Closure of Pete Ellis Ford Remains a Mystery : Business: Two months later the agency’s failure is still unexplained. City’s investment of $700,000 has become a sore point.

The cars and trucks are gone now. Plastic streamers of pink, orange, green and yellow flutter languidly over the deserted lot. The giant “Pete Ellis FORD” sign towers over the 91 Freeway, its electronic signboard unplugged but still noticed by passing motorists.

“People come by here every day,” said a security guard watching over the empty lot from the shade of the service bay entrance. “They say, ‘What happened?’ ” He shrugs. “I don’t know; I just say they went out of business.”

Two months have passed since automobile dealer Ellis abruptly shut down his Bellflower Ford dealership and went into seclusion at his desert home near Palm Springs.

City Council members, who gave Ellis $700,000 in a last-ditch attempt to keep the dealership open, say that exactly what happened is not much clearer today than it was on June 13, when Ellis’ 85 employees were told to go home early and not to bother coming back.

“I don’t suppose we will ever know what really happened,” Mayor William J. Pendleton said.

Ford officials say the dealership is expected to reopen under new ownership in October, but the question of the city’s investment is still unresolved.

Closure of the dealership and the loss of the $700,000 has become a sore point among some critics who contend that the council had no business lending Ellis taxpayers’ money. Ellis received a $300,000 grant and a $400,000 interest-free loan, both from the city’s federal Housing and Urban Development funds.

City Council members have said that helping business people like Ellis to save the jobs of low- and moderate-income wage earners is precisely how federal Housing and Urban Development block money is to be used.

“It was one of those decisions that, if everything had worked, everyone would be patting us on the back, and if it didn’t everyone would criticize us,” Councilman Randy Bomgaars said Tuesday. “It was a gamble . . . I’m not conceding that we have lost the whole ball of wax. We just wanted to keep the dealership. If that happens, then we still were successful.”

Pete Ellis Ford had been one of Bellflower’s largest producers of sales tax revenue, providing the city with about $300,000 a year. City Administrator Jack A. Simpson said he does not know how much money the city has lost since the dealership was closed.

The dealership is scheduled to reopen sometime in October, said Richard Basile, a Ford Motor Co. regional market manager. Basile said that during the last month company officials have been interviewing people who want to reopen the franchise. Ellis is not one of them, he said.

Even after the dealership reopens, the City Council will still be faced with the task of trying to recoup the $700,000. According to the agreement signed by Ellis and the city, Ellis is personally responsible for repaying the $400,000 interest-free loan.

Although there was no agreement to repay the $300,000 grant, city officials said they will try to recover that money, too.

Ellis could not be reached for comment but has previously said he will pay all his debts. However, he also has said that he is on the verge of personal bankruptcy.

Ellis, who had owned four automobile dealerships in the Southeast area, has been forced to close all of them in the last five months. Three of them, located in South Gate, were closed by Chrysler Credit Corp. and have since been reopened under new ownership.

Of the $700,000 given to Ellis by the city of Bellflower, Ford Motor Credit Co. took $430,000 that was owed to it by Ellis, said Bruce J. Low, an automobile industry consultant with Monrovia-based Double Diamond Inc., who was hired by the city to help work out the agreement with Ellis. The remaining $270,000 was spent on payroll and other operating expenses.

Council members are reluctant to discuss why the deal they signed with Ellis went sour because the city may face a court battle with Ellis or Ford Motor Credit Co. to recover the $700,000.

However, Low said the city signed the agreement with Ellis based on a promise from Ford Motor Credit Co. that it would continue to provide financing to Ellis so that he could buy new cars from the factory. Ellis was to spend more time at the Bellflower dealership, taking direct control of the books. He also was to provide the city with monthly financial reports. Low said Ellis did neither, and, he said, about one month after the agreement was signed and Ford Motor Credit Co. took its $430,000, credit company representatives told Ellis that he had 60 days to find financing elsewhere.

“The company (Pete Ellis Ford) was in such a condition that no one would give it financing,” Low said. “What Ford Motor Credit did was strangle Ellis.”

Without credit, Ellis could get no new cars. With no new cars, his business went into a tailspin, Low said.

“Had we (the city) known Ford Credit was going to pull the plug, we never would have loaned the money,” Low said. “Certainly Ford Motor Credit knew they were going to cancel Ellis’ line of credit before the city agreed to fund Ellis. Whether it was their (Ford Motor Credit’s) responsibility to tell the city is the question. Call it what you will, but it certainly was not fair.”

A Ford Motor Credit Co. representative declined to discuss the matter, saying it was Ellis’ personal business. But he said: “The scenario is not even close to what happened in reality. A credit line was extended; he was receiving inventory. There were some problems but I can’t go into any detail.”

Despite Ellis’ problems, council members say they do not regret giving him the money.

“I did the right thing at the right time,” Pendleton said this week.

“There was no way I could have known Ellis was not going to make it. I’m sorry it didn’t work out, but if the same set of circumstances came up, I would do it again. We have to protect our revenue producers. That is the bottom line.”

BACKGROUND

There are numerous guidelines restricting the use of federal Housing and Urban Development funds. However, cities can give such funds to businesses if the action is “necessary and appropriate” in order to keep jobs for its low- and moderate-income residents. At least 51% of the jobs involved must be filled by low- and moderate-income workers. City Administrator Jack A. Simpson said in a March memo to the Bellflower City Council that a written survey of the 85 employees at Pete Ellis Ford showed that 55% of the employees met the criteria.