ACCOUNTING

The South Shall Ride Again

This motorcycle maker has a powerful vision for his company. And he's dragging his supporters along -- whether they like it or not.
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To get to Confederate Motorcycles Inc., you'd better know where you're going. Head north off I-12 onto Louisiana Route 59, which turns into a ribbon of blacktop cut through palmetto thickets and cypress swamps. At Abita Springs the road takes a hard turn, rattles over train tracks, and fades into a county road that runs past tin-roofed houses. Under the brooding presence of live oaks and Spanish moss, it's easy to miss the dirt road leading to the plant. There's no sign along the road, nor is there one on the bunker of a building swathed in midday heat.

Enter through a chairless lobby and proceed down a dank hallway -- stained carpet, scuffed walls -- to the factory floor. There, Confederate suddenly comes to life with a yammer and a hiss, the clang of metal being shaped by men whose grease- and nicotine-stained hands are both rough and knowing. Something unexpected catches the eye: a finished motorcycle, metal gleaming, redolent of new leather, its gas tank a flawless, heaven-sent silver.

At its best, a motorcycle can promise transcendence, and this bike whispers of that. A tag on the handlebars announces its next stop: Istanbul, Turkey.

How does a product built in an obscure factory deep in the bayou find a buyer in a place so far away? Such is the allure of a $30,000 hand-built motorcycle. A lot of people want this machine. But it's also a high-risk product, in sync with the nature of the business. The country is crowded with wanna-be motorcycle makers, but the market is dominated by a corporation so embedded in the national psyche that customers tattoo its logo all over their bodies.

Any start-up carries risk, and this one is no different. But that means little once you meet Confederate's founder. With the bullheadedness you'd expect from a former litigator, Mat Chambers insists on running his business his way -- right down to the contentious name on the gas tank -- no matter what his suppliers, his distributors, or even his customers think. And that only raises the ante on what is already a redline start-up.

The man
To hear Chambers tell it, it's a wonder that the world has survived without the Confederate motorcycle. "This needed to be done," he says. "The market has been crying out for a motorcycle with world-class chassis dynamics like this." Translation: it's a great bike.

Chambers, who bought his first motorcycle at age 13, describes himself as "one of those weirdos who was always searching. I was dying to find out what I was supposed to do with my life." The quest led him through stints in oil and gas exploration, trucking, and restaurants -- as well as commercial real estate, where he managed to lose $1 million on one bad deal. He even took his search to the people, running for the Louisiana state legislature in 1982. But they pointed him in another direction.

Somewhere along the way Chambers made it to law school and built a respectable Baton Rouge practice that was netting him a princely six-figure income. But the money didn't end his search. What would was something that would allow him to play at the top of his game. "I'm a classic mad scientist, a dreamer," Chambers says. "I didn't feel that what I was doing as a lawyer was groundbreaking and revolutionary."

Fate rescued Chambers 10 years ago, when he took on a personal-injury case. "My client was just a good old Louisiana boy who liked to drink a little beer and eat barbecue," Chambers recalls. In a dustup at a local bar one night, the bartender roughed up the good old boy and threw him into his pickup. While he was on his way home the police stopped him, roughed him up some more, and threw him into a jail cell. By dawn he was in bad shape -- paralyzed from his injuries.

Chambers took that story to a judge in 1990. The judge came back with an $8.8-million award, later reduced to $3 million. Chambers's contingency fee came to half a million. Finally he saw daylight. He sold out to his partner and three days later started Confederate, capitalized to the tune of $1 million.

Tim Hood, a Baton Rouge restaurateur, was one of the early investors who helped Chambers get Confederate off the ground. He remembers first meeting Chambers at a coffee shop across from his restaurant. "He was there with his sketches, plans, and dreams. I was kind of swept up by it all. He strikes a chord with people like me," Hood says.

In the early years Chambers and five employees worked in a 6,000-square-foot space in Baton Rouge, where, over four years and 200,000 miles, they developed prototypes. "We rode the bikes, took them apart, put them back together, and rode them some more," says Chambers. They spent an entire six months welding the first frame, ultimately creating a design that was patented with 20 claims.

A Confederate produces 30% more horsepower than a Harley-Davidson and weighs a third less. "It's incredible the way it puts the power to the ground," marvels Don Pfeffer, a Confederate customer who has raced motorcycles for 30 years. He bought his Confederate after one test ride and without even asking the price. (Confederates range from $24,000 to $31,000.) "For the performance and engineering you get, it's a steal. It's head and shoulders above the rest," says Pfeffer.

Confederate Motorcycles Inc. may have been born from passion, yet passion can burn away profit. Cham- bers created Confederate with no business plan or management team. The financing came largely out of his back pocket, and whenever money grew tight Chambers would sell a few bikes. "Mat's done everything backwards," says Ed Reardon, a stockbroker and consultant to the company.

