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AutoCanada making progress landing new auto makers

Patrick Priestner, chairman and founder of AutoCanada is shown in this 2012 file photo. Mr. Priestner is retiring as chairman of the Edmonton-based company in May.

Ian Jackson/The Globe and Mail

Dealer group AutoCanada Inc. says it is making progress in persuading some auto makers to permit ownership of their dealers by the publicly traded company.

The dealership group, which is the largest publicly traded dealer group in Canada, is prohibited from owning dealers of several key brands because the auto makers that own those brands permit only private ownership.

Among those companies are Ford Motor Co. of Canada Ltd., Mercedes-Benz Canada Inc. and Toyota Canada Inc. Ford and Toyota allow Patrick Priestner, chairman and founder of AutoCanada, to own their dealerships privately.

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AutoCanada has spent years trying to persuade auto makers that ban public-company ownership to change their policies.

"Four brands today are willing to accept a proposal from AutoCanada for AutoCanada to be a dealer [owner] that may not have been open to that in the past," AutoCanada chief executive officer Steven Landry said on Friday. "That's an important gain."

Mr. Landry would not identify which auto makers are softening their stance.

A change in attitude by Mercedes-Benz and Toyota, which operates Lexus, would give AutoCanada a stronger foothold in the luxury market, where growth is outpacing the overall market. That is expected to continue for several years because of demographics and the expansion of vehicles offered by luxury brands.

"It feels like [AutoCanada] is making some progress," said analyst Chris Murray, who follows the company for AltaCorp Capital Inc. in Toronto.

AutoCanada is also in negotiations with General Motors of Canada Ltd., which does not permit AutoCanada to control the nine GM Canada dealerships in which it has equity investments.

The agreement with GM Canada permits the AutoCanada ownership as long as Mr. Priestner is listed as what is known as the dealer principal, so that the idea of a single owner is maintained.

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But Mr. Priestner is retiring as chairman of the Edmonton-based company in May, raising questions about whether the agreement will continue.

"The contracts with General Motors are probably in what I would consider the final stages of a potential framework where it would allow us to continue the same plan as we always had," Mr. Landry said on a conference call about AutoCanada's fourth-quarter and year-end financial results. "We're almost there."

Mr. Priestner owns several dealerships privately as well as 87.6 per cent of a company called Canada One Auto Group Ltd., which owns 8.6 per cent of AutoCanada's shares.

He has agreed to a non-compete clause that prohibits him from owning dealerships that sell any automotive brands that AutoCanada sells, chief financial officer Chris Burrows said on the call.

That includes Fiat Chrysler Automobiles NV stores. AutoCanada holds 17 FCA stores, which generated 44 per cent of its $2.89-billion in revenue in 2016.

"He couldn't own Chrysler stores. Period." Mr. Burrows said.

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AutoCanada reported profit of $2.6-million in 2016, down from $22.82-million a year earlier. Per-share profit fell to 9 cents from 93 cents a year earlier.

The collapse in the price of oil is the main reason for the drop – 27 per cent of the company's 62 franchises are in Alberta. The company sees the Alberta economy beginning to turn around late this year or in the first quarter of 2018.

Mr. Landry said it intends to continue acquiring dealerships, with a focus on parts of the country where the market and the economy are growing, pointing to British Columbia, Quebec and Ontario. The company recently purchased two dealerships in Guelph, Ont.

AutoCanada also announced the resignation of president Tom Orysiuk, effective Friday. Mr. Landry will assume that title.

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About the Author
Auto and Steel Industry Reporter

Greg Keenan has covered the automotive and steel industries for The Globe and Mail since 1995. He also writes about broader manufacturing trends. He is a graduate of the University of Toronto and of the University of Western Ontario School of Journalism. More


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