Mel Farr Automotive Group History

Address:

24750 Greenfield
Oak Park, Michigan 48237
U.S.A.

Telephone: (810) 967-3700

Website: www.toyotadealer.com/melfarr

Private Company
Incorporated: 1975 as Mel Farr Ford
Employees: 800
Sales: $492 million (1996)
SICs: 5511 Auto New and Used--Retail; 5531 Auto Parts Dealer--Retail

Company History:

When it comes to auto dealerships in and around the Motor City, the name Mel Farr is ubiquitous. Under the umbrella of the Mel Farr Automotive Group, Fords, Lincolns, Mercuries, and Chevies, as well as import brands are marketed under the familiar "Mel Farr, Superstar" logo, both in the Detroit area and in other key markets across the United States. Hailed as one of the leading African American entrepreneurs in the nation, former Detroit Lions star running back Farr has spent over two decades building what has become one of the country's largest auto dealerships. Despite the scale of his auto empire, Farr continues to direct all facets of the Automotive Group that bears his name; in his role as sports hero-turned-successful businessman he has appeared on such television programs as the CBS Evening News, CNN's internationally aired Moneyline, and NBC's Today Show, and has been featured in business periodicals from the Wall Street Journal to Black Enterprise magazine.

Born in Beaumont, Texas, in 1944, Farr received a football scholarship to the University of California--Los Angeles, where he studied political science between 1963 and 1967 and played football for the UCLA Bruins. His success on the football field caused him to postpone college after his junior year, when the 22-year-old athlete was named Consensus All-American, joined the NFL draft, and became the number one draft choice for the Detroit Lions. Moving east to the Motor City, Farr earned rookie-of-the-year honors in 1967, and was a member of the NFL's All Pro Team in both 1967 and 1972. Equally ambitious and realistic about his post-Lions future, the running back got married and started a family, while also attending night classes. During the off-season he worked in various capacities at Detroit's Ford Motor Company, where he gained valuable job experience and, in 1970, helped Ford design a program to develop minority-owned dealerships. Farr completed his B.S. in political science at the University of Detroit, graduating in 1971; he retired from the Lions three years later due to extensive knee and shoulder injuries. Farr was inducted into the UCLA Sports Hall of Fame in 1988.

Opens First Dealership in 1975

Although in 1974 he ended the affiliation with the Lions that had originally brought him to Detroit, Farr now considered Motown to be his home. He wanted to transform his work experience with Ford into a lucrative career by purchasing an auto dealership, but Ford executives felt that the one-time football star needed more experience. So, in November 1975, Farr entered into a partnership with John Cook, one of his former trainers at Ford's, putting up $40,000 of his own money to purchase a dealership in Oak Park that had floundered under its two previous owners.

While Cook and Farr had been friends for several years, as business partners they rarely saw eye to eye. Growing increasingly frustrated, Farr finally bought out Cook's portion of the Oak Park dealership to form Mel Farr Ford in 1978, financing the purchase with money he had saved from his last three years as a running back for the Lions. While the purchase fulfilled one of Farr's dreams, it also brought him numerous headaches. As he would later admit in Black Enterprise, he was familiar with products and salesmanship but not with finance. "I thought I was buying a profitable business," Farr recalled. "Instead, I had bought a company that was on the verge of bankruptcy." Not only was the dealership on shaky financial ground to begin with, but the rug was pulled out from under it when the Organization of Petroleum Exporting Countries (OPEC) decided to begin their embargo of crude oil a year later, sending gasoline prices soaring and the U.S. economy into a nosedive. Sales of full- and mid-sized American cars plummeted, while inflation spiraled interest rates and the cost of living drastically upward.

1980s Prove to Be a Rollercoaster Ride for Auto Industry

By 1980, with auto sales fallen to half their 1979 level, Farr's Ford dealership in Oak Park was near collapse. His situation reflected the state of things around the nation: minority dealerships were closing in record numbers, down from almost 100 in the late 1970s to 16 by December 1980. The economic downturn across the United States continued to force car sales into a nosedive, and Farr feared he would be among the next casualties of the recession. Forced to lay off half of his work force--including his janitorial staff--the resilient Farr turned to the federal government for help. In 1978 Farr had been honored for his outstanding athletic achievements by President Jimmy Carter; he now turned to Carter for help, appealing directly to the president for loans for auto dealers. Carter responded by pledging to provide $400 million in low-interest Small Business Administration (SBA) loans to Farr and other minority business owners in 1981, allowing these entrepreneurs to avoid the fate of colleagues forced into bankruptcy due to prevailing double-digit interest rates. Farr obtained $200,000 from the SBA, and buoyed his business even more with a matching loan from Ford.

