GM: New GM Dealers Must Sign Loyalty Oath

Robert Farago
by Robert Farago

You may not be familiar with H.R. 2743. The Automobile Dealer Economic Rights Restoration Act of 2009 tells New Chrysler and New GM that they “may not deprive an automobile dealer of its economic rights and shall honor those rights as they existed, for Chrysler LLC dealers, prior to the commencement of the bankruptcy case by Chrysler LLC on April 30, 2009, and for General Motors Corp. dealers, prior to the commencement of the bankruptcy case by General Motors Corp. on June 1, 2009, including the dealer’s rights to recourse under State law.” In other words, it would reverse New ChryCo’s and New GM’s dealer cutbacks—or at least force Uncle Sam to spend taxpayer billions to dump them. The bill is doomed. But that’s not stopping GM from asking its post-cull dealers to show their fealty and help twist the knife into their former colleagues. Text of the “loyalty oath” after the jump. [thanks to you-know-who-you-are]

Action Required: Following your review of my letter below, please open the attached letter to read an e-mail letter that is being sent today to NADA Leadership, Automotive Trade Association Executives (ATAEs) and Congressional Co-Sponsors of the Automobile Dealer Economic Rights Restoration Act of 2009” (“H. R. 2743”).

To demonstrate your opposition to this Bill your signature and dealership information is needed at the bottom of the attached letter.

Dear Fellow GM Dealers:

On June 8, 2009, select members of Congress introduced a bill known as the “Automobile Dealer Economic Rights Restoration Act of 2009” (“H. R. 2743”). The General Motors National Dealer Council (“NDC”) strongly opposes this bill. As a leadership group that includes members that have been issued wind-down notices or have affected brands, all NDC members are painfully aware of the crisis facing GM and the automotive industry – and the impact this legislation would have on the dealer network. The bill is in direct opposition of the interests of the overwhelming majority of GM dealers selected to move forward with the New GM. In fact, the content of this bill could potentially impact our future dealer body in the following manner:

– It would seek to nullify GM’s plan to reshape its Dealer Network into a more effective, stronger distribution channel, and could at a minimum, significantly delay or entirely deerail the closing of GM’s sale of assets.

– Dealer profitability could continue to deteriorate as it has in the past few years where we have had too many dealers, too close together, competing for the same customer in the same market.

– This restructuring presents painful sacrifices to many. However, going forward, approximately 4,140 dealers will continue to depend on the sale of GM cars and trucks. While the National Dealer Council does not advocate the termination of any individual dealership, we understand that optimizing the dealer network will give the continuing dealers a greater opportunity to develop their operations which will improve their ability to compete against our best competitors. In addition, this new dealer network footprint will allow the New GM to focus on the four core brands- Chevrolet, Cadillac, Buick, and GMC, allowing for the attraction of more private capital, the best dealer operators, and most importantly, new customers.

We take strong exception to the way certain members of Congress have characterized GM’s handling of dealer network restructuring – including claims that it has been undertaken without transparency and justification. To the contrary, GM has conducted its dealer restructuring in an objective and professional manner, based on performance criteria that are part of its sales and service agreement with dealers. The NDC commends GM for taking this approach. GM’s approach is in stark contrast to the approach taken by Chrysler, which took a far different approach much less beneficial to the involved dealers.

GM has also taken great care to protect the confidentiality of dealer status and financial information, with the full support of the NDC. We also applaud GM and its leadership for its willingness to work with the NDC and NADA to address recent dealer concerns regarding the Participation Agreements issued to dealers that will move forward with the New GM after bankruptcy.

In closing, we wholly support GM’s reorganization plan, including actions to significantly reduce the overall size and scope of the company. Moreover, we stand ready to continue to work in partnership with GM on solutions to the challenges we face today. I plan to send the following letter to various bill supporters. I urge you to review this letter and would appreciate your signature of support at the bottom where designated. Please fax the signed letter to me at (989) 792-1002. (It is extremely important that you do this immediately. Our voices need to be heard.)

Thank you for your support by continuing to work tirelessly to insure that a new, vibrant GM can continue in to the future.


Duane Paddock

[NB: Duane Paddock is the GM National Dealer Council Chairman.]

Robert Farago
Robert Farago

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  • Sermgreby Sermgreby on Jul 08, 2009

    PCH101 I do not understand where you are coming from that GM should cut dealers that floor plan with GMAC, which by the way they only own a small portion of now. GMAC is in the business of loaning money to both consumers to purchase cars and dealers to floorplan with. This represents profits to GMAC. For a long time GMAC made money even when GM was loosing money on the sale of cars. A lot of dealers do floorplan with other sources and they got wind down agreements also. Remember it was not the dealers or GM for that matter that caused the credit markets to freeze up.

  • Bogyd22 Bogyd22 on Oct 13, 2009

    Well you didn't kill us by putting us on the cut list so now you are aking your so called good dealers to write the congressman and stop the dealer economic right. Most of the smaller dealers they are terminating are profitable. You are cutting these dealers so you bigger dealers might actualy become profitable. GM's problem is not the small dealer or any dealer as far as that goes. I think they should let it up the the dealer to make or break. This is a free country, I pay taxes, Let the economy decide who goes out of business, not Government Motors executives. Where has our freedom gone? Obama is ruining this country just like Henderson is going to ruin GM Again.

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