Minority Dealers Concerned Their Gains Will Erode

Sholnn Freeman, Washington Post, April 28, 2009

Since the 1970s, General Motors has led the way in providing opportunities for minorities to own car dealerships. The automaker pioneered special training programs and put money behind candidates for new dealerships.

Now, after almost four decades of slow but steady progress, minority dealers are increasingly worried that the latest wave of GM cuts could erode any gains. As part of its latest restructuring, GM yesterday said it planned to slash about 2,600, or 40 percent, of its 6,200 dealerships. GM currently has about 240 minority dealers.

GM officials have yet to list which dealers could face closure. GM spokeswoman Susan Garontakos said decisions will be based on individual dealer performance but said the company remains committed to expanding the number of minority-owned dealerships. The criteria include sales, customer satisfaction ratings, capitalization, profitability, location and the quality and size of the store. Minority dealers say those criteria could prove fatal for their operations.

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“I’ve got two of the largest volume Chevrolet stores on either side of me,” said Mike Johnson, owner of Michael Chevrolet in New Baltimore, Mich. “In terms of raw numbers, we don’t compete with the larger, well-established white dealers. GM is going to be looking for the dealers who dominate their market territories.”

GM dealers see other bad signs. They point to GM’s decision to kill the Pontiac brand. Nearly a third of GM’s minority dealers sell Pontiacs, according to the National Association of Minority Automobile Dealers.

The number of minority dealerships industry-wide has slipped to about 1,200 from a peak of 2,000 in 2002 and 2003, according to NAMAD. Johnson said he was particularly concerned about the staggering decline of black-owned dealerships at GM.

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Even during good times, minority dealers struggled. Their problems have centered around insufficient capital and being placed in poor locations by the companies. The recession has brought on plummeting sales and tight credit markets, exacerbating the dealers’ troubles.

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Johnson and other dealers say they are troubled by cutbacks in staffing levels of GM corporate initiatives that support minority dealer development. Dealers say the department has been “basically dismantled” by the cutbacks at GM.

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