Last fall's ouster of Mercedes-Benz USA boss Ernst Lieb cleared the way for the luxury automaker to settle a legal spat with Sonic Automotive Inc. over dealership design standards.
Sonic President Scott Smith told Automotive News last week that Lieb's departure was key to the settlement and that Sonic is now happy to be doing Autohaus makeovers for its seven Mercedes stores. On Feb. 24, Sonic and Mercedes jointly announced they had settled the dispute surrounding Sonic's 2008 lawsuit against Mercedes.
"We had a very good relationship with Mercedes prior to their former leadership, and I don't believe that we would have been able to reach an agreement with the former leadership," Smith said.
By contrast, the new leadership is "fantastic," Smith said. "We're thrilled to have this behind us, and we're looking forward to growing with Mercedes."
Steve Cannon was named Mercedes-Benz USA's CEO in December. He replaced Lieb, who was abruptly dismissed in October for alleged ethics violations and misuse of company funds. Lieb had led the charge in pushing through Mercedes-Benz's controversial Autohaus dealership design requirements for dealers.
Autohaus was at the center of the Mercedes-Sonic dispute. It began in February 2008 when Sonic, the nation's third-largest automotive retailer, agreed to buy a Mercedes store in Charlotte, N.C. Mercedes blocked the purchase, and Sonic sued, claiming that Mercedes was trying to force unnecessary renovations at four of its nine Mercedes stores.
At the time, Smith said the luxury automaker was trying to "extort" the renovations by holding the acquisition hostage.
In October 2008, the North Carolina Division of Motor Vehicles ruled that Mercedes had wrongfully denied the transaction. Sonic closed the deal. But it later sold the Charlotte store, Smith said, after Mercedes threatened to add a third franchise to the market, which would have diluted Sonic's investment.
Meanwhile, Sonic's lawsuit in a North Carolina court continued. That was resolved with the settlement last month. Both companies declined to provide settlement details.
But in a joint statement, Mike Slagter, Mercedes-Benz USA's vice president of sales, said the "agreement allows both companies to wholly focus on their business goals moving forward. For MBUSA, that means continuing to elevate the customer experience within the brand as volumes grow and new customers enter the brand."
Mercedes last week declined to make any further comments.
In the same statement, Jeff Dyke, Sonic's executive vice president of operations, said the settlement "resets the relationship with Mercedes-Benz and allows Sonic to focus on our own growth and acquisition plans within the Mercedes-Benz network as well as across the industry."
While that means Sonic has a green light to buy Mercedes stores, company executives said last week that Sonic is not actively seeking acquisitions.
After selling two small stores in the past few months, Sonic has seven remaining Mercedes stores, Smith said. Autohaus projects are under way at all seven, he said. Six are renovations to be completed this year. The seventh involves construction of a store that will continue into next year.
Smith declined to talk about settlement terms or whether the Autohaus projects were part of the agreement.
"But I can say we're happy to do it now," he said. "It makes sense for us and it makes sense for Mercedes, and it's the right thing to do for our customers."