Holden prepares for war with its dealers
Holden boardroom butt-hurt reached 1000 incredible degrees C the other day: that’s hot enough to normalise even the hardest steel. Predictably enough, to let off some steam, they issued a press release…
The story so far: GM recently announced it was boning Holden and thus Australia without lubrication, and it thus executed a grand plan to gut its extant 200-ish Holden dealers, for (they allege) pennies on the dollar. Here’s how it went down >>
Ironically, dealers were outraged at being treated suddenly as if they were nothing more than Holden retail customers, and nobody deserves that.
So, they collectively procured the services of the biggest firm of proctologist lawyers they could find, and they prepared for a bad remake of Cane and Abel, in order that we all live happily ever after. Gotta love a classic Biblical reboot during a zombie pandemic.
WD&HO Proctologist & Associates, acting for dealers, fired a broadside into Holden’s sinking ship recently, claiming all kinds of, heaven forbid, nefarious arsehole conduct by Holden. Subpoena shortly to follow, kind of thing.
Holden got so butt-hurt at having its Sterling reputation besmirched in this way - it’s hard saying that with a straight face - we’re talking red-hot poker orbiting Uranus in Hell - that after roughly a hundred meetings with counsel they decided, hilariously, to issue a public response.
Oxygenation: So helpful.
I thank them sincerely, from the bottom of my heart, because there’s nothing a locked down Australian car enthusiast needs more than a technicolour soap opera such as this. Please, keep going.
The HWLE proposal made a number of inaccurate claims, assumptions and costs allocations. It also made baseless allegations of unconscionable and misleading conduct which are plainly wrong and unsupported by fact or law.
GM Holden there. Things are getting quite desperate, I think you’d agree, when a company such as Holden seeks to get back together with ‘facts’ and ‘laws’ after such an acrimonious divorce and all that time apart. And yet, here we are.
Hungry for answers
The central problem is that Proctology Legal and Book-cooker and Lecter Accountants have come up with a seemingly plausible proposition that dealers deserve roughly four to 50,000 times the compensation Holden is offering. It’s a big difference.
Proctology Legal: always ready for the worst-case scenario.
Essentially, Holden is offering medium-sized dealers about $700,000 to shut up early and continue as parts and service businesses. Proctology Legal is gunning for about $9 million. In the case of a large dealership, the GM offer is about $1.7 million, and the Proctology Legal counter-claim is almost $22 million. I love lawyers.
Holden is so concerned these claims might get traction that they’ve offered their own alternative facts:
Case Study 2: Large-sized dealership - In the case of a large Holden dealer who sold 466 cars in 2019, the per vehicle compensation offered by GM Holden totals $1,747,500. This significantly exceeds the average large-sized dealer’s total net profit in 2019 across its business of ~$330,000.
It should be noted the $330,000 figure includes the very profitable service and parts business which dealers will continue to benefit from going forward.
In contrast, under the HWLE formula, the compensation for that dealer would be $21,923,902.
Elephant in the room, dudes: If those figures are correct, that is the shittest business model ever.
You sell nearly 500 Holden shitboxes, and you do all this servicing and repair work, and you sell genuine parts to local mechanics and crash repairers, and the resident Ming Molls flaunt their jugs in the time-honoured tradition, and sell all those saxophone holders and magnetic rooftop ashtray mounts - and at the end of the year we are expected to believe the operation generates a net profit of less than $350k? That sucks.
What’s wrong with this picture? The insinuation someone might buy an Acadia.
Sales of 466 cars is (what?) at $35k apiece it’s $16 million in sales. And let’s say two-thirds of that profit is attributable to the showroom. And one third to parts and service. That’s a net profit margin of less than $500 per new car. One-point-five per cent? Really?
I’ve got the Harbour-friggin’-Bridge for sale here, if you’re interested. If the floorplan is worth $20,000 a car, that’s about $10 million invested over the year. Just borrow the $10 million and put it in the sharemarket, you’d do better than a dealership. Especially now.
GM and GM Holden flatly reject HWLE’s claims of misleading, deceptive or unconscionable conduct.
The ‘unconscionable and misleading’ part of all this legal wrangling appears to orbit around GM allegedly knowing far earlier than it let on that it would bone Holden, thus embroiling dealers in an ongoing investment to nowhere.
It defies logic to believe that GM intended to close Holden while investing heavily in new or updated right hand drive (RHD) models for the Australian market including Equinox and Acadia, launched new here in 2017 and 2018 respectively, and significantly updated Trailblazer, Trax and Colorado models introduced across a similar period.
Bit more hi-temp Holden butt-hurt venting into space there. And again here, upliftingly:
In that timeframe GM also launched in Australia its mobility business Maven, its captive finance company Holden Financial Services and invested heavily in the new RHD Corvette to ensure its availability in Australia.
