Toyota Confident That It Will Reopen Dealership : Business: That’s good news for the city, which stands to lose more than $300,000 in annual sales tax revenue.


Toyota said it intends to replace the defunct Downey Toyota dealership, a development that could preserve hundreds of thousands of dollars in sales-tax revenue to the city of Downey and prevent cuts in city services.

“Toyota will have a dealer there,” said John Matt, Los Angeles regional manager for Toyota Motor Distributor Inc., the car manufacturer’s distribution arm in Southern California. “We’re quite confident that will occur.”

For Downey officials, that can’t happen too soon.

The dealership provided Downey with more than $300,000 a year, making it the city’s largest single source of sales taxes. Loss of that revenue would mean cutbacks in services such as street sweeping and possible layoffs, City Manager Gerald M. Caton said.


Caton said city officials will begin considering spending cuts in January, if Downey Toyota has not reopened under new ownership by then. Because of the recession, the city is operating on an austerity budget of $34.5 million this year and vacancies in 20 municipal jobs are not being filled.

“Our hope and our expectation is that another dealership will be going in there,” Caton said. He added that he was “mildly confident” that Toyota would find a new dealership for the Downey Toyota site on Firestone Boulevard. “It’s in their own best interest,” he said.

Matt could not predict when a new dealer would take over, but “a year would be a long time” for the dealership to remain closed.

Downey Toyota’s owners have filed for Chapter 11 bankruptcy protection, and that complicates matters, because any transaction may require approval of a bankruptcy judge.


Too, the field of dealers capable of taking over such a large operation is limited, Matt said. In 1990, Downey Toyota sold 3,971 new cars and trucks to rank among Toyota’s top 60 dealers in the United States.

“It’s a dealership of such magnitude that it takes substantial capital qualifications, so it limits the field,” Matt said. “It would be the very strong financially that are being considered.”

Downey Toyota owners Thomas C. Watts III and Richard C. Watts closed the dealership, which had more than 100 employees, Sept. 13, after failing to find a buyer or a major investor. A handful of area dealers were approached, including Astro Management Services Inc., which runs Nissan and Mazda dealerships in the Cerritos Auto Square and in Whittier, and officials of Woody Chevrolet in Anaheim.

Matt said the Watts brothers were spearheading the effort, with Toyota officials acting as advisers. Toyota is now also searching for a replacement dealer, Matt said.


“Toyota intends to have a representative in Downey,” he said.

Matt said the dealership is too valuable to lose. It is located in Downey’s main commercial hub and benefits from a steady flow of traffic on Firestone Boulevard.

Three other Toyota dealerships in the Los Angeles Region, which stretches from San Luis Obispo to the Mexican border, have closed because of economic problems in the past year and a half, Matt said.

But those dealerships--in Bellflower, Burbank and Duarte--were not in prime locations, and Toyota will not push to replace them, Matt said.


He acknowledged that the recession has chipped away at Toyota’s retail car and truck sales throughout the Los Angeles region, but said he did not have exact figures on the declining sales.

“This has been a pretty tough year,” he said.

In addition, high overhead costs--stemming from a $4.5-million renovation several years ago--contributed to the failure of Downey Toyota, Toyota and city officials said.

The Wattses, who failed to return calls for comment, filed for bankruptcy protection Aug. 26. In their bankruptcy petition, the Watts brothers listed debts of $8.1 million. About $6.4 million of that is owed to Toyota Motor Credit Corp., Toyota’s financing arm, said the Wattses’ lawyer, J. David Pittman.


The Wattses agreed last week to allow Toyota Motor Credit Corp. to take possession of the dealership’s assets, including vehicles, said Pittman, who added that he did not know the value of those assets. Debts to the more than 400 other creditors were unsecured.

Downey Toyota is the latest of at least 12 dealerships in the Southeast/Long Beach area to close in the past year.

Pete Ellis closed his Chrysler/Plymouth, Dodge and Jeep/Eagle dealerships in South Gate last February, and his Ford dealership in Bellflower last June. The three South Gate dealerships have since reopened under new ownership, and the Ford dealership in Bellflower is expected to reopen in the next several months.

Carmen Koosa Toyota of Bellflower, Sopp Mitsubishi and Sopp Oldsmobile of Downey, Coletto Nissan and Queen Ford of Long Beach, Merit Chevrolet of Santa Fe Springs and Freedom Ford of South Gate have closed.


In a related development, Bellflower filed a lawsuit Sept. 13 in Norwalk Superior Court seeking to recover $700,000 it loaned to Pete Ellis to keep his Ford dealership afloat.

South Gate’s Redevelopment Agency also loaned Ellis $250,000 last year. He is behind on his payments, a city official said.

The Watts brothers approached Downey officials about obtaining a low-interest bailout loan from the city’s Redevelopment Agency, but city officials turned them down.

“The agency wanted to help the Wattses,” Caton said. “But after reviewing the financial information, it just wasn’t prudent to do it. The Redevelopment Agency is here to help revitalize business activities and not to be the banker of last resort.”