A Maryland bill fortifying dealers against uniform sales standards was signed into law last week, setting rules on how automakers can measure retailer performance in the state.
House Bill 1120 champions so-called fairness requirements when calculating a dealership's performance metrics -- sometimes known as retail sales-effectiveness ratings -- by requiring automakers to take into account the influences of demographic and geographic factors.
The legislation follows a case last year, when Beck Chevrolet in Yonkers, N.Y., took on General Motors after the automaker tried to terminate the franchise for poor sales.
The court ruled the factory violated New York state law after litigators argued the company's metric, known as the retail sales index, unfairly measured the franchise against the state average and neglected local-market nuances.
"There's a long laundry list of components that dealers perform to," said attorney Aaron Jacoby, automotive group leader at Los Angeles law firm Arent Fox. "There's customer satisfaction. There's number of sales, hitting certain performance thresholds."
Jacoby, who was involved in both the New York case and in advising Maryland state representatives, said, "Dealers are expected to all be above average -- which is a ridiculous standard, because it's not possible mathematically."
As laid out in the Maryland law, local-market nuances can include even the tastes and proclivities of regional clientele. Under the state law, for example, automakers would have to cut some slack to mainstream dealerships operating in areas trending toward luxury brands.
"It may be that in one area Korean cars are preferred over Japanese or German cars, or vice versa," Jacoby said. Such a local-market preference could preclude a dealership from meeting performance standards based on statewide averages.
The attempt to give accurate weight to considerations such as that is just one of the difficulties in setting fair and equal sales targets for licensed dealerships.
"It turns on its head -- both in New York and in Maryland -- the old metric, and the manufacturers will have to consider new methods to deal with the new paradigm," Jacoby said.
In a related case in Ohio in 2012, a state court ruled in favor of Nissan dealer Bill Sims after Nissan North America said his dealership's sales fell short of its target and moved to terminate his franchise.
Sims argued that Nissan should have recognized that the dealership, near GM's massive Lordstown, Ohio, plant, faced an uphill sales battle, with Chevrolet's market share in the area double its state average and Nissan, Toyota and Honda hovering at about half their state average.