Import Outlets Slipping by Some Minority Dealers : Foreign Auto Makers Charged With Making It Tough for Blacks, Asians and Latinos
Mike A. Hernandez Sr., a car dealer for 18 years, still remembers the tough competition from imports in the early 1980s, so last fall he set out to get an import dealership himself.
“To stay in business for the next 10 years, you can’t be a single-line franchise,” he said. “The small dealerships are going to be eaten alive. If you don’t have a domestic and import franchise, you won’t survive.”
But Hernandez remains chagrined by what he found when he went looking for an import franchise. “I did apply with Nissan and a couple places, and they make it tough,” he recalled. “We have been applying, but they’re kind of tough on minorities.”
“Toyota, Nissan, all the big importers can put minority dealers in, if they want to,” added Hernandez, owner and president of Camino Real Chevrolet in Monterey Park, the nation’s eighth-largest Latino-owned dealership. “The Japanese have not been trying.”
Minority dealers such as Hernandez are becoming increasingly vocal in their criticism of foreign car makers. Fewer than 100 import dealers in the United States are black, Latino or Asian, they point out. Honda faces a $73.2-million discrimination lawsuit by a black dealer who says he was unfairly denied a franchise in Georgia. And, unlike General Motors, Ford and Chrysler, the importers have failed to establish any formal programs to train or finance minority dealers.
Blacks are made to feel unwelcome if they apply for import dealerships and so don’t apply, even if they have the money, said Bill Wright, owner of Pasadena Lincoln-Mercury. “It’s like getting a job in Beverly Hills used to be in the ‘30s and ‘40s. There are very few people who have the determination to get rejected absolutely.”
For their part, the major importers, all based in Southern California, reject any suggestion that they discriminate against minorities in the way they hand out dealerships. “To my knowledge, there’s no policy among the importing companies to discriminate against anyone in establishing dealerships,” said Charles H. Lockwood, vice president and general counsel of Automobile Importers of America, a trade group.
“Generally, we don’t go into a minority count, whether it’s blacks or Hispanics or females. We don’t get into a numbers game,” said Honda spokesman Kurt Antonius, adding that the company does not have a minority dealer recruitment or development program.
Buyers Are Top Priority
“We are aware that it could be a problem. But to be honest with you, we don’t get many inquiries” about the number of minority dealers, said Nissan’s William B. Akers, director of U.S. market representation.
Companies say that few current minority dealers have become well enough established to afford the expensive additional facilities the importers require and that their first priority must be to ensure that car buyers are treated properly.
“We would feel that if a minority were qualified, he would come out and say so,” said William R. Bruce, general manager of a new line of Nissan luxury cars--called Infiniti--which has enlisted seven dealers so far, all of them white. Bruce added that “the social responsibility is that we can find the best dealers so that they can provide the best possible service to customers.”
Minority car dealers are rare not just at Nissan and Honda but at all major European and other Japanese makers. Of Detroit auto makers’ nearly 20,000 dealerships, 354 are black-owned, or 1.8%. The five biggest Japanese importers have about 5,000 dealerships--only 11, or 0.2%, are black-owned. Porsche of West Germany and Hyundai of South Korea have none.
Latino and Asian dealers of imported cars also are scarce, though the limited figures available seem to show less of a difference between domestic and foreign car makers.
Importers offer several explanations. Some downplay the importance of a dealer’s race, saying they are unaware of how many minority car dealers they have.
Nissan keeps no formal figures on the race of its dealers, Akers said, adding that he knew of only three black owners among the company’s 1,108 dealerships. Nissan has never had programs for recruiting, training or financing dealers, nor is the company studying the possibility of starting such programs, he said.
Unintended Consequences
Importers also say that the Big Three aren’t doing much better. “I don’t think there’s a hair’s difference between imported and domestic (car makers.) It’s totally indefensible on both sides,” said Robert M. McElwaine, president of the Washington-based American International Automobile Dealers Assn., which represents 9,100 of the nation’s nearly 10,000 imported car franchises.
Sometimes a preference for minorities can have unintended consequences as well, noted Andy Chang, an immigrant from Taiwan and owner of Alhambra Mitsubishi and Toyota of Pasadena. He is upset that Chrysler refused to award him a newly created franchise in Alhambra. “They turned me down because I was the wrong color. They’re going to have a black come into an Oriental town and try to sell American cars. All I can say is good luck.”
A Chrysler spokesman said the Alhambra franchise has been “targeted” for a “minority” but that there were other reasons for turning down Chang. “We could not reach agreement with Mr. Chang over control of the property,” spokesman Tom Houston said.
Several importers say they are stepping up efforts to add minority-owned dealerships.
Mitsubishi says it is giving minorities “first priority” as it adds franchises. Hyundai’s director of dealer development, Richard D. Caille, said he flew to Chicago in October just to talk and hand 20 dealership applications to Michigan State Rep. Raymond M. Murphy, who held a hearing last summer on the scarcity of minority-owned imported car dealerships.
Toyota has started an informal program of individually placing about 40 minority business people as senior managers at cooperating dealerships, said James R. Olson, corporate manager for government relations at Toyota Motor Sales U.S.A. The importer and distributor hopes to start awarding dealerships to blacks now that growing U.S. production is allowing it to sustain an increased number of franchises, he said.
Olson said he felt that a dealer’s race is unimportant to car buyers--”I suspect a black or Hispanic is color-blind,” and will buy the cheapest available car, he said. But Olson nonetheless acknowledged a need for recruiting more minority dealers.
“The point of having black dealers is, why wouldn’t we?” he asked. “We’re an American car company, other American companies do, and don’t you think it’s about time Japanese companies do?”
