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U.S. Small Business Administration forces Big 3 Automakers -- Ford, Chrysler, GM -- to fire white-owned suppliers.

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Case 25 - White Female Owned Business is WRONG Color for Chrysler (and the U.S. SBA)

U.S. Small Business Administration

Her customer, a major Chrysler vendor, was a loyal, satisfied customer for many years.   But then the SBA imposed racial quotas on the automakers' suppliers!

DOWN:  Details of White Woman vs. Automakers (and SBA)

White Female v. Automaker Racial Quotas:  Her company is reliable, competitively priced, and has a long track record.  But the U.S. SBA forced Detroit to impose racial quotas on its vendors.

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(1) Background
Posted Nov. 23, 2000

The Company: White female owned manufacturing company with 88 employees. Call it the "Wire Company" (not the real name of the firm).  

Case 25 Index:

1. Background and Summary

2. Chrysler's Racial Quotas

3. Victim's Testimony

4. Victim's Business Philosophy

5. Documents and Related Reading

Separate Page:
U.S. SBA Quota Agreement with Automakers

Age of Business: Almost 20 years.
Location: Georgia
Product: Wire harnesses and cable assemblies for a variety of customers, including the auto industry.
Customer: 25% of the Wire Company's sales were to a Chrysler supplier (known as a Tier 1 supplier, see below).
Problem: The U.S. Small Business Administration forced the Big 3 Automakers (Ford, Chrysler, GM) to sign a "Memorandum of Agreement" in which they agreed to force their suppliers to stop purchasing billions of dollars in products and services from white-owned firms.

Contact e-mail:

(2) Chrysler's Racial Quotas

Under the SBA agreement, Chrysler’s year 2000 racial quotas are:

Tier 1: Firms selling directly to Chrysler. White-owned Tier 1 firms who sell directly to Chrysler are required to exclude white-owned subcontractors (Tier 2) from $1.5 billion in sales. Conversely, Tier 1 suppliers are required to make up the $1.5 billion in purchases exclusively from Tier 2 companies owned by protected minorities (as defined by the SBA).

Tier 2: Firms selling to Chrysler’s Tier 1 suppliers. White-owned Tier 2 firms are required to exclude white-owned suppliers and subcontractors from $1 billion in sales. Conversely, Tier 2 suppliers are required to make up the $1 billion in purchases exclusively from suppliers and subcontractors owned by protected minorities (as defined by the SBA).

General Motors and Ford had to agree to similar racial quotas.

(See SBA Memorandum of Agreement.)

(3) The Victim's Statement
Submitted to Adversity.Net Sept. 16, 1999

          "I am a white female who owns a manufacturing company which employs 88 people. We assemble wire harnesses and cable assemblies for various industries including the automotive industry.

          "Our largest customer is a supplier to the automakers. They have been our customer for over ten years. We had become their sole supplier for their wire harness assembly needs, providing them a quality product, competitively priced and delivered on time.

          "We also have been instrumental in assisting them with engineering needs, cost containment, product improvements; an added benefit giving them a competitive edge. In turn, we have never courted their competition’s business. This business was fairly earned based upon our merit.

          "Our customer has been directed by Chrysler to have a minimum of 5% content from minority firms. In December 1998, we were notified that in order to meet the requirements placed upon them by Chrysler, they were forced to take some of the existing business we had with them and place it with a minority firm. They assured me they had exhausted all other avenues for procurement of the other commodities they purchased, and Chrysler has supplied them with the name of a wire harness manufacturer that was a minority and would meet the price we were currently charging. This loss of business represented 25% of my total sales dollars and 22 jobs in the United States.

          "Because of the devastation this caused to my business, I began my initial investigation into the background of this decision to take the existing business away from me. I found on the SBA’s Internet site the Memorandum of Understanding (MOU) signed between the Big Three and the SBA. After a careful review of the MOU, I realized the intent was to assist Small Disadvantaged Businesses (SDB) with sales with the automotive industry. After further research, I felt that we qualified as an SDB. We immediately took several steps.

          "First, we completed the application process for SDB status and submitted it to the SBA on Dec 10th, 1998.

          "Second, on Dec 9, 1998, we submitted a copy of our self-certification to our customer with a copy of the MOU, utilizing the format called out in the MOU, from subparts 52.219-1 of the Federal Acquisition Regulations for the self-certification.

          "Our customer notified us upon receipt of the self- certification, that they were informed by Chrysler self-certifications were not acceptable.

          "Third, I contacted Chrysler to find out what my customer needed to do to be able to include the sales dollars to us as part of the 5% requirement. I was informed that effective Jan 1, 1999, self-certifications were not acceptable, companies must be certified SDB by the SBA. As we had already begun that process, I knew I must wait for final SBA approval of my SDB application prior to taking any further action.

          "On March 11, 1999, we received the formal notification of acceptance for SDB status.

          "We immediately contacted our customer with this information. Our customer informed us Chrysler would not accept the SDB status and there is no place on their reporting form to identify sales dollars to SDB’s. The Purchasing Manager sent me a copy of the form Chrysler requires, and I confirmed there is no place to report SDB’s.  There are only categories related to race.

          "We contacted Chrysler, to ask for assistance with this. They informed us they do not recognize the SDB status in their reporting, and I must be registered with a regional office of the National Minority Suppliers Development Council (NMSDC).

