This chapter explores the events associated with the exit of General Motors-Holden (GM Holden) from the Australian new car market, including the impact of the withdrawal on Holden car dealers and its implications for consumers.
GM's decision to withdraw from the Australian market
After playing a significant part in Australia's industrial history over the
last 160 years, GM announced on 17 February 2020 that it would retire the Holden brand from sales in Australia and New Zealand, with its remaining local design and engineering operations to be wound down by 2021.
In its submission, GM Holden outlined the rationale for the company's decision:
GM explored numerous options to maintain Holden operations. Every realistic possibility was carefully examined but none could overcome the challenges of the investments needed for Australia's highly fragmented and right-hand-drive market, the economics to support growing the brand, and the need for an appropriate return on investment.
Despite hopes of reaching a different outcome, the inescapable conclusion was that GM could not sustain further investment into Holden. GM reluctantly made its decision to wind down Holden a few days before the public announcement which was made with great sadness
on 17 February 2020.
GM Holden's former Interim Chairman and Managing Director,
Mr Kristian Aquilina, provided further context for GM's decision at the hearing on 3 August 2020. Mr Aquilina explained:
It was a result of GM being confronted, as I outlined at the time, with some decisions it needed to make around some key investments required by General Motors that were bespoke and unique to Holden continuing in the Australian market. And, as I said, it was not just around right-hand drive vehicles—although, that is a major part of it—but there were investments required in technology, the customer experience, our distribution, our brand and our marketing going forward. And, as I outlined in my opening statement, one per cent of global sales emanate from Australia. It's a very small market, without the scale necessary to recover some of those investments, and, unfortunately, the decision was taken at the time.
GM Holden indicated that it would close most of its operations in Australia, including its Holden National Sales Company, Design, Engineering, Maven and Holden Financial Services entities, with the loss of
approximately 600 employees. Following the wind-down of its design and engineering operations by the end of 2020, a team of around 200 people would remain 'in the business to support a network of authorised Holden Service Outlets across Australia to service and repair vehicles for Holden customers'.
GM Holden also offered affected dealers a transition package, which provided compensation for the early termination of the final two and a half years of its dealership agreement. The transition package is discussed in more detail later in the chapter.
Concerns regarding the decision process
A number of submitters raised concerns in relation to GM's conduct and actions leading-up to its decision to withdraw from the Australian market. Two key concerns raised with the committee were:
the lack of prior consultation with employees, dealers or the Australian Government (the government) in relation to GM's decision; and
GM Holden's conduct in relation to capital investments and transfer of dealerships in the knowledge that they might be withdrawing from the Australian market.
Lack of consultation
Mr Aquilina confirmed that he was first advised of the decision to retire the brand on 14 February 2020, three days ahead of the formal announcement on 17 February 2020. Mr Aquilina rejected criticism that there was a lack of prior consultation by GM Holden:
A decision was taken in the days leading up to our announcement and we announced it very quickly after the decision was taken. I don't know how much sooner we could have done it. Essentially, we were advised, we discussed our plans as a local board and a local leadership team and, as soon as we could possibly let the public know about it and let our constituents know about it, we did so, which was the Monday morning that followed.
In relation to the timing of GM's announcement, Mr Aquilina noted that he had been providing input into GM's internal deliberations about the future of the Holden brand since December 2019:
My role was to provide as much input as I could on the various scenarios that we were considering for Holden in Australia, including a future which would have needed to attract significant investment, and of course it would have had to provide input on how you would conduct an orderly wind-down, if that was the decision that it took.
In addition, Mr Aquilina observed:
If we were to tell people, for example, that we were going through a wind-down of the Holden brand, and then not do it for several years, we would have seen such a deterioration and such poor returns for everyone involved, it would have been a much worse situation than telling people and doing it swiftly. We did it to mitigate losses for everyone involved.
The Australian Automotive Dealer Association (AADA) told the committee that many dealers were only advised of GM's decision on a conference call about 15 minutes before the public announcement, with some dealers not 'in a position to tell their staff before their staff heard it in the media'.
Mr Mark Palmer, who operated a Holden dealership in Inverell, New South Wales, submitted:
I was travelling en-route to New Zealand when Holden released the news to Dealers. The media and public found out at the same time. There was no prior discussions or suggestions from Holden that they were planning this.
