2020 racial strife underscores challenges faced by minority dealers

Karmala Sutton has had a crash course in how to wade through unpredictable situations in her first year as a dealer manager.

There's the coronavirus pandemic, of course. The political climate is so heated that Sutton blocked Fox News and CNN from the waiting area TV to cut down on complaints, leaving customers to watch home remodelings on HGTV instead.

And Sutton's store, Honda of Kenosha in Bristol, Wis., is one of 265 Black-owned dealerships in the U.S. at a time when she believes the nation is in the middle of a new civil rights movement.

The killing of George Floyd, who died in Minneapolis in May after a police officer kneeled on his neck for more than eight minutes, kick-started an uprising that spread across the world and pushed issues of police brutality and systemic racism to the forefront. A police shooting in Kenosha that paralyzed another Black man, Jacob Blake, in August brought those issues even closer to the doors of Sutton's dealership. In the violent aftermath of Blake's death, two protesters were killed, and a used-car store in Kenosha burned down.

"It's one of the things that's going to be in the history books, 15 years from now, where people are going to look back and look at this moment where people are just sick and tired," Sutton, 33, told Automotive News. "They're sick and tired of police brutality. They're sick and tired of exclusion. They're sick and tired of people who don't understand how minorities feel or think and don't ask for our opinions, and don't have people sitting at the table who are making those decisions to help them understand."

While Floyd's death opened eyes and put a greater spotlight on inclusion in the corporate world, this year's events also have prompted the National Association of Minority Automobile Dealers to reaffirm the diversity message that it has been delivering to automakers since the group's founding 40 years ago.

NAMAD has been asking automakers to put their commitments in writing for years, hoping it would help companies hold themselves accountable.

"You see and breathe it as those leaders see and breathe it every day," NAMAD President Damon Lester said. "So putting things in writing also helps with the next person in that leadership seat to understand what the vision was, and hopefully ... they enhance it and not get rid of it, as many companies have."

The auto industry's revolving door for executives can complicate the fight for inclusion and make building momentum difficult, Lester said. He said manufacturers such as Toyota Motor Corp., which has been consistent in its leadership, embraced diversity and made it a part of its business imperative, have done the best work.

After Floyd's death sparked widespread protests, the Detroit 3 and other automakers issued statements condemning racism.

Some followed up with concrete action, as well.

General Motors formed an Inclusion Advisory Board in June. Ford Motor Co. engaged with its dealer community to see how they were feeling, said Eddie Hall III, CFO for Hall Automotive Group, which has stores in suburban Detroit.

In July, Toyota, reflecting the sensitivity of the moment, said two Indiana plant workers who were involved in a video mocking Floyd had been let go.

Meanwhile, automakers have been working to increase their minority dealership ranks.

GM led the industry with a gain of nine minority dealerships in 2019 and this month said it's on track for a net increase in its minority dealer count this year. The company said participants in its Minority Dealer Development program continue to outperform all GM dealers in profitability, with the average participant on pace to achieve a higher net profit before bonuses and taxes than the average GM dealer.

But Lester wasn't impressed with some declarations he saw from automakers that he felt weren't backing up their words.

"To see some of the statements that were made and looking at these manufacturers internally, it was almost like apples and oranges in many cases," Lester said. "We look for them to at least look at themselves in the mirror and advocate for change within themselves, and then that's where it has to bend first."

The story of minority dealers in the U.S. has been an eventful one.

When NAMAD formed in 1980, the nation was in the midst of a recession. Chrysler was on the verge of collapse, gasoline prices were soaring and interest rates were climbing.

Some Black-owned dealerships folded under the pressure, and the body as a whole was in an existential crisis, less than 60 years after the first known Black new-car dealer, Homer Roberts, set up shop in 1923.

For the burgeoning NAMAD, the focus was survival. Minority dealers used their collective voices to lobby for assistance from President Jimmy Carter's administration, which created a loan program that kept stores afloat through the turmoil.