And then, of course, there is the ornery issue of that name. Would Chambers ever reconsider it? "No, never," he replies unblinkingly. And that leaves one to wonder if the biggest risk factor for this company is inside the founder's head.

The market
The American motorcycle industry is as alluring as it is dangerous. Entrepreneurs routinely enter this "glamour" business, sure that they have the next great machine. But they really survive only by the grace of one dominant manufacturer: Harley-Davidson. Producing more than 200,000 units a year, Harley not only owns the market; it makes it.

Harley-Davidson aficionados annually spend half a billion dollars on Harley parts, accessories, and merchandise. In the past decade Harley has been so hot that customers have waited up to two years to take delivery on new motorcycles. That lag has spawned a market for Harley knockoffs, or "clones" built from commercially available Harley-Davidson aftermarket parts. The niche companies that make those motorcycles -- Titan, Big Dog, and American IronHorse, among others -- each typically produce no more than a few thousand units a year. They also struggle to stay afloat.

Chambers, of course, dismisses the clones as insignificant. "All these guys have built the wrong bike. There's no riding advantage, no chassis integrity. How can you build brand equity with that?" he asks.

As for Harley-Davidson, it's little better, the clumsy product of "Yankee engineering." Adds Chambers: "They are about marketing and distributing a product. We have built our company around the product itself. This is a Field of Dreams story."

In fact, you don't have to press Chambers too much to sense that Harley is part of a de facto conspiracy with roots in a certain hot-button historic event. "The Madison Avenue spin-based culture was codified for good after Lincoln's war," says Chambers. "The biggest brands in America -- Coke, McDonald's, Harley-Davidson -- are all fake. They're all just smoke and mirrors."

And yet, Chambers blows a little smoke of his own in touting his creation, which he labels "the real badass motorcycle." He also claims not to be a clone maker. But to the trade, a Confederate is just another clone because it uses the same "V-Twin" motor as Harley-Davidson and all its imitators.

Nonetheless, some observers say that Confederate has done a good job of distinguishing its bikes from the other clones. Reg Kittrelle is the executive editor of Thunder Press, a Scotts Valley, Calif., monthly that covers the Harley-Davidson and clone markets. He says, "A Confederate has an absolutely unique look to it, and with a field flooded with Harley wanna-bes it's refreshing to see a company go off in a different direction."

"Confederate is completely different from the other clone manufacturers in terms of cosmetics, handling, and build quality," echoes Frank Kaisler, editor of Hot Rod Bikes, a trade magazine based in Los Angeles.

And yet, the shadow always looms.

Kittrelle, calling Harley "a very shrewd manufacturer," says that the company recently introduced a proprietary new-generation motor. That means "all of a sudden, all the other bikes are seen to be using the 'old' technology," he says, adding that Confederate, with its "extreme" look and "brute" character, has a good niche position. "If they can hold that niche and manage the business, maybe they can make it," he says.

But it's easier to manage a business when you have money. Kaisler adds that Confederate desperately needs to spend money -- money it currently doesn't have -- on advertising to build brand awareness. And yet, how can it do that with such a loaded name?

Kittrelle views the Confederate label as a needless liability. So does David Edwards, editor-in-chief of Cycle World. He likes the machine. "It's very rough-hewn and organic," he says, but he's unsure of its creator. "He's definitely into the southern culture, and he gets esoteric on you real fast. This is definitely the kind of static this bike doesn't need."

And Edwards offers this practical note of caution: "Most people go broke trying to do what he's doing."

The rebel
A quick glance at the office of Mat Chambers, CEO, who calls himself "a real right-brain kind of guy," would suggest that money -- or at least keeping track of it -- doesn't matter much. His cluttered desk yields the respectable material that most CEOs on self-improvement jags favor -- books with titles like Integrity and Zen Leadership. But it's the stuff on the walls that really grabs you by the throat: an Audubon print of a hawk feasting on a duck, old pieces of Confederate money, and an old photo of an earlier southern "hero."

Every day, Chambers labors under the piercing gaze of Nathan Bedford Forrest, arguably the Confederacy's most brilliant tactician and fiercest fighter, and, depending on your point of view, somewhat of a terrorist. A millionaire plantation owner and slave trader, Forrest joined the Confederate army as a private in June 1861 and bulled his way up the ranks to general. Controversy dogged him as he fought with superiors and allegedly presided over the massacre of a black garrison. After the war, he lent his name to a fledgling organization soon to become the Ku Klux Klan, but later he disassociated himself from it.

