The coronavirus pandemic resulted in a brutal second quarter for U.S. dealerships as sales tanked and deliveries of new inventory came to a halt.
Sales rebounded last summer and fall, but Texas dealer Fernando Varela isn't sure stores are in the clear just yet.
Varela, chairman of the National Association of Minority Automobile Dealers, says another broad economic shutdown could change things in a hurry — and he's worried some stores aren't financially prepared for another hit.
Varela, who is 61 and owns three Ford dealerships and a Chevrolet-Buick-GMC-Cadillac store near Dallas, spoke with Staff Reporter Vince Bond Jr. about the ongoing health crisis and whether it will have the same impact on minority dealers as the Great Recession did. Here are edited excerpts.
Q: Do you think this health crisis may make it tougher for minority dealers to grow? The recession in 2008 really hurt minority dealers. Now the pandemic is another big challenge. How do you recover from this and build on the progress made in the past 10 years?
A: It seems like every 10 years, we have a challenge. Let's go back to when 9/11 happened. That killed momentum. We started making progress, then the [recession] came on and we lost a lot of dealers; now we're building the progress back. We get to a point now where another crisis has come.
Do you think the pandemic will have the same type of impact on minority dealers as the Great Recession?
I think so. I don't think we have seen the full impact yet. And I'm a little concerned because I think that's coming around the block. If people don't have their jobs back, the economy on the car side might finally slow down.
The car business has been doing fairly well since May. But I already see that it's beginning to slow down a little bit. But it could affect us just like the other recession did.
Access to capital — it has always been difficult for us to find money, and the pandemic could cause that problem to even be a bigger problem.
Some of us made it through this with the [Paycheck Protection Program] money. As that money goes away, it could affect the financial side of many minority dealers and force them to sell or go out of business.
It goes back to the original deal that we had 40 years ago. It is the access to capital.
Banks need to be willing to commit some of the resources and say we're going to help small business, we're going to help minorities, we're going to lend you money to survive and we're going to ease off some of the rules or the commitments to make it easier.
You mentioned that you think the impact is still to come. Why do you think that?
In March, a lot of car dealers got PPP loans. We carried all of my employees; we never laid off anybody. We used the resources from the PPP to make sure they have income. That money finally ran out. Then the people have the $1,200 stimulus checks. A lot of people spent that on cars.
The unemployment was high, so that really carried all the way through the end of July, when this extra $600 [in unemployment benefits] went away.
If we have to go back into a lockdown, now I don't have any PPP, I don't have anything.
Is it harder right now for a minority dealer candidate to find a store?
There are some stores available for sale. If a good candidate has the resources and wants to get out and shakes some trees, I think he can find something.
What we're trying to do is get the manufacturers to change some of their processes. They stake so much to sales expectancy, to things like that — a lot of minority dealers cannot quite get there right now.
How has the pandemic impacted you as chairman of the National Association of Minority Automobile Dealers? Does it make it harder to get the word out about your agenda?
Yes, definitely.
We're doing a lot of Zoom calls and telephone calls. It has been a little bit difficult because of that, but it also has given us a little more access to the manufacturers [and] CEOs because they can take 15-20 minutes to talk to us via Zoom call [when] we probably couldn't have that in person. Doing it in person requires travel and more time.
What's your advice to candidates who maybe live in Florida or Georgia, and there's opportunity up north? Should they move or wait for an opportunity in their home market?
When I became a dealer, I told the manufacturer, I'll go anywhere within two hours of an airport. That was my only criteria.
I think candidates need to be open that they might have to sacrifice. You might have to do that for a short time, build yourself and then eventually buy something in the South if that's where you want to be.
I think candidates coming into the car business need to be a little more open-minded. Sometimes you have to work your way around to get to where you want to go.
