The news of two Gilroy auto dealerships closing raises new
questions for Morgan Hill’s two existing dealerships and the
planned auto row on Condit Road.
Morgan Hill
The news of two Gilroy auto dealerships closing raises new questions for Morgan Hill’s two existing dealerships and the planned auto row on Condit Road.
Gilroy Ford Lincoln Mercury closed Feb. 14. The week before, Pontiac GMC Buick shuttered.
The Ford Store of Morgan Hill President Tim Paulus said that by all accounts it was a “tough” and “very volatile” 2008.
“My heart goes out to (Gilroy Ford Lincoln Mercury owner Don Malinoff), he’s a great guy. It could have occurred to us, we’ve just been fortunate that it did not. We went through a restructuring and recapitalization. We’re doing just fine and think we’re going to weather this storm, financially,” Paulus said.
The Ford Store had a successful President’s Day Weekend sale, all things considered. They sold 24 cars, which is a little more than half of 2007’s sales totals for the same weekend, Paulus said. Eleven of those cars were used.
Selling more used cars, getting tax breaks from the city and general downsizing were a few restructuring moves that Paulus said has helped the Ford Store through these trying times.
In an effort to keep the Ford Store’s doors open through the year, the Morgan Hill City Council recently granted the store’s request to lower the baseline for sharing the city’s 1 percent sales tax revenues from $25 million to $10 million. That way, Ford doesn’t have to make as much money to get sales tax revenue back. In the end, the store is likely to receive $375,000 sooner than anticipated and about $155,000 more than they would otherwise.
Still, since sales are low and the tax rebate plan is performance-based, the city will pay about $220,000 less than it originally planned for.
Meanwhile, City Manager Ed Tewes confirmed that the city and Courtesy Chevrolet have been in contact about city assistance, but declined to comment further.
In January, Councilman Greg Sellers called the deal with Ford “a triple win for the city.”
When someone buys a car from a local dealer, the city gets a 1 percent sales tax revenue. Considering that both Morgan Hill and Gilroy have ailing general funds, short millions of dollars, any car bought in either city is a boon.
According to DMV data analyzed by Cross-Sell Research for MainStreet Media Group, of the 1,015 new or used Chevrolets purchased from a dealer by a resident of the region – including South County, Hollister and San Juan Bautista – in 2008, 216 were bought at Courtesy Chevrolet, or 21 percent. For the same year, 364 of the 1,343 new or used Fords bought by residents of the same region were purchased at The Ford Store, or 27 percent.
In total, the city’s general fund welcomed sales tax revenue generated by the sales of 580 Fords and Chevrolets. The Ford tax break will help both dealers contribute to the city’s 2009 bottom line, Sellers said.
“Primarily, it was to prime the pump, to get more business in town and also to complement our current mix,” Sellers said, adding that the Ford Store helps sales with Courtesy as well.
“Having said that, (Courtesy is) an important business in town and if for some reason they feel like they need assistance, we’ll consider what their offer is.”
But dealerships closing is not a northbound trend, Sellers said.
“One of the unfortunate realities of what happened in Gilroy is that it probably strengthens our dealerships in Morgan Hill,” he said, emphasizing how unfortunate that reality is.
While Gilroy’s dealers closed last month, plans for three more dealerships in Morgan Hill inched forward.
Last week, the Morgan Hill Planning Commission recommended that the city council approve a zone change allowing the future construction of three auto dealerships on about 26 acres east of U.S. 101 and north of the Ford Store. Development consultant Vince Burgos, who is working with the Kubo family that owns most of the property, said the zone change had been in the works and the rest of the plans are stalled until the economy picks up.
“Let’s hope it happens soon,” Burgos said. He didn’t tie a date or time frame with when the future development might take place.
Burgos said the zone change process started in 2006 and is just now hitting the city’s meeting agendas. Burgos, who is working closely with Paulus on the project, noted that the motor companies the family is interested in attracting are not going away.
“General Motors, Ford – they’re all moving ahead. They’re doing engineering work, new designs for new products. We shouldn’t assume that they’re all going away,” Burgos said. “Now we’ve got everything in place. … If you don’t have the zoning, it’s hard to get everyone lined up. They’re not comfortable. But once you get the zoning, that’s when it’s real. Now we can go out and say, ‘Here is something that can be built. As soon as you move forward with this, we can develop.’ ”
Sellers said adding dealerships to Morgan Hill is still an achievable long-term goal for the city.
“It’s still attainable but it will take a little longer,” Sellers said, adding that he wouldn’t characterize up to four dealerships on Condit as an “auto mall.”
“An additional number of dealerships would be great,” he said.
Several calls for comment to Courtesy Chevrolet General Manager Barry Rodenberg, who manages the San Jose, Palo Alto and Morgan Hill stores, were not returned.
