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  1. #1

    Default Is It Legal for Car Companies to "Take Back" Dealerships at No Fault of the Dealer

    My question involves a consumer law issue in the State of: Any

    I am disgusted. Dealers across the nation are losing franchises that they paid a lot of money for-- not to mention the signs, buildings, training, etc. Due to the Big Boys taking the government funds, they must consolodate dealers so they take from the guy who bought it (and may still be paying) and give it to another dealer. Dealers don't get subsidized by the suppliers of their merchandise. Is this really legal? It seems completely unetical. The first guy is still paying for the franchise the 2nd guy's business will have.
    People on the news this morning who lost their dealerships yesterday when Chrysler made its announcements were crying and stating that they have their entire life savings wrapped up in their company and now it's more or less worthless due to no fault of their own. I don't want to deal with a big dealer-- this is just wrong. These people should be reimbursed or something. One Pontiac dealer said they still owe on the $500,000 note they took out to buy the franchise and when Pontiac ceases to exist, they will still have to pay that note.

    Is this legal? Is there any action these people can take? I know many dealers and would love to know there is something they can do.

    Thanks in advance.

  2. #2
    Join Date
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    Toledo, OH
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    Default Re: Is It Legal for Car Companies to "Take Back" Dealerships at No Fault of the Deale

    Dealerships are operated on a contract basis, and the manufacturers are under no obligation to renew their contracts when they come up.

    The dealers of your acquaintance need to review the contracts they signed. Somewhere in that pile of paperwork will be a cancellation clause explaining the reasons and procedures for which either party may terminate the agreement. These clauses usually include provisions for dealers who are not meeting a specified number of sales per month, bankruptcy of either party, or other circumstances outlined in the individual contracts.

  3. #3
    Join Date
    Jan 2006
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    38,726

    Default Re: Is It Legal for Car Companies to "Take Back" Dealerships at No Fault of the Deale

    =LawResearcherMissy;317362]Dealerships are operated on a contract basis, and the manufacturers are under no obligation to renew their contracts when they come up.
    actually you might research a few states laws regarding franchises. It is not always as simple as you suggest. Some states franchise laws are intentionally written to not allow such unilateral revocations of franchises without cause.

    The dealers of your acquaintance need to review the contracts they signed. Somewhere in that pile of paperwork will be a cancellation clause explaining the reasons and procedures for which either party may terminate the agreement. These clauses usually include provisions for dealers who are not meeting a specified number of sales per month, bankruptcy of either party, or other circumstances outlined in the individual contracts.
    that is a possibility but many of the dealerships do not fall within the reasoning laid out in their contracts.

    In the case of Chrysler, there is little that can be done since Chrysler is in bankruptcy and the courts can allow them to severe the dealerships, and most likely will, regardless of any challenges from the dealerships.

    GM is a very different animal. There are already legal challenges being mounted to the discontinuations of at least some of them dealerships. GM is apparently also allowing a grievance procedure for the dealerships. I would suggest that GM will have to reimburse, at least some of the dealerships their franchise fees, if not much more, unless of course, GM files for bankruptcy, which is considered a likelihood rather than a simply a possibility.

    The dealerships are getting the short end of the stick, no doubt. Some of them were already on a termination list and knew it. Others have been quite surprised of the current list of cuts. The ultimate reasoning, from my understanding, for the cuts is, GM believes the competition from other same brand dealerships is lowering the sales prices of each vehicle. GM does recieve a percentage of the dealerships sales profits so what the intent is, is to increase the profit of each vehicle while still having the same market share. This will provide additional money to GM compared to the lower profit sales of the same quantity of units sold.

    GM also does provide unpaid support to its dealers in several ways. It provides specific equipment that is proprietary to GM and all rights owned by GM. They supply these items to the dealers with reduced or no costs to the dealers so they can work on the GM vehicles. These items are being taken by GM in the case of the dealership closures. GM is also taking the business signage that they often provide.

    There is also internal manpower at GM required to oversee the dealerships and reducing the number of dealerships will allow a reduction in manpower required by GM.

    Ultimately, I believe GM will also enter bankruptcy protection so the actions to prevent dealership closures will be in vain.

    I do sympathize for the businessmen that are going to lose their shirts on this situation but in reality, is it any worse than the 6,000,000 other unemployed people in this country fighting an economic climate so poor it has been seen by few still alive.

    The times are a changin' and we need to learn how to change to deal with them. Life is going to get real hard for many. That is a fact. How we deal with it, as a society, and a government, will show what kind of people we are.

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