Changing Lanes - Page 2 of 4

Changing Lanes

vehicles this year. “There is not a dealer I know who would not be pleased to have a Toyota, Lexus, Nissan, Infiniti, Honda, or Acura franchise,” says Sheila Vaden-Williams, president of the National Association of Minority Automobile Dealers. The problem is that manufacturers feel they have enough dealerships and are not expanding import franchises, which means dealers must turn to the open market to buy popular import franchises — at a high price. “It’s not uncommon to see a prime Mercedes Benz or Lexus store carry a price tag that includes $10 million to $20 million in blue sky,” says Vaden-Williams.

Paul Taylor, chief economist at the National Automobile Dealers Association, says that an important financial objective for dealers is to generate more business by servicing vehicles over their operational life. And with continued economic improvement expected in 2005, used-car sales will also contribute to dealerships’ financial performance, says Taylor.

In addition to his new collision center, Walton is also expanding his pre-owned business beyond focusing on certified BMW products as he has in the past. The dealership started out a with a 50/50 mix of new and used-car sales. But as BMW expanded its new-car focus, Walton’s new-car business increased faster than his used-car business, resulting in a shift to 70% new and 30% used.

Lackluster domestic sales also means tough times for African American auto dealerships with the Big Three. Numbers of African American-owned GM dealerships continue to fall from a peak of 160 in 1998. Currently, black-owned GM stores make up just 1.6% of GM dealerships, with 113 stores out of 7,200 — the lowest number since 1988. “We are going backwards, no question,” says Marjorie Staten, executive director of the General Motors Minority Dealers Association, a nonprofit organization that is not directly affiliated with GM. “We had a total of about 17 terminations of African American dealerships due to unprofitability, and approximately eight of those did not continue with a minority-owned dealership,” says Staten.

At Ford, the number of African American-owned dealerships decreased from 205 to 199. However, no black Ford dealers on the BE AUTO DEALER 100 list went out of business, says A.V. Fleming, executive director of the Ford Motors Minority Dealers Association.

The number of black DaimlerChrysler dealers held steady last year, with 17 franchise sales balanced by 15 or 16 new appointments, says Jesse Greathouse, president of the DaimlerChrysler Minority Dealer Association. Customer traffic in most members’ showrooms during the 2004 third and fourth quarters matched the previous year’s numbers, but dropped in the first quarter of 2005 by 15% to 25%. “Growing import share is definitely having an effect on us. If your domestic manufacturer just isn’t selling any product, that’s going to hit us first before it hits the big guy, because they can continue to have the money to pound away with advertising and try to draw in customers,” says Greathouse.

While foreign sales continue to rev up industry-wide, Ed Fitzpatrick, CEO of Fitzpatrick Dealership Group in Modesto, California (No. 16 on the list with $125