A long, cold winter in Detroit: international competitors keep U.S. automakers on ice

Black Enterprise, June, 2008 by Cliff Hocker, Alan Hughes

On May 14, 2007, DaimlerChrysler AG announced the sale of 80.1% of Chrysler Group to American private equity firm Cerberus Capital Management L.P. Daimler retains the remaining 19.9% stake. The automaker and its dealers continue to lose revenue and market share, however. "Do we get out and try to salvage what we've got left, or do we try to hang in there, hoping that it will turn around and risk potentially losing everything we've amassed over the years?" asks Reginald T. Hubbard, president of the Chrysler Minority Dealer Association. "That is the question that many minority dealership owners are faced with today. Most of us are first-generation businesspeople and consequently do not have the cash reserves to handle sustained heavy losses."

OVERSEAS POWERS

According to S&P, Toyota is the second largest automaker in the world by volume and the most profitable. For the Japanese automaker's Toyota and Lexus dealerships, 2007 was an excellent year, according to Perry Watson III, president of the Toyota Lexus Minority Dealer Association. "The prospects for African American dealers in our group are good." At the end of 2007 there were 33 black-owned stores out of 96 dealerships owned by ethnic minorities in TLMDA.

Toyota is committed to placing dealerships in the hands of four to six ethnic minorities every year, split among all the groups, says Watson. "But what we can't forecast is who might sell. The prices of these dealerships are so high, you can't get mad at entrepreneurs who cash in. Toyota is bringing in seven times earnings," he says, pointing out that Anthony L. Merritt sold his Superstition Springs Toyota store in Mesa, Arizona, but kept his Lexus franchise.

The high-water mark for minority dealers was back in 1998 or 1999, says Watson, and he doesn't think we'll "ever see it again." He proposes that the new paradigm for minority dealers is to partner with each other--or with majority dealers, and adds that Winston R. Pittman Sr. and H. Steve Harrell, both on the BE AUTO DEALER 100 list, have now joined forces. March Hodge is another dealer partnership on the list. Because the most desirable brands cost so much, says Watson, "The single-point dealer will be extinct if he or she doesn't partner to diversify."

RELATED ARTICLE: Will Congress help? Dealer associations ask for assistance.

Help from Congress is being sought by the National Association of Minority Automobile Dealers and the minority dealer associations affiliated with the auto manufacturers. These organizations are seeking working capital, job training, and job recruitment assistance for dealerships owned by ethnic minorities "We're looking at ways we can have something put into the next budget perhaps added to the economic stimulus package," says A V. Fleming, executive director of the Ford Motor Minority Dealers Association The associations are also exploring how to work directly with various departments within the Bush administration

Working with a Democratic-controlled Congress. President Jimmy Carter acted to rescue American auto manufacturers in 1979 and set a precedent providing federal government assistance to dealers in 1980 After 700 dealerships went out of business during the first half of the year, the Carter administration funneled $400 million in Small Business Administration loan guarantees to automobile dealers--C.H.