03-004083 General Motors Corporation And Buddy Foster Chevrolet, Inc. vs. Roger Whitley Chevrolet, Inc. Status: Closed Recommended Order on Wednesday, February 16, 2005.

Summary: Petitioners failed to show that Respondents were not providing adequate representation. Recommend that the application to relocate dealership be denied.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

GENERAL MOTORS CORPORATION AND )

BUDDY FOSTER CHEVROLET, INC., )

)

Petitioners, )

)

vs. ) Case Nos. 03 - 4083

) 03 - 4084

ROGER WHITLEY CHEVROLET, INC., )

d/b/a UNIVERSITY CHEVROLET 1/ )

AND GORDON STEWART CHEVROLET, )

INC., )

)

Respondents. )

_ )

RECOMMENDED ORDER

Pursuant to notice, Administrative Law Judge Don W. Davis

of the Division of Administrative Hearings (DOAH) conducted a

final h earing in t his case on October 25 - 29, in Tallahassee,

Florida.

APPEARANCES

For Petitioner General Motors Corporation:

Fred J. Lotterhos, Esquire

Holland and Knight, LLP

50 North Laura Street, Suite 3900

Jacksonville, Florida 32202

For Petitioner Buddy Foster Chevrolet, Inc :

Dean Bunch, Esquire

Sutherland, Asbill and Brennan, LLP

2282 Killearn Center Boulevard

Tallahassee, Florida 32309 - 3576

For Respondent Roger Whitley Chevrolet, Inc.:

Edwa rd Quinton, Esquire

Adams, Quinton and Paretti, P.A.

80 Southwest Eight Street, Suite 2150

Miami, Florida 33130

For Respondent Gordon Stewart Chevrolet, Inc.:

John W. Forehand, Esquire

Lewis, Longman and Walker, P.A.

125 South Gadsden Street, Suite 300

Tallahassee, Florida 32301 - 1525

STATEMENT OF THE ISSUE

The issue in this case is whether Section 320.642(2)(a),

Florida Statutes, permits the relocation by Petitioner General

Motors Corporation (GM) of the dealership of Petitioner Buddy

Foster Chevrolet, Inc. (Foster), from its present location to a

new proposed location for the sale of certain line - makes of

Chevrolet vehicles. In order to make that determination, the

question arises as to whether Respondent Roger Whitley

Chevrolet, Inc. (University), and Respondent Gordon Stewart

Chevrolet, Inc. (Stewart), are already providing adequate

representation for sale of the subject Chevrolet vehicles in the

community or territory of the proposed Foster relocation point.

PRELIMINARY STATEMENT

Respondents Univer sity and Stewart both timely protested

proposed relocation of the Foster dealership to the state agency

charged by statute with regulation of such matters, the Florida

Department of Highway Safety and Motor Vehicles (Department).

By letters dated October 30 and November 3, 2004, the Department

forwarded the protests of University and Stewart, respectively,

to DOAH with the specific directive that an administrative law

judge determine the propriety of the protest issues within the

purview of Section 320.642 , Florida Statutes.

The final hearing was originally set for June 14 - 18, 2004.

On May 5, 2004, the parties jointly moved for a continuance of

the final hearing. The final hearing was continued until

July 19 - 23, 2004. On July 2, 2004, Respondents f iled a second

motion to continue the final hearing. After consideration, that

motion was granted and the case was continued until October 25 -

29, 2004.

Prior to commencement of the final hearing, University

purchased the stock of Roger Whitley Chevr olet, Inc., and

changed the dealership name to University Chevrolet.

The parties filed an amended pre - hearing stipulation on

October 22, 2004.

At the final hearing, GM presented the testimony of the

following witnesses: Sharif Farhat, Director of Network

Analysis for North America for Urban Science Applications, Inc.

(who was accepted as an expert in dealer network analysis);

James P. Gurley, Zone Manager for GM’s Tampa Zone; and Victor

David Nelawake, Certified Public Accountant (who presented

opinion te stimony in the area of dealership accounting).

Foster presented the testimony of Harry M. Foster,

dealership owner; and Sharif Farhat, Director of Network

Analysis for North America for Urban Science Applications, Inc.

Stewart presented the tes timony of Gordon L. Stewart,

President of Stewart Management Group; Arthur J. Smith, Vice -

President and General Manager of Stewart; and Ernest Harry

Manuel, Jr., Ph.D., President of The Fontana Group, Inc. (who

was accepted as an expert in economics, stati stics, and local

retail automobile industry analysis). University also adopted

the testimony of Manuel.

Also submitted and received into evidence were the

transcripts and exhibits of the following depositions: Arthur

J. Smith, Vice - President and Gen eral Manager of Stewart; Gordon

Stewart, President of Stewart Management Group; Marvin E.

Beaupre, Dealer Network Development Regional Manager for the

Southeast Region for GM; William E.L. Powell, Vice - President of

Industry Dealer Affairs for GM; Douglas J . Chandler, Assistant

Marketing Manager for GM; Cynthia E. Ritchie, Area Manager for

Dealer Network Development for Central and South Florida, Puerto

Rico, and the U.S. Virgin Islands for GM; Kevin Scott Brodsky,

General Manager and Partner of University; Michael Rodger

Whitley, former Dealer - Operator, General Manager, and President

of Roger Whitley Chevrolet, Inc.; Vernon Gale Buchanan, Owner of

University; and Dennis Bruce Slater, Corporate Controller for

Buchanan Automotive Group and University.

