6795: Rough Ride For Minority Car Dealers.

From The Chicago Tribune…

‘Difficult time’ for minority car dealers
Minority car dealers feeling the pain of shutdowns in particular

By Greg Burns

Desmond Roberts takes the phone calls all day long from his fellow car dealers, and Monday will be no exception.

They call to discuss who has received “the letter” saying their automakers will be dropping them.

They call about banks pulling the credit they need to stock vehicles, or suppliers refusing to renegotiate an unaffordable contract.

Often, they call to egg him on, urging him to speak up and fight the good fight. “We get the calls all the time,” said Roberts, who runs three suburban car dealerships and serves as chairman of the National Association of Minority Automobile Dealers.

With General Motors Corp. in dire straits, Roberts feels the heat. “It is a very difficult time,” he said. “Particularly, it is a difficult time for minority dealers.”

Before the recession, the nation’s 1,200 minority dealers accounted for about 5 percent of the total. With the numbers so low, and certain to go much lower, Roberts and his trade group feel the effects of each shutdown.

Minority dealers tend to have less capital and higher expenses, especially compared with second- or third-generation competitors who inherited land, facilities and franchises. The best locations typically were taken before they entered the business, so they’re vulnerable.

Chrysler and GM have adopted rigorous standards to weed out the weakest players, and Roberts has no problem with that. “It is not a deliberate decision to target minority dealers,” he said. “We don’t want to be treated better or worse.”

Roberts is pushing to moderate the plans for rapid-fire cutbacks. He wants greater consideration for less-established operations, so the most promising young dealerships aren’t snuffed out prematurely.

He acknowledges, however, that reducing the numbers will help those that remain, himself included. “That would be a good thing for me, though you don’t like to prosper at the expense of somebody else,” he said.

Roberts credits good timing. He had bought and sold two out-of-state dealerships when he launched Advantage Chevrolet in southwest suburban Hodgkins at the end of 1999. During the boom years of 2003, 2004 and 2005, he prospered.

Less than three years ago, he bought a Chrysler dealership in Des Plaines, and another Chevy lot in Bolingbrook a few months later. He took on relatively little debt, kept his hiring in check and renovated frugally: “We didn’t go in and build a Taj Mahal.”

Even so, he has had to impose layoffs, slash advertising and reduce profit margins. Without Hodgkins as an established base, his newer stores would be hard-pressed, he said.

On Tuesday, car and truck manufacturers will report sales for May, and no one expects good news. J.D. Power and Associates has forecast U.S. sales of just 10 million vehicles for 2009, the worst in three decades. “We’re now scrapping more than we’re putting on the highway,” noted Paul Kasriel, chief economist at Chicago’s Northern Trust.

Sales probably have hit bottom, Kasriel said, but it will be a slow trip back up again. Americans will be looking to rebuild their balance sheets and boost their savings before they start upgrading to the latest models, he predicted. “We’re seeing a fundamental change in household spending from the last 10 years,” he said.

Car sales will get back to the range of 16 million or 17 million “eventually,” Roberts said, but not soon. “It’s not going to be anywhere near that for at least several years.”

Meantime, he’ll be hunkering down, or, as he put it, “Surviving.”