Consultants help GM study minority profits

DETROIT - General Motors is running a test to see whether outside consultants can shore up the profits of minority-owned dealerships.

Consultants are working with department managers at an unidentified high-volume, profitable, minority-owned dealership. They also will go to an unprofitable dealership and to a marginally profitable dealership.

At the end of the yearlong test, GM will examine whether the consultant's methods have helped profitable dealerships do better and foundering dealerships turn things around.

The test started five months ago, said Bob Romero, GM's general director of minority dealer development. He said the study should help GM determine how to help financially troubled minority dealerships.

"That will help guide us going down the road (on how to deploy) consultants of that type," Romero said.

GM made several changes in its minority dealers program three years ago as the result of a study it commissioned in 1997 to determine why so many minority dealers were failing, even during good economic times.

The initial study was conducted by Washington lawyer Weldon Latham and released in June 1998. It stated that 36 percent of GM's 232 minority dealers were in the red as of Dec. 31, 1997. By comparison, 24 percent of nonminority GM dealers were unprofitable. The study made 215 recommendations, and GM adopted 213 of them in whole or in part.

Latham issued a study of GM's revamped program July 31. It suggested, among other things, that GM do more to help manage failing dealers.

It said that as of May 31, 24.9 percent of GM's minority dealers were unprofitable, compared with 24.5 percent of nonminority GM dealers. Romero said dealership profitability numbers remain virtually unchanged since May.

The follow-up report also points out that while minority dealers in general are doing as well as other dealers, black dealers in particular are still less profitable than the minority dealer body as a whole. Romero said GM is aware of the problem and adds that black dealers have made significant strides in profitability. He said at the end of 2000, 58.5 percent of black dealers were profitable, compared with 71.9 at the end of August.

Romero said the company has a handful of minority dealership appointments pending and the company expects to end the year with 375 minority dealers, its target for 2001. That is up from 367.

You can reach Arlena Sawyers at asawyers@crain.com

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