Frank Weisse, the then managing director of the Foreign Distributors Division, General Motors Corp., very graciously described Kapiolani Motors as one of the finest dealerships in the General Motors organization. I wish to bring to the attention of the committee certain coercive practices of the manufacturers which I personally have experienced with our own manufacturer, and which should be corrected from the standpoint of the automobile dealers in Hawaii as well as elsewhere. For several years I have, on behalf of our association in Hawaii, campaigned actively in support of State legislation designed among other things, to bring to an end coercive practices of the manufacturers in their relationship with their franchised dealers. Our bill was a manufacturer licensing act modeled on similar legislation existing in other States, such as Wisconsin. Our most recent efforts in this regard failed, due to the opposition of the manufacturers and other factors. I have no complaint to voice about the opposition of the manufacturers. They have a right to petition the legislatures as much as our association or others. However, I wish to bring to your attention the effect that my campaigning for this legislation has had upon my relationship with General Motors. Let me give you the facts as I know them. For many years we have had cordial relations with the Foreign Distributors Division of General Motors with whom we directly deal, although GM has always prodded for more sales. No matter how well we did, they always asked for increased sales. Nothing, however, was done about it through all the years. Because, in fact, we represented Pontiac well and do so today. Our association's most recent efforts to obtain remedial legislation in Hawaii through the policy committee of which I was chairman, began in February of 1967 with the introduction of our legislation. We made excellent progress, and the bill passed the Hawaii House of Representatives by a heavy majority something like 48 to 3. The bill went to the Senate and we were very optimistic about its prospects. At about this time the manufacturers made their opposition to the licensing bill known and things began to happen to me. On April 12, 1967, three representatives called upon me in Hawaii. They were Mr. Gregory R. McNabb, managing director of the foreign distributors division of GM, Mr. Walter Gussenhoven, regional manager of GM's overseas operations, and Mr. Joseph C. Lopez, the local zone manager. The expressed purpose of their visit was to discuss Kapiolani Motors' market penetration in Oahu. I was advised that Kapiolani Motors was not measuring up to what GM regarded as a satisfactory sales ratio and I was given a breakdown in percentages of sales. (Exhibit 1 appears on p. 244.) In short, I was advised that Kapiolani Motors should be selling Pontiacs in the same proportion as Pontiacs were sold on the mainland. I will have more to say about our sales performance and mainland averages at a later point. I believe it was at this point that a threat to my business began to develop. In short order after I was advised of GM's concern about Kapiolani Motors' performance, I was visited on April 21, 1967, by Mr. George William Coombe, Jr. Mr. Coombe is on the legal staff of GM. Mr. Coombe was accompanied by Mr. Lopez. These gentlemen spent some hours trying to persuade me to abandon the pending legislation for which we were working so hard. Mr. Coombe said as part of the "persuading," that only lousy dealers sought this sort of protection, and that good dealers did not need it. I was surprised to hear that I was a lousy dealer in view of our past relations with GM and in view of what GM said about us at that luncheon I mentioned earlier. I informed these gentlemen that I believed the proposed legislation to be in the best interests of everyone, including the consumers and the manufacturers, and that I would continue to do everything possible to secure passage of the bill. Shortly after Mr. Coombe's visit, Mr. Lopez again informed me that Kapiolani Motors must sell more automobiles in what we call the regular Pontiac group, so as to come up to the national production percentages. Mr. Lopez gave me some figures, prepared by GM, which purported to show a comparison of national production and Kapiolani Motors' sales. (Exhibit 2 appears on p. 245.) I was also informed by Mr. Lopez that because Kapiolani Motors was not selling up to the national production figures, that GM was considering the appointment of another Pontiac dealer in Honolulu. We continued our efforts before the Hawaii Legislature, but time ran out and the bill died in committee. On May 29, 1967, I met in New York with Mr. McNabb and Mr. Jack R. Palmer, area manager of GM's Foreign Distributors Division. We talked about Kapiolani Motors' market penetration. I asked these gentlemen to tell me, specifically, what I could do to expand our market. Mr. Palmer said that I should sell more cars for no profit and to make up the difference on parts and service. I was informed that the pressure for appointment of a second Pontiac dealer in Honolulu was coming from a higher source within GM. I was advised that I would know in due course of the final decision by GM. On June 26, 1967, Mr. Lopez called me and said that the decision was made. GM was going to appoint a second Pontiac dealer in Honolulu because our sales percentages were lower than the mainland sales percentages. I made it perfectly clear to Mr. Lopez at this time that I regarded the appointment of another dealer in Honolulu as completely unjustified by the market conditions existing there. Let me show you why this action is unjustified and discriminatory and what the real basis for this action is. If you will go back to the comparison figures furnished me by Mr. Lopez (exhibit 1, p. 244), you will note that the regular Pontiac group has achieved a certain percentage of the national sales market. These cars are the larger and higher priced cars in the Pontiac line. Gentlemen, it is a fact of life that in Hawaii on Oahu particularly, people buy, drive, and want small, low-priced cars. Here are the figures. (See exhibit 2, p. 245.) As of August 31 of this year, sales of foreign cars alone equaled 28.6 percent of the total market on Oahu against 8.8 percent on the mainland. The regular Chevrolet sales on the mainland were 15.8 percent of the market. And by that I mean the large-size Chevrolet, the Impala, and so on. However, in Honolulu Chevrolet sales were only 4.7 percent of the market. Ford, with approximately 11.8 percent of the mainland market, gets only 3.9 percent of the market in Honolulu. And this is true of other makes as we go down the line. My car, the Pontiac, gets approximately 5.7 percent of the mainland market and 0.9 of the market in Honolulu. To emphasize this preference of the Hawaiian consumer for compact low-priced cars, I should note here, that before the American manufacturers came out with their compact models, Kapiolani Motors was also one of the largest Vauxhall dealers in the Foreign Distribution Division, selling about 900 cars a year. Vauxhall is a compact lowpriced car made by GM in England. The point I wish to make by these figures is that the placing of another Pontiac dealer in Honolulu by GM because Kapiolani Motors is not doing the job is simply not justified and cannot be reconciled with the facts. Moreover, in Honolulu there is one Oldsmobile dealer and one Buick dealer. Oldsmobile gets 3.2 percent of the mainland market and only 0.5 of the Honolulu market. And that is the same size Oldsmobile as the Pontiac we are referring to. Buick, the same size, gets 4 percent of the mainland market and only 0.8 percent of the Honolulu market. I think it is more than a coincidence that GM's decision to place another Pontiac dealer in Honolulu was made at the same time I was supporting legislation opposed by GM. I have prospered in the automobile business and other businesses with good hard competition. I enjoy it. I do not think, however, that the franchised automobile dealer or any other citizen should be subjected to pressures and actions of the manufacturer which threaten his very existence as a dealer because he attempted to exercise his right to petition before his State legislature. It is a sad commentary, gentlemen, on the present franchisor-franchisee arrangement, that after many years of hard work spent in building up our franchise, investment of nearly a million dollars in capital, building of special facilities, and I might add with a degree of pride, the finest in Hawaii, an excellent staff and our reputation in the community avails us no franchise security whatever. Mr. Chairman and members of the committee, it is for these reasons that I appear before you today and because I feel very strongly that new legislation to protect the integrity of the franchise system is urgently needed. On behalf of the Franchised Automobile Dealers of America, I urge your favorable consideration of Senate bill 2507. Thank you. (Exhibits 1 and 2 follow :) |