Black Auto Dealers Take Big Hit

In 2001, John Hall was treading into unfamiliar territory as a first-generation automobile dealer. But this summer, Hall found himself making one of the most difficult, yet necessary, choices he has had to make his entire career.

Once a $22 million business, Northpoint Ford Lincoln Mercury (No. 96 on the B.E. Auto Dealer 100 list), officially closed its doors Sept. 30.

“It takes capital to stay in business,” Hall says, attributing the decision to the sliding economy. “Some others either ignore that fact or don’t understand how to make a responsible decision.”

For Hall, the decision to shut down has been long thought out. He had good years in 2004, 2005, and 2006, but things started getting rough during the summer of 2007. “When this year started, I decided that I would go through June and then make a decision about the rest of the year.”

It never got any better.

Now, Hall is liquidating. He is moving some of the new cars to other dealers and selling others at auctions.

“I expect to get a really good price for most, if not all, of the heavy equipment,” he says.

Hall is not the only dealer having problems. Across the board, Ford Motor Co. is experiencing their lowest sales to date. According to the Ford corporate communications team, dealers reported total sales of 116,734 in September, down 34% from a year ago. September was the lowest sales month for Ford and the industry this year.

Damon Lester, president of the National Association of Minority Auto Dealers (NAMAD), attributes the decline to the overall rise in gas prices; the shift from sport utility vehicles and large trucks to smaller, more fuel-efficient vehicles; and the rising cost of doing business. It all is taking its toll on everyone in the industry.

“All of these outside and inside forces are affecting practically every minority dealer,” he says. “Dealers are essentially going to run out of money.”

As sales start to decline dealers start to feel the pinch. He said dealers’ ability to access capital is limited or even non-existent; particularly if you do not own your own building. For dealers who do not own their land, they have to pay rent on top of the dozen other expenses. That cost can take a tremendous toll on a business.

But Lester does not want it to seem as though all is gloom and doom. NAMAD is currently in negotiations with Capitol Hill for a bailout that will provide not just a pool

of money to minority dealers, but also access to consolidation assistance, debt restructuring, and direct and guaranteed loans from the Small Business Administration (SBA). Nothing has been written in stone, but Lester says that members of Congress are receptive to the idea.

“Consideration needs to be given to our dealers,” he says, referencing the big three manufacturers and a $25 million loan recently approved by the government to the big three to build more competitive and efficient automobiles. “If the whole ideal of a bailout is to assist, say the banks, so that they can free-up some credit, causing a trickle-affect; then dealers also need some breathing room so that they can survive.”

At the same time, the big three are asking the government for more help, according to recent reports, and General Motors and Chrysler are looking at a

merger to help their dropping business. According to the Associated Press, GM is lobbying the Bush administration and some members of Congress for $10 billion to $15 billion in aid to help keep the company going and possibly to make the Chrysler deal work.

“In order for any of us to survive this,” said Lester, “The way business is done needs to be revamped in the automobile industry, from the top down.”

In the meantime, Hall is focused on liquidating everything he can. Once he does that then he will start considering his next steps. He said his family will be fine, with some minor adjustments, and he could be back selling cars in no time.

“With 23 years of automobile experience I should not have any problems finding work or partnering with another dealer.”