Local car Dealers and their employees will bear the brunt of General Motors’ decision to kill off the Holden brand in Australia, highlighting the need for strong Automotive franchising laws.
“There has been a lot of talk about the 600 jobs that will be lost at Holden’s head office. These amount to very little compared to the people employed in Holden dealerships both in regional and metro Australia, a figure which could be as high as 6,000,” said AADA CEO James Voortman.
“As I have spoken to Holden Dealers in the past 24 hours, I am struck by how poorly this was all done. It is clear that the local management of Holden were blindsided by a decision made in Detroit,” he said.
The AADA welcomes the announcement by Holden that they will put in place “appropriate transition arrangements” for Dealers but we need to see the detail of these arrangements. Australia’s impotent and ineffective franchising laws leave Dealers exposed when it comes to end of a term arrangements, especially in this case which is a complete withdrawal from the Australian market, directly affecting around 200 Dealers.
“Dealers typically own millions of dollars’ worth of vehicle inventory, special tools and equipment, parts and bespoke facilities built to the exacting specification of the manufacturers. On top of that, Dealers have often invested in long term leases, extending to a decade or more for these facilities. We know of Dealers who are in the process of spending significant capital in upgrading or building showrooms, an investment demanded of them by Holden. There are also Holden dealerships that have changed hands through a sale process recently,” said Mr Voortman.
We expect that these investments and commitments will be taken into consideration by Holden when they decide on compensation packages for Dealers.
Dealers enter into franchise agreements with Manufacturers and make these investments in good faith. It is essential that this is recognised and compensated for at the end of the term.
“It is hard to believe that a global Fortune 500 company such as General Motors did not anticipate this decision and questions need to be asked as to why Dealers were allowed to invest significant sums of capital in recent times to grow a brand that was going to be withdrawn,” he said.
“I think it would have been appropriate for the Global Head of General Motors to travel from Detroit to Australia and make the announcement in person that they have decided to kill off one of Australia’s most iconic brands,” he said.
“This just highlights the massive power imbalance between multinational vehicle Manufacturers and local car Dealers. Simply put Australia needs strong automotive specific franchising laws similar to those in the United States,” said Mr Voortman.
The AADA which represents all Holden Dealers will be writing to the Prime Minister to request a meeting with a delegation of Holden Dealers to discuss the effects of this decision on Dealers, their employees and customers.