‘Vulture’ shoppers circle car dealers
In the shadow of a big blue inflated gorilla perched on the roof, bright yellow signs shouted “Ultimate Liquidation Event.” Deep price cuts, painted in bold neon letters, adorned the windshield of nearly every car on the Garden Grove dealership lot.
Janice and Yao Huang arrived on a hot afternoon looking for a bargain.
“We’re here for the sale,” Yao told Danny Covin as he approached, squinting in the sun. “We heard you are closing down. Do you have things on sale?”
A grimace flickered across the salesman’s face. But then Covin smiled, nodded and slowly turned to show them the Jeeps he had in stock, many with prices $4,000 or more below sticker.
The young Irvine couple had been thinking about buying a new Jeep for some time. They said they didn’t seriously consider doing so until they heard about the woes of Chrysler, Jeep’s parent company, at which point they searched online for the nearest dealership.
That brought them here to the Union Chrysler Jeep Dodge on Trask Avenue. It’s one of 789 dealerships nationwide whose franchise agreements with Chrysler will be severed June 9. The bankrupt automaker says that aggressively shrinking its network of 3,200 dealers is a painful but necessary step as it tries to return to viability.
Dealers slated for closure will have to unload, at a loss, the vehicles and parts they can’t sell before that date.
Like other ill-fated dealers, Charles Lee, owner of the Union Chrysler Jeep Dodge, received notice in an express mail letter May 14. “We wish there were a better way, but there isn’t,” it read.
Because Chrysler is using the bankruptcy to break the contracts, it was obliged to publish a list of all the dealers it’s targeting. That created a frenzy among buyers.
Salesmen like Covin, already struggling through the worst sales downturn in three decades, view the situation as a mixed blessing. Long-anemic showroom traffic is finally up, but everyone seems to expect fire-sale prices.
Customers have demanded:
“We want liquidation prices!”
“We want a deal!”
“We’ll pay half price!”
In the end, the Huangs didn’t buy, but they said they were pleased with the pricing and might come back to make a purchase.
“You can’t blame folks for wanting a good deal,” said Covin, trudging back to the spot on the lot where he prefers to stand, scanning the street for more customers.
Covin, a Vietnam vet and grandfather of four, started his sales career at Montgomery Ward in Lakewood, selling sporting goods before moving up to televisions and stereos -- a job, he said, that paid for his first house. He began selling cars in 1978: Hondas in Long Beach, then Toyotas and Nissans just down the street from the Union dealership.
Like the other salesmen here, Covin spends five or six days a week walking the block-long lot. His skin is tanned a golden brown from long hours standing outside. He sports a salt-and-pepper goatee. He wears a suit and tie on weekdays and a billowy Hawaiian shirt on weekends, revealing a big watch and a heavy gold bracelet on his wrists.
Covin lifts his sturdy shoulders into a good-natured shrug when yet another customer demands an outlandish price.
“People throw it in your face,” Covin said as he went to greet a family arriving in a hulking pickup. “They say, ‘You guys are going out of business.’ I say that the best deal you’re ever going to get is right now.”
--
A few decades ago, Frank Lee, an immigrant from Korea, saved up enough money working as a mechanic to buy a dry cleaning business. He parlayed that into a used car lot. In 1995, he bought the Union Dodge new-car lot on Trask Avenue, sandwiched between Garden Grove’s bustling Korean District and Little Saigon.
His son Charles, a reserved and dignified man, took over the business in 2005 after his father retired. A year and a half ago, he bought out another franchise to bring the Chrysler and Jeep brands onto the lot, fulfilling the wishes of Chrysler brass that wanted to do away with single-brand locations.
As one of the few three-in-one stores in Orange County, Charles Lee said, he assumed he’d be safe from any cuts.
“The letter was a surprise,” said Lee, who declined to discuss the dealership’s finances. “I don’t have any definite plans now about what I’m going to do.”
Nor do his employees. Arty Khan has worked here for eight years, and his official title has him overseeing used car sales. But since the general manager quit a few months back and wasn’t replaced, Khan and new-car manager Jeff Locastro have been running the show.
On June 9, affected dealerships must take down their Dodge, Jeep and Chrysler signs and cease advertising with the automaker’s trademarks. They will no longer be allowed to sell new Chrysler vehicles to consumers or provide warranty service.
