Texas dealer Fernando Varela urges minority dealers to conserve cash for economic slowdown


Cash management will be one of the key issues heading into 2020 for minority dealers, said Varela, who was named chairman of the National Association of Minority Automobile Dealers in August. Varela, 60, owns three Ford dealerships and a Chevrolet-Buick-GMC-Cadillac store — all near Dallas.

He spoke with Staff Reporter Vince Bond Jr. about his goals as NAMAD chairman, the prospect of an economic downturn and challenges facing minority dealers. Here are edited excerpts.

Q: How did you get into the business?

A: I originally went to the Ford dealer development training program back about 27 years ago. I’m actually celebrating 25 years as a dealer this month. I graduated from the Ford program and I purchased my first store, the one here in Palestine. That’s how my car career started.

Was it a challenge to start your first store?

Yeah. Somebody just gives you the keys and says, “Here is your baby.” Things were a little bit different 25 years ago, maybe a little bit slower, which probably worked in my benefit. You always surround yourself with good people and good managers.

That makes the whole transition a little bit easier, and I was fortunate to get a good team of people around me from the beginning. That helped my transition and learning curve.

What has led to your success? What are some of your strategies?

I think it’s like in any business. When you start taking care of the customer and you make the whole experience enjoyable, people come back to see you time after time. Treating people in the service department the right way, and that has always come back around and helped me. People come back and support the sales side of it. People, no matter if they’re your family members or not, they will not buy from you if you don’t treat them right and give them a fair price.

I would always make sure that it doesn’t matter who they are, that they’re being treated right. Sometimes people get caught up in “I got to make a lot of money,” but they don’t care how they treat people. I’d rather treat people right, and I know the financial side will come along with it.

Was it hard to raise money for your first store?

Yeah, actually it was. I had help from my parents. My father had just retired and he had some money set aside. He lent me some money. The training program was two years, so I spent two years saving every penny I could to be able to invest my percentage into the business. And that challenge continues today, just the amount is a little bit bigger for some people.

You have a son in the business, too?

Nicholas just turned 30 this year. He runs two of the stores, and I run the other two. I’m getting him more involved in running all of the stores. I know things like NAMAD need a lot of time.

That’ll allow me to do other things while he focuses on the running of the business.

What are your goals as chairman?

Minority dealers, you have heard over the years that we’re the last ones at the table and the first ones out of the table. We continue to go through what could be a little bit of troubled times ahead. Maintaining the numbers of minority dealers, it’s going to be a priority. Figuring out how to give them some access to cash, it’s always tough for us to raise cash.

You know how it is when times get tough, unless you have a million dollars in the bank, the bank will not give you a penny.

Succession, profitability, sales effectiveness — some of the things that dealers have to deal with today, that maybe 20 years ago, I didn’t have to deal with. All I had to deal with was profitability. Continuing to figure out how we expand our dealer network has always been the goal of the chairman of NAMAD.

Today, to buy a dealership is a little bit more expensive and difficult than it was before. So the challenge of getting the manufacturers to help through their internal dealer development plans, that maybe allow us to buy bigger points. If you look at the history of minority dealers, very few minority dealers sit in a metropolitan area. Unless you’re in Miami, or maybe the California area, there’s really not too many minority dealers. And I think for us to grow, we need to have access to those points and, obviously, the access to the capital to be able to get some of those points. The multiples for those things are huge.

If there’s a point over there that, let’s say, is $30 million, what kind of plan can we create to get a minority in there with 15 to 20 percent on it, and automakers have to finance the rest of it.

If you get into a market that is an African-American market, Hispanic market, Asian market, and you put a Hispanic, Asian or African-American person in that market, I truly believe that sales will come up. We all tend to go where we feel comfortable purchasing cars.

What are some of the key challenges facing minority dealers going into 2020?

We have to be very cautious about our expense control. If I go back to 2008, ’09, ’10 and ’11 when we had the last recession, in the car business, a lot of dealers were not prepared because they were not controlling their expenses. NAMAD has told dealers over the years to start watching your expenses and start saving cash.

We always say cash is king, and at those times it is more critical that we control how we spend it. You can make it through a bad time if you have enough cash in the bank. At those times, banks are not willing to give money to businesses that are not necessarily stable. That is key to our dealer body.

Do you have concerns that a downturn is on the way?

Some days I look out the window and the showroom floor is quiet, and I start wondering about what’s going on. Hopefully, it’s not going to be like it was back in 2010. But this economy’s been so hot for so long, I think, eventually, it could just slow down a little bit.

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