Petitioners’ exhibits number 1, 1 - A, 4 through 12, 17, 19,

20, 21, 30, 33, 40, 42, and 44 through 49 were admitted into

evidence. Pages A - 87 and A - 88 of Petitioners’ exhibit 1 and

Petitioners’ exhibit 46 were admitted over objection. Pages R -

34 and R - 48 of Petitioners’ exhibit 49 were not admitted into

evidence, but were proffered, along with related testimony, for

the record.

Respondents’ exhibits 1 through 5, 7 through 9, 18, 21

through 23, 25 through 30, and 32 through 38 were admitted into

evidence. Respondents’ exhibit 28 was admitted over objection.

Respondents’ exhibits 6, 31, and Tabs 32 and 44 of exhibit 27

were offered but not admitted into evidence. Foster exhibits 1

through 11 were admitted into evidence.

By stipulation of the parties, post - hearing submittals

were due within 30 days of the filing of the completed

transcript. The transcript was filed December 13, 2004. On

January 5, 2005, University filed a Motion for Extension of

Time to file post - hearing submissions. By Order, the deadli ne

for filing post - hearing submissions was extended until

January 19, 2004. All parties timely filed Proposed

Recommended Orders which have been reviewed and utilized in

part in the preparation of this Recommended Order.

Unless otherwise indicated, cit ations to the Florida

Statutes refer to the 2004 Florida Statutes.

FINDINGS OF FACT

Parties

1. GM is a “licensee” and “manufacturer” as defined by

Sections 320.60(8) and (9), Florida Statutes.

2. Foster, Stewart, and University are “motor vehic le

dealers” as defined by Section 320.60(11)(a)(1), Florida

Statutes.

Notice and Standing

3. On October 3, 2003, notice of GM’s intent to permit the

relocation of Foster (the Proposed Relocation) from its current

location at 36822 Highway 54 West, Z ephyrhills, Florida

(Existing Location) to a proposed location at Interstate 75 and

State Road 56 in the Wesley Chapel Area (Relocation Site) was

published in the Florida Administrative Weekly , Volume 29,

Number 40, page 3964. Both the Existing Location a nd the

Relocation Site are in Pasco County, Florida.

4. Stewart is an existing franchised Chevrolet dealer who

timely protested the proposed relocation of Foster. Stewart has

standing to maintain that protest.

5. University is an existing franchised Chevrolet dealer.

After Roger Whitely Chevrolet, Inc., timely protested the

proposed relocation of Foster, University purchased the stock of

Roger Whitley Chevrolet, Inc., and changed the name of the

dealership to University Chevrolet. Univer sity acquired the

rights of Roger Whitley Chevrolet, Inc., to protest the proposed

relocation, and has standing to maintain that protest.

The Community or Territory and Recent Modifications to the

Chevrolet Dealer Network

6. The Community or Territo ry (Comm/Terr) relevant to this

proceeding is the area defined by GM as the Tampa Multiple

Dealer Area (Tampa MDA) plus the Wesley Chapel and Plant City

markets. 2/

7. There are currently four Chevrolet dealers in the Tampa

MDA: Stewart, University, Ferman Chevrolet, and Autoway

Chevrolet. There are currently five Chevrolet dealers in the

Comm/Terr, the four Tampa MDA dealers plus Bill Heard Chevrolet

(Bill Heard) in Plant City.

8. Foster is not currently in the Tampa MDA or the

Comm/Terr. T he area currently assigned to Foster as its Area of

Primary Responsibility pursuant to its GM franchise agreement is

referred to as a Single Dealer Area (SDA), meaning that Foster

is the only dealer assigned to the APR.

9. The Proposed Relocation would add Foster as a fifth

Chevrolet dealer in the Tampa MDA and a sixth Chevrolet dealer

in the Comm/Terr. The Comm/Terr currently contains four full

line Ford dealerships and one light - truck only Ford dealership.

All other line - makes currently have f our or fewer dealers in the

Comm/Terr.

10. In 2004 there were two significant changes in the

Chevrolet dealer network within the Comm/Terr. In May of 2004,

Bill Heard relocated to a new facility adjacent to Interstate 4,

placing Bill Heard in a be tter position to sell into the Tampa

MDA along with the expectation of both a significant increase in

Bill Heard’s new vehicle sales and Chevrolet’s level of

performance in the Comm/Terr. 3/

11. In June of 2004 University purchased Roger Whitley

Che vrolet, changed managers, expanded business hours, and

tripled advertising expenditures. The recent ownership change

is expected to result in increased new vehicle sales from the

dealership and an increased level of Chevrolet performance in

the Comm/Terr. 4/

Proposed Relocation

12. In the Fall of 2002, the owner of Foster, Harry M.

Foster, requested that GM grant him an additional Chevrolet

location in the Wesley Chapel, Florida, area. Subsequently, GM

conducted a market study to determine whether it was appropriate

to add a Chevrolet location in Wesley Chapel. Marvin Beaupre

was assigned the task of analyzing the Wesley Chapel market and

determining whether an additional Chevrolet location was

justified. Beaupre’s subsequent market study revealed that

Chevrolet had historically received an adequate level of

representation from existing dealers in the area currently

assigned to Foster in its GM franchise agreement (the

dealership’s APR). Beaupre concluded that although there

appeared to be a defic iency in Chevrolet performance in the

Tampa MDA, the deficiency was not significant enough to justify

the addition of a new dealership in Wesley Chapel.

