DEALERSHIP DIVERSITY
There are 115 new-car dealerships in Orange County and Milton Barnes owns just one of them.
His Yorba Linda Chevrolet is a standout nonetheless--one of eight minority-owned new-car dealerships in the county.
Barnes, an African American who worked for General Motors for 30 years before taking over the 75-year-old dealership on June 4, says minorities are woefully underrepresented whenever car dealers gather.
“There are a lot of obstacles for anyone who wants to be a car dealer and who doesn’t inherit [a dealership], but there are a lot more barriers for African Americans and other minorities,” said Barnes.
The complaint isn’t new. And the numbers provide powerful ammunition for those who say the auto retailing industry has been slower than most to recruit minorities.
Civil rights activist Jesse Jackson says the lack of minority dealers and the absence of efforts to promote minority candidates for dealerships is most pronounced among import auto companies, the biggest of which are Asian and headquartered in Orange and Los Angeles counties.
In conjunction with the National Assn. of Minority Automobile Dealers, Jackson is calling for a boycott of offenders, including Mitsubishi Motors, whose U.S. sales and dealer development arm is based in Cypress.
For their part, officials at the import companies agree there are not enough minority dealers, but say they have had little to do with the problem.
The number of dealerships in the country is shrinking, not growing. Most dealerships are passed down through generations in the same families and the economics of the auto world are such that only the highly experienced and financially well-off need apply when a dealership does become available on the open market. All those things, they say, have barred not only minorities, but the bulk of candidates from becoming new-car dealers.
The financial barrier is the toughest to overcome these days, dealers say. Most car companies require dealer candidates to use their own funds to make a down payment of at least 15% and often as much as 25% on the dealership. That can run anywhere from $100,000 for a small rural dealership to $2 million or more for a major brand in a major market. And the money cannot be borrowed.
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Still, Barnes and other minority dealers say those with a passion for the business usually can overcome that obstacle. Barnes, for instance, scrimped to save almost $200,000 in his first 20 years as a GM wholesale representative and then invested that in a real estate venture that netted him nearly $100,000 more over the next 10 years.
“You have to sacrifice, but if this is what you want, you do it,” he said.
The National Assn. of Minority Automobile Dealers says it has had to hire a private consultant to take a count of minority-owned dealerships because many manufacturers won’t release information about the makeup of their dealer groups.
The group found that fewer than 1,200 of the nation’s 22,750 new-car franchises are minority-owned. And in a country where ethnic minorities make up 30% of the population, “it is absolutely unacceptable” that they have 5% or less of the new-car dealerships, says Shiela Vaden Williams, executive director of the minority dealers group.
In Orange County, the numbers are scarcely better. The Orange County Motor Car Dealers Assn., to which almost all new-car dealers belong, counts only eight dealerships owned or run by ethnic minorities and two owned by women.
And although Latinos make up nearly 25% of Orange County’s population, there is only one Latino new-car dealer, Steve Rojas, owner of Fullerton Dodge.
Rojas, who spent 14 years with Chrysler Corp. including two as an executive with its minority dealer program--of which he is a graduate--says the lack of minority dealers is “a shame,” but he doesn’t blame it on prejudice.
“The problem is that the pool of dealerships is getting smaller and smaller,” he said. “Independents have to compete for every available franchise with the giant mega-dealers. That’s what’s scary.”
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But many believe that racial prejudice has played a historic role in limiting minority ownership of new-car franchises. Several African American dealers say that as recently as the late 1980s most blacks felt that the major Japanese car companies purposely excluded them when seeking new dealers.
“No one would say it to your face, but the word was out that blacks need not apply,” said Lester Jones, who operates the Buena Park Lincoln-Mercury/Isuzu dealership under Ford Motor Co.’s minority dealer program.
While still critical of the slow pace at which some of the Japanese auto companies are developing minority dealers, Jones says the climate has changed. Isuzu certainly raised no objections about his taking over the Buena Park franchise, he said.
One Asian American who runs a major Orange County dealership for an Asian-owned corporation said that discrimination has given way in recent years to a clamor by car companies to find qualified minority candidates for the relatively few franchises that become available each year.
“If anything, they are all bending over backward now to do favors” for minorities, said the dealership manager, who asked to remain unidentified. He said he has been approached “many times” in recent years by auto companies seeking to recruit him for their minority dealer programs but so far has turned them down “because I just don’t feel that I am ready yet.”
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It wasn’t until the early 1980s that the U.S. auto companies--Ford, Chrysler and General Motors--seriously began recruiting minority dealers and providing training programs for minority candidates. Today, Ford is the only one of the Big Three domestic car makers with more than 5% minority-owned dealerships.
Import car companies have generally done less and done it slower than the domestics.
Congress conducted a seven-month hearing in 1992 into allegations by the National Assn. of Minority Automobile Dealers that Japanese car companies were systematically excluding minorities from owning franchises.
Yet today only three of the nine Asian car makers with U.S. headquarters in Southern California say they have minority development programs. And two of those programs--at American Honda Motor Co. in Torrance and Mazda Motor America in Irvine--are just being launched.
Nissan Motors, which doesn’t have a minority program, offers a typical explanation.
“The number of minority dealers certainly is less than it should be, and we are trying to initiate several steps to improve things,” spokeswoman Diedre Francis Dickerson said. “But the situation is difficult because the dealer body is getting smaller, not larger, and the total investment required to be a dealer is huge. It’s not that we can’t find qualified candidates, but that we can’t find candidates who really want to be dealers and risk all of their capital.”
The domestic auto companies found a way around that after many new minority dealerships created in the 1980s failed when the economy dried up in the late ‘80s and early ‘90s.
