Abbott, a Republican, filed an objection Friday in GM’s pending bankruptcy case in federal court in New York.
The contracts GM wants its dealers to sign are “take-it-or-leave it” deals that prevent them from selling other brands, requires them to order new GM cars they may not want to sell and alters state law regarding dealer locations, Abbott said at a news conference.
“GM is trying to gut Texas laws” that have regulated and protected dealers for decades, Abbott said. “If dealers don’t sign the contract, they will lose their business.”
Texas has 415 franchised GM dealers. Chrysler’s pending bankruptcy does not have the same contract provisions for its dealers, Abbott said.
Abbott wants the bankruptcy court to recognize state laws governing dealerships. He said the Texas action should not slow down GM’s bankruptcy proceedings.
In a statement, GM said it is “subject to the jurisdiction of the bankruptcy court and will obviously follow that court’s orders with respect to dealer contracts. We are not going to comment on the Attorney General’s press release other than to say respectfully, that we think his statement is misplaced. GM takes very seriously its obligation to comply with all applicable law.”
Bill Wolters, president of the Texas Automobile Dealers Association, said the contracts would hurt franchise dealers and could put some out of business.
Dealers in rural areas may not have a viable business if they could sell only GM cars, Wolters said.
The bankruptcy deal and contracts would also force Texas dealers to take disputes with the manufacturers to an out-of-state court, Abbott and Wolters said. Those disputes are now regulated by a Texas agency.
Those provisions could force even more dealers out of business, Wolters said.
“If you start reducing the number of dealers, price goes up, service goes down,” he said.
Most states have laws regulating auto dealers, but Abbott said he didn’t know if others would follow Texas’ lead and file similar complaints.
The attorney general’s office consulted with the Texas Automobile Dealers Association before filing the objection, Abbott said.
The action by Texas came on the same day GM and Chrysler executives were in Washington to defend the closings of hundreds of dealerships around the country. GM plans to shutter about 1,350 by the end of next year, including 55 in Texas.
Lawmakers have questioned whether the decision to close dealerships would save any money or help the troubled companies rebound.
GM filed for Chapter 11 protection on June 1 and the company hopes to emerge from bankruptcy as a new company in 60 to 90 days.
