DETROIT -- General Motors Co. is imposing no onerous conditions on dealers who it is offering to reinstate, five lawyers said.
Most of the 661 eligible dealerships will agree to the conditions outlined in the letter of intent that GM started sending Friday, the lawyers and some dealers said. They spoke anonymously because dealers have a confidentiality agreement with GM.
The confidential three-page letter lists 13 conditions and requirements, including working capital, facility, location, floorplan financing and licenses, none of which treat the dealerships differently than non-rejected stores, a copy of the letter obtained by Automotive News shows.
The letters reassure dealers who had worried that GM would require costly changes to their stores.
“It'll be kind of just turning the clock back,” one dealer said. “Almost everything is the same.”
The second dealer called the letter “more than fair.”
GM spokesman Dave Roman confirmed that the letters GM is sending to the 661 dealerships are “essentially the same” as typical GM letters of intent to offer franchises.
The March 11 letter is a form letter with just two items that differ for each dealership: the amount of working capital that each must have and the size of the wind-down payment that it received from GM, which all dealers must return.
One troublesome provision
The only potentially troublesome provision of the letter for dealers is its requirement that the dealerships operate under the federal bankruptcy code rather than state law through October, three dealer lawyers said.
This could pose a problem, for example, if a dealership did not comply with GM's brand-image requirements and the company sought to terminate the dealership, a lawyer said.
GM would have an easier time eliminating a dealership under federal bankruptcy code than under state law, he said.
The two lawyers said it is not yet clear how many of their clients, if any, might refrain from signing the letter because of this issue.
Getting the word out
GM announced a week ago that it planned to reinstate 661 of the 1,160 rejected dealerships that were seeking reinstatement through arbitration. GM also said that dealerships who weren't told by phone that they were candidates for reinstatement could still request settlement talks on their own.
The letter of intent requires the dealership to return the document within 10 days of its receipt, signed.
About two weeks later, GM will send an amended wind-down agreement to the dealerships that “will allow dealer company to resume normal dealership operations for reinstated brand(s),” the copy shows.
Dealers who sign the agreement must withdraw their arbitration claim by April 30, the document says.
Finally, within 60 days of the return of the agreement, the dealership must provide “satisfactory evidence of compliance with all of the terms and conditions of this letter” or the letter of intent will expire, it says.
A total of 2,000 GM dealerships were told before the company's bankruptcy last spring that they must wind down by Oct. 31. Of these, 1,350 were to close entirely, and 650 were to lose at least one GM franchise and keep another.