In Black America; Black Owned Auto Dealership with Mr. J. Michael Chargois

KEEP THE NEXT Mirellio Jesus. From the Longhorn Radio Network, the University of Texas at Austin, this is In Black America. I've always been fun of automobiles, I've always liked to race them and build them and do whatever. And I have a diesel mechanic degree and diesel mechanics.

And again, I've just always been in automobiles. I have a small business degree from South Texas College in Houston, Texas. And then I went into drafting and engineering and worked that in several years. And again, toying with cars on the side, I've just made a commitment in the early 60s to go in the automobile business. Mr. J. Michael Shagwai, owner of Pavillion Lincoln Mercury dealership in Austin, Texas. Today, Black car dealers seek to parlay profits into foreign models and new business challenges. The number of Black dealers is rising as a result of agreement reached with domestic auto manufacturers in recent years. Successful dealers are expanding their operations into either multiple franchises or other business that may or may not be related to the automobile industry. Ford Motor Company is the leader in Black dealership appointments, with nearly a 70% increase. Although the number of Black-owned Ford and Mercury Lincoln dealers went up from 65 to 110 in 1985,

this is still a small fraction of the 5,628 Ford and Lincoln Mercury dealerships in the US in 1986. Journal of Motors, with nearly twice as many dealerships nationwide, has only 95 Black dealers in 1986. Chrysler double its numbers of Black dealers in 1985 from 21 to 42 by the end of the first quarter of 1986. I'm Johnny O. Hanson Jr. and welcome to a new season, our 19th on the air. This week, African American auto dealer, J. Michael Shagwai, owner of Pavillion Lincoln Mercury in Austin, Texas, in Black America. I was hired in Houston by a dealership by the name of Frank Gillman Pontiac Company in 1966. And at that time, it was very hard for Black to get jobs and sales fields.

And I tried several times, several other different agencies and dealerships to get a job. And I just couldn't get no one to give me an opportunity. And I went by and made an application to Frank Gillman Pontiac at the time. And the civil rights movement was going on. And I was just at the right place at the right time. Today, all three major domestic automakers are continuing to make progress with minority dealers training programs. Journal Motors candidates require the most capitalization, a minimum of $60,000 in cash and securities. The company pays a stipend of 3,000 a month from the first to the 12th month, rather than pay merit increases. Ford Motor Company, which requires less money to start, offers financing of up to 80% of the dealers' cost. According to Ford, it's cost anywhere between 0.5 million to open a dealership in the suburbs to well over 1 million to start up in most metropolitan areas. The company is also starting a dealer middle management training program for candidates who want to get into the business, but don't have the capital.

Gone are the old problems, such as lack of funding and location for Black dealers in inner cities, where problems of bad credit can be hazardous to start up businesses. Improving the quality of dealer candidates as an important factor that increases the success of a dealership. J. Michael Shaguar is one such dealer. Starting in the auto business back in 1966, Mr. Shaguar has managed a Cadillac dealership in Houston, Texas, and now he owns his own Lincoln Mercury dealership in Austin, Texas. I recently spoke with Mr. Shaguar regarding his dealership and his involvement with the automobile industry. I had to really go in and start on the bottom level. I worked in the use card department. At the time I was hired, my white counterparts, I didn't know anything about the automobile business. I didn't have a new idea of it, but I was a young man at the time, and I went in looking for help for someone to show me how to do the paperwork and how to actually get qualification, how to get borrowers, qualified to get the financing done. And actually, with the normal procedures, what to do, how to sell an automobile. And at the time, I couldn't get anyone to show me anything.

So when I'm trying to get over everything I've done, I had to pay a price for it. And actually work harder in twice as hard to get to get why I am today. What are you talking about? Probably a six million dollar investment, total investment, plus the actual another seven, eight million dollars in inventory. So you're talking about a pretty sizable investment. And we're talking about how many years of the life of the loan. I'll probably, you're talking about maybe seven to eight years, maximum. So let you know what type of job we have to do. What were the benefits of the four minority dealer training? What did they actually take you through to prepare yourself to go out here and try to make a living and try to provide a living for your employees? Well, I didn't go through the four development training. I kind of, again, learned my in the hard way. I worked at a Pontiac store where I thought out into business and I worked there for eight years. And then I went over to a kind of like agency, which is David Taylor, kind of like in Houston, Texas.

