Article

David V. Goliath When Andy Chevrolet Fought General Motors

May 2007, Auto Dealer Today - WebXclusive

by Jennifer Murphy Bloodworth - Also by this author

There wasn’t a long line waiting to fill David’s shoes when he battled Goliath.  Likewise, not many would choose to fill the shoes if Goliath was General Motors (GM).  However in 1999, when Mark Sims purchased Joe O’Brien Chevrolet in Lyndhurst, Ohio, and renamed it Andy Chevrolet; he was about fight a similar battle.

Since a Chevrolet franchise was included in the purchase agreement, GM had to approve the buy-sell agreement between Sims and Dealer John O’Brien.  Before GM would approve it, Sims had to draft a proposal that included pro forma sales projections of new vehicle sales.  His sales projection for one year was just above 900 new vehicles. 

Granville Cole, then zone manager for Chevrolet in the Cleveland area, was required to review Sims’ qualifications and application package, which included the sales proposal.  Cole recommended that GM should reject the buy-sell agreement because the sales proposal was too low. 

Ignoring Cole’s recommendation, GM approved the agreement without disclosing to Sims that his sales projections were far too low.  Cole also never disclosed to Sims that his sales projections were too low.  So, as far as Sims knew, he was expected to sell 900 new Chevrolet vehicles – not the 1,700 he was contractually responsible for.

Another thing Sims didn’t know was the location he’d purchased had a history.  GM had tried to terminate O’Brien’s franchise in the early 90s because his dealership wasn’t meeting contractual agreements in sales, but O’Brien protested to the Ohio Motor Vehicle Dealers Board and won.  Later, GM was encouraging O’Brien to sell the franchise, but he failed to mention any of this information to Sims.

After GM failed to terminate O’Brien’s franchise agreement, the giant tried again with Andy Chevrolet.  On Oct. 26, 2004, GM served Sims with a “Notice of Intent to Terminate Andy Chevrolet’s Dealers Sales and Service Agreement” due to unsatisfactory sales performance. 

According to Sims, he tried arbitration, but GM “stonewalled” him.  So, he risked roughly $1 million for the fight to keep his franchise.  “You’ve got to have the money and the guts,” he added. 

A few months later, Sims protested to the Ohio Motor Vehicle Dealers Board.  If GM approved his proposed sales figures, even though they were lower than the contractual agreement, he felt GM should not be allowed to terminate his franchise.  His attorneys successfully used that when arguing his case.

In Ohio, the board considers numerous factors when hearing a dealer’s protest.  Some particularly relevant to this case include:

  • Whether Sims had knowledge of the facts and circumstances upon which termination is based. 
  • The degree and importance of his failure to comply with the franchise terms and the fairness of the terms
  • Whether Andy Chevrolet meets consumers’ needs
  • The permanency of Sims’ investment

The board also considered how Andy Chevrolet performed in comparison to other Chevrolet dealers in the Cleveland area.  In 2003 and 2004, Andy Chevrolet was the No. 7 dealer on a list of 14.  Since there were other Chevrolet dealers selling far fewer new vehicles, GM’s actions against Sims appeared discriminatory.  The sales numbers for the 14 stores and the fact that Andy Chevrolet was an average dealer in the Cleveland area was a strong point in Sims’ case. 

Another factor taken into account by the board was the location of the franchise.  Lyndhurst, Ohio, is largely comprised of people with higher-than-average incomes and college educations.  In 2000, the median family income in Lyndhurst was just under $65,000.  Jack Matthews, an expert testifying on Sims’ behalf, said, “Generally speaking, my research has found that as you go to higher and higher income levels, higher and higher levels of education, Toyota and Honda do well in terms of market share… Chevrolet does not.” 

Matthews said Chevrolet does well in other regions of the Cleveland metro area, but Sims’ store is not located in such a market.  Matthews has a doctorate in quantitative analysis, knows the Cleveland metro area well and has been considered an expert in more than a dozen cases in that area alone.  His contribution to this case helped the board decide Andy Chevrolet’s sales were satisfactory when considering location and demographics. 

Almost two years after the notice was delivered to Sims, the board decided in favor of Andy Chevrolet and the proverbial David is still selling new Chevrolet cars and trucks.  GM has since appealed and lost.  One piece of advice Sims provided to dealers was to know your state laws better than your adversary.  If a giant like GM comes after your franchise, know what the board in your state will focus on and zero-in on how to prove you deserve to stay in business. 

All things considered, Sims has taken everything in stride and even offered some advice both dealers and manufacturers should heed.  “No matter what, you want to take great care of the customers and great care of the employees.”  Luckily, he’s still able to do just that, and he’s even considering renovations on Andy Chevrolet once GM reimburses him for his legal fees.

Vol 4, Issue 3

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