In June 1986, with the national economy stabilized and his Oak Park dealership now on solid financial footing, Farr purchased what he would grow into an award-winning Lincoln-Mercury Merkur franchise based near the city of Pontiac. Now with 78 employees, Mel Farr Automotive grossed $26.8 million in sales during the year. By 1989, with three dealerships--Farr opened another Lincoln-Mercury Merkur dealership in Aurora, Colorado--and the economy still on the fast track, Farr Automotive would earn $52.1 million in annual revenues through the efforts of its 160 employees.

Opportunities for Minorities Becomes Crusade

While there were still a handful of minority-owned Ford dealerships in place after the industry's tailspin in the early 1980s, most of them were located in struggling inner-city neighborhoods rather than in prime retail locations. "The general practice in the placement of the original black dealers was to place them in inner cities with deteriorating neighborhoods," Farr explained during a speech before the Automotive News World Congress in 1992. "These locations were without growth potential, with poor credit risks, and limited access to competent personnel. It should not surprise you that these dealerships failed."

Although continuing to expand his own business's market in the area of domestic car sales, Farr was also frustrated by the lack of minority-owned import car franchises in the United States. It was a situation that was also gaining the attention of state legislators. As early as 1983 Farr had recognized that the growing sales of Japanese cars among U.S. buyers was not a fad but a long-term trend; he applied for a Toyota dealership but was forced to wait almost eight years before receiving one. According to a report by Carol Cain in the Detroit News, gaining import franchises was a prime goal of large dealers in an increasingly competitive auto market. "Under the wave of consolidation," noted Cain, "the survivors will most likely be the 'megadealers' which offer a variety of car lines under one roof." A savvy businessman, Farr intended to become one of these megadealers; in addition to Toyota, he pursued dealership opportunities with Mazda, Honda, and other import car companies, all without timely success. Finally, in July 1989, Farr's application for a Toyota dealership was approved. Deciding to close his Colorado Lincoln-Mercury dealership due to its distance from his Michigan home, Farr channeled those assets into building a foreign compact car market with Mel Farr Toyota. The dealership, which was the fifth African American-owned Toyota dealership in the country, would be expanded in 1993 and renamed Mel Farr Imports after franchises for Mazda and Volkswagen were added at its upscale Bloomfield Hills location. By 1997 the showroom would be staffed by over 50 employees.

Expands in Midwest and Beyond in Early 1990s

As a recessionary economy stagnated growth during the early 1990s, Farr was one of only 20 percent of minority dealers who managed to stay in business nationwide. In 1991, as 904 new-car dealerships went out of business across the country (70 of them minority-owned), Farr Automotive Group's collective sales were reported at $106 million, a 16 percent jump over the previous year, while the company's Oak Park store watched more than 300 new or used cars roll out of their sales lots each month. Mel Farr Automotive, which employed 240 men and women in 1991, ranked sixth highest in sales volume of any Ford dealer in the country and second in sales of the compact Festiva and Escort models.

Now director of the National Association of Minority Auto Dealers (NAMAD), Farr decided to approach the government regarding further SBA loans, this time to right what he saw as an uneven playing field, particularly in the foreign auto dealership sector. By 1992, minority dealers of Japanese and European import cars numbered only 60--scarcely 1 percent of the total import dealerships nationwide&mdashcording to NAMAD. In contrast, 43 percent of the cars purchased by African Americans were imports.

Farr continued to build upon his success throughout the decade. In May 1993 Mel Farr Automotive made its first move out of the metropolitan Detroit area, purchasing the Mel Farr Ford of Grand Blanc franchise. The year 1995 would find Farr crossing state lines for the first time; in April Mel Farr Lincoln-Mercury-Ohio opened its showroom in Dayton. The following year saw the opening of Mel Farr Ford-Texas in Houston and in January 1997 Farr opened a Ford dealership in Baltimore, Maryland, that employed 65 people.

