Former defense industry executive and custom motorcycle dealer Scott Meyers has emerged from the bidding war over American IronHorse's assets as the new owner of the bankrupt OEM.
Meyers, who owns Rocky Mountain Choppers in Montana and Black Water Choppers in Osseo, Minn., told Dealernews upon submitting his $6.7 million bid for the troubled manufacturer that his goal was to get the Fort Worth, Texas-based company back on track by veering away from the mass production model it had been following.
A judge in the U.S. Bankruptcy Court's Northern Texas district agreed and in a May 23 rulling approved the sale of AIH to Meyers, whose professional history includes executive roles with Alliant Techsystems and Magnavox Electronic Systems, the electronics giant's defense division.
The Fort Worth Star-Telegram reports that the total cost of the acquisition will be about $8 million, a price that includes liabilities from existing bike warranties. Meyers is also reported to be financing a portion of the purchase with his own money, with the remainder of the funding coming from Textron Financial, AIH's main lender.
Prior to the bankruptcy's court's approval, Meyers talked with Dealernews about his interest in the company. He was accompanied on a conference call by his financial representative, Geoff Richards of William Blair & Co., a Chicago-based investment firm, and AIH CEO and president Buck Hendrickson.
"The reason that I got involved is I knew that the company was having troubles. So I was kind of watching it and when they did their final act of filing Chapter 11, that's when I called Buck and told him 'Hey, we want to come down and see you,'" Meyers said.
As a longtime dealer for AIH, as well as for custom brands such Arlen Ness and Bourget, Meyers was keenly aware of how soft this niche of the motorcycle market had become. As an aside, Meyers said he bought 91 bikes from the Texas-based company in 2005 and was pretty sure he had them all sold by now, adding that he figured a lot of dealers had experienced the same thing.
Meyers, however, said he recognized that, despite its dwindling fortunes in a down market, American IronHorse carried a superior brand name and product. He said he could also see that the company's production model wasn't working, it was merely pushing out bikes that weren't selling. "We could operate this company without having to sell as many bikes as [the previous owners] did. It's very workable," Meyers said. "Let's get the supply back to where it never exceeds demand."
The goal, said Richards, the investment consultant, is to not be the biggest on the block, but the best by continuing to build a great product, offer great service to dealers and be nimble enough to respond to changes in the marketplace. Whether they'll be able to accomplish those goals is still a matter of speculation at this early stage.
There had been much industry criticism that AIH was slow to respond to changes in customer's tastes and hadn't built any new, exciting, less-expensive models in several years. More than one V-twin wonk said that these problems attributed to the company's eventual slide into bankruptcy.
In fact, the company detailed in its bankruptcy court filings that its efforts last year to prop up sales with lower-priced models didn't take. AIH has already watched its sales go from $96 million in 2005 to $53 million in 2006 and then to $25 million in 2007. Hendrickson agreed with the complaints about high prices, saying "I think that's what's driven a lot of people away."
This planned turnaround is reportedly why Meyers brought in Richards, who heads the restructuring division of William, Blair and has a long background in ushering companies through Chapter 11. He said he helped the dealer assess AIH's strengths and weaknesses and how best to pursue a plan to pull it out of bankruptcy. "What Scott saw was an opportunity to help a superior brand with great marketplace recognition…and help that company restructure itself in a way that enables it to emerge from Chapter 11 as a leaner, meaner and more efficient…business."
The first step, Meyers said, will be a thorough survey of existing dealers to see what models they want to see built. While the end user is an important factor the company's overall health, it's the dealerships that are most important to its future, Meyers claimed. Another crucial aspect of restructuring in a soft market is pricing, he added.
"We kept the price of the bikes going up, up and up," he said. "The average cost of [the] bikes went up about $4,500 over two years," all while the economy was rapidly slowing. Now, with some hindsight, they can consider offering a great bike in the low $20,000, he said.
Richards asserted that Meyers will bring in a level of discipline needed to contain costs and lead the company toward its goal of being flexible, profitable and successful.
As of press time, it's unknown how the company's management structure will change under Meyers, but in his earlier interview he said that the company will hold on to key people. "We're not going to just throw away everything that was learned over the years," he said.
Meyers said he plans to keep the company in its Fort Worth location and will redevelop the local workforce. The company reportedly is down to eight employees.