13. When Foster learned of GM’s decision not to add a new

Chevrolet dealership in Wesley Chapel , he requested the

opportunity to relocate his existing dealership in Zephyrhills,

Florida, to the Wesley Chapel area. GM agreed to allow the

Proposed Relocation on the basis of growth in the Wesley Chapel

and New Tampa area.

14. Currently, Foster is located in approximately the

center of its APR/SDA. The Proposed Relocation would place

Foster in the furthest southwestern portion of its APR/SDA, with

a location immediately adjacent to the AGSSAs assigned to

Stewart and University.

15. As a result of the Proposed Relocation and the

addition of Foster to the Tampa MDA, Stewart and University

would be assigned new AGSSAs considerably smaller (in both

geography and population) than their existing AGSSAs.

16. The new AGSSA that would be assigned to Foster as a

result of the Proposed Relocation would be larger in terms of

population and sale opportunity than its existing APR/SDA.

Those portions of the current Foster APR/SDA which would not be

included in the AGSSA assigned to Foster after the relocation

would be reassigned to the dealership immediately to the north

of Foster, Dade City Chevrolet, increasing the geography,

population, and sale opportunity of the Dade City Chevrolet

APR/SDA. Harry M. Foster owns both Foster and Dade City

Ch evrolet.

Is Current Representation Adequate

17. As a result of the Proposed Relocation, certain

consumers would suffer a negative impact, although some

consumers would have more convenient access to a Chevrolet

dealer. Consumers in the new AGSSA t hat would be assigned to

Foster would experience an average decrease in distance to a

Chevrolet dealer of 3.7 straight - line miles. 5/ Contrarily,

consumers in the existing APR/SDA assigned to Foster would

experience an average increase in distance to a Che vrolet dealer

of 4.0 driving miles, and those same consumers would experience

an average increase in distance to Foster of 6.0 driving miles.

18. Throughout the Comm/Terr, the Proposed Relocation

would only result in an average decrease in the dist ance from a

consumer to a Chevrolet dealer of .4 straight - line miles. Other

than convenience, there is a second factor arising from the

Proposed Relocation that could impact consumers. There will be

a greater number of consumers located between Foster an d Dade

City Chevrolet. Consumers previously located between Foster and

Stewart or University (with easier access to cross - shop between

Foster and Stewart or University) would be located between

Foster and Dade City Chevrolet after the relocation with

conv enience lying in the cross - shop between Foster and Dade City

Chevrolet. Since both Foster and Dade City Chevrolet are owned

and operated by the same individual, it is possible that the

Proposed Relocation could result in a decrease of competition

among Ch evrolet dealers as it relates to some consumers, a

negative impact on those consumers and on the public interest.

19. In terms of competition between two Chevrolet dealers,

convenience to the customer is the most critical factor. The

Proposed Reloc ation would move Foster significantly closer to

both Stewart and University, and to consumers served by those

dealerships. In terms of straight - line distance, the Proposed

Relocation would be a move of 10.7 miles. Currently, Foster is

20 straight - line mi les from Stewart and 19.6 straight - line miles

from University. After the relocation, Foster would be 9.7

straight - line miles from Gordon Stewart and 10.8 straight - line

miles from its old location. In terms of driving time, Foster

is currently 37.7 minute s from Stewart and 33.5 minutes from

University. After the relocation, Foster would be 18.4 minutes

from Stewart and 14.1 minutes from University.

20. As a result of the Proposed Relocation, Foster would

be significantly closer to many consumers n ow closer to either

Stewart or University. Additionally, Foster would be

significantly closer (both in straight - line distance and drive

time) to a large percentage of the existing new vehicle, used

vehicle, and service customers of both Stewart and Univer sity.

In 2002 and 2003, Stewart and University made 40% of the sales

registered in the area to which Foster would gain a convenience

advantage as a result of the Proposed Relocation.

21. There exists a statistical correlation between the

size of a dealer’s AGSSA and the number of new vehicle sales

made by the dealer. As the size of a dealer’s AGSSA decreases

the number of sales made by the dealer will typically decrease.

22. In this instance, based on the relative change that

would result i n the increased convenience of Foster to those

consumers who currently find it more convenient to shop at

Stewart or University and the decrease in the area in which

Stewart or University would have a competitive advantage based

on convenience (i.e. a decr ease in each dealer’s AGSSA), a

reasonable estimate of impact to Stewart from the Proposed

Relocation is a loss of approximately 17% of new vehicle sales

and 15% of used vehicle sales and service business. 6/ A

reasonable estimate of impact to University from the Proposed

Relocation is a loss of approximately 16% of new vehicle sales

and 15% of used vehicle sales and service business. 7 /

23. Based on Stewart’s performance in 2003, the financial

losses incurred by Stewart as a result of the Proposed

Relocation would be in the range of $600,000 per year. Based on

the pro forma financial statement submitted to GM by University

at the time of its purchase of Roger Whitley Chevrolet, Inc.,

the financial losses incurred by University as a result of the

Pr oposed Relocation would be in the range of $750,000 per year. 8 /

24. The Proposed Relocation could have a significant

short - term negative impact on existing dealers, including a

significant financial impact on Stewart and University. GM’s

expert cl assified short - term as up to a year, and indicated that

after that period the market could adjust and existing dealers

re - establish their pre - relocation level of performance.

