Group 1 Automotive, the nation's fourth-largest auto retailer, last week ordered all participating stores to cut ties with TrueCar.com, citing concerns over the security of data plumbed from dealers' computer systems by the fast-growing online lead generator.
The move came soon after officials from Honda suggested to Group 1 executives at a Honda event last week that they rethink their stores' dealings with TrueCar, said Peter DeLongchamps, Group 1 vice president of manufacturer relations and public affairs.
A Honda spokesman said he was not aware of such a request.
TrueCar has been hurt by enforcement of a Honda policy that threatens to withhold marketing dollars if dealers advertise vehicles below invoice price. Many shoppers on TrueCar's Web site are able to secure prices below invoice as dealers bid for the business.
Group 1, of Houston, has 108 stores, 42 of which were TrueCar participants. Of the 108, eight are Honda dealerships.
TrueCar has lately been a target of criticism among retailers that say the rising influence of Internet shopping sites is driving down transaction prices for new vehicles.
But Group 1 cited not pricing but potential privacy risks to consumers and to dealerships posed when TrueCar and other vendors gain access to data contained in dealer management system software. TrueCar requires access to verify vehicle sales resulting from the leads it provides.
And DeLongchamps said the company was not convinced that the online leads generated enough revenue and profit, given the requirement that TrueCar have access to dealership data.
"We questioned the value proposition," he said.
DeLongchamps said several Honda officials at the Las Vegas event had asked several Group 1 officials to rethink Group 1's dealings with TrueCar.
American Honda Motor Co. spokesman Chris Martin said Honda has had no official communication with Group 1 about TrueCar, though he said he can't confirm what takes place in conversations between Honda field officers and dealers.
The 42 Group 1 stores that had been TrueCar participants paid TrueCar a $299 fee for any lead that resulted in the sale of a new car and $399 for a successful used-car lead.
In addition to offering discounted prices to shoppers, TrueCar's Web site, truecar.com, allows shoppers to view transaction prices on vehicles in their area. TrueCar says it gets the data from 30 sources, including financial institutions, but not from the dealer management systems of participating dealers.
TrueCar CEO Scott Painter said he was sorry to lose Group 1 as a customer and said he would work to persuade the group to come back.
He defended TrueCar's data security, saying TrueCar uses dealer data only to verify vehicles sold from TrueCar leads and for no other purpose.
"There has been a lot of misinformation about us," Painter said.
He said he has spent most of the past several days answering questions about the integrity of TrueCar's processes to protect dealer data.
Dealers have increasingly voiced concerns about what is happening to data extracted from dealer management systems by third-party vendors. They have raised the specter of data being sold to marketers and others without the dealers' knowledge.
The dealer management system is the nerve center of a store, containing information on everything from customer transaction and financing data to vehicle inventory and the store's accounting reports.
DeLongchamps said Group 1 dealers, acting independently, have signed up with TrueCar over the years. He said Group 1 has had privacy concerns about any third-party vendor that is able to extract data from dealership operating software.
Painter said that while Group 1 had been a significant customer for TrueCar, its 42 participating stores accounted for less than 1 percent of the 5,840 dealer franchises participating with the shopping site. He said TrueCar has dealerships in all markets being vacated by Group 1. Group 1 has stores in 15 states.
Honda does not prohibit Honda or Acura dealers from advertising vehicles below invoice. But the company has clear guidelines that put a dealer's local marketing allowance at risk if a dealer does so. The allowance can account for 1 to 2 percent per new vehicle sold, or $300 to $600 for a $30,000 vehicle.
TrueCar prides itself on finding discounts for vehicle shoppers by getting dealers to bid for the business, many at below invoice. Invoice typically is several hundred dollars above the dealer cost of a vehicle.
But the enforcement of Honda's standard longstanding policy on advertising below-invoice pricing prompted TrueCar this month to put a disclaimer on its Honda shopping page. It warned Honda shoppers with a banner that they might not get TrueCar's low price.
TrueCar has big expansion plans. Next month TrueCar becomes the exclusive online vehicle shopping partner of Yahoo.com, the search-engine giant. TrueCar is paying $50 million a year over three years for the partnership.
As a result of the deal, TrueCar expects traffic on its Web site to jump from a couple of million unique visitors a month to 20 million.
TrueCar's Painter has said he expects sales from TrueCar leads almost to double in 2012 to about 500,000 vehicles, and participating dealer franchises roughly to double, to 10,000.