For GM dealers, redrawn sales territories may have plusses, minuses

Donna Harris covers automotive retailing for Automotive News.
General Motors is redrawing the boundaries of most dealer sales territories effective in mid-February. Dealers need to be sure their territories are accurate reflections of the markets they serve because the territory affects how GM calculates their sales penetration.

The sales territories are based on U.S. Census tracts. The last time GM revised dealer territories was in 2002 in response to the 2000 Census, says GM spokeswoman Ryndee Carney. She says the latest changes were necessary because GM reduced its dealer network.

An expanded sales area can be good news to a dealer. It means GM won't be adding a competitor right around the corner.

But it can be bad news, as well.

The factory can give a dealer a tract that is closer to a competitor, so the competitor has an easier time penetrating the sales area, explains Carl Woodward, a dealer accountant with more than 200 dealer clients.

Woodward also says automakers sometimes ignore natural boundaries, such as rivers and lakes, and traffic patterns when redrawing sales areas -- again giving a competitor a potential advantage.

A larger territory could also dilute the dealer's sales penetration and put more pressure on the dealer to increase sales. “Generally speaking, the more territory a dealer is assigned, the more vehicles the dealer will need to sell in order to be considered sales efficient,” warns dealer attorney Richard Sox.

The bottom line: GM dealers should review their new territories to see how the boundaries will affect their stores' sales effectiveness ratings.

Dealers who wish to file an objection have 30 days following the receipt of the notice GM sent by Fed-Ex, says Carney. They also can request a 30-day extension.