(1995-1996) GM ASKS SIGNER TO TRADE BUICK FRANCHISE FOR DOOMED OLDS FRANCHISE
As part of the original agreement between Motors Holding Division (MHD) and me, for a period of 90 days (later extended to 120 days) from opening on July 1, 1995, I was able to increase my investment and purchase additional shares of common stock in the new corporation. As I was preparing to make that investment in October 1995, MHD Branch Manager Ron McCants told me that he wished to discuss my trading my Buick franchise for the Oldsmobile franchise at Fremont Pontiac-Oldsmobile-GMC, and would delay the additional investment until a Buick/Olds trade agreement would be executed. I responded with my objection to the ludicrous concept of my taking the doomed Olds franchise, but courteously agreed to listen to GM’s proposal. So, after nearly 15 years as a General Motors dealer with 100% ownership, I had entrusted my investment to MHD at GM’s insistence, and relocated to a location I didn’t want. Then, MHD almost immediately began the attempted dismantling of what I had worked for, while changing the investment agreement at the same time.
Mr. McCants arranged a meeting on November 10, 1995, “to begin initial discussions regarding the existing and future GM franchise alignment in Newark, CA.” Attendees were Fremont Pontiac-Olds-GMC dealer Bob Gee, Ron McCants, and me. Mr. McCants was to act as the facilitator for the proposed trade arrangement, and stated that he was confident it would result in a “win-win” for both dealers. Since I was selling more than three times as many Buicks as Fremont Pontiac-Olds-GMC was selling Oldsmobiles, and Oldsmobile’s demise was widely expected, a “win” for me was extremely difficult to imagine.
On January 25, 1996, Mr. McCants furnished me updated Buick and Oldsmobile registration data for Newark. Mr. McCants also asked both Mr. Gee and me to furnish each other the dollar amount contributed to our dealerships by the respective divisions we were being asked to trade off. After having received our respective data, Mr. McCants asked Mr. Gee and me to prepare “post-alignment” forecasts using the data provided by each of us. The data showed that for the preceding three years, I averaged 227 new Buicks per year, and Mr. Gee averaged 66 new Oldsmobiles. Even more dramatic was the difference in new vehicle gross profit, with my new Buick gross profit averaging $438,074 per year and Mr. Gee’s Olds gross profit averaging $89,550. The difference in used vehicles, service, and parts was nearly as dramatic.
Using the data I received, I subsequently prepared and submitted to Mr. McCants the requested forecast, a tedious process requiring days of preparation. I created two forecasts with slightly different assumptions, one showing an annual net loss of $676,500, and the other a net loss of $506,900. These compare to my previously submitted Buick forecast showing a small profit.
On April 12, 1996, Ron McCants’ requested a meeting between he, Dealer Network Investment and Development Area Manager Tom Flanigan, GM Worldwide Real Estate Project Manager Tim Miller, and me. Topics of the meeting included the proposed Buick/Oldsmobile trade, a proposed unsigned confidentiality agreement, and a proposed complex lease/sublease agreement whereby GM would take control of my real estate.
On May 24, 1996, a GM-requested meeting was held between Ron McCants, Tom Flanigan, and me. Mr. Flanigan presented me his forecasts for my showing 5.27 times as many new Oldsmobile sales as Mr. Gee had been selling, thus having no connection whatsoever with reality. He proposed a payment to me of $250,000 to make the Buick/Olds trade, an insult to my intelligence considering the anticipated $600,000 per year net profit reduction.
On June 17, 1996, Ron McCants met with me and presented me with a new forecast with expenses at an absurdly low level. With this overly optimistic forecast, he offered a proposed one-time support payment of $500,000, not even enough to cover one year’s loss.
On June 26, 1996, Mr. McCants again met with me. He requested that I write a letter to my own Board of Directors naming terms I would accept for GM’s desired Buick/Olds trade. He indicated that GM might pay $750,000 – $1,000,000 subsidy for the trade, and later said that his position would be $1,000,000. Obviously, the subsidy would cover less than two years of the more than $600,000 per year negative profit impact by Olds.
On July 12, 1996, I wrote the letter to my company’s Board of Directors as requested by Mr. McCants. In the letter, I expressed some of the reasons I considered the trade proposal ludicrous, as well as clearly state my concern about the widely expected eventual closure of Oldsmobile division. A graph I provided at the time shows a nearly uninterrupted seven-year market share decline for Oldsmobile, and a dramatically less steep decline for Buick, which is included as page 3 of the July 12 letter. Nevertheless, I fulfilled Mr. McCants request with a possible proposal, about which I stated in the letter that I knew made no sense for General Motors. I never received a response to the letter. I also never made the additional investment that had put on hold by Mr. McCants pending a Buick/Olds trade. This lack of additional investment lengthened the time it took for me to buy out MHD’s stock.
In summary, the Buick/Olds trade proposal marked yet another chapter in the ongoing conflict between GM’s views and my views of good business decisions. The presentation to any dealer of a trade of Buick for the doomed Oldsmobile franchise would be an insult to the dealer’s intelligence, as it was to mine. There was virtually no credibility in any of the “logic” used by Mr. McCants or Mr. Flanigan to support their proposals, and I find it difficult to understand how they could even present it in good conscience. Worse yet, the 1995 – 1996 Buick/Olds trade proposal was only the first of what was to be a series of items on Motors Holdings’ dealer control agenda that would negatively impact Bob Gee and me.
