General Motors dealers could face major penalties, even termination, if they fail to use a new disclosure form for customers who buy non-GM service contracts, a new or used vehicle with non-GM accessories or used vehicles with non-GM parts, the automaker told dealers last month. But by enforcing the new disclosure process and draconian penalties, GM itself may be violating its franchise agreement, said dealership lawyers and associations, pushing back against the automaker's notice.
Under GM's franchise agreement, dealers for several years have been required to disclose when a service contract, part or accessory is a non-GM product. But now they must use the standardized form to make the disclosure, Alan Batey, president of GM North America, told dealers in a letter dated Aug.10. GM says the move is intended, in part, to make clear to consumers the limits of its responsibility and liability for non-GM products. But opponents see it as an attempt to promote GM products at the expense of competitors'. Given the size of the accessories, parts and service contract markets, the stakes are huge.
Dealers whose stores ignore the new disclosure form could be required to pay $500 per incident. They could become ineligible to buy other GM dealerships or to benefit from GM's incentive programs, including the Essential Brand Elements program. Ultimately, the dealer could face possible franchise termination.
GM's letters to dealers:
... failing to comply with these disclosure requirements may subject the dealer to an appropriate remedy, including but not limited to:
Up to a $500 surcharge per incident/VIN;
Rendering the Dealer ineligible for consideration for additional GM Dealership opportunities;
Suspension from various current and future sales programs including, but not limited to SFE and EBE; or
Termination of the Dealer Sales and Service Agreement.
- Aug. 10 letter from Alan Batey, president, GM North America
This process is not intended to be punitive.
- Aug. 24 letter from Steve Hill, GM vice president, U.S. sales, service and marketing
The disclosure form makes clear to customers that GM "has no obligations to the customer under a non-GM service contract" and that "GM is not responsible for the consequences of installing non-GM parts, equipment, or accessories on the vehicle," the letter says.