And I started out there as a youth car salesperson and worked my well up through General Manager. And I've kind of learned how to run a dealership and how to manage people and how to market and merchandise. Most of my techniques at the kind of like dealership. And that's, I didn't have to go through the program. So I was actually a working manager, learning experience and how to run with these dealerships and learning to articulate myself around one. Before helping you with the financing, did that have a decision on what particular manufacturer of cars that you wanted to sell? So did. A real big decision. Because, you know, again, what's getting one of these dealerships and making them work is getting someone to actually do the financial support. Because, you know, we need help. And to take on something like this, you need to have someone supporting you for the financial part of it. How much of a staff do you have here in Austin at the current time?

Right now, we have up to 80 employees right now. We opened seven months ago in November. And we started out with 25 employees. So you can look at the growth factor there. And we were profitable the first five months in business. Why Austin, Texas? Why did you particularly want to come to Austin? Were there other cities that you considered in opening the dealership? Yes, I looked at Los Angeles. I looked at Ohio and Atlanta and some mortgages in Chicago. And I was born and raised in Houston. I've always known the Texas market did very well in the kind of like business. I made a lot of money. And I had a good repeat following. And I think people in Texas are just a little bit special. And, you know, it's real nice to have a nice smile. If they have a problem, they'll tell you. If they don't, you know, it's at least you know about it. And I was so used to this Texas market. And Austin, I've always been a favorite fan of Austin and had a desire to move here. And I worked on trying to get these facilities here for seven years. And finally, just like a dream come true.

Seven-year project? Yes. Are the other black dealers, four dealers here in Texas, here in Texas? And is there a black auto dealers associate that you may be a part of? No, it's not a black auto dealers association. Yes, we have other black dealers in Texas. We have, I think, one or two in Houston. And also some in surrounding areas. But it is a few more black dealers in Texas. No, we don't have an association, but we're planning on forming one. From my research, there are only a maybe 200 black auto dealers. It's for the most aggressive manufacturer as far as putting its money, whereas mouth is to a four blacks and opportunities to own dealerships in this country. Yes, it is for what I tell you what I have to take my hat off to them. And they are really dedicated through the project of getting more blacks and more minorities. And it's just not only the black, it's the black female also. That's actually awarding these dealerships too. And they know the percentage of market share of the black population is really increasing. And they are aware of this. And they want their products seen and visualized. And they want it represented by the black community. So yes, they are really putting up, making a really sizable investment in this program and really making it work and giving all the support to make it work.

You increase your staff after five months. Is there any secret or what have you noticed from the market here in Austin to make you so successful so soon? I came in with a good positive attitude. As you know, Austin has been a downturn for so many years. And the use of March has been down. And a lot of the I look at downturns, it's the adjustment period. And we had so much print and negative in the news and everything else. And we came in with a good positive approach. And in my one of my slogans, I was going to be the best motoring partner that Austin has ever seen. And we've used that type of approach and that we're going to make cars affordable. And we did make cars affordable. And plus again, we service automobiles. And my service facilities, we've grown it. I mean, I'm running two shifts right now. And I worked very hard, very long hours. And we just came in with a good positive outlook for the city of Austin and this panel for us. There was only one other Lincoln Mercury dealership in the surrounding Austin area. Was that a part of the plan when you looked at Austin as far as society that you want to make Austin your new home?

Yes, that was part of it because you've got a growing metropolitan market here. And yes, when they're going to add a new store, which they call an ad print, is very attractive to have an opportunity like this to have to be the second dealer in town. And a lot of the dealers say right now that the population is about 350,000. It's not room for another Lincoln Mercury franchise. But it is. We've shown it is. How do you project overhead and try to keep your overhead in check from time to time? We do this on a monthly and a weekly forecast. Basically, we try to forecast on a monthly basis. How many new cars we're going to sell? How many used cars that we're going to sell? What type of dollar a month that we're going to spend in advertising? I was sales projection service in parts and in body. And you try to get all these number of calculations together and actually you try to forecast your expense and your type of profit.

