Honda heads north

Gilroy Honda is the newest dealer to close in the city.

In one year, half of Gilroy’s car dealerships have closed down
or set up shop elsewhere.
In one year, half of Gilroy’s car dealerships have closed down or set up shop elsewhere.

Gilroy Honda, which opened 25 years ago at 6700 Chestnut St., has plans to move 10 miles north to Morgan Hill. The dealership will take up residence in the 20,000-square-foot building near the intersection of U.S. 101 and East Dunne Avenue that used to house Courtesy Chevrolet.

“Being right on the freeway has always been desirable for auto dealers,” said Gilroy Honda General Manager Mike Lunar. “Plus there’s the increased capacity of the building.”

The new store’s service area will be about twice as large as at the current store in Gilroy, Lunar said.

Honda’s departure will mark the fourth car dealership to close its doors in Gilroy since February 2009. The once-thriving auto hub in southern Gilroy hosted eight dealerships along Chestnut and Monterey streets at the beginning of 2009. But once Honda heads north, only four – South County Chrysler Jeep Dodge, South County Nissan Hyundai, Gilroy Toyota and Gilroy Chevrolet Cadillac – will remain.

Unlike the Ford, Pontiac and Mazda dealerships that shuttered their doors in 2009 after plummeting sales took their toll, Honda’s closure in Gilroy and move to Morgan Hill signal the company’s success, rather than failure.

“Honda’s doing really well,” Lunar said. “They make great cars.”

For the city’s last fiscal year, which ran from July 2008 to June 2009, the City of Gilroy took in $11.65 million in sales tax, said Christina Turner, the city’s finance director. A little more than $900,000 – or about 8 percent – came from Gilroy’s auto dealers, Turner said. Those figures, however, reflect the year that Gilroy was home to eight dealerships. The city does not disclose store-specific tax information because that would give away sales figures. In addition, the city’s sales tax figures from the second half of 2009 will not be available until April.

When Honda moves, it will take with it other business – to which Turner had difficulty assigning an exact dollar amount – such as the revenue that would be generated when Honda drivers fuel up or stop for lunch.

“I don’t think it would be a huge number, but we would miss out,” Turner said.

Although the city has a “fairly diverse” sales tax revenue base, such as the outlets and other big-box retailers on 10th Street, “one dealer does make a difference,” she said. “But we are lucky enough that our sales tax revenue is spread out among several different sectors.”

Though City Councilwoman Cat Tucker wasn’t happy with the news of the move, she said she understood Honda’s motives.

“Every business is going to do what they can to survive,” she said. “I just hope this isn’t a trend.”

Councilman Bob Dillon, who had heard of Honda’s move through the grapevine, said he was “sickened” by the news.

“We don’t want the auto dealerships to leave without a fight,” Dillon said. “We have to try to win them back.”

Dillon said he hoped the new president and chief executive officer of the Gilroy Economic Development Corporation, Richard Spitler, could change Honda’s mind.

Spitler said he planned to make contact with Lunar. But if Honda has already decided to move to Morgan Hill, Spitler said he wasn’t sure there was much he could do to reverse their decision.

As the new head of the EDC, part of Spitler’s job is to retain existing businesses and facilitate expansion. Since coming on about a week ago, he has already sat down with the managers of South County Nissan Hyundai to discuss how the EDC can help fortify their business.

“They’re re-energized,” Spitler said. “We’re going to be plugging into that so we don’t lose any more dealerships.”

Although he hasn’t been approached yet, Lunar said he didn’t know if there was anything Gilroy officials could do to keep Honda in Gilroy. The visibility of the new location right off the freeway combined with a growing market in Morgan Hill and south San Jose are two major advantages, he said.

“San Jose is going to continue expanding south as the economy recovers,” Lunar said. “We want to capture that market.”

In the meantime, Lunar hopes his Gilroy customers will remain loyal to Honda.

“We certainly don’t want to lose any of our customer base in Gilroy,” Lunar said. “Hopefully bringing them a nicer facility will be worth the extra 10 minutes. It’s crucial that we make sure we give our Gilroy customers a reason to come to Morgan Hill.”

Where have the dealerships gone?

Dealership Departure

Pontiac Buick GMC February 2009

Ford Lincoln Mercury February 2009

VW Mazda June 2009

Gilroy Honda Spring 2010

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