Volkswagen of America (VWoA) began legal proceedings to terminate its franchise agreement with Prestige Imports, a dealership located in Pleasantville, New York, due to prolonged underperformance in sales. While this might seem a little harsh, the lawsuit, filed in the U.S. District Court for the Southern District of New York, alleges that Prestige has consistently failed to meet its sales targets, achieving just over half of the expected sales volume since 2011.
VW Is Chopping A Dealer
Prestige Imports became a Volkswagen franchisee in 1998, committing to sticking to the automaker’s operating standards and annual sales expectations. However, as early as October 2010, VWoA identified deficiencies in Prestige’s sales performance and issued a formal notice of default in August 2011. Despite multiple extensions and ongoing support from VWoA, including guidance on improving sales processes and enhancing digital marketing efforts, Prestige’s sales metrics remained woefully under quota.
In mid-2023, VWoA turned up the volume on its concerns by sending another notice of default, setting a deadline of April 1, 2024, for Prestige to rectify its sales performance issues. This deadline was later extended to September 30, 2024. Despite these measures, Prestige reportedly did not implement VWoA’s suggestions, such as creating an effective service-to-sales process and improving its online presence. Notably, Prestige allegedly reported zero expenditure on advertising initiatives for new Volkswagen vehicles in 2024.
VWs In The Area Were Selling But Not From Prestige
The persistent lack of performance has not only impacted Prestige’s standing but has also affected VWoA’s market presence in the region. Sales data from the area indicates that customers in Prestige’s vicinity have been purchasing vehicles from other Volkswagen dealerships, suggesting that Prestige has struggled to attract and retain its target customer base.
VWoA’s said enough is enough and recently began its current legal action to terminate the dealership agreement. The automaker asserts that Prestige’s longstanding poor sales performance constitutes a material breach of its contractual obligations and provides due cause for termination under applicable New York statutes governing motor vehicle dealership franchises. Despite that legal mouthful, it’s clear to see that VWoA is fed up with the under-performing dealer and is finally playing hardball.
As of now, both VWoA and Prestige Imports have refrained from public comment on the pending litigation. The outcome of this lawsuit could set a precedent for how automakers address underperforming dealerships and enforce compliance with franchise agreements.
Source: CarScoop, AutoNews
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