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GM Canada’s parent in Detroit decided to eliminate the Pontiac brand as part of a plan to convince the U.S., Canadian and Ontario governments to finance a bailout worth more than $60-billion.


More than two dozen Buick GMC dealers have launched a lawsuit against General Motors of Canada Ltd., in the latest in a series of court actions arising from the turmoil that has disrupted GM's Canadian sales network since its parent company went into bankruptcy protection in 2009.

The 26 Buick GMC dealers – battered by the cancellation of their Pontiac franchises when General Motors Corp. phased out the brand in 2009 – want the Ontario Superior Court to order GM Canada to allow them to sell Chevrolet vehicles.

It's the third lawsuit filed by large groups of GM Canada dealers and demonstrates that the restructuring of the auto maker during the 2008-09 auto crisis and recession is still creating fallout more than three years later as the company struggles to regain its traction in Canada.

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While GM has scaled back to four brands, its Canadian network is still a hodge-podge of about 460 dealerships that includes stores offering all four of Chevrolet, Buick, GMC and Cadillac vehicles, outlets offering Chevrolet only and about 40 that sell just Buick and GMC vehicles. The plan appears to involve a model in which all four brands will be under one roof, similar to what many of GM's competitors do, such as Ford Motor Co. of Canada Ltd. with its Ford-Lincoln outlets.

If GM loses this case, it will be faced with the issue of determining how to close more dealerships because many of the Buick GMC outlets are in close proximity to existing Chevrolet dealerships and it might have to provide financial assistance to dealers to further rationalize its network.

"I think this claim reflects one of the last significant legacy issues of the restructuring and it reflects the fact that although GM has successfully restructured, for a significant portion of its dealers they have been denied the opportunity to participate in that restructuring," said Toronto lawyer Jonathan Lisus, who represents the Buick GMC dealers.

The Buick GMC dealers, all but two of which were kept on by GM Canada after it terminated about one-third of its network of more than 700 outlets in May, 2009, are located from British Columbia to Newfoundland. A previous lawsuit by dealers, also represented by Mr. Lisus, that were terminated then but did not sign wind-down agreements was settled before going to trial, with many of the 19 dealers involved in that case winning reinstatement.

A third group of dealers that were terminated and did sign wind-down agreements are now involved in a class-action lawsuit against GM Canada that has been certified and is making its way through the courts. There have been other individual suits and some cases in which dealers sued each other over sales territory and brand issues.

GM Canada spokeswoman Faye Roberts said it is company policy not to comment on matters before the courts.

The new case centres on the decision by GM Canada's parent in Detroit to eliminate Pontiac, one of four brands it shed as part of a plan to convince the U.S., Canadian and Ontario governments to finance a bailout worth more than $60-billion.

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Pontiac generated the majority of vehicle sales for what were then Pontiac-Buick-GMC dealers. MacDonald Pontiac Buick GMC Cadillac Ltd. in Moncton, N.B., for example, relied on Pontiac for 89 per cent of its new vehicle sales. Without the Pontiac line, Buick GMC dealers are at a disadvantage against Chevrolet, says the statement of claim filed in the lawsuit.

GM produces only trucks and utility vehicles for its GMC line and no passenger cars. Buick is an upscale brand that has no small cars that compete with Chevrolet offerings, the claim says, unlike the days before the restructuring when Pontiac and Chevrolet offered vehicles in most passenger car segments.

"The Buick line does not have a small, fuel-efficient, affordable entry-level vehicle," the dealers' statement of claim says. "The ability to offer customers small, fuel-efficient, entry-level and affordably priced cars is essential to a dealer's success in light of consumer preference, rising gasoline prices and increasing environmental awareness."

Buick has begun offering its first compact car, the Verano, but it's aimed at more upscale buyers than the Chevrolet Cruze, which is also a compact.

Mark Reuss, president of General Motors North America, was asked by Canadian reporters in Detroit last month if the acrimonious relations between the company and its dealers contributed to GM Canada's 2 per cent sales decline last year in an overall market that rose 2 per cent.

"I'm not sure it's value added for me to go do some sort of analysis on that," Mr. Reuss said. "I'd rather move forward with it. That's what we did [in the United States.]Let's get on with it."

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