What do you think led to the bankruptcy?

[jinx44]

QUOTE (Wistech @ Apr 4 2010, 06:51 PM) <{POST_SNAPBACK}>

On a side note here are some funny stastistics they published
R@D costs Motorsports Bicycles
2000 4.7 mil 3.8mil
2001 3.7mil 2.9mil
2002 2.5mil 3.3mil

What do you think R&D costs for the motorsports division was in 98-99 upon initial design?

[kdeal]

I think one key ingredient here that is missing is the cost per unit bicycle vs motorsports. Plus what was the profit margin on each. If I am making 30% profit on the bicycles and next to nothing on the motorsports products, it doesn't matter how many motorcycle/quads you sell.

My take on the motorsports thing was that Cannondale way over ordered parts and supplies for the motorsports division with the thought process that they would be selling way more units then they actually did. So the costs were definitely higher in the motorsports division. They had an order for 5,000 ASSO piston kits on the loading dock when the factory closed. Considering they only sold about 6,000 quads and bikes total..... You do the math. They re-ordered enough piston kits to pretty much put a new piston in every motor they had already built!

In my honest opinion they over designed and under sold. The quad R&D money was very little because it was designed and on the production line within a 6 month time frame. This was after taking years to come up with the ultimate motorcycle. The designer of the quad is our very own 4strokemadman. Now he didn't have to design a motor and he was able to use some of the same design ideas, but this is still one heck of an accomplishment. What's funny is that they sold more than twice as many quads as they did motorcycles with a year less worth of sales. The strategy was definitely backwards.

[MX Quad Dad]

QUOTE (kdeal @ Apr 5 2010, 11:35 AM) <{POST_SNAPBACK}>

My take on the motorsports thing was that Cannondale way over ordered parts and supplies for the motorsports division with the thought process that they would be selling way more units then they actually did. So the costs were definitely higher in the motorsports division. They had an order for 5,000 ASSO piston kits on the loading dock when the factory closed. Considering they only sold about 6,000 quads and bikes total..... You do the math. They re-ordered enough piston kits to pretty much put a new piston in every motor they had already built!

The way I see it, if they sold $5mil in 01 and $22mil in 02. that is a increase of over 400%. 5000 kits may have been to many anyway but, most likely they have some delay from when they order and ASSO can manufacture and ship. also probubly a price differance on a larger order. and weren't they just starting to ship over seas?

[MX Quad Dad]

QUOTE (kdeal @ Apr 5 2010, 11:35 AM) <{POST_SNAPBACK}>

What's funny is that they sold more than twice as many quads as they did motorcycles with a year less worth of sales. The strategy was definitely backwards.

I've said that from the moment I heard they were designing a quad. They had no compitition for a sport 450 class quad at the time they came out with the bike. the 400ex had just came out about the time their bike was available. the raptor wasn't even out and it and the Banshee were open class quads anyways

[NRath]

My guess is that they tried to pin a bit of the losses on the bike side so they'd be able to find investors for the whole and continue the motorsports division. At one time, I read a report stating that bikes were carrying a 30% margin. I believe they were trying to save money by buying in bulk, but those large purchases weren't well managed and they ended up with huge amounts of inventory that would've been better used as working capital.
I would guess that sales didn't take off as expected and that really threw a wrench in things. And, we all know that warranty work was bleeding them dry.

[4strokemadman]

Don't forget the holy grail of accounting stealth: Capital Expenditures, such as equipment and tooling etc... Where is the cost of the building, eddy current dyno, crankcase tooling, plastic tooling, CMM machines, production line tooling, aging ovens, pallet machine to name a few. Don't forget about Cannondale europe another accounting black hole.

The reason the motorsports division was born was because bicycle sales were flat. This is why they tried to build wheelchairs before venturing into motorsports. It was all pressure from stockholders to continue growth.

[wistech]

So what happened to make bike sales so crappy ? My personal opinion has always been the marketing blunder of not building the quad and forgetting about the motorcycles. That one or 2 year wait could have made the difference in sales. the negative reviews of the bikes were the biggest nail.

[cannondale27]

Walmart is what happened to bike sales. Alot of the highend bike makers got bought by Chinese or whoever and sold cheap.

[4strokemadman]

It wasn't that bike sales were crappy, it was a maturing market. Mountain bikes injected a huge boost into the bicycle market. Cannondale as other bicycle retailers rode this wave for all it was worth. As this growth waned with the maturing mountain bike market sales started to flatten out.

The MX400 was released too early, plain and simple. It was honestly still in development. However, it is a delicate balance, when to shoot the engineer and start making production. So I could see Joe's point of view, but he pulled the trigger just a bit early. The saddest thing of all is that we had crested the hill and were making money on the quads in the last 4-6 months. Nobody had any idea that we would make an ATV when we started. That wasn't even on the drawing board until the motorcycle was recieved so badly.

The only thing honestly that I can say I would have changed is giving us another year before pulling the plug. After learning from all of our mistakes everything was really starting to come together in the last year.

[kdeal]

I was wondering when you were going to reply. My gut feeling is you are holding back on some of your thoughts out of respect for Joe. (Which I personally have no problem with by the way, there use to be this thing called loyalty!) I don't think the quad needed to be as technical as the motorcycle. So it took off like a ball of fire, since most quad riders are way different than competitive motorcycle riders. The rework of the motorcycle platform after one year must of cost a crap load of money as well.

To be honest with you guys, I don't care what went wrong, how it went wrong, I am just sad it is still not up and running. That being said, why don't you do some research on how many motorsports companies still had a strong loyal following after 7 years of being off the market! I think it is impressive. I also think that the number of contribitors over the years has been quite impressive as well. Even the ones that we no longer mention and think they did us wrong gave us something (even if it was what not to do!). That being said, I want to personally extend a thanks to all of those guys and say thank you!

Yes you are a big part Mr. Laska!