Jilted in search for quality - how Great American Tool and Manufacturing Co. folded

Black Enterprise, April, 1992 by Ingrid Sturgis

In order to secure million-dollar contracts from large corporations, many minority businesses are investing heavily in retooling their firms. However, by committing to new quality standards imposed by large corporations, minority firms risk accumulating a debt burden that can spell disaster.

Anthony Robinson, president of the Minority Business Enterprise Legal Defense and Education Fund Inc., says he has seen 50 cases over the last two years where minority suppliers were forced out of business because they invested heavily to recast their firm, and then a white-owned firm breached its contract with them. "We've had any number of instances where this kind of predatory practice drives competitive minority firms out of business.... They use methods such as slow payment and no payment," Robinson says.

Such is the case of Great American Tool and Manufacturing Co. Inc. Felix A. Burrows, president of the black-owned, Bensenville, III.-based firm, has filed a $20 million lawsuit against Adolph Coors Co. Inc. for failing to honor several agreements, including three statements of intent to purchase $3 million in custom-manufactured parts from Great American from 1988 to 1992.

Burrows contends that he followed Coors' advice to make capital improvements, institute stringent quality controls and reduce Great American's customer base from 100 clients to only six in order to comply with Coors' prerequisites to signing a purchasing agreement. Despite rating first among Coors' machine suppliers in 1987 and second in 1988, Coors cut its orders with Great American to 40%, and by 1990, had canceled all purchases with the firm. Unable to replace Coors' business. Great American folded in 1990. "I made deep financial commitments to others because I had the utmost faith and confidence that [Coors] would keep their commitments to me," Burrows says. Coors would not respond to numerous requests for comment.

Robinson says breaches such as these are often violations of antitrust statutes, the Racketeer Influenced, Corrupt Organizations Act (RICO), the False Claims Act or other contract laws. But many minority contractors just don't have sufficient financial resources to fight lengthy court battles.

Ralph C. Thomas, executive director of the Washington, D.C.-based National Association of Minority Contractors, says suppliers should research corporations to find out how they treat minority businesses. Minority contractors should also have a thorough understanding of the agreements they make and definitely have a game plan for disaster.

Thomas suggests working helpful clauses into the contract that will define what will happen if a corporation doesn't honor its contract. He does point out that it won't be easy because demanding white corporations may go elsewhere rather than bend to such negotiations. Even though the corporation may not offer guarantees, says Thomas, "It takes a lot of discipline [for a minority-owned company] to walk away from a million-dollar contract."