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Nov. 10, 2008 – S&S Cycle CEO cites family obligations as key to departure

November 10, 2008
Filed under Features

After leading V-twin engine manufacturer S&S Cycle for more than six years, heading the company’s development of a strong dealer network, focus on emission-compliant products and technology and large investments into dealer and technician training, Brett Smith surprised many by recently announcing his resignation from the company. Powersports Business interviewed Smith to find out his reasons for leaving, what impact his departure will have on the family-owned business and what, if any, plans he has for the future.
Powersports Business: Your resignation was unexpected to many in the industry. What prompted you to leave S&S?
Brett Smith: The main reason I decided to resign is that the pace that I maintained as president was quite rigorous, and it was having a negative impact on the time I was able to devote to my family. I traveled probably as much or more than anyone in the V-twin industry, my wife and I have four kids and in July we agreed to take on the responsibility of raising my nephew. We home school and are very actively involved in our community and church activities, and something had to give. And if I couldn’t give
100 percent to the company, I didn’t think that was fair. But at the same time my family wasn’t getting the attention they deserved, and that was a big part of my decision to leave.
The second reason I decided to step down is that there are varying desires and goals amongst the family groups that own this company, and they are not always in concert with each other. That played a significant role in my decision as well because it was difficult to gain a consensus on the direction we wanted this company to follow. I spoke to my father about it at length, talked to some of the board members about it, there seemed to be consensus that I should stay. So from a professional level it was a very difficult decision to leave, but on a personal level it was a really easy decision for me. I finally let the personal side carry the day, so to speak.
PSB: Is this something you’ve been considering for awhile, and how did you decide upon the timing of your resignation?
Smith: My wife Robin and I have been discussing it for some time. If you remember last year, there was news going around that I had applied for the White House Fellowship Program, and that was really my first step toward doing something different. After the company’s 50th anniversary celebration we knew we were going to have to make some staff cuts, and I really didn’t think it was appropriate for me to leave prior to those cuts being made. And at that time I had not made a final decision about leaving S&S.
PSB: Have you been involved in the selection process of your successor?
Smith: I believe that the board of directors is going to search for a long-term replacement for me, and that will take some time to conclude in my opinion. I am not going to be directly involved in that search. I am available to assist and offer any input if asked, but I felt that it was probably best for my father and the other second generation family members and outside directors to focus on that themselves. And I think they are moving forward with that process already quite aggressively.
PSB: What was your father’s reaction to your decision to resign?
Smith: He did not want me to leave and tried to talk me out of it. He suggested that I even consider taking less responsibility and staying on as the vice president of sales and marketing. I did consider doing that, but for me, as long as I was there it had to be an all-on or all-off type of situation. And I think it would have been awkward for me to take that position even if I was able to scale back my workload, because of having someone new come in and take over as president.
PSB: Do you have any specific plans for the near future? What about a return to the military?
Smith: I’m 37, so I’m at the stage where it’s pretty tough to rejuvenate a career in the military. Right now I’m looking at possibly purchasing a smaller business that I would run, and maybe even Robin would help me with that or something along those lines. I am entertaining some opportunities within the powersports industry but not necessarily the motorcycle side. And my faith is a pretty major component of what I do, and the time I’m taking now is really being spent on that and on the ministries that Robin and I have been involved in. It’s a possibility that I may transition and start a ministry as well. And right now the two things I’m really focused on is one opportunity in particular in the powersports industry and the possibility of taking on a ministry position.
PSB: How much of an adjustment is this change going to be for you and your family?
Smith: Taking on the ministry position in particular would be a major change for us and we’d have to figure out financially how we’d swing that. Because not too many people go from being a 37-year-old CEO of a multi-million dollar company to the faith ministry and have five kids who haven’t even started college yet. So my situation is unique there, but my wife and I have talked about this possibility many times. Both the jobs I’m looking at right now would take us away from the LaCrosse, Wis., area, but if I decide to buy a business that would keep us here.
PSB: Do you believe you’ve left S&S in a position for success in the long term?
Smith: I think that the platform that I helped guide us toward during my years at S&S is one we’ll be able to build from for many years. I think it really depends upon where the board and new leadership are going to take things. Whether they’re going to follow through with that strategic plan and philosophy, or if they’ll adopt a new strategy will dictate the company’s future success. My approach was no Internet sales, we wanted to really support the dealer network and clean up our distribution as well as we could. And that to me was critically important to our future. And if you look at the decisions that I made, nearly every one was related to supporting the dealer network. And when you’re in an environment when sales are down and you look at different ways to create revenue and potentially get more margin, it’s possible that some other person could look at that and conclude that if S&S sold over the Internet retail-direct, we could increase our revenue possibly and our gross margin. I don’t believe that the new team is necessarily planning on doing that, but if someone new did come and take that approach, it would be a variance from the approach I believe in. And these economic situations we’re facing now sometimes can cause people to make decisions based on the short term, and the problem with that is when you spend a lengthy period of time developing something like training and certification, those are things that require added expense. But all of those projects right now look a lot more costly because of the downturn in sales, and the question is do you eliminate those products and reverse course because of the sales situation? Or do you circle the wagons, defend your position and just get lean and make it through the storm. I think everyone knows where I stand on that issue, and where others might take the company is up to them. My father is on record as stating that he’s in favor of reinforcing and endorsing the strategic direction I’ve taken the company, so that comforts me.
PSB: What are some specifics that S&S will need to do to survive this economic downturn?
Smith: If it were me running S&S for the next several years, I would be operating on cash flow only. I would not necessarily focus on profitability because it’s very difficult to make a big profit in our aftermarket performance side of the powersports industry right now. You can do it if you scale down and change things, but I’ve always been geared toward the thinking of where do we need to be five years from now? And sometimes what you do today doesn’t necessarily make sense in the short term, but it does for success down the road. And maybe that’s the wrong approach, maybe I shouldn’t have been doing that. But I’m pretty confident that in order to survive in the powersports industry today as a designer/manufacturer and marketer of high-performance aftermarket parts, there are a few fundamental things you have to do. No. 1 is you have to take care of the dealers. No. 2, you’ve got to make products that are emissions compliant, whether it’s from an air or noise perspective. No. 3, you’ve got to make them affordable with superior customer service. If you use those three points as an outline, then look at the things we did while I was at S&S, it’s very easy to see how we were making our decisions. And I really don’t think that there’s anything happening in the market that should change that philosophy significantly.
PSB: Is there a scenario where you can envision yourself coming back to S&S?
Smith: That is not something I’ve put a lot of thought into. When I made the decision to resign, I made it under the auspices to never, ever come back. Does that mean that I won’t? The answer is no. There are circumstances where it might be necessary for me to come back, or where I might want to come back. But the current dynamics in place now would need to be resolved on my end, specifically concerning the clarity of the company where it pertains to the diversity of shareholders. And that could change in a number of ways. Everyone could come to agreement on a strategy, or there could be some ownership changes where some family groups buy out others. The business could even end up being sold. Although I don’t see that as a real strong possibility, it could happen. And if it did the new buyers might want to have me come back and get involved. But I feel good about the decision I made and I think that S&S is a fantastic company, and I’m honored and humbled to have been a part of it for as long as I was. I tried to do what I felt was in the best interest of the shareholders and my family members, the employees, our customers and the industry. And while there are some people out there who are critical of things that I’ve done or some of my methods, I think by and large there are a lot of people out there who respect what I did during my time at the company.

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