Vinnie Johnson went from a clutch player for the championship Detroit Pistons to owner of one of the biggest Black-owned auto suppliers in the U.S. Now, the entrepreneur says he’s at risk of losing up to $2.5 billion in contracts because his company’s executive ranks are too White.
The Michigan Minority Supplier Development Council stripped Johnson’s company, Piston Group LLC, of its “minority” status, a designation that gave him a foot in the door of global automakers, which award lucrative supply-chain contracts to companies that are owned by and hire people of color.
The MMSDC, as the nonprofit is known, decertified the Piston Group in February after a protracted fight over the racial makeup of its management team. The Piston Group hadn’t replaced its outgoing chief financial officer, who is Asian, with a person of color, leaving its 11-person executive team devoid of any minorities, except Johnson, who is the chief executive and chairman, and its government affairs director, who is Black. The council argues Johnson is not involved in the day-to-day operations of the company, either, another requirement for certification.
Johnson disagrees and in a lawsuit filed last month counters that the council has been arbitrary and opaque in its dealings with him. The MMSDC has used “unfettered discretion and secrecy to wrongfully punish Piston Group and the Piston Companies due to a misunderstanding of Mr. Johnson’s role or personal differences with him,’’ he argued in the suit. Johnson declined to comment.
On Monday, a judge approved the Piston Group’s request for an injunction and temporary reinstatement of its minority certification while the case continues. The ruling found MMSDC had not provided enough evidence to support its claims beyond “unspecified customer complaints,” Judge David Groner of Michigan's Third Judicial Circuit wrote in his decision Monday. He also added that the evidence favors Johnson’s version of events.
“We are delighted by the court’s decision today,” the Piston Group said in a statement Monday. “We will continue efforts to vindicate Mr. Johnson.”
The MMSDC didn’t immediately have a comment on the ruling, but has previously said the lawsuit has no merit and that it requires all companies to meet the same basic criteria: at least 51% ownership by a minority, active minority management in day-to-day operations, and operational independence.
The simmering conflict has erupted into a debate over the nature, purpose and scope of minority set-aside programs, which were created to chip away at America’s racial wealth gap. Johnson advocates argue he’s being penalized for success, and the certification standards need to be adjusted for a company the size of his. Critics say he’s undermining decades of work to create economic opportunity for racial minorities, and that he hasn’t provided a path to the top for them within his own company, either. If he doesn’t want to play by the rules, he should compete without his minority status, they say.
“If companies do not want to follow those rules, then a decertification is relevant and appropriate,” said William Bradford, dean emeritus at the University of Washington’s Foster School of Business, who has researched minority-owned firms. At the same time, he warned against tightly prescribed criteria for growing companies, arguing their impact should be measured by broader things like the diversity of their labor force and suppliers, and even the generational wealth created for an entrepreneur’s family. “We lose the real key outcomes we want when we try to focus on, say, ‘You have to remain a Black business.’”
The MMSDC argues meeting the requirements is crucial for the system to work. “Our policies are not designed to create wealth for one, but to create wealth for many through employment and entrepreneurship,” the organization said after the lawsuit was filed. “This is how generational wealth is realized in communities of color.”
At a time when corporations are under pressure to show progress and transparency on racial equality—even President Joe Biden has made procurement a key tool in his racial equity agenda—the Piston Group’s decertification could complicate minority spending for powerhouse automakers like General Motors Co., Ford Motor Co. and Jeep owner Stellantis NV. In 2019, GM, Ford and Stellantis spent an average of $7.5 billion each with diverse suppliers, which include businesses owned by women, veterans, disabled people, LGBTQ persons and, for Ford, small enterprises. GM spent 28% of of its minority spend with Black-owned firms that year; Ford and Stellantis didn’t disclose that detail.
GM created the industry’s first formal supplier-diversity program in 1968, a year after riots erupted between Detroit’s Black residents and its police force. Since then, the programs have evolved to include spending targets, mentoring, and joint ventures between global suppliers and smaller firms. Some automakers have even spun out pieces of their own company for minority ownership.
Automakers rightly take credit for pioneering the programs, which have directed hundreds of billions of dollars toward minority-owned businesses and minted a generation of successful entrepreneurs of color. But they have limitations. While the number of eligible groups has expanded to include women, veterans and LGBTQ people, the size of the procurement pie hasn’t, several Black auto executives said. When a minority-owned company forms a joint venture with a global auto supplier, it can help the business scale dramatically, but there’s a ceiling to that growth—taking outside capital means sharing financial control and forfeiting minority certification. If a minority owner wants to sell the company, they can only sell to another minority, or risk losing preferential status with automakers.