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Tough Times Just Seem to Get Tougher : Slow Car Sales Reduce Jobs and Pinch City Revenues

Recession in San Gabriel Valley. One in a series of occasional reports on the local impact of the distressed economy

January 05, 1992|IRENE CHANG | TIMES STAFF WRITER

One evening in December, Bill Campbell, general manager of Jeep/Eagle Hyundai in Alhambra, found himself in the service garage, his shirt sleeves rolled up and a hose in hand. Having laid off 11 employees last year because of sluggish sales, Campbell was without a car-washer that night. So he did the job himself.

"I'm handling everything," said Campbell, who let go of two mechanics, three sales people, two service writers, two porters, a cashier and a parts person. "I go out and close deals. I talk to people on the lot. I do the paperwork. . . .

"Whatever it takes."

Such are these recessionary times.

The prolonged economic downturn has dried up business at the Main Street dealership. In November, Campbell sold only four Hyundais. The previous year, he was selling an average of 18 to 20 per month. And because he only sold half the number of Jeeps he had expected by December, he canceled all new stock orders.

"This is the slowest I've ever seen it," Campbell sighed, adding that his commission-dependent income has taken a dive, though he wouldn't say how much. "It used to be fun selling cars. Now it's gotten to the point where customers are saying, 'Let's see how much the dealer can lose to sell a car.' "

Car dealers across the San Gabriel Valley tell a similar story: Shaky consumer confidence, shrinking paychecks and massive white- and blue-collar layoffs, which dealers had hoped would magically disappear after the Persian Gulf War, have lingered and driven sales way down.

Though no statistics were available specifically for the San Gabriel Valley, local dealers say the area tracks national figures. Sales of all U.S.-built cars and trucks, including Japanese models made in American plants, were down 18.7% toward the end of 1991.

When the economy was healthier, and car dealerships were considered the ultimate cash cows, revenue-hungry cities used their redevelopment powers to buy up vast tracts of land, envisioning Taj Mahal-like auto malls--the bigger, the better. Now, cities are reeling from closures and bankruptcies of once-prized dealerships.

Freeway Nissan, Rosemead's only new car dealer--and the city's fourth-largest sales tax producer--closed in November after less than three years on Montebello Boulevard.

Toyota of Duarte, one of several dealerships along the Foothill Freeway (210), closed seven months ago because of financial difficulties. And, for an entire year, the city's Nissan, Isuzu and Suzuki dealership was shut down, depriving the city of hundreds of thousands of dollars in sales tax revenue. The dealership reopened two months ago under a different owner, as a Nissan franchise.

Those developments are part of a larger disappointment for Duarte: After spending more than $15 million on land for a proposed nine-dealer 210 Freeway Autoplex, officials gradually abandoned the idea, because dealers simply were not interested.

Instead of a Volkswagen and Subaru dealership, the city brought in a Staples office supply store, which recently opened along the freeway. A recreational vehicles lot occupies a parcel where other car dealers were supposed to go, while still more land stands vacant, waiting for some other kind of business.

"It's a mistake to stubbornly stick to an idea that's not going to work," Duarte City Manager Jesse H. Duff said, adding, "We're very optimistic about the future of the 210 corridor."

Claremont Auto World, meanwhile, endured a rocky 16-month reorganization under federal bankruptcy law, and its sales plummeted in 1990 and 1991. Last May, the six-dealership auto mall was sold and renamed the Claremont Auto Center.

City officials say the center is off to a smooth start. But it sold a paltry 210 cars in November, compared to Auto World's peak of 600 units a month in 1989. And in December, 60% to 70% of the cars in the center's six franchises were 1991 models, far above the typical end-of-the-year inventory of 35% to 40%, auto center owner Takashi Sugimura said.

Despite hefty manufacturer rebates of as much as $2,000, and very low interest rates on financing packages, "people just are not making that decision to drive off in a car," Sugimura said. "It used to be the prevailing thought that it takes a person 72 hours to (buy a car). Now it takes 10 days."

In Alhambra, sales tax revenue from the city's car dealerships fell $100,000 below the expected revenue for July, August and September.

City Manager Kevin J. Murphy said the downturn was exacerbated when Century BMW filed for reorganization under federal bankruptcy code. The city stands to lose even more, Murphy said, from the October closure of Jim Marino Mercedes-Benz.

"Dealers that weren't able to scale back quickly enough were really hurt," Murphy said.

Alhambra's 1991 overall sales tax revenue will amount to $1 million less than the previous year, or an 8.5% drop, officials predicted. Sagging auto sales are a major factor, because dealers generate 30% of the city's sales taxes.

But not everyone in the auto business is reporting bad news.

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