For African American auto dealers, it’s all about making inroads and getting over the bumps along the way. As the nation’s No. 1 black auto dealer for the past several years, Mel Farr knows those bumps come with the territory at the top. But the past year was a particularly rough one for the Detroit-based businessman. Farr was forced to close three of his dealerships and rethink his strategy for selling cars and trucks. His sales dropped from $596.6 million in 1998 to $432.4 million last year, a loss of nearly 28%.
Although the Mel Farr Automotive Group is still No. 1 on the be auto dealer 100 list, “It was a tough year for us,” says Farr. “We got rid of three dealerships that were not profitable. Actually, Ford Motor Co. closed the Houston and Baltimore dealerships, saying they were in urban markets and weren’t performing. There were lots of credit problems. The New Jersey dealership was also closed due to a fire in the building.”
Farr now believes he purchased dealerships that were too far from his Detroit headquarters, but he learned a valuable lesson. “It was difficult for management to stay on top of those dealerships. We’re probably better off not running dealerships that far apart and that far away, especially in urban markets where it’s hard to get good personnel. In this economic boom, and with unemployment being so low, it’s hard to hire and retain good people.”
In addition, Farr, who also owns the Triple M Finance Co., was embroiled in a controversy that generated negative publicity. His company placed “on-time devices” on the vehicles it financed; when payments were late, the vehicles could not be started once they were turned off. Farr says about a dozen customers filed lawsuits against him because of the devices.
“We saw significant improvements in the way of payments,” he says, “but we had a number of lawsuits filed and we were unfairly targeted by the media. The negative publicity about the lawsuits really hurt our business.” Traffic in his dealerships dropped off, he says, and the lawsuits are still pending.
But not all auto dealers shared the same fate as Farr last year. In fact, with the nation’s booming economy, record low interest rates and strong consumer confidence, 1999 was a banner year for the auto industry as a whole. Sales of more than 17 million new vehicles shattered the previous record of a little more than 16 million set in 1997. According to research from the National Association of Automobile Dealers (NADA), the average dealer saw profits before taxes rise 20.3%.
However, it was a slightly different story for black auto dealers. Several dealerships fell on hard times and went out of business; sales slowed considerably for others. “Last year was better than the last two or three years, but not as good as it was for the majority dealers,” explains
Donald Tinsley, chairman of the National Association of Minority Automobile Dealers (NAMAD) and president of Centralia Ford Lincoln Mercury in Centralia, Illinois.