Similarly, a former engineer in GM Holden's engineering department, who did not wish to be identified, also indicated that there was no advance warning to Holden employees 'about the potential closure of the business and there was no request from Holden management for staff to make any contribution to avoid the closure'. The submitter noted:
Given the recent growth of the Holden Engineering team, the announcement of the closure of Holden operations was a complete shock. On the day of the closure announcement, 8 new engineers commenced employment at Holden. Perhaps nothing better illustrates how unprepared we were for this announcement.
The Department of Industry, Science, Energy and Resources, and the Department of Education, Skills and Employment (the departments) both indicated that they were advised of GM's decision on the same day as the official announcement. Mr Bruce Wilson, Head of Division, Industry Growth, Department of Industry, Science, Energy and Resources, observed:
We would like more consultation on decisions such as this. Various car manufacturers have given both the industry and us more warning on their proposed changes. But you can't regulate this sort of consultation; that doesn't work.
Submitters questioned whether GM made the strategic decision to withdraw from the Australian market well before its announcement, despite indicating 'both privately with its dealers and publicly through the media that it was in Australia for the long haul'.
Indeed, the AADA highlighted that 'the sale of the plant in Thailand where Australia's top selling Holden vehicle, the Colorado ute, was manufactured was announced at the same time as the closure of Holden'.
Mr James Voortman, Chief Executive Officer, AADA, commented:
I believe this decision was in the pipeline for some time because common sense dictates that it would have been. My view is that the minute that they decided that that factory was to be sold, that was when the whole future of Holden in Australia was called into question. At that point, I believe GM had the moral obligation to many of its long-term partners to inform them to cease capital expenditure programs, to refrain from engaging in a buy/sell process and to basically protect them financially.
However, GM Holden rejected the suggestion that GM's decision to sell its Thailand plant was linked with its decision to withdraw from the Australian retail market. Mr Aquilina argued:
We knew a decision was made on the sale of the Thailand plant in the days leading up to 17 February. I can't be specific about the dates when GM decided to sell that plant in the days leading up to 17 February, when it was announced in Thailand. I just want to put to bed this whole conspiracy, which has been a long-held view of General Motors to unwind our operations right across South-East Asia and Australia and so forth. We were producing the highest volume and most popular model, the Colorado, in three plants around the world. If, for whatever reason, there was a shock to supply out of our Thailand plant, we had options to source vehicles from two other plants that we have to produce the Colorado.
GM Holden's conduct prior to the announcement
Some submitters raised concerns that GM Holden allowed dealers to make capital investments, approved the transfer of dealerships and prevented dealers from taking on additional franchises, in the knowledge that they would be withdrawing from the Australian market. For example, the AADA submitted:
…many dealers were asked until very recently, to make significant capital expenditures. In one case, the company demanded that one Dealer Group build a $6.5 million 'Holden Dealership of the Future', which was not slated to open until May 2020, three months after GM announced the demise of the brand in Australia.
The Motor Trades Association of Australia (MTAA) also expressed similar concerns on behalf of its members:
…MTAA suggests it is incomprehensible that (as reported by a Holden Dealer constituent) a GMH business development executive can travel from one side of the nation to the other in the first week of February 2020 to consult a dealer on plans for a new facility, the capital investment and requirements of GMH for that facility, and progress being made on those plans, when only 14 days later an announcement is made to end the Dealer's franchise agreement and vacate the Australian market.
The AADA also submitted that GM approved the transfer of dealerships right up until several weeks before its announcement and that 'a regional Holden Dealership sale was completed barely three weeks before the announcement that Holden Dealerships would no longer exist'. The AADA argued:
…the applications for consent to transfer Holden Dealerships have been approved by GM knowing that the purchaser was relying on the usual industry practice of rolling over Dealership Agreements. Had the purchasers known of GM's intentions, they would most likely not have proceeded or would not have paid as much goodwill for the Holden Dealerships.
In addition, the AADA submitted that GM had prevented dealers from taking on additional franchises:
Even as sales figures continued to decline and many Dealers had been discontinued, Holden continually refused to allow Dealers to take on other franchises. Indeed, the Holden Dealer Council has stated that 'Dealers can prove that Holden has consistently disallowed applications for multi-franchise arrangements and caused immense loss through their unconscionable acts over the past 15 years'.
In response, GM Holden rejected any suggestions that it approved projects in the knowledge that it would be exiting the country. Mr Aquilina pointed out:
In 2018, or recently before that, we had struck new dealer agreements of five years in length, we had introduced a new finance company into the market, we'd kicked off these new engineering projects, we'd introduced new programs that were firsts for Holden and we'd introduced new products that we committed significant right-hand-drive investment to. To think that we would do all that whilst having a plan to wind up our operation just defies any logic whatsoever and it's just a big red herring.
