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Running on Empty : Recession, Auto Malls Throttle Dealerships, Leave Many Jobless


It is a brilliant February morning, but Carmen Koosa, once listed as the world's best auto salesman in the Guinness Book of World Records, sits glumly at his desk. His plush office in Santa Fe Springs overlooks an automobile showroom where the only things moving are the flashing lights around a white Infiniti convertible.

Two and a half years ago, Koosa looked out over his fledgling empire of automobile dealerships and proclaimed that he would one day own at least seven dealerships in Southern California.

Today, the salesman who sold 3,892 cars in 1980 and later owned five dealerships, said he'll be lucky if he ends up with one dealership.

"All I have is two left, and I'm hanging by my thumbs," Koosa said. "I'm the best salesman in the world, but that won't save my life."

Koosa has been caught in the vise of a growing recession and what one expert described as a "structural revolution" in the automobile-sales business. Experts estimate that the effects of a shrinking economy and a trend toward auto malls or mega-dealerships forced about 900 dealers to close nationwide last year, and may cause the closure of another 2,000 automobile dealerships this year. At least 10 automobile dealers in the Southeast have gone out of business. Increasingly, many dealers find themselves without the dollars they need to pay for advertising, employee salaries, rent and monthly costs of financing inventories of unsold cars and trucks.

During the last few weeks, Queen City Ford and Coletto Nissan have closed. South Gate lost three Pete Ellis dealerships and Freedom Ford. Koosa closed his Bellflower Toyota operation. Sopp Oldsmobile and Sopp Mitsubishi in Downey have been shuttered. Merit Chevrolet in Santa Fe Springs never saw the start of the new year.

Most auto dealers are blaming the current crisis squarely on the recession. "People are running scared," said Kelly Shaw, general sales manager of Pacific Lincoln Mercury in Downey. He and other automobile dealers said the recession has sent consumer confidence spiraling to an all-time low, and many would-be buyers are saving their dollars rather than spending them on a new car. Dealers who do find interested customers have been running into another effect of the recession: jittery banks unwilling to make loans to customers who pose even the slightest credit risk.

Some dealers, such as Koosa, also blame their woes on manufacturers, both foreign and domestic. "There are just too many cars and not enough buyers," Koosa said. That means a lower profit margin for dealers, experts said.

Industry experts said the coming of the auto mall and the consolidation of franchises have also posed a threat to the independent auto salesman.

"Even before the recession hit, there were new dealerships going down every year," said Frank Fraser, a consultant with J.D. Powers and Associates, an automotive consultant firm based in Agoura Hills.

Fraser said that in 1989, nine dealerships were closing every 10 days in the United States. In 1950, he said, there were 50,000 auto dealerships. Today, half of that number survive.

"What we are seeing is the emergence of multifranchise dealerships and auto malls," Fraser said. "In a way, it parallels what is happening in many other consumer fields. There used to be a time when you could go to a General Electric store or an RCA store for a radio. Today you go to Circuit City. You know you want some form of electronics and you can shop around and find it."

Auto malls and multifranchise dealers, Fraser said, offer the same convenience. There is easy parking, a wide selection and much time is saved. The result has been that independent salesmen may be finding themselves shouldered out of the business.

The Cerritos Auto Center, which opened in 1979 with five dealerships and today has 21 dealers, is still doing well, said Michele Wastal, Cerritos public information coordinator. The auto mall provides the city with about $4 million a year in sales-tax revenue. While some dealers in the center report a slowdown in business, they said they were still drawing customers.

Santa Fe Springs officials had hoped to start a mini-auto center, anchored by Carmen Koosa's Infiniti and Merit Chevrolet. When Merit Chevrolet went out of business, Koosa found himself, his 17 employees and an inventory of about 100 Infinitis isolated in an industrial section of the city just off the Santa Ana Freeway. Koosa gives little credence to the idea that auto malls are putting him out of business. He believes that there are simply too many cars on the market.

Last May, he sold his San Diego dealership. In October, Koosa sold his Cypress Nissan dealership. Last month, he shut down his Bellflower Toyota dealership, and he is trying to salvage his Downey Nissan and Santa Fe Springs Infiniti dealerships. He predicts that he will be closing both before the end of the year.

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