If you’ve assigned Chris-Craft boats and Indian motorcycles to the business boneyard, this may startle you: both are alive and well in Kings Mountain.
These iconic brands are the latest resurrection projects of Englishman Stephen Julius and American Stephen Heese, friends since they met at Harvard Business School in the late 1980s.
Through Stellican Limited, a London-based private equity firm, Julius and Heese have bought both Chris-Craft and Indian Motorcycle; lock, stock and barrel—as well as brand. In doing so, they are adding new chapters to significant success stories.
Choosing the Charlotte Region
Chris-Craft was founded in the 1870s in the Detroit area and over the course of the following century became famous for its mahogany hulled powerboats. Indian Motorcycles was established in the early 1900s in Springfield, Mass., and at one time sold nearly as many motorcycles as its major rival, Harley-Davidson. By the early 2000s, both companies had fallen on hard times succumbing to bankruptcy, which is where Julius and Heese as partners in Stellican Limited got involved.
“We have a passion for the brands,” says Julius, chairman and founding partner of Stellican, which has specialized since 1991 in buying and rehabilitating distressed
companies, almost all with heritage brands, mainly in the recreational products area. Julius, who lives in London and commutes to the United States, is also chairman of Chris-Craft and Indian Motorcycle. Heese, who splits his time between Florida and North Carolina, is president of both.
“We were surprised that great brands could be mismanaged this way,” Julius says of the boat and motorcycle firms. “Reviving such firms isn’t complicated,” he adds, “It’s just understanding the heritage of the brand and determining what kind of product needs to be made to reflect the attributes.”
Today, each brand’s future seems bright, from a decidedly Tar Heel perspective. Based in Sarasota, Fla., Chris-Craft is manufacturing mostly new model boats in its Kings Mountain, N.C., headquarters facility. Nearby, Indian Motorcycle continues re-engineering engines and other components, readying for the anticipated start of production in 2008.
Julius and Heese scouted more than 300 sites in seven states for existing buildings and a work force suitable for building
“Chris-Craft is a high-end boat and it requires craft-oriented workers,” says Robin Spinks of Wrightsville Beach, N.C., president of Greenfield Development Company, which helps find operating sites. “Julius and Heese were impressed with the skilled work force in the greater Charlotte region,” Spinks adds, “a great percentage of which is made up of former furniture and textile employees.”
For Indian Motorcycle, Julius and Heese cast a national net, but eventually were lured by the auto industry resources in the greater Charlotte area. No other region could boast the car design presence of NASCAR combined with the furniture and textile craft worker availability, she says.
Commuting from London and Tampa, respectively, Julius and Heese also were attracted by the convenience of Charlotte-Douglas International Airport.
Julius and Heese say they are betting both Chris-Craft and Indian Motorcycle will succeed on a grand scale and that they are committed to them for the foreseeable future.
“In the past, I bought companies, revived them and sold them,” says Julius, whose previous successes have included the resurrection and eventual sale of the Italian firm that makes Riva motor yachts and Sarema S.p.A., Italy’s largest cash register company. Julius, whose mother is Italian, also bought from bankruptcy Vicenza Calcio S.p.A., a soccer club in the Italian Premier League.
Getting on Board
Julius and Heese have learned two stabilizing concepts.“One is that you can’t have more than a couple of businesses at any one time because they require so much heart, passion, soul and time,” Julius says. “And buying brands like this is very difficult. When you have the privilege of buying them, you probably want to hang on to them. They’re like gold mines.
The collaboration of Julius and Heese took a while to develop. At Harvard, they were drawn to each other by similar backgrounds. Both had been in Catholic boarding schools in England, Heese by way of Wisconsin and Florida.
After their 1988 Harvard graduation, they stayed in touch. “We became advisors to each other,” says Heese, who worked for an American construction products company for more than a decade in Far East stops such as Australia, Singapore and Hong Kong. His wife Amanda is Australian and they have and 11-year-old daughter and 8-year-old boy-girl twins.
Heese, who was living in England at the time and still spending 30 weeks a year away from home, felt his globe-trotting was stealing him too often from his family. So, in 2000, he resigned from the company and moved his family back to Tampa.
Meanwhile, Julius had just let go of the Riva boat company from the Stellican portfolio when he read in The Wall Street Journal that Outboard Marine Corporation, parent of Chris-Craft, was in bankruptcy and up for auction. He called his friend Heese, who readily agreed to drive an hour from his Tampa home to inspect the Sarasota Chris-Craft plant.
Soon after in December 2000, Heese and Julius bought Chris-Craft for $5 million, but that didn’t include the Chris-Craft trademark which, through a series of twisting transactions, had ended up with a string of television stations that were being sold to News Corporation, parent of Fox Broadcasting Company. The pair bought the trademark for another $5 million. Thus they came to own the company and the brand that had propelled former owner Harsen Smith to the cover of Time magazine as its 1959 Man of the Year, an accolade presented, the magazine said, for bringing boating to the American people.
