SAN JUAN CAPISTRANO — The gleaming Continentals and Cougars were proudly displayed in the tile-floored showroom as guests munched on tacos and listed to a mariachi band brought in to celebrate opening day of San Juan Lincoln-Mercury.
But that party atmosphere in the fall of 1995 didn't last.
Just 15 months later, bereft of customers and bleeding cash, the dealership quietly closed. Ford Motor Co.'s Lincoln-Mercury division, which never was able to find a dealer to buy the place, told its hired manager just before Christmas last year to lock it up and tell the two dozen employees that their jobs were over.
Today, the parking lot remains vacant, the Lincoln-Mercury sign covered with a canvas tarp. The two-story, Spanish-style dealership, dangling a few strings of white holiday lights from the showroom roof, stands in silent witness to retailing's basic rules: you need a good location, and you'd better have something that people want.
Lincoln-Mercury, it seems, had neither when it decided to spend more than $2 million to build the state-of-the art dealership in a hollow alongside Interstate 5 near Mission San Juan Capistrano and the city's picturesque old town area.
Officials at the car company would like to pass off the failure of the dealership as an example of the vagaries of the market. They say they did their studies and were caught by an unforeseen, and unforeseeable, slowdown in the growth of the area from which the dealership was to pull its customers.
But others in the industry--including some of the dealership's former employees--say the real story is one of bad judgment.
San Juan Lincoln-Mercury, it seems, was built on the wrong side of the freeway in a hard-to-get-to location.
But more important, it was built in a market that now prefers foreign luxury sedans and big American-made sports utility vehicles to the $40,000 domestic luxury cars that Lincoln makes.
The number of new Lincolns registered in California last year was down 18% from 1992 and Lincoln registrations were off 11% nationally over the five-year period, according to R.L. Polk & Co.
Annual Mercury registrations, up 11% nationally, were down 10% in California, according to the Detroit marketing firm.
California is an especially poor place for the brand because several generations of car shoppers have been weaned on Hondas, Toyotas, Nissans and Volkswagens and have no loyalty to domestic models, says marketing consultant George Peterson, president of AutoPacific Group in Santa Ana.
Lincoln-Mercury has been targeting "a dying market" of over-60 buyers, says Bruce Caudill, a 14-year Lincoln-Mercury dealer in Ohio and chairman of the national Lincoln-Mercury Dealer Council.
"To see a dealership open and close that quickly scares the hell out of me," he says.
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Auto dealers have been warned that there are a lot of closures coming. Trimming bloated dealer networks has become a prime goal at several major car companies.
Jim O'Conner, Lincoln-Mercury division manager, said late last year that he will wade through the U.S. dealer network like the Grim Reaper, closing several hundred stores in the next few years.
As part of that drive, the company shuttered a second Lincoln-Mercury dealership in Orange County earlier this year. The Buena Park store was run by Lester Jones Sr., one of the few African American dealers in the industry.
"Things had gotten real slow," said Jones in a classic of understatement.
Fred Perry, sales manager at Ray Fladeboe Lincoln-Mercury in Irvine--the defunct San Juan dealership's nearest competitor--knows what he's up against.
"I live in Laguna Niguel, and all day long I see all the yuppie soccer moms going for Land Rovers, Chevy Suburbans and [Ford] Expeditions. That's the fad."
Lincoln-Mercury has told San Juan Capistrano city officials that it plans to reopen the dealership in the 1998 or '99 model year.
That would be after Lincoln starts selling both the redesigned 1998 Town Car unveiled at the New York Auto Show last month and the Navigator luxury sports utility vehicle that is to be introduced in May. Both are aimed at younger buyers and many believe the Navigator is Lincoln's best chance for survival.
Caudill thinks that if Lincoln-Mercury had held off for a few years, the dealership might have worked.
"I've worked closely with the company for three years as a member of the dealer council board," says Caudill, "and I know they're capable of making some big mistakes. . . . It's likely in this case it was a mistake of timing."
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It isn't that San Juan Capistrano is a bad place for a car dealer.
Since 1992, sales for most of the other dealerships have been rising steadily, says Steve Coleman, general manager of Saturn of San Juan and president of the local new car dealer association.
The seven San Juan Capistrano dealerships sold $64.6 million worth of new cars in 1995, the last year for which figures are available. That's an 80% increase over the decade's low point of $35.8 million in 1992.
