” the General Motors bulletin said. Under the formula used by Holden dealers, the compensation for that dealer would be $21,923,902, the General Motors bulletin claimed.
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