The Road to Recovery

B.E. auto dealers cope with a sluggish economy by using incentives and other measures to drive traffic in their direction

To say that 2001 was a rough year for African American auto dealers would be putting it mildly. Like the technology industry, the auto industry was hit hard by a combination of factors, including the events of Sept. 11 and the ensuing war on terrorism, climbing gas prices, massive corporate layoffs, and instability in the stock market. After three consecutive years of profits, the industry went into a spinout as sales slowed and profits plummeted. Sales of new vehicles in 2000 were at 17.4 million units. In 2001, the numbers dropped slightly to 17.1 million and will continue to fall to around 16.1 million units, according to economists at the National Automobile Dealers Association (NADA) in McLean, Virginia.

And the first quarter of 2002 hasn’t been much better. One of those hit hardest was Mel Farr. Once the owner of the largest African American auto dealership in the U.S., Farr was forced to sell all of his Ford dealerships back to the manufacturer because of legal problems and financial issues (see “Driving In a New Direction?” Newspoints, April 2002). What’s more, since last year, 15 dealerships have exited the BE AUTO DEALER 100 list.

The year, at best, was a mixed bag, says Sheila Vaden-Williams, president of the National Association of Minority Automobile Dealers (NAMAD) in lanham, Maryland. “A number of our dealers did well last year, but others have been hit hard due to the economy and the new war on terrorism. We are working with the manufacturers to come up with plans to try and save those minority dealerships that are having difficulties.”

One such plan to help dealerships navigate the troubled economic waters was 0% financing. GM implemented it and Ford and DaimlerChrysler followed suit. “The 0% financing helped a lot of dealerships,” says Michael Flynn, director of the University of Michigan’s Office for the Study of Automotive Transportation. “Thanks to that, sales picked up significantly in the last quarter of 2001, but overall, it was still a bad year in terms of car dealership profits. There was a real profit squeeze at the Big Three.”

Although 0% financing did help some firms, Vaden-Williams says it was far from a cure-all for minority dealers. “A lot of [their] clients were not eligible for those incentives because you almost have to have a perfect credit record to qualify,” she says. “Many of our clients were simply not able to participate [in the program].”

Despite the challenges facing African American auto dealers, the top 100 managed to eke out increases in their total number of employees (from 12,257 in 2000 to 12,305 in 2001, up less than 1%) and expanded their total sales (from $8.7 billion in 2000 to $8.8 billion last year, or roughly 1%). 

OVERCOMING THE ODDS
One auto dealership that has managed to buck the downward economic trend is The Harrell Co. Sales from Steve H. Harrell’s Atlanta-based company were $417.4 million in 2001, earning it the No. 1 spot on the BE AUTO DEALER 100 list. That’s a jump of 55%

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