Pete Ellis Shutdown a Shock to Workers : Dealerships: About 170 workers become unemployed. South Gate will lose 12% of its yearly sales-tax revenue.

Just before 3 p.m., employees of Pete Ellis’ three sprawling auto dealerships were told to shut down the service bay, turn off the telephone switchboards and gather in the Dodge showroom.

When they arrived they knew something was wrong--Ellis’ secretary was in tears.

In a somber speech, his voice cracking with emotion, Ellis told more than 100 employees Thursday that he was immediately closing his Chrysler/Plymouth, Jeep/Eagle and Dodge dealerships in South Gate. Ellis said he had “tried and tried hard” but that he was losing too much money.

The closure leaves about 170 people out of work, and the city of South Gate without its largest source of sales-tax revenue. The dealerships provided $700,000 annually to the city, about 12% of the city’s total estimated sales-tax revenue this year.

Mayor Robert A. Philipp said the city may have to consider cutting back such services as police and recreation. “That is a tremendous amount of money we will lose,” he said. “It will have a great impact on us.”

Ellis also owns a Ford dealership in Bellflower. He said he hopes he will be able to continue operating the Bellflower dealership.

At the South Gate dealerships, employees said they knew things were bad, but were stunned by the abrupt closure.

“This is a shock,” said Angel Zaizar, a finance director who had been with Pete Ellis since 1982. “I never expected this.” Zaizar packed his training and salesmanship certificates. He stopped, his eyes suddenly red. “I felt like this was my home,” he said.

Inside the showroom, employees gathered in clusters, many weeping. Outside, some men dragged fiercely on cigarettes as oblivious customers walked among vans and trucks.

“I had a deal,” said an incredulous Francisco Mota. “I had just closed it. A $37,000 van conversion. I had to come back and tell (the customer) there was no deal.”

Some city officials said they had been told Wednesday that the business was going under, but they still found it hard to believe.

“When you’re talking about a big dealership like this, it’s going to mean an obvious economic loss to the city,” said Ruben Lopez, deputy director of the city redevelopment agency. “But it’s more than just that.”

Indeed, as one employee put it: “This is a landmark to South Gate. I think it’s the most famous dealership in Southern Cali fornia.”

For years, South Gate’s name has been drilled into the minds of thousands who have heard or watched Pete Ellis commercials urging shoppers to take the “Long Beach Freeway, Firestone Exit, South Gate.”

“It’s terrible,” said a solemn Ellis as shocked employees milled around the showroom of the Dodge dealership. “It’s just killing us.”

As he spoke, he shook hands with departing employees, pausing to pat each one on the shoulder.

The Chrysler Credit Corp. on Thursday shut down all three dealerships, which lost $500,000 in 1990. Ellis said his business liabilities were $2 million to $3 million greater than his dealership assets, and that he owed Chrysler Credit Corp. about $12 million. In all, there are about 800 vehicles on the lots of the three dealerships.

The corporation is assuming control of the unsold automobiles, which will be distributed to other dealers.

Ellis said business had been going downhill for the last year, but that in the past three months it was practically at a standstill. Sales were off by about 50%, he said. “It’s just been rough,” he said. “I’ve got to blame the recession and the war.”

South Gate officials said they will meet Monday to discuss how to adjust for the lost sales-tax revenues. “We will have to look at some options and alternatives,” Philipp said. “But no decisions have been made.”

The city had loaned Ellis $250,000 last year to help improve more than two acres of vacant land that had previously been owned by a Hyundai dealership. Ellis had been making payments on the loan, which carried a 12% interest rate, Philipp said.

Philipp added that the city offered to provide up to $1 million from its Redevelopment Agency fund when Ellis told city officials earlier in the week that the dealerships were in financial trouble.

Within an hour of Thursday’s announcement, all three dealerships were nearly deserted.

In the empty showroom of the Chrysler dealership, Myran Heilbron, a receptionist with the company for five years, sat at her desk, staring at a ringing telephone. When asked what she was going to tell callers, she said quietly: “I don’t know. I don’t really understand it myself. I don’t know what to tell people.”

She paused and stared at the lights blinking on the phone bank. “I’m not going to tell them anything,” she said.

Leaning forward, she reached behind the telephone and disconnected it.