General Motors wants to prevent a dealer in Iowa from selling Chevrolet and Cadillac models alongside Fiat Chrysler Automobiles (FCA) vehicles in the dealer’s “dualed” showroom. However the dealer argues that state law permits it to sell both GM vehicles and FCA vehicles under the same roof.
According to a recent report from Automotive News, a federal judge denied GM’s request for preliminary injunction against KAR Auto Group in Decorah, Iowa. Previously, KAR Auto Group’s Chevrolet-Cadillac dealership and Chrysler-Dodge-Jeep-Ram dealership were separated by about 180 feet. However, KAR Auto Group combined the two dealerships earlier this year to help reduce overhead, citing a state law passed in 2010 that took precedence over General Motors’ franchise agreement.
General Motors argued that the dealership group failed to submit a formal request to combine the two franchises, and that the dual arrangement did not meet the minimum size requirements stipulated in its contract, even when it was previously divided between GM and FCA products. GM also said that adding FCA products to the to the GM dealership tarnishes GM’s image, and that the dealer was planning to “commingle” the two automakers’ branding.
“GM’s standards – comparable to those of other manufacturers – are designed to enable efficient dealership operations, and positive customer experience and brand image,” said GM spokesman David Caldwell. “We will continue our efforts to enforce the contract.”
Meanwhile, KAR argues that a 2010 state law gives it a right to consolidate operations. U.S. District Judge C.J. Williams said that General Motors failed to show how the consolidation could cause GM “irreparable harm” to have competing brands in the same showroom. Williams also added that dividing the General Motors and FCA operations would force the FCA store to close, leading to job losses and preventing FCA customers from obtaining repair and service work in the relatively rural town of Decorah.
“KAR is pleased with these results and in particular the broader effect the decisions will have with respect to dualing in Iowa and on the viability of a trademark claim that a manufacturer may bring in response to dualing,” said KAR’s lawyers. “A trial on the merits will follow.”
KAR estimates it will save $575,000 annually by dualing General Motors and FCA franchises.