GM Holden also disputed the suggestion from the AADA that it refused to allow dealers to take on other brands:
Over the 18 months prior to Holden's announcement to withdraw, more than 60 multi-franchise applications were approved by Holden. For the same period, our records indicate only 3 applications were found not to meet our multi-franchising criteria and we remained open to these dealers for them to re-submit applications that did so.
In its submission, the Australian Competition and Consumer Commission (ACCC) stated that it had:
…also heard concerns that GM encouraged some dealers to make large financial investments, despite having knowledge that they would be withdrawing from the Australian market. It has been suggested that GM did not conduct its negotiations with dealers in good faith, and did not give adequate disclosure of materially relevant facts, as is required under the Franchising Code.
However, the ACCC also indicated that it had:
…not heard directly from any dealerships who have recently made such financial investments or are involved in the negotiation process. We are mindful that many franchisees may be unwilling to voice their concerns because they fear retribution from their franchisors.
The ACCC elaborated on this point in its submission:
Even where there is no overt retaliation, we recognise that individual franchisers may be unwilling to approach the ACCC for fear of damaging their ongoing commercial relationships with their franchisor.
Transition support for dealers
At the time of GM Holden's announcement on 17 February 2020, there were approximately 185 Holden dealers operating some 203 facilities across Australia. Most of these dealers had signed or renewed five-year franchise agreements with GM Holden in 2018. These agreements were due to expire at the end of 2022.
GM's decision to withdraw the Holden brand and operations from Australia meant the existing five-year agreements with dealers were effectively terminated two and half years before they were due to expire.
Following GM's announcement, GM Holden offered affected dealers a Transition Support Program (TSP), which set out compensation and transition arrangements. The TSP offer included:
compensation for the loss of new vehicle profit opportunity for the remaining balance of dealer agreements;
additional compensation for unamortised capital investment in Holden showrooms, as well as for special circumstances and dealers who were solely dependent on the Holden brand;
payment for the removal of signage and additional cash assistance to help clear new vehicle inventories; and
a guarantee of full margin opportunity for every new car sold in 2020.
At the hearing on 3 August 2020, Mr Aquilina provided the committee with an explanation of the various components of the compensation package:
The compensation offer was multifaceted. There was an offer that dealt on a per vehicle amount; there was $1,500 per car for every car which they sold in 2019, multiplied by the 2½ years remaining in their agreement. There was also an offer to make good on capital investment expended on selling new Holden vehicles. We took into account any special circumstances associated with the decision that we needed to comprehend. We also provided dealers with significant liquidation support to help them move on their unsold inventory and their inventory in pipeline, which they accepted.
In addition, affected Holden dealers were offered the opportunity to become authorised Holden Service Outlets. GM Holden indicated:
All Holden dealers are getting the opportunity as part of a transition support package to continue as authorised Holden Service Outlets for an initial term of five years, which is double the remaining term on the existing agreement. This will enable dealers to maintain an extensive customer base to service Holden vehicles and provide spare parts and accessories.
Holden dealers benefit from one of the biggest vehicle brand populations in Australia. There are about 1.6 million Holdens on Australian roads, making it a lucrative brand for service and repair work. This is typically a very profitable ongoing business stream for dealers.
In its submission, GM Holden also pointed out that it expected that 'most - if not all - dealers would wish to continue with Holden Service Operations given that service and spare parts have been profitable for the dealer network'. GM Holden noted:
Each time a vehicle is serviced under, for example, the 'free service for 7-years' offer or under warranty arrangements, the work is undertaken by dealers but is paid for by Holden. Holden will continue to fund this arrangement on the same basis as present.
GM Holden initially requested that Holden dealers provide a response to its TSP offer by 31 May 2020, which it argued was a timeframe 'consistent with or longer than on previous occasions where GM has exited its brands from markets, such as Europe and South Africa'.
However, the response date was subsequently extended until 30 June 2020 following the intervention of the ACCC. The ACCC noted that:
The ACCC had received complaints that Holden was placing undue pressure on dealers by imposing an unnecessary deadline for acceptance of the proposed compensation package. This meant that dealers would have been forced to choose whether to accept the compensation offer before completing a dispute resolution process.
The ACCC was concerned that this conduct may raise concerns under the good faith obligations of the Franchising Code of Conduct and the unconscionable conduct provisions of the Australian Consumer Law.
