SOME GM DEALERS TO STAY OPEN UNDER SETTLEMENT

A employee at a General Motors dealership washes down cars in Toronto on Thursday, March 5, 2009. Several General Motors dealerships slated for closure will remain open following nine months of legal wrangling. GM Canada says a deal has been reached with 21 dealerships that sued the company after they told they would close. The Canadian Press/Nathan Denette

The Canadian Press by Kristine Owram - Several General Motors dealerships slated for closure will remain open after reaching a settlement with the automaker following nine months of legal wrangling.

GM Canada spokesman Tony LaRocca confirmed Tuesday that a deal has been reached with 21 dealerships that sued the company last year after they were told they'd be closed as part of GM's restructuring efforts. Of those, about a dozen will remain open.

The terms of the agreement are confidential.

"The case has been resolved to the mutual satisfaction of the plaintiffs and GM. I'm sure both parties are pleased the litigation is concluded," said Jonathan Lisus, a lawyer with McCarthy Tetrault who represented the dealerships.

LaRocca said the settlement will allow GM Canada to turn its attention back to improving its sales performance.

"We keep looking at trying to make important steps forward ... (putting) products and customers at the front and centre of everything we do, and now we can do that together with our dealers," he said. "From that point of view we see it as a very positive development."

GM announced last year it would eliminate more than one-third of its Canadian dealerships by October 2010 in an attempt to cut costs and streamline its business. The company had more than 700 dealerships in Canada before the closures which were estimated to employ about 33,000 people.

The 21 dealerships named in the lawsuit were slated for closure as part of GM's restructuring, but refused to sign the wind-down agreement. They argued that the automaker used an arbitrary measure to decide which businesses to close and broke a contract that promised to automatically renew their franchises as long as they fulfilled sales and other obligations.

GM denied this and said it had no choice but to close hundreds of stores to stay afloat during the recession.

The claim asked for punitive damages of $1.5 million as well as additional damages for "loss of profit, loss of goodwill, loss of reputation, loss of business opportunity and loss of market share."

One of the plaintiffs in the lawsuit said his dealership will not remain open under the GM banner, but he's still relieved to have reached a settlement.

"We're very pleased that the ordeal has finally come to a mutual agreement," said Bob Slessor, owner of Robert Slessor Pontiac Buick in the southwestern Ontario town of Grimsby.

"It will allow us now an opportunity for a little bit of closure regarding the situation and an opportunity to move forward with our future business plans."

Slessor said he's been in talks with other automakers and intends to keep his 55-year-old dealership open under a different brand.

"From a personal standpoint, we'll miss our association with General Motors. We've enjoyed a long-term relationship and there's mixed emotions as we move forward, but we are pleased that we've been allowed the opportunity to continue business and that the ordeal is finally behind us," he said.

A separate class-action lawsuit by more than 200 GM Canada dealers who signed the wind-down agreement is ongoing, said David Sterns, a lawyer with Sotos LLP, the firm representing the dealers.

"We believe that our case is on very solid ground. We're happy that GM has seen fit to resolve its dispute with the (other dealers), but it's full steam ahead for the class action," Sterns said.

"We're fully prepared to take this case to trial and to prove our case on the merits, and if GM sees fit to try to come to a reasonable resolution, then we would be all ears," he added.

The lawsuit, which is seeking $750 million in damages, claims GM Canada broke franchise laws by failing to give the dealers adequate information and putting "a tremendous amount of undue pressure" on them.

The class-action also names law firm Cassels Brock & Blackwell LLP. The firm was hired in advance to represent the terminated dealers, but failed to disclose that it was also representing Ottawa during bailout discussions which ultimately resulted in GM receiving $10.5 billion from the federal and Ontario governments. As a condition of that funding, Ottawa told GM it would have to scale back its dealership network.

GM dealers across the country took a beating last year from a 29 per cent drop in sales, the result of the recession and the automaker's struggle to stay afloat with the help of court-ordered bankruptcy protection in the U.S. and massive government bailouts in both the U.S. and Canada.

Besides the approximately 300 dealerships slated for closure in Canada, GM had also planned to close more than 1,400 stores in the U.S.

Following a fierce lobbying campaign by car dealers, Congress approved legislation last year requiring arbitration for closed stores. GM said it would reinstate more than 660 dealers it had threatened with closure, reducing the number of dealers planning to appeal.