General Motors of Canada is facing a large class action lawsuit from more than 200 GM dealers whom were given permission to do by an Ontario judge. The dealers are suing for approximately $750 million in restitution for the forced closure of their franchises in 2009. The dealers asserted that they were only given the option to either close their franchises or push GM into incurring significant losses if they did not comply. Whether or not GM has violated Canadian franchise laws is now being investigated. This GM case could potentially cause drastic changes to the automobile industry as any car insurance company may be affected by these changes.
GM of Canada claims that it was instructed by the government to eliminate the dealerships as a condition to receive several billion dollars in bailout assistance. According to GM, it had no other choice but to offer the ultimatum to the dealerships in order to continue to keep the corporation in existence. The threat was that GM of Canada would file for bankruptcy if the dealers refused to shut down their franchises, and the consequences of a forced shut down by GM would be worse than if they decided to cooperate. Though most of the dealers accepted the conditions, they claim that they never should have been excluded from the bailout plan and are attempting to recover their own financial losses. So far, the courts appear to be sympathetic towards the former GM dealers.
The dealerships contend that this whole ordeal has created a ripple effect that has greatly impacted thousands of former GM employees in Canada, leaving them without work and further contributing to the ongoing economic crisis. According to the dealerships, they had financed their own businesses and required very little involvement at all from GM. They argue that it is unfair that they should be forced to suffer the loss of their incomes and businesses as a result of GM's financial instabilities.
Lawyers for both sides argue the validity of the claims. One side questions the financial impact that the elimination actually posed to GM, while the other claims that weaker dealerships were a threat to the brand and marred its image. Lawyers for GM have even suggested that the eliminations may not have been sufficient enough in keeping the corporation out of the red. According to the earnings statement posted in the investor relations section of its website, GM had generated a net income of 4.7 billion for 2010 and revenues were calculated at over a hundred billion dollars for the calendar year. In fact, the 2010 calender year has been their highest financial accomplishment in little over a decade.
As the profit varies between dealerships, it is unlikely that these dealers would receive the full amount of $750 million. Realistically, they might retain a quarter of the amount that is being sought. The trial is estimated to take place next year, however, the dealers' right to sue can be appealed by GM Canada. The decision for GM Canada to appeal could lead to significant delays in the legal proceedings for several years.
GM of Canada claims that it was instructed by the government to eliminate the dealerships as a condition to receive several billion dollars in bailout assistance. According to GM, it had no other choice but to offer the ultimatum to the dealerships in order to continue to keep the corporation in existence. The threat was that GM of Canada would file for bankruptcy if the dealers refused to shut down their franchises, and the consequences of a forced shut down by GM would be worse than if they decided to cooperate. Though most of the dealers accepted the conditions, they claim that they never should have been excluded from the bailout plan and are attempting to recover their own financial losses. So far, the courts appear to be sympathetic towards the former GM dealers.
The dealerships contend that this whole ordeal has created a ripple effect that has greatly impacted thousands of former GM employees in Canada, leaving them without work and further contributing to the ongoing economic crisis. According to the dealerships, they had financed their own businesses and required very little involvement at all from GM. They argue that it is unfair that they should be forced to suffer the loss of their incomes and businesses as a result of GM's financial instabilities.
Lawyers for both sides argue the validity of the claims. One side questions the financial impact that the elimination actually posed to GM, while the other claims that weaker dealerships were a threat to the brand and marred its image. Lawyers for GM have even suggested that the eliminations may not have been sufficient enough in keeping the corporation out of the red. According to the earnings statement posted in the investor relations section of its website, GM had generated a net income of 4.7 billion for 2010 and revenues were calculated at over a hundred billion dollars for the calendar year. In fact, the 2010 calender year has been their highest financial accomplishment in little over a decade.
As the profit varies between dealerships, it is unlikely that these dealers would receive the full amount of $750 million. Realistically, they might retain a quarter of the amount that is being sought. The trial is estimated to take place next year, however, the dealers' right to sue can be appealed by GM Canada. The decision for GM Canada to appeal could lead to significant delays in the legal proceedings for several years.
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