And that way you try to have all your managers and we work on a team concept to actually get all of the numbers together and try to actually accomplish this goal. So we set goals every month. And we come up with these numbers and we try to actually shoot for them and we're very successful at shooting. And they are realistic goals that we can go after. You can Mercury as a top full-size type car. Are you are receiving or feeling any damage from Japanese or other European auto manufacturers as far as luxury cars being sold here in the country, particularly here in Austin or in Texas? Well, I would say in a whole I think the public needs to wake up. And this is a very harsh statement. I'm going to say really it has been an automobile dealer. You know, we are now living in the United States. We sell American products and I represent to be an American. And if you look at the amount of money that's going back overseas from the actual foreign product.

And we try to get involved with some exporting to Japan. We can't export any of our products over here. And I think it's kind of unfair and I think I will buy in public. We need to wake up and buy more American products and keep this money at home. Put it back in some of the neighborhoods that it needs to belong in even though they might have the smaller brand cars. It's real cheap, but we actually get what we pay for in the future because we have future generations to worry about. So overall, I'll answer your question back to Lincoln. No, it hasn't hurt us. It hadn't hurt Ford Motor Company. But other products I would say yes. But we need more market share. I would say that. The automobile industry isn't doing as well as it did in the late 60 or early 70s. But more or less honing its own. So with the incentives that dealers offer and manufacturers offer, are you all coming out ahead in this type of marketing strategy of actually trying to get people in and offering them rebates, et cetera, et cetera? No, right now we're actually losing money. It's not a profitable for us. But again, we have to show the American public what type of product that we are selling and producing right now that we have a top quality product to compete with the Japanese and the Germans and whoever that's importing cars in our market.

And again, I really stressed this figure that our American consumers need to really wake up and look at the American product because that money stays home. It goes back in our steel plants, our rubber plants, our glass plants, electronics, and it needs to stay here. With the Austin Academy increasing, hopefully there will be a convention center here and the town is growing. What do you foresee will we see Pavillion Lincoln Mercury adding on another line of cars or increasing your space, putting another dealership in another part of town? Now, I have plans to build a multi-story parking garage and a used car building right now and that's the plans of being drawn right now as we speak. And we're going to probably get in this project in about 90 days because we've outgrown a facility as I stated earlier.

Now, I think the city is just going to just really grow and I think, like I said, we came in with a good positive attitude. You'll be hearing a lot about Pavillion Lincoln Mercury. Our goal is to be the one of the top Lincoln Mercury stores in the country. Has interest rates hurt the automobile industry thus far or I can't part to that question the uneasiness of the American economy thus far? No, it hasn't hurt because the manufacturers come along with so many support programs. But yes, I would say because of the economy of the United States, it's really hurt in a whole of the automobile business because like the East Coast was doing fabulous and now it's down. The West Coast was doing just really a great, great job and it's kind of going down and now the central U.S. is kind of picking up now. So it's all in cycles and we call these in the automobile business adjustments. We all have to go through these adjustments. One time ago there was a big hoop to do about big cars, gas guzzlers, but obviously that particular argument has gone by the wayside.

People are returning to buying larger cars. Is that so the case? People like full-size automobiles. They want a nice car, a nice automobile. And again, getting back to the American main car, we manufacture the most quality in the luxury automobile. And also you get the quality of the luxury with all the power and a nice soft leather seats or cloth, whatever you like in this particular automobile. And plus have a good, soft, quiet ride, any automobile and also a decent gas mileage. And that's why the luxury market is just so popular right now. People want luxury. They earn a car is 45% of their time. They want luxury. They want a nice car. You mentioned service. When people buy cars, do they actually ask about the service warranty? Do I bring my car in on Monday? Do I have to work three or four weeks the following month Monday to receive it?

