General Motors Offers To Sweeten Settlement Deal For Some Dealers
General Motors has decided to stop selling its Chevrolet cars in India by this year end.
General Motors India offered a better settlement deal to some dealers who had cried foul over “an unacceptably low” settlement amount, dealers and officials of the Federation of Automobile Dealers’ Associations (FADA) told BloombergQuint.
“They have now sweetened the settlement amount for some dealers who seem to have an influence over opinion of other dealers. The intent seems to be to get them to not be able to file a class action suit in court,” said a Chevrolet vehicles dealer requesting anonymity.
The U.S.-based company had last month announced that it will stop selling its Chevrolet brand of cars in India by this year end. It is currently in the process of working out a compensation for dealers, who said they were not apprised in advance about the move and will be left with unsold inventory.
Several dealers had then contemplated a class action suit against the automaker for offering low compensation figures.
FADA will take the matter forward if approached by a majority of the 96 dealers, which operate around 140 showrooms across India, President John Paul Kuttukaran had told wire agency PTI earlier this month. The dealers’ body is also examining the possibility of filing a suit in the U.S., he had said.
However, about 15-20 dealers have now accepted General Motors’ latest offer, a FADA official told BloombergQuint.
The ideal outcome would be if dealers arrived at a settlement with General Motors through these talks, as taking the matter to court would only result in more money and time being spent, the official added.
None of the dealers BloombergQuint spoke to said they had accepted any offer from General Motors. The last date for dealers to accept the offer is July 15.
“GM India is working directly with our dealers to transition to authorized service outlets and to recognise some of the investments made in dealerships. As we consider these discussions to be confidential, it would not be appropriate to discuss them publicly,” the company said in a emailed statement.
The settlement amount offered by the automaker was calculated on the basis of average retail sales done by the dealer over a period, the built-up area of the dealership, and the age of the construction, taking depreciation into count, said a dealer.
The automaker seems to have given relaxations on the lines of considering the average of retail during festive months instead of all months, and considering ancillary areas of the dealership also, while calculating the amount, said dealers.
The amount offered varies from one dealer to another, and is around 10-12 percent of the total investment they made.
One of the dealers, who runs a couple of showrooms in central India, said General Motors offered just Rs 70 lakh as compensation for a total investment of Rs 6 crore for setting up a showroom, according to the PTI report quoted above.
“The compensation offered is measly. It is just around 12 percent of the investments we made. Imagine the hit to those of us who made investments to the tune of Rs 11-12 crore in setting sales and service outlets,” an owner of a dealership was quoted as saying in the report.
Dealers of Chevrolet vehicles, General Motors' only brand in India, are expected to meet in Delhi on June 24 to discuss the future course of action.
In 2015, the company had announced to invest $1 billion in India to enhance manufacturing operations and roll out 10 locally produced models in the country over the next five years.
But in January this year, the firm put on hold its investments on new models for the country as it undertook a full review of its future product portfolio in the country.
The company will now focus on exporting vehicles from its manufacturing plant at Talegoaon in Maharashtra after it stopped production at its first plant at Halol in Gujarat last month.
GM India sells models such as Beat, Sail and Cruze under the Chevrolet brand in India.
With inputs from PTI.