However, that dealership growth would, at least in part, be a

result of general growth in the market and does not indicate

that existing dealers will regain their pre - relocation level of

performance in an economic sense (because they have been denied

the opportunity to capture the growth that would have resulted

from general market ex pansion).

25. Significantly, the financial loss expected for both

Stewart and University could, because of the “turn and earn”

system employed by GM to determine vehicle allocation, result in

a circumstance known in the automobile industry as a “de ath

spiral,” where the dealer cannot earn vehicles because of a slow

turn rate and cannot turn vehicles because it has not earned

them. As the name implies, the “death spiral” results in a

dealer either going out of business or having to sell the

dealersh ip.

Impact on GM

26. GM would not significantly benefit from the Proposed

Relocation. Although it is clear that there has been recent

growth in the Wesley Chapel area and that other manufacturers

have, or plan to, establish locations in that genera l area, the

evidence establishes that existing Chevrolet dealers are

actively pursuing sales and service business in the Wesley

Chapel area (including producing a significant amount of

advertising for Chevrolet products) and, as noted above, that

Chevrolet currently has an adequate level of convenience to

customers in Wesley Chapel. The evidence does not establish

that GM will enjoy increased sales or overall increased customer

convenience as a result of the Proposed Relocation. 9/ Existing

Chevrolet deale rs have historically provided an adequate level

of customer satisfaction performance and have adequate

facilities to serve the Comm/Terr. 10/

27. Short - term competition between Chevrolet dealers for

customers in the Comm/Terr could increase after th e Proposed

Relocation. The likelihood, however, that competing Chevrolet

dealers will not be as successful as they have been in the past

in making sales into the Wesley Chapel area if Foster is

relocated, makes it highly probable that competition among

Ch evrolet dealers for customers in that area will actually

decrease in the long - term. Existing dealers will focus their

marketing efforts on areas other than Wesley Chapel.

Investment of Existing Dealers

28. The owners of Stewart and University have invested

significant dollar amounts to perform their obligations under

their respective GM franchise agreements. The owners of Stewart

invested approximately $9,000,000 in purchasing land and

constructing facilities for the dealership. The owners of

Uni versity recently purchased the stock of Roger Whitley

Chevrolet, Inc., and have an investment of $12,000,000 to

$14,000,000 in the dealership. The Proposed Relocation would

put the investment of the owners of Stewart and University at

significant risk.

M arket Penetration

29. A line - make’s market penetration is measured by

dividing the number of that line - make’s new vehicles registered

in a particular area by the total number of competitive new

vehicles registered by all line - makes in the same area.

30. In determining whether Chevrolet is currently

achieving a reasonably expected level of market penetration in

the Comm/Terr a reasonable standard or benchmark must first be

established against which Chevrolet’s performance is compared

which is n either too high nor too low.

31. Chevrolet’s national average market penetration as a

standard against which to judge Chevrolet’s current performance

in the Comm/Terr is not reasonable. 11/ There are several reasons

why use of the national average is not appropriate to test

Chevrolet’s current market penetration in the Comm/Terr. First,

the national average represents a very large area (the nation),

which is demographically very diverse in terms of culture,

economy, politics, climate, terrain, etc. The Comm/Terr, or for

that matter the State of Florida as a whole, does not share that

same level of diversity. 12/

32. Second, most manufacturers have rejected national

average as a reasonable standard for evaluating dealer

performance. Indeed, GM uses state average when evaluating the

performance of its Chevrolet dealers. 13/ The deposition

testimony of William E.L. Powell, the former Zone Manager

responsible for approving network changes such the Proposed

Relocation, establishes that, although national average is

considered, state average is the focus of GM’s analysis of

whether a particular line - make as a whole is being under

represented in a market.

33. Third, the national average includes areas that are

heavily influenced by special p urchasing plans provided to GM

employees, those employees’ family members, and employees of GM

suppliers. Those plans provide participants an incentive to

purchase GM products by establishing a standard price (only

slightly above dealer cost) at which the participant may

purchase a vehicle from any dealer in the country. It is

telling that those states in which Chevrolet’s average

penetration meets or exceeds what is expected based on national

average are almost exclusively found in the “heartland” of

Ame rica. Those states, which are the traditional home to

manufacturing in this country, are also the states in which

Chevrolet’s penetration performance is most likely to be

positively influenced by GM’s employee and supplier purchase

plans.

34. Use by GM of the national average as a standard to

judge Chevrolet’s performance in the Comm/Terr overlooks the

fact that the only Florida MDA in which Chevrolet’s market

penetration meets or exceeds what is expected based on national

average is Pensacola, Flo rida. In all of the 10 other Florida

MDAs, Chevrolet falls short of the expected penetration based on

national average. The markets in Florida where Chevrolet does

achieve the expected level of market penetration based on

national average are significant ly different from the Comm/Terr

which is the subject of this proceeding. They tend to be more

rural in location than this Comm/Terr and significantly smaller

in terms of automobile retail activity. 14/ In these more rural

areas, the market penetration of what are traditionally

considered domestic brands, such as Chevrolet, tends to be

higher than in urban areas because throughout the rural areas

there is a lack of representation of what are traditionally

considered import brands.