          "[The NMSDC registers] companies that are owned and operated by a member of one of the [protected] race categories, and they do not register SDB’s.

          "On March 24 1999, I spoke with the SBA. I was advised SBA's position was that Chrysler had agreed to the terms of the MOU and therefore there must be some misunderstanding.

          "Since that date, I have corresponded with the SBA, and they in turn have been in contact with Chrysler. On July 9th, 1999 I received a letter from the SBA assuring me Chrysler was now in compliance with the MOU. In fact this was not true.

          "Working with the SBA to attempt to obtain some written verification from Chrysler, on Sept 15th, 1999 I received an e-mail from the SBA informing me that Chrysler has not been in compliance and had no intention of adding non minority SDB's to their requirements placed upon their vendors.

          "I have several other issues that I feel are also pertinent to this problem.

          "First I do not believe the intent of the MOU and other SBA initiatives was to force companies to take existing business away from women owned Small Disadvantaged Businesses. The business we lost was based solely on the hard efforts and trials in a demanding competitive marketplace.

          "Secondly and most importantly, we have learned the minority firm located in Arizona who will receive our business will actually be performing the work off shore in a facility located 50 miles south of the Arizona State line in Mexico. Twenty-two AMERICAN jobs are going to Mexico. My work force is 61% minority.

          "[The Arizona firm which is sending all of these jobs "off shore" enjoys] minority firm status [under SBA rules] and are given special preferential treatment by the automakers and the Small Business Administration, but in fact the benefit of jobs [awarded under SBA's program] is not to deserving Americans.

          "Thirdly, we have no assurances from our customer of our ability to retain the balance of the sales we have with them. If they are unable to meet the 5% requirement, we could potentially lose more business. We were under the impression although we have already lost sales dollars, with the certification as an SDB, we could be assured of no future loss of sales dollars.

          "I and my company followed the rules outlines in the [SBA] MOU, but Chrysler has no intention of conforming to the agreement they signed [with SBA]. And what makes matters worse, under the guise of a program designed to help "disadvantaged" Americans the jobs are actually now in Mexico. A lot of help that was!!!"

(4) Victim's Business Philosophy

          "I never have believed in the quota system or affirmative action. I believe that the individual should benefit based upon merit, not the color of their skin, religious preference or sex.

          "I have owned my business for almost 15 years. I started the company on a shoe string, and through my hard efforts I have been very fortunate to become successful. My company will never be an IBM or Microsoft, but I am very proud of my accomplishments.

          "I have never used the "woman" card to gain preferential treatment. We are a government supplier on a limited scale (Government sales amount to less than 2% of my total sales dollars). Every contract I have received in both the public and private sector has been based solely upon merit.

          "What angers me the most is the government’s interference in the private sector. In the private sector, if Ford, General Motors and Chrysler want to establish Special Supplier Relations Programs which encourages purchasing departments to give preferential treatment to minorities, although I don’t agree with it, I have no recourse. What the SBA has done with the MOU they signed [with Chrysler and the other automakers] is legitimize minority preferences within the private sector.

          "Unfortunately, the SBA’s intention when the MOU was drafted was to include SDB’s (Small Disadvantaged Businesses) which as you know does go a tad bit beyond the race issue. This was the first time in the history of my business that I played the "woman" card.  Not in an effort to secure additional business, but to preclude having additional existing business taken away from me -- business that I have cultivated for over 10 years, and had been awarded based upon merit.

          "When the Big Three realized they has made an error by signing the MOU, as SDB’s could be non minority, their response was to decide to ignore the MOU. What this means is the MOU is a total sham. The hundreds of thousands of dollars spent by the SBA in drafting, finalizing, and subsequently staffing offices, has been and continues to be a total waste of taxpayer’s money.

          "Of course, what angered me initially, was the existing business I lost, that was awarded to a minority firm, does not benefit deserving American’s as the work is now being performed in Mexico, by a [supposedly disadvantaged] firm that employs over 800 people.

          "I have been in touch with Senator Coverdell from Georgia, and his office has agreed to look into this further.

          "As much as I hated to do it, I have also contacted NOW and the ACLU.  Not that I think they will help me, I don’t think the situation I have fits into their agenda, even though I feel my rights have been violated.  I think it will be very interesting to see what type of response I get from them.

          "I am apprehensive at this time about approaching the media. I do not want this to back fire into my face.

          "I have contacted a prominent civil rights lawyer in Atlanta, and though he is sympathetic to my cause, I must agree with him that litigation may not be the right step at this time.  I need to explore all the other options (as limited as they are) available to me.

          "I have no problem with Adversity.Net posting my "Case" on the internet. In fact, that’s the reason I sent you my story."

Signed:  Owner of "Wire Company" (not the firm's real name)

(5) Documents and Related Reading


END Case 25:
White, female owned business is WRONG color for Chrysler (and SBA)


Main Index
Case 25: MAIN
White female owned business is WRONG color for Chrysler
Case 25: DOCS
U.S. SBA Quota Agreement with Big Three Automakers
Case 25: DOCS
U.S. SBA "Fact Sheet" on Big Three Racial Quota Program

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*  We use the term reverse discrimination reluctantly and only because it is so widely understood.  In our opinion there really is only one kind of discrimination.