Success of Dealer’s Venture Riding on Used Cars : Automobiles: Undaunted by the collapse of his businesses, Pete Ellis will open a lot in Costa Mesa, with a new sales approach.

Pete Ellis’ radio jingles used to urge customers to follow the “Long Beach Freeway, Firestone exit, South Gate” to his car dealerships.

Those businesses collapsed, victims of the recession, along with his Ford dealership in Bellflower. But now, two years later, Ellis is back.

On Saturday, a used-car lot called Pete Ellis Auto Center will open on Costa Mesa’s automobile row, Harbor Boulevard. After months of market research, Ellis said, he has decided to hire only college graduates who have never sold cars before and who will be paid salaries instead of commissions. The cars will have fixed, non-negotiable prices, and the lot will sell only models less than five years old with good reviews from consumer magazines.

Fixed prices and the soft sell are old hat at some new-car dealerships. But Ellis’ approach is novel for used-car lots, some of which are known for high-pressure sales tactics and a casual approach to business ethics.

Ellis said he expects the venture to take off and envisions himself heading a chain of used-car lots.

If that happens, it would be a dramatic turnaround. His Ford dealership in Bellflower went belly up in 1991, a few months after the city gave Ellis $300,000 in public money and lent him another $400,000 interest-free to keep the dealership afloat.

South Gate loaned him $250,000 and gave him another $300,000 for his Dodge, Jeep/Eagle and Chrysler-Plymouth-Hyundai dealerships shortly before they went under.

Ellis was a huge taxpayer in both small cities--about $300,000 a year in Bellflower alone. For that reason, the cities wanted to keep the businesses badly enough to subsidize them. It is not uncommon for cities to offer inducements to keep car dealerships and their huge streams of sales tax revenue from moving away or going under.

“As near as we can tell,” South Gate City Manager Todd Argow said Thursday, “he put forth a good-faith effort to keep those dealerships going. . . . But he was a victim of the recession.”

Now, however, South Gate and Bellflower are trying to get their money back.

There is a possibility that South Gate’s lawyers will recover all of its $250,000 loan through negotiations, Ellis said.

Bellflower, meanwhile, has filed a lawsuit that is set for trial in September.

Ellis, 47, said he obtained the money to start the used-car lot by privately selling stock in the venture. He has no subsidy deal with the city of Costa Mesa, he said.

So far, Ellis said, he has managed to avoid personal bankruptcy.

His new strategy, he said, features one big difference: This time, he won’t have to get his cars from the big auto makers. Jeep and the others, he said, stuck him with their less-favored models to sell in return for supplying him with popular cars.

“When you have a tremendous overhead and tremendous need for inventory, like I did when I was selling a lot of cars,” Ellis said, “the factories have a lot of control over you by way of what cars they supply you.”

“To get another 150 Jeeps, for example, the factory told me I had to take 50 Eagle Premiers. I was selling two Premiers a month and losing $2,000 on each.”

Eventually the factory relented and agreed on fewer Premiers. But then, Ellis said, after supplying 40 Jeeps, the factory told him there was a “supply glitch” and he would not be able to get the vehicles he wanted. That sort of thing, he said, happened all the time.

“I decided the only way I can buy the cars I want to sell,” he said, “is if I buy them used.”