GM Denies That It Is Undercompensating Holden Dealerships

General Motors has responded to claims asserting that its compensation to Holden dealerships forced to close is unfair.

Under the compensation plan offered to dealerships, GM will pay out the equivalent of AU$1,500 per new car sold over a set period of time. In addition, the car giant will provide funding for recent showroom upgrades made by individual Holden dealerships while also covering other associated costs.

However, in a proposal for a lawsuit on behalf of Holden dealers from law firm HWL Ebsworth (HWLE), it is claimed that dealers should be receiving the equivalent of AU$6,110 for each new car sold over the set period. GM says the modeling for such an amount is wrong.

“For example, it omitted to factor in dealers’ opportunity to continue the service, repair, warranty and parts activities. Aftersales is typically one of the most profitable parts of a dealer’s business representing on average up to 115% of a dealer’s total net profit in 2019,” the automaker said.

GM also claims that HWLE’s proposal was wrongly based on 7.7 years of compensation when there is approximately 2.5 years remaining on the current agreement with Holden dealerships. After the sale of new Holden vehicles winds down, dealers will be able to continue to service and repair vehicles through to the end of this agreement. Dealers who accept the compensation offer will also be given the opportunity to continue as Holden authorized service operations beyond the current agreement.

Based on calculations undertaken by PricewaterhouseCoopers on behalf of GM, the appropriate range of compensation is AU$350-$1,409 per vehicle.

“GM and GM Holden flatly reject HWLE’s claims of misleading, deceptive or unconscionable conduct. These claims are based on a bizarre and illogical argument that GM has secretly planned to shut down Holden since at least 2015, but made various significant investments in programs, plans and strategies to support and promote Holden in order to mislead dealers into thinking that there was no secret plan to shut down Holden,” GM’s statement adds.

“It defies logic to believe that GM intended to close Holden while investing heavily in new or updated right hand drive (RHD) 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.”

General Motors added that it also made significant investments to launch its mobility business Maven in Australia, invested heavily in the right-hand drive Corvette, as well as in marketing campaigns and ongoing spending on motorsport and other sponsorships in recent years, claiming it would be illogical to have made these investments if it had secretly been planning to end Holden operations from as far back as 2015.