General Motors has restored language to the franchise agreement it is developing that dealers say will help protect their investments if the automaker kills a brand.
GM revises its franchise contract with dealers every five years. It initially deleted from a draft of the 2005 agreement a clause in previous contracts that says GM seeks to give "each dealer the opportunity to achieve a reasonable return on investment."
A copy of the proposed 2005 agreement filed with the Virginia Department of Motor Vehicles includes the phrase.
Martin NeSmith, a Chevrolet-Pontiac-Buick-GMC dealer in Claxton, Ga., says some dealers consider the provision "a safety net."
NeSmith, this year's GM line chairman for the National Automobile Dealers Association, helped negotiate the franchise agreement.
The phrase does not guarantee profitability, but dealers say it commits GM to working with them to enhance their chances of a reasonable return.
Some Oldsmobile dealers used the clause to sue GM when it eliminated that brand. Several dealers alleged GM hindered their prospects of earning a reasonable return by urging them to invest heavily in the franchise just before it pulled the plug.
Amid GM's financial troubles, some analysts have speculated that GM is thinking of eliminating Buick or Pontiac. GM insists it does not plan to kill any brand.
GM spokesman Dee Allen says GM sought to delete the return-on-investment language from this year's franchise agreement because some dealers read it as a guarantee.
"No one can guarantee a return on investment," Allen says. "That's a phrase that can be misinterpreted. But because it was of some significance to dealers, we felt that we would leave it in."
NADA wrote GM last month to ask for restoration of the clause, sources say.
GM dealers must sign the 2005 contract by Nov. 1 to renew their franchises.
NeSmith says GM consulted NADA and GM's national dealer councils frequently in crafting the agreement. GM was willing to compromise on several issues, he says.
An early draft of the agreement would have required GM dealers to offer GM-branded vehicle service contracts. GM scrapped that provision after dealers objected.
"This is an example of how GM is working with dealers," NeSmith says. "GM's top management is listening to dealers more than ever. They take our advice on important issues."
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