GM to reinstate half of U.S. dealerships; no word on Canadian counterparts

"There's no word yet on whether or not they are going to be flip-flopping on the terminations in Canada," said David Sterns, a lawyer representing more than 200 Canadian GM auto dealers who were forced to close their doors in 2009 in a class-action lawsuit filed in January. "It was sort of a change of heart on the part of GM."

http://www.canada.com
March 5, 2010

GM to reinstate half of U.S. dealerships; no word on Canadian counterparts

GM.jpg

General Motors Co., said on Friday it will offer to reinstate 661 of its U.S. dealers that had been targeted for closure as part of its bankruptcy restructuring last year. Photograph by: Reuters, Reuters

TORONTO — As General Motors moved to reinstate hundreds of its U.S. dealers on Friday, there was no word whether a similar offer would be made to dealerships north of the border.

"There's no word yet on whether or not they are going to be flip-flopping on the terminations in Canada," said David Sterns, a lawyer representing more than 200 Canadian GM auto dealers who were forced to close their doors in 2009 in a class-action lawsuit filed in January. "It was sort of a change of heart on the part of GM."

Sterns said about 240 dealership contracts were terminated in Canada as part of the cost-cutting measures introduced in connection with last year's auto bailout.

"It is clear that the process used to terminate some 240 GM dealers in Canada was flawed. Based on the American admission it is clear GM Canada has made some mistakes and needs to own up to these mistakes and reinstate Canadian dealers just as they are doing in the United States," said Canadian Automobile Dealers Association CEO Richard Gauthier in a statement Friday night. It said the forced closures in Canada took out 12,000 jobs in every region in Canada.

General Motors Co., said on Friday it will offer to reinstate 661 of its U.S. dealers that had been targeted for closure as part of its bankruptcy restructuring last year.

GM planned to terminate franchise agreements with about 1,300 U.S. dealers by the end of 2010 in a bid to operate its retail networks more efficiently and return the company to profitability. But some 1,160 of them sought — and won — arbitration.

GM North American President Mark Reuss said the automaker has opted to reinstate more than half of the dealers appealing closure in an effort to complete the arbitration process before a congressionally mandated deadline of July 15.

The company plans to continue settlement talks with some 500 dealers who will not be offered reinstatement and remain in arbitration, he said.

To be reinstated, the dealers will have to meet certain business criteria, including minimum working capital requirements, sales and profitability within 60 days of receiving reinstatement letters next week.

"We are highly confident that this is the right size and the right quality," Reuss said during a conference call with reporters.

Representatives from GM Canada were not available for comment late Friday evening.

The class-action suit here, filed in an Ontario Superior Court of Justice, seeks $750 million in damages for 215 franchises over "breached franchise laws" when the dealers weren't granted a formal insolvency proceeding in Canada.

With files from Reuters
© Copyright (c) Canwest News Service

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