Holden dealers accept ‘inadequate’ GM compensation offer

Bitter Holden dealers say they’ve been forced into accepting a poor offer from GM and delivered a warning to other franchisers.

Holden dealer Adam Sawicki was one of many dealers unhappy with GM’s proposed compensation. Picture: Rob Leeson.

A majority of Australia’s Holden Dealers have relented and accepted a compensation package from brand owner General Motors Holden they previously rejected as the ongoing coronavirus crisis further pressure on the struggling car sales industry.

Dealer groups have also hit out a regulations they say allowed the Detroit motor giant to walk away from agreements and leave dealers deeply out of pocket. GM’s dumping of its struggling Australian operation came amid a wider global exit from all right-had drive markets.

The agreed-to GM package is designed to support 185 Holden dealers in the aftermath of the 90-year old car brand’s retirement, announced by GM in February.

The compensation arrangement will provide dealers with a settlement of $1500 per vehicle over the next two and a half years, based on the 2019 dealer volumes, plus the opportunity to serve as an authorised service provider for Holden vehicles for the next five years.

The deal – which has been accepted by 120 of the 185 Holden dealerships in Australia – was rejected by all dealers in May and branded by the Australian Holden Dealer Council as inadequate. The group said KPMG modelling suggested compensation should be in the region of $6110 per vehicle.

But GM has previously countered this claim with its own modelling from PwC stating the KPMG report contained “a number of inaccurate assumptions and cost allocations”.

Settlement discussions and an arbitration process suggested by The Australian government have also failed to provide a solution.

On Wednesday Australian Holden Dealer Council Secretary David Nicholson said the dealers who relented “were left with no choice but to accept General Motor Holden’s compensation offer with “great reservation, financial pressure and reluctance.

“Holden dealers … loyally supported General Motors Holden (GM) during some of its toughest times,” Mr Nicholson said.

“During the 1991 recession and throughout the Global Financial Crisis, Holden dealers continued to take stock from GM in order to help it survive the crisis, while it squandered more than $2 billion in taxpayer funded support over the years.

“Yet, as Australia entered its first recession since ’91, sadly the loyalty and support toward GM has not been reciprocated,” he said.

Poor regulation also wore some of the blame for the situation faced by dealers, he said.

“Weak regulations, heavily favouring the multinational franchisor, have effectively allowed GM to walk away from their agreements leaving dealers with empty showrooms and millions in losses.”

Evan Stents, lead partner of the automotive industry group at HWL Ebsworth lawyers, who will represent the dealers who did not agree to the compensation package said it remained “manifestly inadequate.”

“It’s very disappointing that GM-Holden has not sought to shift its offer, not even one dollar, despite the KPMG analysis demonstrating the inadequacy of their offer,” Mr Stents told The Australian.

“It’s the same deal. It hasn’t challenged one dollar.

“Dealers are bitterly disappointed in having to accept the offer but most dealers are not in a financial position to have to wait until the conclusion of a legal proceeding to be compensated.

“GM Holden has cynically exploited the vulnerability of dealers. If its offer was truly fair as GM Holden says it was, then it would have agreed to the Government‘s reasonable suggestion of arbitration.”

Mr Stent said the dealers who did not accept the offer will now pursue other options to get “fair and just offers from Holden.”

Mr Nicholson said that the actions of General Motors did not bode well for other businesses reliant on multinational partners.

“GM have thumbed their nose at Canberra … refusing to negotiate in good faith, making a mockery of mediation and finally rejecting arbitration. If Australia continues to allow small, family businesses to be ruined by overseas corporates then what have we become?

“General Motors Holden’s exit sets a dangerous precedent – it’s time to make some changes otherwise it might be your job or business next.”

A spokesman for General Motors Holden told The Australian all dealers in New Zealand had also accepted the offer.

“‘While it has been a very difficult four and a half months for everyone involved since the announcement to retire the Holden brand, our focus is now on how we can best support our 1.6 million Holden drivers,” he said.

In a note to dealers, Holden interim chairman and managing director Kristian Aquilina mirrored the sentiment of difficulty felt by all involved.

“Many of us may still feel bruised from this long process. While it is natural to feel this way, choosing to heal and put in the hard yards towards repairing the relationship is the best path forward,” he said.

“Winding down new Holden vehicle sales was not something any of us wanted. But it is now time to get things back onto a positive footing and focus on a successful transition, for the sake of our customers.

“I am now hopeful Holden’s legacy in Australia will transcend the difficulties of the last few months.”