#DealerCull

GM’s CEO and Chairman Whitacre gave Automotive News [sub] some choice nuggets of quote today. Addressing almost everything except his firm’s stagnant sales, Whitacre took on some of GM’s most staggering challenges in the most… folksy tone imaginable. Mr Whitacre, your explanation of GM’s bankruptcy dealer cull if you please:

The way it came out, if you fell above or below a line, you were removed. But you had to do it that way. You can’t just go around flipping coins, so you had to have a process.

Ok, take a minute to wrestle with that one. Then hit the jump.

If you haven’t been following the drama surrounding the effort to restore dealers culled during GM and Chrysler’s bankruptcy, you might need to be brought up to speed. In essence both the cut dealers and the automakers have agreed to send create an arbitration process by which dealers could have the decision to cut their franchise reviewed by a neutral third party. The remaining conflict is over the criteria arbitrators should use to judge dealer viability, as the GM and Chrysler proposition would have forced arbitrators to use the same criteria GM and Chrysler did in the initial cuts. That would obviously have yielded the same results as the initial cull, so the dealers pushed for a set of criteria that is more favorable to their interests. Automotive News [sub] reports that a compromise has been reached in conference committee that would allow dealers to present “any relevant information” to make their case. That bill is now been approved by the House [sub] and is headed to the Senate, where its passage is “virtually assured.” But despite having all but guaranteed an independent review, culled dealers still aren’t happy.

As soon as GM and Chrysler agreed to review their dealer cull decisions, the culled dealers in question began complaining that the review would not improve their situations. According to the aggrieved dealers, the new review would be based on the same allegedly flawed data as the initial cull, meaning nothing would be changed. By GM’s own admission, only 39-51 of the over 1,000 dealers cut would even stand a chance at reinstatement. Now, Automotive News [sub] reports that a new measure has passed the House of Representatives which would allow dealers to “present any kind of relevant information during the arbitration.” The measure comes in the form of an amendment to the House Financial Services bill, which is headed to a conference committee in which House and Senate leaders must arrive at a compromise in order to send the bill to President Obama.

Bowing to legislative pressure, GM and Chrysler have announced today that they will initiate reviews of the dealer cull undertaken during bankruptcy. GM is announcing a “Comprehensive Plan To Address Dealer Concerns,” while Chrysler characterizes its agreement as a “Binding Independent Review Process for Discontinued Dealers.” Both firms take pains to thank Senator Dick Durban and Rep Steny Hoyer for their leadership in preparing the non-legislative conclusion of months of bitter acrimony. Culled GM and Chrysler dealers, you know who to make your campaign donations to… unless you’re a member of the dissident group the Committee To Restore Dealer Rights. According to Automotive News [sub], the group says the new plans will only allow “between 39 and 51” culled GM dealers to be reinstated. “The GM proposal guarantees that they would win every arbitration,” says one member of the committee, who alleges that the new process is based on the same allegedly flawed data the initial cull was based on. Hit the jump for the plan outlines.

North of your border (not mine), GM dealers are slightly annoyed. In fact, they’re fuming. Topnews.us reports that Bob Slessor, owner of a dealership for GM has sued the firm after he was informed that his dealership would be closed before the end of 2009. And don’t think he’s the only one, 12 dealers are submitting multi million dollar lawsuits against the automotive arm of the U.S government. The lawsuits hinge on the way GM approached these dealer closures. Bob Slessor claim that GM used “high handed and oppressive” tactics. The plaintiffs are looking for a permanent injunction against their terminations and $1.5 million in punitive damages. The report didn’t state whether that figure was in U.S or Canadian dollars.

As congress nears the end of the 2009 legislative session, culled GM and Chrysler dealers are pushing hard for the rapid passage of the Automobile Dealer Economic Rights Restoration Act. Meanwhile, nearly two dozen members of the Senate Commerce Committee from both parties are calling on GM and Chrysler to resolve outstanding disputes with culled dealers in hopes of defusing the situation by non-legislative means.

Given the federal government’s ownership stake in Chrysler and GM, it is our shared obligation to ensure all impacted dealers are treated as fairly as possible. We continue to urge you to take all actions necessary to uphold the assurances you provided earlier, as well as to achieve a mutually agreeable and timely outcome to the negotiations between Chrysler, GM and the dealers. Chrysler and GM’s unprecedented bankruptcy has greatly impacted dealers, consumers, employees, small businesses, and communities across the country. It is crucial that outstanding issues be resolved as expeditiously and efficiently as possible to provide the least amount of hardship to Chrysler, GM and the dealers.

GM’s response to the senatorial call out? “Those discussions are still underway,” according to spokespeople, who refused to characterize the discussions for Reuters. Meanwhile, two examples of possible mitigating action by GM and Chrysler are not off to good starts.