ASIC urged to investigate GMSV

Australian corporate watchdog ASIC has been urged by a federal Labor politician to investigate General Motors’ plan to axe Holden and establish GM Specialty Vehicles (GMSV).

That call came yesterday as GM also confirmed it had rejected a reduced compensation offer made by Holden dealers on Monday.

Both these new moves came as GM Holden’s June 30 deadline for dealers to accept its compensation closes in.

NSW Senator Deborah O’Neill wrote to ASIC (Australian Securities and Investments Commission) chairman James Shipton describing the closure of Holden and the creation of GMSV as “a potential phoenixing situation”.

Phoenixing is when one company emerges from the closure of another. According to the Australian Tax Office, it is “illegal when a new company is created to continue the business of an existing company that has been deliberately liquidated to avoid paying outstanding debts, including taxes, creditors and employee entitlements”.

Her letter also pointed out current directors of Holden could also be involved with the new business.

O’Neill’s letter – in which she refers to GMSV as GM Special Vehicles rather than Specialty Vehicles – is reproduced in full below.

It reflects the concern of the Australian Holden Dealer Council (AHDC), which represents the 185 dealers who had their franchise agreements terminated nearly three years early in February when GM announced Holden’s closure.

On the same day GM axed Holden it confirmed work was underway to establish GMSV in Australia.

This is expected to take the form of a wholly owned GM business that contracts Walkinshaw Automotive Group to convert locally some of the North American models it will sell through a new dealer network. The Chevrolet Corvette C8 is expected to be the flagship of the line-up.

Holden dealers have identified GMSV as a weak point for GM as negotiations over compensation have dragged on.

The AHDC has lobbied across the major parties in Canberra using the phoenixing argument and questioning appropriateness of current Holden directors joining the new business.

O’Neill’s letter is evidence that lobbying is having some effect.

“I will always stand up for small business. This exploitative behaviour cannot continue,” she told carsales in a short statement.

O’Neill is one of many politicians who have protested in one form or another GM’s handling of its Australian exit. She is also a member of the Senate education and employment references committee that is enquiring into the Holden closure and its impacts.

Meanwhile, the dealers were understood to have dropped their demand for compensation of $6100 to around $2500 per car sold over a set period, bringing them much closer to GM’s offer of $1500 per car.

But in a press statement issued on Wednesday night, GM Holden said it had refused the compromise offer and reiterated its belief that its $1500 per car offer was fair. It has not shifted from that position since February, including a failed two-day mediation effort in June.

The GM compensation offer also includes some remuneration for capital works and, most significantly, access to a profitable five-year servicing and parts agreement.

“A great deal of time effort and care has been expended in developing Holden’s compensation offer and discussing and negotiating it with dealers which remains open through June 30,” the statement read.

So far the compensation offer has had very little take-up amongst dealers, but June 30 will be the crunch date.

Court action against GM Holden is an option dealers admit they are considering post June 30, although they acknowledge it could involve years of litigation and millions of dollars in costs.

Letter from Senator Deborah O’Neill to ASIC Chairman James Shipton as follows:

24 June 2020

Mr. James Shipton
Chairman
ASIC
GPO Box 9827
Sydney NSW 2001

Dear Mr Shipton, I write to you regarding a potential phoenixing situation. Specifically, the introduction into the Australian market of GM Special Vehicles while GM Holden has current large liabilities, particularly to its existing dealership network. I also note that this could involve current directors of GM Holden moving to Registered GM Special Vehicles, a new company that will import and sell GM vehicles in a manner almost identical to GM Holden. I ask that you inquire into this and ascertain whether this is or isn't a case of phoenixing. I look forward to your speedy and positive reply.

Yours sincerely,
Deborah O'Neill
Labor Senator for NSW