A Succession Story

Jimmy Walker had left Laurel Ford Lincoln Kia Inc. (No. 59 on the BE Auto Dealers list with $21.7 million in revenues) in the hands of his managers to focus on his other dealerships. But when the business lost a combined $1.4 million in 2007, 2008, and 2009, the 25-year industry veteran was compelled to return to stop the red ink before transitioning the business to his daughter.

The losses were largely a result of a miscalculation of the severity of the nation’s economic crisis that devastated the auto industry, says Walker. “I didn’t think that it could drop that far,” the CEO asserts. “It was a poor business decision.” But Walker remained resilient. He went back to Laurel Ford after a five-year absence and, over time, sold his three other dealerships in Mississippi, Louisiana, and Tennessee.

The first order of business was to cut expenses at the Laurel, Mississippi-based dealership. This consisted of firing the store’s general manager and parts and service director. He cut expenses from about $458,000 per month to $225,000 and reduced payroll by cutting the staff from 68 people to about 29 at that time. Walker asked the remaining employees to take a 15% pay cut, stopped taking a salary, and cut the advertising budget by about 85%. He also put more attention on the used-car business as Ford cut production on new vehicles. The dealership now has about 38 full-time employees.

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By the time sales picked up in 2010, Laurel Ford was again profitable, setting the stage for Walker to pass the business on to his daughter, Urica Walker

Martin, who has been under his tutelage for at least the last decade. The transition, scheduled to occur in the near future, is more than a first-generation owner passing the keys to a second-generation owner. It will also place the 39-year-old Walker Martin among only a handful of African American women to oversee a dealership for one of the major automakers.

Walker Martin is proud that she is about to become part of such a small group of African American female car dealer operators. “The significance is in the opportunity,” she says. “We are in a position to open doors for others and shed light on the fact that this is no longer a white male-dominated field.”

A Small Group
Walker Martin has been at Laurel Ford since March 1996, when she was also attending William Carey College in Hattiesburg, Mississippi. In 2002, her father sent her to the National Automobile Dealers Association Academy in McLean, Virginia. Since then, Walker has been grooming her to take over the dealership mainly by showing her how to manage its sales team and finances. “I stay out of the dealership a whole lot since we got it turned around and make sure people understand that she’s the one in charge,” Walker, 58, says.

All told, there are more than 17,000 U.S. dealerships, says Damon Lester, president of the National Association of Minority Automobile Dealers in Largo, Maryland. Of that number, about 250 are African American-owned and roughly 10 out of that number are owned by black women.

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With the auto industry still often viewed as a field with a so-called old-boy network, Walker Martin says it is not always easy being the African American daughter of the owner, because on so many levels, “every day it’s like I have to prove myself.” As the dealership’s general manager for the last two years, Walker Martin constantly asks questions of the dealership’s managers to get a better understanding of its operations. It can sometimes be a challenge, she says, because some of her managers have been in the business longer than she’s been alive. “It can be tough,” Martin says of finding common ground, but also reaffirming her rank in the company. “I have to learn how to deal with stress and not take things personally.”

Lester says NAMAD is starting a push to increase diversity this year by visiting U.S. colleges such as Howard University in Washington, D.C., and Bowie State University in Bowie, Maryland, to encourage African American men and women to pursue career opportunities in the auto industry. “There’s no silver bullet answer to the lack of African American women dealers,” Lester says. “It starts with access to capital, experience, and an opportunity. We have to increase awareness that this is an attractive entrepreneurial career path.”

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Women Wanted
The car business is unfamiliar territory for many. Not typically growing up in a family with a dealership owned by a minority, little exposure to the business, and the strain that all-day retail can cause families and their schedules are reasons for the lack of African American female dealer representation, says Jenell Ross, president and CEO of The Bob Ross Auto Group (No. 33 on the Be Auto Dealers

list with $48.5 million in revenues). A second generation owner of the 38-year-old dealership, Ross also cites the inability to access capital to open or acquire a dealership by minorities as another key factor for the low count. Ross says there are not a lot of African American second-generation dealers–male or female. In contrast, she says it’s common to have fourth and fifth generations of dealers in the majority community.

Still, Marjorie Staten, president of the General Motors Minority Dealers Association in Southfield, Michigan, says much more needs to be done industry wide to encourage ethnic minority women to own and operate dealerships. She says Ross and Pamela Rodgers, CEO of Rodgers Chevrolet Inc. in Woodhaven, Michigan (No. 32 on the Be Auto Dealers list with $49.5 million in revenues) are the only two female African American GM dealers nationally.

Staten says the low number for African American women dealers won’t change much until there’s a “dedicated, committed, and structured outreach effort by all automakers to develop programs that offer support, training, and recruiting to help ethnic minority women become successful dealers.”

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Observing why more African American female dealers are needed, Walker Martin says, “It leads to more diversity and different perspectives, which have a huge impact in our changing world.”

Planning the Succession
Walker and Walker Martin began working on a succession plan 10 years ago to create a smooth transition for the change in ownership, which is the only way to ensure a business survives its founder. “I always tell my friends that we believe we are immortal,” Walker says. “That belief sometimes results in people being unprepared.”

The two offer some basic questions entrepreneurs should ask before planning a succession:
– How much money will it take to keep this business going?
– Where will that money come from?
– What are the tax liabilities?
– Who will be in charge of making sure the plan is followed?

Another key point to look at is how a business owner should groom someone to take over a business. Walker offers some grooming tips:
– Make sure the person has an interest in the business and wants to be part of it.
– Provide classroom and on-the-job training.
– Make sure the business is financially stable and know where the money is.
– Teach your successor how to surround themselves with good people and how to treat those people once they are hired.
– Teach them the importance of giving back to the community.

In Walker’s case, he’s working to leave a debt-free business. He plans to achieve that through estate planning, life insurance, and a trust that is set up to cover estate taxes with a second-to-die life insurance policy. This is a type of life insurance on two people that provides benefits to the heirs only after the last surviving policy holder dies. If her father leaves the dealership debt free, Walker Martin says that will create one less stress that she will have to deal with. “You don’t want to leave things undone,” she says. “That’s something that benefits me in the long run as far as trying to keep the business open.”