Corp.'s minority dealer program hit all of its growth targets last year but its future may be even tougher than its imperfect past.
The number of GM minority dealers grew from 320 in 1999 to 350 last year, 70% of them owned their businesses and 77% of GM's minority dealers were profitable. Those numbers are in stark contrast to 1998, when only 62.5% of GM's 280 minority dealers were profitable, which meant there was almost a 40% failure rate and a 20% profitability gap between the automaker's minority dealers and its Caucasian dealers.
That was one of the more glaring deficiencies found in a 1998 internal review that GM commissioned of its own minority dealer program. GM claims the program, dating to 1974, is the industry's first.
The review, which Ward's Dealer Business obtained a copy of, found that GM's minority dealer program was adrift within the corporation and disconnected from the operational goals of the automaker.
There were 215 recommendations by the review team to improve the automaker's minority dealer program. GM says it has implemented 213 of them.
Eric Peterson, GM's executive director of dealer development, attributed the program's shortcomings to the poor preparation of candidates, the poor quality of the points they were put into and to a failure to coordinate the minority dealer program with GM's field organization.
Since then, Mr. Peterson says GM is working hard to implement the review team's recommendations, most of which fall into three broad categories: candidate selection and training, dealership acquisition and dealership operation.
“Anything that sells less than 400 new vehicles, we're not interested in because the throughput is not significant enough to generate the type of return that we and the candidate are looking for.”
— Eric Peterson
GM has installed a rigorous screening process, which includes leadership evaluation, to objectively evaluate candidates before they are admitted to the minority dealer program.
“The selection process is a lot keener,” says Gregory Jackson, president of Michigan-based Prestige Automotive, which is comprised of Prestige Pontiac Oldsmobile in Mt. Morris, Prestige Lincoln Mercury in Flint Township, the Prestige Used Car Center also in Mt. Morris, Prestige Chevrolet in Flushing, Prestigein Clare and Prestige Ford in Harrison. “Certain people who would have got in in the past would never get in now,” he says. Once enrolled, there are six checkpoints, or “gates” through which candidates must pass during the year-long training program. Simply being admitted to the program no longer implies, as the review found in the past, that a candidate will graduate and be awarded a dealership.
Mr. Jackson, who is also treasurer of GM's minority dealer association, says, “That is where a lot of the problems of the past lie because a lot of people felt that if they got in the first door, they would be a successful GM dealer. There's been a renewing of the understanding that there are no promises.”
GM also standardized the process for acquiring points for its minority dealers. The automaker is after stores in metropolitan areas or in hub towns which are on the periphery of metropolitan areas and the centers of commerce in their areas.
GM will not consider acquiring a store with less than 400 annual new vehicle sales.
“In the past, we looked at any opportunity that was out there,” says Mr. Peterson. “If a dealer raised his or her hand and said ‘I want to sell,’ we'd say, ‘Let's consider it.’” Not anymore. “Anything that sells less than 400 new vehicles, we're not interested in because the throughput is not significant enough to generate the type of return that we and the candidate are looking for.”
Candidates also have the right to refuse the deal. “In the past, it was kind of like we knew best,” says Mr. Peterson. In other words, it was take this deal or there will be no deal.
“There are three things that they (minority dealers) really can control: advertising, personnel and your floor planning expense,” says Mr. Peterson. “You have to feel that you have control over those things. And many times (minority dealers) didn't.”
In terms of operating the dealership, GM initiated a three-part plan. Before the store is launched, the stakeholders — which include GM's legal department, GMAC, marketing and dealer network development — meet with the dealer to address any needs he or she may have.
There is a review every 90 days during the first year of operation. Mr. Peterson's office makes sure that the field offices are working with minority dealers on a day-to-day basis.
Perhaps most important though is that under the new setup Mr. Peterson reports to Michael Grimaldi, vice president of field sales, service and parts.
“If there are any problems, I'm sitting right on his staff,” says Mr. Peterson. “Anytime we talk about sales, customer satisfaction, warranty — anything — minority dealers, their appointments and their profitability is on that list.”
But even Mr. Grimaldi can't help Mr. Peterson quell controversy and the criticism of some minority dealers about GM's Women's Retail Initiative which was announced in March.
The program, modeled along the lines of GM's minority dealer program, is aimed at creating more points for women. But it is more than that.
“We want to get more women involved in helping us,” Mr. Peterson says. “How do we market to women, how do we design our cars better, those kinds of things. So it's not single-focused, there's more to it than just women dealers.”
However, one former GM minority dealer thinks the company's Women's Retail Initiative is a shill.
“This is a white female program,” he says. “The majority (white) dealers are going to put their wives, their daughters and other female relatives in dealerships. Just watch, this is how they're going to come at us and they're going to show this number (of dealerships) for minorities really skyrocketing.”
Glenda Gill, director of the Rainbow Push Coalition's automotive project in Detroit, says GM's women's initiative “only becomes an issue with us when it begins to distract from the minority dealer program.”
Still, Ms. Gill is suspicious of GM's women's initiative. “I have a cautionary attitude about this. If the first candidates come out and they do not reflect a rainbow, GM is going to have some morale issues with its minority dealers.”
