Auto Industry Tune Up Means Rebound For Black Auto Industry Professionals - Black Enterprise
Black Enterprise Magazine September/October 2018 Issue

Mobbed by executives, journalists, and owners, General Motors Vice President of Global Design Edward T. Welburn Jr. unveiled the 2014 Corvette Stingray at the recent North American International Auto Show in Detroit. As admirers examined the lines and features of the low, light, and lean carbon fiber machine, Welburn recounted how he’d brought together top designers and engineers to produce a vehicle that would “build on tradition but that was also forward thinking.” GM President Mark Reuss told Black Enterprise that there’s a lot riding on the introduction of the 2014 Stingray, the first of a series of launches “as we redo our product portfolio over the next 18 months”–one of the most revolutionary pursuits undertaken by the automaker in its 105-year history.

 

Edward T. Welburn Jr., General Motors VP of Global Design

GM’s rebirth is indicative of the transformation taking place throughout the automotive industry. After surviving near-death experiences just four short years ago–GM and Chrysler emerged from government-managed bankruptcies–domestic automakers have come roaring back while manufacturers of imports remain in the fast lane. Check out the stats: New car sales have increased from 10 million in 2009–the height of the Great Recession–to 14.5 million in 2012, the best performance in the past half decade. Analysts expect auto sales to zoom past 15 million in 2013. According to automotive research and marketing firm R.L. Polk, auto registrations for new vehicles grew faster among ethnic groups than among any other consumer segment in recent years. Toyota, Ford, Chevrolet, Nissan, and Honda have been identified among the top brands favored by African American consumers, according to a 2012 Polk analysis. Marc Bland, Polk’s head of diversity and inclusion, says, “2012 U.S. new vehicle registrations are up 14% versus 2011. This is good news, but it pales in comparison to the combined group of ethnic consumers–African Americans, Asians, and Latinos–growth of 23%, which is 60% greater than the overall industry.”

Against this backdrop, Black Enterprise held a series of interviews with the top executives and designers of leading automakers as well as BE 100s auto dealers, automotive suppliers, and advertising honchos to find out what’s driving the industry’s growth. Automakers have been making sizable investments in innovation, technology, and marketing to develop new models and woo various consumer segments. But will this industrial transformation produce greater diversity in showrooms, manufacturing plants, and media by significantly advancing the numbers of African American employees, dealers, suppliers, and dollars spent on ethnic media?

INVESTING IN DESIGN AND TECHNOLOGY

There are a number of trends revving up the sector: pent-up consumer demand; global competition; and development of fuel efficient, ecofriendly, tech-driven models.

Innovation is most evident in automotive design. GM’s Welburn describes how his team married advanced aerodynamics with styling to attract a new generation of Corvette buyers who have the need for speed. As the leader of the interior design team for the 2014 Chevrolet Impala, Crystal Windham was given the task of hooking young consumers. Beyond updating seats and the dashboard for comfort and functionality, her team departed from tradition by providing storage and connectivity for mobile devices.

Ford Motor, which realized its greatest revenue growth through its outreach to the 18-to-24 market, also emphasizes interactive features “so when they bring their smartphone into their car they’re seamlessly connected with the world,”says Chief Operating Officer Mark Fields. But beyond gadgets, Fields asserts that Ford has successfully implemented “a go-to market strategy” by focusing on lifestyle and creating “authentic” experiences through the use of social media. And Raj Nair, Ford’s group vice president for global product development, points to the highly popular Ford Fusion as an example of its ability to accommodate any customer’s “green” bent; offering gasoline, hybrid, and plug-in hybrid versions.

Automakers plan to meet consumer needs by making a gargantuan investment. Take Toyota Motor Sales. President and CEO James Lentz says the company has pumped $1.5 billion into operations over the past 18 months and expects to hire 3,500 additional workers as it develops the third generation of hybrid models. “We’re pushing the envelope to lower cost and improve overall performance,” he says.”But there’s also safety and connectivity enhancements that are going into the vehicles to always keep products cutting-edge.”

Toyota expects to beat competitors with new model introductions such as the Corolla Furia as well as pushing sales leaders such as Scion FR-S, Lexus, Corolla, RAV4, Camry, and Prius.