After further unsuccessful attempts to resolve the issues with the TSP via mediation, the Minister for Employment, Skills, Small and Family Business wrote to GM and the Australian Holden Dealer Council (the dealers representative body) on 27 June 2020, requesting that both parties should settle the dispute via arbitration, and that GM should extend the 30 June 2020 deadline for acceptance of the TSP offer.
GM Holden subsequently advised Holden dealers:
As you may be aware there was some publicity over the weekend regarding a suggestion that GM Holden and the Australian Holden Dealer Council would seek to settle their current dispute via arbitration, and that the deadline for the acceptance of transition support packages (TSP) would be extended beyond 30 June.
This is not the case. Arbitration was suggested by the Federal Government but GM Holden does not agree that an arbitration process would be appropriate or helpful. We have responded to the Government accordingly.
On 6 November 2020, GM Holden advised the committee that '92% of its dealers have now accepted Holden's TSP offer and almost all of these dealers are continuing business with Holden as authorised Holden Service Outlets'.
Concerns regarding the TSP offer
Stakeholders raised several concerns in relation to the adequacy and terms of the TSP package offered by GM Holden. These concerns included:
the adequacy of the compensation provided for in the package;
the eligibility to become an authorised Holden Service Outlet and other conditions linked to dealers acceptance of the compensation package; and
whether GM acted in good faith before and after its announcement, including during its negotiations with Holden dealers.
Adequacy of compensation
One of the principal concerns raised by submitters was in relation to the adequacy of the compensation package offered by GM Holden to affected dealers. For example, a Holden dealer, who did not wish to be identified, submitted:
The compensation offer made to dealers is significantly unfair. Holden offered $1,500 per unit, times the volume a dealer sold in 2019, times
2.5 years (the remaining term of the Franchise agreement).
KPMG told us they calculated that the true compensation should be in the order of $6,000 per unit, times the average volume a dealer sold in the past three years (which is what dealers based their continuing investment on), times 7.5 years (being the remaining term of this agreement plus an Expectation of a further agreement term).
At the hearing on 3 August 2020, Mr Palmer also told the committee:
Their formula of $1,500 a car is less than half of what I gross out of car sales alone for the General Motors Holden product—less than half—without taking into account service and without taking into account parts, without taking into account finance, and without taking into account the used car business that goes along with trading and operating a motor dealership.
Similarly, Northam Holden submitted that the compensation offered by GM Holden did not adequately compensate for the loss of capital invested in their business:
Holden's position that they will only consider claims for capital investment for the last five years is unnecessarily arbitrary and should be expanded to include the capital paid for goodwill and building investment at least for 10 years, the very minimum that our decision was made upon.
Indeed, the AADA argued in its submission that the 'compensation offered by GM has been described by almost every dealer as grossly inadequate'. The AADA pointed out that:
While GM has claimed publicly that it would also take into consideration the unamortised costs of facilities and signage, there is no indication of how this would be done.
Further, the compensation is based on the number of cars sold in 2019, a number which reflected the previous poor product design and planning decisions made by Holden leading to the lowest ever number of Holden vehicles sold in Australia. Adding insult to injury, Holden Dealers in New Zealand have received substantially more in compensation than their Australian counterparts.
In addition, the AADA argued that the 'offer makes no provision for staff redundancies, length of service or goodwill and lease commitments, which can be as long as 20 years'.
The MTAA also questioned the adequacy of the compensation in relation to dealership employees. The MTAA submitted:
Although GM has indicated that it believes the impact of Holden's departure is primarily limited to its new car sales staff, it fails to recognise the flow on effects to other dealership employees including finance, service, customer relations and administration.
The compensation package offered by GMH under the 'Transition Plan' makes no mention of nor offers any compensation or assistance for the costs associated with Holden associated staff in these areas being made redundant.
In its submission, GM Holden outlined the basis for its compensation offer to Holden dealers and argued that the level of compensation was what it 'believed is fair and the structure of which has been accepted by dealer networks in other markets where GM has exited'.
GM Holden observed that it used a similar 'approach to methodology that was used to formulate offers for Australian and New Zealand dealers'. It argued that over 'recent years, New Zealand dealers were more profitable than Australian dealers, so the same formula used in both countries resulted in more compensation in New Zealand, as they have suffered greater loss of new-car-sale profit opportunity'.
