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GM India exit: Dealers say compensation offer arbitrary, plan class action suit

LiveMint logoLiveMint 06-06-2017 Amrit Raj

New Delhi: Peeved by a compensation offer that they say is arbitrary in nature, some of General Motors India Pvt. Ltd’s dealers plan to initiate legal action against the company and its subsidiary Chevrolet Sales India Pvt. Ltd (CSIPL), even as the US company starts the process of exiting the country.

The dealers, as a group, have hired law firm Cyril Amarchand Mangaldas to explore legal options, at least three company dealers said on condition of anonymity.

The law firm declined to comment.

Some dealers, especially those that opened showrooms in the recent months, also plan to file cases against the company.

The Federation of Automobile Dealers Associations (Fada), a lobby group, will also file a representative class action against the company, the three dealers added.

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Some 70 dealers are also expected to visit GM’s headquarters in the US, they said.

GM’s one-on-one talks with its dealers end on 7 June and the dealers say more concrete action will take shape after that.

“The compensation package (on offer) has a lot of riders, which are very uncomfortable. But there will be some small dealers who do not have (the) wherewithal to fight and may accept GM’s offer,” said one of the three dealers.

“...there will be some who opt for arbitration as there is a clause for that. Some will also opt to file criminal and civil cases,” a second dealer said.

A GM India spokesperson said that the company has a strong “partnership” with its dealers and is “working with them to provide appropriate support through this transition”.

“Our dealers are important partners in implementing our transition plan, which is focused on providing continuity and peace of mind for our customers.”

For instance, the company could facilitate the transition of some dealerships to “authorized service outlets” and it will “recognize some of the investments made in dealerships”, the spokesperson said, adding that these discussions are “confidential, and it would not be appropriate to discuss them publicly”.

GM’s dealers in India allege that the company kept them in the dark even as it prepared a plan to exit the country. In November, the company renewed contracts with its dealers for one year as against a norm of three years.

In an email addressed to Fada on 21 May, GM India dealers advisory body claimed that General Motors was “cheating and fooling all their dealers”.

“Time and again we were assured that General Motors is working towards 10% market share and is developing a new product range for India. We have been made to invest on commitments that we would have a good future with General Motors,” it said in the email.

The email further claimed the dealers were shown future models on several occasions and assured that GM would invest “heavily to revive its operations in India”.

These dealers say they were assured that the company would launch 10 new products in India.

“We all are stuck with huge unsaleable stock of cars, which will be difficult to liquidate as, till date, there is no additional support from company, and financers will be reluctant in financing cars which they know will have zero resale value,” they said.

Fada took up the issue with General Motors but to no avail.

Responding to an email from Fada that sought the same parameters of settlement across the dealership network, the company’s managing director Kaher Kazem wrote on 26 May that CSIPL had an independent relationship under the retailer agreements with each retailer and that the company would continue to work directly with them to resolve the issues.

“We are engaging directly with each of our retail partners and sharing with them our proposed transition plan. These discussions are confidential between the retailer and CSIPL,” he wrote.

The dealer advisory body said in the email to Fada that it has no trust in GM.

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