Rental Car Franchisee Sues GM in Dispute Over Pact

The largest independent operator of Dollar Rent-A-Car franchises in Southern California is suing General Motors Corp., alleging that the auto maker caused it such financial hardship that the franchisee was forced to close most of its 18 outlets.

In a suit filed in Superior Court in Santa Ana, the franchisee--Irvine-based Wishcorp--accuses GM of breach of contract, fraud and misrepresentation for canceling an agreement allowing Wishcorp to purchase discounted cars from the auto maker, obtain financing at favorable rates and sell the cars back to GM at guaranteed prices.

The suit alleges that Wishcorp was put at a severe competitive disadvantage when GM unexpectedly canceled the arrangement in October 1993. Wishcorp was forced to close 15 of its Dollar locations late last year, including eight in Orange County. The company is seeking more than $1 million in damages, according to the complaint.

“GM pulled the rug out from under us,” Wishcorp owner Murray Wishengrad said. “We’re in litigation to find out why.”

Attorneys for General Motors said they intend to defend the company vigorously. “GM is confident it will demonstrate that Wishcorp’s allegations are unfounded and that GM is free from liability,” said Layne Melzer, a Costa Mesa attorney representing GM in the case.

Established in 1983 as an independent Dollar franchise, Wishcorp was free to purchase cars from any auto maker. Prior to 1990, Wishengrad said his firm purchased between 1,000 and 1,500 cars a year from a variety of suppliers.

Wishengrad says that GM approached him in 1990 with an offer to step up purchases of GM cars and become a “program buyer” eligible for deep discounts, low finance rates and guaranteed repurchase of GM cars--an arrangement offered only to high volume car rental franchises that purchased at least 3,000 cars a year from the auto maker.

The suit alleges that Wishengrad expanded his business based on the “program” agreement with GM, increasing his outlets from seven to 18 to get the volume discounts and other benefits from the auto maker. Wishengrad said the agreement required him essentially to severe ties with other car makers and purchase at least 90% of his fleet from GM.

According to the lawsuit, GM unexpectedly canceled its arrangement with Wishcorp in late 1993, too late for Wishcorp to secure favorable discounts and buy-back arrangements from other auto makers for 1994 model cars. GM continued to offer discounts to some car rental firms, including the National and Avis chains in which it held an ownership stake.

Wishengrad said the change cost Wishcorp “thousands of dollars per car,”

As a result, he said, Wishcorp was forced to shutter 15 of its 18 Dollar locations last November and lay off 140 of its 175 employees. Wishcorp continues to operate Dollar sites at John Wayne Airport, the Hilton Hotel in Anaheim and at the Westin Bonaventure Hotel in Los Angeles.