A year after a New York dealership won a court battle over General Motors' use of generic sales-effectiveness ratings, the ruling's impact has spread across the country. Courts, state agencies and state legislatures have repeatedly decided automakers can't evaluate a dealership's performance without taking local factors into account.
California, Florida, Illinois, Ohio and Maryland are among the states that have joined New York in rejecting the use of generic sales-effectiveness ratings, and the practice is under review elsewhere.
Automakers typically use generic sales-effectiveness ratings to see how a dealership's local market share compares with the brand's state average. Dealers argue doing so ignores local conditions, including income disparities and geographic considerations. If, say, a rival automaker has an assembly plant 10 miles from a dealership, that automaker's vehicles are likely to have a disproportionate local market share — a factor ratings often don't acknowledge.
The stakes are high. Dealerships with poor ratings don't qualify for incentives that can often determine whether a store is profitable.
"It's not like a bad letter grade. It has serious consequences," Zach Doran, president of the Ohio Automobile Dealers Association, said. "It can affect allocation. It can affect [dealers'] ability to transfer their dealership to a successor. It can affect their incentive programs."