Honda in mediation with its dealers too

UPDATE 16/06/2020 3:00pm: Honda Australia has advised that more than 12 of its existing dealers will be retained.

"Honda Australia will reduce the number of owners within its existing dealer network, but the number of sites is not expected to materially change," it said in a statement today.

"Unfortunately, we can’t confirm numbers at this stage, but we will make sure to keep you updated."

Honda and some of its existing dealer network are entering mediation as the Japanese auto manufacturer restructures in Australia.

As first revealed by carsales March, Honda is swapping from a traditional franchise model to agency sales for its Australian retail network and will dramatically reduce the number of dealers it will partner with.

It intends to have the changeover completed by July 1, 2021. As few as 12 dealers are expected to be retained, with each operating multiple outlets. Currently, 71 dealers operate 105 Honda sites in Australia.

The mediation will be with exiting dealers to negotiate the terms of their compensation, Honda confirmed to carsales in a statement.

“Honda Australia is pleased to report that it has already reached an agreements with a number of exiting dealers and it is continuing confidential negotiations with the remaining dealers on an individual basis.

“We can confirm some of these dealers have engaged a law firm to negotiate the terms of their exit offers. We intend to participate in a mediation process with some of those dealers with a view to amicably resolving any disputes with the exiting dealers.

“As these negotiations are ongoing and confidential, we can't comment on this further.”

Honda enters mediation with its dealers just days after mediated negotiations between General Motors and Holden dealers failed last week. Legal action now seems likely.

Professional services provider Deloitte Australia has been negotiating exit arrangements with dealers on Honda’s behalf since the agency announcement was made.

While rumours of anger among the Honda dealer body at their treatment have been rife in the auto industry and they have engaged the law firm HWL Ebsworth to represent them, they have so far declined approaches from carsales for comment.

HWL Ebsworth is also the legal firm representing Holden dealers in their negotiations with GM, which announced last February it was axing the Holden brand and exiting Australia by the end of 2020.

The Australian Competition and Consumer Commission (ACCC) is said to be watching the Honda negotiations with interest. It threatened legal action against GM Holden to ensure it negotiated fairly with its dealers.

Meanwhile, federal industry minister Karen Andrews told carsales her department was following Honda negotiations with its dealers. She had previously lashed GM for closing Holden.

“We will continue to keep a close eye on negotiations to ensure a fair outcome for dealers affected by Honda’s decision to scale back its number of showrooms,” she said.

“I have been working very closely with the automotive sector to improve the relationships between dealers and manufacturers to make them fairer and more transparent.

“Last week we introduced automotive-specific amendments to the Franchising Code of Conduct to rebalance the new car retailing market.”

Carsales reported on those amendments here and on their possible benefits for new car buyers here.

Following is the entire statement supplied to carsales by Honda Australia:

In March 2020, Honda Australia notified its dealers of plans to restructure its dealer network from 1 July 2021 to optimise the business for long-term success. Honda Australia remains committed to the Australian market.

As part of these plans, Honda Australia will reduce the number of owners within its existing dealer network. Accordingly, Honda Australia has entered into the exit negotiations with some dealers.

Honda Australia is pleased to report that it has already reached an agreements with a number of exiting dealers and it is continuing confidential negotiations with the remaining dealers on an individual basis.

We can confirm some of these dealers have engaged a law firm to negotiate the terms of their exit offers. We intend to participate in a mediation process with some of those dealers with a view to amicably resolving any disputes with the exiting dealers. As these negotiations are ongoing and confidential, we can't comment on this further.

We understand this is a stressful time for our exiting dealers and we are firmly focused on facilitating the best possible transition for those affected by these changes. Honda Australia has been, and remains committed to working with exiting dealers in good faith and in a constructive manner.