A group of prominent General Motors of Canada Ltd. dealers is suing the company and its parent General Motors Co., saying the auto maker has ignored their repeated pleas for financial help to address a dramatic drop in sales and market share.
GM Canada's market share in the Greater Toronto Area plunged more than 50 per cent between 2008 and 2013, hitting just 5.6 per cent last year, according to the suit by 17 Toronto-area dealers. The list of dealers includes operators of some of the biggest GM dealerships in the country and some whose relationship with the company goes back to the 1920s.
GM Canada (GMCL) and its parent, the suit alleges, have failed to offer the dealers financial help, while pumping millions of dollars into support programs for U.S. dealers in markets that are similar to Toronto. While Toronto area dealers' market share declined, U.S. dealers' market share grew, says a statement of claim filed in Ontario Superior Court last week.
"GM responded to the problems faced by its American dealers by extending financial support and assistance, in accordance to its obligations to them, but GM and GMCL withheld similar support from Canadian dealers during a continuing decline in their market share," the claim says.
That decision threatens the Toronto dealers' long-term future, the claim says, even as the auto maker demands that the dealers spend up to $10-million each to redevelop their stores to meet new image standards set by the head office in Oshawa, Ont.
The lawsuit is an illustration of how the company's restructuring of its Canadian dealership network is still reverberating – five years after its parent company went into Chapter 11 bankruptcy protection in 2009 and emerged after a $60-billion bailout financed by Canadian and U.S. taxpayers.
The suit alleges that none of the more than $10-billion contributed by the Canadian and Ontario governments went to help Canadian dealers, despite pledges that part of the bailout money would be used to help restructure the company's network in Canada.
"The claims are without merit and we intend to defend them vigorously," GM Canada spokeswoman Adria MacKenzie said in an email. She said the company will have no further comment because the issue is before the courts.
The lawsuit is the fourth legal action filed by groups of former or current GM dealers against the Canadian unit of the Detroit-based auto maker.
Two of those lawsuits, including one that was settled out of court in 2010, were filed by dealers who were terminated in 2009 when the company slashed its network in Canada by 30 per cent. A separate class-action suit by terminated dealers is ongoing. A suit by Buick dealers is also still making its way through the legal system.
The suit filed last week arose because Toronto dealers "have been concerned for a number of years about the absence of an adequate response from GM and GMCL to declining market share in the GTA," their lawyers Jonathan Lisus and Rocco DiPucchio said in an emailed response to questions about the suit. They represented dealers in the suit that was settled in 2010 and also represent the Buick dealers.
"In the United States, GM responded two and a half years ago to similar market issues by implementing a special program designed to address the specific challenges of large metro markets," the lawyers said.
Each of the Toronto area dealers reported new vehicle sales last year that were their lowest in the 2010-2013 period, and several of them are unprofitable, the statement of claim says.
The suit noted that GM Canada has more dealers in the Greater Toronto Area than any other manufacturer except Chrysler Canada Inc., and its dealers sold the smallest number of new vehicles of any of the major auto makers in the Canadian market.
GM dealers in the Toronto area sold an average of 531 vehicles last year, compared with 1,194 for the average Honda Canada Inc. dealer – a number that leads the market. Chrysler dealers sold 721 vehicles on average.