The Federation of Autombobile Dealers Association have flagged the exit of automobile companies from the country to the Union government, stating that the sudden exit of MNCs causes “great distress” to the entire auto retail industry. It said that Ford India’s manufacturing exit will be the fifth biggest exit from Indian markets since 2017, following General Motors, Man Trucks, UM-Lohia, and Harley Davidson. FADA had earlier flagged the impact of the company’s exit from the country, stating that dealerships employ 40,000 people who could now lose their jobs. It also alleged that Ford is forcing dealers to sign Non-Disclosure Agreements (NDA) before a compensation package is worked out. “Many Ford dealers have directly or indirectly requested FADA to take up the matter for amicable resolution,” FADA said.
The letter by FADA President Vinkesh Gulati said that the definition of confidential information in the NDA was “extremely broad and does not explicitly mention the scope of the discussions that Ford intends to undertake with the dealers”. It added that it is unclear if discussions will cover points such as damages on several grounds, including — towards costs of idle establishment & infrastructure, maintenance, employee retrenchment claims; loss of opportunity and restrictions in availing dealerships of new OEM in the existing infrastructure; damages arising out of stopping of sales and only continuation of parts and service; and owing to loss of reputation and goodwill.
“Such coercive efforts on Ford's part to get their channel partners to sign an NDA with an imposition of unreasonably tight timelines, under economic duress is not the right approach and adversely impacts dealer interests,” the letter read. The letter laid out losses caused by the exiss as well as the potential job loss, stating that there are 170 Ford dealers in the country, with 40,000 jobs at stake. It said that Rs 2,000 crore has been invested at Ford dealerships in the country.
According to FADA’s figures, the job loss and quantum of investment in Ford dealerships and its impact is far higher than the effect of the exit of General Motors, Harley Davidson, Man Trucks and UM-Lohia was. On Thursday, September 23, FADA said that a majority of auto dealerships are family-owned small and mid-sized businesses and that dealers invest savings for long-term investments, but the dealership agreements only happen on a yearly basis.
Gulati called for the ministry to work on the protection of the rights of auto dealers, and asked for protective legislation. “A protective legislation would also ensure that adequate information is available to the customers, protect dealers from sudden exits by OEMs and ensure protection from unfair termination of dealership agreements,” the letter read.
The association called for the Ministry to intervene and create a task force “which takes day to day updates from Ford India to monitor the compensation plan for automobile dealers and dealership employees, and that Ford India keeps FADA in the loop for issues related to dealers.
It also asked for a formal discussion on an Automobile Dealers’ Protection Act, and its importance to protect small and medium enterprises, their skilled employees and their customers. In a final demand, Gulati said, “Make sure that Ford India indemnifies dealers from various consumer and civil cases, both under pendency and against any future cases that may arise directly or indirectly out of Ford’s restructuring announcement.”