DETROIT - Mel Farr - once the owner of the nation's largest group of black-owned dealerships - is dismantling his empire.
Four years ago, Mel Farr Automotive Group's string of 11 new-car dealerships generated $568 million in revenue. His 13 franchises included Ford, Toyota, Mazda, Suzuki, Volks-wagen and Hyundai, and Farr dreamed of opening a string of used-car superstores.
Now most of it is gone. Under pressure from Ford Motor Credit Co. and other creditors, Farr over the past two years has sold nearly all of his new-car stores. Today, Mel Farr Automotive has just one 18-acre location in a Detroit suburb that houses a Hyundai and Kia dealership, a used-car dealership and a consumer finance company that specializes in subprime lending.
The details of Farr's rapid decline have begun to emerge. Last December, Derrick Mayes, Farr's former CFO, sued Mel Farr Enterprises in Oakland County Circuit Court in suburban Detroit. Mayes alleged his career was damaged by the company's financial trouble and said Farr owes him wages.
The lawsuit also alleges Farr, now 57, was forced to sell six dealerships after he defaulted on $50 million in debts owed to Ford Credit. And it purports to describe the collapse of a $36.5 million corporate bond issue in 1999 that was a crushing blow to the fading Farr empire. Farr had intended to use that money to expand his consumer finance operation and open more used-car superstores.
A spokesman for Ford Credit declined to comment. But Farr addressed Ford Credit's role in a court document filed in March. According to Farr, Ford Credit "was responsible for removal of certain assets of the defendant, thereby causing and or contributing to the financial collapse of the securitization."
The same document also blames nearly every party involved in the bond sale as being "wholly or partially at fault in this cause."