Estherville, Iowa (Iowa Capital Dispatch) — A long-simmering dispute between General Motors and a northwest Iowa auto dealership that’s fighting to retain its GM franchise is headed back to court.
The dispute centers on an obscure Iowa law that discourages auto manufacturers from terminating franchise agreements with Iowa dealers for breach of contract or poor sales, particularly if those dealers contribute to the public welfare through community support. It pits General Motors, one of the world’s largest automakers, against a small, family-owned dealership in rural Iowa.
The dispute began seven years ago when GM responded to declining sales of Buick and GMC vehicles at Estherville’s Motor Inn, a GM dealer owned by the Heywood family since 1937. The automaker put Motor Inn on their dealer improvement program, citing a lack of advertising, and a failure to use a website provided by GM.
Unsatisfied with what it saw as Motor Inn’s subsequent lack of improvement, GM sent the dealership a letter in 2015 the dealer was in material breach of its contract with GM due to what it called poor sales performance and poor customer satisfaction scores.
According to court records, GM gave Motor Inn six months to improve, then renewed its five-year contract with the dealership. After Motor Inn’s sales failed to improve, GM sent the dealership another letter in June 2016, warning that the situation was under review. In December 2016, GM notified Motor Inn it was terminating the dealership’s contract to sell GMC and Buick products. Motor Inn challenged that decision, citing the Iowa law that restricts the manner in which auto-franchise agreements can be terminated.
Motor Inn’s dispute with GM went before an administrative law judge who issued a decision blocking GM’s efforts. The Iowa Department of Transportation then upheld that decision, prompting GM to file an appeal in Iowa District Court. A judge sent the case back to the DOT director, Scott Marler, for consideration of additional evidence.
In his decision, Marler concluded the evidence supported a conclusion that “Motor Inn transacts an amount of business more than adequate to turn a profit.” As for the Heywoods’ alleged lack of investment in the business, Marler found that the family “has made investments in the dealership across generations, which have allowed the business to now enjoy the benefit of a lack (of) long-term debt obligation.”
In challenging those findings, GM’s has filed a court petition seeking a judicial review of the decision, claiming portions of it are unsupported by substantial evidence.
The DOT has rebutted that, arguing GM’s claims have no merit. A hearing date has yet to be scheduled.
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