American Motorcycle Dealer AMD 236 March 2019 | Page 18

instructor for SCCA for both open
wheel and production classes.”
Charvat has been a motorcycle rider
from a very early age. “When I was very
young, my Dad got hold of a mini bike
frame and I watched as he put a 50 cc
engine into it, and with very little else
by way of brakes or anything, that
became my first bike. I learned to ride,
and more importantly how not to
crash, and then my first bought bike
was a Yamaha 80 cc dirt bike.
“I progressed up through 125 and 250
and then in the mid ‘80s [Charvat is 53
years old] I started road racing with a
RZ 350 two stroke and loved that. Then
I progressed to motorsports and I’m
still a weekend racer whenever I can
find the time.”
Asked for his assessment of the
challenge he was taking on when
accepting the MAG job, he said he’d
done his research thoroughly. Being no
stranger to how private equity
generally operates he said that “the
Lacy (LDI) acquisition from Leonard
Green and Partners was fairly typical
of its kind. The company had been
leveraged with debt at the time of the
deal, but through the filing they were
able to wipe the balance sheet clean.
The new owners have been very
mindful to make sure history doesn’t
repeat itself and that, on emergence
from the filing, the business hasn’t
been overburdened with debt again.
“So that is positive. But then you have
to look at the reasons why the
business failed. Yes, you had the
overall downturn, but coming out of
the downturn motorcycle sales have
continued to be mostly flat to down
“people
buy from
people”
ever since. Our consumers have still
not, really, completely started to open
up their wallets and spend on helmets,
apparel, hard parts and accessories
again like they did.
“I don’t think anybody can look to the
market to start doing them any favors.
We are not going to be seeing any
unbelievable rebound with people
starting to buy new motorcycles like
crazy again, tomorrow. Now, with that
said people are buying motorcycles,
but they are buying used - so that is a
dynamic that suggests that the future
for businesses like MAG, like Tucker, is
brighter than might otherwise be
thought.
“But in that context, you look at what
puts a business like MAG and Tucker,
with that potential, into bankruptcy,
18
and you have to say that some pretty
poor decisions had been made.”
Charvat’s remarks when we met him,
and his open, transparent and honest
appraisal of the history he’s inherited,
and the challenges the group faces
(self-inflicted and otherwise), came as
a breath of fresh air.
“I don’t know any of the prior owners
or managers so I’m not talking about
the individuals concerned as I did not
meet any of them, I do not know them,
but decisions were taken without any
consideration or understanding of
what the collateral damage could be.
“For example, you take a business like
MAG, with some legendary brands like
Vance & Hines, Performance Machine,
Kuryakyn and the other business units
MAG owned, and you look at
combining them, and with a powerful
distribution business like Tucker into
what you could call ‘vertical
integration,’ and that looks to have a
certain logic.
“In a conference room, on a white
board, that may well look like it made
a lot of sense, but while you have a lot
of very bright people working in
private equity, very few of them are
what you’d call experienced as
individual business operators.
Interestingly, Charvat sees more to the
subsequent issues than a simple
matter of ongoing market decline. “I’m
sure that when the decisions were
made, on an income forecast level they
may well have thought that this is
what the future may well look like. But
what they didn’t appreciate were the
nuances of the distribution industry. At
the end of the day people buy from
AMERICAN MOTORCYCLE DEALER - MARCH 2019
people. While you have dealers who
see Tucker as a great supplier and
partner, you also had those who
weren’t buying from Tucker. This
‘vertical’ concept allowed dealers to
start seeing Tucker as a competitor.
“The moment you mandate that you
can no longer buy a particular product
direct or through an alternate
distributor of choice, but have to buy it
from Tucker, that just incenses them. So
they decide to go and buy an alternate
product, or from another supplier, and
you chase that business away, all
because you were trying to chase this
‘vertical’.
understanding. An understanding of
how those products are taken to
market, and what their appeal is to the
various corners of the market, was
completely missed. The questions were
never asked or, if information was
volunteered, people were just not
necessarily heard.”
Good point, well made. Anybody who
has been witnessing the
hemorrhaging of talent of the past few
years will be aware that there has been
a great deal of messenger blaming for
what turned out to have been valid
and even prescient messages.
“So, when I looked at all that, and you
“the new owners have
been mindful to make sure
history doesn’t repeat”
Was it simple naivety or worse? “Some
of the decisions that were made to try
and force this ‘vertical’ were inherently
flawed, or at least somewhat short-
sighted. Combined with that, some
decisions that were made on the
manufacturing side to try to pull some
business footprints together, just
weren’t ever going to work either. Yes,
you’re bending and cutting metal, but
they were and are completely distinct
products.
So, was it a failure of trying to drive
manufacturing by ‘spreadsheet’?
“I think there was a lack of
come back to where we are now,
today, the opportunity that we now
have is look very carefully and
selectively at what we can do to
unwind some of the decisions that
were made in a way that allows us to
restore some of the relationships,
maybe outside of Tucker, with other
customers.
“But that maybe also allows us to go
back and ask how do you leverage the
relationships you restore with these
dealers. We really have walked away
from servicing some of them, either
through not having the inventory, or
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