Wednesday, June 03, 2009

Dealergate: Some minorities more equal than others

Eearlier today, Chrysler claimed that it had carefully selected under-performing dealerships when deciding which outlets to close. A spokesperson stated that the decision about cutting dealers weighed serious factors such as location, customer satisfaction ratings and sales growth potential.

But, tellingly, no detailed explanation of the process was forthcoming.

"Car Czar" Steve Rattner, who oversees the Chrysler and GM reorganizations, said earlier this week that the government made "no plant decisions, no dealer decisions, no color-of-the-car decisions."

But a Chrysler executive, under oath, is reported to have differed with that take. An attorney who
deposed Chrysler President Jim Press last week said that he left believing that Press does not support the closures.

Lawyer Leonard Bellavia, of Bellavia Gentile & Associates, who represents some of the terminated dealers, said he deposed Chrysler President Jim Press on Tuesday and came away with the impression that Press did not support the plan... "It became clear to us that Chrysler does not see the wisdom of terminating 25 percent of its dealers," Bellavia said. "It really wasn't Chrysler's decision. They are under enormous pressure from the President's automotive task force."

He added the government task force, which he criticized for having no members with retail experience was, in effect, attacking U.S. entrepreneurs.

The answer as to who really called the shots in the closings of the dealerships -- can be told through a simple sequence of events.

Little more than two weeks ago, minority dealer-owners worried that their ranks would be devastated by the closings.

The National Association of Minority Automobile Dealers estimates that 140 of Chrysler's 170 to 175 minority-owned franchises could be closed...

...[the] minority-owned dealerships are at risk because many are small stores that offer only one of the company's three brands, Chrysler, Dodge and Jeep. Fewer than half have converted to the company's "Genesis" format that puts all three makes under one roof, NAMAD said. That compares to the approximately 60% of all Chrysler dealerships that have the three-brand format... Genesis stores are usually more profitable because they sell and service more vehicles than single-brand dealerships. Chrysler plans to emphasize Genesis dealerships under its reorganization...

...Many minority dealers operate in cramped downtown locations that are less desirable than the spacious suburban auto malls that are now popular, said Mr. Lester and other dealers. Urban franchises typically draw fewer shoppers and carry less inventory for customers to choose among. Both factors tend to limit sales...

In other words, roughly 82% of minority-owned dealerships were originally anticipated to close, but after the dust settled, it turned out that only 5% 25% of African-American-owned dealerships had been shuttered (corrected: thanks, Tom Blumer for the heads up).

Thomas A. Lamb provided an in-depth look at the down-selection of minority dealerships.

In looking at the data and the reported account of 52 African American dealerships in 2007 and the substantial decrease in dealerships in 2008, it seems that most of the remaining balance of 32-38 closures will fall on either Hispanics or Asian owned dealers. There are only four African American dealerships closed with the latest up date and two of the closures started last year.

Put simply, Hispanic-owned dealerships appeared to be extraordinarily hard-hit:

At least three of [the closed Chrysler dealerships] make frequent appearances on Hispanic Business Magazine's annual list of the 500 largest U.S. Hispanic-owned companies. They are Burt Dodge, Chevy, Jeep in Colorado, owned by L.G. Chavez; Greenway Chrysler, Jeep, Dodge in Orlando, owned by Frank Rodriguez; and Signature Jeep in Michigan, owned by Irma Elder.

Sure enough, the closed Burt, Greenway and Signature dealerships all appeared in a recent Hispanic Business Magazine's Top 500 businesses list.

Hispanic Business Magazine's list included three Chrysler dealers in the top 10. The top dealer, ranked No. 3, was Lloyd Chavez Jr. of the Burt Automotive Network in Centennial, Colo., which includes Burt Chrysler Jeep Dodge of Parker, Colo., and other franchises. The dealership group boasted $2.12 billion in revenue last year. The second dealer was Ernesto Ancira Jr. of Ancira Enterprises Inc., which was ranked No. 7 and grossed $691.26 million. Ancira Enterprises includes Ancira 281 North Chrysler Jeep; Ancira Dodge; and Ancira Motor Co., among its many franchises. Also on the list was Frank Rodriguez of Greenway Ford Inc., at No. 9, which grossed $520.13 million. Rodriguez's franchises include Greenway Chrysler Jeep Dodge in Orlando, Fla.; and Atlanta Chrysler Jeep Dodge in Atlanta.

These large, Hispanic-owned businesses were all shuttered -- inexplicably -- despite their excellent track records. In fact, 42% of Hispanic-owned Chrysler dealerships were closed.

The owner of another top 100 Chrysler dealership -- third in the state of Florida and Hispanic-owned -- was stunned to discover his "Genesis" dealership was shuttered.

Tamiami Chrysler Jeep Dodge in Miami is one of the largest volume dealers in the Southeast and one of the biggest Hispanic-owned Chrysler dealers in the nation, its owners claim... Yet those distinctions weren't enough to keep the store at 8250 SW Eighth St. from being listed among the 789 dealerships that Chrysler plans to shed by June 9. The carmaker on Thursday asked a New York bankruptcy court for approval to trim about a quarter of its 3,200 stores...

...''I was surprised, concerned and upset, in that order,'' said Carlos Planas, Tamiami Chrysler Jeep Dodge's president and CEO, on learning of Chrysler's decision. ``I didn't think that was something they would do after 20 years of being the largest volume dealer in Dade, third in the state and top 100 nationwide.''

When dealerships had to be closed, it would appear political correctness trumped merit.

And like so many things, the government wants to rush the reorganization of Chrysler. No one should be surprised, then, that the wheels of justice appear to be greased:

On Monday, one of the country's leading bankruptcy experts told us he was surprised by how little "push back" Judge Arthur Gonzalez gave to the government's controversial plan to sell Chrysler's best assets to a new entity headed by Fiat and the United Auto Workers -- junior creditors who will come out ahead, critics say, of senior secured lenders.

Starting tomorrow, there will be at least some token push back both in Gonzalez's courtroom, and perhaps more importantly, at the U.S. Court of Appeals for the 2nd Circuit, where what remains of a once-large group of dissident lenders will argue on Friday that the deal is essentially illegal...

The process that Chrysler used to kill dealers remains opaque. And there must be a good reason for hiding the process. It's therefore likely that politics played a significant role.

That's why you haven't seen any rational explanation of the process used to select dealerships for closure. Nor will you.

Perhaps some of the dealers -- who deserve a better explanation -- will able to discover the real rationale in a court of law.

06-01-2009: Stillborn Motors
05-31-2009: Dealergate Maps: Zero Hedge understated 'The Clinton Effect'
05-31-2009:Quantitative Analysis Indicates Clinton Donors Rewarded By Selective Closings

05-29-2009: Olbermann, accidentally confirm bias in dealership closings
05-29-2009: Dealergate: 40 Democrat-friendly Dealers Become 42 After The Dust Settles
05-27-2009: Dealergate: Stats demonstrate that Chrysler Dealers likely shuttered on a partisan basis

Update: Appeals Court To Hear Chrysler Objection, Delay Bankruptcy Emergence. Hat tip: Reliapundit, who was among the first to notice the statistical anomalies associated with minority dealership closings. Linked by: Daily Uprising.

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