Eight Indiana dealers are suing General Motors in a bid to block GM from taking control of local advertising funds.
Last week, the dealers charged that GM improperly laid claim to ad funds generated from a 1 percent assessment on the list price of each new vehicle delivered to dealers.
In a lawsuit filed in federal District Court in Indianapolis, the dealers sought a permanent injunction to force GM to return the money. The plaintiffs also sought class-action status.
The dealers contend that state franchise laws prohibit automakers from forcing dealers to participate in local advertising campaigns.
SIMILAR TO CHICAGO SUIT
The Indiana dealers' arguments are similar to those of a recent lawsuit filed by 90 Chicago-area dealers. Meanwhile, GM has settled three older lawsuits - in Pennsylvania, Minnesota and Mississippi - that also disputed GM's right to collect and control those ad funds.
The Indiana and Chicago lawsuits were triggered by GM's decision to retain the ad funds starting April 1. That money now is controlled by GM's five regional general managers, who are based in Chicago, Dallas, Los Angeles, At-lanta and New York. Previously, that money was earmarked for 954 dealer marketing groups throughout the country.
WHOSE MONEY IS IT?
'We are asking the court to determine whose money it is,' said Ron Smith, an attorney representing the Indiana dealers. 'If it is the dealers' money, it should be spent on local advertising controlled by local dealers.'
The dealers could exercise that control through the old dealer marketing groups or in some other fashion, Smith said. 'We are not wedded to the dealer marketing groups,' he noted.
GM spokeswoman Anne Marie Sylvester defended the company's use of the ad funds. 'We are disappointed that some dealers in Indiana are unhappy with our new approach to local marketing.
'We certainly disagree with the positions they are taking in their lawsuit,' Sylvester said.
The lawsuits come at an awkward time for GM. In December, the company announced plans to harmonize local dealer advertising with GM's national ad campaigns.
To do so, GM put its national ad agencies in charge of local advertising and gave its regional general managers control of about $500 million in ad funds generated by the 1 percent fee.
To placate dealers, GM also launched a program dubbed GM Co-Op. It offered matching funds to dealers who spend money to advertise their own stores.
GM sweetened the deal by offering to pay dealerships up to $5 for each new vehicle sold since 1990. That inducement helped the automaker to settle the three lawsuits filed in Pennsylvania, Mississippi and Minnesota. However, dealers were asked to sign a waiver promising not to sue GM.