Dealers Get Closed-In Feeling

Dealer George Glassman is hit with the occasional lawsuit. It is part of doing business in a litigious society. He typically doesn't get too irked about it.

Nor did he get mad, at least not at first, when the friendly process server stopped by the other day. “I even know the guy,” says Glassman, an attorney as well as head of Glassman Kia in Southfield, MI.

But he started fuming when he saw who is suing him in federal court: Kia Motors America.

Glassman holds the first franchise Kia awarded in Michigan. He has made a go of it, selling Korean-brand vehicles in a metro Detroit market that skews towards domestic nameplates.

“I've worked with Kia in a productive way, and now this,” he says of the suit.

In a way, it is the same old story. The legal dispute is over how many miles a same-brand dealership can be to another. Auto makers seem geographically challenged when it comes to that issue.

Most state franchise laws require same-brand dealers to keep their distance. In Michigan, they must be at least nine miles (14 km) apart.

Kia wants to locate a new store in an auto mall in Troy, MI. But that spot is about seven miles (11 km) northeast of Glassman's dealership.

“I told them, ‘Troy is a big city; you can still locate a store there, be 9.1 miles from my dealership and not violate my rights,” he says.

The lawsuit stems from earlier horn locking. That started last year after a Kia regional dealer development manager told Glassman of plans to open the new store in the Troy Auto Mall. Glassman bridled at that. He suggested Kia compensate him if it wanted him to go along.

Then the stick came out. Glassman says the Kia representative, who no longer is with the company, made “threatening remarks” about increasing sales quotas and such.

“I was furious at the tone of that conversation,” he says. He fired off a letter to Kia noting that his Kia vehicle sales were 120% above the year before and customer-satisfaction scores above average.

Kia sent in the lawyers. The lawsuit asks a judge to declare that the auto maker can open another dealership seven miles from Glassman's, even though state law says that's two miles too close.

Kia attorneys say Michigan's amended 9-mile restriction dates to 2010, but Glassman's Kia franchise agreement goes back to 1998. The plaintiff claims the distance limit only applies non-retroactively to dealers who signed franchise agreements after the amended law took effect.

That would include just about all Kia dealers in Michigan.

Glassman says he's fighting for dealers everywhere. That may be stretching it, but one wonders if state legislators really intended for the franchise amendment to apply just to rookie dealers.

His angry letter to Kia concluded by saying, “No dealer, including George Glassman, deserves to be treated this way.”

But his case hardly is unique. A similar legal battle is shaping up in Los Angeles where Chrysler opened Motor Village LA eight months ago.

Chrysler ballyhoos the place as an automotive emporium for Chrysler, Jeep, Dodge, Ram Truck and Fiat vehicles.”

Nearby Chrysler-brand dealers are miffed for a couple of reasons.

First, Chrysler owns Motor Village LA. One sure way to vex dealers is to put a factory-owned store in their market.

Second, the old distance issue bobs up again. California law bars manufacturer-run stores within 10 miles (16 km) of same-brand dealerships. Three independently owned Chrysler dealerships are closer than that to Motor Village LA.

The California New Car Dealers Assn. has filed a state regulatory board.

Auto makers have their own interpretation of state franchise laws. Most of those statutes include exemptions for special circumstances. Trouble is, too many auto makers think they're special.