TORONTO - General Motors Canada insists it used objective criteria when deciding which dealerships to shut down during its restructuring process.
A group of 20 dealerships is suing the company for what they call the "arbitrary and unfair" closure of their businesses.
But GM argues it used "a number of objective criteria" when evaluating which of its approximately 700 Canadian dealerships to close, including sales, customer satisfaction, profitability, market share, location, facilities and how they would be affected by the phase-out of GM's non-core brands.
"(GM Canada's) task was to exercise its business judgment and to make the difficult decision as to which of its dealers would form part of its restructured dealer network in the future," the company says in a statement of defence filed in the Ontario Superior Court.
GM argues that unless it was able to quickly restructure _ a process which necessarily included closing hundreds of dealerships _ both General Motors Corp. and GM Canada "would have been forced to liquidate their operations."
This would have put all 700 dealerships out of business, the company says.
GM also says it had raised concerns about the performance of many of the dealerships involved in the lawsuit prior to the economic crisis, contrary to the dealers' claims that they were caught completely unaware.
The dealers involved in the lawsuit say the company broke a contract with them that promised to automatically renew their franchises as long as they fulfilled sales and other obligations. The affidavit says none of the plaintiffs in the suit are or ever have been in default of these obligations.
GM Canada filed a motion to have the case heard by the National Automobile Dealer Arbitration Program, or NADAP, rather than the courts, but this was dismissed.
The claim asks for punitive damages of $1.5 million as well as additional damages for loss of profit, loss of goodwill, loss of reputation, loss of business opportunity and loss of market share.'
None of the allegations have been proven in court.
GM intends to eliminate more than one-third of its Canadian dealerships by October 2010 in an attempt to cut costs and streamline its business. The company had more than 700 dealerships in Canada before the closures which were estimated to employ 33,000 people.
Another lawsuit, this one a class action, has been launched on behalf of 215 Canadian GM dealerships whose businesses were closed last year. The lawsuit, which is seeking $750 million in damages, claims GM broke franchise laws by giving its dealers at most four business days to respond to a termination package offered by the company.
