Chrysler Credit Closes 3 Pete Ellis Car Dealerships
Chrysler Credit Corp. on Thursday shut down three money-losing dealerships operated by Pete Ellis, a high-profile businessman in Southeast Los Angeles County, another sign of weakness in the nation’s recession-wracked automobile industry.
Ellis, whose dealerships have been the leading producer of tax revenue for South Gate, is also known for his commercial jingles directing car buyers to “Long Beach Freeway, Firestone Exit, South Gate.”
Chrysler Credit closed and assumed control of unsold automobiles at Pete Ellis Dodge, Pete Ellis Jeep-Eagle and Pete Ellis Chrysler-Plymouth-Hyundai, idling 175 employees at those South Gate dealerships. Pete Ellis Ford, a dealership in Bellflower, was not affected.
Among the potential losers in the commercial failure is the city of South Gate. The Ellis dealerships produce 15% to 20% of South Gate’s $5.6 million in sales taxes, said South Gate Mayor Bob Philipp. The sales tax money goes into the city’s general fund, and about 55% of the fund is used to cover the cost of maintaining the city’s 91-member police force. Philipp said the South Gate City Council would meet Monday night to discuss the financial crisis.
“It’s a dramatic and traumatic situation,” Philipp said. “There are a number of options, and layoffs are among them.”
The city of South Gate last April agreed to provide Ellis with a grant of $350,000 and a loan of $250,000 to redevelop an auto sales dealership at 5910 E. Firestone Blvd. Ellis used the money to establish the Pete Ellis Chrysler-Plymouth-Hyundai dealership, but he pledged no dealership assets to back the loan.
“I secured it with personal assets,” Ellis said in an interview Thursday. “They took my guarantees. I feel sick about all of this. I’ll try to be as responsible as I can.”
Ruben Lopez, deputy director of the South Gate Redevelopment Agency, said the city had accepted the guarantees after reviewing Ellis’ bank statements and reports on other personal assets.
“At that time, we made a business decision,” Lopez said. “We thought it would be wise to bring in a Chrysler dealership. After he made arrangements with Chrysler, he brought in Hyundai. He didn’t seem to be in trouble.”
The financial troubles began last year, Ellis said. The dealership operations lost about $500,000 in 1990, much of it in the last half of the year, Ellis said. Sales began to plummet when the U.S. government sent troops to the Persian Gulf after Iraq’s Aug. 2 invasion of Kuwait. Sales declined 30% to 40% between August and November and fell 50% in December and January, Ellis said.
“The recession and the war in the Gulf created difficult times,” Ellis said. “The (military) call-up sent a mental message to people--it stunned.”
Ellis said his business liabilities were $2 million to $3 million greater than his dealership assets. He said he owed Chrysler Credit Corp. about $12 million. In all, there are about 800 vehicles on the lots of the three dealerships.
“I tried to restructure; I tried everything to make this work,” Ellis said.
When Ellis decided he could not salvage the dealerships, he signed an agreement voluntarily surrendering his automobile inventory to Chrysler, said Robert Heath, a spokesman for the Southfield, Mich.-based Chrysler Credit. Heath said the vehicles would be distributed to other Chrysler dealerships.
The Ellis failures are a sign of industry times, said John Hammond, a partner at J. D. Power & Associates, an car research company in Agoura Hills. For the month of January, domestic car sales were down 22% and foreign automobile sales were down 23%, Hammond said. “A large number of dealers are not making money on new car sales,” Hammond said. “Over the next 12 to 18 months as many as 2,000 dealers may go out of business--that’s out of a total of 24,000 nationwide.”