In 2020, the situation is eerily similar. The economy is again in recession, this time racked by an unrelenting pandemic. The government provided temporary relief with a round of loans as dealerships battled through a disastrous spring.

Although minority dealers overall are seeing gains, ownership numbers for Black dealers have stagnated at around 270 stores. Before the Great Recession, there were more than 800 Black dealers.

Jenell Ross, president of Bob Ross Auto Group in Centerville, Ohio, believes her father would be pleased with what NAMAD has achieved. One of the founding members of the organization, Bob Ross was an auto retailing pioneer, becoming the nation's first Black Mercedes-Benz dealer in 1979. He died in 1997 at age 62.

"I think he would say that NAMAD has continued to be very necessary for all minority dealers and those aspiring to be," Ross said. There "probably would be some disappointment in regards to the small numbers that are still being reflective of the body as a whole, but still, definitely, seeing the validity that NAMAD brings."

Many of the challenges of 40 years ago haven't dissipated. Getting a foot in the door as a fresh candidate takes some hard work, and the costs to do so have only grown.

Irving Matthews, NAMAD's chairman from 2017 through 2019, doesn't think support for minority dealers is quite as strong as when he got into the business in 1991. Matthews owns two Ford stores in Florida, a Kia store in the Atlanta area that he bought in 2018, and Mazda and Toyota dealerships in Portland, Ore., that he recently bought.

Matthews came into the business with capital. Before getting into the car business, he worked in manufacturing at Procter & Gamble for 14 years and spent six years running Frito-Lay's manufacturing operation in Orlando.

"There are funding sources with some of the manufacturers right now, there are opportunities to go to [the National Automobile Dealers Association convention] and get training and so forth, but they aren't out there recruiting individuals like they were when I went into it," said Matthews, 73, who is now preparing two of his sons to succeed him after retirement.

Succession planning is another factor critical to keeping minority-owned dealerships going. The next generation of minority dealers are hitting the ground running now.

Sutton and her sister, Karen Ford, grew up around the business and eventually joined their father, Nathaniel Sutton, who founded Sutton Auto Team. In addition to Honda of Kenosha, the group has a Ford-Lincoln dealership in Matteson, Ill., and a Honda store in Coon Rapids, Minn.

But not all minority dealers nearing the end of their career have family in the wings to take over. If selling the store is the best option, there isn't always another minority owner ready or willing to buy, given that they make up only about 6 percent of dealers.

The outcomes of such transactions can play a big role in determining whether minority-owned dealerships will live on or gradually dwindle.

Lester said NAMAD can't control the attrition. Some individuals will sell to a nonminority, Lester said, while others may end going out of business or giving their stores back voluntarily.

"Minority dealers are businesspeople, too," Lester said. "We try to put some processes in place to deter a lot of the attrition that may take place. However, it's difficult to try to do it when you've got public companies. The price of tea is extremely high right now."

In Michigan, Hall, the Hall Automotive CFO, watched his father, Eddie Jr., build a formidable business and knew he wanted to build on the family legacy. The group now has four dealerships. He has an ownership stake in Northland Chrysler-Dodge-Jeep-Ram in Oak Park, a struggling store the group purchased in 2019 and quickly turned around.

The previous ownership approached the Detroit market as a subprime haven, so the store carried only models the owners thought residents could afford. The dealership did almost no leasing and stocked few Ram pickups.

So Hall and his team carried more Rams, went after lease deals, priced used vehicles to reel in online shoppers and ditched misconceptions about Detroiters.

Hall wanted to participate in the Floyd protests, but with the unrest around Detroit, he didn't think that would be safe. Instead of pounding the pavement, he decided to donate to worthy causes.

Hall said the Floyd killing deserved the attention it received but lamented that the situation was nothing new for the Black community. The spotlight was just bigger this time.

"I've grown up extremely privileged, live in the suburbs, and I can feel my heart rate rise whenever I drive past a police officer knowing that I've done nothing wrong," Hall said. "We're raised to have that fear because of everything that happens, and that's a shame. We're citizens like everyone else, and we shouldn't have to feel any different than anyone else."