I’d suggest that there are facts, and then there are allegations, which are essentially weaponised hypotheses…
Mettle detection
So, let’s kick off with the facts.
GM and Holden knew they were boning the brand, and thus the dealers, before the fateful announcement - because it can't happen any other way. Decision, then announcement. That’s how this works. So the question is: How much earlier? I’d suggest actions speak louder than words on this.
GM’s plan to escape from right-hand drive seems pretty clear from about 2017. They sold Opel to the Frogs three years ago - which kind of up-ended Holden in the biggest possible way, seeing as the new Commodore was just a hastily re-badged Insignia. That’s a fact.
Holden dealers have found the AAAs for their moral compass, which only points to themselves.
GM sells about 7.7 million vehicles annually, and more than seven million of those are in North America, China or South America, which are overwhelmingly left-hookers. The balance of GM production is in overwhelmingly left-hand-drive markets. For GM, right-hand drive was increasingly just a sideshow. (As a proportion, as China took off.) That’s just a fact.
In February 2014 it was announced Toyota would cease manufacturing in Australia. Toyota’s Altona plant ultimately closed in October 2017. Dave Buttner - Big Butts - was appointed president of Toyota Australia in May 2014. That’s just three months after the plant closure announcement.
Big Butts, AO, had a 30-year career at Toyota Oz. He was president from May 2014 until December 2017 - three months before to two months after the factory closed. During that time, it’s safe to say, he had one main job - which would be to close the friggin’ factory as quietly as possible. Then he retired.
Big Butts has plenty of reason to smile.
He was subsequently resurrected, not unlike Jesus, to become boss of Holden in July 2018. He stepped down in December 2019 - after less than 16 months at the helm. He was outta there just a couple of months before the big Holden-boning announcement.
So, those are facts - and here’s my working hypothesis: There appears to me to be very little doubt that making right-drive cars was decreasingly viable for GM. They’ve got professional bean-counters who look at this stuff. Unlike Japanese and British carmakers, GM is not joined at the hip to the idea of making right-drive cars for the home team. It’s just about money.
When you recruit a new CEO, you pick one with runs on the board doing the kind of job you’re going to need them to do. Dave Buttner’s CEO specialisation is shutting up the shop. He has a proven track record there. No muss; no fuss.
They got rid of the right-drive sideshow that was Opel three years ago. The knock-on consequences for Holden were deemed irrelevant or inconsequential. The next year they installed Big Butts - with that demonstrated track record of turning the lights out on his way home.
Big Butts escapes without a scratch, at the 11th hour, and they install Kristian Aquilina as “interim chairman” and who, to me, has always seemed like kind of a nice dude, but operationally a boy doing a man’s job. And the rest is history.
There’s smoke and fire here - and the smoke dates back as far as 2017. And all it does is get thicker. It’s pretty friggin’ thick in July 2018, right?, when they installed the right man for the job. It becomes a full-on hazmat emergency by December last year, when they let Big Butts off the hook moments before the shit hits the fan.
So it seems to me one could allege with some justification there was a plan, on the balance of probability, and it dated back months to years. I don’t have a smoking gun on this, but if all of this is just a coincidence, it’s a helluva confluence of serendipity, I think you’d agree.
Unspeakable act
I’ll leave you with this: A very smart news producer on network TV once mentioned to me that a skill I needed to develop was to listen for what is not said, because that often tells you more about what’s going on than what people or corporations actually say in statements and interviews.
See, what is said is informed by motivation. It can be a smokescreen. But the avoidance of some - let’s call them ‘inconvenient’ - issues is often explicit. Holden issued seven paragraphs of statements supporting its claim denying any long-term plan to bone the brand.
They called the allegations by Proctology Legal:
...a bizarre and illogical argument that GM has secretly planned to shut down Holden since at least 2015
The company pointed out specifically that it announced the Holden boning on 17 February this year. But what did it not say?
Not once did it point to a date where investigations commenced into the viability of Holden, or the viability right-drive generally, nor did it list the date when the decision to execute the retreat from right-drive was taken at a senior level.
Decisions like this don’t just happen organically. They’re not ‘word of mouth’ things. Mary Barra does not wake up one day and go ‘hey, let’s bone Holden tomorrow’. There is typically a mountain of supporting paperwork.
Yet they cite no boardroom resolution to investigate right-drive and its ongoing niche viability or otherwise. No communication from Mary Barra to the COO or CFO - commissioning an investigation. No ongoing cascade of comms leading to this conclusion. Just rhetoric that the other team is wrong.
If you were truly innocent of some vulgar allegation, would you not deploy exculpatory evidence? I sure as shit would. So I do find this state of play incredibly interesting. I so hope they don’t settle out of court.
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