General Motors dealers unite to drag MNC to court over measly compensation

They are planning dharna at Jantar Mantar next week, may move courts in both US and India

At a day-long meeting at a city hotel in Delhi, dealers of US multinational car giant (the world's third largest) General Motors have decided to drag the car maker to court over compensation related issues.

They have decided to stage a dharna at Jantar Mantar on Tuesday, provided they get permissions for the same. Dealers want the government to wake up to this issue as this not only involves investments made by dealerships but also livelihoods of over 10,000 people directly or indirectly connected with them.

In May, GM announced that it would stop selling cars in India's domestic market by December 2017 and would use its local manufacturing base at Talegaon, near Pune, to focus on the export markets. 

As many as 40 dealers out of the 96 dealer owners attended the meeting. There are 120 sales outlets, with several owners having multiple sales outlets. Many dealers could not make it to the meeting though. The representatives of the Federation of Automobile Dealers Association (FADA) were present and the industry body claimed that about 75 per cent dealers are expected to come on board for the legal battle against the automobile manufacturer.

Dealers' action plan

Unhappy with the measly compensation offered, ask FADA to represent them for legal action

49 dealers have already deposited token money with FADA for legal expenses etc

Class Action suit to be filed in US court against GM; Indian court to be moved as well

Dharna planned at Jantar Mantar next week

FADA president John Paul, who was present in the meeting, said that dealers have been misguided by GM as far as their business plans in India went. "As late as April this year, the company had indicated to dealers that they have an India business plan, they would continue to invest in India and that dealers would need to enhance their investments," he said.

Dealers definitely are feeling cheated at this kind of behaviour. Also, for the last seventeen years the company had been renewing contracts with dealers for three year terms. This year, they have reduced that to a one-year term.

The compensation offered by GM India is based on the average of last two years sales of a particular dealership multiplied by a factor, plus 40 per cent of the sales establishment cost at a rate of Rs 1,800 per square foot. For most dealers this is working out to be 10-12 per cent of the investments they have made.

Sources claimed that GM India is not compensating for the sales personnel, inventory, and spares.

Nikunj Sanghi, director, international affairs, FADA, said dealers have written to the managing director of GM India and informed the company that they do not wish to deal with them individually, but FADA would be representing the dealers. Initially when FADA had written to GM India on behalf of the dealers, the company, however, had responded by saying that they would be dealing with dealers individually. 

"We are taking legal counsel and would explore all possible course of action including moving an Indian court as well as an US court. The company is resorting to coersive action to make the dealers sign on the compensation papers," Sanghi said.

GM has set a deadline of mid September for dealers to accept the compensation offered or else settle for nothing. They are also not releasing any sales incentives, warranties, etc until dealers accept the compensation offered.