YONKERS, N.Y. — An administrative judge from New York’s Department of Motor Vehicles said Wednesday that General Motors’ (GM) statewide sales benchmark is unreasonable, ruling that the automaker cannot enforce a post-bankruptcy agreement with one of its dealers, Beck Chevrolet Co. Inc.
Administrative Law Judge Walter Zulkoski found that the manufacturer’s sales benchmark was unfairly applied to the Yonkers Chevrolet store when it attempted to terminate the dealer’s franchise agreement in 2013. In his ruling, Zulkoski cited New York’s Franchised Motor Vehicle Dealer Act, which states that manufacturers may not “use an unreasonable, arbitrary or unfair sales or other performance standard in determining a franchised motor vehicle dealer’s compliance with a franchise agreement.”
GM uses a measure of sales performance called the Retail Sales Index (RSI), a percentage determined by the actual sales of a dealer over the dealer’s expected sales. According to the ruling, “An RSI of 100 indicates the dealer is selling the number of vehicles the franchisor expects can be sold in the dealer’s Area of Geographic Sales and Service Advantage …”
As part of a participation agreement with GM, Beck Chevrolet agreed to achieve an RSI of 70 in 2010, 85 in 2011 and 100 in 2012. The dealership was unable to reach those benchmarks, but neither did several other dealerships — and those dealerships did not face termination.
“In 2013, Beck’s RSI was 105th out of 127 for New York State … Thus in 2013, 22 dealers in New York were below Beck’s RSI but not one of those in the nine downstate counties was facing the termination process that Beck is now challenging,” the ruling read, in part.
The reason so many downstate dealerships failed to meet GM’s standards, Zulkoski noted, is because GM uses a statewide average to determine RSI. Beck Chevrolet argued that using a New York City metropolitan average would be more realistic.
“Other jurisdictions have agreed with Beck that dealers in large metro areas should not be held to a statewide average,” Zulkoski said in his ruling.
Because GM did not attempt to terminate other dealers in the New York City metropolitan area that did not meet the statewide RSI standard, Zulkoski determined that the standard was not reasonably applied. He also noted that the manufacturer does not base its decisions to terminate solely on the basis of RSI, but noted that GM did not give another reason for terminating the dealership’s franchise agreement.
Under Beck Chevrolet’s participation agreement with GM, the dealership was also required to make image improvements. But Zulkoski ruled that GM “… does not like Beck’s facility’s physical appearance … it has not shown photos of what other Chevrolet dealers’ facilities look like to support its claim that Beck’s facility is below its standards by a preponderance of the evidence.”
Beck Chevrolet’s Vice President and Dealer Principal Russell Geller, who testified for both sides, also admitted that he knew of GM’s plans to put another dealer at the Beck Chevrolet location once the dealership was terminated.
“For the New York City metropolitan area, the RSI standard of GM is unreasonable as it does not realistically reflect the Chevrolet sales challenges that Beck and other New York metropolitan dealers face, and GM is not applying the RSI uniformly to all dealers in New York and thus GM lacks due cause to terminate Beck’s franchise,” Zulkoski concluded in his ruling.