NEW ORLEANS - General Motors is giving a reprieve to minority dealers in financial trouble, thanks to civil rights leader Jesse Jackson.
On May 8, Jackson faxed letters to GM President Jack Smith and Ford Motor Co. Executive Vice President Peter Pestillo, requesting that the companies postpone the removal of failing minority dealers until Jackson could meet with the companies to discuss how to help the dealers.
GM agreed to a moratorium and to let an independent evaluator examine why so many minority-owned GM stores are in serious financial trouble, according to dealers and other sources.
GM declined to comment. Doris Davenport, a spokeswoman for Jackson's organization, Rainbow/PUSH Coalition, said it would be premature to comment, but added: 'We're still working things out.'
In his May 8 letters, Jackson also requested that failing dealers be given an infusion of capital, abatement of interest and higher allotments of hot products.
About 45 percent of GM's 275 minority dealers and more than half of Ford's 236 African-American dealers are unprofitable, dealers say. Ford has a total of 338 minority dealers. The letter was not sent to Chrysler Corp.
JACKSON, SMITH AGREE
Jackson and Smith put together the GM agreement on June 19 in Detroit, said dealers and other sources. The evaluator will look into such issues as dealer candidate selection, training, financing structure and the viability of the points, the sources said. Jackson is working with GM to choose the evaluator.
In May, Lee McDaniel, GM general director of minority dealer development, said GM does not have a campaign to terminate minority and African-American dealers and that GM wants to improve the operation, not remove the operator.
Separately, about 20 GM dealers who attended the National Association of Minority Automobile Dealers conference in New Orleans last week signed a letter in support of McDaniel. They fear he will be the target of bad publicity about GM's minority dealer program. The letter is addressed to GM Chairman Smith, but has not been sent, dealers said.
Dave Smith, Ford manager of minority dealer operations and training, said Ford does not have a program of 'systematic removal' of minority dealers as alleged in Jackson's letter and that Ford has not imposed a moratorium on the closure of failing minority dealers.
He said Ford executives have met with Jackson and that the company meets regularly with the Ford Lincoln-Mercury Minority Dealer Association. Smith said Ford has a systematic way of reviewing and trying to help dealerships in trouble, which includes input from the Ford L-M minority dealer group.
OUTSIDE HELP WELCOME
Smith said the number of unprofitable Ford and L-M dealers is not as high as cited by the dealers, but he could not cite exact numbers.
'Over the last couple of months, we've shown an increase in the number of dealers making money,' he said.
Richard Davis, president of the GM Minority Dealer Association, and Winston Pittman, president of the National Association of Minority Automobile Dealers, say they welcome the outside scrutiny.
Davis said he believes that the GM minority dealer development program has made tremendous strides, but he recognizes that the program is not perfect.
In the late 1980s, he said, GM minority dealers were failing at a rate of 30 or 40 a year. In 1996, only three minority dealers were terminated for financial reasons.
He said many of the dealers terminated over the years were first-generation dealers who put their homes and livelihoods on the line and lost everything.
'If an independent evaluator can save one or two dealers over 20 years, that's 20 lives and families that don't have to be disrupted,' he said. 'You see them lose everything, and its gut wrenching.'
Pittman added that the independent evaluator is needed 'to find out why we're having this failure of dealers at a time when we're having the greatest growth and profit period in the history of the auto industry.'