One of the reasons for Farr's success was advertising. Whether or not you were in the market for a new car, chances were that if you lived in the Detroit area, Farr was a familiar sight. Beginning in 1979, his zany commercials--which he wrote, directed, videotaped, edited, and starred in--peppered the television airwaves. Calling himself "Mel Farr, Superstar" in reference to his moniker as a running back for the Lions, the auto dealer was pictured flying high above the competition by 1981, complete with a red cape à la Superman. Mid-1987 found the superstar dealer overseeing a giant "Wheel of Farr-tune" located in each of his Ford dealerships that new or used car-buyers could spin after a sale for a chance at $10,000. When the auto market turned sour, as it did in both the early 1980s and 1990s, Farr's ads became more wacky and more common; in fact, they had their genesis in the recession of 1979 when, as Farr later recalled, he thought to himself "things are so bad I might as well go for it. If I go out of business, I'm going to go out with a bang." In 1986 Farr would hire an advertising manager to take care of the production of his television spots, continuing his policy of frequent, high-visibility advertising.

Record-Breaking Sales Characterize Mid-1990s

Thanks to the work of an employee base that now numbered 495, company sales for 1995 climbed to $372 million, an 82 percent increase over 1994. Throughout the early 1990s Farr's dealerships continued to break records and receive praise both inside and outside of the industry. In 1995 alone, Mel Farr Ford would rank in the top 10 in new car sales in four car categories according to Ford Motor Company calculations, and its service department was cited for excellence as well.

The high sticker prices on new vehicles and the flood of late-model, preowned cars released onto the used car market during the mid-1990s after being turned in by leaseholders created both a strong demand and a steady supply in the used car market. Realizing that this was an ideal time to get into the market, in August 1996 Farr opened Mel Farr "Superstar" Used Cars in Ferndale, a suburb of Detroit. Staffed with 43 employees, the new dealership covered 13 acres with an inventory of between 400 and 500 used vehicles. The showroom for the new Farr location was a converted Midas Muffler Shop; in addition to serving as a used-car showroom it also housed a used car reconditioning center and a body shop.

During the same month, Farr also expanded in the foreign car market, supplementing his Toyota, Mazda, and Volkswagen franchise with Mel Farr Hyundai and Suzuki. By the end of 1996 Farr's nine franchises and his used car dealership reported combined annual gross sales of $492 million; the projection for the following year stood at over $700 million in new and used auto sales. In June 1997 he balanced these new import dealerships by acquiring a Chevrolet franchise in Metuchen, New Jersey.

Top Black Business-Owner in Michigan in 1997

Beginning in 1982 with only 52 employees at his flagship store, Farr would watch his payroll roster grow to 197 by 1997. Regularly positioned at or near the top of annual rankings of state-operated businesses, Mel Farr Automotive Group was cited as the #1 Black Owned Business in Michigan by Crain's Detroit Business in 1997, an honor that followed its ranking as #24 of the top 200 privately owned companies in the state the year before. The network of 10 franchises, taken together, employed over 800, most of them in the metro-Detroit area.

In addition to his many area dealerships, Farr remained committed to the city of Detroit and to improving the opportunities for blacks and other minorities in the auto industry. Active in city and regional affairs, he served as a board member to numerous organizations, including the Better Business Bureau of Detroit and Southeast Michigan, the Metropolitan Detroit YMCA, the Oak Park, Michigan, Chamber of Commerce, and others.

In 1996 Farr was recognized by President Bill Clinton as one of the Top African American Businessmen in the United States. The father of three grown children with his wife, Mae, Farr has watched as sons Mel Jr. and Mike have followed in his footsteps, both as managers of Mel Farr Automotive Group and Mel Farr Ford, respectively, and as football players for the NFL. "I have always been a dreamer," Farr told Tedra Butler-Dudley of African American on Wheels. "You just need to set goals when you dream. My goal is to become the largest merchandiser of automobiles both new and used for urban dwellers." By 1997 Farr could claim to be fast approaching his goal, and expressed the possibility of going public with his business to further both Mel Farr Automotive Group and the industry.

Principal Subsidiaries: Mel Farr Ford; Mel Farr Lincoln-Mercury; Mel Far Imports; Mel Farr Ford--Ohio; Mel Farr Ford--Texas; Mel Farr "Superstar" Used Cars; Mel Farr Chevrolet.

Mel Farr Automotive Group History

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