Minority dealers share industry's pain, potential
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"There's no reason why," Townsend replied. "We're looking for dealers, and we don't care who they are, so long as they're qualified."
The journalist recommended Detroit dealer Ed Davis, who had opened a used-car lot in 1939 and added a Studebaker franchise a year later.
Chrysler Corp. awarded Chrysler and Plymouth franchises to Davis in November 1963. The chain of events is related in Davis' 1979 autobiography, One Man's Way.
Ed Davis Inc., Chrysler's first black-owned dealership, occupied a half-block in Detroit's inner city. Davis closed the store in 1971 because of a labor dispute with his salesmen.
Weeks before his death in 1999 at the age of 88, Davis told Automotive News that "discrimination was happening then, and it's happening now."
Still, he said: "Opportunities are out there for black people who want to get involved. Minorities who do their jobs well, learn the business before they get into it, get a good location and get money to operate on - they'll be successful."
The civil rights movement of the 1950s and 1960s generated insistent demands for equal economic opportunity for black Americans. The turmoil of those decades led the Detroit 3 to open their dealer networks to black entrepreneurs and ultimately to other ethnic minorities.
Despite complaints about the speed of the process, the number of minority dealers has continued to grow.
Pioneer days
Minority entrepreneurs owned and ran dealerships as early as the 1920s.
Homer Roberts was the first black entrepreneur to hold a new-vehicle franchise, says Rusty Restuccia, a retired director of marketing services for Ford Motor Co. who writes about the history of minority dealerships.
Roberts, an Army officer in World War I, brokered vehicles in the black community of Kansas City, Mo., after the war, Restuccia says. Restuccia cites newspaper ads that suggest that in the 1920s, Roberts had Hupmobile and Rickenbacker franchises in Kansas City and a Hupmobile franchise in Chicago.
Roberts also sold cars, most likely on consignment, for an Oldsmobile dealer from 1924 to 1927. He had two black partners and hired 50 black employees at his stores, Restuccia says.
After his dealerships failed during the Depression, Restuccia adds, Roberts worked as a manager at other dealerships. He died in 1952 at age 66.
Ford's first black dealer was Dan Gaines, who opened a dealership on Chicago's South Side in 1936. Gaines advertised his store in the Chicago Defender as "the only Ford-Lincoln-Zephyr dealer owned and operated by race personnel."
Author Nathan Thompson says Gaines also was a bookie and tavern owner. His dealership went out of business in 1940, and Gaines died in 1983, Thompson writes.
Hispanic entrepreneurs also began to make their mark in automotive retailing. Efren Ramirez opened a Ford dealership in 1945 in Miguel Aleman, Mexico. Ramirez, a U.S. citizen of Mexican descent, lived in Texas, across the border from his dealership.
Before that, says his grandson Danny, Ramirez and his brothers briefly owned a Chrysler-brand store in Laredo, Texas. Efren Ramirez sold the Mexican dealership to his brothers and opened Ramirez Ford in Rio Grande City, Texas, in 1962.
Efren Ramirez's son, Roel, inherited the dealership. Danny Ramirez and his brother Michael now operate it. The family business encompasses 10 new-vehicle franchises.
"It was in the blood," Danny Ramirez says.
Overcoming obstacles
Pioneering minority dealers say they had to overcome prejudice as well as economic obstacles to succeed.
Automakers for decades restricted franchises to white dealers not because the franchise system was racist but because the larger society was, says dealer Nathan Conyers. "There was no thought that blacks, Hispanics or women should be a part of the distribution system," Conyers told Automotive News.
Nathan Conyers opened Riverside Ford in Detroit in 1970. He sold the store in 2003, when he opened a Jaguar dealership in the Detroit suburb of Novi, Mich.
General Motors established a formal program to train black dealer candidates in 1972. Ford created a similar program in 1974, and Chrysler followed in 1983. The number of black Detroit 3 dealers rose from 87 in 1980 to 408 in 1990.
When GM launched its minority-dealer program, it looked for black candidates who had succeeded in other businesses and professions, says Dawin Wright, GM's director of North American dealer development.
"We couldn't go to managers or dealers who happened to be minority, because there virtually weren't any," Wright says.
At about the same time, Ford hired Levi Jackson, a black man, to manage its newly formed Minority Dealer Operations. Jackson was charged with recruiting minority dealers for the company.
Ford also created a middle-management training program for minorities, says Judson Powell, who helped lead the effort.
There were 39 hopefuls in the first class. All except "a couple of Hispanic guys" were black, says Powell, now a consultant to the Ford Motor Minority Dealers Association. The group also included eight black women.
The candidates trained for as long as two years to qualify as dealership managers. The idea was that they would use that experience to become dealers one day, Powell says.
"At the end of the training period, all of the women except one had a job, and (they) probably remained in the business until they retired," Powell recalls. "None of the men had jobs."
Powell said he thinks the men were shunned because white dealers perceived them as a threat. "It was racism," he adds.
Still, both men and women in the program went on to become dealers, Powell says.
