Custom Chrome Faces Uphill Battle In Turnaround

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Leaner, meaner and more focused may not be enough

HOLGER MOHR SAYS IT'S TIME to cut the bulls**t and get to work. That may be the only prescription that can help the new Custom Chrome struggle back to success in the next year. There's been plenty of talk and plans and press releases telling us how things are going to improve. But mostly, for many reasons, they haven't come to pass.

"Our big thing now," says Mohr, the new CEO of Custom Chrome Inc. (CCI), "is less words and more action."

The problem over the last several years has been obvious: Not enough of the products dealers wanted, when they wanted them.

MOTORCYCLE STUFFED

By the time you read this, Motorcycle Stuff will be history, its inventory liquidated and most of its employees pushed out the door. Stuff was a victim of limited resources, says Mohr. The company couldn't revive both CCI and Motorcycle Stuff, he told me; there was only enough money and manpower and time to save one of the companies, and the choice was made to go with CCI.

"People keep saying [CCI is] competing with Drag and Biker's Choice and MS is competing with Parts [Unlimited] and Tucker [Rocky]. That's BS," he says.

Stuff didn't have anything to differentiate itself from Parts and Tucker, Mohr argues, and it didn't even have as many products as the two majors. "The bottom line," he says, "is that CCI margins are way higher [than those of Motorcycle Stuff] and our brand name is light years ahead of what we had on metric. And on products, we have proprietary [CCI] products.

"I'm better putting my money into a business we know we can fix."

Steve Veltri, VP of sales and marketing, echoes Mohr's comments. "It's really about having a serious focus on the products, and we believe our area to win is in the V-twin side of the business."

However, it may be too late for even a focused CCI, given the tough, established competition from Drag Specialties, Biker's Choice, Harley-Davidson; the lack of sales in the custom-cruiser segment; and the extremely poor record of CCI over the last several years. As one long-time CCI supplier puts it: "The only thing that may survive is CCI-Europe."

OUT OF TIME?

Mohr knows that he has to get the CCI house in order quickly. This year is shot, so he's gearing up for 2009 where the company may have its last chance to turn things around. Here's what he has in mind:

  • Relocate the company's headquarters to a much smaller facility in Morgan Hill, Calif. The new 30,000 sq. ft. office space will not have any warehouse space and will be one-third of the current 100,000 sq. ft. office/warehouse. The move is expected to be completed this fall.
  • Beefing up his management team with experienced CCI motorcycle executives. That includes 15-year veteran Veltri and Bob Russell, who heads up the supply chain as VP of logistics. He's been with the company for 20 years. There are others, but the team doesn't include industry veteran Frank Esposito, who suffered under the outside investment groups (See Speed Read, June, p.18).
  • Developing a line of proprietary CCI products including seats, handlebars and other bolt-on accessories. It'll have its RevTech engine, but it's unclear what might happen to the Driveline brand engine. (Mohr says he resigned his position with CCI in the U.S. and returned to Europe last year because management failed to implement his plan to add new products at that time.)
  • Improving fill rates to more than 90 percent next year. This means 90 percent of what dealers want to order, not the lesser amount that they settle for because they know CCI doesn't have the products. CCI has maintained its customer base at about 5,000 dealers for several years, says Veltri, but the company won't disclose an average ticket for the dealers.

The bottom line is that management at the new CCI only has a few months to gear up for the big push in 2009. It has to wash away the remnants of Motorcycle Stuff; expand its proprietary products, settle on its product portfolio and build its inventory before its October catalog deadline; downsize its headquarters; integrate its management team; and figure out how to please the new Korean owners — guys who want to sell the RevTech motors they are manufacturing.

The scenario for CCI to successfully function as a niche distributor makes some sense but only if the costs have been whittled down enough — and if he can grab business from Drag and Biker's Choice.

Joe Delmont can be reached at jdelmont@dealernews.com or 952-893-6876.