A Senate inquiry into Holden’s exit from Australia has been told of catastrophic flow-on effects with some car dealerships at risk of financial and personal ruin.
General Motors announced last year the Holden brand was no longer competitive and it would be ‘retired’ from sales across Australia and New Zealand.
The Senate’s Education and Employment Committee has begun examining the impact of General Motors’ decision.
Its investigation will focus on how the decision affected Holden employees, the brand’s dealership network, the role of the Franchise Code and the federal government’s proposed dealership amendments to the code.
The committee has received 77 submissions; most are anonymous or confidential, with only one dealership publicly identified.
Anxiety, stress and financial devastation
Northam Holden in Western Australia elaborated on the shock exit decision in its submission to the inquiry.
“The loss of the Holden franchise means a loss of capital invested in the business in excess of $1 million,” said dealer principal Bryan Lee.
“Our major claim is that Holden compensates us for the $750,000 goodwill we paid to obtain the business of the previous holder of the Holden franchise, plus an additional $150,000 to compensate for the increased costs of building as dictated by Holden.”
Another dealership owner, who asked for his name to be withheld, was scathing in his comments to the committee.
“The impact of Holden’s decision to withdraw the brand is devastating,” he said.
“I have spoken with numerous dealers who are suffering anxiety and there are even more under considerable financial stress, experiencing mental health issues and, family issues.
“There are dealers that I believe will lose everything … their business, their home, possibly their marriage.
“General Motors Corporation (GMC) and Holden have deceived the Holden dealers’ network for several years.”
‘Wind down the brand with dignity’
In its submission to the committee, GM Holden said it had tried to keep the brand in Australia.
“GM explored numerous options to secure a future for Holden but very sadly it was not possible, for reasons announced,” the company said.
“We are now determined to wind down the brand with dignity.”
GM also outlined the terms of its compensation package.
“As part of its offer, all Holden dealers have been given the opportunity to continue the very profitable service, warranty and repair operations, for a longer new five-year term.
“So additional compensation is primarily focused on the loss of new vehicle sales, over the remaining two-and-a-half years of the current dealer agreement, plus some other features.
“Holden’s compensation offer is about four times the amount of average profit which dealers were making on the sale of a new car, over the past three years.”
Watchdogs investigate decision
Australian Small Business and Family Enterprise Ombudsman Kate Carnell said in her submission she was worried dealership owners had been left high and dry.
One of her major concerns was the proposed compensation package.
“It was just catastrophic for many of them [the dealers],” she told the ABC.
“We heard some dreadful stories of dealerships who had made the call to buy another or invest money in them literally months before the decision was announced.
“In one case they had even gone to speak to Holden and Holden hadn’t indicated to them that they should hold off any major investment.
“I think it was around eight weeks later that the announcement was made.”
Australian Competition and Consumer Commission (ACCC) chairman Rod Sims called for dealerships to contact the watchdog.
“The ACCC has heard concerns that GM encouraged some dealers to make large financial investments, despite having knowledge that they would be withdrawing from the Australian market,” Mr Sims said.
“It has been suggested that GM did not conduct its negotiations with dealers in good faith, and did not give adequate disclosure of materially relevant facts, as is required under the Franchising Code.”
However, the ACCC said it had not heard directly from any dealerships that recently made such financial investments or were involved in the negotiation process.
“We are mindful that many franchisees may be unwilling to voice their concerns because they fear retribution from their franchisors,” he said.
He said the watchdog would act.
“The ACCC will investigate alleged breaches of the ACL and Franchising Code by GM in relation to the withdrawal of the Holden brand from the Australian market.”
The committee is due to report back by March 18.