Rainbow could be another word for minority. Thirty years ago, minority meant blacks. Today, it means African Americans, Asian Americans, Hispanic Americans, Native Americans and women.
More minorities want to become GM dealers, but there are less GM dealerships. In 1974, according to the review, there were 12,939 GM dealers. By 1997, their numbers had shrunk to 8,090. Today, it's around 7,500.
Mr. Peterson, who is also responsible for GM's Women's Retail Initiative understands the problem, but says GM is still committed to having dealers who reflect the company's customer base. The automaker has more women dealers than ethnic ones, and its Hispanic stores outnumber the ones owned by African Americans.
“We've already had discussions to see how we can expand our acquisition efforts so that we can bring more deals to the table,” Mr. Peterson says.
“And we've got our folks aligned as to how we're going to go out and beat the bushes to find more deals.”
As the yin and yang between minorities and women for dealership intensifies in the future, GM has apparently not forgotten one lesson it learned in the past.
Says Mr. Peterson, “What we found was if we didn't commit ourselves to bringing on good, solid quality dealers and putting them in good, solid quality points, you end with a 62.5 profitability rate. Nobody wants that, it's not good business.”
Minority dealer runs impressive fleet empire
By Frank S. Washington
Gregory Jackson has been a hustler, albeit a clean-cut one, all of his life.
As a youngster, Mr. Jackson sold so many subscriptions to the Detroit News that he was lauded with trips to Disney World, Toronto and even London.
He once started a cookie company that led him to develop a dough for cookies that were baked and served at a Midwest department store chain from 1984 to 1992.
And when the rise left his cookie business, Mr. Jackson ended up inCorp.'s' minority dealer program, acquiring his first dealership in 1993. Since then, he has experienced a growth rate that even Microsoft's Bill Gates might envy.
In 1995, Mr. Jackson's Prestige Pontiac Oldsmobile in Mt. Morris, MI, had $24.5 million in sales. That put Mr. Jackson on Black Enterprise magazine's list of the top 100 black-owned car dealer-ships in the nation Mr. Jackson was named Black Enterprise's top automotive growth leader with sales of $253 million in 1999, up 218% from 1998's $79.8 million. And last year, Mr. Jackson says Prestige Automotive Group revenues reached $670 million, primarily from fleet sales.
That puts Mr. Jackson, 42, in the same neighborhood as Mel Farr whose automotive group had $432 million in sales in 1999 — mostly retail sales. That ranked Mr. Farr as Black Enterprise's top black-owned business last year. The magazine's new rankings are due out soon, and it looks like Mr. Jackson is going to give Mr. Farr a run for his money, although the nature of their sales (fleet versus retail) is different.
Says Mr. Jackson, “I always had a strong interest in working for myself because it became real apparent to me in college that the people who are going to make any real money in America, they're not going to make it working for anybody else.”
He adds, “What you're going to make is a salary. There's nothing wrong with that. But if you aspire to more, you have to be willing to do more. And if I'm going to do more, I might as well do it for myself.”
“If you aspire to more, you have to be willing to do more. And if I'm going to do more, I might as well do it for myself.”
— Gregory Jackson
Mr. Jackson's do-more translates into more dealerships. He's acquired five more since the first one he purchased in 1993.
In addition to Prestige Pontiac Oldsmobile, Prestige Automotive consists of Prestige Lincoln Mercury in Flint Township, the Prestige Used Car Center also in Mt. Morris, Prestige Chevrolet in Flushing, Prestigein Clare, and Prestige Ford in Harrison.
At each one of those stores Mr. Jackson has increased business, but the catapult for his increased revenue is fleet sales.
“I run approximately 70% fleet and 30% retail,” Mr. Jackson says. “We're doing about $200 million retail.” The growth of Prestige Automotive can be attributed to more dealerships, increased retail sales at each one of them and a surge in fleet business. But Mr. Jackson's business philosophy is at the core of his success.
He is an African-American who owns dealerships in small and mid-size towns that are predominantly white. To that Mr. Jackson says, “The real money to be made by entrepreneurs is in the cracks. I consider middle America to be a crack.
“There is a lot of money to be made in secondary markets. That means any market that's not part of a large metropolitan area. Everybody is trying to compete in the heart of Detroit, that's why everybody is marginally profitable.”
Mr. Jackson's other business tenet is service. The back of his business cards say:
“We pride ourselves in providing personalized attention to each customer. Our goal is lifetime customers through first-time quality service. We are dedicated to work together as a team to meet and exceed customer needs.”
Mr. Jackson says business today has nothing to do with race, it has everything to do with service. “People of all nationalities and ethnic backgrounds want quality service, they want it fast and they want it with a smile.
“You've got to be willing to give high-quality service the first time. If you don't, you've got a problem, because those people are not coming back.”
Mr. Jackson doesn't think in terms of dollars, he set goals rather than revenue targets. His dream was to be financially independent, live in reasonably comfortable and create some wealth to pass on to his daughter and son, now 16 and 12 respectively.