DALLAS (CN) – Texas Attorney General Greg Abbott has filed an objection with the bankruptcy court overseeing General Motors’ Chapter 11 reorganization, saying the automaker is making dealerships sign agreements waiving protections of Texas law.
Abbott says GM is gutting Texas statutes that regulate car dealers and defies U.S. Supreme Court precedent that upholds the state-based dealership structure.
“GM is putting dealerships across Texas, and thousands of their employees, at risk. The new federally controlled GM that emerges from bankruptcy wants to be freed from Texas laws that require it to deal fairly with local dealerships,” Abbott said in a statement. “Its plan will move the business toward a command economy model and away from a free market model.”
Abbott says that under its bankruptcy plan, GM seeks to sell itself to a new company called the “New GM.” GM insists that its dealers sign a new agreement if they want to be part of the New GM operation.
Abbott calls the new agreements “take-it-or-leave-it ultimatums” that force dealers to waive state laws that protect businesses from such oppressive tactics.
If the dealers do not sign the contract, they will lose their franchise.
Abbott says the 415 franchised GM dealers in Texas are mostly family-owned businesses that employ more than 27,000 and generate billions of dollars in annual sales.
Abbott objects that under the new dealership agreements GM is seeking to take these steps:
to free itself from Texas law limiting GM’s ability to dictate that a franchise be modified or terminated
to skirt Texas laws regarding new vehicle inventory by forcing dealers to order new GM vehicles from the manufacturer – even if a dealer does not believe those cars will sell
to deny Texas dealers their legal right to market other brands
to alter Texas law, or skirt the law regarding dealer locations
and to limit dealers’ warranty claims under Texas law.