Mar. 9, 2009 – Refocusing on its core business
March 10, 2009
Filed under Features
By Neil Pascale
CINCINNATI — The huge downturn in the custom side of the V-twin motorcycle business has caused one of the market’s biggest players, S&S Cycle, to refocus on its parts and accessory business.
George Smith, S&S Cycle’s CEO and president of the family business’ board of directors, discussed that change with Powersports Business as well as the company’s entry into the off-road parts and accessory markets and enhanced metric offerings at the V-Twin Expo in Cincinnati.
The new pursuits are a result of the custom V-twin industry’s rapid decline during the past few years. Officials with some of the largest custom OEMs have said the market has declined from 10,000 new units a year earlier this decade to less than a third of that today.
“That has caused us to end up losing probably half or more of our business,” Smith said of S&S Cycle, which has served as the engine supplier to many of the larger custom production builders.
“Our focus is twofold,” Smith said. “The first is to downsize so we reduce our operating expenses appropriately so that our cash flow and our profitability is not in jeopardy. That’s a significant undertaking.”
The LaCrosse, Wis., manufacturer announced layoffs last summer as it cut 60 positions.
“The second thing is how do we take this challenge and turn it into an opportunity?” Smith said. “That means we’re going back to basics, our core business. A long time ago our core business was bolt-on parts, internal engine parts and in general, parts that somebody might use to take an existing bike and make it better.”
The company is now devoting more attention to that business, something that was difficult to do in the past with the heightened custom V-twin engine demand.
“We didn’t pay quite as much attention to our traditional core, go-fast parts,” Smith said, noting the tremendous resources that went into the engine-building part of the business. “Our catalog has gotten pretty thick and voluminous and maybe not as user-friendly as it should be. We have not focused on the replacement parts business. A lot of our parts are interchangeable with stock parts and our quality level is certainly as good if not better.”
As part of this refocusing, Smith says the company is ensuring it makes itself more available to dealers and consumers so each group receives responses in a quicker timeframe.
Smith also believes a change in marketing will be key as the company hopes to increase its brand recognition with Harley-Davidson riders, especially the ones just entering the sport.
“The demographics of the people making that purchase don’t necessarily know who we are,” he said.
Besides refocusing on the replacement parts business and aligning expenses to its current business, S&S Cycle also is looking at new profit streams. The company has introduced high-performance kits for the RZR, Polaris’ side-by-side, as well as offering metric motorcycle parts and accessories.
Seeing the trend in consumers fixing up their older bikes rather than buying new ones, S&S Cycle is offering more vintage engines and parts under Flathead Power, a brand that was acquired last year. S&S Cycle also showed off a limited-edition Flathead bike at the V-Twin Expo that it will build this year.
“If people are going to fix and repair, and there’s diehards out there that like the old stuff, it’s almost a no-brainer,” Smith said of the company’s interest in the vintage market.
Smith says the company’s efforts at finding new profit streams also means potentially going outside of the industry. Smith believes the company has all the ingredients to successfully bring in some of the $20 billion-$40 billion worth of high-quality machining and fabricating that he says is done annually in the upper Midwest.
Smith, who took over as CEO of S&S Cycle when his son Brett left last year, says not only is the company seeking new business opportunities, but also new management ideas. He says the company has brought in outside consultants to bring some fresh perspective.
“It isn’t that we don’t have the brainpower to do it ourselves, it’s just when I want to take a look at a tough decision, I like to make sure that we don’t miss anything,” Smith said. “And that’s what we’re doing.”