ADC first thought it could sell its cars at $12,000 to $18,000 -- a good price since that was less than half what their collector-car counterparts were fetching at auction. Another lesson the learning curve demonstrated was that no profit could be made at those levels. Suggested retail was cautiously jacked up. "We've purposely been going slow, because I don't want to put us in a position where we price ourselves too high and have to give rebates," says Seasonwein. "The day we give rebates is the day I'm out of here."
Another of Seasonwein's realizations was that "when you strip down the body to bare sheet metal, that's the moment of truth; you have to live with what you get." Sometimes you have to live with patches of plastic putty where metal used to be. One reason for raising prices is that ADC now pays more for higher-quality core vehicles than planned.
* If it flies, will there be competitors? Without doubt. There's no secret to selling these cars, Cline grants. But there is a secret to modifying them efficiently. So secret that when ADC brings dealers to Cleveland, visitors aren't allowed to take pictures.
* Will it take time for economies of scale to be realized? Maybe. Even in the tiny universe of the six or seven different models that ADC focuses on at a time, it has already established sources for thousands of replacement parts. Although ADC is a national account with a few OEMs, such as its engine remanufacturer, it has been seeking more. But at only 240 to 400 cars a year, qualifying for discounts and favorable payment terms isn't yet a given.
* Will needed expansion be too expensive? Probably not. ADC is looking for a 50,000-to 75,000-square-foot building with acreage to expand into and has already contacted the mayor's office and the Greater Cleveland Development Corp. in search of it. "They like what we do and where we do it," says Seasonwein, who intends to set up an industrial revenue bond in an enterprise zone around Cleveland, thus qualifying for tax abatement and public funding.
* Can the business be run from 600 miles away? We'll see. It's inefficient, but it keeps the CEO happy. Why doesn't Seasonwein leave Bethesda for Cleveland? "Because I like it here," he says with resolve.
What a strange and powerful force is nostalgia: older and older stuff changes hands at higher and higher prices, and buyers never run out, it seems. Indeed, the Americana market has shown little sign of fizzling, neither in autos nor in baseball cards, carousels, Coke, comics, and on down the alphabet of coveted native memorabilia.
Bianco's revivals, however, aren't authentic nostalgia, adding another layer to the considerable challenges the company already faces. Like many other manufacturers, ADC must attend to such conventional details as finding adequate yet reasonably priced facilities to grow within, attracting and keeping skilled labor, and lowering labor costs to sustain the pricing levels it has committed to. It also has to solve some inherent problems such as establishing and transporting a steady stream of base components, standardizing disparate parts from hundreds of outside vendors, and tying into a dealer network ruled over by giant competitors.
It also must convince 1,200 consumers each year that its neither-fish-nor-fowl artifact is better than the real thing. If it can't, CEO Seasonwein may be in a position to offer you a nice '57 Bel Air Sports Coupe in good condition. Cheap.
* * *
EXECUTIVE SUMMARY
THE COMPANY
American DreamCar Inc., Bethesda, Md.
The Concept: Efficient and systematized reconditioning of classic American muscle cars, targeting the nostalgia market with an affordable product that yields high margins.
Projections: Break-even by October 1990 (end of second fiscal year) on sales of $474,000. Annual earnings of more than $900,000 on sales of 400 cars in fiscal 1992; earnings of $4.4 million on sales of 1,200 cars in 1994, yielding a pretax margin of 18.6%.
Hurdles: Are there enough buyers for $20,000 reconditioned cars? Can labor and raw-material costs be kept low enough to yield acceptable margins at projected price ponts?
THE FOUNDER
Joseph J. Bianco, Chairman
Age: 40
Source of idea: Fond reminiscences of Camaro from youth and a suspicion that many other drivers shared the nostalgia
Equity (held separately by wife): 26.2%
Workweek: 5 to 10 hours
Salary: $5,984
Education: Yale Law School, 1975
Outside directors: Yes
Other businesses started: British Performance Car Imports Inc., general partners with Lotus Performance Cars, 1982; sold 1986. Van Allen Capital, 1983; dissolved 1986. Fulcrum Capital, now called Whyte Lyon & Co., 1987. Sentex Sensing Technology Inc., 1983. Cognitive Systems (cofounder), 1981.
FINANCIALS
American DreamCar Inc. Projected Operating Statement
($ in thousands) 1992 1994
Units sold 400 1,200
Man-hours/car 152 127
Revenue
Average unit price $19.75 $19.75
Total Revenue 7,900 23,700
Cost of Revenue
Core-car and major components cost 5,031 14,674
Labor cost 886 2,215
Total Direct Expenses 5,917 16,889
Overhead* 1,082 2,380
Total Expenses 6,999 19,269
Profit 901 4,431
*Includes rent, utilities, telephone, accounting, legal, leases, insurance, travel, and marketing
WHAT THE EXPERTS SAY
COMPETITOR
ALAIN CLENET
Manufacturer and marketer of custom cars, 1975-82. Founded ASHA Corp., an automotive-development company in Santa Barbara, Calif., 1986
The venture has a lot of merit, and I completely agree with its point of view. The formula is not to make a collector car, but a nostalgia car. Nobody makes good money restoring cars. And buyers won't care if the car isn't absolutely authentic. They want the car they always wanted, and suddenly it's available with the reliability and comfort and service that collectors' cars do not have. But it's a hell of a lot to control, mostly because of the training. When I was in manufacturing, there were 360 parts vendors, and we had more than 4,200 parts numbers -- for one model alone! If I were in American DreamCar's shoes, I would stick with only three models: the Mustang, the Camaro, and the GTO. They were a reasonable size, and they're in plentiful supply.
