At the end of May 1990, after six months of trial-by-error engineering of its reassembly techniques plus one month of line production, the average time devoted to each vehicle still was 773 man-hours. That factor must be lowered to 161 simply to break even. Then, presuming that can be achieved and held, ADC will have to steer around a number of other potholes, some as yet unseen, to maintain even moderate levels of income.
Here is a selection:
* * *
* Will the supply of car bodies dry up? It's not likely. Muscle cars were manufactured by the millions, and even if the lion's share lie rusting in junkyards, ADC needs but a minuscule percentage. If one model becomes too expensive or scarce -- as Bel Air convertibles have -- production can switch to still-plentiful types such as Chevelles, Gran Sports, or 'Cudas. The rule is that a dealer wanting delivery has to take whatever is going through the factory, which depends on whatever ADC's buyers happen to have acquired.
Rather than rely on just-in-time purchasing and the willingness of owners to part with their suddenly coveted heaps, ADC could stock up on vintage machines. But if they're stored outside, Seasonwein frets, they may be vandalized; if kept inside, they'd occupy valuable cubic footage. And hoarding a meaningful number would tie up serious cash. Besides, he says, "accountants attribute overhead to cars that are in inventory, and it drives your inventory costs up."
* Will replacement parts be hard to find? Possibly. So far, so good, though. Even after 20 years body parts such as fenders remain available off the shelf, because such replacements were produced in the same large quantity as the dented cars they're sculpted to fit. And if a part is not in stock, some original equipment manufacturer likely has tooling to stamp out an order.
As for elusive trim pieces such as tail-fin bezels or hood ornaments, the worst that can happen, foresees Bianco, is that the company will have to make its own. Far from being distressed, he views such a lack as a growth opportunity. "Think of a subsidiary called American DreamCar Parts!" the entrepreneur muses. One of ADC's suppliers, Year One Inc., of Tucker, Ga. (#308 on the 1988 INC. 500), sold more than $8 million worth of muscle-car accoutrements in 1989 alone.
* Will working capital run out? Unlikely, as long as there are car fanatics -- or bargain hunters. To sweeten the first round, each investor was offered an American DreamCar for $1,000. Bianco's intention was to use the first $1.75 million to stay in business long enough to get product flowing. After 18 months or so the plan was to raise more through a public offering. In July 1989, however, some cash came from an unlikely source. Bianco was approached by a public corporation with $600,000 lying idle in its treasury. Through a reverse merger, the shell, an entity called Access Capital, in Bethesda, acquired an interest in ADC, after which the corporate name was changed to DreamCar Holdings Inc. Its only holding is American DreamCar. In exchange for about 18% of the original company, ADC gained both an easy chunk of second-round capital and a public market.
Even so, the aggregate $2.35 million threatened to approach zero well before the operation could become self-sustaining. In March 1990, therefore, a second private placement for up to $1.25 million more in working capital got under way. With virtually no debt (as of April 30, 1990), ADC could look to the public for a flotation; its NASDAQ symbol is DCAR. However, this past summer its 52 million common shares, not to mention an overhang of warrants, were trading for around 50 each, at which price the stock market valued the company at more than $26 million. Talk about American dreaming.
* Will the concept be rejected by retailers? Quite the opposite. One attraction of taking on the ADC line is that a dealer can enjoy a markup of 25%. Compare that with the recent estimate from the National Automobile Dealers Association, which brooded that between 1990 and 1997 new-car dealers will realize an average 0.4% return on sales.
In fact, scores of would-be ADC dealers have been held at bay ever since three prototypes -- a '67 GTO, a '57 Bel Air, and a '69 Mustang -- were unveiled at a trade show in Las Vegas last February. Instead of the handful of queries ADC expected, 160 dealers showed interest, says de facto sales manager Cline, some begging to buy the show cars on the spot, despite Big Three prohibitions against their franchisees' carrying off-brand lines. Overnight ADC's problem became not one of representation but of supply: how can you sign up dealers if you have nothing for them to deal?
As of June, 9 dealers had already been enlisted of the 15 or so ADC intends to end up with nationwide in its first phase. Each was a new-car dealership, an ADC criterion. One, Dream Cars of Connecticut Inc., was established in Milford specifically to handle ADC products. Its reasoning, as expounded by owner George DeLauri, "I decided this was a good market area. Fairfield County is one of the richest in the country, and there's a return to nostalgia here -- '60s restaurants, old-car clubs, and so on. I had been thinking of putting something together ourselves to sell restored cars like these, but after I saw American DreamCar in Las Vegas, I realized I couldn't do it for the same dollars. And I wouldn't have the quality or the backing of their warranty."
* Will demand fall short? You don't need to sell many cars to make money. Bianco's importing company was moving only about 250 a year to the United States before GM bought it, for example. Even if those cars happened to be exotic Lotuses from England, which went for considerably more than domestics, the principle is the same: low volume, big margin. "They'll be popular," DeLauri predicts, "but not as popular as 10 a month." Dream Cars of Connecticut will be content to sell 4 a month, he says.
* Is the price too low or too high? Your guess is as good as theirs. Seasonwein discusses how prices were determined: "To make it more like a new car than a used car, it was important to standardize the retail price. Real car manufacturers determine where they want their car to be in the marketplace and work backward from there; they have to shave costs off the car if it's too expensive to make a profit. We went at it the other way. We knew approximately the acquisition cost of a core car and what it would cost to buy parts. We thought we knew -- and didn't, but have figured it out since -- how long it would take to tear one of these cars apart and put it back together. From that, we ballparked what it would cost to add the parts and shove it out the door."
