General Motors confident of India dealer settlement though half object to terms

General Motors Co is confident of reaching a settlement with dealers in India before halting sales in the country even though half say the compensation on offer is too low, people familiar with the matter said after the first round of talks.

The US automaker last month said it would stop selling passenger cars by the end of the year after two decades in a market where it commands less than one per cent.

It is now tasked with minimising fallout as it restructures its money-losing India operations, which will continue making cars for export. At the same time, the firm has had to fend off an attack from a hedge fund demanding change at the top after a 16 per cent stock price fall during the current CEO's tenure.

GM concluded a first round of talks on Wednesday with its 96 India dealers, who operate 120 dealerships, and the company is confident its settlement terms will be accepted by a large majority, a person at GM India said on condition of anonymity.

GM told Reuters discussions with dealers were confidential.

"We are meeting with dealers individually and working through a plan that addresses their concerns," a spokesperson said. "GM India is working directly with our dealers to transition to authorised service outlets and to recognise some of the investments made in dealerships."

But GM's Dealers Association Board (DAB) comprising 15 high-sales dealers said the compensation on offer was "negligible and not sufficient", in a June 6 email to Chief Executive Officer Mary Barra, shown to Reuters by one DAB member.

Two other DAB members told Reuters that about 50 dealers were dissatisfied with the terms and have contributed to a fund created by DAB for use in the event of any legal action.

The president of India's Federation of Automobile Dealers Associations, John K Paul, said "several" dealers were planning legal action in India and exploring the possibility of a class action suit in the United States. He said they aimed to finalise plans this month ahead of the second round of talks.

One of the three DAB members said GM offered compensation based on dealers' average monthly sales over the past two years, showroom size and expenses for sundry items such as signage. The member favoured compensation based on a dealer's two best years as the past two years suffered from a scarcity of new models.

The three DAB members plus three more dealers told Reuters the offer was too low. One of the DAB members said compensation amounted to about 10 to 12 percent of their original investment, and that it should be "higher by a few multiples".

All six dealers declined to be identified as the matter was confidential.

Two of the DAB members said they were surprised when GM announced the end of sales on May 18. One showed Reuters a GM email dated April 28 announcing a new hatchback for July.

"The excitement is about to roll, and you will see action-packed days ahead," GM said in the email.