Good News/Bad News/Good News For Disenfranchised Dealers

December 14, 2009
Capitol Hill

Capitol Hill

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Last week, we told you about General Motors' "Comprehensive Plan to Address Dealer Concerns", in which GM essentially said, "Okay, dealers: we'll explain our criteria for cutting you from our network, and if you think you were treated unfairly, we'll go to arbitration. (Although the only thing subject to arbitration is whether or not you met our elimination criteria. If you just want to argue that you're an awesome and viable dealership, save your breath.)" That was good news to dealers -- fairly limited good news, but good news nonetheless.

However, in the press release announcing GM's plan, there was one significant caveat: "GM will begin to implement this plan in mid-January provided that legislation related to GM's dealer restructuring does not move forward." And guess what? That legislation has now moved forward. It was included in a larger spending bill that passed the U.S. Senate yesterday on a vote of 57-35, which President Obama is expected to sign. The bill requires "neutral arbitration", meaning that arbitrators will have to consider not only the needs of GM (and Chrysler), but also the needs of dealers and the general public.

This is great news for eliminated dealers. Under GM's plan, the standard for arbitration would have been simply whether or not GM cut dealerships in accordance with its established criteria; if dealers had met the criteria for elimination, any arguments they might make about strong sales, good location, or longstanding membership in the GM network would be moot. Under federal arbitration, however, dealers will be able to make exactly those sorts of arguments and potentially see reinstatement.

On the other hand, although the bill should prove beneficial for dealers, it may have a less desirable effect on GM's sales and marketing fronts. We'll keep you posted as more details about the legislation and its implications become available.

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