The National Association of Minority Automobile Dealers has signed a memorandum of understanding with General Motors Co., embracing the automaker's offer of binding arbitration for rejected dealerships, says the dealer group's president.
Damon Lester says many of NAMAD's affected members don't have the financial ability to be reinstated as dealers. The memorandum, signed Dec. 10, gives those dealers the opportunity to seek additional wind-down money and other financial assistance from the manufacturer.
Lester says some NAMAD affected members may pursue reinstatement under a law signed Wednesday, Dec. 16, by President Barack Obama. But that process will take 61/2 months and could cost up to $100,000 in legal and other fees.
The new law, hammered out by the National Automobile Dealers Association and the Committee to Restore Dealer Rights, would give dealers access to neutral, third-party arbitration. NAMAD's memorandum of understanding accepts a more narrow arbitration process crafted by GM.
"This is a business decision each individual dealer has to make," Lester says. The memorandum of understanding "provides dealers with another option other than reinstatement."
GM spokesman Greg Martin says diversity within GM's dealer network is important. The agreement allows GM and NAMAD to strengthen minority dealers' "business footing and increase their ranks," Martin says.
"We've been trying to work through the dealer concerns that balance our interests with their interests," he says.
The GM arbitration plan covers only dealerships being wound down by 2010. The new law would allow dealers to file for arbitration even if they lost the franchise for one or more brands but still sell other GM brands.
Lester says the memorandum of understanding is nonbinding. Individual dealers enter a legally binding contact if they sign an agreement with GM as outlined under the memorandum.
Entering the NAMAD-sanctioned agreement prohibits dealers from seeking reinstatement or remedies under the new federal law, Lester adds.
Under the NAMAD pact, the automaker would partner with the association to try to work out relief for wind-down dealers who have been left with huge personal debts, often with GMAC Financial Services. In many cases, the dealers took on the debt to buy out GM's interest in their stores in the past four years.
"They are still liable for those mortgages. They are still liable for those leases," Lester says. "We tried to get our dealers additional compensation because those debts don't go away."