Suzuki Dealers Face Tough Decision on Compensation

Now that Suzuki has filed for Chapter 11 bankruptcy in the states, the brand’s dealers are faced with a decision; take a cash settlement from the brand, or fight Suzuki HQ in bankruptcy court.

Suzuki is requesting that all of its 220 U.S. auto dealers surrender their franchise agreements in exchange for a cash settlement, and a new contract giving the dealers the rights to operate Suzuki parts and service centers. To calculate how much each dealer will get, Suzuki is using dealership sales, rent, vehicles in inventory, and investment in facilities to come up with a number. This issue that dealers are having with this plan is that many dealers have had very poor sales, and therefore would receive less.

On the other hand, if Suzuki dealers reject the agreement, they must go to court and fight for what they are entitled to according to state franchise laws. These laws compel Suzuki to buy back new-vehicle inventory as well as parts, and to compensate dealers for rent, facility costs and other costs. The issue with this route is that such a claim could net the dealers a fraction of what the cash settlement would have been, especially after Suzuki has paid its higher-priority creditors.

SEE ALSO: Suzuki Bankrupt, Files for Chapter 11 in America

If the dealer does accept the cash settlement, it will also sign a contract stating that it will not take legal action against Suzuki. This clause is upsetting the National Automobile Dealers Association (NADA) because it seems like Suzuki may be trying to give the dealers less than they deserve, especially when it comes to left-over inventory.

“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,” James Moors, NADA’s director of franchising and state law said.

“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,” finished Moors.

[Source: Automotive News]