June 9, 2017 / 10:26 AM / 2 years ago

GM confident of India dealer settlement though half object to terms: sources

NEW DELHI (Reuters) - General Motors Co (GM.N) is confident of reaching a settlement with dealers in India before halting sales in the country even though half say the compensation on offer is too low, people familiar with the matter said after the first round of talks.

FILE PHOTO: Employees work inside a plant of General Motors India Ltd. at Halol, about 150 (93 miles) east from the western Indian city of Ahmedabad August 28, 2009. REUTERS/Amit Dave/File Photo

The U.S. automaker last month said it would stop selling passenger cars by the end of the year after two decades in a market where it commands less than one percent.

It is now tasked with minimizing fallout as it restructures its money-losing India operations, which will continue making cars for export. At the same time, the firm has had to fend off an attack from a hedge fund demanding change at the top after a 16 percent stock price fall during the current CEO’s tenure.

GM concluded a first round of talks on Wednesday with its 96 India dealers, who operate 120 dealerships, and the company is confident its settlement terms will be accepted by a large majority, a person at GM India said on condition of anonymity.

GM told Reuters discussions with dealers were confidential.

“We are meeting with dealers individually and working through a plan that addresses their concerns,” a spokesperson said. “GM India is working directly with our dealers to transition to authorized service outlets and to recognize some of the investments made in dealerships.”

But GM’s Dealers Association Board (DAB) comprising 15 high-sales dealers said the compensation on offer was “negligible and not sufficient”, in a June 6 email to Chief Executive Officer Mary Barra, shown to Reuters by one DAB member.

Two other DAB members told Reuters that about 50 dealers were dissatisfied with the terms and have contributed to a fund created by DAB for use in the event of any legal action.

The president of India’s Federation of Automobile Dealers Associations, John K. Paul, said “several” dealers were planning legal action in India and exploring the possibility of a class action suit in the United States. He said they aimed to finalize plans this month ahead of a second round of talks.

One of the three DAB members said GM offered compensation based on dealers’ average monthly sales over the past two years, showroom size and expenses for sundry items such as signage. The member favored compensation based on a dealer’s two best years as the past two years suffered from a scarcity of new models.

The three DAB members plus three more dealers told Reuters the offer was too low. One of the DAB members said compensation amounted to about 10 to 12 percent of their original investment, and that it should be “higher by a few multiples”.

All six dealers declined to be identified as the matter was confidential.

Two of the DAB members said they were surprised when GM announced the end of sales on May 18. One showed Reuters a GM email dated April 28 announcing a new hatchback for July.

“The excitement is about to roll, and you will see action-packed days ahead,” GM said in the email.

Reporting by Aditi Shah; Editing by Paritosh Bansal and Christopher Cushing

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