Desperate in Detroit

Desperate in Detroit

Few industries are as highly competitive as the automotive business. Changes in consumer demand have forced the three major American automakers to recalibrate their models. Meanwhile, Japanese automaker Toyota gained momentum and is now poised to supplant Ford from its long-held position as the No. 2 automaker in the U.S. To remain viable and competitive, black auto dealers–the majority of which sell Ford, General Motors, and Chrysler vehicles–either began wholesale fleet transactions or realigned their businesses to focus more on servicing and used car sales.

Among them is Steven Ewing, owner of Smyrna, Georgia-based Wade Ford Inc. (No. 8 on the BE AUTO DEALER 100 list with $248.9 million in sales). To keep his dealership in the black, Ewing decided to enter the commercial fleet business and focus on his auto parts business. His dealership wooed corporate customers to the tune of 7,000 fleet vehicles last year. This increased revenues, but since these volume sales are made at a deep discount, profits were essentially flat at the dealership. Total sales were up, but retail sales were down. Combined service and parts revenues were up 25% because the dealership got “real serious about going after the parts business,” Ewing says. “We were very fortunate that we were able to go and find new revenue streams and new business. And that is what I’m pursuing right now–new business. I’m not sticking my head in the sand.”

Other dealers sought exit strategies. Hank L. Aaron Sr., CEO of Hank Aaron Automotive Group (No. 15 on the 2006 BE AUTO DEALER 100 list) sold four of his five dealerships: BMW and Mini Cooper in Union City, Georgia, and Honda and Hyundai in Griffin, Georgia. Aaron still retains the lone dealership, Toyota in McDonough, Georgia, but is expected to sell that one too. Aaron was BLACK ENTERPRISE’s 2004 Auto Dealer of the Year.

Consumer demand dictated the need for readjustment from dealers to suppliers to the manufacturers themselves. The total number of light vehicles sold in the U.S. decreased by 2.6% from 2005. Chrysler sold 7.0% fewer units, Ford Motor Co. was down 8.3%, and GM was off by 8.7%. By comparison, Asian and European imports rose 5.1% and 2.8%, respectively. And while GM still sells more cars than any of its competitors, that lead is being eaten away.

GM maintains a 24% to 25% market share in the U.S. while Toyota, whose market share ranges from 15% to 16%, now jockeys with Ford for the No. 2 position. Toyota has momentum on its side, with the greatest growth in the U.S. market in recent years. In February 2002, Toyota had just 9.3% of the U.S. market share. “We forecast that by this summer, Toyota is likely to surpass Ford as the No. 2 automaker on a permanent basis in the United States,” says Jesse Toprak, executive director of industry analysis for

What went wrong in Detroit? According to Aaron Bragman, research analyst of the Americas for market research firm Global Insight, the biggest mistake that the