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Warning over two-year termination notices

Forget one or two-year termination notices - franchised dealers could get their notice from carmakers just days before the new block exemption regulations are introduced next year.

According to leading members of the European Union's Competition Commission, in instances where a two-year notice period has been given there will be no contract under which to operate for the remaining year when the transitional period expires in September 2003.

“Franchise agreements become redundant from next September irrespective of the notice period - all bets are off,” says one source.

The competition directorate's Sven Norberg says block exemption should not cause a fundamental restructuring of a manufacturer's dealer network. But automotive industry experts say his comments, made at the European Traders and Repairers Council block exemption congress in Frankfurt, mean there may not be a rush to terminate existing dealer contracts by the end of September.

“Carmakers will apparently be able to terminate dealers without giving a good reason all the way up to September 30, 2003,” says Piers Trenear-Thomas, client service director Grant Thornton Motor Retail.

But crucially, if manufacturers have issued termination notices they must amend the paperwork before the deadline to outline the new agreement, otherwise, dealers will be entitled to all the benefits of the new system, says RMI chief executive David Evans. The commission is still holding out authorized repairer status as a lifeline for terminated dealers but the news means that this may take another year to be approved.

The commission also clarified the view that existing service contracts are enforceable for the duration of the transition period at the congress.

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