Over two years ago, the owners of Beck Chevrolet in Yonkers, Queens (New York) received a letter from General Motors that its franchise agreement wouldn’t be renewed due to mediocre sales performance for 2011 and 2012. Now an administrative law judge has ruled in favor of the dealership, stating that GM lacked “due cause” to terminate Beck.
The ruling suggests that the RSI (“retail sales index”), which GM uses to measure the effectiveness of dealers’ sales, is flawed because it doesn’t account for the Chevrolet’s lack of appeal in the New York City market or other factors that make it a challenge for Beck to achieve the goals set by GM. Automotive News reports that Judge Walter Zulkoski cited “factors that were beyond the control of Beck,” such as “stiffer competition from other makes, significant preference for other makes, reduced advertising by GM” and Chevrolet’s weak market share in the New York City area.
“All of Beck’s other operational metrics were excellent,” says Beck Chevrolet’s lawyer, Russell McRory. “So if the only problem is RSI, then maybe the problem is RSI itself, and not Beck Chevrolet.”
Zulkoski also concluded that Beck Chevrolet were singled out as over half of the 22 Chevrolet dealerships in metro NYC had 2012 RSI scores below Beck’s.
The ruling questions the legal authority that automakers have in using RSI or other quantifiers, says Virginia-based lawyer Mike Charapp, who represents dealerships. These sales-performance ratings “are done for leverage. It gives the manufacturer the opportunity to address issues about which it may not be happy.”
This isn’t the first time dealers have complained about the system(s) automakers use to measure performance, as they claim the measurements don’t account for market nuances. For example, in the import-heavy New York City market, Beck was measured against stores in the Buffalo area, which is home to thousands of GM factory workers and has a strong domestic presence. In fact, in a July 2013 letter to GM, the New York State Automobile Dealers Association said the system “makes no attempt to adjust for … vast geographical and socio-economical differences in the markets,” which results in “a flawed indicator of sales performance” that “creates unnecessary conflict between GM and its dealers.”
A GM spokeswoman declined to comment on the judge’s decision or whether the automaker will appeal, but owner Russell Geller is happy that he and his 40 employees can stay in business. “I fought this hard because I love Chevrolet and love being a Chevrolet dealer.”