Suzuki Dealers Are Stuck Between A Rock And A Hard Place

William Maley

Staff Writer - CheersandGears.com

November 13, 2012

The news of Suzuki automobiles leaving the U.S. has left their dealers with a choice, either take a cash settlement or take Suzuki to court.

Last week, American Suzuki Motor Corporation was authorized by a U.S. Bankruptcy Court to borrow $45 million dollars as part of a settlement with dealers. The settlement would give dealers a cash settlement, and a new contract giving the dealers the rights to operate as parts and service centers for Suzuki vehicles if the dealers voluntary surrender their agreements with Suzuki.

There’s two problems with the settlement. For one, the settlements to be paid out, Suzuki will use dealership sales, rent, vehicles in inventory, and investment in facilities to come up with a amount. This arrangement would cause dealers who didn’t sell that many Suzuki vehicles to get a small amount. Also, dealers who agree with the settlement also agree not to take legal action against Suzuki.

Now, Suzuki dealers can decline the settlement and take the company to court to fight for what they are entitled to thanks to state franchise laws. The franchise laws make Suzuki buyback the dealer’s inventory of new vehicles and parts, and provide compensation for for rent, facility, and other costs.

There’s a problem with this as well because a dealer’s claim could be just worth pennies on the dollar, especially after Suzuki pays its higher-priority creditors.

"If Suzuki had chosen to exit the market and terminate the franchise agreements, it would have been subject to state franchise termination assistance provisions such as buying back vehicle inventory, parts, tools and rent on the dealership facility," said James Moors, NADA's director of franchising and state law.

"NADA would be concerned if Suzuki is attempting to use the bankruptcy process to avoid its obligations to its dealers. NADA is reviewing this proposal and believes that Suzuki dealers should not receive less than what they are entitled to under their franchise agreements and applicable state law," Moors went onto say.

Source: Automotive News (Subscription Required), 2

William Maley is a staff writer for Cheers & Gears. He can be reached at [email protected] or you can follow him on twitter at @realmudmonster.

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