Auto Dealers Struggle to Hang on

For Henry A. Ware, Jr, CEO of Southaven Pontiac Buick GMC Inc. (No. 65 on the BE Auto Dealers list with $40.329 million in sales), May 11 could be the date that determines the fate of his business — and the livelihood of his 52 employees. General Motors is expected to mail letters on that date to the nearly 3,000 dealerships the automaker plans to phase out in an event that could be catastrophic for the black-owned automotive dealers.

Making matters worse, Pontiac — the auto line to be discontinued by GM — represented 20% of Southaven’s sales year to date, the second blow of the one-two punch resulting from perhaps the worst ever business climate for this industry. Ware knew the Pontiac line was in trouble but didn’t expect it to go away. “In the previous viability plan it was to become a smaller version of itself — a niche brand, which means it would have fewer offerings, but more specific offerings,” Ware says. “I knew we had to strengthen the business in other areas since there would be fewer products for customers.”

As part of GM’s restructuring efforts the automaker announced that it would focus on its four core brands in the U.S.: Chevrolet, Cadillac, Buick, and GMC. This would lead to reduction in the number of GM dealers from 6,246 in 2008 to 3,605 by the end of next  year and Ware is among hundreds of black auto dealership owners who were impacted by that decision.

“It’s very discouraging to us here. More than half of the minority dealer network has Pontiac as a franchise,” says Marjorie Staten, executive director, General Motors Minority Dealers Association (GMMDA)

. “We will suspect that minority dealers will be greatly affected. We have no indication as to what the [dealers] fate will be. We’re all sitting on the edge of our seats, our heads hanging low worried that the keys will be taken from us tomorrow.” According to Staten, nearly half of the GMMDA’s 300 members are deciding to go out of business because they can’t get working capital.

Staten points out that GM’s plan is to shut down the less profitable dealerships in less than ideal locations that may not be as new and modern as others. These dealerships, she says, are predominantly minority owned. “Many of our dealers aren’t in the cities, we’re on the outskirts. We’re not in the major metropolitan areas that they probably want to continue on with,” she

says. “And because of the downturn in the industry over the last few years, many of our dealers have not been granted the money or given the opportunity to build a better facility. So we’re very concerned.”

Staten says that she expects the current 3% minority dealer representation of all dealerships in the U.S. will decrease to 1% in the next 30-90 days as GM decides upon which dealers they will no longer maintain a business relationship with coupled with the brand eliminations it has already confirmed.  “In short, our dealers are on the verge of extinction as evidenced by the dismal number of 70 African-American owned GM dealerships remaining in business today.”

Ware for one, says he hopes the Obama administration focuses more of its energies on aiding the struggling dealerships. “I think while the administration has

focused on the manufacturing side, I don’t think it’s given as much light to the entrepreneur side of this business, the dealer network,” he says. “These are people that created a lot of jobs, are vital in their respective communities and they have been part of what is the true economic engine of any country and that’s small business.”

Ware is keeping optimistic however. He says the industry will turn around and will have a smaller, stronger dealer network. “From a faith perspective, I try not to make things I can’t control worry me. I’ve devoted a life to this business but it’s not my life,” he says. “Yes, I’m nervous about the future of GM and Southaven Pontiac, but it’s hard to focus on being angry when I still have a business and a community.”