GM's Minority Dealership Program: Dealers Receive Support, But Obstacles Outweigh Opportunities

Raymond Palacios made a deal with Motors Holding, GMs finance arm, in 2000 for a troubled Cadillac/Oldsmobile store in El Paso, Texas.  Today he counts himself as one of the lucky graduates of GMs minority dealer development program, with a solidly profitable operation in El Paso, and another dealership he acquired three years ago in nearby Las Cruces, N.M., that is doing even better.

When Palacios originally approached General Motors about their minority dealership development program back in the ‘90s, he was everything the giant auto manufacturer was looking for. He had an impressive background in finance as a controller in Texas for one of the country’s biggest homebuilders, and while he didn’t have any experience as a dealer, he loved cars.

For Palacios, the road to owning GM dealerships was opened by the company’s ambitious program to attract minorities into the business. Now he sits on the General Motors Minority Dealer Advisory Council, which works to place other minorities on the same path and help them survive the tough challenges that lie in wait for them.

The Minority Dealer Advisory Council dates back to 1988, said Alma Crossley, GM’s director of minority dealer development. It was created because the company established a mission to increase the number of minorities running GM dealerships. Minority dealers from four groups – Asians, African-Americans, Hispanics and Native Americans – elect representatives to the council. Dealers can go to their council members if they have a franchise problem, and council members also act as mentors to other minority dealers or dealers-in-training.

To date, there are 345 minority dealers with GM franchises, said Crossley, accounting for close to 5 percent of GM’s total dealer group. Last year, they sold a collective 226,870 vehicles, bringing in about $12.6 billion in revenue.

While GM’s minority program may open some doors, though, it doesn’t make buying or owning a dealership easy.

Out of Palacios’ class of five minority candidates that GM put through the NADA Dealer Academy in McLean, Va., he was the only survivor, and few successors are in the training pipeline these days. As GM has had to grapple with swooning sales nationwide, the number of new dealership opportunities has shrunk. There’s been a two-year gap since the last class.

“The opportunities aren’t as available,” said Saundra Reid-Smith GM’s national candidate manager. “A candidate will often have a specific geographic choice in mind, and we don’t want to put people in the program if they can’t get into the store.”

“The number of dealers across the board has been shrinking,” noted Crossley. “It’s harder to find opportunities of placement. While our goal is to increase the number, at this point, we’re focused on maintaining the number.”

GM and the advisory council, though, haven’t abandoned their original goals. The council has shifted much of its attention to supporting minority dealers already in business, and there’s a new academy class in the making.

While they’re at the academy, minority dealer candidates get a $5,500 a month stipend. Once finished with the academy, there’s no exact model for the training program, but candidates who haven’t had a significant amount of real-car-world experience are expected to go into on-the-job training after they graduate. Once in a dealership, they’re expected to move through various departments and learn the ropes of the dealership business first hand.

Later, GM will look for a franchise opportunity that might suit them. But when it gets right down to contract-signing time, the minority dealers still have to toe the same financial line that anyone else would. A few have the private capital on hand to buy a dealership, while the others would be expected to come up with at least a 15 percent stake, with Motors Holding financing the rest at a rate that would complete a buyout in around seven to nine years.

After they acquire a franchise, GMs minority program switches gears, offering consulting and mentoring help to keep them in business. “We actually monitor dealership performance on a monthly basis,” added Crossley. “If there’s a downward trend, the dealer operations manager can go in as a consultant, visit with the dealer, talk to managers and put some action plans into place.”

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Vol 5, Issue 9