Henry Jackson has a problem.
His company, Jackson Plastics Inc., a supplier of plastic wheel covers, is racking up so much new business that sales are rising 50 percent a year.
To keep up, he needs money - lots of money - and that means taking on debt or attracting outside investors. But for the Nicholasville, Ky., company, a stock offering is a no-no: Henry Jackson is black.
If his company goes public and issues stock, he'll have to dilute his ownership. But if he keeps less than 51 percent of his company, customers no longer will consider Jackson Plastics to be minority-owned.
It's a cruel irony: The same affirmative-action policy that promises Jackson more business also limits his opportunities.
'We want to be a major player in the industry,' Jackson says. 'But I also want to remain master of my own destiny, and keep 51 percent ownership. So we have to look at other means of raising money.'
It's a touchy issue. Some black leaders, including Jesse Jackson, fear a change in the rules could spawn white-owned companies that recruit minority businessmen to act as fronts.
The industry is painfully aware of the dilemma. Last month, the National Minority Supplier Development Council provoked a controversy when it proposed easing the rules on what constitutes a minority firm. Companies would be allowed to drop to 30 percent minority-owned on a case-by-case basis if they meet three criteria:
1. They must show that the change would result in more business.
2. The ownership change must come as a result of an institutional investor's involvement.
3. The supplier must remain minority-managed.
Proponents of the rule change hail it as a way to bring capital infusions to minority auto suppliers.
'We viewed it as a no-brainer,' says Steven Sims, the council's vice president of programs and field operations. 'We've got to find a way to let these companies grow. You can't grow your business through debt. Eventually, it takes venture capital.'
Others were leery. Jesse Jackson says he supports studying the question further, but believes that 30 percent minority ownership is too little for a company to qualify as minority-owned.
The supplier council defused the controversy by delaying a decision until January. Sims expects it to be passed at that time, and the auto industry widely supports the change.
GM purchasing chief Harold Kutner is chairman of the council's executive committee. Other purchasing officials also are supportive, believing that lowering the ownership threshold will let minority suppliers grow into the global stature that automakers desire.
'They have to have access to capital to grow,' says Ray Jensen, Ford's director of minority supplier development. 'Some of our suppliers are scratching at the threshold of needing to do a public offering. It should be an option.'
Billions of dollars in parts contracts are riding on the outcome. This year, GM expects to buy parts and services worth $2 billion from minority-owned suppliers. Ford Motor Co. will spend $2.7 billion, and increase that to $3.5 billion in 2004. DaimlerChrysler will spend $2.1 billion this year.
Major suppliers have their own aggressive programs. Johnson Controls Inc. alone will buy $235 million in parts and services from minority companies this year and $317 million next year. In addition to purchasing, Johnson Controls has helped minority suppliers relocate, open new plants, enter new markets and launch new joint ventures.
For now, the industry is balancing its desire to direct more business to minority suppliers with the companies' ability to absorb it. A number of suppliers have seen rapid growth in the 1990s as major industry players formalized their diversity-purchasing plans.
One of them, the Detroit-based machining supplier Uni Boring Co. Inc., has risen from sales of $800,000 in 1983 to an expected $110 million this year. In recent years, the Hispanic-owned company has expanded into additional plant sites in Michigan and South America.
'We're definitely trying to be global,' says Uni Boring ChairmanFacundo Bravo. 'We see moving into Europe and elsewhere. Money is always on our mind. And maintaining that 51 percent ownership level is like a wall in front of you.'