National news: driving uphill.
But while each of the Big Three (General Motors, Ford and Chrysler) has issues to address with its minority auto dealers, the problem came to a head this past summer at GM. Indeed it was a rough summer for the nation's largest auto manufacturer. Not only was GM faced with a nationwide strike that virtually froze its operations, but the company was also stung by criticism of discrimination, favoritism, poor locations and excessive dealership prices for African Americans. GM was implored to address problems in its Minority Dealers Development (MDD) Program. What might be most surprising for a corporation of GM's magnitude is that top executives complied. GM CEO Jack Smith gave the green light to a major independent investigation of the program
Of GM's 8,090 dealerships, only 109 are owned by African Americans. (By comparison, Chrysler has 146 black-owned dealerships and Ford has 243; see "Black Auto Dealers Are Spinning Their Wheels," Newspoints, this issue.) Ironically, it was GM that took the lead in 1973 by becoming the first car company to create a minority dealership program. But 26 years later, even GM brass admits that the growth in minority dealers has been unspectacular. After the auto manufacturer spent more than $1 billion on the program over the last 25 years, black auto dealers constitute just 1.3% of the "GM family."
Conducted by the Washington, D.C.-based law firm of Shaw Pittman Potts & Trowbridge, the investigation was led by Weldon H. Latham, a senior partner with the firm. GM released the results of the independent review in June, which included interviews with 70 minority dealers across 25 states as well as majority dealers. The 132-page document meticulously detailed the complaints and concerns of GM's minority auto dealers. They include the following:
* paying too much for "Blue Sky" or goodwill fees to purchase a particular dealership;
* favoritism in the way benefits such as restructuring, renovations and loan forgiveness are administered by GM;
* locations presented to African American dealers, which are more often in poorer, crime-ridden neighborhoods.
"The key to success for any dealership is location, location, location," says Raymond M. Wilkinson Jr., owner of Ray Wilkinson Buick Cadillac Inc. (No. 11 on the BE AUTO DEALER 100 list.) "And the deal must be structured right. The truth is that GM has structured some deals poorly, which inevitably led them to fail." Wilkinson says he was working on a deal to acquire another GM dealership in Milwaukee, but the asking price was simply too high. "You can't make money when they're asking you to pay $50,000-$60,000 a month in rent. I don't need to be a genius to realize that's a money-losing proposition," says Wilkinson, whose Racine, Wisconsin, dealership had revenues of more than $108 million last year.
GM officials admit that in the past, minority dealers were offered less-than-ideal locations, but insist that has since changed. "Clearly there were some dealers who went into locations that were less than desirable," says Marcia McGee, a member of GM's global communications staff. "But the commitment now is to look for minority dealer locations that are rated as better than average."
Eric Peterson, general director of GM's MDD Program, adds, "If there are questions about the potential growth of a given area, or if a location appears to be in decline, we will not be targeting those particular points to place minority candidates in."
Another complaint that the independent review examined was the insensitivity of mid-level management to the concerns of African American dealers. "We need quality deals to bring to the table," says Gregory Jackson, owner of Prestige Automotive Group in Mount Morris, Michigan. "And that means middle management needs to be sensitive to the fact that it's good business to assist black dealers. It's not a social issue. It's good business for GM and the stockholders to have reciprocal trade with the black community," says Jackson, whose dealership had sales of $74 million last year.
"That's still not clear to a large majority of middle-management people. They don't see the real necessity for minority auto dealers. To get them to be accountable, their performance pay structure should be tied into how much they help improve the minority dealership program," says Jackson. "But it's hard to teach an old dog new tricks."
Latham believes the top brass at GM is committed to improving life for its minority dealers as well as increasing their numbers with the company. But he's concerned about whether that message is getting to the mid-managers as well. He also favors a system of rewards and punishment for management. "We want to change behavior," says Latham.
For now, GM appears to be listening and open to suggestions. "Our game plan is to go out to the field organizations and reaffirm what we want to do in the marketplace," says Peterson. "They must understand completely the importance of improving relations with our minority dealers."
But not everyone is as optimistic about the study as executives at GM. "It's going to take more than a report to change things at GM," says Cornelius A. Martin, owner of Martin Automotive Group in Bowling Green, Kentucky (No. 4 on the BE AUTO DEALER 100 list). "It's going to take a major commitment and it's not necessarily in dollars. It's the commitment to training, selecting qualified candidates and making the right selection for the deal that I'm concerned about."
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|Title Annotation:||Newspoints; Weldon H. Latham of the law firm Shaw Pittman Potts & Trowbridge releases report of General Motors Minority Dealers Development Program|
|Date:||Nov 1, 1998|
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