But some black dealers say the steps taken by importers so far are not enough. They criticize what they perceive as unhelpful attitudes at importers and urge them to match the Big Three’s efforts.
‘A Callous Way’
“None of the Japanese auto makers have done anything significant to date,” said Bill Shack, half owner and chairman of a Long Beach-based company with seven dealerships. He said such inaction is a symptom of “a total insensitivity to the ethnic makeup of this country.”
Shack added that: “It has just been a very subtle and callous way that Japanese manufacturers have denied blacks an entree. . . . The dealer thing is just what stands out, is very visible. When you look behind the veil you see total insensitivity.”
Importers have few black dealers, said Urban Bourgeois, half owner of Ontario Suzuki and Burbank Dodge, because “there simply hasn’t been enough pressure. The black dealers that exist with the Big Three exist because of the pressure that’s been brought during various phases of the civil rights movement.”
Shack pointed to a little-known case in Atlanta, in which Chrysler dealer Johnny Mac Brown has sued Honda for $73.2 million, alleging that the Japanese car maker violated his civil rights in denying him a dealership when he says that he met all their requirements. “He just wanted to pay his money and buy his dealership,” said Thomas B. Branch, Brown’s lawyer.
Filed two years ago, the case is scheduled to go to trial later this spring. Honda declined to comment on the case and has obtained a court order preventing Brown and Branch from discussing specifics of the case.
The trial will follow revelations 12 days ago that Honda and Toyota have negotiated costly settlements of Equal Employment Opportunity Commission investigations into alleged racially discriminatory hiring practices.
Shack and others hope that some of these legal actions will pressure the importers to change. He wants importers to start emulating Detroit’s Big Three. Ford, Chrysler and GM have set up 18- to 24-month dealer training programs, complete with both classes and temporary management jobs in existing dealerships. They also have long-established programs to subsidize dealers--General Motors started its Motors Holding dealer financing arm in the late 1920s--and now use these outfits to supply up to 87.5% of the investment a minority entrepreneur needs to open a new dealership or buy an existing one.
But newcomers of every race find it tough without financing to break into the car retailing business nowadays--partly because they must bid against existing dealers whose operations generate lots of cash and who are hungry to diversify.
Dealerships are very expensive and getting more so. The typical investment to start a Hyundai dealership includes $1 million to $1.3 million for land, $750,000 to $1 million for a building and facilities, and at least $500,000 with which to buy the first batch of cars and pay salaries until the dealership starts making money, said Caille, Hyundai’s director of U.S. dealer development. No financing help is available from the company.
“There are very few if any black Americans who are able to risk that kind of money in a business they know nothing about,” said Lenny Woods, Shack’s partner in Shack-Woods & Associates, the nation’s second-largest black-owned auto dealership company.
No Use Talking
When Camino Real’s Hernandez applied for a Nissan dealership last fall, his application was sent to the company’s Infiniti division, which told him that he would need $3 million and that no financial help was available. Hernandez was amazed and gave up on gaining such a dealership.
“When someone hits you for so much investment,” Hernandez said, “there’s no use talking to them.”
Financing assistance alone may not be enough, he said. Hernandez said he remembers that four Latino-owned dealerships in Southern California went bust in the 1970s despite financing assistance from manufacturers.
Most of the dealers failed because they lacked experience at working in a dealership and didn’t know what to do with the preferential financing they received, said Hernandez, who spent 10 years working for three other dealerships before buying his own. “It was because they were not prepared to be dealers. . . . It’s like giving a kid $500,000.”
But officials and spokesmen for the Big Three and 12 importers opposed calls by Shack and Woods for them to create a pool of seasoned future minority dealers by subsidizing the employment of minority senior managers at current, predominantly white dealers. Dealerships are free-standing firms in which manufacturers try not to meddle, they said. “They’re all owned by independent business people who choose their own management teams,” said Joseph J. Vasquez, GM’s director of dealer business management and development.
“My advice would be for existing black dealers to train individuals within their operations so that they can make recommendations to the manufacturers and importers that they have these people available,” said Rod Hayden, senior vice president and general manager of Mazda Motors of America.
Local black dealers argue that manufacturers who do not cultivate the black market by naming black dealers are doomed to lose that market. Shack said: “We’re not talking about a charity and philosophy thing. We think there’s a great big black market. . . . We feel that we will only be satisfied when we have parity--and we’re a long way from that.”
MINORITY-OWNED U.S. CAR DEALERSHIPS
TOTAL BLACK- MANUFACTURER DEALERSHIPS OWNED PERCENT LATINO PERCENT ASIAN General Motors 10,065 110 1.09 48 0.48 16 Ford 5,447 187 3.40 28 0.51 6 Chrysler 4,050 57 1.41 17 0.42 16 Honda 1,150 2* 0.17 NA NA NA Nissan 1,108 3 0.27 NA NA NA Toyota 1,092 3 0.27 6 0.55 5 Volkswagen 865 5 0.58 9 1.04 5 Subaru 831 2* 0.24 NA NA NA Mazda 800 1 0.13 10 1.25 6 Mercedes 422 1* 0.24 NA NA NA Yugo 330 0 0.00 2 0.61 0 Porsche 320 0 0.00 NA NA NA Hyundai 237 0 0.00 4 1.69 4 Suzuki 210 1 0.48 3 1.43 1 Mitsubishi 205 2* 0.98 NA NA NA
MANUFACTURER PERCENT General Motors 0.16 Ford 0.11 Chrysler 0.40 Honda NA Nissan NA Toyota 0.46 Volkswagen 0.58 Subaru NA Mazda 0.75 Mercedes NA Yugo 0.00 Porsche NA Hyundai 1.69 Suzuki 0.48 Mitsubishi NA
* Estimates by National Assn. of Minority Automobile Dealers
Source: Company statements
