GM dealers plan class action suit over 'measly' compensation

New Delhi: Dealers of General Motors, which has decided to stop selling vehicles in India by year-end, are gearing up to drag the auto major to court while also exploring possibility of a class action suit in the US, over "measly" compensation.

A majority of 96 dealers, which operate around 140 showrooms across India, are unhappy with the company's offer of just around 12 per cent of total investments they have made as compensation.

Moreover, they also said there would be job losses of around 9,500 due to closure of showrooms and service outlets.

The dealers also warned that existing car owners of the company will face service issues as many of them are unwilling to continue providing only after sales service after GM exits from the Indian market.

Confirming plans by dealers of GM India to drag the company to court, Federation of Automobile Dealers Association (FADA) President John Paul Kuttukaran told PTI that around 50 of them have approached the apex body of automobile dealers seeking support.

"We are also examining the possibility of filing a suit in the US. GM is a very big company and so we have to first examine if is feasible to take up such a step, if it is possible we will do it," Kuttukaran said.

He said the FADA is already discussing the matter with lawyers.

Kuttukaran also accused General Motors of indulging "in loose talk" and misleading dealers by stating that it would make new investment and bring in models and "then suddenly announcing to shut operations" in India.

According to one of the dealers of the company, who runs a couple of showrooms in Central India, GM offered just Rs 70 lakh as compensation for a total investment of Rs 6 crore for setting up a showroom.

"The compensation offered is measly. It is just around 12 per cent 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 said on the condition of anonymity.

When contacted, General Motors India spokesperson said the company is meeting with dealers individually and working through a plan that addresses their concerns.

"GM India is working directly with our dealers to transition to authorised service outlets and to recognise some of the investments made in dealerships," the spokesperson added.

The company is also "committed to maintain a service network across key locations in India with staff trained to take care of all the needs of Chevrolets on the road for maintenance and repair", the spokesperson said.

GM is estimated to have a total of 4.5 lakh to 5 lakh vehicle parc in India.

Another senior FADA official, who is directly involved in the matter alleged that GM engaged in talks with dealers in "a secretive one-on-one basis and not as a group" to break their unity.

There will be a clarity on by early next week after the 15-day negotiation process had ended yesterday, the official added.

FADA will seek advice from law firms whether to file case in India or to also simultaneously file a law suit in the US where the company is based, he added.

"The Indian arm of the company will cease after December 31, so we will have to decide whether we need to file a case in the US," he said.

In 2015, the company had announced to invest USD 1 billion (Rs 6,400 crore) in India to enhance manufacturing operations and roll out 10 locally produced models in the country over the next five years.

In January this year, the American 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.

On May 18, the American General Motors suddenly decided to stop selling its vehicles in India as there was no turnaround in its fortunes here after struggling for over two decades to make a mark.

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 like Beat, Sail and Cruze in India.