How important is service to the total overall sale of a particular vehicle? I'm going to answer this real quick for you. It is 99% part of the sale and today's market is service. And we've all seen the actual commercial quality job one. That's all related back to service. Right now if you can't service the automobile and service the customer, you can't sell them a car the second time. Anybody can sell them a car the first time is the second and third time. And that's where the service port come in. Are the other black entrepreneurs like yourself becoming more interested in Ford? Because that's the dealership that you own, but in owning automobile dealerships, since the demographic of the American population will be more minority oriented come the year 2000. Yes, because that's why I would just take mine off again to Ford Motor County. They've looked and they've did the proper research and look at the market. And yes, we have other minority dealers that are real successful. We've got any woods that's out of California.

It's very popular dealer. He has about seven or eight dealerships doing great. We have dealers in Chicago, dealers in New York. And we have a lot of minority dealers that are just really doing great in this automobile business. Besides making a living for yourself and your family and your employees, how important is it for you to be involved in the community in which you sell cars? It is very important because the public needs to know who's representing the name like my dealership is named for William Lincoln Mercury. Who's standing behind it and they get a chance to know me. They know my type of quality or procedures I like to do business. And it's very important that I get involved with the community to chamber the city and get involved with local affairs and schools. And that's one of the parts in being a dealer because I'm a kind of a public official, public person. And that's what people look for. They want to know who's behind the name. Speaking of behind, no one is successful alone. When you got the idea to put your own dealership together, first of all, what type of people are you looking to be salesman of cars? And secondly, what type of people are you looking for to run the service in parts departments?

Well, number one, I've always kind of prided myself on hiring the top quality salesperson or people in management. And you know, managers have to manage people. We have to structure a business partially on job descriptions. And so you try to find people with the type of quality that want to excel into business. And every one of my employees that we have heard in this business have an opportunity to grow and to probably become a dealer one day. Because I am teaching all of them how to actually read a financial statement, how to do advertising, how to do marketing, how to service automobiles, and how to be polite to a customer, and also get the job done. So we have a different criteria for when we hire, looking for that special person. Normally, when one signs on, I know there's turnover, but basically, being in the business, you probably have a realistic outlook on some employees that will and won't work out. For those that won't work out, when do you know this person will not be successful at this particular dealership?

For the next 60 day, overall, which we call a probational period, and the employees give an understanding when we hire them. And we go through normal procedures of hiring, and after the 60 days, either we have another interview, and either we're both satisfied with each other or not, and then we use the port company and try to do it on a friendly basis. And you'd be surprised how well you can do operations where if you go in with a good understanding, you can always come out with a good understanding. I was always wondered, you see all these cars out here. How do you convince the bank or someone to loan you that much money to have these cars sit down a lot? And I'm quite sure some of the cars will sell, but I'm quite sure a lot of them won't sell as fast as you would like them to. Do you still pay on those cars, still sitting on the lot there? Every month we pay, and it's what we call floor playing charges.

And it's very expensive. A dealership, as a very good business, it could be detrimental to you if you don't watch your inventory. If you have a car like you mentioned earlier, they had to sit on you for six months. We need to sell that car. That car is probably costing me two to three, four hundred dollars a month just to park it. So, you know, the main thing is actually to sell the automobiles to turn them. So it's a costly type of business, and you have to really watch all the ins. How do you say it on what cars you're going to put on the showroom floor? I'm quite sure there's a secret to that if you can devolve that secret. Well, it's not really a secret. It's actually we looked at the car. And we try to pick a nice color, a bright color, seven little good on the lights. And actually we'll show real good. And actually we can show Trump to trunk dimensions, the back seats, the leg room, the actual hood. And again, everyone like a different color.

So we just can't be stuck on colors that we like. So we have to kind of go with the market. Use the market does this for us. We have computers now. We can see what brands, colors that sells more. And 60 days and the other was doing 90 days. So we're going to use that as a kind of an answering question answer. What cars are put on the showroom floor now? Are there any certain parts or time of the year that sales are higher than other times? And you as a dealer may offer certain incentives that the manufacturer may not offer. Or to get people to at least come look at the cars if there's a particular slow period during the year. And normally in the in the scene of past three years, the manufacturers with all the rebates and the actual interest programs. And normally you're summer selling seasons, real good seasons, are from June, July, August. Normally you're good season. But right now with the economy, the way it is, days of supplies, of units of building up. And this is what I'm talking about days of supplies is when the emitors are building up on the manufacturer.

