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Jan. 21, 2008 – Saxon focuses on cutting costs, diversifying its lineup

January 21, 2008
Filed under Features

In his relatively short time as Saxon Motorcycles’ president, David Schwam has addressed two issues many custom V-twin manufacturers are identifying as vital areas to survive the market downturn: cutting costs and diversifying product line.
“We want to do something that will spur sales, make our line attractive to a different group of people in the market and reduce our cost base so that our operational burden is lowered,” Schwam said in an interview with Powersports Business. “We’ve accomplished the second goal pretty well.”
The first goal remains on the to-do list for Schwam and the manufacturer’s employee base, the latter of which work out of the company’s Casa Grande, Ariz., facility. The manufacturer, which was started by four former housing industry executives, is entering its fourth model year.
Earlier this year, Schwam was named president of the manufacturer that is likely to build approximately 400 new bikes this year, some of which will go to its surging international market.
“Clearly our position, at least from a domestic market perspective, is hunker down, run an efficient business, keep our costs in check and try to deliver the level of support and service we need to to make sure the dealers love our brand,” said Schwam, previously the company’s vice president of sales and marketing.
“And as the market comes back around, we think we’ll be in a very strong position to be one of the few manufacturers that can capitalize on that.”
Improving the company’s inventory handling was one of the keys the company saw in ensuring its future in the V-twin business. Saxon is now more efficient in buying and managing parts in a “just-in-time” inventory handling process “rather than have millions of inventory on the shelves waiting for people to place an order.”
“We’ve really done a tremendous amount of work to improve the way we do business here,” Schwam said. “I’ve brought in some new team members who could help us run the business more efficient. We’ve also reduced headcount in positions so we don’t have redundant positions.”
The other key part of the company’s focus is delivering product that is truly different from the rest of the market, something that can be a struggle.
“People who aren’t really well educated could look at our bikes next to many of our competitors and really when it comes down to it, you’re splitting hairs somewhat to notice the difference between them,” Schwam said. “So we’ve really been making an effort to work on new product and develop our pipeline in a way that it would have some bikes that are more highly differentiable.”
Saxon hopes to show off one of those new products at this year’s V-Twin Expo. It did something similar last year — in unveiling a bike with a different look — with its Mad Jack, a motorcycle with plenty of retro-style features. The Mad Jack, which the company is seeking to get into production, was meant to appeal to a younger buyer.
“Obviously we need to go after customers that aren’t being captured right now in the production custom market,” Schwam said.
Going after the younger demographic can be problematic, however, as they are less apt to have the necessary income or have enough of a credit history to warrant the necessary financing. Does this mean Saxon, which offers bikes in the mid-$20,000 range and up, must lower its price point?
“It’s absolutely on our road map, but there are more questions there,” Schwam said. “The companies that have been able to offer bikes much less expensively that are production custom companies using American-made components are giving up something. Whether it’s dealer support or customer service or warranty or things like that, you have to pay for it somewhere.”
But backing off service or support isn’t something Schwam thinks is in the best interest of the brand.
“There are just certain limitations around the price points we can get to if we’re going to deliver the level of service we have in the past,” he said. “However, we are looking at a variety of options and companies we can partner with to do what we do best while leveraging their strengths to help us put a less expensive bike on the market.”
Besides eyeing price points, Saxon also will be looking at dealer training in 2008. The company previously has developed toolkits to help dealer profitability. This year, Schwam said the company is looking at other ways to provide training, whether it’s for F&I, service department or other potential profit-making centers.
“We’re going to make a concerted effort to do that,” he said of dealership training, which the company is finalizing for the upcoming year.
For 2007, Saxon will be off approximately 10 percent-12 percent in volume, a number that is likely better than most custom manufacturers. The company’s ability to remain close to the production level of 400 bikes annually is a testament in part to their ability to create markets outside the United States.
“Over a year ago we saw a downturn coming in the domestic market,” Schwam said. “As a result of that, we made some significant moves to boost our presence and develop distribution internationally and that’s now starting to pay off. We’re in a very strong position to allow our business to sustain itself and potentially grow where it was in past years with our domestic business alone.”
— Neil Pascale

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