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GENERAL Motors has squandered its opportunity to depart Australia in an orderly manner by low-balling by a country mile its compensation for its 220 Australasian dealers.

In doing so, it has brought down upon itself a legal and political firestorm that could include public cross examination and humiliation of key Holden executives past and present in a Senate inquiry and most likely in the legal proceedings that are sure to follow if GM does not change its stance on compensation.

Shocked dealers say their compensation packages are being offered on a blank sheet of paper with no Holden letterhead and no name or signature.

The sudden impact of the withdrawal on dealers is only just hitting home with only enough stock on hand to keep their showrooms open until mid-April or early May. And dealers say they are being told that they will not be able to keep their service departments open unless they apply to Holden and sign a new service and parts agreement.

Dealers say that such a move would be held over them and would be designed to keep dealers complicit and cave in on the GM offers because keeping Holden service operations is so vital to tiding them over until they can make plans for their Holden facilities.

It would also appear to go against statements made by GM at its recent press conference that Holden owners would be able to get their cars serviced at their Holden dealership for another 10 years.

Right now ‘town hall’ meetings are being held across Australia with dealers and with forensic accounting and legal teams which are outlining how far apart GM is from providing truly equitable compensation.

Dealers are signing on to an initiative that will inevitably lead to those dealers taking part in a class action if GM does not settle on a fair result. It is estimated that 150 dealers will join the joint action by the end of this process.

Dealers are saying that Holden’s offers are at least one fifth of what is reasonable in the circumstances, and in some cases one tenth. Calculations by accountants familiar with dealers’ books suggest that claims on GM will total $2 billion – about the same that the General Motors Company makes in profit in a typical three months of operations.

GoAutoNews Premium has been told: “There is no appetite in the network to settle on these numbers.”

The background steps have already been taken to prepare the matter for trial.

Dealers are saying: “Step up and offer us full value or we will make this very, very painful for you.”

Politically, pressure is coming from the Australian parliament and this is where it gets messy for current and previous Holden executives where steps to prevent Holden dealers from taking on other brands in order to protect and diversify their businesses will come under the spotlight.

During an unprecedented period of new brands entering the Australian market, Holden was refusing permission for its dealers to open dealerships for any new brands on pain of losing their Holden franchise.

Dealers will argue that in denying them the opportunity to spread their business risk across other brands, GM took on a special responsibility to ensure its Holden plans were successful.

Jim Bunnell

Given their plans were spectacularly unsuccessful, GM therefore must accept responsibility for refusing those other brands and compensate the dealers for hobbling their business prospects.

Dealers will also be attempting to establish that at the same time Holden was encouraging dealers to invest heavily in the brand with new or upgraded premises, GM had already embarked on internal strategies that would lead to GM leaving right-hand-drive manufacturing worldwide which meant Holden dealers would no longer have cars to sell.

That it has come to this sorry pass is entirely down to the way GM has managed the process.

Had GM allocated funds for a fair compensation package then dealers would have licked their wounds and got on with reorganising their businesses as best they can.

But the package is so far away from being fair (it is said some offers do not even cover staff redundancy costs), battle lines have been drawn and as a consequence of the mismanagement of the process, Holden executives face cross examination from senators in the Australian parliament.

Of particular interest would be evidence by Jim Bunnell, the GM senior executive sent to Australia to manage the exit arrangements with Holden dealers, should he be called.

Mr Bunnell has a reputation among GM dealers overseas, who have felt the heat of his blowtorch, as being one of GM’s ‘hard men’. He has been called out of retirement to handle the Holden dealer exit arrangements.

Mr Bunnell is a GM expert in network rationalisation and guided GM through the exit of Chevrolet in Europe, South Africa and India. Mr Bunnell, or someone else high up in Detroit, may well be able to cast light on just when GM drew up its plans to end RHD production.

This is significant because dealers now believe that while they were being encouraged to focus on Holden and invest in the brand with statements like ‘a return to 10 per cent market share’ or ‘22 more Holden models to be launched in Australia’, someone in GM already knew that Holden was finished.

Dealers say the Senate inquiry is therefore important as it can seek the truth under parliamentary privilege.

It is also important because it has the potential to expose to the wider business world the internal browbeating that goes on between many OEMs like GM and their dealers and this could get a lot out into the open at the time when the dealers are working to get their special automotive retailing franchise code over the line.

As earlier reported, Holden dealers, via the AADA, met with the prime minister Scott Morrison last week and then with key members of the opposition.

Following those meetings, a Senate hearing was set down to investigate the impact of the decision to leave Australia on Holden owners, including servicing and repairs, and will be scrutinising the effect on dealers, workers and research and development facilities.

In a statement a Holden spokesman said: “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/unit of all dealerships over the 2017-2019 fiscal years. This number includes the sale of highly profitable domestically produced Commodore units in 2017/18.

“The compensation formula Holden is using is applied consistently for all dealers and covers reasonable earning expectations from the New Holden sales department over the remaining portion of the Dealer Agreement. All dealers also have the opportunity to continue as Holden Authorised Service Outlets, maintaining their current service and repair client base. This is a consistently very profitable part of their businesses.

“The proposed compensation also includes a provision to reimburse dealers for a portion of their unamortised investments in their new car showroom, as well as full reimbursement of unamortised investments in Holden dealer signage.”

By John Mellor

Dealer Auction