Driving In A New Direction?

Mel Farr Automotive to sell all its Ford dealerships

In a move that surprised many, Mel Farr, president of Mel Farr Automotive in Oak Park, Illinois, informed employees in early January that he was in discussions to sell his franchises in Oak Park and Waterford Township, Michigan, to Ford Motor Co.

“Right now, he is planning to sell,” says Charlene M. Mitchell, a spokesperson for Farr. “Ford has agreed to buy them back. They’re working on the numbers.” Once completed, the transaction would leave Farr with one Hyundai dealership, a Kia dealership, and a used-car superstore, all located in Ferndale, Michigan. About 150 workers will be affected; some may be transferred to the Ferndale dealership.

Mel Farr Automotive, once the largest black-owned business (No. 3 on the 2001 BE AUTO DEALER 100 list with $298.5 million in sales), lost some of its luster due to slowing auto sales and a reorganization plan, which contributed to a reduction in revenues by some 31%, from $432 million in 1999 to $298.5 million in 2000. Legal problems surrounding Farr’s controversial On-Time Device also impacted business. In June 2000, Farr settled a suit with customers who complained that the device (which prevents drivers of leased vehicles from starting the car if they miss payments) turned off their cars when they were in motion. Many claimed they had not been late with their payments. Each of the 1,500 customers received $200 worth of coupons for their troubles.

Mitchell says the pending sale is a result of Farr’s longtime plan to refocus his business on the used-car market. “We already have the prototype [based on] our used-car superstore in Ferndale,” she says. “He wants the second store to be in the city limits of Detroit and now we’re looking for places to put one.”

Mitchell contends that Farr’s decision is not out of the blue. “He’s been talking about this for years, but he’s never really acted on it,” Mitchell says. “And with Ford having its troubles, he just wants to focus on what his dream has always been. He wanted to move into an area that is much more exciting and [one] he feels will be much more gratifying.”

Farr’s announcement came a day before Ford announced it would cut 35,000 jobs worldwide, closing five plants and discontinuing its Escort, Cougar, Villager, and Lincoln Continental models. Ford had been contending with lower sales, price pressures, rising foreign competition, as well as high-profile product recalls such as Explorer sport-utility vehicles equipped with Firestone tires. The automotive industry as a whole has fared little better. The 0% financing deals, rebates, and high-cost marketing programs have cut into price margins. Meanwhile, Japanese automakers continue to cut into the Big Three automakers’ market share with an armada of SUVs.

Sheila Vaden-Williams, president of the National Association of Minority Automobile Dealers (NAMAD) in Lanham, Maryland, says the recession and the war on terrorism has hit minority dealers exceptionally hard. “It has become more difficult for us to market our car products,” she says. “Some of our minority dealers have large numbers of consumers with

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