GM Holden also pointed out that the TSP had been scrutinised by PricewaterhouseCoopers (PwC):
Holden's analysis, based on data provided by dealers, showed average profit to be $351 per vehicle over the period 2017-2019. Holden's compensation offer of $1,500 per vehicle is over four times that amount.
In 2019, on average Holden's Australian dealers made a loss of $600 on each new car sale. With the TSP offering $1,500 cash per lost sale – through to the end of 2022 – this represents an increased payout of $2,100 per vehicle sale, based on 2019 sales and locked in for 2.5 years.
PwC's analysis concluded an appropriate range of compensation
is $350–1,409 per vehicle.
Overall, GM Holden rejected suggestions that it compelled dealers to accept inadequate compensation. GM Holden reiterated that:
In 2019, Holden dealers on average (sometimes described as 'a single dealer') made a loss of $600 on the sale of a new vehicle. This is based on data provided by dealers. Holden's compensation offer of $1500 per new vehicle sale, for the remainder of the agreement, is a $2100 improvement on this previous loss-making position. On top of this, dealers can continue the profitable service and repair operations. Nearly all dealers have opted to do that.
Conditions attached to the TSP offer
A further issue of concern raised by submitters was in relation to the conditions attached to the acceptance of the TSP offer. This included the concern that if dealers did not sign-up to the compensation package they would be ineligible to become an authorised Holden Service Outlet.
For example, the AADA questioned the offer and pointed out that it had been made subject to dealers' acceptance of the compensation offer, and that the servicing contracts were being offered for only five years. The AADA argued:
Most of those dealers will reluctantly take up a role as Service and Parts agents in what was meant to be a ten-year support transition for the fleet of Holden vehicles currently on the road. However, even this undertaking by GM proved disingenuous, as a proposal sent to dealers offered servicing contracts for only five years.
Similarly, the MTAA noted its concerns about the linkage of the offer to become authorised Holden Service Outlets with the broader compensation package:
MTAA is concerned that participation in ongoing service provision via a 5-year contract (despite assurances of GMH that it will meet consumer obligations for the next 10 years) was part of the 'Transition Package' and a condition of the offered compensation package. MTAA respectfully suggests this contract and provisions within it should have been de-coupled from the compensation package and negotiated separately when the matters surrounding compensation are completed.
MTAA views the offering of ongoing service provision as a component of compensation negotiations as an inappropriate 'carrot' to 'entice' dealers to accept the compensation package. MTAA suggests this is a further example of not negotiating in good faith by making an important contract that has implications for the sustainability of many businesses part of the compensation package.
In correspondence to the committee, Mr Aquilina responded to these concerns and advised that:
…there are still two and a half years under the current dealer agreement during which dealers can continue to be authorized Holden service and repair operations. If dealers accept the TSP, they have the opportunity to continue as authorized Holden Service Outlets through to the end
of 2025 and at the end of that time, a new agreement for an additional five years could potentially be negotiated.
The committee also heard from a former Holden dealer, who did not wish to be identified, who submitted:
…the new Holden Service Operations Agreement that they have forced dealers into, is also riddled with unfair terms and completely lacks any protection from the Franchise Code because of the way they have structured the agreement. The Terms and Conditions are actually worse than the previous Franchise Agreement. But for a Holden Dealer to receive ANY compensation, they actually had to sign away their rights and sign up to the new agreement, before they would receive a cent.
The MTAA also expressed concern in relation to the ongoing consumer obligations of former dealers:
There are also concerns regarding the lack of clarity regarding GMH ongoing consumer obligations to warranty and recall and compensation for future problems that may occur for GMH product and the lack of specificity on what service providers (former dealers) obligations and requirements are versus those of GMH as the product manufacturer.
Consideration of Holden's obligations to consumers under the Australian Consumer Law (ACL) is considered later in the chapter.
Lack of genuine negotiation and good faith bargaining
The committee heard concerns from submitters in relation to the conduct of GM Holden during the TSP negotiation process. In particular, that GM Holden failed to act in good faith during its negotiations with Holden dealers and its reluctance to participate in dispute resolution processes.
In its submission, the AADA argued that 'GM's actions leading into the decision to close down Holden as well as its actions after the decision beg the question as to whether it has acted in good faith'. The AADA submitted:
The AADA believes that the failure to offer fair compensation for walking away from its contracts; the way GM has conducted itself since presenting its offer of compensation; and the actions in the lead up to its withdrawal announcement all pose serious questions as to whether GM has acted in good faith.
