Dealer Expo 2004

Global Motorsport Group, based in Morgan Hill, Calif., plans to make waves across the U.S. and into Europe this year, officials said during recent interviews with Powersports Business.

Global is the parent company of Custom Chrome, a major aftermarket supplier and distributor to the American V-twin market, and Motorcycle Stuff, a distributor that deals in the off-road and metric markets.

At the same time, management debunked rumors being whispered at the recent V-Twin Expo in Cincinnati that the company was preparing to file for Chapter 11 bankruptcy protection.

“No truth to that whatsoever,” said Frank Esposito, president of Global. “It’s just talk by people who can’t get their facts straight,” he said.

“In the last few months,” adds Maurice Murray, Global’s vice president of sales and marketing, “we’ve been in an uncomfortable cash flow situation brought about by relationships with our banks. But we’re almost clear of that, and we’ll be coming out with both barrels.”

According to Esposito and Murray, the bankruptcy rumors were brought about by a combination of four events: A tight cash situation, the retirement of its CEO, a staff cutback at its Ft. Worth, Texas, call center, and its absence from the V-Twin Expo last month.

“Some people took these events, added two plus two and got eight,” says Esposito.

First, Global has suffered a cash flow problem because it’s recently been paying principal plus interest on funds provided by lenders when the company was purchased by Stonington Partners, the New York investment group, that took Global private in 1999.

However, Global is completing a refinancing of its total debt package which will significantly reduce these payments, said Esposito. The refinancing was expected to be completed late last year, he said, and now is nearly finished. Global has an agreement in principle with new lenders, he said, and the parties are now in the process of “crossing the t’s and dotting the i’s.”

A factor in the refinancing, said Esposito, is that Global had to post three consecutive quarters of solid performance.

With the quarter ended Jan. 30, Global has posted four quarters of improved earnings, quarter over quarter from last year, he said. “We’ve had a very significant improvement of EBITDA (earnings before interest, taxes, depreciation and amortization) each quarter,” he said. Global’s January sales were up 33% over the previous January, he said.

Second, CEO David Sadler, the turnaround specialist who joined Global in June, 2002, announced his retirement Jan. 28, effective at that time. Sadler lived in a California hotel, separated from his family living in Michigan.

In a prepared statement announcing his retirement, Sadler said “GMG has paid down a substantial amount of bank debt and interest, more than doubled their earnings, drastically reduced inventory while at the same time improved overall fill rates to over 90%.” Sadler, 64, said it was time for him spend more time with his family.

“He did what he set out to do,” said Esposito, “ turn the company around and get the refinancing set, and then went back with his family.” Perhaps Sadler’s biggest contributions, according to Esposito, where that he got rid of excess and discontinued inventories; “got control” of the purchasing operation by improving accountability, rebuilt the sales force and added top management.

Esposito said a new CEO is expected to be in place within the next few months, and no other management changes are foreseen. “Stonington has said they are happy with the new management team,” he said.

Third, Murray last month transferred a number of sales support positions from the company’s Texas call center to the Morgan Hill headquarters in an efficiency move.

Fourth, Global did not exhibit at the recent V-Twin Expo in Cincinnati, a decision made and announced last February.

BIG SPLASH AT INDY
Global perhaps will present the most changed image of any major player at the Dealer Expo this year. It will have a substantial presence in the RCA Dome this year with its Custom Chrome display, will continue its large Motorcycle Stuff exhibit in the main hall and eliminate its smaller Streetwear Brand exhibit.

At the same time, Murray said, Motorcycle Stuff will announce at the Expo that it has signed a deal with a major European manufacturer for exclusive distribution rights for the product line in the U.S. The line will be promoted through a major race sponsorship, Murray said.

Custom Chrome will have the largest footprint in the Dome, according to Murray, with an exhibit that covers close to 5,000 sq. ft. That’s about 1,200 sq. ft more than last year.

At the same time, Custom Chrome has arranged to have all aisle signs in the Dome and will use the giant videotron display that is used by the home team professional football team, the Indianapolis Colts. “We’ll run video of our dealer show,” says Murray, “and maybe we’ll set it up for the Daytona 500 race. We haven’t decided on the complete program yet.”

In another aggressive marketing step, the marketing team has arranged for the Custom Chrome and Motorcycle Stuff logo to be placed on each of the 6,800 hotel keys to be used during the Expo. Motorcycle Stuff also will use all the aisle banners in the main exhibit area.

In addition, Motorcycle Stuff will introduce a new logo at the Expo and hand out CDs of its fancy new catalog.

“Unfortunately,” says Murray, “the book won’t be ready until about a week after the show. We completely redid the entire catalog, from front to back, and it just took longer than we expected.” The new book has about 1,300 pages, approximately the same size at the popular Custom Chrome catalog.

In one other step, Global has dropped the Streetwear Brand of motorcycle clothing, folding it into its Custom Chrome apparel line. In previous years, Streetwear, primarily a product of the old Chrome Specialties company, had its own booth at the Expo.

“The line wasn’t paying for itself as a stand alone line,” says Murray, “so we brought it back closer to the mother ship.”

NEW WEB SITES ON DISPLAY

In a final Dealer Expo note, Murray said that both of the company’s new B-to-B Web sites, www.customchrome.com and www.motorcyclestuff.com will be demonstrated at the show.

The sites were launched last fall, and Murray says that dealer use and number of dealers is increasing by about 30% each month. Almost 2,500 of Global’s 10,000 active dealers are participating.

The sites are typical B-to-B, offering dealers the opportunity to check stock live from six warehouses, do price checks, and place orders.

MOTORCYCLE STUFF GOES TO EUROPE
In other Global news, Murray talked about the planned expansion of Motorcycle Stuff to Europe, a move slated for this spring.

Custom Chrome already runs an operation in Europe, based outside of Frankfurt, Germany. The operation is headed by Holger Mohr, managing director, who also will manage the Motorcycle Stuff operation.

“CCI is a dominant player in the V-twin business over there (with nearly 50% market share),” says Murray, “and we have warehouse facilities and sales staff. All the logistics are in place.”

Global plans a major show for the European market March 26-28. “It’ll be a good opportunity for dealers to see what’s going on,” says Murray. For details, call Global at 408/778-0500.

SPEAKING OF SHOWS...
In a final bit of show news, Global announced that it is going to combine its Custom Chrome and Motorcycle Stuff dealer shows into one big event Oct. 8-10 in Morgan Hill.

In the past, Motorcycle Stuff has had a small show in Clearwater, Fla. Custom Chrome returned to a Morgan Hill show last year, following a less than successful road show program in 2002.

“Many of our vendors cross over, as do a growing number of our dealers,” notes Murray, “and they are getting sick of shows. So, we’re going to do the whole thing here at one time.”

Custom Chrome normally draws about 1,800 dealers and Motorcycle Stuff, about 300. Murray expects the one show to draw about 2,500 dealers, adding a group of metric dealers who have not traveled to Florida in the past.

The show will be in the same location in Morgan Hill as last year. A 41,000 sq. ft. warehouse adjacent to the corporate facility will be rented and a 30,000 sq. ft. tent will be added to the 15,000 sq. ft of useable space in the Global warehouse.

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