Honda accused of intimidating Aussie dealership

Car giant Honda has been grilled over allegations it intimidated its Australian franchises as part of its strategy to shut down dealerships.

Honda has been accused of intimidating an Australian dealership into accepting a “grossly undervalued” compensation package, after abruptly cancelling its contract.

The Japanese car giant terminated a five-year deal with its largest-selling Australian franchise, Astoria, as it pushed ahead with plans to scale back its number of showrooms in Australia.

The Melbourne-based dealership had been in continuous operation for more than 50 years, but is now fighting for its survival after what it described as the “shock” termination.

It employs about 100 staff, some of whom have been at the franchise for over 30 years.

Honda has been accused of pressuring its Australian franchises to accept ‘grossly undervalued’ compensation, despite terminating their contracts. Picture: Philip Fong/AFP

In a submission to a senate inquiry last month, Astoria said Honda offered a compensation package that “grossly undervalues the actual loss we will suffer”. It claimed a separate accountancy group found it was entitled to four times the offered value.

The compensation package did not cover redundancies caused by the contract termination.

Astoria also alleged it was intimidated to accept the deal with threats of money-sapping litigation.

“Many (other Honda dealers) have reluctantly decided to accept their offer because they don’t wish to be involved in litigation and have otherwise been muzzled by an exit deed,” the dealership said in its submission.

“They have advised us that they have also been subjected to intimidatory tactics but have folded, as they do not have the appetite to continue.”

The Japanese car giant has been accused of using intimidatory tactics. Picture: Philip Fong/AFP

Honda Australia requested the committee purge Astoria’s submission from its website, and replace it with a redacted version, a demand the committee rejected.

Honda Australia executive director Stephen Collins denied the company had engaged in intimidation, claiming it “erred on the generous side” during compensation negotiations.

He insisted all compensation packages were agreed to willingly.

“We had an open, transparent communication. We’ve been to mediation in absolutely good faith,” he told the inquiry.

But Labor Senator Deb O’Neill bit back, saying multiple businesses had complained their compensation did not adequately cover redundancy costs or capital investment.

“An open and transparent communication from one powerful entity to a less powerful entity doesn’t always look like (that) to the less powerful person,” she said.

Labor Senator Deborah O’Neill says there is a power imbalance in compensation negations. Picture: Gary Ramage

“When you’re the little guy, when you’re a small business against a big multinational like Honda, you haven’t got much power in those negotiations, have you?”

Federal Labor has called for a stand-alone dealership code that would include mandatory arbitration. It argued the move would address the imbalance between huge multinationals and local franchises.

Senator O’Neill told NCA NewsWire that Industry Minister Karen Andrews and the Morrison government had not done enough to protect the Australian auto industry.

“How does a business go from being the largest selling Honda car dealer in Australia in 2019 to currently being in court fighting for their survival? The answer is: Karen Andrews,” she said.

“Any claim this government ever makes about being the party of small business can never again be accepted.

“Jobs are gone and more are going, while Andrews and Scott Morrison don’t lift a finger to stop overseas companies power smashing our car sales and repair network to bits.”

Labor has taken aim at Industry Minister Karen Andrews. Picture: Matt Taylor

The government amended the Franchising Code of Conduct in June, in a move it said clarified dispute resolution.

Despite claims the reforms could go further, Ms Andrews said the Morrison government had delivered results that protected Australian car dealers.

“Deb O’Neill can try to rewrite history and make this as personal as she likes, but her pithy comments only emphasise her distinct lack of understanding of the sector and what the issues are,” she told NCA NewsWire.
“Our reforms balance the need to better protect car dealers with an environment that is attractive to manufacturers to invest in our nation, while ensuring a good deal for everyday Australians buying the cars.

“After years of neglect under Labor, the two peak bodies representing car dealers described the changes as a strong step toward levelling the playing field.”

Honda plans to scale back the number of showrooms in Australia, and move to a fixed-price agency model. The switch would prevent Australian dealers from negotiating prices with customers.

Originally published as Honda accused of intimidating Aussie dealership