Holden responds to frustrated dealers, defends its compensation package

General Motors and General Motors Holden have finally responded to the bold claims of unfair compensation and questions of timing behind its decision to close its doors this year from frustrated Holden dealers across Australia. 

A web of unsatisfied dealers is taking legal action against General Motors, with the aid of law firm HWL Ebsworth (HWLE), over underrated compensation (reportedly leaving some dealers in the red over staff redundancies) in Holden's 'Transition Support Programme'. 

"We consider that Holden’s Transition Support Program (TSP) is more than fair and reasonable, even before the devastating impact of COVID-19 on the economy and industry," reads GM and GM Holden's statement, constructed with the aid of analysis from Price Waterhouse Coopers and Norton Rose Fulbright. 

"The HWLE proposal made a number of inaccurate claims, assumptions and costs allocations. It also made baseless allegations of unconscionable and misleading conduct which are plainly wrong and unsupported by fact or law. These allegations are categorically rejected by GM Holden.

"The compensation for new vehicle sales was calculated using three fiscal years, 2017 – 2019, and includes highly profitable Commodore units that were produced in Australia. It includes all facets of new vehicle profitability and amounts to $1500 per car. This compensation is over four times what the average dealer made in the new vehicle department over this same timeframe.

Read more: What Holden's death means for current owners

"HWLE has claimed that such amount should be $6110. The PwC analysis of HWLE’s modelling for such amount identified a number of inaccurate assumptions and cost allocations.

"For example, it omitted to factor in dealers’ opportunity to continue the service, repair, warranty and parts activities. Aftersales is typically one of the most profitable parts of a dealer’s business representing on average up to 115% of a dealer’s total net profit in 2019."

In the statement, GM and GM Holden also responded to claims made by some that the firm knew it would be closing its doors in 2020 as early as five years ago.

"These claims are based on a bizarre and illogical argument that GM has secretly planned to shut down Holden since at least 2015, but made various significant investments in programs, plans and strategies to support and promote Holden in order to mislead dealers into thinking that there was no secret plan to shut down Holden," the statement adds.

"It defies logic to believe that GM intended to close Holden while investing heavily in new or updated right hand drive (RHD) models for the Australian market including Equinox and Acadia, launched new here in 2017 and 2018 respectively, and significantly updated Trailblazer, Trax and Colorado models introduced across a similar period."

GM and GM Holden cited investments in and the Maven mobility service as further evidence that it was operating not knowing that was coming up ahead. "Investments such as these cannot by any logic be held to be the actions of a company that allegedly intended to close through that time," it said. 

The statement added two case study examples of dealership compensation models based on sales volume, to underline the "excessive" nature of the dealer claims. The first concerned a medium dealership that sold 190 cars last year, and the latter concerned a large dealership that sold 466 cars in the same period. 

The compensation packages for each dealership totalled $712,500 and $1,747,500; each figure much higher than the claimed annual approximate earnings of $200,000 and $330,000 that dealerships of each size category would have earned in 2019. According to GM and GM Holden the dealer projections for compensation from the dealers taking legal action, based on a formula constructed by HWLE, are a much higher $8,936,930 and $21,923,902 for medium and large-size dealerships, respectively.