The state Motor Vehicle Administration yesterday approved the license application of two Houston auto dealers to operate four new car stores in the Baltimore area owned by General Motors Corp.
It also approved a fifth to be opened later this year.
The approval came a week after the MVA launched an investigation into the transaction to determine if it was in violation of a state law prohibiting auto manufacturers from owning retail outlets.
Other GM dealers in the region complained to their trade group, the Maryland New Car and Truck Dealers Association, that GM's ownership of the outlets amounted to factory stores.
The dealers were concerned that in such an arrangement GM would give the stores favorable treatment in its distribution of popular models of cars and light trucks."I don't want to compete against a factory store," said Jerome H. Fader, president of Atlantic Automotive Group of Owings Mills, one of the largest auto dealers in the state.
In their application for a license, the two dealers - Fernando Somoza and Kirk Franceschini - failed to disclose GM's financial interest in the dealerships as required by state law."That has been corrected," Charles D. Schaub, manager of business licensing at the MVA, said yesterday. "Their application will be approved.
After meeting with Somoza and Franceschini, Schaub said he had not detected any attempt to deceive or mislead the MVA.
Schaub said he was convinced that the dealers simply made a mistake when filling out the license application.
At question was a line in the application asking applicants to "list all persons that have direct or indirect financial interest in the dealership." Schaub explained that "persons" also means corporation.
Franceschini said he thought the application required the identity of only the operating partners.
Schaub said the form will be changed to avoid future confusion.
Maryland's law is vague, but it allows for a manufacturer to own retail outlets for only a temporary period until a buyer is found. The law also requires the new buyers to have a significant investment in the dealerships.
Franceschini said he and his partners already have a significant investment in the dealerships and they plan to buy out GM's interest in the dealership within five to seven years.
GM took over the Pontiac, Buick and GMC truck dealerships earlier this year after its share of the Baltimore area market declined to 22 percent from 31 percent, according to Terry Sullivan, a GM spokesman.
Sullivan said GM picked two experienced, successful and minority dealers to take over the operations in Baltimore when there was no interest on the part of local dealers to acquire the package of five outlets.
Schaub said the dealerships currently owned by GM are in Glen Burnie, Ellicott City, Columbia and Owings Mills. They operate under the name of Performance. The fifth, a Pontiac GMC operation, is scheduled to open in Cockeysville later this year.