Toyota’s U.S. sales subsidiary on Monday terminated the franchise of an Arizona dealership recently bought by Republic Industries Inc., escalating the legal battle between the two companies.
Toyota Motor Sales USA Inc. and Republic have been at odds since the rapidly expanding, publicly owned dealership group began buying Toyota franchises earlier this year.
Since December, Republic has become the world’s biggest dealer group. It owns or has agreed to buy more than 120 dealerships nationwide.
Earlier this month, Republic said it would buy Spokane’s Appleway Group of auto dealerships for $42 million in Republic stock. A Toyota dealership is included in the deal.
While Detroit’s Big Three automakers have been cooperating with Republic, Toyota Motor Corp. and Honda Motor Co. have been wary. With far smaller U.S. dealer networks, the Japanese automakers fear the outcome if Republic buys too many stores and fails.
Toyota’s latest attack was filed with the Arizona Motor Vehicle Division. Toyota wants the agency to approve the termination of Republic’s franchise in Tempe, Ariz. Republic closed the Tempe Toyota purchase last week.
Republic spokesman Jim Donahue did not return a phone call for comment Monday.
Jim Press, senior vice president of Toyota Motor Sales in Torrance, Calif., said Republic disregarded Toyota’s right to approve the sale of its franchises.
“While the process was under way, behind our backs, they went ahead and closed the deal anyway,” Press said in a telephone interview. “They took over the franchise without our approval.”
Toyota said it would withdraw the termination if Republic reinstates Tempe’s previous owner, Mitchell D. Pierce, who has stayed on with Republic in a management role.
In May, Republic filed a complaint with the Arizona Motor Vehicle Division over Toyota’s refusal to approve the purchase. Toyota then asked a federal judge in Phoenix to uphold its franchise policies and prevent Republic from buying any more dealerships until it accepts them.
About a year ago, Toyota adopted policies limiting an individual or company to no more than seven Toyota franchises and three Lexus franchises. Toyota also imposed a nine-month waiting period between purchases.
Press said all other dealer groups, publicly and privately owned, have agreed to Toyota’s policies.
Republic so far owns one Toyota dealership, not counting Tempe, and is in the process of buying three others and two Lexus franchises. Toyota says Republic plans to acquire 59 Toyota dealerships.
“We’re very concerned with the size and speed with which they’re growing,” Press said. “You’ve got a large group here that up until six months ago never operated a new-car dealership.”
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