AIH to stress production

John Boudreau is 78 years old, but he’s acting like a kid with a new toy. Boudreau is the new president, CEO and COO at American IronHorse, the Fort Worth, Texas, maker of premium-priced motorcycles.
He took over the top spot in November and has wasted little time in making changes. Big changes. Especially on the personnel side. Here’s a partial list. He:
– Replaced the relatively new CFO, Peter Anton, with Robert Schleizer.
– Cut marketing department managers and shifted that responsibility to Bob Kay, who had joined AIH about 18 months ago from Tucker Rocky as COO. Kay also was given responsibility for dealer development and the expanded warranty/customer service operation.
– Reorganized, centralized and beefed up the purchasing functions under James Little, who also has responsibility for some warehouse functions.
– Strengthened the design/engineering process under Jeff Long and co-founder Tim Edmondson.
“Yes, I restructured this company,” the candid Boudreau told Powersports Business. “But investigation will show that I almost didn’t touch the production department; I augmented that. I cut out a bunch of frills, but kept the hard core people in those departments. Obviously, some people feel I threw out the baby with the bath water and perhaps I have. Only time will tell that.”
Boudreau isn’t a newcomer to AIH; he’s studied it for a current investor from a distance for 18 months and very intensely for two months last fall before taking his present post.
“I was asked to take a look at this company relative to additional investments and that’s what I did. My recommendation was that we invest more because I felt this company was a real winner and could easily maximize its profitability.
“As a consequence, they asked me to take it over, and that’s what I elected to do. I put my money where my mouth is.”
The former Air Force officer describes himself as a turnaround expert and a manufacturing specialist. He’s been performing turnarounds for “better than 40 years” on companies building products ranging from buses to windows, many of which were publicly-held.
His most recent venture was with Michigan General Corporation, a miniconglomerate that controlled 31 companies. “Within three years,” he says, “we took it from $117 million to almost one billion dollars.”

MEETING THE CHALLENGE
At AIH, the principal problem, says Boudreau, is simply increasing production while maintaining quality. “The problem here is not sales,” he says. “As a matter of fact, at the present rate of production, we’re fully booked up for better than a year.”
Boudreau says he would have to double weekly production to produce what he calls a satisfactory delivery date of 45 days. Now it’s more than twice that figure.
AIH produced an estimated 1,800 bikes in 2002 and 2,700 this year, or about 50 bikes per week. Boudreau sees that number climbing sharply in 2004. “I anticipate dropping bikes on the floor at 75 or 80 bikes a week by March. That wouldn’t take care of my backlog, but it’s a manageable number for the next three to four months.”
Calling the current effort a “ramp up phase,” Boudreau says AIH will have done a “stellar” job if it can get to 100 bikes per week in the next nine months. “The biggest problem,” he says, “is getting over the first hurdle of 70 bikes. The rest will be easy.”
PRODUCTION CHANGES
The major production bottleneck, he says, is getting outside vendors to supply the proper parts. To that end, the purchasing department has been beefed up and reorganized under James Little.
“We’re going to a very strong centralized scheduling system here,” says Boudreau, “so everything flows through the scheduling department, whether it’s made by us or outside. When production demands parts to build 100 bikes, they’ll be there. That parts shortage is the main thing we’re attacking right now.”
Boudreau won’t discuss sales figures, but he notes AIH posted compound growth rates of 50% annually for the past three years. “Obviously, when you get to this size,” he says, “those kinds of gains are not sustainable. But our goal is in excess of 30%.”
At the same time, Boudreau is boosting production capacity by adding second and third shifts in selected areas. The company is hiring and now has about 360 employees.
He’s also stripped away ventures that he feels detract from the production of motorcycles. The Gunslinger parts line introduced in January 2003 has been put on hold. “Gunslinger is definitely on the back burner,” said Boudreau. “As far as the parts business and kit business, it’s been put on the back burner. Let’s go back to building bikes and get that under control and take care of the tremendous demand before we jump off into another puddle.”
Under the direction of Bob Kay, an independent warranty program has been set up, as well. In the past, says Boudreau, warranty work had to be integrated into the production run, often taking weeks to complete simple tasks. “Customers and dealers are going to see service they’ve never seen from this company,” he says. “We’re going to be the premier (warranty) company.”
Meanwhile, co-founder Tim Edmondson continues to lead AIH’s successful creative efforts. “Tim wants to be a designer and that’s what we want him to do,” says Boudreau. “He has a visionary eye; it’s an extraordinary thing; he and Jeff (Long) make an extraordinary team and I think are directly responsible for the growth of this company. These guys create bikes that are head and shoulders above any other bike in their categories.”
Edmondson serves on the Board of Directors and is the company’s largest shareholder.
CAPTIAL REQUIREMENTS
Capital is important for expansion and Boudreau says meeting funding needs won’t be a problem for AIH. The company recently cleaned up its balance sheet when investors agreed to convert $7.5 million debt to equity. And a securities offering of $6 million has been oversubscribed, he said. Finally, an existing investor has agreed to put in additional capital this year to the tune of “multiple millions,” he said. “This (investor) will make available access to a significant amount more,” said Boudreau. “The commitment is here by people who believe in this company and its future.”
No public offering is planned in the near future because AIH isn’t ready to go to the market, he says. “I’ve run many public companies and we’re not ready for anything like that. You’re selling part of this company and you don’t want to sell it too cheaply.”
At age 78 Boudreau says he doesn’t need this job but enjoys the work and is good at it. His tenure “could be as short as a year,” he says. “This will be well under control in nine months.”