National Press Release

Bankruptcy courts should not be used to circumvent rights under state laws

WASHINGTON, June 3 /PRNewswire-USNewswire/ -- John McEleney, chairman of the National Automobile Dealers Association, commended a Senate committee today for focusing on the unfair treatment of the General Motors and Chrysler dealers. Also, McEleney expressed grave concerns about GM's plan to require all of its surviving dealers to sign a one-sided, open-ended operating agreement as a condition for remaining a GM dealer.

GM delivered the so-called "Participation Letter," actually a 24-page binding, legal contract, to all of its surviving dealers on Tuesday, June 2.

"If I sign it, I will be committing my business to spend hundreds of thousands of dollars that I know about today, and committing to millions of dollars of potential financial obligations in the future," McEleney said.

"Also, I will be subjecting my business to sales performance standards that are not specified in the contract. Even worse, GM can alter the terms of these requirements at any time at its sole discretion. The final blow: I must waive any right of protest to any action taken by the manufacturer," he added.

"This is a classic example of opportunistic and overreaching behavior by the manufacturers that has prompted the enactment by the legislatures of all 50 states of franchise laws governing the relationship between dealers and their manufacturers," McEleney added. "No other manufacturer has forced dealers to sign such an onerous agreement. This is NOT necessary for GM's viability, and federal funds are being used to empower GM to do this."

McEleney called GM's efforts a manipulation of the bankruptcy process to eviscerate the state franchise laws.

"State franchise laws inject balance in the inherently one-sided economic relationship between a dealer and the manufacturer and provide consumers a reliable, convenient, and competitive auto retail network," McEleney added. "The terms of the GM 'go-forward' Agreements must be changed. No manufacturer has ever imposed such outrageous terms in dealer operator agreements."

Chrysler and GM have announced plans to terminate 3,400 dealerships, which will affect more than 100,000 employees.

Click here for McEleney's full testimony.

SOURCE National Automobile Dealers Association