Friday, June 12, 2009

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Statement from Texas Attorney General Greg Abbott Concerning the Objection Filed by Texas Regarding GM's Attempts to Circumvent Texas Laws

GM is putting dealerships across Texas – and thousands of their employees – at risk. 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. Its plan will move the business toward a command economy model and away from a free market model.

In an unprecedented move, GM – which will be 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 so, federally-owned GM guts Texas statutes that regulate car dealers – and flaunts U.S. Supreme Court precedent that upholds our state-based dealership structure.

Media links

View Video of News Conference
Texas Attorney General Abbott's Objection to the GM Bankruptcy Reorganization Plan

Under its bankruptcy plan, GM seeks to sell itself to a new company – at this time called “New GM”. GM has insisted that current dealers sign a new dealership agreement if they want to be 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 kinds of oppressive moves. If dealers don’t sign the contract, they will lose their business.

According to the Texas Automobile Dealers Association, there are 415 franchised GM auto dealers in the State of Texas. These largely family-owned businesses generate billions of dollars in annual sales and employ almost 27,000 Texans.

Under the new dealership agreements GM is seeking to, among other things:

· Free itself from Texas law limiting GM’s ability to dictate that a franchise be modified or terminated

· Skirt Texas laws regarding new vehicle inventory by forcing dealers to order new GM vehicles from the manufacturer – even if a dealer does not believe those cars will sell

· Deny Texas dealers their legal right to market other brands

· Alter Texas law (or skirt around existing law) regarding dealer locations

· Limit dealers’ warranty claims under Texas law

States’ legal rights to establish a structure for auto dealerships has been long-standing and unquestioned. The United States Supreme Court recognized that States are “empowered to subordinate the franchise rights of automobile manufacturers to the conflicting rights of their franchisees where necessary to prevent unfair or oppressive trade practices.” (New Motor Vehicle Board of Cal. V. Orrin W. Fox Co. 439 U.S. 96 (1978)).

The Texas Occupations Code provides a comprehensive legal structure for dealerships. Now, under the threat of financial panic and the guise of emergency, GM is asking a bankruptcy court to hurriedly approve a plan that would let it – the only federally controlled auto manufacturer – be the sole exception to those well-established state laws. Perhaps more ominously, GM’s new mandates threaten free enterprise by allowing the federally controlled company to compel business judgment decisions that formerly were made by businessmen and women. GM is seeking to place short term profit above long held principles; short term accounting above long term accountability. America deserves better; Texas is demanding it.