35. The appropriat e standard against which to measure

Chevrolet’s performance in the Comm/Terr, when judging the

performance of a line - make in a Florida market, is to use that

line - make’s performance in the State of Florida as a whole as

the standard. Although there exist differences in the

demographic, geographic, economic, and political make - up of the

various communities throughout the State, Florida as a whole is

much more representative of the Comm/Terr than is the Nation as

a whole. 15/

36. Chevrolet’s performance in the Comm/Terr has

historically been either above or essentially at the expected

level of penetration based on Florida average. In 2001,

Chevrolet performed at 102.8% of the expected level. In 2002,

Chevrolet performed at 99.6% of the expected level, and, in

2003, at 99% of the expected level. In those years where

Chevrolet was below the expected level, the shortfall was

insignificant (32 out of 7,292 expected units in 2002, and 80

out of 7,517 units in 2003). 16/

37. More importantly, the stat istics presented regarding

Chevrolet’s performance during previous years do not reflect the

performance of the currently existing dealer network. 17 / Rather,

if a reasonable level of increased performance is attributed to

Bill Heard as a result of that dea lership’s relocation in May of

2004 (note 3 supra ), it is unquestionable that Chevrolet does

now achieve its expected level of penetration in the Comm/Terr

based on Florida average.

38. As for the AGSSA that would be assigned to Foster if

it reloca ted, Chevrolet’s level of penetration in that market

has historically been slightly under its expected penetration

based on Florida average. In 2001, Chevrolet performed at 94.3%

of the expected level, in 2002 Chevrolet performed at 91.1% of

the expected level, and in 2003 Chevrolet performed at 91.9% of

the expected level. Again, the shortfall in terms of number of

retail units sold was not substantial (50 out of 883 expected in

2001; 82 out of 916 expected in 2002; and 83 out of 1,018

expected in 2003).

39. As with the Comm/Terr, if the impact of changes in the

dealer network, which occurred in 2004, are considered (notes 3

& 4 supra ), the shortfall in performance within the relocated

Foster AGSSA disappears or becomes statistically insignificant .

Thus, under the currently existing dealer network, Chevrolet’s

present penetration in the relocated Foster AGSSA does not fall

significantly below the Florida average. The minimal shortfall

that may exist in the relocated Foster AGSSA relates to the fa ct

that Chevrolet products do not perform as well in higher income

markets as in markets with more modest incomes. This phenomenon

is a factor beyond the control of the dealers within the

Comm/Terr. Because Wesley Chapel is a higher income area,

Chevrole t cannot be expected to perform as well in that market

as in the Comm/Terr as a whole.

GM Denial Of Growth Opportunity to Existing Dealers

40. The owners of Stewart established the dealership in

1991. The dealership was established as an addition al

dealership location granted by GM, and GM established the exact

location of the dealership. Prior to agreeing to open the

dealership, Gordon Stewart, the principal owner, expressed to GM

his concern that the dealership was to be located in a sparsely

p opulated area north of Tampa. In response to Mr. Stewart’s

concerns, GM reassured him that it had conducted a market study

and determined that the location they had chosen was the optimal

location for the dealership based on future market growth GM

reaso nably expected to occur north of Tampa.

41. Based on GM’s assurances, Mr. Stewart and his partner,

Arthur Smith, made considerable investment in constructing and

equipping the dealership, with what they believed to be a

reasonable expectation of se lling approximately 2,500 new

vehicles each year. The growth, however, that GM expected north

of Tampa did not materialize, except for in the Wesley Chapel

area. Nor has Stewart reached its projection of 2,500 new units

sold per year, achieving instead o nly half as many sales.

Because of the number of competitive dealers located south of

Stewart, the dealership has had to rely on growth in the Wesley

Chapel area as the basis for a significant portion of its

profits and for future growth potential of the dealership,

particularly as areas immediately surrounding the dealership

have begun to decline.

42. As discussed above, the Proposed Relocation would have

a significant negative financial impact on Stewart and

University. Additionally, the Propose d Relocation would deny

Stewart the opportunity to serve the North Tampa market, which

was the original purpose for establishing the dealership.

43. GM’s approval of the Proposed Relocation would deny

Stewart the reasonable opportunity for expansio n and growth of

its business that GM indicated would be available when

Mr. Stewart and Mr. Smith agreed to invest in the dealership.

Coercion of Existing Dealers

44. There have been no efforts by GM to coerce existing

dealers to consent to the prop osed relocation.

Distance and Accessibility

45. Distance and travel time, between Foster and Stewart

and Foster and University would be reduced by half if the

Proposed Relocation were to occur. There, however, is no

indication that consumers in the Comm/Terr do not already have

easy access to existing Chevrolet dealers in the Comm/Terr. At

present, Chevrolet currently enjoys the second lowest average

distance to consumer measurement of all the line - makes

represented in the Comm/Terr. The Proposed Relocation would not

add any significant improvement to the ability of customers in

the Comm/Terr to access a Chevrolet dealer.

Benefits to Consumers Obtained by Geographic or Demographic

Changes

46. Rather than providing benefits to consumers tha t are

not likely to be obtained by geographic or demographic changes

in the Comm/Terr, the Proposed Relocation may result in a

negative impact to consumers.

Protesting Dealers And Dealer Agreements Compliance

47. Stewart and University are in comp liance with the

terms of their dealer agreements.

Adequacy of Interbrand and Intrabrand Competition and Consumer

Care

48. The high level of market penetration being achieved by

Chevrolet in the Comm/Terr and the increase in that market

penetration that will occur as a result of the recent dealer

network changes, indicates that there is adequate intrabrand and

interbrand competition in the Comm/Terr. (notes 3 & 4 supra. )

As previously noted, Chevrolet’s level of convenient consumer

care is among t he best in the Comm/Terr.

