Three luxury brands OK AutoNation's strategy

Acura, Infiniti, Volvo in; Germans not asked yet

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Some luxury brands are giving AutoNation Inc., the country's largest auto retailer, the OK to put the AutoNation brand name on their dealerships.

But continued reluctance about retailer branding from the best-selling luxury automakers -- the German manufacturers, in particular -- may keep AutoNation's branding strategy from spreading to the rest of its network and throughout the industry.

Since announcing on Jan. 31 that it will rename its 160 domestic and mass-market import-brand stores, AutoNation has received the blessing of three luxury brands: Acura, Volvo and Infiniti. Those brands account for 11 more stores, two of which already have adopted the AutoNation moniker. The rest will be renamed by early June.

But AutoNation has not formally asked other luxury brands, including its largest, Mercedes-Benz. AutoNation has 17 Mercedes-Benz stores.

Steve Cannon, CEO of Mercedes-Benz USA, expressed reluctance about retailer brand names on Mercedes stores. The German automaker pushes retailers to use the vehicle brand and geographic location in store names: Mercedes-Benz of Fort Lauderdale, for example.

"I certainly understand AutoNation wants to have their brand and build their brand. That is their company, and they are responsible to their constituents and their shareholders," Cannon told Automotive News. "For us, it is the Mercedes-Benz brand that is the most important thing, and that is what we will continue to highlight in our public face."

AutoNation CEO Mike Jackson, who was the top U.S. Mercedes executive before moving to AutoNation in 1999, made a courtesy call to inform Cannon before the Jan. 31 branding announcement, Cannon said. But the parties have not had conversations about rebranding Mercedes-Benz stores.

Porsche hasn't been approached either, said Detlev von Platen, CEO of Porsche Cars North America. Like Mercedes-Benz, Porsche's dealership-naming policy is to use the vehicle brand name along with a geographic location.

"It's less confusing for the customers than having another group name up on this store," von Platen said.

AutoNation executives declined to be interviewed but issued a brief statement confirming the Volvo, Infiniti and Acura approvals. Cadillac already had approved the name change. The retailer's four Cadillac franchises and six Lincoln franchises were included in AutoNation's original 160 stores scheduled for renaming. AutoNation has 221 dealerships.

Deterrent to other retailers

For retailer branding to spread, it's important to have the OK of the largest luxury brands. Manufacturers would be walking back existing policies and also would need to consider whether approving AutoNation's strategy would create a precedent. Some of AutoNation's biggest competitors have cited luxury brands' naming policies as an obstacle to their own branding campaigns.

"It's important to keep in mind that a lot of our manufacturer partners don't want to see another brand up there on the dealership," said Scott Smith, president of Sonic Automotive Inc., the nation's third-largest dealership group. "For instance, BMW or Audi or Mercedes or any of these luxury stores, they tend to want their brand name up there."

Smith has said that while Sonic is not planning to brand its stores now, there is a "strong possibility" of a future branding bid. But given Sonic's large luxury footprint, particularly with BMW, the luxury manufacturers would have to be on board.

"We probably wouldn't brand half the company and keep the other half unbranded," said Jeff Dyke, Sonic executive vice president of operations.

Roger Penske, CEO of Penske Automotive Group Inc., the country's second-largest dealership group, told analysts last month that Penske wouldn't pursue a branding strategy for its dealerships.

He noted that 72 percent of Penske's revenue comes from luxury-brand stores and that "some of our peers are in a little different position because of mix."

Tougher guidelines

If other retailers pursue branding, they would likely have to agree to more stringent manufacturer guidelines.

Acura put additional requirements on AutoNation in exchange for branding approval, said John Mendel, American Honda Motor Co. executive vice president.

"I don't know that all the other public companies would want to abide by those terms and agree to do those things," Mendel told Automotive News. "Nobody has said yet, 'What would we have to do?' Nobody has said, 'We want to do it, too.'''

Lindsay Chappell, Diana T. Kurylko and Mark Rechtin contributed to this report

You can reach Amy Wilson at awilson@crain.com.

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