Group 1 Does Battle With DaimlerChrysler: Can Either Side Win?

AutoNews reported yesterday morning that Group 1 (GPI) is suing DaimlerChrysler (DCX) for using coercive tactics when Group 1 tried to switch their $300 million floor plan from DaimlerChrysler to JP Morgan.

I am not a big fan of large dealer groups taking manufacturers to court over grievances. Because you may "win the battle but lose the war." Meaning your relationship with the manufacturer is so soured after the court case, that even if you win the ruling, your ability to acquire other brands and get awarded new "add points" is hindered.

So even if Group 1 is completely in the right, I think shareholders need to realize that this is a negative (in terms of the implications for Group 1's long term growth outlook).

Nonetheless, if Group 1's accusations in the article are true that Daimler prevented Group 1 dealerships from offering to retail customers DCX's subvented financing and even discriminated against Group 1 customers (not accepting credit ratings below 680), DaimlerChrysler Financial should be embarrassed.

Because that is not how an automaker or any business should act. Each business unit should be able to compete on its own (competitively), or else the larger organization should re-think whether or not they should be in the business at all (like financing).

So, if Daimler is discriminating against a dealership group because they can't compete with JP Morgan on floor plan financing, Daimler has some serious problems. Because Group 1 is one of the few dealership groups that has the capital to invest in a lot of the dealer consolidation initiatives they need (on the Chrysler side), and service bay capacity expansion (on Mercedes side).

Having said that. Group 1 really should try to "play nice." Meaning they should have tried to work quietly within to show DaimlerChrysler the "error of its ways." Taking the battle out in public is always a recipe for bad manufacturer relations. Although admittedly, at some point (after repeated efforts to show Daimler the error of its ways,) management does owe it to other dealers (and investors of both companies) to bring the concern to light. I just don't know how long this had been going on.

In either case, I don't see how either side wins from this conflict/dispute. I encourage both parties to try to reconcile their differences.