The fact that many African American auto dealers across the country are stuck in neutral isn’t shocking news. Just, glance at the 1998 BE AUTO DEALER 100 list and you’ll note the disappearance of no less than 22 auto dealers that made the 1997 listing.
But while each of the Big Three (General Motors, Ford and Chrysler) has issues to address with its minority auto dealers, the problem came to a head this past summer at GM. Indeed it was a rough summer for the nation’s largest auto manufacturer. Not only was GM faced with a nationwide strike that virtually froze its operations, but the company was also stung by criticism of discrimination, favoritism, poor locations and excessive dealership prices for African Americans. GM was implored to address problems in its Minority Dealers Development (MDD) Program. What might be most surprising for a corporation of GM’s magnitude is that top executives complied. GM CEO Jack Smith gave the green light to a major independent investigation of the program.
Of GM’s 8,090 dealerships, only 109 are owned by African Americans. (By comparison, Chrysler has 146 black-owned dealerships and Ford has 243; see “Black Auto Dealers Are Spinning Their Wheels,” Newspoints, this issue.) Ironically, it was GM that took the lead in 1973 by becoming the first car company to create a minority dealership program. But 26 years later, even GM brass admits that the growth in minority auto dealers has been unspectacular. After the auto manufacturer spent more than $1 billion on the program over the last 25 years, black auto dealers constitute just 1.3% of the “GM family.”
Conducted by the Washington, D.C.-based law firm of Shaw Pittman Potts & Trowbridge, the investigation was led by Weldon H. Latham, a senior partner with the firm. GM released the results of the independent review in June, which included interviews with 70 minority dealers across 25 states as well as majority dealers. The 132-page document meticulously detailed the complaints and concerns of GM’s minority auto dealers. They include the following:
Paying too much for “Blue Sky” or goodwill fees to purchase a particular dealership;
Favoritism in the way benefits such as restructuring, renovations and loan forgiveness are administered by GM;
Locations presented to African American dealers, which are more often in poorer, crime-ridden neighborhoods.
“The key to success for any dealership is location, location, location,” says Raymond M. Wilkinson Jr., owner of Ray Wilkinson Buick Cadillac Inc. (No. 11 on the BE AUTO DEALER 100 list.) “And the deal must be structured right. The truth is that GM has structured some deals poorly, which inevitably led them to fail.” Wilkinson says he was working on a deal to acquire another GM dealership in Milwaukee, but the asking price was simply too high. “You can’t make money when they’re asking you to pay $50,000-$60,000 a month in rent. I don’t need to be a genius to realize that’s a money-losing proposition,” says Wilkinson, whose Racine, Wisconsin, dealership had revenues of more than $108 million last year.
GM officials admit that