Mercedes-Benz AG vehicles sit on display at the Daimler AG booth during the Chicago Auto Show on Feb. 9, 2017. The change in policy at Mercedes-Benz is a breakthrough for AutoCanada, which is not permitted to own dealerships selling some of the leading brands in the country.Daniel Acker/Bloomberg
The strong growth of dealership groups in Canada helped persuade Mercedes-Benz Canada Inc. to change its policy and allow a publicly traded dealership company to own a franchise, says Brian Fulton, the auto maker's president.
That publicly traded company is AutoCanada Inc., which was granted approval this month to buy a Montreal-area Mercedes dealership.
"The automotive landscape has changed quite dramatically in Canada," Mr. Fulton said in an interview. "We have many successful one-franchise owners within the Mercedes-Benz network, but more and more of our dealers now own more than one competing automotive franchise."
The change in policy at Mercedes-Benz – and the purchase that came about because of it – is a breakthrough for AutoCanada, which is not permitted to own dealerships selling some of the leading brands in the country.
The Edmonton-based company operates 56 dealerships, but Ford Motor Co. of Canada Ltd. and Honda Canada Inc. and other auto makers allow only private ownership of their dealerships in Canada. Both companies said they are maintaining that policy and not considering changing it.
AutoCanada chairman Patrick Priestner owns some Ford dealerships and a Honda Canada store. AutoCanada provided Mr. Priestner with a so-called participatory loan for the purchase of the Honda store that allows the dealership group to receive some of the profits from the Honda store.
Mr. Fulton said another reason Mercedes-Benz let AutoCanada purchase a dealership is the presence of Steven Landry as chief executive officer of AutoCanada.
Mr. Landry, who took over as CEO last year, is a former president of DaimlerChrysler Canada Inc., which had the same ultimate parent company as Mercedes-Benz until Daimler and Chrysler divorced in 2007.
Mr. Landry was on the Mercedes-Benz Canada advisory council, "so we have a long-standing relationship with Steven; you look at his track record, his experience," Mr. Fulton said.
He pointed out that Mercedes Rive-Sud, the dealership AutoCanada is buying, will have a dealer principal who holds an equity stake in the outlet.
"It's not AutoCanada based in Edmonton hiring a local general manager to run the dealership," Mr. Fulton added. "We made that very clear to Steven right from the outset of our discussions – we wanted to find a proven successful dealer principal in the Montreal market that would have an equity stake in the dealership [and] would be running the dealership on a day-to-day basis."
The change by Mercedes-Benz to allow AutoCanada to own stores provides another option for dealers who want to exit the business, said Chuck Seguin, a consultant who advises dealers on mergers, acquisitions and succession. "Hopefully, it will lead to some other brands that currently don't accept public ownership to reconsider their position."
As dealership groups get bigger, pressure will grow on companies that don't accept public ownership to allow it, Mr. Seguin said.
"Because the market has become so consolidated, most of the large dealer groups have a mix of brands that allow public ownership and [those that] don't allow public ownership," he said. "So when those groups want to exit the business and the owners want to retire, their options are very limited. They have no option other than to break some of those up, which means an ultimate loss of value."
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