General Motors may have to reconsider the way it measures and enforces dealership sales effectiveness in the nation's largest vehicle market after a ruling that the company's system violates a state law.
California's New Motor Vehicle Board ruled Aug. 13 against GM's use of a benchmark called the retail sales index as grounds to terminate the franchise agreement of Folsom Chevrolet, a Sacramento-area dealership owned by Marshal Crossan.
The decision capped a long-running battle between Folsom and GM, which had concluded that Folsom failed to meet sales expectations and sought to revoke its franchise in late 2016.
Attorneys representing Folsom Chevrolet argued that GM's reliance on RSI was a violation because it failed to account for various market conditions, including brand preference, geography and demographics.
The decision follows a similar case in New York, where the state's highest court ruled in 2016, on similar grounds, that GM violated state law by trying to cancel a Chevy dealer's franchise for subpar RSI.
The California ruling could have implications for franchised dealerships across the country, according to California law firm Scali Rasmussen, which represented Folsom.
"This outcome provides not only a shield as used in this case, but potentially a sword for recovery of damages caused by GM's application of the faulty metric," said Christian Scali, managing partner of the firm, in a statement.