At the Tucker Dealer Expo at Fort Worth, Texas, in late January, IDN sat down with new Motorsport Aftermarket Group (MAG) CEO Hugh Charvat and found a man at ease with the challenges and opportunities he faces; a man determined to take the first steps on a road that should see MAG successfully draw a line under its recent past...
The owner of Tucker Powersports (until 2018 known as Tucker Rocky) and a slew of leading aftermarket brands such as Vance & Hines, Performance Machine, Kuryakyn, Answer, ProTaper and, until recently, Renthal, MAG (Motorsport Aftermarket Group) has had a rocky decade.
Hit hard by the global economic downturn and the decline in the domestic U.S. powersports industry that continues to this day. As was widely reported at the time, the merger of MAG with Tucker in 2014 was eventually followed by a bankruptcy protection filing and subsequent change of ownership some 18 months ago.
The new CEO (appointed in October 2018) is Hugh Charvat, someone who brings a rare combination to one of the market's hottest of hot seats - a blue chip resume of relevant business experience and a genuine passion and enthusiasm for powersports and motorsports of all kinds.
"people buy from people"
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 [2014] 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 [September 2017] they were able to wipe the balance sheet clean. The new owners [a consortium of three equity investors headed up by New York based Monomoy Capital Partners] 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.
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| New MAG CEO Hugh Charvat: "What they didn't appreciate were the nuances of the distribution industry" |
"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 [in the United States] 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 favours. 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, 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.
"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.
"the importance of relationships has been underestimated"
"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 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'.
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| Greg Blackwell, Senior VP Sales & Marketing at Tucker Powersports: "We need to make Tucker the 'good guys' again" |
"Some of the decisions that were made to try and force this 'vertical' were inherently flawed, and 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.
"I think there was a lack of 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. 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.
"Key to this will be building up the team, adding established market knowledge and understanding. In the past 90 days we've already brought in the likes of Greg Blackwell, a well known and respected industry veteran, and we've brought back John Potts, who was very well known on the Vance & Hines and Performance Machine side of the business. We've also just announced well received further appointments at Tucker, and taken with other hires such as Greg Heichelbech at Kuryakyn and Mustang, the team already looks very different to the one the business had a year ago. I think this speaks well to the start we have made, to our preparedness to make the necessary changes and our determination to meet the challenges."
"they've had a blurry windshield for too long"
"We will need to approach each of the issues we are faced with, each of the challenges and each of the prior decisions on an individual basis, on their specific merits. Since those decisions were made, the market itself, the retail environment, has continued to evolve, and we have to be realistic and cognisant of that, as all distributors and businesses have to be. But for sure there can and will be changes and better ways of building better relationships. Where that involves unwinding prior decisions, we'll do that if there is a better outcome available.
"Our path to market, our channel strategies, need to be based on what is best for all concerned, including the end consumer. But Tucker is not going to be selling on Amazon, for example, and we are going to be as rigorous as possible in enforcing a MAP policy. If a dealer insists on buying brand direct and wants to have an online business of their own, then fine, but they are going to have to play by the same rules that the big boys do.
"Above all, Tucker has to focus on doing what is essentially a simple task, and doing it well. Tucker is in the box moving business. While there is subtlety and nuance surrounding doing that well, we have to recognise the reality that dealers no longer run deep inventory and look to their distributor of choice to absolve them from the need to do so.
"The secret sauce, if there is one, is how do you help your dealers to be as successful as they can be in an evolving marketplace. If we can figure out that recipe, if we can help them to want to do business with us, and to be able to do business with us, then that is how we earn their business, respect and loyalty. Our job is to make sure our dealers want to buy from us rather than another guy by simply being a better partner. That is the secret ingredient, but the objective itself is actually pretty simple.
Charvat's focus on team rebuilding found dramatic expression when it was announced that industry veteran Greg Blackwell had joined Tucker as the new Senior VP of Sales and Marketing. The general industry reaction was that this was a powerful signal of intent.
Blackwell's first significant role in the powersports industry was as President of Metzeler Pirelli in North America, a role he held for nine years. He then spent 14 years at LeMans (Parts Unlimited and Drag Specialties, Moose, Thor MX and ICON), initially as a pioneer of the Brand Manager role, and then for many years as VP Sales and Marketing.
Blackwell's twin passions are motorcycles and bicycles, and after LeMans he managed to scratch an itch to return to his native California working for the Dutch Accell Group, one of the world's leading bicycle, parts and accessories distributors.
He followed that by running PG&A for KTM North America, then got a call from Motovan, Canada, owners Mike and James Paladino. They had completed buying MTA Distributing from Larry Popp and wanted Blackwell to head up the headquarters operations they were transferring from Louisiana to California.
After three years as President at MTA there was another call, and that one has seen him now faced with what will be one of the biggest challenges of his life - to make Tucker an effective competitor for the market leading distributor he did so much to build into the powerhouse it became on his watch.
"make Tucker the 'good guys' again"
"From a personal point of view, my own dealings with Tucker Rocky, as it was, go way back to the days when I was the 'Metzeler' guy in the industry, to the days of Joe Piazza and Bob Nickel. TR was one of 15 distributors we had as Metzeler Pirelli, and I still have a lot of friends here from those days, people I used to go out on the road with and who are still here at Tucker, who bleed Tucker.
"I look at what they've been through, and I think that their still being here represents a true passion for and commitment to their company. For Blackwell too it is all about relationships. "We have to rekindle our relationships with our vendors, our dealers and our sales teams. We have a lot of really smart people who are passionate and who want to be able to love their company again.
"I believe they have been in a state of turmoil with the changes that have gone on for the past few years. We just need to help them to do their jobs and use the experience they have.
"The people here at Tucker have had a blurry windshield for the past few years. Coming into the company, the one thing that has been clear is that something needs to change - the company failed after all. Part of that change is bringing in new people - people with the knowledge and experience needed for this marketplace; people who can make the changes and reorganise the company for the future, and do so in the ways needed to get it back to be a sales organisation.
"We have to recognise and understand what has gone on before, but we also need to move on. We are a new company now, and we are already in a better position than we were a year ago, especially in terms of inventory, and the new ownership understands just how important that is.
"We need to look at everything we are doing, and how we do it, and change the way we are doing business. We need to identify what's good and improve it still further, but we also need to see the mistakes that were made for what they were and change direction.
"We are in a difficult market and have very good competitors. If we are going to achieve the growth we think we can create, we have to realise that there's only one place that growth can come from at this time, and that is from our competitors. We simply have to be better than them.
"Tucker used to be a worthy competitor, I know this, as it was my competitor. So, my goal here? To make Tucker a worthy competitor again - we need to make Tucker the 'good guys' again".
