Toronto-area dealers sue GM, claim company won't help them offset sales drop

TORONTO - A group of 17 Toronto-area General Motors dealers is suing the automaker, claiming GM failed to provide them with adequate financial support despite receiving million of dollars in aid from taxpayers.

The Canadian dealers say they have been struggling to make a profit amid a big drop in market share and sluggish sales, and have spent years asking General Motors of Canada Ltd. and its parent company in the U.S., General Motors Corp., for help.

But, they say, none of the $10-billion bailout provided to the company by the Canadian and Ontario governments as part of joint funding with the U.S. during the financial crisis in 2009 has been spent in Canada.

That has created a particular hardship for dealers in the Greater Toronto Area, a major urban market where it is expensive to operate, the lawsuit says.

"Despite the fact that the Canadian and Ontario governments provided bailout funds to GMCL based on the representations made and assurances given by GM and GMCL ... all of the $10 billion received from Canadian taxpayers . . . (was) directed to GM in the United States," the court filing said.

"At GM's direction and insistence, GMCL ceded the right to allocate the bailout funds it received from the Canadian and Ontario governments to its parent company in the United States, and GM in turn prioritized the needs of its own dealer network over those of Canadian dealers" despite initial suggestions that the funding would benefit both markets.

The dealers operate in what they describe as the third-largest market in North America and say GM is aware that the GTA as a market is comparable to major U.S. markets such as New York, New Jersey, San Francisco and Los Angeles.

But according to the court filing, the company did nothing to address declining market share in Canada, or to stop the loss of customers from brands like Pontiac, which were eliminated as part of GM's restructuring.

The dealers say market share in the GTA has fallen markedly since 2008 - from 12.5 per cent to an all-time low of 5.63 per cent in 2013.

Without adequate support, the dealers say their business is not viable in the long run, especially since they are required by the company to invest millions of dollars in their dealerships in renovations to meet new image standards.

GM spokeswoman Adria MacKenzie described the allegations in the lawsuit, which have yet to be proven in court, as being "without merit."

"We plan to defend against them vigorously," she said. "As the matter is before the courts, we cannot provide any further comment. We will continue to be focused on our customers."

The lawsuit was filed last week with the Ontario Superior Court of Justice.

In it, the dealers are asking that GM provide them with "an appropriate level of financial support and assistance" and are seeking $400 million in damages.

They are also asking for a declaration from the companies that they "breached their duties to deal fairly and act in good faith" toward the dealers.

The GTA lawsuit is the latest in a string of legal battles for the company, including an ongoing U.S. suit in which GM links 13 deaths to a defective ignition switch in cars such as the Chevrolet Cobalt and Saturn Ion. Trial lawyers and lawmakers say claims of wrongful death and injury could total in the hundreds.

GM has agreed to pay compensation to all victims of crashes in those cars under a program announced Monday, provided they can prove the ignition switches caused the accidents.

Kenneth Feinberg, one of the top compensation experts in the U.S. who is running the plan, said GM has placed no limit on the total amount he can pay to injured people or relatives of those killed. And he alone — not GM — will decide how much they each will get, even though he is being paid by the company and it didn't like some of the program's provisions.

Feinberg wouldn't estimate the ultimate cost for GM, but based on the methodology he plans to employ, a large amount of claims could mean a sum running into the hundreds of millions of dollars, if not billions.

— With files from The Associated Press