Everett Chevrolet looks open for business. The lot is full. There’s even an “open” banner flying from a post along Evergreen Way.
But step inside the sales office. That’s where the desks are too clean and tidy, where the hallways are too quiet.
John Reggans, owner of Everett Chevrolet, has sold just one car since June. He used to have 75 employees; now he has five, all of whom he pays from his own pocket.
Reggans is locked in a legal battle with General Motors, fighting to keep selling Chevrolet automobiles.
A Snohomish County Superior Court judge sided with Everett Chevrolet earlier this year, finding that GMAC, the financial arm of General Motors, acted in bad faith by pushing the dealership to make sales while depriving it of much-needed capital.
The ultimate goal, according to Judge Eric Lucas, was to shut down the dealership.
GMAC is appealing that decision, pointing out that Reggan’s dealership was more than $800,000 in default and that GMAC acted to minimize losses.
Reggans said the appeals process is bleeding his company dry.
“Our hands are tied,” he said Friday. “We do not have funds right now to operate our business.”
Reggans, who is black, says his race factored into the decision to close down his franchise.
The battle started late last year, when GMAC asked Reggans to provide additional financial security to back financing for his dealership — including a personal guarantee. After monitoring the dealership, GMAC suspended the dealer’s line of credit in December of 2008, then terminated it two weeks later.
GMAC filed an order on the last day of 2008, essentially seeking to end the franchise relationship with Reggans.
The April 11 ruling by Lucas was in favor of Reggans, with the judge admonishing GMAC for “breach of the implied covenant of good faith and fair dealing.”
Lucas said: “GMAC did not conduct itself honestly. There was a hidden agenda … The goal of the team from GMAC in this case was to shut down the dealer. The mechanism was to set a false target that could not be achieved and by so doing manufacture a default.”
An appeals court judge granted a second hearing in June, citing probable error in the earlier ruling.
GMAC spokesman Mike Stoller declined to comment at length about the case, saying the appeal is still pending.
“GMAC disagrees with the ruling of the trial court and immediately filed a motion for discretionary review by the Washington Court of Appeals,” Stoller said.
He added: “Everett Chevrolet failed to pay GMAC more than $800,000 after Everett Chevrolet sold vehicles that GMAC financed. This is known as “being out of trust,” and is a default under the financing agreements between GMAC and Everett Chevrolet. When a dealership does not honor its commitments, GMAC has an obligation to minimize its losses. Consequently, and in accordance with its agreements, GMAC then asked Everett Chevrolet to repay all amounts that GMAC loaned it, in excess of $5 million.”
General Motors set about closing thousands of dealerships across the country earlier this year in response to a revenue crisis in the automotive industry. In June, Everett Chevrolet received a closure letter along with a handful of other Puget Sound dealerships, and he appealed the decision.
But Reggans said he believes there’s more to General Motor’s motivation than dollars and cents. He believes his dealership was targeted because he is black.
“(Everett Chevrolet is) the only 100 percent minority owned GM dealer in the state of Washington,” he said, adding that in the 14 years he has owned it, the dealership met GM standards and won sales awards.
Non-minority-owned GM dealerships have been given other franchises, Reggans said. But he was unable to obtain the right to sell anything except Chevrolet. “The only conclusion I can come to is that they have discriminated against me based on racial bias,” he said.
GMAC spokesman Stoller said the company would take the same steps with any dealer in default.
For now, an appeals court judge has ordered that all proceeds from sales be put into a holding account, meaning business expenses are paid from Reggans’s own bank account.
His wife, Carmenlydia Reggans, said she just wants one thing: to bring back the employees they laid off and start selling cars again. “We put everything into this business — everything,” she said. “And we don’t want to walk away.”
Read Amy Rolph’s small-business blog at www.heraldnet.com/TheStorefront. Contact her at 425-339-3029 or arolph@heraldnet.com.
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