KNOXVILLE, Tenn. -- Mercedes-Benz USA is talking to its retailers about putting a cap on the number of stores any single dealership group will be allowed to own. But it doesn't plan a uniform cap, applied equally to all groups, which makes some dealership groups wary.
Mercedes-Benz USA chief Steve Cannon says he is looking out for the future of the brand and wants to protect it from having too much concentration with any single group, especially as dealership consolidation activity picks up and more outside investors look to get into auto retailing. Cannon confirmed the discussions with dealers to Automotive News in an interview at a press event here last week.
"If suddenly one entity comes in and buys up all the dealerships, then we don't have competition, and we're looking to make sure that we keep a balanced portfolio with our dealer network," Cannon said. "We've got a nice variety. We like that variety, and we'd be nervous about overconcentration against any single group."
Mercedes has governed the brand's exposure to big retailers through individual framework agreements that have limited expansion to an undisclosed percentage of sales. Cannon says he's now looking to make those framework agreements more precise by tying them to a specific number of dealerships.
Each group would have its own number based in part on how many Mercedes stores it has today.
Having different caps for dealership groups that compete with one another is a concerning prospect for some retailers.
Jeff Dyke, executive vice president of operations at Sonic Automotive Inc., the country's fifth-largest dealership group, said he needs to understand more about what Mercedes is trying to accomplish before he would agree to anything.
"We can't be put in a position where we're not competitive as to the number of stores versus what another dealer group might have," Dyke said. "We're not going to sit back and let our competition get an upper hand on us unless they come to us with a very, very good explanation. That is contradictive to the benefit of our shareholders."
Dyke noted that Sonic has had a great relationship with Mercedes under Cannon's leadership. The retailer has seven Mercedes stores and soon will open an eighth, in McKinney, Texas.