GENERAL Motors has slammed the law firm acting for some Holden dealers by “flatly” rejecting claims of deceptive conduct. It refutes claims around its plans to shut down Holden as “a bizarre and illogical argument.”

In a strongly worded counter to the law firm acting on behalf of Holden dealers, HWL Ebsworth, GM said “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 including Equinox and Acadia, launched new here in 2017 and 2018 respectively, and significantly updated Trailblazer, Trax and Colorado models introduced across a similar period.”

It said that in that period, GM also launched car-share business Maven, Holden Financial Services, invested in a right-hand drive Corvette for Australia, supported motorsport, invested in engineering and upgraded the Lang Lang proving ground.

“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,” it said.

GM has also hit back at compensation claims by dealers by saying its offer “is fair and reasonable” and more than four times what the average Holden dealer made in new vehicle sales in a three-year period to 2019.

In a statement, Holden said its calculations – undertaken by PriceWaterhouse Coopers (PwC) and Norton Rose Fulbright – were based on the fiscal years 2017 to 2019 and equivalent to $1500 for every new vehicle sold, saying that is four times the return on each vehicle.

In claims made by Holden dealers and law firm HWL Ebsworth, the value was estimated at $6110 per vehicle.

Holden also refutes claims by its disgruntled dealers and HWL Ebsworth by saying their claims include “a number of inaccurate claims, assumptions and costs allocations.”

Holden’s statement said HWL Ebsworth claimed, for example, that “it also made baseless allegations of unconscionable and misleading conduct which are plainly wrong and unsupported by fact or law” .

“These allegations are categorically rejected by GM Holden.”

In its statement, GM said the analysis by PwC of HWL Ebsworth’s modelling for the $6110 per vehicle value “identified a number of inaccurate assumptions and cost allocations.”

“For example, it omitted to factor in dealers’ opportunity to continue the service, repair, warranty and parts activities,” GM said.

“Aftersales is typically one of the most profitable parts of a dealer’s business representing on average up to 115 per cent of a dealer’s total net profit in 2019.

“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.

“If they accept the compensation offer, dealers are also given the opportunity to continue as Holden authorised service operations beyond the current agreement.

“PwC, after making appropriate corrections and adjustments, concluded that an appropriate range of compensation is actually $350-1409 per vehicle.”

GM said it was committed to maintaining an aftersales operation in Australia for at least 10 years to provide warranty, service and parts to Holden customers.

It said the proposal by HWL Ebsworth “wrongly based” calculations on 7.7 years of compensation “when there is approximately 2.5 years remaining on the current agreement” because of the 10-year commitment to support owners”.

In February, GoAutoNews Premium reported that Vinesh George of Sydney-based VS George Lawyers said Holden dealers could be significantly out of pocket as the brand’s compensation package did not appear to cover lease costs and recent facility expenditure costs.

“If Holden is offering to pay out dealers’ net profit for the remainder of their dealer agreement term, which is what appears to be on the table, then I would say it will fall far, far short of the true value of the claims open to Holden dealers,” Mr George said.

“Such an offer, in many cases, wouldn’t cover the lease costs.”

He said that Holden dealers could take legal proceedings against Holden and GM for contract claims that could be considered unlawful stretching back at least six years.

This includes the period when a large number of Holden dealers were acrimoniously sacked in December 2017 as the brand reduced its dealer footprint.

In response, GM said its compensation offer includes un-recouped Holden facility investments which it said were “valued independently and dealt with separately in addition to the compensation offered” using the PwC formula.

GM included two case studies in its answer to HWL Ebsworth’s claims which it said “show the excessive nature of the dealers’ claims.” They are:

Case Study 1: Medium-sized 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 about $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. In contrast, under the HWLE formula, the compensation for that dealer would be $8,936,930.

Case Study 2: Large-sized 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 about $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. In contrast, under the HWLE formula, the compensation for that dealer would be $21,923,902.

By Neil Dowling