April 23, 2007 – V-twin sales slowdown results in layoffs

A slowdown in the V-twin market has hit what is believed to be the largest manufacturer of custom motorcycles.
Big Dog Motorcycles recently laid off 18 employees — or about 7 percent of its work force — mostly because of reduced new motorcycle sales.
The Wichita, Kan., manufacturer is hardly the only V-twin company that has experienced layoffs in the past year. Saxon Motorcycle Co. and S&S Cycle are among the larger V-twin companies that have reduced their workforce in the past year due to slower new bike sales.
Big Dog President Nick Messer said the slowdown that started last year has continued this spring, resulting in about a 10 percent sales drop compared to the following year.
“Dealers have more bikes on the floor and are being more cautious about overloading their inventory,” Messer said. “We’re trying to do the same thing.”
Messer also indicated that about one-third of the layoffs are a result of more internal efficiencies, such as buying more preassembled motors from S&S Cycle.
“If I really needed to,” he said, “I suppose I could keep building production numbers the same as we were, open up more dealers to get the bikes out there on the dealers’ floors. But it’s not our intentions to just open up dealers for the aspect of loading dealers’ floor plans with motorcycles. Sell-through is critical to us, and unless the sell-through shows we need to build more motorcycles, than we’re not going to build more bikes.”
Messer does believe Big Dog’s sell-through is doing better than most, noting the company’s sales of 68 bikes during the recent Daytona event was an indication of that. Still, this year’s Daytona sales dropped noticeably from a year ago.
“I don’t anticipate we’ll have to lay off anymore (employees),” Messer said, noting all the layoffs came from the production and parts departments, or direct labor. No engineers or product development employees were affected.
“We just want to make sure that we do it now rather than do it later,” Messer said. “We’re trying to be proactive rather than reactive.”
He noted Big Dog still has the flexibility in its labor force to ramp production up by 25 percent if the market demands it.
Saxon Motorcycle Co., the Casa Grande, Ariz., manufacturer, did lay off 10 percent of its workforce in February. Part of the layoff was a result of the market downturn seen in the third and fourth quarters of 2006, but also an attempt by the company to improve its productivity, said David Schwam, vice president of sales and marketing for Saxon.
“We wanted to wait until January to get a sense of what the spring market might look like, to see how dealer floor traffic would be,” Schwam said of the timing of the company’s layoff announcement.
The timing was tricky because almost at the same time of the announcement Saxon heard that a couple of its models had been approved to be sold in Europe, meaning the company would have additional production responsibilities.
Still, Schwam said company officials are “convinced (the layoffs) were the right thing to do because it forces us to be more efficient, profitable and healthy.
“We weren’t operating nearly as efficiently as we could be,” he said. “The productivity per person wasn’t at the level that we benchmarked it to be.”
The downturn in the new unit business has trickled down to S&S Cycles, one of the segment’s largest complete engine builders. President Brett Smith said S&S has either laid off or not rehired about one-third of its direct labor workforce — about 55 people. The layoffs started last summer and continued in the fall.
“We’re at a stage now where we’re running quite lean with respect to direct labor, and I don’t foresee us going through more layoffs,” Smith said, noting the layoffs were solely attributed to the reduced volume of complete engine sales.
Smith said the EPA emissions issue “has really impacted the custom bike sales so we’re not seeing the sales from the guys that are building the 10-15 bikes a year.”
Other parts of S&S’ business, like its Proven Performance aftermarket parts, is “humming along and growing very, very well,” Smith said.
“The heart and soul of our industry and company is product development. So for us what we’re doing is investing in the people who are going to design parts and products for the future, and we’re not wavering on that.”
One established V-twin company that says it hasn’t had layoffs directly tied to the sales slowdown is Daytec, the frame manufacturer.
Tony Day, son of founder Phil Day, said the company had layoffs in early 2006, but the move was an attempt to streamline its workforce rather than a reaction to the market.
The sales slowdown has affected their business, but not necessarily in a negative way, Tony Day said.
“We’re branching out a little bit more, working with a lot of the small OEs that we couldn’t help out in the past because we were so busy,” he said.
Daytec also has split its R&D department, with one side working on OE projects and the other side working on custom frames for dealers, and building more frames for other powersports vehicles.
Overall, Tony Day said business has been good, and he has good news for the industry. “We’re hearing from some dealers that some of their business has picked up.” psb

Leave a Reply

Your email address will not be published. Required fields are marked *