Toyota Seeks to Curb Huizenga Buying Spree

Toyota sought to interrupt billionaire H. Wayne Huizenga’s nationwide auto dealership buying spree on Wednesday, petitioning the state of Texas to block his company’s purchase of a Toyota dealership in Houston.

Toyota said Republic Industries--which has become the nation’s biggest car dealer in a four-month-long acquisition binge--intends to buy 59 Toyota dealerships that are responsible for 20% of the company’s U.S. sales.

“Our concern is that a rapid, uncontrolled aggregation of a larger number of our dealerships by a single owner could be harmful not only to us and our dealers, but to the public as well,” said Yale Gieszl, executive vice president of Toyota Motor Sales in Torrance.

Toyota petitioned the Texas Motor Vehicle Board to bar the sale of Joe Myers Toyota, claiming that Republic refused to abide by policies recently adopted that limit dealership purchases by single entities.

Republic spokesman Jim Donahue dismissed the Toyota action as “without merit.” He would not elaborate.

Toyota’s move is the first to formally resist Republic’s drive to build a nationwide auto retailing empire by acquiring new-car dealerships and building AutoNation USA used-car superstores. Since December, Republic has acquired about 90 new-car dealerships with annual revenues of more than $4.5 billion.

The news of the dispute reverberated on Wall Street, where investors drove Republic’s stock down $3.19 to close at $28.50 in trading Wednesday on Nasdaq.

Republic’s rapid growth has led to worry among auto makers and some smaller dealers that Huizenga and other emerging big retailers could gain a market advantage by demanding volume discounts or refusing to carry slow-moving vehicles.

Donald Keithley, an auto retail expert with J.D. Power & Associates, said some auto makers want to limit acquisitions of dealerships by large concerns because it maintains their control over distribution.

“But the consumer holds the trump card,” he said. “If the consumer likes these new retail formats, it will be hard for the manufacturers to resist.”

Several auto makers have limits on the number of dealerships that can be owned by a single company, but the issue has not been tested in the courts.

The auto makers’ concerns are reflected in Toyota’s petition filed in Austin, Texas. “Toyota must have the right to maintain influence and control over its distribution system and philosophy,” the filing said.

Toyota executives have expressed skepticism for months that publicly owned companies like Republic could manage their far-flung entities efficiently without damaging the brand equity of their vehicles.

Last summer, the company adopted several policies aimed at controlling its relationship with publicly held companies and other entities that wanted to acquire multiple franchises.

They included a nine-month waiting period between dealership purchases. This is aimed at allowing the company to evaluate whether a new owner meets the sales, customer service and financial performance criteria required, Toyota said.

“It’s not a roadblock; it’s a speed limit,” said Jim Press, a Toyota senior vice president.

He said the waiting period was particularly important in Republic’s case because the company has no track record in running new-car dealerships. But Republic has retained existing management in all of its acquisitions to date.

Republic ignored the waiting period by announcing plans to acquire the Texas store after buying a Toyota and Lexus dealership in Florida. It also announced this week a deal to buy a Toyota dealership in Tempe, Ariz.

Toyota also recently restricted to 10 the number of franchises any one entity can hold. It says this is meant to protect other dealers from unfair competition as well as protect the company if a dealer group failed.

The auto maker said Republic refused to agree to a dealership limit. It said Republic plans to acquire 59 of Toyota’s largest dealerships within the next 18 months.

“If Republic’s rapid expansion should fail, it would leave Toyota and its customers without adequate sales and service representation in a significant number of markets,” Gieszl said.