GM plans to fight legislation that will protect Ky. auto dealers

GM plans to fight legislation that will protect Ky. auto dealers

General Motors


by Frankfort, Ky. AP

Posted on March 19, 2010 at 5:27 PM

Updated Friday, Mar 19 at 5:29 PM

(Frankfort, Ky. AP)-General Motors Corp. is fighting legislation in 5 states, including Kentucky, which gives leverage to automobile dealers over carmakers in the rush for franchises.
Kentucky is the nation’s third largest automotive manufacturer.

On Friday, GM said they would launch an ad campaign in Kentucky in hopes to stop the bill before it reaches Gov. Steve Beshear. GM plans for the $50,000 advertising campaign to begin Sunday in Kentucky with ads appearing in newspapers in Ashland, Bowling Green, Lexington, Louisville, Owensboro and Paducah.

The ads will point out that GM is a major employer in Kentucky, home to the company's Corvette plant. The ads call on Kentuckians to call their legislators in opposition to the measure.

Gov. Beshear said he was waiting to see a final draft of the bill before deciding whether he will sign it into law.

State Rep. Jimmie Lee, a former automobile dealer, created the legislation. The Elizabethtown Democrat said, “I don’t think there’s anything they can do to stop it.” State Rep. Lee said he created the legislation in response to efforts by GM and Chrysler Group LLC to close dealerships.

A GM spokesperson, Greg Martin, said the Kentucky measure would establish special rights for failed auto dealerships, including an unprecedented 10-year right of first refusal, even to those who have performed poorly in the past.


Martin said that legislation like this would prevent GM from opening new dealerships that would be more effective in improving customer service and sales.

"We're going to be very aggressive in our opposition in every jurisdiction where we see these onerous types of bills," Martin said.

Martin also said closing some dealerships helped create a better company and there is an arbitration process for dealers currently in place.

"As part of our restructuring, everyone inside the GM family had to make sacrifices to create a new, stronger company," Martin said. "While we understand the frustration that some dealers feel, there is a fair arbitration process established by federal law that allows dealers to have their grievances heard by an independent third party."

GM told 2,000 dealers nationwide it planned to revoke their franchise agreements in October and Chrysler slashed 789 dealers. But Congress passed a law allowing dealers to appeal to arbitrators.

   The cuts to GM's 6,000-dealer network were designed to compensate for much lower demand for cars and trucks, but some dealers argue that lots that are still profitable are at risk, and that the automaker hasn't offered enough details about how it's choosing which businesses to close.

GM executives said earlier this month that about 600 dealerships out of the 1,100 seeking to stay with the carmaker will receive letters giving them that option.

In Colorado, Martin said GM was able to get a compromise to a bill that would have given dealers the right of first refusal if the manufacturer decided to open another franchise nearby within 10 years. The compromise reduced the 10-year right of first refusal to 5 years.
Other states considering legislation like Kentucky’s are Georgia, Missouri, North Carolina and Ohio.