State AG: GM plan may violate state laws

The restructuring of General Motors, and new dealership agreements it has made mandatory that dealership owners sign, may violate state law, according to Texas Attorney General Greg Abbott.

“GM is putting dealerships across Texas, and thousands of their employees, at risk,” Abbott said. “The new federally-controlled GM that emerges from bankruptcy wants to be freed from Texas laws that require it to deal fairly with local dealerships. Its plan will move the business toward a command economy model and away from a free market model.”

General Motors will be majority-owned by the federal government. Abbott notes that GM is disregarding Texas statutes that regulate car dealers and U.S. Supreme Court precedent that upholds a state-based dealership structure.

Under bankruptcy restructuring, GM will become “New GM” and has insisted that current dealers sign a new dealership agreement if they want to be part of the New GM operation, according to Abbott. He notes the “take-it-or-leave-it ultimatums force current dealers to waive state laws that were enacted to protect businesses from those kinds of oppressive moves.” If dealers don’t sign, he says, they will lose their business.

The Texas Automobile Dealers Association notes there are 415 franchised GM auto dealers in Texas which employ 27,000 people.

Abbott has filed an objection on behalf of the state of Texas. In it, he notes GM is attempting to: deny Texas dealers their legal right to market other brands; alter Texas law regarding dealer locations; limit dealers’ warranty claims under state law; free itself from state law limiting their ability to dictate that a franchise be modified or terminated; skirt state laws regarding new vehicle inventory by forcing dealers to order new GM vehicles from the manufacturer, even if a dealer does not believe those cars will sell.

Abbott cites U.S. Supreme Court case law that states are “empowered to subordinate the franchise rights of automobile manufacturers to the conflicting rights of their franchisees where necessary to prevent unfair or oppressive trade practices.”

Governor Rick Perry has noted his concern about the impact of proposed cap and trade legislation and possible regulation of carbon dioxide by the Environmental Protection Agency (EPA) on Texas’ energy industry and economy. He hosted a roundtable discussion with state and industry leaders this week to discuss their concerns about the proposed regulations.

“The threat to our energy industry and economy as a whole comes from the Waxman-Markey energy bill, which emphasizes cap and trade agreements and would end up being the largest tax increase in the history of our country. Equally as concerning are the EPA’s efforts to have carbon dioxide identified as a toxic substance, naming it and other natural gases, such as methane, a threat to public health,” Perry said. “We are in trouble if a federal agency is free to impose burdensome regulations in a way that harms family farms, job-creating factories and even large buildings, such as hospitals and churches. These two key factors have serious implications for our state, economy, and citizens, who will have to stretch their dollars to pay more for energy in a time of tight budgets for no clear benefit to public health.”

Texas’ energy industry fuels the nation, supplying 20 percent of the nation’s oil production, one-fourth of the nation’s natural gas production, a quarter of the nation’s refining capacity, and nearly 60 percent of the nation’s chemical manufacturing. The Texas energy industry employs nearly 375,000 Texans with $35 billion in total wages.

The governor noted that the federal government is conducting hearings on the regulations, none of which are in the south or near Texas, the nation’s energy capitol. Rather than adopting the EPA’s suggestion to make traditional energy sources more expensive, Perry has proposed making alternative energy technologies less expensive, thereby encouraging widespread commercial use and removing barriers to innovation and competition.

Diversifying the state’s energy portfolio remains a priority, Perry has previously said. Texas has already installed more wind power than any other state and all but three countries, and provided new transmission lines that will move more than 18,000 megawatts across the state, more than all other states’ current capacity combined. Texas has also attracted more than 9,000 megawatts of energy from the development of next generation nuclear power plants. The state is also looking to add new clean coal plants which will capture and sequester carbon dioxide emissions or use the carbon dioxide to increase production from Texas oil fields.

The governor was joined by Texas Comptroller Susan Combs, Railroad Commissioner Michael Williams, Public Utility Commission Chairman Barry Smitherman, Texas Commission on Environmental Quality Commissioner Bryan Shaw and representatives from industry leaders from across the state for the discussion.

The Texas and Southwestern Cattle Raisers Association (TSCRA) is calling upon Perry to add eminent domain to the list of issues to take up if the Legislature is called back to Austin for a special session.

"Of all the issues facing Texas ranchers today, perhaps none is discussed more than the urgent need for eminent domain reform,” said TSCRA President Dave Scott. "Members of the Texas and Southwestern Cattle Raisers Association were hopeful that important provisions would be added to Texas law that would have leveled the playing field for property owners. Despite a good effort by a group of legislators, that didn't happen.”

Perry noted in his State of the State Address to open the legislative session that he wanted lawmakers to present him a bill addressing eminent domain by the end of the session.

"Texas is growing, mostly in urban areas. In 2010, Texas will take an annual census, and during the 2011 Legislative Session that census will be used to draw new state and federal legislative districts. More elected officials will be needed to represent growing cities, most likely at the expense of rural Texas. This is why we need to secure the rights of property owners now.

"Eminent domain reform is needed to preserve Texas’ natural resources and agriculture,” Scott said. “Without strong protection, Texas will diminish its ability to thrive. Of even more concern, without eminent domain reform, Texans will continue to lose one of the most sacred rights we have, the right to own property. If Governor Perry calls a special session, eminent domain should be a priority."

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