ROBERT DURELL / Special to The Bee

John Hancock, president of Kargo Master Inc., last week walks through the company's Rancho Cordova plant, where cargo racks for vans and trucks are made. Kargo Master's payroll has been cut in half.

More Information

  • Regional car dealerships that have closed this year:

    April: Auburn Nissan, Auburn

    May: Great Valley Chrysler Jeep Mazda, Fulton Avenue in Sacramento

    May: Capitol City/Paul Blanco Chevrolet, Florin Road in Sacramento

    June: Elk Grove Ford, in Elk Grove Auto Mall

    July: Carmean Dodge, Shingle Springs

    August: Winter Volvo Lincoln Mercury, Florin Road in Sacramento

    September: Lithia Dodge, Fairfield

    September: Maita Ford Mercury, Auburn

    October: Maita Hyundai, Auburn Boulevard in Sacramento

    November: Weaver Auto & Truck Center, GM dealer, Grass Valley

    November: Saturn of Elk Grove, in Elk Grove Auto Mall

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Auto slump hits hard in car-mecca California

Published: Sunday, Nov. 30, 2008 - 12:00 am | Page 1A
Last Modified: Sunday, Nov. 30, 2008 - 9:24 am

The Saturn dealership, closed two weeks ago, is still jammed with cars; signs at the curb promote a red-tag sale. The Ford dealership, closed since June, sits empty, stripped clean.

These are terrible times for the auto industry, and the impact shows up at places such as the Elk Grove Auto Mall. Sales are down, staffing is down, and the loss of two dealerships hurts the survivors.

"It doesn't help the image of the auto mall to have two tenants gone," said David Johnson, general sales manager at Elk Grove Buick Pontiac GMC. "It doesn't help with consumer confidence."

Johnson has cut his sales staff in half, eliminating six jobs.

The crisis gripping Detroit's Big 3 automakers is worsening the downturn in California and Sacramento. As executives plead for a bailout, car sales are falling faster in California than elsewhere, and the effect is significant.

The industry's downfall is responsible for nearly 11 percent of California's job loss in the past year. It's robbed tens of millions of dollars from state and local treasuries. It's punched holes in business districts such as Florin Road, once a mecca for car lots. It's deprived the media of advertising revenue, and has affected corporate sponsorship of sports franchises such as the Kings.

This is what happens when a vital and treasured business implodes. Outside of the industrial Midwest, perhaps no other place is as steeped in car culture as California. It's no coincidence that the world's automakers maintain major marketing and design centers in and around Los Angeles; it was there that the sporty Mazda Miata and revived Volkswagen Beetle were hatched.

Now California is paying for this infatuation. The state's retail car sales are down 24 percent this year vs. 21 percent nationally, said analyst Art Spinella of CNW Marketing Research Inc. of Bandon, Ore.

California "has suffered the most," he said.

Car purchases linked to homes

The numbers pay perverse tribute to Californians' other great love, real estate. Before the housing market crashed, 30 percent of California's new cars were bought with home-equity loans, according to CNW. That was triple the U.S. average. Now only 16 percent of California cars are purchased with home equity.

"When the housing bubble burst … that just hammered car sales," Spinella said.

He said 250 dealerships have folded in California this year. That's one-fourth of all the shutdowns nationwide; California accounts for 12 percent of sales, he said.

Eleven dealerships have perished this year in the Sacramento region, the latest a General Motors dealer in Grass Valley.

Sacramento's struggling Florin Road had 13 dealers a decade ago. With this year's loss of Capitol City Chevrolet and Winter Volvo Lincoln Mercury, the street is down to four new car lots.

"The immediate impact, of course, is it leaves 25 or 30 acres vacant in the middle of the commercial corridor," said Larry Carr, director of the nonprofit Florin Road Partnership. "To find a re-use for these huge facilities is not easy."

California's only major auto plant, the General Motors Corp.-Toyota Motor Corp. joint venture in Fremont, hasn't downsized. But other manufacturers are hurting. About 140 jobs were shipped to Mexico when the Automotive Importing Manufacturing parts factory in Rancho Cordova was sold in May. AIM couldn't compete on cost.

Another Rancho Cordova manufacturer, Kargo Master Inc., has cut its payroll in half, to 25 workers. The company makes cargo racks for commercial vans and trucks.

Kargo Master's sales inside California were already crumbling when the financial crisis hit in September. Then business "slowed significantly elsewhere in the country," said the company's president, John Hancock.

Hundreds of jobs lost locally

Led by dealers, the auto industry has cut 10,900 jobs in California in the past year, or almost 11 percent of all those lost in the state. More than 800 jobs have vanished in the Sacramento area.

The industry's downfall has contributed, albeit slightly, to the state's $28 billion budget deficit over two years. Taxable sales from all car-related sources, including the sale of vehicles, parts and fuel, fell by about $1.22 billion in the third quarter of 2007, the latest statistics available. That cost the state about $90 million, and it's certain the drop is worse this year.


Call The Bee's Dale Kaler, (916) 321-1066. Read his blog on the economy, Home Front, at www.sacbee.com/blogs.


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