The news that German adventure tour specialist Touratech had to file for bankruptcy protection in August sent shockwaves around the European parts and accessory market.
However, it has emerged that the Black Forest-based specialist has mostly been a victim of its own success and of the kind of expansion and new building issues, especially software traumas, that can be hiding around the corner for any successful enterprise.
In speaking with founder and Adventure Tour visionary Herbert Schwarz at EICMA he confirmed the stories that had been appearing on the internet about the reasons they ran out of money and the really still very positive prospects for the business moving forward.
Schwarz started the business in 1990 at a time when the Adventure Touring sector was an unheard of niche within a niche. Fast forward to 2017 and it is responsible for 20 percent of new model sales in Germany and is one of the fastest growing motorcycle industry sectors worldwide.
“It turns out we were right, and just look how far the market has come. Our growth has always been carefully managed, and I have to say that even following the banking crisis in 2008 we continued to grow. Space had long been an issue for us and having not been able to buy the land adjacent to our existing building we broke ground on a new site 400 m away from the old building in late 2015. The warehouse itself went up very quickly, the fabric of the construction was completed by July 2016 and the logistics and software issues we encountered as we commissioned the building really set us back.”
The new space is an 8,000 sq m warehouse, logistics, product planning and offices complex with a 1,000 sq m retail shop on a 20,000 sq m site. The next step was then to move and consolidate manufacturing into space made available in the old building shop space, and that is when the problems really escalated.
“We bought new machinery, such as laser cutters and automated welders and encountered massive production software issues. It meant production slowed up, inventory ran down and sales followed on a downward cycle, down 25 to 30 percent by this summer.
“Rather than making sales, our sales people were having to explain why we couldn’t fulfill orders and we had to tell our OE customers, BMW, KTM and Ducati, that we couldn’t keep up with their supply schedules. It was a really bad position to be in.
“Inevitably, the inability to make enough product soon enough resulted in us running out of money, and the August filing was the only way for us to protect the business, our employees and our customers.”
Asked about the employees Schwarz said “we haven’t had to lay anyone off as a result of the bankruptcy. Some people have left through the natural course of things and from around 380 people we are now at 360, but the restructuring plan that the insolvency specialists have implemented will see that grow back towards 400 quite quickly in 2018.”
In terms of the capital injections needed to continue trading and resolve the issues, especially the production software problems, Schwarz says that “we have now been in a position to be able to build production back up again during the insolvency process and once a deal is done for new capital and ownership the company will be able to start meeting new orders again.”
Schwarz says that the interest in investing in or acquiring Touratech was massive. “We very quickly had some 150 or so expressions of interest from investors. That was reduced to 40 serious candidates, and that in turn was down to about 10 bidders as we headed for EICMA.”
By the end of the show it was expected to reduce this further to a short list of five offers, and with due diligence underway he expects the process to be concluded by the end of the year.
“I think it is quite certain that the details will be finalised by the end of December and that Touratech will be able to exit the insolvency process and start to grow again by the start of 2018.”
Asked about the company’s OE contracts, in terms of how robust the backing from them was Schwarz said: “They have all been very supportive and will stay with us. Our aftermarket distributors have also been very positive, pledging in the region 50 m euro of orders over the next three years.”
www.touratech.com
