They should jettison the “industry standard” of zero-sum metrics that make it a certainty that “lower performing” dealers are unsatisfactory and in breach. They need a methodology that contemplates and encourages compliance with reasonable standards by 100 percent of the dealer body. I then urged auto manufacturers to heed Beck’s lessons to jettison their obsession with skewed and flawed metrics and to adopt a sensible, fair and reasonable approach to assessing their dealers: General Motors, wherein the United States Court of Appeals for the Second Circuit, interpreting New York law, held that “it is unlawful…to ‘use’ standard – alone or in conjunction with other metrics – to assess an automobile dealers’ compliance with its franchise agreement.” I quoted from the 2016 landmark case, Beck v. The article’s opening premise was the following:Īuto manufacturers routinely assess dealer sales performance relying on metrics with no established or demonstrated statistical reliability or accuracy to gauge the minimum number of new cars dealers should expect to retail. On May 15, 2017, my article, “Carmakers must scrap metrics for dealers,” appeared in Automotive News. As the two recent decisions suggest, courts wisely reject auto manufacturers’ references to “ease” of calculation as an excuse to dispense with accuracy, reliability, fairness and reasonableness. There are always “winners” and “losers” in this metric-based methodology. Worse still, the prevailing factory methodology is a form of “zero sum game,” because the calculations depend on how dealers rank against each other. ![]() ![]() ![]() The invocation of “simple arithmetic”, therefore, is foreseeably and consistently wrong. The trouble for the factories, though, is that they cannot statistically control for the numerous variables that render the metric calculations meaningless. As courts have observed, the factory methodology may be “easy” for franchisors to calculate by use of simple arithmetic. Among other things, these variables include unique dealership locations, areas of responsibility, demographics, etc. These metrics, however, fail to account for a host of unascertainable variables, the lack of which makes problematic any determination of so-called “expected” retail sales numbers. Occasionally, a low sales performance score might trigger a termination threat or notice. They may determine eligibility levels for bonuses or incentive payments, and they can be benchmarks for approvals of dealership acquisitions or buy-sells. Yet the importance of such assessments to dealers cannot be understated. By citing numbers under a guise of science, they mask the reality that such metrics lack a true factual and statistical basis. The minimum passing grade is often “average” per factory calculations, or close to it. For many years, America’s auto manufacturers/franchisors have deployed what they describe as “performance metrics” to assess how well their franchised dealerships measure up against minimum standards in retail sales of new vehicles. ![]() Two recent decisions in New York and Ohio, respectively, should – but likely will not – motivate auto manufacturers to abandon their reliance upon provably undependable “metrics” to evaluate dealers’ retail sales performance.
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