GILROY
After 60 years in business, Gilroy Pontiac Buick GMC has run out of gas, leaving 26 people without a job and causing other auto dealers and city officials to wonder who’s next.
“We’re fine” was the collective response from nearby dealerships Thursday morning, but with sales tax revenue from auto vendors down 27 percent – or $512,000 – compared to last year, city officials remain skeptical.
“We were all worrying that the cascade of failure could begin, and apparently it has,” said Councilman Bob Dillon. The self-described “Pontiac man” bought his Pontiac Bonneville from Donald Malinoff’s dealership and even persuaded his girlfriend to buy her 2009 Ford Focus from Malinoff’s other store, Gilroy Ford Lincoln Mercury, but he and others said grassroots patronage was no match for demands from Detroit.
Although General Motors received $13.4 billion in federal bailout money in December, the giant did not pass that cash down to the front lines, leaving dealers with fewer financing options to offer customers and 60 percent fewer sales as a result, according to Joe Lopez, the Pontiac store’s former general manager, who will move to Malinoff’s Ford branch along with “a couple” other sales people, he said.
“That money didn’t trickle down to us. It stayed up there somewhere, but I don’t know where it went,” Lopez said. “They forgot about the little people.”
He described what used to be a cordial relationship between lender and borrower deteriorating along with the availability of credit. No longer does GM front the dealership money for rebate promotions and other credits, and instead of coming around once or twice a year to check on inventory, cautious bank officials now stop by twice a month, Lopez said.
“The relationship just isn’t there anymore,” he said in his office Thursday as Malinoff’s son, Don Malinoff Jr., walked around his father’s cold showroom.
Soon GM will repossess the 100 or so shiny sedans and hefty trucks parked outside and worth about $3 million, Lopez said. Malinoff’s property and building are worth about $5.3 million, according to county tax records, but Lopez said his boss, who declined to comment, has no plans to sell the limited-use lot unless the right offer comes around. Instead, Malinoff may try to unload some of the service department’s tools and equipment when GM takes the cars back. But beyond that, it’s just a matter of turning off the lights and locking up until times improve, Lopez said.
“I think it’s going to turn around, but whether this place will be around then is another story,” Lopez said.
Surrounding dealers gave mixed reactions to the news. Troy Pelzl, the general manager at Gilroy Chevrolet across the street, said he expected more parts and service business but he also listened to warnings from the National Automobile Dealers Association that 1,200 dealerships would expire this year, up from 1,000 last year, he said.
Over at Gilroy Toyota, Operations Manager Larry Crewse said Pontiac’s absence will mean less traffic and less business.
“We complement each other,” Crewse said, adding that collective advertising will now cost more.
“It’s a sad day for everyone. Malinoff was a great guy, a great dealer – a real family business,” said Lem Hymes, the general manager of South County Chrysler Jeep Dodge who has spent 32 years in the business. “This is just out of control.”
That equals stress for City Administrator Tom Haglund, who said he will deliver updated financial projections to the city council next month even though the numbers change daily.
“This is a moving target. If the news gets worse, you have to plan for further adjustments, and that’s what’s so difficult for so many cities,” Haglund said. “This will have an effect on sales tax in Gilroy, but to what extent, I’m not sure.”
In October, Haglund reported that sales tax revenue this fiscal year would likely fall from the budgeted amount of $13.9 million to $13.6 million, down from $14.2 million the previous year. That money generally accounts for about a third of the city’s general fund – which faces a $2.3 million deficit this fiscal year – but between September 2007 and September 2008, Gilroy only pulled in about $11.8 million in sales tax. About 12 percent of that money, or $1.4 million, came from auto sales, which netted Gilroy $1.8 million in 2006 and $1.9 million in 2004 and 2005, according to city figures. For each car sold in Gilroy, 1 percent of its price return to the city through sales tax.
For these reasons, Haglund said city officials “stand ready” to meet with auto dealers to see what, if anything, the city can do, “but of course, everyone knows that Gilroy is struggling to balance its own budget.”
And now 26 people will struggle to find jobs along with the 2,500 or so working-age Gilroyans already looking, according to the California Employment Development Department, which reported in December that Gilroy’s unemployment rate stood at 11.6 percent, 4 percent higher than the national rate, according to U.S. Department of Labor. While high, Gilroy’s unemployment ratio exceeded 13.5 percent twice in 2003 after the Dot-com bust, and looking as far back as 1998, the lowest the rate was 4.7 percent, according to Economic Development Corporation President and CEO Larry Cope.
As for smaller auto outlets and mechanics looking to pick up business, Cope said residents looking to save money may opt to buy their own parts or hold off on service.
“All of this trickles down,” Cope said. “It’s kind of a mixed bag for everyone.”
