GM sues stores for missing targets
About a month ago, General Motors shared some good news with dozens of dealerships across the country: They could keep their franchises.
But for a handful of dealerships, the message wasn't positive. Those stores had missed their 2011 targets, and GM was taking back their franchises.
So far, GM has filed federal lawsuits against at least eight dealerships, arguing the stores failed to meet certain performance requirements agreed upon two years ago.
Back then, the company had settled with about 120 dealerships, reinstating their franchises on a probationary basis rather than continuing with arbitration.
The stores were among 700 others that had filed for arbitration after GM sought a wind-down as part of its 2009 bankruptcy restructuring.
In all, GM targeted 2,064 dealerships for elimination.
As part of the settlement deal, GM required the stores to create new business plans and meet individual targets for 2011, including reaching certain sales goals.
The "vast majority" have met the criteria and will keep their stores, said Ryndee Carney, a GM spokeswoman.
But for the few that didn't, GM is exercising an option to buy their assets, according to federal lawsuits filed in June and July.
Darvish: GM seeks Chevy store's assets.
Among them is DARCARS Chevrolet in Lanham, Md., a store owned by Tamara Darvish, an outspoken critic of the dealer terminations, and her family.
In 2009, Darvish helped give a voice to rejected GM and Chrysler dealers in Washington. Along with two other dealers, Alan Spitzer and Jack Fitzgerald, she lobbied for legislation that made arbitration mandatory, giving dealers a way to win back their stores.
"I just don't know why they're going after us, why they're bothering," said Darvish, a second-generation dealer whose Silver Spring, Md.-based company is among the country's top 25 dealership groups based on new-unit retail sales.
The Chevy store, she said, pays its bills, supports local vendors, employs people from the community and is in an urban area east of Washington, D.C. -- not a big market for domestic brands.
"We should be partnering to figure out how we can strengthen the GM brand in a very heavily import market," Darvish added.
The lawsuits signify that while hundreds of dealers have been successful at restoring their franchises, the litigation isn't over for some.
The settlement agreements required dealers to, among other things, achieve a retail sales index of at least 85 -- a requirement "substantially below" the average for other dealers and the functional equivalent of a "C student," according to the lawsuits.
GM's Carney said the company doesn't comment on specific cases. The terms "were mutually agreed upon by dealer and manufacturer," but the details of each agreement are confidential, she said. GM isn't disclosing how many dealers failed to meet their objectives.
"It was an objective process, and the dealers were involved in setting the benchmarks," Carney said.
Still, some dealers are fighting back.
Andrew Fusco, an attorney for Astro @ Exit 132 Buick-GMC in Whitehall, W.Va., said GM didn't give the store the inventory it needed to reach its 2011 sales targets.
The dealership had invested heavily in its marketing, expanded its service department, and more than tripled sales from 2010 levels, the store's owner, Joseph Asterino, wrote in a letter to GM.
Still, in 2011, the store was getting only a portion of GMC and Buick product it needed to hit its targets, and in many cases, it wasn't the right mix, Fusco said. The dealership has since filed a counterclaim, arguing GM failed to hold up its end of the contract.
David Barker, an attorney representing Bob Wiese Oldsmobile Inc., which owns Wiese GM Center in Taylorsville, Ind., said he believes Wiese GM was singled out because it's small and in a rural area. His client, he said, was taken aback by the suit, especially since he'd invested heavily to comply with a GM request that he move the store farther away from a neighboring Toyota dealership.
GM "filed a barebones complaint without specifics to support it," Barker said.
Darvish said she, too, was surprised by GM's move.
"I've met with them over the last few years, and there was never, ever an expression of displeasure with our performance," she said.
If the Chevy store is lost, she said, DARCARS Automotive Group no longer will have a GM franchise, and right now, the dealership employs about 50 people.
She added: "To me, it hits below the belt."