Senate goes after car brands

A Senate committee investigating the axing of Holden by General Motors has voted to commence a wider examination of the relationship between car manufacturers and independent dealers.

The prompts are the bitter dispute between GM and its dealers over compensation, and Honda and Mercedes-Benz’s decision to swap from traditional franchising to agency retailing in Australia.

The Education and Employment References Committee is due to deliver its report into GM Holden operations in Australia on November 12.

Through the process of gathering evidence for the report and the public hearing conducted on August 3 reported here, the treatment of dealers and the level of protection offered them by federal franchising regulations has become a concern for members of the committee.

It is likely senior executives from across the car industry will be called to give evidence before the committee.

The issue was highlighted by NSW Labor Senator Deborah O’Neill in a letter sent last week to federal employment minister Michaelia Cash and industry minister Karen Andrews.

O’Neill is a member of the Education and Employment References Committee and a consistent campaigner on franchising regulation.

O’Neill highlighted the move by Mercedes-Benz to agency, an issue covered extensively by carsales.

Under the agency model, the factory sets fixed prices and sells its cars through an online platform and at select dealerships. The retailers, acting as agents, then receive commissions for selling the cars on behalf of the manufacturer.

“This decision is one that highlights the profound imbalance in power between car dealers and car manufacturers in the Australian market, where foreign Fortune 500 companies can effectively dictate the terms of sale to their dealers with no heed to either transparency or consultation,” O’Neill wrote.

“Despite years of service and goodwill, these car dealers are being left out in the cold.

“Mercedes Benz have openly said that they will not compensate dealers as they embark on the new sales model and one of their global executives recently said that they are pursuing this model in Australia specifically because Australian law allows it, unlike in other jurisdictions such as the USA.”

Speaking before the inquiry was announced, Australian Automotive Dealer Association CEO James Voortman expressed his support.

“We would naturally like to see the government take action to address the power imbalance between dealers and manufacturers as soon as possible as there are real fears some manufacturers are seeking to follow the example of General Motors,” Voortman said.

“A range of inquiries and reviews have demonstrated that action needs to be taken to overcome this power imbalance and another Senate inquiry will add to the overwhelming weight of evidence.

“The government needs to start prioritising local Australian businesses over those offshore manufacturers which behave poorly.”