When the dust all settled, Julius and Heese had inherited about 100 boats in the factory’s backyard and more than a few disgruntled employees. Yet, as the boating industry has shrunk in each of the last three years—victimized by rising interest rates, skyrocketing gasoline prices and ever more expensive insurance—Chris-Craft has thrived.
“We believe we’re beating the trend because we target a premium customer,” Heese says. “The buyer of our boat would be less affected by $3-a-gallon gas.”
The company makes outboards, stern-drives and inboards, from 20 feet to 40 feet long. Prices range from $35,000 to $650,000. “Five to six percent of our production goes into tenders for mega yachts,” Heese adds.
The firm expects to do $60 million in sales this year. It hit $54 million for 2006 and maxed out the Sarasota plant that employs 360.
That necessitated the purchase of the Kings Mountain facility, 220,000 square feet on 20 acres. Julian and Heese paid $5 million for the structure that was started for a fiber optic firm, then passed on to truck maker Freightliner, which completed it but never occupied it.
Chris-Craft moved in last year. The Kings Mountain work force will swell to 125 by year’s end. Chris-Craft makes about 800 boats a year and the run rate in Kings Mountain, which started at zero in March, will balloon to 300 a year by January 2008.
The company markets 13 models now and plans to introduce three new ones each year for the foreseeable future.
Chris-Craft projects it will double in size in the next five years.
“That’s on the back of additional models we’ll develop, as well as geographic expansion of our dealer network,” Heese says. Currently, the company has 75 dealers, a quarter of them overseas.
“We just started production of our new 26-foot center console fishing boat, a brand new model,” Heese adds. “The bulk of the new models will come here in Kings Mountain, just because of the beautiful physical capabilities and the availability of labor.”
Indeed, Stuart Gilbert, president of the Cleveland County Chamber of Commerce, remembers well the 3,200 resumes of workers “who had great skills” that the Chamber hand delivered to Julius and Heese to help win them over.
Wooing Chris-Craft and Indian Motorcycle was a team effort; Gilbert is quick to point out, crediting local, area and state officials from Cleveland Community College, the Charlotte Regional Partnership, and the N.C. Department of Commerce.
“If they asked us a question at 5:00 p.m., we had an answer by 10:00 a.m. the next day,” Gilbert says.
Before long, Heese says, North Carolina felt like home for the world-savvy pair. “We were on a trail to find a community where we wanted to live, with people we wanted to be around.”
Heese and his associates brought 10 or so experienced boat builders from Sarasota as trainers, and they found apt students. “The textile and furniture workers are terrific,” Heese confirms. “They’re willing to learn new things and they’re not be set in their ways. They’re everything we expected.”
Gearing Up for 2008
The pair will certainly be needing more skilled workers soon to build the 2008 model Indian Chief motorcycle. Julian and Heese bought Indian Motorcycle out of bankruptcy in 2003 for a price they don’t disclose. They paid $1 million for the 50,000-square-foot manufacturing building on 11 acres off Kings Mountain’s Battleground Road within a few miles of the Chris-Craft facility.
Currently, about 20 people, mainly engineers, are toiling toward producing that first bike that will sport a V-Twin engine, weigh about 800 pounds, and sell in the $20,000 range. It will compete against Harley-Davidson, BMW and custom models from names such as American Iron Horse and Big Dog.
“One of the reasons the prior owners went bankrupt was that the bike wouldn’t work properly,” Heese explains. “They had problems with the engines mainly. We’re coming out with a brand new engine.”
He’s excited about rebuilding the brand that he says claimed 45 percent of the American motorcycle market in the 1940s. “We get hundreds of e-mails a week from Indian fans cheering us on, asking questions, making comments and wondering when the next bike’s coming,” he says.
Like Chris-Craft, the Indian brand creates immensely positive feelings, Heese adds. “When you unite great products with a brand like that, it makes it much easier to win sales and grow the company,” he says.Still, there’s a reason reviving brands is an uncluttered field.
“Very few people do what we do,” Julius explains, “because what we do is not something that private equity firms or big public companies can do.”Reviving a brand takes a long time and requires hands-on involvement. “For Indian, we’ll probably see five years of investments before we even start to make any profit,” Julius says. “To really develop the company, it will take 15 years.”
Do other brands tempt Julius? He mentions MG, which he tried to buy two years ago, and Jaguar, which Ford Motor Company probably will sell to Chinese interests.
“There are always brands that are out there in our dreams,” Julius smiles. “I’ve got to say, though, we’ve already got two of the most lovely brands. They just ooze heritage and history.”