GM Reinstatement Offers Deemed 'More than Fair'

General Motors Co. is imposing no onerous conditions on dealers it is offering to reinstate, five lawyers said today.

Most of the 661 eligible dealerships will agree to the conditions outlined in the letter of intent that GM started sending today, the lawyers and some dealers told Automotive News. They spoke anonymously because dealers have a confidentiality agreement with GM.

The confidential three-page letter lists 13 conditions and requirements, including working capital, facility, location, floorplan financing and licenses, none of which treat the dealerships differently than non-rejected stores, a copy of the letter obtained by Automotive News shows.

The letters reassure dealers who had worried that GM would require costly changes to their stores.

GM spokesman Dave Roman confirmed that the letters GM is sending to the 661 dealerships are “essentially the same” as typical GM letters of intent to offer franchises.

The March 11 letter is a form letter with just two items that differ for each dealership: the amount of working capital that each must have and the size of the wind-down payment that it received from GM, which all dealers must return.

The only potentially troublesome provision of the letter for dealers is its requirement that the dealerships operate under the federal bankruptcy code rather than state law through October, three dealer lawyers said.

This could pose a problem, for example, if a dealership did not comply with GM’s brand-image requirements and the company sought to terminate the dealership, a lawyer said.

GM would have an easier time eliminating a dealership under federal bankruptcy code than under state law, he said.

The two lawyers said it is not yet clear how many of their clients, if any, might refrain from signing the letter because of this issue.