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GM Canada accused of ambushing dealers with wind down agreement in 2009

David Paddon, The Canadian Press

A showroom at a GM dealership in North Vancouver is pictured on May 20, 2009. THE CANADIAN PRESS/Jonathan Hayward
A showroom at a GM dealership in North Vancouver is pictured on May 20, 2009. THE CANADIAN PRESS/Jonathan Hayward

TORONTO - A lawyer for former GM Canada dealers says the automaker deliberately ambushed and misled them in 2009 when it downsized its retail network in the wake of the financial crisis and recession.

In his opening remarks, lawyer David Stern told a packed courtroom that GM Canada broke provincial laws when it told the dealers they could only get compensation if all of them agreed to a deal within six days.

Stern said Tuesday that the law in Ontario, Prince Edward Island and Alberta say franchisees must get 14 days notice and complete disclosure.

He said that GM was able to give the required time, but chose to wait until the last possible minute for its own reasons including that it wanted to reduce its dealership size without needing court protection from creditors.

"The evidence will show that General Motors achieved this result by ambush, deception and divide and conquer tactics" Stern said.

The former dealers are seeking up to $750 million in compensation, but the amount would be reduced by money they previously received from GM.

The automaker says former dealers covered by the class action received a total of $123 million for agreeing to shut down by the end of 2009 and that there was no room for negotiation.

GM Canada has not only denied the allegations against it, but is also suing the former dealers that are pursuing the case, which was prohibited under the wind down agreements.

As Stern put it in court before a lunch break, GM Canada's position is that it "is entitled to its money back."

GM's lawyers will make their opening statements after another of the dealers' lawyers outline the case against Cassels Brock, a law firm that the accused of representing them badly when GM made its ultimatum to sign the deal quickly and without negotiation.

The dealers allege that GM knew that law firm Cassels Brock & Blackwell LLP was in a conflict of interest because it represented both them through their national association and the Canadian federal government, which was negotiating a bailout for General Motors

GM and Cassels Brock have disputed the allegations.

The case was originally filed by a former Toronto GM dealership, now called Trillium Motor World, on behalf of dealerships in Ontario, Alberta and P.E.I. that were told in May 2009 that their dealer agreements would be terminated before their normal expiration date.

General Motors automaker slashed its operations to qualify for billions of dollars of government bailout money following the financial crisis.

Both Ottawa and the Ontario government acquired GM shares in 2009 after providing some C$10.6 billion in aid to the automaker.