Group 1 charges DCX with 'coercion'

Bradford Wernle
Automotive News
July 23, 2007 - 12:01 amGroup 1 Automotive, the nation's fourth-largest dealership group, has sued DaimlerChrysler and its finance companies, alleging discrimination against Group 1's Chrysler group and Mercedes-Benz dealerships.

The civil suit, filed Monday, July 16, in U.S. District Court in Los Angeles, claims DaimlerChrysler used "unlawful coercion, retaliation, discrimination and bad-faith conduct" after Group 1 switched its $300 million floorplan loan from DaimlerChrysler Financial to JPMorgan.

Plaintiffs are Group 1's three Mercedes-Benz and 12 Chrysler dealerships. Houston-based Group 1, headed by CEO Earl Hesterberg, sold 129,198 new retail vehicles in 2006 through 105 dealerships.

Last September, the suit says, Group 1 told DaimlerChrysler Financial that it would not renew the DaimlerChrysler Financial loan for wholesale vehicle inventory.

DaimlerChrysler Financial then illegally pressured Group 1 to give up the JPMorgan financing, the suit claims. The suit claims DaimlerChrysler violated its franchise agreements.

After the switch to JPMorgan, DaimlerChrysler Financial prevented Group 1 dealerships from offering to retail customers DCX's subvented financing, including 0 percent and no-down-payment deals.

DaimlerChrysler Financial also told Group 1 it would not accept retail loan applications from any Group 1 customers with credit ratings below 680, which is slightly below average. DaimlerChrysler Financial accepts such applications from other dealers and even makes them the focus of some incentive programs, the suit claims.

It also claims DaimlerChrysler Insurance Co. canceled property and casualty insurance on Group 1's inventory "using a false and pretextual basis for the cancellation."

The suit seeks payment for losses caused by DCX's actions and an injunction prohibiting continuing discriminatory behavior.

Spokesmen for both sides declined to comment.