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September 24, 2007 – A candid industry conversation

September 19, 2007
Filed under Features

By Neil Pascale
Editor
MADISON, Wis. — To prepare for his annual National Vendor Presentation speech, LeMans Corp. founder and CEO Fred Fox reviewed notes from past speeches and found something of particular interest.
Something he initially wrote in the mid-1970s, repeated in the mid-1980s and found to be relevant again some 20 years later: A discussion on how a company can grow and prosper during turbulent times.
“Things are a little bit tough, but it’s opportunity time,” Fox told a room full of suppliers on hand for LeMans’ annual event held Aug. 26 in Madison, Wis. “I think everybody is in the same boat — there isn’t anybody in the industry that isn’t looking at budgets and seeing if there’s anywhere we can tweak our expenses, anywhere we can get our margins up a little here.”
Unlike last year, Fox did not characterize LeMans’ current fiscal year in terms of growth to the Madison audience. In a later discussion with Powersports Business, he said the company has historically had double-digit annual growth, with 15 percent or more annual growth occurring many times.
“Right now, there is not a chance that it’s going to be in the 15 percent range in the next couple of years,” Fox said. “Our goal is to always try to get double digit (growth). Right now, we and many other (companies in the industry) are going to be satisfied with less than that.”
Areas of potential growth for the company, owners of Parts Unlimited and Drag Specialties, that Fox cited in his speech to vendors: the European market and a stronger emphasis on the Christmas selling season.
The latter will be a focus at an upcoming LeMans event. The company is hosting an open house for its newest U.S. warehouse Nov. 10-11. The 418,000-square-feet facility “is the nicest one we’ve ever built,” Fox said, noting the state-of-the-art facility in Nevada makes the company’s 15-year-old Janesville, Wis., facility “obsolete” in terms of technology. The new warehouse, located 10 miles north of Reno, cost approximately $35 million to build and includes $15 million in shelving and conveyor belts.
Another warehouse project Fox is currently working on is the start of a new branch of LeMans Corp.: Parts Europe.
The company has purchased land in Konz, Germany, to build what is expected to be the largest distribution center selling exclusively motorcycle products in Europe. Fox was scheduled to meet with architects and construction officials in early September on the 160,000-square-feet facility.
LeMans, which already ships euro 12 million ($16.3 million) in volume to Europe annually, has already received assurances from a handful of manufacturers that they will distribute through Parts Europe.
“Our concept in Europe is very similar to here,” Fox said. “We’re going to teach the dealers that they don’t have to buy a three-month supply to be sure they’re going to have (product in stock). We’re going to say, ‘You can rely on us.’ You can order a two-week or three-week supply and we’ll ship that order in an hour, just like we do here.
“A lot of people say they aren’t ready for that. Well, they weren’t ready for that here (in the United States). It just takes a little time, good road (sales reps) and someone to explain why you don’t have to order 500 sparkplugs. You can order 50 if you want and when you need 50 more, you can order and get 50 more sparkplugs. And that helps these dealers in tough times.”
Fox, whose company celebrated its 40th anniversary this year, is seeing some of those tough times in the United States.
“I’m predicting that up to 15-20 percent of the dealers will either close or be so superiorly handicapped that they can’t buy inventory,” Fox told vendors. “Some of them have already done that. They tell our salesmen, ‘You know, I have some things I need, but we’re so darn short of cash I can’t do it. I’m going to have to wait a week or two.’”
The nation’s current economic troubles that are impacting the aftermarket and the industry as a whole aren’t going away anytime soon, Fox believes.
“We don’t think it’s going to bounce back in 30 days or 60 days,” he said. “We think it’s going to be a year. We think there’s going to be some shake up on all levels.”
Fox advised manufacturers to cut expenses – but not too dramatically, including advertising — if possible, but not to diminish the value of their brands by selling product at one-time, cheaper prices.
And most of all, don’t panic.
“It’s normal,” Fox said of the current challenging business cycle. “Every business I know goes through this.”
Plus, consumer interest in the industry isn’t diminishing.
“Consumers who want to ride motorcycles aren’t going away,” he said. “It’s just the people who want to get their business are going to have work harder to get it.”

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