49. As for existing dealership facilities, the existing

Chevrolet dealers in the Comm/Terr have facilities which are

adequate to service the market.

Relocation Justification Based on Economic and Marketing

Conditions

50. There are no economic or marketing conditions to

justify the Proposed Relocation. The recent changes in the

dealer network (the Bill Heard relocation and the change of

ownership at University) have made this even more emphatic.

Volume of Exi sting Dealers Registrations and Service Business

51. The existing Chevrolet dealers are transacting a

significant level of service and sales business in the

Comm/Terr. In terms of retail sales volume, in 2003 Chevrolet

ranked second in passenger ve hicle sales and second in light -

truck sales registered within the Comm/Terr.

CONCLUSIONS OF LAW

52. The Division of Administrative Hearings has

jurisdiction over the parties to, and the subject matter of,

these proceedings. § 120.569, Fla. Stat.

53. Respondents have standing to protest the proposed

relocation.

54. Chapter 320, Florida Statutes, governs this matter.

Section 320.642, Florida Statutes, exists, within that chapter,

for the purpose of protecting existing motor vehicle dea lers from

unnecessary and potentially harmful changes to a manufacturer’s

dealer network in a particular market. Bill Kelley Chevrolet,

Inc. v. Calvin , 322 So. 2d (Fla. 1st DCA 1975).

55. Accordingly, a dealer network change (i.e. the addition

of a new dealership or relocation of an existing dealership)

should be made only if its existing dealers in the market in

question are not adequately representing the manufacturer.

§ 320.642(2)(a)2., Fla. Stat. In making the determination that a

manufacturer is not being adequately represented in a market, it

is not enough to simply conclude that the existing dealers could

do a better job, or that the proposed dealer network change will

improve the manufacturer’s performance in the market. Hess

Marine, Inc. v. Calvin , 296 So. 2d 114, 115 (Fla. 1st DCA 1974).

While, however, one must not forget the famous words of Louise

Heath Leber that “[t] here’s always room for improvement, you

know — it’s the biggest room in the house,” 18/ that sentiment does

not equate to inadequate representation. The real focus of

proceedings brought under Section 320.642 is whether the existing

dealers are doing enough.

56. In making the determination of whether Chevrolet is

being adequately represented in the relevant Comm/Ter r in this

case, Section 320.642 calls for a balancing of factors. In

essence, the decision - maker must balance any deficiency in

Chevrolet’s performance within the Comm/Terr and the degree to

which that deficiency will be addressed by the proposed

relocati on, along with the impact that the relocation will have

upon the other existing dealers and consumers. Petitioner, GM,

bears the burden of establishing that the existing franchised

Chevrolet dealers are not providing adequate representation of

Chevrolet i n the Comm/Terr. § 320.642(2)(a)(2), Fla. Stat.

57. With respect to whether or not a proposal to relocate

an existing dealer may be approved following a protest, Section

320.642(2)(a), Florida Statutes, provides:

(2)(a) An application for a motor vehicle dealer

license in any community or territory shall be denied

when:

1. A timely protest is filed by a presently

existing franchised motor vehicle dealer with

standing to protest as defined in subsection (3);

and

2. The licensee fails to show that the existing

franchised dealer or dealers who register new

motor vehicle retail sales or retail leases of

the same line - make in the community or territory

of the proposed dealership are not providing

adequate representation of such line - make motor

vehicle s in such community or territory. The

burden of proof in establishing inadequate

representation shall be on the licensee.

58. The statute goes on to provide the following salient

criteria in Section 620.642(2)(b)1. - 11., to be utilized in

determinin g whether existing representation is adequate, as

follows:

1. The impact of the establishment of the

proposed or relocated dealer on the

consumers, public interest, existing dealers,

and the licensee; provided, however, that

financial impact may only be c onsidered with

respect to the protesting dealer or dealers.

2. The size and permanency of investment

reasonably made and reasonable obligations

incurred by the existing dealer or dealers to

perform their obligations under the dealer

agreement.

3. The reasonably expected market

penetration of the line - make motor vehicle

for the community or territory involved,

after consideration of all factors which may

affect said penetration, including, but not

limited to, demographic factors such as age,

income, ed ucation, size class preference,

product popularity, retail lease

transactions, or other factors affecting

sales to consumers of the community or

territory.

4. Any actions by the licensees in denying

its existing dealer or dealers of the same

line - make t he opportunity for reasonable

growth, market expansion, or relocation,

including the availability of line - make

vehicles in keeping with the reasonable

expectations of the licensee in providing an

adequate number of dealers in the community

or territory.

5. Any attempts by the licensee to coerce

the existing dealer or dealers into

consenting to additional or relocated

franchises of the same line - make in the

community or territory.

6. Distance, travel time, traffic patterns,

and accessibility between th e existing dealer

or dealers of the same line - make and the

location of the proposed additional or

relocated dealer.

7. Whether benefits to consumers will likely

occur from the establishment or relocation of

the dealership which cannot be obtained by

oth er geographic or demographic changes or

expected changes in the community or

territory.

8. Whether the protesting dealer or dealers

are in substantial compliance with their

dealer agreement.

9. Whether there is adequate interbrand and

intrabrand comp etition with respect to said

line - make in the community or territory and

adequately convenient consumer care for the

motor vehicles of the line - make, including

the adequacy of sales and service facilities.