John Mendel, executive vice president of American Honda, says Honda and Acura brand production has rebounded since the automaker was rocked by the earthquake and tsunami that hit Japan in 2011. Mendel says, “The emphasis on technology and innovation for us is about simplicity and ease of use–relevant technology that is not complex.” The company has applied additional resources to increase the safety of new models with features such as lane assistance and backup cameras.

At Chrysler, managed by Italian automaker Fiat, Ralph Gilles, president and CEO of SRT Brand and Motorsports, and senior vice president of design for Chrysler L.L.C., says new models like the Viper are a sign that the company’s “mojo” is back. While the high-performance vehicle best represents Chrysler’s fun-loving spirit, he says Jeep brands demonstrate choice, offering consumers an array of models that fit varying tastes and sensibilities. “There’s a lot of technology in a modern-day car,” says Gilles. “The good news is as vehicles get better their residual value gets better as well.” Chrysler has augmented its ambitious plans with a proposed $400 million investment in plant operations and a mandate to hire an additional 8,000 workers.

 

Ralph Gilles, SVP of Design for Chrysler LLC and President & CEO of SRT Brand and Motorsports

IS DIVERSITY A PRIORITY?

As automakers continue to retool product lines and marketing strategies, concerns about diversity persist. Will the industry’s rebound translate into increased opportunities for African Americans in the workplace–especially as designers, engineers, and senior executives? What initiatives will be executed by manufacturers to accelerate the growth and viability of dealers and suppliers? And will the industry significantly increase its spending with ethnic media?

Historically, the auto industry–a sector that has played a considerable role in the development of the black middle class–has displayed a solid track record in workplace diversity. Ford, GM, and Toyota have been mainstays on the Black Enterprise Best Companies for Diversity list. And eight senior executives from GM, Chrysler, Ford, and Toyota can be found on BE’s 100 Most Powerful Executives list.

Gilles, who is on our Most Powerful roster, admits, however, that during the Great Recession Chrysler lost a disproportionate number of young black and Latino engineers and executives.”So when we came back on our feet, we had this great imbalance with that workforce,” he says. “The good news is all this great news for Chrysler has really helped us become a brand for them to want to be associated with. It’s been a lot easier lately to bring on young talent.”

The auto industry has continued to be an important revenue generator for black-owned businesses, especially BE 100s companies. Roughly 42% of the sales posted by the 2012 BE 100s were derived from auto suppliers and car franchises.

Still, no group has felt the impact of the industry’s crash more than African American dealerships. According to the National Association of Minority Automobile Dealers, there were 751 black dealerships in 2005–a peak year–versus 260 by the end of 2012, a staggering 65% decline. Over the same period, the BE ranking of largest auto dealers shrank from 100 in 2008 to 60 today. NAMAD President Damon Lester says the restructuring of domestic automakers wrecked black dealers and many of the survivors are still reeling. “We lost a significant amount of dealers,” he says, “when GM eliminated Saturn, Saab, Hummer, and Pontiac as part of its reorganization.”

Many BE 100s CEOs assert that major auto companies must do more to preserve existing dealers and bring new operators into the fold. “I think the manufacturers have stopped supporting [minority dealer and development] programs,” says Bill Perkins, CEO of Eastpointe, Michigan-based Bill Perkins Automotive Group (No. 12 on the BE Auto Dealers list with $118 million in revenues). “There are a lot of minorities that would go into business, but they don’t have the necessary capital, and the manufacturers have kind of pulled in their horns.”

Jenell Ross, CEO of Centerville, Ohio-based The Bob Ross Auto Group (No.33 on the BE Auto Dealers list with $48.5 million in revenues) and the only African American woman to run a second-generation dealership, maintains that black entrepreneurs have not retained adequate capital reserves to expand operations much less position their franchises for longevity.

As African American dealers continue their skid, automotive suppliers continue to gain traction. According to Leon Richardson, president of the National Association of Black Suppliers, the average annual spend with minority businesses is between 6% and 8%–an estimated $200 billion–with the largest percentage coming from GM, Ford, Chrysler, and Toyota. Black-owned companies receive roughly 2% of that, or about $4 billion annually.

Richardson, CEO of ChemicoMays L.L.C. (No. 77 on the BE Industrial/Service Companies list with $34 million in revenues), says African American suppliers who managed their operations efficiently “suffered very minimally.” He points to GM as one of the automakers who “never wavered from their commitment to support diverse suppliers.” GM’s manager of supplier diversity, Linda Ware, says GM will offer greater assistance to vendors such as providing them with access to capital as “our volumes are increasing [and] we’re having a 70% change of our product line.”

