Minority dealers buy stores with Ford loans

3 get sites this year with help from program that aims to boost ranks

Sil Gonzales, shown with wife Taide, bought Ford of Ventura in California under the Ford Capital Loan Investment Program. Dealers must put up at least 20 percent of the cost.

Ford Motor Co. is adding to its minority-dealer ranks through a program designed to help dealers and individuals with dealership management experience to buy Ford and Lincoln stores.

Three minority dealers were awarded new or additional stores this year under the Ford Capital Loan Investment Program, which was unveiled in 2012. It is up to candidates to find a store to buy, arrange the deal and bring it to Ford. If Ford approves a deal, candidates pay 20 percent or more of the dealership cost, a Ford spokeswoman confirmed.

After putting up his or her share, the purchasing dealer takes out two loans from Ford Motor Credit Co.: one secured by the dealership's assets and a second unsecured, subordinated, loan to finance the rest.

The program is structured for the secured loan to be paid off first. The second loan then is refinanced and converted into a secured loan. The borrower doesn't begin to pay off the principal on the second loan until the first loan is paid off.

"The goal is not to burden the dealership with too much debt at one time," the spokeswoman says.

Open to all

The spokeswoman said Ford evaluates candidates individually on character, capacity, customer satisfaction and capital. "This is for people who lack the last C, capital," she said.

"It was established in the spirit of adding more minority dealers, but it is open to everybody," not just minority dealers, the spokeswoman said. She would neither identify the ethnicity of the dealers who acquired the stores nor where their stores are.

But according to the Ford Minority Dealers Association, all three are Hispanic, and their stores are in California.

Under its former dealer development program, which ended in 2009, Ford invested in stores with dealers who lacked adequate financing. Over time, dealers were able to buy out Ford's stake with profits from the store.

"I found the opportunity, and I had good relations with Ford. I couldn't have done it without Ford's help."
Sil Gonzales

But under the current program, the automaker does not take stakes in the stores. Nor do its representatives sit on the dealerships' boards of directors. The spokeswoman said Ford defines a dealer as someone who owns at least 51 percent controlling interest in a store.

Sil Gonzales is one of the three dealers. Gonzales, a dealer almost 20 years, purchased Ford of Ventura under the program. He said he found the store by word of mouth and initially was turned down by the owner when he offered to buy the dealership in April 2012.

But the owner changed her mind and called him eight months later. That's when negotiations began in earnest. With a loan from Ford, Gonzales closed the deal March 7.

'Ford's help'

"I found the opportunity, and I had good relations with Ford," said Gonzales, who also owns Gresham Ford in Gresham, Ore. "I couldn't have done it without Ford's help."

About 70 African-American and "about the same number" of Hispanic dealers operate Ford dealerships, the spokeswoman said.

Osvaldo Garcia and A.V. Fleming, co-executive directors of the association, applauded the program, saying it will help pave the way for more minority-owned Ford and Lincoln dealerships.

Fleming said the program presents a great opportunity for former dealers, who got out of the business during the recession because of dwindling profits, to get back in.

"A lot of people who got out in '08 got out not because they couldn't perform. They just saw the handwriting on the wall," Fleming said.

Added Garcia: "There is no set formula. We're asking our members if they find a deal to bring it forward, and we'll put them in touch with Ford Motor Co. representatives."

You can reach Arlena Sawyers at asawyers@crain.com

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