And so we had so many programs lately that it's been fair and it could be a lot better. Are the consumers confused with all these different programs floating around from the three manufacturers and now we have foreign competition? I would say yes. Yes, they're really confused because they don't know if they're getting a thousand dollar rebate or 2.9% APR. And I will suggest that anybody is interested in an automobile that they'll just take to time, either look at the print add in the paper or discuss the dealership. And this is what kind of programs that the manufacturer is offering. And that way you'll have a clear understanding of what you have. And a lot of the advantages of these rebates is to actually get you into carbon no-down payment. You can buy a car and actually the manufacturer is going to pay you down payment for you. So it's a good program. Your dream took seven years within that seven year period. Were there any significant changes Lincoln Mercury did to his Lincoln and Mercury model cars that were significant over those seven years in your opinion? Yes, not too much of the actual sheet metal itself.

They changed philosophy. They wanted to give to be the best motoring company in the country and they went after the word quality and job one. And they went in and actually regrouped or re-structured their whole philosophy on actual doing business. And they started at the top and went all the way through the factories and the guys who built the cars. And the positive you should see some of the quality coming out of these cars quality on these automobiles. I mean defenders and hoods and the trucks the fifth of these automobiles. And the quietness and actual dashboards. And I remember in times I've got a new cars and half the dashboard was you can stick your hand on one side and on the other side you couldn't put a toothpick in it. But they really went in and actually went in and wanted to build quality automobiles and it's paying off. And that's really a good selling too for me as a dealer to sell the product. I'm quite sure there's life after a Pavilion Lincoln Mercury. What are some of your other interests when you allow to be away from the dealership? The one I have a beautiful wife, her name is Roxanne and I have four kids.

And I like to spend time with them. We do boating in snow skiing and water skiing. But my ultimate is drag racing. I'm a vivid automobile drag racing. I used to run a circuit around the country and I built racing. Not really. I've just put on a site and tell like and get my business going. When I have a race car right now that I'm selling it's a GM product 81 Camaro. And it runs a class of super cop, super competition. And it's about a eight second automobile. I run a quarter of mile and 165 miles an hour. But that's what I like. I like to race automobiles. I love the automobile business. For a young person listening to this program or middle age of someone just out of college, that may be interested in the automobile dealer industry. What advice would you give him or her? Well, number one, if you're just getting out of college and have the actual background

on running a business or know the functions of running a business, I would suggest to get in contact in either Ford Motor Company, Chrysler and GM. They have dealer, excuse me, training programs that you can get involved with. And I would say spend the time to go through one of these programs if you've never been in the automobile business. And it will show you all the structural parts of the automobile business, for say as the Porsche department, how to run a Porsche department, how to service automobiles, how to actually what to do in service departments, the body shop. And that's a very, very important structure of this business. And then after the program train, I would say go on and sell automobiles for a couple of years. And make yourself an investment into the business to know what you're doing, know the product, know the actual philosophers of different manufacturers. And you pick your manufacturer what you like to go with. And I think it's a great opportunity for a lot of us to get in the automobile business and to be very successful entrepreneurs in the business.

Mr. J. Michael Shoghwa, owner of Pavillion Lincoln Mercury Deutership in Austin, Texas. Have you have a question or comment write us? Remember views and opinions expressed on this program are not necessarily those of this station or the University of Texas at Austin. For in Black America's production assistant Betty Rodriguez, and IBA's technical producer David Alvarez, I'm John L. Hanson, Jr., please join us again next week. Cassette copies of this program are available and may be purchased by writing in Black America cassettes. Longhorn Radio Network, Communication Building B, UT Austin, Austin, Texas, 78712. From the Center for Telecommunication Services, the University of Texas at Austin, this is the Longhorn Radio Network.

I'm John L. Hanson, Jr., join me this week on in Black America. I would say no because black people do buy new cars. But at the time, and I would hate to say it was racism, it was just a sign of the times. You just didn't have blacks in those types of jobs. Black on automobile dealerships this week on in Black America.