Jun
12
Written by:
Mark Lavergne
6/12/2009 2:12 PM
Attorney General Greg Abbott has filed an objection on behalf of the State of Texas to General Motors' bankruptcy court petition, certain provisions of which he says would require dealerships in Texas to either waive state law or lose GM's business. GM, which is now mostly owned by the federal government, is looking to require all existing GM dealerships in Texas, over 400 of them employing 27,000 Texans, to sign the new agreement which would, among other things, deny them their legal right to market other brands, and the right to
Abbott called the new agreement a "take-it-or-leave-it ultimatum." Under it, dealers would also be forced to go to court in New York to voice grievances.
"GM is seeking to place short term profit above long held principles; short term accounting above long term accountability," Abbott said today in a statement. "America deserves better; Texas is demanding it."
He is arguing that federal law prohibits GM from circumventing Texas law, and that GM is seeking to free itself from state law governing franchise modification and termination. State law says a manufacturer "may not modify or replace a franchise if the modification or replacement would adversely affect to a substantial degree the dealer's sales, investment, or obligation to the public" without notive and the right to protest on the part of the dealer. GM's agreement with the dealers would also require the dealer to order and accept additional new cars from the manufacturer, also in contravention of state law, specifically the Texas Occupation Code, Abbott said. The agreement would give GM powers over dealers that Ford and other motor companies would not have, Abbott argued.
The hearing is set for June 30 in New York. He will wait to see GM's response to his objection. If it does not satisfy him, he will go to the hearing. He declined to say whether the state would have to shut down the GM dealerships in Texas if the court rules in their favor. Louisiana, Abbott said, has sent a letter to GM saying that they can only sell cars in the Sportsman's Paradise if they comply with state law there.
There may be other states that take similar legal action, Abbott said. "We just happen to be the first."
Abbott said that objections had been voiced by dealers in the state, but that his concern was to make sure GM was acting in compliance with state law.