NAMAD chief: Minority dealers must help increase their ranks

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Tom Moorehead

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Tom Moorehead is the owner of BMW of Sterling and Mini of Sterling in Sterling, Va. -- as well as two hotels. So he's used to working with several business models.

Now, as chairman of the National Association of Minority Automobile Dealers, Moorehead wants to find ways to get more minorities into the auto business.

Too many minority dealers fell by the wayside during the recession, and many former dealers and managers who would like to own a store can't come up with the cash to do so, he says. Moreover, some auto companies that provided financial backing for minority dealers before the recession are challenging them to come up with alternative ways to expand their ranks.

Moorehead, 68, spoke with Staff Reporter Arlena Sawyers about how NAMAD members can assist other prospective minority dealers and about his own business strategy.

Q: The recession took a heavy toll on dealers in general and minority dealers in particular. What is the current state of minority dealers?

A: Right now we have 1,016 minority dealers. That number fluctuates, but it's pretty consistent right now.

During the downturn we lost a significant number of our dealer body. We lost them primarily because we literally ran out of cash in many of our stores. We haven't been in business long enough to have amassed enough capital to handle a downturn in the marketplace. That was the major issue.

We were like the other dealers in the portfolio, but a disproportion of us were aligned with Saturn, with Oldsmobile, with Pontiac and with Hummer. So when those brands -- just on the GM side -- closed, that meant that our guys had to close, too. We haven't all gotten back on board again.

Are minority dealers participating in the industry's upswing?

We are participating, but we are not participating at the level we would like because we don't have the capital to buy the store. We're running into issues with land and buildings and working capital. Getting a franchise today, when one has to pay the blue sky multiples -- blue sky isn't something you can get financed at the bank or with one of the captives.

Those kinds of financial burdens are a little tough for us.

What's the solution?

We're looking at various alternatives. Some of the manufacturers are saying to us, "We don't want to go down the road we went down before. We would like to have you come to the table as a private cap dealer." That's easy to say, but in tough times like these it's hard to have the financial wherewithal to do that.

What we're starting to see is that those of us who have been fortunate enough to have amassed a certain amount of capital or the financial ability within the financial community to be able to cover certain debt are the only ones able to play in this arena today.

There are some individuals that have talent, but it means some of us have to come together and help. It may take two or three of us to come together and take a guy who perhaps was in a Saturn store but may not have the funds and bring him in.

There is a model Tony March [an owner of March-Hodge Automotive Group] used: Take an individual and give him a percentage of a store and let him buy the remaining percent out of profits.

Are any minority dealers doing that?

I, along with Ed Fitzpatrick [owner of the Fitzpatrick Dealership Group in Modesto, Calif.] and Winston Pittman [owner of Winston Pittman Enterprise in Louisville, Ky.], are committed to doing that. Greg Baranco [owner of Baran Co. in Atlanta] and Richard Davis [owner of Davis Automotive Group in Austin, Texas] are a part of that, too. After 25 or 30 years in business, we're saying that's a model we can use to start giving back.

It could happen today, if we had the right dealership opportunity. We have to begin to help ourselves. We have a responsibility, as well, to keep asking the manufacturers to assist us. It's going to take all of us. That's something we're pushing all of our dealers -- African-American and Hispanic dealers -- to do.

How's your business these days?

We've been extremely blessed being located in Loudoun County, the richest county in America, and we've got great brands in BMW and Mini. The nation's capital and the surrounding area is probably one of the best places to be. The product we offer and the level of service we provide has afforded us an opportunity to do well.

You're building a new dealership, right?

Yes, we just finished and opened 43 service bays across the street. We had a 26-bay BMW and Mini Cooper store, and we outgrew it. We put on a service component across the street, and we're getting ready to add a BMW showroom to that facility. And we're going to renovate the old facility to make part of it exclusively Mini.

How important is service?

I've always said you can buy a car from anybody but what people really buy from you is sales and service. If you perform in a manner that brings them back and you do it well, that's what makes you successful. We have been fortunate enough to win BMW's Center of Excellence, and we're up for Center of Excellence this year again.

It takes into account every aspect of your business. There is a sales requirement, a service requirement, a parts requirement and a customer service index that address your ability to take care of your customers.

My boss is Mr. and Mrs. Customer. Without them, we might as well lock the doors.

We have 19 programming bays on the outside of the building where we can just take a car and plug it up and program a car and make sure all the computers are running at maximum efficiency.

We also have another 16 charging bays -- if a car is sitting on your lot, at BMW you have to make sure its battery is performing at maximum capacity. We'll also be able to charge electric vehicles as well. They are all up and running.

How many vehicles do you service a day?

Right now we're servicing about 132, 133. With the new store it will take us to over 200. Probably starting in January, we'll be serving 240 to 250 cars a day. We had to expand; we didn't have any choice.

Your business portfolio includes hotels. Why did you venture into the hospitality industry?

Part of it had to do with looking at everything that was happening to the auto industry. I just wanted to have a hedge against that. Even though we're blessed with BMW and Mini, I had a good friend who said you can make money in something other than the car business. Since I didn't know anything other than the car business, my wife, a lawyer by training, agreed to go and study that industry and learn the business.

When did you buy your first hotel?

That was six years ago, in 2006. We bought the Marriott Residence Inn in National Harbor, Md.

Do you still own it?

No, I sold it to Bob Johnson [a partner in RLJ McLarty Landers Automotive Holdings] in November 2010. We now have a Sheraton in Silver Spring, Md., and we have a Holiday Inn Resort in Hilton Head, S.C. Right after we sold the Marriott to Bob, we took the money and invested it.

In this industry, it's not like you get [hotels and] you hold on to them forever. But once you turn them, you can maximize your opportunity. In most cases, on the hospitality side, guys reinvest.

What does the hospitality business have in common with luxury dealerships?

It's all about service. So we fight and push for the same thing. You want to be aligned with a franchise that has a great reservation system and the ability to put people in your hotel.

Do you recommend that other minority dealers consider a diverse business portfolio?

I am an advocate for that. I think it's really critical. When you look at [white] business owners, that's what they have done. You take the time and energy, if necessary, to learn the business and invest your money wisely.

You can reach Arlena Sawyers at asawyers@crain.com.

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