Abbott: GM deal violates Texas laws | Postcards.
Texas Attorney General Greg Abbott, charging that General Motors is attempting to use its bankruptcy to violate state law governing dealerships, announced this afternoon that he is challenging the troubled automaker’s proposed restructuring in court.
In a filing with the U.S. Bankruptcy Court for the Southern District of New York, Abbott alleges that new franchise agreements that GM is requiring Texas’ 415 GM dealers to sign violate state law.
By requiring its dealers to market only GM brands.
By forcing its dealers to order new GM vehicles, even the models a dealer does not believe will sell.
By limiting its dealers’ warranty claims.
By allowing GM to modify or terminate franchise agreements, in violation of current law.
“GM is putting dealerships across Texas — and thousands of their employees — at risk,” Abbott said. In an unprecedented move, GM — which will majority owned by the federal government — claims that states’ rights and states’ laws that protect dealerships can be ignored at GM’s choosing. In doing do, the federally owned GM guts Texas statutes that regulate car dealers and flaunts U.S. Supreme Court precedent that upholds our state-based dealership structure.”
If successful, the legal challenge could throw an unexpected delay into GM’s plans to perhaps emerge from bankruptcy as a new, leaner company within 60 days.
A court hearing in the GM bankruptcy case is scheduled June 30. Abbott said his challenge will be considered at that time.
Texas has 415 GM dealerships, many of which also sell other brands.
Under current state law, the Motor Vehicle Division of the Texas Department of Transportation oversees dealer franchising for GM and other automakers. Abbott said that if GM were allowed to proceed with its new franchise agreements unchallenged, “GM would have a different standard than Ford or Chrysler or other automakers.”
Abbott said GM is requiring its dealers in Texas and other states to sign the new franchise agreements “if they want to be a part of the New GM operation.”
“The new agreements, however, amount to take-it-or-leave-it ultimatums that force current dealers to waive state laws that were enacted to protect businesses from those very kinds of oppressive moves. If dealers don’t sign the contract, they will lose their business.”
Abbott said the State of Louisiana also is challenging the franchise revisions, telling GM in a latter that “GM will not be allowed to market cars in Louisiana unless it follows state law” there.
A GM spokesperson had no immediate comment, saying the company had not seen Abbott’s court filing.
According to the Texas Automobile Dealers Association, the GM franchises in Texas are largely family-owned businesses that employ 27,000 people and generate billions of dollars in annual sales.
“The new federally controlled GM that emerges from bankruptcy wants to be freed from Texas laws that require it to deal fairly with local dealerships,” Abbott said, citing a string of court rulings that bolster Texas’ position. “Its plan will move the business toward a command control economy model and away from a free-market model.”
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