General Motors is modifying its criteria for how it holds dealers accountable for their sales performance -- at least in New York state -- after 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 scores in the retail sales index, or RSI, 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 couldn't 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 -- the New York City area's preference for imports vs. the domestic bias upstate, for example.
The court's ruling sided with Beck Chevrolet in Yonkers, N.Y., whose owners, Russell Geller and his father, Leon Geller, sued GM over its use of RSI to determine whether they could keep their franchise.
Legal experts have said the ruling could force GM and other automakers to ditch or substantially alter their benchmarks for measuring sales effectiveness in New York and possibly other states. Most other automakers use essentially the same metric to determine whether dealers are complying with their franchise agreements.
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.
The Greater New York Automobile Dealers Association, in a bulletin to dealers last week, called GM's change "a pivotal moment for New York dealers." The association said it expects GM to have a "useable performance metric" by year end.
The association's bulletin said, "With RSI set aside, dealers must pay particular attention to other aspects of their operation, which GM may seek to exert leverage on."
