Rumor: GM Pressuring Dealers to Oppose Legislation

By Richard Read

Last week we mentioned that Congress is considering legislation that would turn back the clock on the Chrysler and General Motors bankruptcies -- at least as far as dealers are concerned. Now comes word that GM is putting pressure on its remaining dealers to oppose that legislation, and some elected officials and dealer groups aren't happy.

If passed, the bills under consideration in the House of Representatives would essentially reinstate dealers who were dropped by Chrysler and General Motors during their respective restructurings. Dealers that have the wherewithal to continue doing business could do so; those that don't would have legal standing to force Chrysler and GM to pay them a portion of the value of their assets. Obviously, this would impact each company's cash flow and its ability to do business.

Now, Senator Charles Grassley (R-IA) has gotten word that GM is putting dealers over a barrel by asking them to sign a statement opposing the legislation. Grassley's complaints are echoed by a number of other groups, including the Automotive Trade Association Executives, which passed a resolution condemning General Motors' "heavy handed pressure tactics and veiled threats". Senator Grassley has sent a letter to GM's CEO Fritz Henderson expressing his alarm at the company's tactics.

Apparently, there's some truth to the allegations. An opposition statement was formally distributed to GM dealers on July 6 by the GM National Dealer Council. Dealers were asked to sign a statement that read, "I agree with the National Dealer Council's position to NOT support the passage of HR 2743", and to return it to the Council the following day. GM zone managers allegedly made follow-up calls to dealers encouraging them to sign the statement. No additional details about those "veiled threats" or what Grassley calls "strong-arming" are available at this time.

Interestingly, GM isn't denying the allegations at all -- and we're not entirely sure they'd need to, since the company doesn't appear to have done anything illegal. (Yet.) In an email, GM's Washington spokesman, Greg Martin, said "Many dealers who signed participating agreements are ready to move forward, and so are we as a new company. Certain proposed legislation puts our progress and viability at risk. We have a right to have our voice heard, too, and we look forward to responding to Senator Grassley's letter." Meanwhile, the legislation at hand seems to be doing well in the House, and lobbying efforts are growing in the Senate. Stay tuned.

Comments

[Boxed Merlot:]

Ordinarily I shy away from repostings, but I'm still unclear on a couple of questions posted earlier and this seems the most logical thread to attach them to.

Was the UAW precluded from purchasing an equity position in the auto industry prior to its meltdown?
If yes - by whom? and why?
If no - why didn't / wouldn't they have?

It seems if it was important for them to be "Employee Owned" after bankruptcy, it should've been more important before.

Jul 14 01:48 PM

[Tha Man:]

The only reason they are now 'employee owned' is the bondholders got the shaft and the government was paying back the UAW for their contributions to Democrats so they said 'no' to their control. They couldn't have afforded it any other way. We should have funded their pension under the federal guarantee (PBGC) and then let GM sort out their problems in bankruptcy. In the end we will have to fund the pension anyway since they will not get a return from the stock to cover the benefits. Just wait 5-7 years.....

Jul 14 05:36 PM

[a. palmer jr.:]

Does the new administration have something against doing things legally? There are already laws on the books about how a bankruptcy is handled and the way GMs bankruptcy went wasn't by the book. The way they split things up is bordering on criminal. If I were a bondholder I'd never set foot in another GM vehicle. To put a new spin on what was stated above, loyalty to the party is more important than the rule of law.

Jul 15 12:10 AM

[Boxed Merlot:]

Thanks for the response but I guess I was hoping more for sound legal reasoning rather than the obviously politically expedient outcome predetermined before the judge even put on his robe. I've got to believe too that if Calpers can go after the rating agencies for their inability to correctly rate financial instraments, these bondholders may look to retain the same legal council to win back their losses from whoever rated GM bonds as having value before this ruling.


On Jul 15 12:10 AM a. palmer jr. wrote:

> Does the new administration have something against doing things legally?
> There are already laws on the books about how a bankruptcy is handled
> and the way GMs bankruptcy went wasn't by the book. The way they
> split things up is bordering on criminal. If I were a bondholder
> I'd never set foot in another GM vehicle. To put a new spin on what
> was stated above, loyalty to the party is more important than the
> rule of law.

Jul 15 10:44 AM