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.”
Comments
Instead of Spending Money on these hack lawyers, how bout doing a Major Update on the RSI and Help your Dealers be Successful by infusing that Money into Marketing, you can Preach a Culture Change but willing to Kick a Family Member out for No Fault of their own at All, is pure Old GM!!!!!!
This is one time I say good for the judge. Certain markets are tough for reasons beyond the dealers control and they shouldn’t have to be punished so to speak for low volumes.
No matter what is said here the fact is GM has to cut dealers. As it is now they still have way too many and it hurts them all.
I know in this area we have 3-4 Chevy dealers per every single Toyota. and it really spreads the market thin. They compete against each other more than they compete against the others. It cost them much in dealer profits. I is great for me as a buyer but it really hurts the dealers.
not hateing this dealer.
but
some dealers are a turn off.
lookers and purchasers will go elsewhere.
maybe dealer should develope there own inward looking index system to attract real customers and not suck on GM.
some dealers must die or at least change.
The fact that several other dealers in his area scored lower on RSI yet did not receive termination letters is a problem. But in big, varied state like NY the RSI calculation is not valid to begin with. To compare a dealer in NYC, where Chevy has about 5% market share to dealers in Rochester and Buffalo, where Chevys share is north of 20%, is not right. With such a wide variation in penetration by geography It’s easy for dealers in the high market penetration areas to score above the state average (since the other areas drag the average down), and hard for dealers in the low penetration areas to score well. Manufacturers need to compare dealers to the relevant comparable market area only, not statewide.