All three domestic minority development programs allowed dealer candidates like Jones at Buena Park Lincoln-Mercury to put their investment funds into escrow accounts while they operate a dealership for several months before deciding whether to buy it. GM has eliminated the grace period, but at Ford and Chrysler the investment capital still is returned and is available to fund another effort if the candidate backs out.
Mitsubishi, the only Asian car company being criticized by name in Jackson’s campaign to improve minority representation, has the second-highest percentage of minority dealers in the industry and a dealer development program that mimics the Big Three programs.
Of Mitsubishi’s 505 dealers, 22, or 4%, are ethnic minorities and 23 are women. By comparison, only 3% of General Motors dealerships are owned by minorities and fewer than 2.5% of Chrysler’s dealers are minorities. At Ford Motor Co., which Jackson holds out as an example of the kind of progress he’d like to see all car makers achieve, there are 332 minority-owned franchises, or just under 7% of its total of 5,034 dealerships. A decade ago, Ford had fewer than 150 minority owned dealerships.
Mitsubishi Motor Sales also has a 2-year-old program aimed at developing minority dealers by providing training and underwriting the steep costs of opening a dealership.
Kevin Ormes, Mitsubishi’s vice president for marketing and dealer development, says the company has met with Jackson to discuss minority development issues and has agreed to make changes in its program. He said he believes the Cypress-based sales and marketing company is being singled out because of Jackson’s prior call for a boycott because of the harassment suit against its independently run sister company, Mitsubishi Motor Manufacturing in Illinois.
“Other than that, I just don’t know why,” he said. “We’ve been very active in minority development.”
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The manufacturers say they can only work with the raw materials the nation’s existing dealerships provide--that the number of minority dealer candidates depends on the availability of a pool of well-trained dealership managers.
“If there are few minorities with experience as general managers in dealerships, that’s not the manufacturer’s fault,” said Jay Amestoy, vice president for corporate affairs at Mazda Motor, which for the past four years has retained a private consultant to identify qualified minority dealer candidates.
Most dealers work their way up from the sales floor to the management suite, and few are selected for dealer training who haven’t served 5 to 10 years as a general manager, responsible for all aspects of a dealership’s operation: new and used car sales; financing and insurance; parts and service; administration; leasing and the collision repair and paint shop.
“You have to know how to run five or six separate businesses,” Jones said. A former Pasadena city employee, he owned a used-car dealership for several years before enrolling in the GM minority dealer program. He also worked at dealerships for nearly five years while scouring the country looking for a franchise he wanted to buy.
Still, most dealer development programs provide hands-on training in all fields of dealership management. Non-dealers like Barnes and Rojas, who both came up through a manufacturer’s ranks, can obtain the experience needed.
Rojas says that minority dealers themselves can do a lot to help bolster their numbers. “My goal is to be part of five [minority-owned] dealerships by the time I’m 50,” the 44-year-old Dodge dealer said. He wants to identify promising minorities and invest with them in dealerships that they would run, he said.
Rojas, vice president of the Orange County Motor Car Dealers Assn. this year, says he believes that most dealers today “understand and want to help heal some of the social inequities we’re talking about.”
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But dealers can do only so much, said minority dealers group director Vaden Williams. Only the manufacturers can provide the in-depth training and the financial assistance needed to dramatically increase the number of minority dealers, he says.
And if it takes a boycott later this summer to get things moving, as Jackson has suggested, then let it come, she says.
Many dealers--including some minorities--disagree, pointing out that a boycott of a manufacturer’s car will hurt every one of that car maker’s dealers, including the minority dealers.
“Jesse Jackson is a good social conscience,” said Rojas, “but I really don’t want him speaking for me. I don’t think it would be fair to boycott the local dealer for something he had no control over.”
Others, though, agree with Vaden Williams that a boycott, like a strike, is a necessary bargaining tool that trades short-term pain for long-term gain.
“A boycott won’t be aimed at manufacturers showing support for the minority community,” Jones said.
“It will be pressuring those that are not doing anything. And the dealers are hand-in-hand with the manufacturers; you can’t have one without the other,” he said. “Maybe dealers [who don’t like the idea of a boycott] should start pressuring their manufacturers for some changes.”
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
WHO’S IN THE DRIVER’S SEAT
Toyota Motor Sales USA Inc.
Headquarters: Torrance
Total dealerships: 1,190
Minority-owned dealerships: 44
Female-owned dealerships: 23
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Nissan Motor Corp. USA
Headquarters: Carson
Total dealerships: 1,090
Minority-owned dealerships: n/a
Female-owned dealerships: n/a
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American Honda Motor Co.
Headquarters: Torrance
Total dealerships: 1,267
Minority-owned dealerships: 37
Female-owned dealerships: 22
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Mazda Motor America
Headquarters: Irvine
Total dealerships: 900
Minority-owned dealerships: 29
Female-owned dealerships: 164 women have part-equity interests
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Mitsubishi Motor Sales of America
Headquarters: Cypress
Total dealerships: 508
Minority-owned dealerships: 22
Female-owned dealerships: n/a
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Hyundai Motor America
Headquarters: Fountain Valley
Total dealerships: 468
Minority-owned dealerships: 22
Female-owned dealerships: n/a
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Kia Motors of North America
Headquarters: Irvine
Toal dealerships: 170 dealers
Minority-owned dealerships: 17
Female-owned dealerships: n/a
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American Suzuki
Headquarters: Brea
Dealerships: 320
Minority-owned dealerships: 16
Female-owned dealerships: 7
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American Isuzu Motors
Headquarters: City of Industry
Total dealerships: 581 dealers
Minority-owned dealerships: 5
Female-owned dealerships: n/a
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n/a: Information not available
Source: Individual auto manufacturers
