News Column

Hispanic Dealers Face Rough Road Over Economic Potholes

Oct. 31, 2008

Frank Nelson for HispanicBusiness magazine

auto dealers, credit crunch, auto dealership, car dealerships, minority dealerships

At a time when the auto industry is spinning its wheels under the weight of high gas prices and a crippling credit crunch, many Hispanic-owned dealerships are feeling the pain.

Carlos Planas, general manager of Tamiami Chrysler Jeep Dodge in Miami, has been in the business 37 years, 20 of them as joint owner of this Florida dealership. He's weathered the oil embargo of 1973 and 20 percent interest rates in 1980 but says things have never been this bad.

"I think I'm going to have to let a few people go," he said. "We have to try to adjust to the situation but I believe things are going to get worse before they get better."

Despite cutting costs where possible and coming up with creative ways to increase his customer base, Mr. Planas has seen his staff drop from 128 employees to 113.

Nationwide Sales Figures Down

August vehicle sales of 1.25 million nationwide were down for the 10th consecutive month. They plummeted more than 15 percent compared with last August and more than 11 percent year-to-date.

According to New Jersey-based research firm Autodata Corp., Chrysler's numbers were even worse, with August off 34 percent from the same month in 2007 and year-to-date sales tumbling 24 percent.

Dealers elsewhere are also feeling the pinch. Bob Zamora, a Mexican-American who's been in the auto business 35 years, owns California Honda dealerships in Stockton and Lodi, and another in Mesa, Arizona.

"The current climate is challenging, to say the least," Mr. Zamora said. He operates primarily in blue-collar communities especially hard hit by foreclosures.

He estimates that vehicle sales are off about 20 percent compared to last year. Cutbacks in advertising and staff have kept profit decreases to about five percent, he said.
Used sales have decreased due to the falling trade-in values of SUVs and other larger vehicles, he said. Parts and service have only dropped off slightly, though he expects that area may fall further as people drive less.
Despite everything, Honda sales nationwide are up slightly so far this year, continuing an unbroken run dating back to 1994. In August, the company passed Chrysler to grab fourth place in U.S. auto sales, behind GM, Toyota, and Ford.

Toyota Also Down

On the other side of the country, Jeronimo Esteve, owner of Headquarter Toyota in Hialeah, Florida, expects revenue to top $200 million this year, but that's still down between 15 and 20 percent. "Things are tough right now," said the Cuban-born businessman, who, after analyzing expenses and reducing spending, hopes to avoid lay-offs.

Toyota, for so long a stellar performer, has been hurting this year with sales slumping almost 8 percent. However, Mr. Esteve remains resolute. "There are people out there buying cars. ... We just have to find them," he said. "We don't have time for anything negative."

GM Suffering, But Not Everywhere

General Motors, with sales down 20 percent from a year ago and 18 percent this year, is suffering more than most. Yet Raymond Palacios, one of a growing number of Hispanics in minority-owned dealerships, says he's doing just fine.

Mr. Palacios runs two successful GM dealerships -- one in El Paso, Texas, the other 45 miles away over the New Mexico border in Las Cruces -- employing close to 200 people.
"In El Paso we're actually doing better than last year," he said, adding that strong sales of used cars have helped smooth out an otherwise bumpy road.

He believes in service and choice, stocking everything from the fuel-efficient Chevrolet Aveo, the luxurious XLR-V Cadillac and the rugged Hummer. "We carry a full range of vehicles for every type of consumer and every lifestyle," he said.

Mr. Palacios sits on GM's Minority Dealers Advisory Council which meets regularly with company CEO Rick Wagoner in its efforts to increase the numbers and profitability of minority auto dealers.

In Detroit, Dawin Wright, executive director of dealer development, says GM has around 600 minority and women-owned dealerships -- easily the most among major automakers -- and actively helps those businesses grow and prosper.

Ford Boasts 'Aggressive' Minority Recruitment

Ford Motors has around 300 minority dealerships, according to Jamy Hall, director of dealer development, who says the company sees that network as an important reflection of its customer base.

"Ford is a big supporter of minority dealerships. We have been for many years, and we're very proud of that," said Ms. Hall, who called the company's minority recruitment and training approach the "most aggressive program in the industry."

However, she said no new programs are running now since there so few opportunities for new dealerships in the current market. Ford's August sales were off more than 26 percent compared to August last year. "It's been tough lately," Ms. Hall said.

Credit Crunch Hurting Lease Sales

Many dealerships are also taking hits in their leasing programs due to the sharp decrease in available money from banks. People are holding on to their cars longer and leasing has fallen as a favored option.

The Planas dealership has been hit hard by the leasing cutback. "Eighty-five percent of my business was leasing," said Mr. Planas. "That's what people did in South Florida."

Mr. Planas has been trying to negotiate better terms with various suppliers. His staff has been combing old service records and calling previous clients, hoping to lure them back with promises of special packages and other deals.

In these turbulent times, minority auto dealerships are becoming increasingly flexible and creative in their efforts to stay afloat. Besides pricing adjustments, dealership orders of giveaways like T-shirts, key chains, calendars and coffee mugs are at an all-time high as the search for ways to ride out the economic storm continues.

Source: (c) 2008. All rights reserved.

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