GM puts sales-effectiveness ratings on hold in wake of N.Y. court ruling

General Motors is modifying its criteria for how it holds dealers accountable for their sales performance -- at least in New York state -- following a court ruling there that shot down GM’s preferred formula for rating dealers’ effectiveness.

GM sent letters to New York dealers last month notifying them of their quarterly Retail Sales Index scores, which measures dealers’ performance against a statewide average. But unlike in past quarters, the letters didn’t assign dealership ratings such as “superior” or “needs significant improvement.”

The company told dealers it’s holding off on those ratings because it is “actively looking to modify, supplement and/or augment its dealer sales-performance assessment metrics in New York.” A GM spokesman said he could not immediately comment on the letters.

GM’s review stems from a New York Court of Appeals ruling in May that found the company’s use of RSI violated state franchise laws because it doesn’t account for market variations -- metro New York’s preference for imports vs. the domestic bias upstate, for example.

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The court’s ruling sided with Beck Chevrolet of Yonkers, whose owners, Russell Geller and his father, Leon Geller, sued GM over its use of RSI to determine their ability to retain the franchise.

Changing benchmarks

Legal watchers have said the court’s decision could force GM and other automakers to ditch or substantially alter the RSI benchmark for measuring sales effectiveness, in New York and possibly other states. Most other automakers use essentially the same metric to determine if dealers are in compliance with their franchise agreements.

In a May interview, GM North America President Alan Batey told Automotive News that the automaker was reviewing its use of RSI in light of the Beck ruling.

'Other relevant factors'

GM’s letter told dealers that for now, the company will continue to deliver an RSI report, but will not use the rating system to assess compliance with dealer agreements. While it will continue to measure RSI, “it should be understood that General Motors’ retail sales expectations might be higher or lower … based on other relevant factors.”

The Greater New York Automobile Dealers Association in a bulletin to dealers last week called GM’s suspension of its RSI ratings “a pivotal moment for New York dealers.” The association said it expects GM to have a “useable performance metric” by year’s end.

“With RSI set aside, dealers must pay particular attention to other aspects of their operation, which GM may seek to exert leverage on,” the association’s bulletin said.

The group also said non-GM dealers should keep tabs on the matter because other manufacturers could also modify their use of RSI to determine sales effectiveness.