10. Whether the establishment or relocation

of the proposed dealership appears to be

warranted and justified based on economic and

marketing conditions pertinent to dealers

competing in the community or territory,

including anticipated future changes.

11. The volume of registrations and service

busi ness transacted by the existing dealer or

dealers of the same line - make in the relevant

community or territory of the proposed

dealership.

These criteria are summarized in tag lines in the Findings of

Fact.

59. The relevant Comm/Terr in this matt er is the Tampa

MDA, as defined by GM, plus the Wesley Chapel and Plant City

markets.

60. There is no evidence that the Proposed Relocation will

provide benefit to consumers or is in the public interest.

Rather, it appears that the Proposed Relocati on could result in

a negative impact to consumers and the public interest.

61. GM’s reliance upon Chevrolet’s national average market

penetration as the appropriate standard against which to judge

the line - make’s performance in the Comm/Terr, is mis placed. The

Florida average is the appropriate standard for judging

Chevrolet’s performance in the Comm/Terr. Using the Florida

average as the standard, the existing Chevrolet dealer network

is providing a reasonable level of market penetration in the

Co mm/Terr and in the AGSSA that would be assigned to Foster

after the relocation.

62. The Proposed Relocation will have a significant

adverse impact on existing dealers, including a significant

negative financial impact on Stewart and University.

63. In this case, on balance, the evidence relating to the

eleven statutory factors outlined in Section 320.642(2)(a),

Florida Statutes, weighs in favor of Respondents and establishes

that GM has failed to meet its burden of proving that current

Chevrolet dealers are not providing adequate representation.

Mitsubishi Motor Sales of America, Inc., et al. v. King Motor

Co. of Coconut Creek LTD, et al. , Final Order No.: HSMV - 00 - 740 -

FOF - DMV (Dept. of Highway Safety & Motor Vehicles, December 12,

2000). Furthe r, GM presented only minimal evidence, primarily

in the form of estimations, regarding the adequacy of

Chevrolet’s representation in the Comm/Terr after significant

changes in the dealer network occurred in 2004 (in particular

the relocation of Bill Heard) .

64. All parties agree that changes occurring in the

Comm/Terr since 2003 (the date of the most recent data presented

by GM), will positively impact Chevrolet’s performance in the

Comm/Terr. However, no party was able to precisely quantify

that i mpact such that a determination can be made as to the

level of representation being provided to Chevrolet by the

current dealer network. The Mitsubishi decision requires that

once a manufacturer has implemented a dealer network change in a

community or te rritory (such as the Bill Heard relocation) the

manufacturer must wait until the effect of that change on the

line - make’s level of representation can be determined before

seeking to implement a second change in the dealer network

within the community or te rritory.

65. In this case, the relocation of Bill Heard took place

in May of 2004. That relocation was approved and supported by

GM. That relocation represented a change to the Chevrolet

dealer network within the Comm/Terr. The impact of that

relo cation, as well as the expected increase in University's

sales, on Chevrolet's representation and market penetration in

the Comm/Terr cannot yet be determined and therefore, makes it

impossible to determine if there is currently inadequate

representation. GM has failed to satisfy its burden of proof

that the currently existing dealer network is providing

inadequate representation and should be prohibited from

implementing the dealer network change that is proposed in this

proceeding.

RECOMMENDATION

Having considered the foregoing Findings of Fact,

Conclusions of Law, the evidence of record, and the candor and

demeanor of the witnesses, it is

RECOMMENDED:

That a final order be entered determining that Petitioner,

General Motors Corporation, has failed to sa tisfy its burden of

establishing that existing Chevrolet dealers are not currently

providing adequate representation to the Chevrolet line - make

within the community or territory of the proposed relocation,

and denying the application to relocate Foster fro m its current

location to the proposed location at I - 75 and State Road 56.

DONE AND ENTERED this 16th day of February, 2005 in

Tallahassee, Leon County, Florida.

S

DON W. DAVIS

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675 SUNCOM 278 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 16th day of February, 2005.

ENDN OTES

1/ Respondent University, an existing franchised Chevrolet

dealer, purchased the stock of Roger Whitley Chevrolet

dealership, changed the name to University and has continued the

protest which is the subject of this proceeding.

2/ An MDA, as the na me suggests, is a market containing more

than one Chevrolet dealer. The dealers in an MDA are assigned

by GM an Area of Primary Responsibility (“APR”), which is equal

to the geography of the whole MDA. Each dealer within the MDA

is also assigned an Area of Geographic Sales and Service

Advantage (“AGSSA”) which contains those areas within the APR

that are closer to that dealer than to any other MDA dealer

(i.e. the area in which the dealer has a sales advantage over

other dealers simply because of proximit y). (T: 93 - 94.)

3/ It is difficult to predict the precise impact that the

Bill Heard relocation will have upon Chevrolet’s performance in

the Comm/Terr. However, at the final hearing evidence was

presented which supports a reasonable conclusion that Bi ll

Heard’s new vehicle sales will increase in the range of between

60% to 100%. (T:196 - 197; T:224 - 230; T:302 - 303; T:429 - 432;

T:544 - 545; T:850 - 858; Pet. Ex. 47.)