GM Holden submitted that its discussions with the Holden dealership network were conducted 'on an individual basis as well as with the Holden Dealer Council's representative, HWL Ebsworth'. It also argued that it had 'acted in good faith throughout this transition process with its dealers and its discussions have been cordial and respectful'.
However, at the hearing on 3 August 2020, Mr Palmer commented on the pressure felt by Holden dealers to accept the compensation offer. Mr Palmer argued that:
…whilst it might be true that 90 per cent of the dealers accepted the agreement by the deadline of 30 June, two days prior to that, at midday on Monday 28 June, 176 dealers were still ready and willing to proceed towards litigation. The fact that that fell away so desperately in the last two days indicates the pressure that was on them, some of it financial, to take the offer. Then there was—I think many dealers will readily admit this—FOMO, fear of missing out, and, once the numbers dropped away, their deemed cost of litigation frightened them, so most of them took the offer. One of my very good friends and colleagues has openly stated to me, in the one and only time he's been able to speak to me since 1 June—we used to talk all but daily—that he hates himself for accepting the offer, so strong, in my opinion, was the pressure from General Motors Holden.
GM Holden noted that it had appointed Dealer Transition Managers (DTMs) to undertake individual discussions with dealers which included:
…asking dealers to provide information about capital investment costs and other special circumstances in order for Holden to understand and negotiate suitable additional compensation specific to those dealers.
In contrast, Mr Palmer described his dealings with the DTM who was appointed to his Holden dealership:
From the very first meeting with our terribly unprepared and inexperienced DTM, it was evident that there was to be no discussion or negotiation. Holden's offer was fixed and final. This was extremely unfair to this Dealership as we are and have always been a 'benchmark' Dealer. It was clear that there was absolutely no consideration of our past or present performance. Also, right from the start Holden had indicated there was to be a deadline for the first and final offer.
In its submission, the ACCC pointed out that the protections under the ACL and the Franchising Code of Conduct (Franchising Code) applied to the negotiations between Holden dealers and GM Holden:
The prohibitions under the ACL relating to misleading or deceptive conduct and unconscionable conduct and the Franchising Code's obligation that the parties act in good faith apply to these negotiations. This means that parties to the negotiations must act honestly and not arbitrarily, and must cooperate to achieve the purposes of the agreement.
However, a number of submitters indicated that the Franchising Code offered dealers with little or no protection in their negotiations with GM Holden.
For example, Mr Voortman argued:
The biggest failing in GM's withdrawal of Holden from Australia was that dealers could not access justice. It demonstrated the frailties of the franchising code and it showed how important it is that we take the action that is needed and entrench a system of justice for dealers. There is a major power imbalance. We see that there is a system of arbitration for other industries where there is a major power imbalance—whether its the dairy industry or the food and grocery industry.
The MTAA also observed:
The GMH experience in 2020 demonstrated a considerable lack of, or inherent flaws in, enforceable regulations to ensure dispute resolution, good faith negotiations and fair and reasonable compensation outcomes. The acceptance by dealers of the termination and compensation package should not be misinterpreted. It was more to be able to walk away with something rather than walk away with nothing after, in some cases,
a 40, 50 years relationship.
At the hearing on 3 August 2020, Mr Aquilina strongly rejected assertions that GM Holden had not engaged in good faith negotiation with Holden dealers:
…since we originally made the offer, we were asked to extend time lines, which we did. We had an economic situation arise, which only deteriorated the future outlook for Holden dealers, yet we held our offer firm during that time, and we did not reduce it; we kept it going at the levels that we originally put forward. I think that speaks to a company that acted in extraordinarily good faith, that participated in all the discussions that we were requested to. We gave people every opportunity to identify any issues through the process.
GM Holden also rejected comments that dealers were unable to access adequate dispute resolution processes:
From the outset, dealers engaged legal representatives who from very early on and repeatedly, threatened Holden with litigation on behalf of all Holden dealers. Holden and the dealers utilised the dispute resolution mechanism in the dealer agreement and the Franchise Code of Conduct, and, with their respective legal representatives and financial analysts, PwC (paid for by Holden) and KPMG (paid for by dealers), engaged in a two-day settlement conference in May that was overseen by the Honorable Peter Jacobson QC to discuss and debate at great length their respective positions.
In relation to GM Holden's refusal to participate in an arbitration process with dealers, Mr Aquilina argued:
In the end, arbitration was indeed suggested in the final days leading up to a time when we said we needed to know an answer from Holden dealers as to which way they would like to go with this. In those final days, we had had an indication from a vast number of dealers saying that they were going to sign up. So it wasn't appropriate to then launch into an arbitration process in the final days of this dispute when there were some parties who were not satisfied with it and wanting to push for that. In the end, we allowed the time to elapse.
