Ducati shows improvements

Last March, Michael Lock moved to Cupertino, Calif., from London, to take the reins of Ducati Motorcycle’s struggling North American operations. It wasn’t a pleasant situation.
Dealers were near revolt because parts weren’t available, inventories were stuffed with current and non-current bikes, a new computer system wasn’t working and a January move of the headquarters from New Jersey to California caused a major turnover of key staff.
Lock knew he had to pacify dealers. “It will take the rest of this year and the first part of next year before I can look them in the eye,” he told Powerports Business in April.
But he didn’t wait for next year. Instead, during June and July, Lock met with dealer groups in Florida, Illinois, California and Texas.
“There was blood on the walls during those meetings,” he said during an interview this month with Powersports Business.
But those dealer meetings gave Lock the ammunition he needed to deal with the Ducati factory in Bologna, Italy, and to make subsequent moves to get things rolling here.
Regaining Ground
The first quarter of this year, Lock notes ruefully, “was diabolical. We weren’t organized, the economy was bad, and the dealers had lost hope.”
But things are getting better, he says. September was the best in U.S. history, and registrations in early October were almost 100% ahead of the same month last year.
“We’ve cut the (machine) inventory; that was the monkey on our shoulder,” says Lock. In March, machine inventory was close to 11 months, but now it’s down to about five months and by the end of the year he expects it to be even better. “I would be comforable with the levels we have in Europe,” says Lock, which are three months in season and four to five months offseason.
The international computer system now is up and running and today every dealer is online with the factory to order parts and process warranty claims. In March, only about one-third of the dealers used the network.
Lock also has made progress on parts distribution. Today, the company has a first time fill rate of about 92% (Nine of 10 items are filled on each dealer order immediately.). That compares with about 55% in March. “In Europe, it’s about 95%, so we have something to go,” he says.
Making Changes
One of the most obvious moves Lock made was to launch a very aggressive consumer financing program October 1. Calling it the “strongest ever” finacing program offered here by Ducati, Lock noted the program has low rates and opens up financing to a much larger market than ever before.
Ducati’s new “Feel the Deal” financing package offers no interest for 24 months, and no payments for three months. For example, if a buyer borrowed $10,000, he would have no payments for the first three months and then monthly payments of $416.67 for 24 months for a total of $10,000. Buyers may also include up to 15% of MSRP for Ducati accessories and apparel. The deal is good only for 2003 and older models.
While that package is very strong, Ducati also moved to help dealers finance customers who have weaker credit. “We’ve generated the buy down rate quite aggressively for B and C paper,” says Lock. “It’s easy to headline for great rates, but dealers get frustrated if the only people who qualify are those who don’t need it.”
So, Ducati now will finance consumers with lower FICA scores than ever before, down to 675 and even 650, in some cases. That’s considerably lower than anything the company has ever done.
Ducati also has become more generous with its machine margins, bumping the base margin from about 17% to 21%, which puts it about in the middle of OEM packages.
Lock also has reopened a small warehouse in Ontario, Calif., to serve West Coast dealers and to support new product launches and promotions.
And he’s opened a small sales and administration office in New Jersey to add four more business hours to work with the factory in Italy.
There are also new training and incentive programs aimed at pushing Ducati performance products.
On the dealer side, Ducati still has about 155 dealers, the same as last year. Ducati lost about a dozen, but has replaced them.
Sales for the year 2003 will be about the same as last year, but that’s not bad, considering first quarter sales were off about 35%, says Lock. Sales were buoyed by the new Multistrada which will sell about 600 units at retail this year, beginning in June. It’s the fastest selling new bike ever by Ducati here.