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Honda Files Suit to Stop Republic Industries

Autos: Firm joins Toyota in fight to bar Huizenga's firm from buying more dealerships.

May 08, 1997|JOHN O'DELL | TIMES STAFF WRITER

American Honda Motor Co., fueling a challenge to billionaire H. Wayne Huizenga's drive to become the nation's dominant car dealer, filed a potentially far-reaching lawsuit Wednesday seeking to block Huizenga's Republic Industries from buying more Honda dealerships.

The Torrance-based importer and distributor of Honda and Acura cars claimed in its federal suit that Republic is disrupting Honda's relationship with its dealers and is refusing to abide by Honda's year-old rules limiting the number of dealerships that one entity can own.

Most car makers have similar rules. Honda's Torrance neighbor, Toyota Motor Sales of America Inc., launched the effort to block Republic's buying spree last month when it asked Texas to bar the firm's planned purchase of a Toyota dealership in that state. Toyota, whose state regulatory action is pending, said Republic was violating company rules limiting ownership of its Toyota and Lexus dealerships.

The car companies have said Republic wants to buy at least 63 Honda and 59 Toyota dealers, enough to control 20% of their new-car sales in the United States.

Republic denies that, but won't say how many of the dealerships it does want. "Right now, we own one Honda dealer and two Toyota dealerships," said Republic spokesman Jim Donahue.

Since December, Republic has become the nation's largest new-car dealer, snapping up 104 dealerships representing more than $5 billion in annual sales. The company has said it wants to dominate the 50 biggest markets in the nation's $300-billion-a-year new-car business within two years.

The two car companies fear the Ft. Lauderdale firm will wind up controlling their distribution networks and could hasten the end of brand loyalty among buyers. They are concerned that Republic intends to build consumer loyalty for its AutoNation brand name at the expense of the individual brands of cars it sells.

"We are not going to sit back and allow Republic Industries to exploit our 27 years of relationship-building with our customers and our dealers," said Richard Colliver, Honda's senior vice president for sales.

Republic, however, denies it has any such plan.

"It is not in Republic's interest, nor in its plan, to walk away from the outstanding consumer franchise that Honda has built over the years," Donahue said. Republic, he said, may someday add the AutoNation logo to its dealerships, "but never superseding the brand name of the automobile" being sold.

Although Republic hopes to resolve the issue without a court battle, he said, it "finds the suit without merit and intends to defend itself vigorously."

Honda's suit is important because the outcome could set a precedent governing car makers' ability to set limits on ownership of their new-car franchises.

Honda prohibits any individual or firm from owning more than seven Honda dealerships and three Acura dealerships. Toyota has set the same limits for its Toyota and Lexus franchises.

Republic owns three auto dealerships in Southern California: Magic Ford and Magic Lincoln-Mercury in Valencia and Champion Chevrolet in Los Angeles.

Honda filed its suit in Los Angeles just two days after Republic said it would buy de la Cruz Auto of Miami, which would give Republic its first Honda dealership.

Republic's shares, which almost doubled last year on the company's expansion plans, closed up 25 cents at $28.25 in Nasdaq trading.

Donahue said Republic is discussing dealership purchase plans with every car maker that has a U.S. retail network. The firm has reached agreements with Chrysler Corp., General Motors Corp. and Ford Motor Co. to allow it to buy franchises throughout the U.S.

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