WASHINGTON: What does an automaker do with a dealer who has badly underperformed on sales targets?
The right thing to do is to warn the dealer to buck up, lend a helping hand, be patient and hoped the situation will improve.
That's the stance adopted by Volkswagen of America with a dealer until it decided: Enough is enough!
It has started legal proceedings against Prestige Imports of Pleasantville, New York, marking a dramatic end to one of its longstanding dealership relationships.
The suit, lodged in the US District Court for the Southern District of New York on Feb 18, stems from over a decade of poor performance by the dealer, which has consistently failed to meet the stringent sales targets set in its franchise agreement dating back to 1998.
Over the years, Prestige Imports repeatedly failed to meet Volkswagen’s operational standards. Concerns began in late 2010 when the automaker first flagged the dealer’s subpar sales performance, which led to a formal Notice of Default in August 2011.
Prestige Imports is facing a lawsuit from Volkswagen. — Image from Google Maps
Despite efforts to turn the situation around, including 17 months of support with Volkswagen representatives visiting to address the issues, the dealer's performance was said to remain dismal.
Volkswagen data indicated that local customers were increasingly turning to other dealerships, resulting in loss of potential sales.
The suit criticises the dealer for its failure to carry out strategies recommended by Volkswagen, including the development of a strong service-to-sales process, enhancement of its online presence, and execution of a digital marketing campaign.
The dealer also did not spend on advertising new Volkswagen vehicles for 2024.
Additional reports indicate that Prestige’s continual underperformance had cost Volkswagen an estimated 1,500 potential new vehicle sales since 2011.
Volkswagen’s legal complaint asserts that Prestige Imports has materially breached its contractual obligations, thereby justifying the termination of the dealership agreement.
Efforts by both Volkswagen and the media to secure comment from Prestige Imports have been unsuccessful, with the dealership remaining silent and Volkswagen’s legal representative declining to comment further.
