A Belleville auto dealership that has existed for nearly a century is suing General Motors for $7 million claiming the troubled auto maker fraudulently induced it into constructing a new facility in 2007, only to be informed last month it would not have its franchise renewed by GM.
Wagner Motor Car Co. is one of 1,100 dealers nationwide whose relationship with the bankrupt manufacturer will cease in 2010. GM filed for bankruptcy in federal court in New York on Monday.
Wagner's suit was filed May 27 in St. Clair County Circuit Court.
Represented by Judy Cates of Belleville, Wagner also claims GM fraudulently induced it into buying a local Pontiac dealership, Jennings Motors Dealership, in 2003 for $550,000.
Wagner borrowed $500,000 to complete the transaction and GM agreed to pay $50,000, the complaint states.
Wagner claims it agreed to buy Jennings to further a GM-defined strategy to streamline operations so profits could increase. It also agreed to buy Jennings because GM, through its employees, indicated that Wagner would lose its already existing franchise if it did not commit to the sale.
In April, GM announced it would no longer build Pontiac brand automobiles after the 2010 model year.
"Defendant's announcement has essentially rescinded Plaintiff's purchase of the Jennings Motors Dealership, leaving Plaintiff with nothing of value for its purchase," the complaint states.
"Plaintiff, relying on the aforedescribed representations, and on the fear of losing its own franchises and dealership, purchased the Jennings Motors Dealership. But for these representations, Plaintiff would not have purchased the Jennings Motors Dealership."
According to the complaint, GM employees represented to Wagner that its current franchises would not be renewed without the construction of a new facility built to GM's specifications.
"Plaintiff, in order to save its existing franchises and business relationship with Defendant, built a new retail facility located at 3800 State Route 15 in Belleville, Illinois," the complaint states.
Wagner borrowed $4.9 million for construction of the $6.5 million facility, without financing from GM, the complaint states.
"At the time Defendant required Plaintiff to purchase the Jennings Motors Dealership, the Pontiac franchise and required Plaintiff to build the new retail sales facility, the Plaintiff owned its then-existing facility located at 4400 N. Belt West in Belleville, Illinois in its entirety, with no outstanding debts," the complaint states.
Wagner has been selling motor vehicles since 1912, according to the lawsuit. It has held a Buick franchise since 1916 and a GMC Truck franchise since 1993.
The suit also seeks punitive damages, attorneys' fees and costs.
St. Clair County Circuit Court case number: 09L276.