Hispanic 781
Black 751
Asian 359
American Indian 213
Source: National Association of Minority Automobile Dealers
The Detroit 3's minority-dealer development programs have generated chronic complaints. Many black and Hispanic dealers said they were assigned failing dealerships that white dealers wanted to dump. Minority dealers also have complained about inadequate access to business training and investment capital.
"What (the Detroit 3) did was an important first step," says Sheila Vaden-Williams, executive director of the National Association of Minority Automobile Dealers. "But they lacked the foundation that was necessary to ensure short-term and long-term success.
"When you look at some of the (dealership) locations, the neighborhoods, the marketing, the expense structure that was thrust upon ethnic minorities, it was clearly a situation that was destined for failure," she says.
Oswaldo Garcia, executive director of the Alliance of Ford Motor Minority Dealers, says automakers have learned from experience. For example, he says, the Detroit 3 no longer put novice minority dealers in small stores that sell fewer than 500 vehicles a year.
"Their improvements have helped ethnic minorities obtain more viable dealerships," says Garcia, a former Ford diversity manager. The dealership alliance has roughly 65 members, about 90 percent of them Hispanic.
Problems persist
The success rate of minority dealers, and of black dealers in particular, has lagged behind that of the overall dealer network. In 1991, NAMAD said 14 percent of black-owned dealerships had gone out of business the previous year and said many more were in danger of failing.
In response, GM became the first automaker to send minority-dealer candidates to the National Automobile Dealers Association's training academy. Ford and the Chrysler group followed.
Late last year, GM's Wright acknowledged that the company's black-owned dealerships were more likely to lose money than stores owned by other minorities. About 70 percent of black-owned GM dealerships were profitable, Wright said.
By comparison, he said, 82 percent of GM's entire dealer body was profitable. Dealers from other minority groups were about on par with the full dealer body for profitability, Wright added.
GM hired Weldon Latham, a lawyer and diversity specialist, to review the automaker's minority program. He made a similar study nearly a decade ago. Latham is scheduled to deliver his report by year end.
Desmond Roberts, a Chevrolet dealer in Hodgkins, Ill., and president of the General Motors Minority Dealers Association, says minority dealers generally lack the deep pockets that could help them get through cyclical downturns in the industry.
A.V. Fleming, executive director of the Ford Motor Minority Dealers Association, warns that the troubles confronting domestic automakers threaten the future of black-owned dealerships.
The industry jobs that many black dealers held before they owned their stores are drying up, Fleming says. At the same time, he says, minority dealers who leave the business won't be around to mentor a new generation of dealers.
"We are losing the pipeline of potential minority dealers," he says.
Import opportunities
As late as the 1990s, few import-brand automakers had minority-owned dealerships. None had formal programs to recruit or finance minority dealers. In 1991, minorities owned 49 import dealerships, compared with 616 Detroit 3 stores.
But under pressure from NAMAD and other industry groups, as well as civil rights leaders such as Jesse Jackson, import automakers have worked to increase the diversity of their dealer networks.
NAMAD says last year, minorities operated 483 import-brand new-vehicle franchises. That figure was 4.4 percent of all 11,020 import franchises in 2005.
Of the 1,430 dealerships operated by Toyota Motor Sales U.S.A. Inc., 94 are owned by minorities, says Irv Miller, the company's group vice president of corporate communications. Miller insists Toyota will not appoint minority dealers for the sake of building numbers.
"Our business is successful representation," he says. "When we put (minority dealers) in business, we want them to be in business for the long term. We know they're going to make money. We don't put them in points that are not going to be in existence during the first downturn in the market."
Tom McGurn, general manager of retail and industry relations at BMW of North America LLC, says 21 of the company's 339 dealerships are minority-owned.
McGurn says his company works with NAMAD to identify minority candidates who are likely to succeed as BMW dealers. In "three or four" instances, he says, BMW offered dealerships to minority candidates who ultimately declined the offer.
"Most of the time, it was geographic," McGurn says. "The person didn't feel comfortable going into an area. We have some really good candidates on the bench. It's an active program."
System successes
Despite continued controversy, many minority entrepreneurs say the dealer franchise system has given them the means to achieve the American dream.
Gregory Jackson peddled soda pop bottles as a child. Today he owns the nation's largest black-owned dealership group. Prestige Automotive Group, of St. Clair Shores, Mich., reported revenues of nearly $1.34 billion last year. It ranks No. 42 on this year's Automotive News list of the 100 largest U.S. dealership groups.
Jackson opened his 11th dealership, a Mercedes-Benz store in suburban Detroit, in June. He says the new dealership gives him an opportunity to sell the world's finest automobiles.
Jackson says he is enrolling a vice president of his company, who is black, in NADA's dealer academy. "We have to have the best players on the field to win the Super Bowl," he says.
Fernando Varela, president of Varela Auto Group in Palestine, Texas, says he also seeks to promote the advancement of his minority employees.
"I look at the people who helped me," Varela says. "If they are loyal to me and have the desire to do something, I will help them out."
You may e-mail Arlena Sawyers at asawyers@crain.com
You can reach Arlena Sawyers at asawyers@crain.com.
