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GM Canada

Peter Power

At least 10 General Motors of Canada Ltd. dealerships that had been scheduled to close as part of the auto maker's restructuring will remain open as part of a settlement in a lawsuit between the company and 21 of its Canadian dealers.

The 21 dealerships sued GM Canada earlier this year after receiving termination notices in May, 2009. Outlets in Charlottetown, Outlook, Sask., (population 2,500 and home of Canada's longest pedestrian bridge), and several in Ontario will continue operating after Oct. 31, when the majority of 240 dealers who received termination notices from GM last May are scheduled to be closed.

"We are able to say we're still in business," said Cindy Robinson, whose Pontiac Buick dealership in Guelph, Ont., has been in the family since 1965.

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The lawsuit stemmed from the events of May, 2009, when GM Canada's parent company, General Motors Corp., was heading into Chapter 11 bankruptcy protection in the United States and there were fears among its Canadian dealers and warnings from the company itself that the Canadian unit faced a similar fate.

The Canadian unit sent termination notices to 240 dealers in Canada and gave them about five business days to decide whether to accept wind-down agreements and waive their rights to sue or turn the offers down and risk the potential dangers to their businesses that would arise in bankruptcy protection. In the end, GM Canada stayed out of bankruptcy protection.

The termination agreements were rejected by 38 dealers, 21 of whom joined the lawsuit, which had been scheduled to go to trial this fall.

GM Canada is also facing a lawsuit by another group of dealers who signed wind-down agreements, but now are seeking certification as a class-action suit, alleging that the agreements are invalid in part because the law firm giving them advice was also advising the auto maker in discussions with the federal and Ontario governments about a bailout. Two other lawsuits in Quebec have also been filed.

The settlement reached Monday with the group of 21 involves reinstatement of some dealers and settlement payments, but the terms are confidential, said Jonathan Lisus, a lawyer who represented the 21 dealers.

GM Canada spokesman Tony LaRocca confirmed that the suit has been settled, but added that the company also will not discuss the terms.

Reid Motors Ltd., in Outlook, is one outlet that will continue in business offering Chevrolet, Buick and GMC vehicles, said owner Bob Reid, who added that he sells between 70 and 100 new vehicles annually.

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Dealers said a confidentiality order that was part of the settlement prevents them from disclosing the terms, except that they are permitted to say whether they will remain in operation or close. None would reveal the monetary aspects of the settlement.

"We're happy, our customers are happy and our employees are happy," said Gary Rier, whose Bud Rier Chevrolet Ltd. in Paisley, Ont. is among those that have been reinstated. "We can move ahead and make things happen."

Mr. Rier spent $250,000 to upgrade his 15-employee outlet after GM insisted in June, 2008, that he do so, according to court documents. He received a termination notice less than a year later.

Tom Donnelly, who owns Donnelly Pontiac Buick GMC in Gloucester, Ont., said his dealership will close effective Oct. 31 and become part of his family's used car operations.

"I'm glad it's been dealt with and I'm glad it's behind us," Mr. Donnelly said Monday.

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About the Author
Auto and Steel Industry Reporter

Greg Keenan has covered the automotive and steel industries for The Globe and Mail since 1995. He also writes about broader manufacturing trends. He is a graduate of the University of Toronto and of the University of Western Ontario School of Journalism. More

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