When asked about GM Holden's actions throughout the withdrawal process at the hearing on 3 August 2020, the ACCC explained that it was:
…in the middle of an investigation at the moment looking into allegations of unconscionable conduct and misleading and deceptive conduct levelled against General Motors Holden. We are assessing evidence and assessing the complaints to see whether or not there is a matter that's actionable under the Competition and Consumer Act and the Australian Consumer Law.
When pressed about possible timelines, the ACCC indicated that:
…we're certainly giving this investigation the highest of priorities, and, at this stage, we expect to have a public outcome this year—either proceedings or an announcement that we haven't found any actionable conduct. But we are certainly hoping to wrap up our investigation this year.
However, at the time of writing the ACCC had yet to publicly release an update on the progress of this investigation.
GM's obligations to consumers
GM Holden indicated that it would continue to provide 'aftersales support – servicing, spare parts, honouring warranties and conducting recall actions if required – for at least the next 10 years through a national aftersales network'. In its submission, it stated:
Holden will continue to honour all commitments given to consumers at the time of purchase, including the 7-year free service commitment. This service commitment is funded by Holden, which pays dealers for services undertaken on Holden vehicles. Holden will also be providing appropriate resourcing for warranty claims and product quality issues.
Holden will continue to maintain local operations to handle any recall and safety-related issues if they arise, working as usual with relevant government agencies.
At the hearing on 3 August 2020, Mr Voortman emphasised the importance of GM Holden's 'ongoing obligations to the owners of its vehicles and to the dealers servicing these vehicles'. He argued that GM Holden:
…needs to honour its Australian Consumer Law obligations and honour its recall and warrant obligations and guarantee the supply of parts. It should demonstrate what funds it has set aside to honour these commitments, particularly under the obligations its parent company has under US federal law and certain statutory obligations.
Mr David Blackhall, Managing Director, Raglan Ridge Advisory, also commented on GM's obligations to the owners of Holden vehicles and to the dealers servicing those vehicles. Mr Blackhall argued:
As regards warranty, what I know of General Motors' reputation globally leads me to the view that they're unlikely to maliciously go out and put their customer relationships, their legacy customer relationships, at risk.
…I don't think they're going to purposefully go out and do that. I'd be staggered if they did. It's not in line with their overall global reputation, and I think they understand their obligations under the consumer legislation in Australia anyway. They made a warranty. They made an arrangement. I think they'll stand behind it.
In its submission, the ACCC explained that consumers are entitled to a remedy in the event of a failure to comply with a guarantee. The ACCC advised:
…that consumers may experience a greater difficulty in enforcing their rights and obtaining an appropriate remedy, particularly where faults arise with their vehicles after the finalisation of Holden's initial withdrawal at the end of 2020.
The ACCC also noted that GM Holden's undertaking to provide servicing and spare parts for at least ten years, may not be sufficient to comply with automatic consumer guarantees under the ACL:
…depending on the particular circumstances, this may not be enough to comply with the guarantee as to repair facilities and spare parts. 10 years may also be an insufficient timeframe in relation to product safety obligations which may arise.
At the hearing on 3 August 2020, Mr Aquilina reiterated GM's commitment to continue to meet servicing and repair obligations for at least ten years.
Mr Aquilina told the committee:
Ten years gives people a lot of comfort. It's well beyond the ownership cycle—even numerous ownership cycles—of that one particular vehicle. Typically, there are opportunities to continue to provide parts well beyond that, if that is the case. We've said this, and we'll say it proudly: we will continue to support our customers for a long time. As to what that timing is, well, it's at least beyond 10 years.
In relation to the enforcement of these rights following the exit of the brand in Australia and New Zealand, the ACCC noted:
We understand that a local entity will remain, and I assume it's the entity the dealers that enter into the service agreement have contracted with.
We expect that would be the entity that would ultimately be responsible for consumer guarantee issues.
The ACCC also indicated that it had 'previously taken enforcement action against a number of motor vehicle companies, including GM Holden, for unconscionable conduct and misrepresenting the availability of consumer guarantee rights to consumers'.