Some of the dealerships carry brands from other automakers and will probably stay in business, while others plan to make a go of it selling used cars. But many more will have little choice but to shut altogether. Tens of thousands of employees will be out of a job as a quarter of all Chrysler dealerships, in every state but Alaska, get yanked simultaneously.
Khan in recent weeks has been focused on unloading his store’s 175 Chrysler-made cars, trucks, SUVs and commercial vans.
With an average value of $28,000 per vehicle, he estimates there is nearly $5 million in steel, glass and rubber sitting on the lot, not to mention half a million dollars in parts.
“We want people to come in and cash in on our sadness,” Khan said.
“We’re making the best deals of our lives,” said Locastro, who has been selling cars for nearly 25 years joined Union this year.
Though Chrysler won’t buy back unsold vehicles from terminated dealers, it did offer to help sell Union’s inventory to ones on the safe list. But other dealers won’t pay the full wholesale price, Khan said, and Union would be forced to absorb a $350 loss on each 2009 model year car and $1,850 on 2008 models.
At least that gives him a floor to work with when figuring out how low his salesmen can go when negotiating with customers.
“It’s better to lose $1,500 instead of $1,850 on a car,” Khan said.
--
Khan holds out hope that Lee will convert the dealership into a used-car lot, saving his job and quelling concern about providing for his three young children. With their income down, Khan’s wife, a registered nurse, recently began working for the first time in years.
“We just have to sell as much inventory as we can,” Khan said. “It’s a big unknown after that.”
Unfortunately for Khan, Locastro and the skeleton crew of four salesmen -- down from 14 a year ago -- the cars have hardly moved, even at a discount.
At its height a decade ago, the dealership would often sell nearly 300 cars a month, and it has averaged about 100 a month over the last five years. But it’s currently selling only half that. The problem, it seems, is one of customer expectations.
The dealerships’ dire situation attracts what Steve Brazill, professor of automotive marketing at Northwood University in Texas, calls “vulture shoppers,” similar to those who stood in line seeking big discounts on televisions, stereos and digital cameras when electronics retailer Circuit City liquidated all of its stores early this year.
“Many will assume this is similar to the Circuit City liquidation, but there are important differences,” Brazill said, pointing out, for example, that 2,400 Chrysler dealers are not going out of business. Still, he said, “Many dealers will go with the flow and let the fire-sale atmosphere drive traffic.”
That could lead to gasps of disappointment from thousands of buyers dismayed to learn that even in the depths of a crisis, a dealer still won’t accept $12,000 for a $25,000 car.
Smoking a Parliament in the afternoon sun, Dennis Lentz spotted the customers as they drove a champagne-colored luxury SUV onto the dealership lot.
An older couple who traveled from Riverside County in search of a lowball deal clambered out and walked up to Lentz, who smiled broadly beneath a graying mustache as he offered to help them.
“We’re looking for 60% off!” the customer, giving his name only as Richard, barked from under a straw hat.
“We saw it on the TV,” chimed in his wife, Barbara. “This dealership is closing.”
Lentz has been in sales for only five years, switching careers after 26 years in the pharmaceutical plastics industry, but he’s shown a knack for the special blend of skills required to get people to take out their checkbooks. Keeping as upbeat as possible, Lentz showed the couple the lot’s inventory of Dodge Ram pickups. The cheapest one available, with crank windows and basic trim, would cost around $27,000, he said.
“Plus 50% off for going out of business, right?” Richard asked.
When the salesman laughed and shook his head, the customer sneered. “I’ll call you in two weeks, and then we’ll see what price you’ll give.”
More likely, the dealership will auction off any cars that remain.
As a field rep for ABS Auto Auctions, a wholesaler in Colton, Shannon Prentice has worked with Union for years. Should the dealership need to go the auction route, she has offered to waive the usual $200-per-car seller’s fee.
“It’s not fair that these people are going to have to take a bath on these cars when they stood by Chrysler,” Prentice said as she scrolled through a database of the dealership’s inventory. “Where’s the loyalty?”
Late in the day, Lentz was still patrolling the lot, showing a family PT Cruisers, all of which were greatly reduced.
“It’s cheaper than normal, but not cheap enough,” Nam Nguyen, a student at Cal State Long Beach, told him. “I want to pay even less.”
Unfazed, Lentz reached for another cigarette, watching Nguyen drive away in his Toyota Camry.
“A lot of people come to see what it’s all about, like a train wreck,” Lentz said. “But there are real buyers out there. It’s like fishing. You can go all day and not get a bite, and as soon as you put your pole down, you get a customer.”
--