4/ Again, it is difficult to predict the precise impact that

the ownership change will have upon Chevrolet’s performance in

the Comm/Terr. However, evidence was presented at the final

hearing which supports a reasonable conclusion that the

dealership’s new vehicle sales will increase in the range of

between 10% to 40%. (T:199 - 202; T:429 - 432; T: 454 - 455; T:855 -

858; Pet. Ex. 1 at R - 74; Pet. Ex. 47.)

5/ Currently in the AGSSA that would be assigned to Foster

after the relocation, Chevrolet has a better level of

convenience to consumers than every line - make other than Kia and

Ford. (T:339 - 340; Pet . Ex. 1 at A - 72.)

6/ Both co - owners of Stewart testified that Marvin Beaupre

admitted to them that he expected the dealership would have

losses of 20% as a result of the relocation. (T:694 - 695; T:767 -

768.)

7/ There was significant evidence presented i n the form of

“real world” examples to support the conclusion that losses will

result to existing dealers as a result of the Proposed

Relocation. (T:904 - 925; Res. Ex. 27 at Tabs 27, 27A, and 31A.)

8/ University presented evidence that indicated that the

financial losses incurred by University as a result of the

Proposed relocation would be in the range of One Million and Two

Hundred Thousand Dollars ($1,200,000) to One Million Four

Hundred and Forty Thousand Dollars ($1,440,000) per year.

(Brodsky at 15 ; Slader at 33.)

9/ The evidence actually establishes that customer

convenience is not an important factor in competition between

dealers of competing line - makes (interbrand competitors).

(T:884 - 885; Res. Ex. 27 at Tab 36.)

10/ Indeed, Foster recently completed a Two Million Dollar

($2,000,000) upgrade on its existing facility. (T:435; T:594 -

595; Res. Exs. 1 - 4.)

11/ GM also presented the Clearwater/St. Petersburg average

market penetration as a second possible standard for comparison.

(T:148 - 150; P et. Ex. 1 at A - 28 to A - 31.1.) Because it is

apparent that the State of Florida average is the appropriate

standard to apply in this matter, it is not necessary to further

discuss use of the Clearwater/St. Petersburg average.

12/ Although GM’s expert tes tified that his use of a segment

adjustment process accounts for all such variables and

differences between the nation and the Comm/Terr, it would be

mathematically impossible to control the hundreds of variables

that exist by simply running an analysis th at considers only 30

or so product segments. (T:840 - 41.)

13/ Prior to 1999 GM did use national average to evaluate

dealer performance. (T:271 - 272; T:840 - 844; Res. Ex. 12 at 8.)

However, after establishing a committee to study the matter, GM

adopted th e state average as the appropriate standard for dealer

evaluations. A representative of GM’s expert served on that

committee and suggested that GM use the higher of either

national, state, or another more local area as the standard for

evaluating dealer p erformance. That suggestion was rejected by

GM. (T:271 - 272.)

14/ By way of example, based on the national average the

Comm/Terr was expected to have 7,528 retail Chevrolet

registrations through September of 2003. Every Florida market

in which Chevrole t met or exceeded its expected level of

penetration based on national average through September of 2003

had less than 2,000 expected retail registrations. Only two of

those markets had more than 1,000 expected retail registrations.

(T:290 - 292; Res. Ex. 1 at App - 63 & App - 64.)

15/ Although Stewart and University did present the average

performance of Chevrolet in the Florida MDAs as another

reasonable standard against which to judge the Comm/Terr (T:858 -

860), it is not necessary to discuss that analysis as it is

apparent that the Comm/Terr meets or exceeds the Florida average

with the currently existing dealer network.

16/ In fact, any shortfall is within the margin of error

that one would expect to see in this type of statistical

measurement. Therefor e, it would be mathematically impossible

to state that in 2002 and 2003 the Comm/Terr was not performing

at the expected level. (T:847 - 849; Res. Ex. 27 at Tab 9.)

17/ Indeed, that is another failing of GM’s analysis, which

also does not consider the imp act of recent changes in the

dealer network, such as the Bill Heard relocation. (T:237 - 238.)

18/ On being chosen Mother of the Year, NY Post 14 May 61.

COPIES FURNISHED :

Carl A. Ford, Director

Division of Motor Vehicles

Department of Highway Safety

and Motor Vehicles

Neil Kirkman Building, Room B - 439

Tallahassee, Florida 32399 - 0500

Michael J. Alderman, Esquire

Department of Highway Safety

and Motor Vehicles

Neil Kirkman Building, Room A - 432

2900 Apalachee Parkway

Tallahassee, Florida 32399 - 050 0

Fred J. Lotterhos, III, Esquire

Holland & Knight, LLP

50 North Laura Street, Suite 3900

Jacksonville, Florida 32202

Dean Bunch, Esquire

Sutherland, Asbill and Brennan, LLP

2282 Killearn Center Boulevard

Tallahassee, Florida 32309 - 3576

Mark L. Ornste in, Esquire

Killgore, Pearlman, Stamp, Ornstein

and Squires, P.A.

Post Office Box 1913

Orlando, Florida 32802 - 1913

John W. Forehand, Esquire

Lewis, Longman and Walker, P.A.

125 South Gadsden Street, Suite 300

Tallahassee, Florida 32301 - 1525

Edward Qu inton, Esquire

Adams, Quinton and Paretti, P.A.

80 Southwest Eight Street, Suite 2150

Miami, Florida 33130

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this Recommende d Order. Any exceptions

to this Recommended Order should be filed with the agency that

will issue the Final Order in this case.