An automaker getting out of its franchise agreement with a dealer is rare, but it happens. Usually the circumstances surrounding the termination of the agreement are dicey; from my time in the business I’ve heard some pretty wild stories about dealer franchises ending, and none of them were good. Some dealers just go broke and want out, while others can be as sketchy as they are with their own customers by doing something like cooking the sales books and not reporting it to the automaker, which then finds out and cuts the dealer off.
In rare instances, some dealers are just simply horrible at selling cars, and they can be so bad at it that the automaker will be the one to break things off. That’s exactly what’s happening with Prestige Imports of Pleasantville, New York. Automotive News reports that the dealer is currently being sued by Volkswagen because it never met the automaker’s sales goals, and now VW wants out. The automaker filed a suit on February 18th in the U.S. District Court for the Southern District of New York.
The dealer hasn’t met sales goals in over a decade
According to Auto News, Prestige originally entered into a franchise agreement with VW way back in 1998. The agreement came with certain provisions that Prestige had to meet, mainly abiding by VW’s operating standards. Those standards included sales goals. Things seemed as if they were fine until late 2010, which is when Auto News says VW sent Prestige a deficiency letter — basically, VW was letting Prestige know that it wasn’t holding up its end of the bargain when it came to the franchise agreement. A more formal notice of default came in August 2011.
Volkswagen wasn’t so quick to end things, though. According to the suit, the automaker gave Prestige more than enough chances to turn things around, even working with the dealer to outline or try to identify just what the problem was. Over a 17-month period, VW sent out representatives to Prestige to try and right the ship. Nothing helped. “Despite VWoA’s sustained efforts over many years, Prestige continued to fail to achieve a satisfactory level of sales performance and has remained among the worst-performing dealers in New York State and in the region,” the complaint reads.
Just how bad was Prestige at selling VWs? So bad that data from VW showed that customers in the area were buying their cars at other VW dealers. The complaint says “Prestige is failing to effectively attract and retain customers, follow up on sales leads and secure sales from the customers it does interact with.” Despite this, VW still gave the dealer chances to turn things around. In May of 2023, another default letter came with a deadline to fix things of April 1, 2024; that date was later extended to September 2024. That last extension turned out to be the final straw, with the suit saying VW is “justifiably at an end” with Prestige’s sales performance. It doesn’t seem as if Prestige was actually trying to sell anything either, according to the suit. From Auto News:
“Prestige failed to implement VWoA’s suggestions to create an effective service-to-sales process, an improved online presence and a concerted digital marketing campaign,” according to the complaint. “Indeed, Prestige reported zero dollars spent on advertising initiatives for new Volkswagen vehicle sales in 2024.”
Now Volkswagen wants out. The automaker is seeing a judgement that “Prestige Imports materially breached its obligations under the dealer agreement, declares the breach is ground for termination and declares VW has due cause to terminate the agreement.” Auto News reached out to Prestige for comment but the dealer never returned its calls. Neither did VW’s lawyer, Owen Smith. A spokesperson for the automaker told Auto News that they can’t comment on ongoing litigation.