At the hearing on 3 August 2020, Mr Nicholas Heys, Deputy General Manager Enforcement Coordination, ACCC, outlined the specific action:
The action we took in relation to GM Holden was concluded in August 2017 by way of a court enforceable undertaking that the ACCC accepted from GM Holden. Primarily the concerns related to issues raised by consumers with the ACCC and other consumer law regulators that General Motors Holden wasn't repairing vehicles or providing them with a remedy in accordance with the consumer guarantees, which, depending on the extent of the fault, could be a refund or some form of compensation or restoring the vehicle to a reasonable standard. That was the context of our investigation.
The ACCC assured the committee that it would 'continue to monitor reports from consumers having problems enforcing their consumer guarantees rights and, where appropriate, undertake further enforcement and compliance initiatives'.
In relation to consumer reports about possible misleading conduct or representations, the ACCC noted:
GM will need to ensure it complies with any representations it has made to consumers regarding entitlements to express warranties, fixed price servicing, roadside assistance, or fixed-term vehicle replacement offers. Failure to do so may breach the misleading or deceptive conduct or false representations provisions of the ACL.
The committee notes that the complete withdrawal of a major player like GM Holden from the Australian automotive market was unusual in that it resulted in the termination of an entire dealer network. However, the committee is mindful that GM Holden's subsequent negotiation and compensation arrangements with its former dealers are likely to set a precedent for how other manufacturers may conduct themselves in Australia. Indeed, with other manufacturers changing their distribution models in Australia, similar stories are already emerging.
Based on the evidence received, it is apparent to the committee that there was a clear imbalance in bargaining power between GM Holden and its dealership network. For example, the committee was made aware of dealer concerns, both publicly and confidentially, in relation to GM Holden's failure to engage in genuine negotiation over the TSP, including that dealers felt pressured into accepting the TSP offer despite concerns about the adequacy of the compensation. The committee was also made aware of concerns that the offer to dealers to become Holden Service Outlets was made conditional on the acceptance of the TSP.
In addition, the committee remains concerned by allegations that GM Holden may have breached the good faith obligations of the Franchising Code and the unconscionable conduct provisions of the ACL. The committee is particularly disappointed that GM Holden only agreed to extend the deadline for acceptance of its TSP offer following the intervention of the ACCC, and subsequently ignored requests from the government to settle its dispute with dealers through arbitration.
The committee also notes concerns raised by submitters that the Franchising Code was not helpful in providing dealers with a mechanism to resolve their dispute with GM Holden when attempts at mediation were unsuccessful. Further, it appears that the ACCC investigative mechanism was not effective in assisting in the timely resolution of disputes between dealers and GM Holden.
It is of little comfort to former Holden dealers that the ACCC investigation into GM Holden's exit appears to have not progressed, despite an initial indication that it would be wrapped up by the end of 2020. Accordingly, the committee considers that the ACCC should expedite its investigation into concerns raised by former Holden dealers and provide regular public updates on this investigation. Indeed, to instil greater public confidence in the operation of the regulatory framework, the ACCC should in future provide regular public updates for similar investigations relating to car manufacturers and dealers.
The committee is confident that GM Holden intends to meet its obligations to consumers and its undertaking to continue to service and support Holden vehicles for at least ten-years. However, given the large number of Holden vehicles still on the road in Australia, the committee recommends that the ACCC proactively undertake increased oversight of GM's operations in Australia to ensure that it meets its obligations under the ACL to vehicle owners in relation to warranty and recalls, technical support and access to parts.
Finally, while acknowledging and respecting the right of private companies to make their own decisions, the committee condemns as un-Australian the actions of GM in the lead-up, during and following the shutting down of Holden. The committee censures GM for their treatment of Holden dealers, employees and their families.
Considering the disappointing conduct of GM during the retirement of the Holden brand, the committee is not convinced that the Holden brand is likely to be preserved in perpetuity. The committee is particularly concerned that the rich history associated with one of Australia's great cultural icons should not be lost to the Australian people and calls on GM to reaffirm its commitment to ensuring that Holden's historic collection of motor vehicles and memorabilia remains on public display in Australia.
Given the importance of the Holden brand to the Australian psyche, the committee requests that the Holden brand is not sold unless to an Australian entity.
The committee recommends that the Australian Competition and Consumer Commission should expedite its investigations into the behaviour and actions of GM Holden and should commit to provide regular public updates on this investigation and similar investigations into the relationship between manufacturers and dealers in the future.
The committee recommends that the Australian Competition and Consumer Commission proactively ensures that General Motors Australia and
New Zealand is meeting its Australian Consumer Law obligations to Holden vehicle owners in relation to warranty and recalls, technical support and access to parts.