With African American consumers representing 7% of U.S. vehicle registrations, they served as chief contributors to the sector’s comeback. And black auto buyers tend to be more brand loyal than other groups. For instance, Ford received the Polk African American Loyalty Award, gaining a 60% retention rate within the African American community; Toyota and Mercedes were runners-up. Even so, Polk’s Bland argues that “there is still significant opportunity for automotive manufacturers and dealers to develop marketing initiatives toward the African American consumer.”

Several BE 100s advertising agency heads agree with his assertion. “The auto industry for the most part doesn’t seem to have defined objectives for the African American market. It continues to be an afterthought,” maintains Carol H. Williams, CEO of Carol H. Williams Advertising Inc. (No. 6 on the BE Advertising Agencies list with $18 million in revenues). “Even though they claim to embrace and support this target, most of them have their experiential marketing handled by mass market firms without an insightful cultural basis. It’s about what is convenient rather than what can really deliver results. Then they use the lack of results to justify not committing more resources to this segment.”

Fay Ferguson, co-CEO of Burrell Communications Group L.L.C. (No. 4 on the BE Advertising Agencies list with $23 million in revenues), says although the industry is often ranked at the top of the list in spending with ethnic media, automakers should take an “all-in” approach to successfully influence this segment, because African Americans are huge media consumers. “Those brands that do the best job tend to rely on an African American-owned agency to help keep them culturally and strategically on point with both creative messaging and placement.” She points to Burrell client Toyota as a brand that consistently leverages multiple African American media channels–print, broadcast, events, digital, and social media–to connect with the African American community in an “authentic and credible way.”

 

Crystal Windham, GM Director North American Passenger Car Design

Danny Bakewell, publisher of the Los Angeles Sentinel and former chairman of National Newspaper Publishers Association, representing a sector that has been assaulted by declining readership and digital media over the past decade, is more blunt. He says industry support has been “putrid, with some exceptions. General Motors has absolutely put the best foot forward with the black press, particularly with black newspapers. Toyota is not far behind. Ford does just a little. After them, [the others] all fall off the radar screen.” Most noticeably absent are Jaguar, Land Rover, and Volkswagen.

Domestic automakers defend their track record. Ryndee Carney, manager of cross-brand communications for GM, maintains that the percentage of GM’s overall media budget allocated to African American media has remained constant since it emerged from bankruptcy, and its 2013 spend with African American media will be at the same levels as that of 2012. (GM would not disclose figures for competitive reasons.) “We are expecting to spend more with multicultural media, including African American media, at the regional level in 2013 to support the new vehicle launches we have going on this year, particularly the Chevrolet Silverado and Impala,” she says.

Eileen Wunderlich, a spokeswoman for Chrysler, says brand advertising targeting African Americans has increased significantly since 2009, the year the new company was formed. She claims that spending jumped nearly 800% in 2010 and 174% in 2011 compared with that of previous years. She shares recent multiplatform campaigns for Jeep Altitude Edition models, Dodge Dart “Ultimate Combo,” and Chrysler 300 Motown Edition, linked to the upcoming Broadway show Motown: The Musical to make her case.

At the auto show, BE asked C-suite executives about their respective companies’ overall commitment to inclusion. CEO Lentz says Toyota has added “almost a hundred diverse dealers,” and that to expand its business “diversity is critical for us.” Ford’s Fields says “our DNA as a company is to be very inclusive; we have not lessened our efforts in that area and as the market comes back up, we’re bringing our resources back up as well.” GM’s Reuss says, “We have one of the most recognized diversified supply bases in the industry, and we have specific programs that actually do the same thing for our dealer base.”

But as the industry continues to drive toward record sales, Thomas Moorehead, CEO of Sterling, Virginia-based BMW of Sterling (No.10 on the BE Auto Dealers list with $123 million in revenues), challenges auto manufacturers not to take African American consumers for granted. “I think they need to understand that America is changing, and with that browning of America, we would really like to see more of us selling to those individuals,” he says. “The only way the manufacturers are going to understand and recognize the need is to see that we are the ones actually buying the product. If we show them we can affect the bottom line, then they’ll make changes.”

–Additional reporting by Sonia Alleyne, Caroline V. Clarke, Cliff Hocker & Shannon Lanier

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