Rob King, co-owner of Bymar Tire & Brakes in Mission Viejo, said demand for his services has definitely softened. You can see it in the number of empty bays in his repair shop and the stack of used tires outside, some worn through the rubber to the carcass.
"We get a lot of: What do I need and can any of it wait?" said King, whose family has owned the repair shop for 31 years. "There’s less of a preventive attitude and more of ‘What can I get away with?’ People don’t have a lot of money."
When it comes to the auto business, all signs point to slowing traffic. Sales of new cars and trucks have hit the skids in Orange County – down 9.2% in 2007, falling another 24 percent through February.
But slumping auto sales represent a fraction of the economic downturn across the auto industry in Orange County, a region that sometimes fancies itself "Detroit West," because of the concentration of headquarters, design studios, car collectors and after-market parts makers.
Not that Detroit is an economic dynamo these days.
The causes of the local auto industry’s woes are no secret: Falling real estate values, tightening credit, job insecurity, rising gas prices. But the impact rippling across Orange County is surprising.
Autos are one of the typical consumer’s biggest expenses, second only to homes in total value. The Orange County Automobile Dealers Association estimated their total revenue tumbled by almost $1 billion last year – almost 10% – falling to $8.5 billion. Statewide, auto dealers reported sales fell from $109 billion in 2006 to $96 billion in 2007 – off 12%.
Sales in California and Orange County have sunk more than most of the nation, in part because the economy here was red hot a couple of years ago, pumped up by real estate prices and easy credit. J.D. Power & Associates reports 55% of new car purchases in Southern California were financed in the first quarter of this year, down from 67 percent in mid-2004, the peak of the boom.
The average U.S. new car buyer spent $28,600 in 2007, while the average Californian spent more than $31,000, according to Paul Taylor, chief economist for the National Automobile Dealers Association. Taylor did not have figures for Orange County.
But people in Orange County drive more Mercedes, BMWs and Lexuses per capita than almost anywhere in the country. Luxury vehicles account for one in four local new car registrations – double the national average.
These days, more used, low-cost and aging vehicles populate the roads. J.D. Power reports the average Southern California trade-in was 5.5 years old in the first quarter of 2008. That’s 6 months older than the average trade-ins during much of 2004 and 2005.
Age is not treating the cars well. Frank Gromak, owner of a CT Cars, a used auto lot in Newport Beach, said the trade-ins he sees are often in sad shape.
"Most we’re seeing need a lot of work, because people have been holding off on maintenance, like tires and brakes," said Gromak, who opened his lot 21 years ago. "Times are tough."
Gromak slashed his workforce from nine to five people earlier this year. Despite the sagging real estate market, he said his business might be worth less than the half-acre lot it occupies near the intersection of 16th Street and Placentia Avenue.
"If someone comes along and offers the right price, I think it would be hard to say no," he said.
People are driving a little less. The state Board of Equalization reported gasoline sales have declined almost 2 percent since the first quarter of 2006. But ridership on Orange County’s public transit appears unchanged.
Sellers of new cars say they have witnessed a downsizing in consumer tastes. People want more fuel economy, less ostentation. At Toyota/Scion San Juan Capistrano, customers have been trading in gas guzzling Cadillac Escalades and Hummers for Prius hybrids. Ali Khan, general sales manager at Buena Park Honda, said sales are down except for fuel-efficient vehicles.
"I had 23 hybrids on my lot last week. Now I’ve got three," he said.
Austerity is not just a byproduct of local economic woes. Nationwide troubles in the auto industry are adding to local bad news.
Amid the struggles at Ford Motor Co. to slash costs, its Volvo branch announced in March that it was moving its North American headquarters from Irvine to New Jersey to be closer to corporate headquarters in Sweden. Jaguar and Land Rover, which like Volvo were part of Ford Motor Co.’s Premier Automotive Group in Irvine, could also be shedding some of their 80 local employees since their sale to India-based automaker Tata.
Other automakers with North American headquarters in Orange County remain committed to staying. Mazda, which employs 505 people at its design center and North American headquarters in Irvine, has no plans to scale back. The Japanese automaker saw 10 percent sales growth in 2007, thanks to successful new models that were partially designed in Orange County, such as its crossover-SUVs and its Mazda 3 sedan.
"I think this market drives trends all over the U.S.," said Jim O’Sullivan, president of Mazda North American Operations. "We are firmly entrenched in this market. We are firmly entrenched in Southern California."
Jim Fletcher, co-owner of Fullerton-based Pete’s Road Service, said his company saw business rebound slightly in the first half of April. A possible sign that the slump Fletcher first detected in 2006 had hit bottom? Not exactly.
While Fletcher is selling more retreaded tires and making more on truck maintenance through his nine-outlet Fullerton-based chain, that’s partly because of others’ misfortunes. "Some of our competitors have disappeared," he said. (Tire Review/Akron)
