Dealer Joe Laham makes a bold promise in newspaper ads for Cadillac of Norwood: 'Factory Direct Pricing.' And he pitches a Cadillac Escalade for about $5,000 below sticker.
It's not the first time a dealer has touted factory-direct prices. But GM dealers in the Boston area see Laham's Cadillac store as a particular threat - and as a sign of things to come.
The reason: GM has invested in the dealership.
General Motors put dealers across the country on edge by announcing two weeks ago that it would buy as many as 770 GM dealerships around the country during the next 10 years. The factory-owned stores would be operated by a new GM subsidiary, GM Retail Holdings.
GM promises that the factory-owned stores will follow the same rules as the independent GM dealerships. There will be no favoritism, declares Darwin Clark, CEO of GM Retail Holdings.
Dealers are skeptical.
'From a dealer's perspective, it has made my manufacturer my competitor,' says GM dealer Frank Ursomarso, president of Union Park Automotive Group in Wilmington, Del., and a member of GM's dealer advisory committee.
'I don't see how the playing field will be level,' he said.
BOSTON TEA PARTY
Some Boston-area dealers competing with Laham, 41, wonder if they are peering into the future, even though his dealership is not connected to GM Retail Holdings. In late September they met to discuss Laham's ads and what some see as factory favoritism.
In the ad, Laham pitches the Escalade for $41,995, well below the manufacturer's suggested retail price of $46,875.
One GM dealer, who attended the meeting concerning Laham but asked not to be named, said dealers are still trying to determine if Laham and GM are breaking the state's franchise laws.
'I suspect there's nothing that can be done,' the dealer said.
Laham and GM say he has a traditional Motors Holding arrangement, where Laham will buy out GM over time. Traditionally, GM dealers have used the 60-year-old Motors Holding program to borrow money from GM to buy and expand dealerships.
Laham already owned the Cadillac dealership, which sells about 300 new vehicles and 1,000 used vehicles per year. Laham said it is either the No. 1 or No. 2 Cadillac dealership in the state.
However, Laham wanted to buy and build other dealerships, and decided to use the Cadillac store as leverage through a Motors Holding agreement. GM, seeking a boost in its lagging Boston market, was eager to help, he said.
Laham says he is not getting any special favors from GM. He adds that he has millions of dollars invested in his plans, and GM has no operational control of the dealerships.
'Nobody is going to come in and tell me how to run my business. It's my business and my business only,' he said.
Although GM has said it will absorb some Motors Holding stores into GM Retail Holdings, Laham says his stores are not on the list, and over time he will buy out GM.
'You can't have GM Retail Holdings in the state of Massachusetts. It's prohibited' by state franchise laws, Laham said. 'The only thing I know about GM Retail Holdings is what I read.'
Dealer distrust of GM, already high because of distribution blunders and reorganizations, has skyrocketed since the automaker announced it would own and operate dealerships.
'There are things we dealers worry about, like insider information, inventory allocations and processing of warranty claims,' said Jim Willingham, a GM dealer outside of Los Angeles and chairman of the National Automobile Dealers Association.
GM recently bought Cerritos Pontiac-GMC in Cerritos, Calif., not far from Willingham's Buick-Pontiac-GMC dealership.
'I give GM my financial statements every month, and that means the factory store eight miles away in Cerritos is going to know what I'm making on every vehicle and what I'm paying my technicians,' he said.
GM will face sharper criticism as it becomes more clear where GM Retail Holdings is buying dealerships, and which ones. Because of that, GM has agreed to set up a process to expedite complaints from its dealers about factory-owned stores.
Part of the problem, according to Willingham and other dealers, is that GM did not ask for dealers' input on the new project. One major reason dealers have not complained about a similar project by GM's Saturn Corp. is that the dealers helped create it.
Additionally, Saturn next year will spin off the dealerships - 41 so far - as an independent publicly traded company.
Although GM has no plans to spin off GM Retail Holdings, Clark said he eventually will move the subsidiary out of GM's Detroit headquarters. Dealers say it will take more than that to guarantee fair play.
As for Laham, GM does have a policy against advertising 'factory direct' prices. In the past, GM has told dealers who violate that policy to stop.
Laham said GM has not ordered him to stop running the ads. Even if GM did, Laham said he would fight it 'in a professional business manner.'
Laham, an innovative dealer who uses salaried salespeople and a form of one-price selling, chalks up the dealer complaints to simple jealousy: 'They just don't know how to compete.'
Staff Reporter Mark Rechtin contributed to this report