GM recently settled an SEC investigation into its accounting practices. The automaker didn’t admit guilt or pay a fine, but it was confirmation– if confirmation was needed– that GM under Rick Wagoner has played fast and loose with the numbers. And when you’re as big as GM, little “tweaks” here and there can have a significant effect on the bottom line. In fact, I’d go as far as to say that history will eventually regard Wagoner as an accountant gone wrong: a GM lifer whose only genius lay in his ability to make numbers his bitch. Until he couldn’t. As part of that legacy, this [press release after the jump]. I’m no lawyer, but it appears that GM violated rules regarding mark-ups to dealers and, thus, customers. And once again, the “winners” of a legal action against an automaker get discounts on the offending company’s products, while the lawyers get millions of dollars. Not to coin a phrase, but how great is that?
“A notification program began today, as ordered by the Court of Common Pleas of Lancaster County, to alert those who bought certain new GM vehicles from Pennsylvania GM Dealers about a proposed class action settlement involving GM’s marketing programs.
The case is about GM adding 1% of the Manufacturer’s Suggested Retail Price (“MSRP”) to the invoice for certain new vehicles it sold to its dealers, as part of their “Marketing Initiative” programs. The lawsuit claims that GM required dealers to use the 1% amount for advertising, and that this violated Pennsylvania law. The lawsuit also claims that dealers passed this amount on to consumers when they purchased vehicles. GM denies any wrongdoing, and states that the 1% was a legal, wholesale price increase to its dealers, and that dealers did not necessarily pass on the 1% amount to each purchaser.
The settlement includes a group of people, called a “Class” or “Class Members,” who bought a new vehicle at retail in Pennsylvania from a franchised dealer that was made or distributed by GM. The GM dealer must have purchased the new vehicle on or before March 31, 1999, but after (a) September 1, 1998 for Chevrolet or GMC Truck vehicles; (b) July 1, 1989 for Cadillac or Oldsmobile vehicles; (c) July 1, 1990 for Pontiac vehicles; and (d) August 1, 1990 for Buick vehicles. The Class does not include anyone who purchased vehicles under the GM Employee Purchase Plans, GM qualified fleet purchasers, government entities, attorneys of record in this case, lessees, or anyone who previously requested exclusion from the Class.
The settlement provides rebates certificates worth up to $200 toward the purchase or lease of a new GM vehicle. Certificates will be valid for three years after the settlement receives final court approval. Up to two certificates can be used toward the purchase of one vehicle.
Notices informing Class Members about their legal rights are scheduled to appear in Pennsylvania newspapers and magazines leading up to a hearing on April 28, 2009, when the Court will decide whether to grant final approval to the settlement.
The Court has appointed Joseph F. Roda and Michele S. Burkholder, RodaNast, P.C. of Lancaster, Pennsylvania, to represent the Class as “Class Counsel.”
Those affected by the settlement can send in a claim form to ask for a rebate certificate, object to the settlement, or ask to appear and speak at the fairness hearing. Claim forms must be postmarked no later than June 15, 2009. The deadline to object to the settlement or request to appear and speak at the hearing is March 16, 2009.
A toll-free number, 1-888-866-1738, has been established in this case (called Soders v. General Motors Corp., No. CI-00-04255), along with a website, www.onepercentcase.com, where notices, claim forms, the settlement agreement, and the Court’s preliminary approval order may be obtained. Those affected may also write to Soders v. General Motors Corp., PO Box 91196, Seattle, WA 98111-9296 for more information.
The settlement involves worthless script to the ripped-off customers and hundreds of millions of dollars to legal firms. More to follow.
I agree with Shakespeare on the treatment of Lawyers.
Nintendo has a similar lawsuit some time ago. Usual story of the Lawyers get big $ while those who were ripped off get a pitiful discount on the purchase of a future product.
The settlement provides rebates certificates worth up to $200 toward the purchase or lease of a new GM vehicle
And yet another entry in the history books under “Functionally Useless Class-Action Settlements”.
Every automaker has increased prices. GM’s dealers are the only ones childish enough to file a lawsuit, it seems.
he automaker didn’t admit or pay a fine, but it was confirmation– if confirmation was needed– that GM under Rick Wagoner has played fast and loose with the numbers.
I agree with TTAC’s view of the issue discussed in the article, but allow me to disagree with the statement quoted. Companies settle lawsuits all the time, and it doesn’t prove their guilt. It’s generally more expensive to pursue a full judicial resolution than to settle, unfortunately. Now, maybe you have more knowledge of that settlement leading you to the conclusion that GM was in the wrong, but settlement in itself should not be enough.
One of the many reforms which is needed is in these bogus class action settlements. Consumers routinely get coupons while the lawyers get cash.
There should be a law which says simply that any payments to class action attorneys in settlement of these cases must be in the same form as those paid to the aggrieved parties on whose behalf the attorneys claim to be working.
While we are fantasizing about fixing crazy stuff, how about a law which says the financial reports used as the basis of tax returns have to be the same as those used for public reporting? Presently companies keep two sets of books, one for the public and one for the tax man.
The ultimate was the law firm who received millions of dollars in fees while Sears auto repair customers had to apply for a 10 dollar discount coupon at sears.
Can you re-explain what was done and how that hurt consumers?
If I read this correctly…
GM raised the price of the car they sold to dealers by 1%.
GM demanded that the dealers increasing their advertising budget by exactly the dollar amount that 1% price increase came to for all the cars the dealer purchased.
The problem is that GM is prohibited by PA Franchise Law from telling a dealer how to spend their advertising dollars.
I don’t get it. Why didn’t GM just raise their wholesale price and use that extra revenue to buy ads themselves? Or they could have given dealers advertising grants. If GM wanted to increase advertising, then this is was very convoluted way to do it.
And how did this impact the end consumer? If the dealer’s expenses go up, then they can either raise prices, or trim profits. Then if the retail price is too high, the customer can take their business elsewhere, or not buy the car.
I must be missing something. It doesn’t make any sense to me.
Going forward in to our new era of “Change” let’s consider doing away with this particular sacred cow…the class action lawsuit. What a rip to the general public!