Local GM dealers face franchise fight

Local GM dealers face franchise fight

March 16th, 2010 by Ellis Smith in Business


Of the roughly 2,000 dealerships nationwide which were told their franchise agreements would not be renewed as part of GM's bankruptcy proceedings, about 1,100 filed for arbitration on or before Jan. 25, 2010. Of the 1,100 dealers who sought arbitration, GM sent letters to 661 dealers on March 11 allowing them to retain their franchise.

Dealers who did not receive a letter of intent have the option to either accept a wind-down settlement from GM, which will let the franchise expire on Oct. 31, or pursue arbitration with the carmaker to negotiate.

Arbitration must be completed by June 14.

Source: General Motors

None of the three Chattanooga-area auto dealerships whose franchise agreements were left unrenewed by GM has received a response to their appeal, dealers said Monday.

GM said on March 5 that 661 of the 1,100 dealers who filed for arbitration in response to their nonrenewal would receive letters of intent in the mail, allowing them to retain their franchise. The letters were mailed on March 11, the company said.

"All I can tell you is that we're still basically in limbo," said Tim Kelly, owner of Kelly Auto Group. "We're pursuing arbitration, and we've got some things that have been proposed, but until the other shoe drops, we won't know what's happening."

Mr. Kelly said he has no plans to lay off employees until he settles the matter with GM. His dealership sells Cadillac and GMC from GM. He also sells Saab, Mitsubishi, Subaru, Infiniti and Hummer brands.

Herb Adcox of Herb Adcox Chevrolet and Debbie Ledford Melton of Don Ledford Automotive in Cleveland, Tenn., have also avoided laying off employees thus far, they say, and have no plans to do so.

Ryndee Carney, spokeswoman for GM, said that if dealers were going to be reinstated, they would know by now.

FILE - General Motors Co. said Friday, March 5, 2010, it will reinstate about 600 dealerships that were slated to be cut from the automaker's network.(AP Photo/Lisa Poole, file)

FILE - General Motors Co. said Friday, March...

"We called all of the dealers who will be receiving letters by close of business on Monday the 8th, so anybody who was going to get a letter was telephoned," she said. "Their option is now to either reach a settlement with us, which we hope they would do, or pursue arbitration."

Herb Adcox of Herb Adcox Chevrolet said that while GM originally took a hard line with dealers during the carmaker's bankruptcy, public outcry, congressional mandates and new management have begun to soften the company's stance.

"I think (GM management) found out the old GM acted in haste, and did some things to get out of that bankruptcy as quick as they could that they shouldn't have, and I think the new GM has had a chance to look at it and say, 'Well, we've canceled a lot of dealers that we shouldn't have,'" Mr. Adcox said.

In the meantime, cars remain in short supply as a result of what some dealers say is GM's decision to keep production levels low for those whose franchises are in limbo.

"Right now, every dealer I talk to is complaining about not being able to get the proper mix of cars to their dealership to make a profit," Mr. Adcox said.

Mr. Kelly agreed, saying that although he has been unable to get cars directly from GM, he's been able to restock by going through brokers and other dealers.

Despite the difficulties of low inventory, a legal battle and an uncertain future, Mr. Adcox said he isn't going anywhere. He added that even if GM denies his petition to stay on under GM, he's prepared to go into business under another brand.

"Some of the dealers have gone into used cars, and you have imports that are open for dealers," said Mr. Adcox. "I'd say a former Chevrolet dealer would be an ideal candidate for an import franchise."

Debbie Ledford Melton, general manager for Don Ledford Automotive, said that while she too has heard nothing from GM regarding the franchise status of her dealership, she remains hopeful.

"I don't think anybody's as eager as I am to get this resolved," she said. "I'm very optimistic that we will be getting our franchise back."

Spokesmen for the dealerships were reluctant to reveal details of their negotiations with GM under trms of nondisclosure agreements signed with the automaker as a condition of the arbitration process.