A Long, Cold Winter in Detroit

A Long, Cold Winter in Detroit

A frigid residential housing market combined with cooling consumer confidence and already bleak new vehicle sales from domestic automakers have created a harsh business climate that’s left many black auto dealers out in the cold. Sales for the U.S. automakers were downright chilly: General Motors’ volume fell 7.22%, Ford’s tumbled 11.15%, and Chrysler Group’s slipped 5.96%. On the other hand, import carmakers continued to outperform their domestic counterparts: Toyota’s sales, though down, slipped by less than 1%; Nissan’s climbed 2.29%; and BMW’s jumped 5.52%.

The current environment has wrecked several black auto franchises. In 2007, Chrysler lost four black auto dealers, bringing its number down to 52. The Ford Motor Minority Dealers Association reports that it lost 17 black members in 2007, bringing the total number of black Ford dealers to 149. “By the end of 2008, we could lose 17 to 20 dealers again, depending on some policy changes going on with Ford,” says A. V. Fleming, FMMDA’s executive director. Ford’s falling truck sales battered the franchise’s profitability. Though a dealer may have sold the same number of new vehicles as in 2006, Fleming says, the sales of cars versus trucks shifted dramatically, crashing gross margins of most dealerships.

Marjorie Staten, executive director of the General Motors
Minority Dealers Association, says the organization lost about a dozen black dealers in 2007 and adds that the ranks of
black GM auto dealers have shrunk to 43, down from a record high of 112 two decades ago. Staten also points out that some entrepreneurs opt to sell. “It’s tough. In times like these they have to make hard decisions,” she admits. “So they have to make decisions now, when the dealerships still have some value and it’s still an attractive dealership.”

BE 100S CEOs no longer driving auto dealerships include veteran Nathan G. Conyers, who sold his Novi, Michigan, Jaguar franchise; Leroy Kemp, who no longer owns Forest Lake Ford in Forest Lake, Minnesota; Terry L. Holmes, who divested his Warner Robins, Georgia, Ford Lincoln Mercury dealership; and Walter E. Douglas Sr., who shuttered Jaguar Land Rover Toledo in Ohio. Other entrepreneurs who hit the road: Theresa Jones, who took over Northwestern Dodge in Detroit after Chrysler Minority Dealer Association co-founder Jesse Jones passed away, sold the franchise back to Chrysler; William E. Shack Jr., sold his share of Shack Findlay Honda in Henderson, Nevada, to his white partner; and Helen B. McIntosh, whose husband died in November 2002, sold Seattle-based Kirkland Chrysler Jeep.

This grim picture is expected to continue in 2008. Standard & Poor’s analysts remain bearish on the industry’s prospects, citing an unfavorable economy, heightened competition from import automakers, a weak dollar, and high gasoline prices. The research firm says it expects the Big Three automakers to continue to lose market share to international carmakers, though at a slower pace for GM and Ford, which shifted their low-margin fleet sales business to auto rental companies. In these turbulent times, leadership and vision are critical to the survival of black-owned businesses. Here’s what they’re doing.