Plans for 3rd Auto Mall in South O.C. Announced : Cars: Competition from the 35-acre Foothill Ranch center could result in price-cutting, analysts say.

Developers of the Foothill Ranch planned community launched an auto mall war Monday, announcing that they are building a 35-acre new car center less than five miles from the auto center being built in Rancho Santa Margarita.

The newest center has won the support of mega-dealer Joe MacPherson, who helped develop the Tustin Auto Mall, and appears to have snatched General Motors and its seven makes of cars and trucks from the Rancho Santa Margarita mall.

GM, which has sent a letter to Foothill Ranch Co. stating its intent to acquire six acres in the mall, wants to use the Foothill mall for a new type of “showcase” auto retailing, said Dougall Agan, vice president of marketing and commercial development for Foothill Ranch Co. That means building facilities that look more like retail stores than car lots, with smaller but fancier displays of vehicles and comfortably furnished sales areas and customer waiting rooms.

If both malls really are built--both development companies say they intend to go ahead with their plans--the car mall war could be good news for consumers.

Both mall sites are within 10 miles of the huge Irvine Auto Center, which features dealerships selling 19 makes of cars and trucks. Analysts say the proliferation of competing dealerships could lead to various price-cutting promotions if dealers get desperate for customers.

Local government also could benefit: The Foothill mall’s studies show that it could generate up to $1.25 million a year in sales tax revenue, while an earlier study for Rancho Santa Margarita pegged its auto mall’s annual sales tax contribution at $1.7 million.

But the situation could be bad for car dealers if not handled properly, industry insiders say.

“The same kind of situation exists with the Oxnard and Ventura auto malls,” said Bob Fitzharris, senior consultant with auto marketing analyst J.D. Power and Associates. “They are about three miles apart, and there are competing Toyota and Mitsubishi dealers in each one. Those dealers are really struggling.”

Orange County now has five auto malls as well as several well-defined “strips,” including the Harbor Boulevard strip in Costa Mesa and the Beach Boulevard strip in Huntington Beach, each with about a dozen dealers.

There are about 160 new-car dealers in the county already, but MacPherson said he believes both of the planned South County malls can prosper.

The most successful scenario, he said, would be for established dealers in Orange County to use the sites, as he intends to do, to expand their reach with satellite facilities.

That would keep out competing same-brand dealers and improve profits because satellite dealerships are less expensive to operate. Although the customer usually doesn’t see any differences, the dealer can centralize record-keeping, accounting and other “back office” functions and use the larger, original lot for storing parts and keeping an inventory of cars on hand for both facilities.

Ford dealer Jim Graham, who is building the first dealership at Rancho Santa Margarita, said he is “disappointed” that a rival mall is opening. But he doesn’t believe that the Foothill mall threatens the Rancho Santa Margarita mall.

“I’m going in there whether I have neighbors [in the mall] or not,” Graham said, adding that he believes the competition for tenants will slow the growth of both auto centers and that “neither one will reach a full 35 acres.”

He said he expects Rancho Santa Margarita’s mall to ultimately be home to “four to six [conventional] dealerships” and several smaller satellites.

MacPherson, who also wants to open a central tire store and perhaps a tune-up and oil change center, said Monday he believes Foothill Ranch is a better site than Rancho Santa Margarita, which is farther south.

Both centers are next to the Foothill Transportation Corridor, one of the toll roads being built in the county to ease congestion on the freeways and major surface streets, and each is in a planned community’s commercial center.

But MacPherson said he was drawn to Foothill Ranch because the mix of merchants in the retail center, anchored by Wal-Mart, Target and Mervyn’s as well as a 24-screen movie theater complex, is likely to pull a lot of potential customers into the area.

He said he will open two or three facilities, including a satellite of his Irvine-based Chevrolet store, at the new Foothill Ranch mall. MacPherson has three dealerships and a leasing operation in the Tustin auto mall.

MacPherson has purchased six acres in the Foothill Ranch auto mall--the same amount GM wants to buy for resale later to individual dealers as franchises are awarded. Agan said all 35 acres there should be sold within the next six months.

The Rancho Santa Margarita auto center was announced 21 months ago but so far has sold only 7 1/2 acres, all to Downey Ford owner Graham. He said Monday he is opening escrow on the deal this week and expects to open Santa Margarita Ford next summer.

He is the only confirmed tenant there, but Santa Margarita Co. spokeswoman Diane Gaynor said company officials are negotiating with “three or four” other dealers.

As to the loss of GM’s franchises, Gaynor said that although “it appears we don’t have General Motors now, we do have Ford.” American Honda also has approved Rancho Santa Margarita for a new dealership, she said.

Developers of the Foothill mall, in contrast, claim to already have secured seven of the 12 dealerships that ultimately will be located there.