Chambers does not share Forrest's views on race. He is attracted, rather, to Forrest's warrior spirit and seeming invincibility. Chambers likens the experience of riding a motorcycle to Forrest's riding into battle. It leaves the rider unprotected from the hazards of the road; it leaves him shielded only by the fervor that comes with true belief.

Chambers named one of his models, the NBF Hellcat, after Forrest, and it is the ghost of Forrest and his ilk that drives Chambers. Just as Chambers can wax poetic on the aesthetics of riding a Confederate, he can quickly digress to lectures on the so-called War of Northern Aggression, which in his view had little to do with race or slavery. "It was the last real conflict between those fighting on the side of individual empowerment and those advocating centralized power," says Chambers. "Everything else is spin."

It is that mind-set that informs not just Chambers's thinking but his sense of mission. He stands against what he sees as the hegemony of Yankee capitalism with "its lust for money," which, he believes, has for more than a century undermined the South's efforts to create a homegrown industrial base. Badass motorcycles like the Hellcat are simply Chambers's form of in-your-face payback. "I want the bike to represent a different North American culture that was never allowed to express itself mechanically," he says.

None of the metal parts on Confederate's bikes (outside of the engine) are cast. They are machined from solid aircraft-quality aluminum. The gas tanks, made from carbon fiber, are similarly crafted.

Into such distinctive features Chambers has sunk a lot of money that will be hard to recoup. Some call it engineering overkill. Kittrelle says such touches are "today's fad" and "engineering du jour," adding expense without necessarily enhancing performance.

It currently takes the company about 100 hours to build one motorcycle, during which about 50 of the company's 62 employees touch it. "There's a ton of waste out there," Chambers concedes, looking out on the factory floor, where at any time about 15 bikes are under construction. The waste is only compounded by Chambers's penchant for making design changes in the middle of a model year or for pulling bikes off the assembly line to add features at customers' requests.

But Chambers claims those inefficiencies will soon be in the past. Starting with the 2001 model year, the company will focus on building one stock model a month. (Confederate makes five different models.)

Still, the road ahead seems impossibly steep -- and Chambers's numbers impossibly rosy. This year the company produced 300 motorcycles and came close to breaking even. But Chambers intends to build 1,000 units in 2001. The year after that, he expects to make 2,500 units and a pretax profit of $25 million.

That seems a distant vision, given that Confederate continues to cycle through cash droughts. Only now is Chambers buying an inventory-and-accounting software program and hiring someone to manage it. "If I can't control my inventory, I can't control my cash flow," he acknowledges.

That lack of attention to detail raises the stakes because he is playing with other people's money. To date, Confederate has consumed about $12 million in invested capital, and Chambers, who once owned the entire company, now owns just a third. He has 30 fellow shareholders to contend with, and further dilution is in store as the company strains to close on a $5-million private placement. His interim chief financial officer is an investment banker, Ike LaRue. LaRue and Ed Reardon, Confederate's sales consultant, bring skeptical eyes to the business. Reardon allows that Chambers is a visionary but then says dismissively, "Mat didn't even know what the book-to-bill ratio was until I told him."

"Operations is not Mat's strength," echoes investor Tim Hood. He has ridden his Confederate from Baton Rouge to the factory for a look around. "When I walk through the kitchen, I can sense the level of efficiency," he says. You can tell by Hood's tone that what he senses here would not pass muster back in Baton Rouge.

Hood, like many around Chambers, is drawn to the paradox that Chambers personifies. "I kind of fell in love with the product," Hood admits. "Mat does recognize there are shortcomings in operations, and he always solicits my opinion. But sometimes he proceeds to do what he wants to do."

Confederate currently has no senior management, save Chambers, and its board has yet to be approved by the shareholders. Chambers has acknowledged that he needs a chief operating officer and has begun interviewing for one. One candidate, asked what he thought of the company, said he enjoyed speaking with Chambers but called him "a dreamer." Yet "the company can't afford to take shortcuts, and Mat knows that," he said. "When you start a small manufacturing company like this, you get only one chance."

A few weeks after the interview, Chambers, who had previously raved about that candidate, called him "lacking," adding, "He's never ridden a motorcycle."

The dealer
Chambers and LaRue are hot to take the company public in the next year, ostensibly to reward their workers but perhaps also to defuse investor impatience. Confederate, after all, is a manufacturing company that has yet to break even. What kind of respect can it expect from Wall Street?

Despite his contradictions, Chambers does have his champions. Don Atchison is one -- for now.

For much of his life Atchison -- who rode his first motorcycle at age four, when he was too short to reach the clutch pedal -- was in the thrall of speed. Then his best friend ran off the road and died while racing Atchison through a canyon in Arizona. "I figured I'd better slow down after that," says Atchison. "So I bought a Harley."

It might as well have been a Buick. "It weighed a ton and was hard to stop," Atchison recalls. That's when he found the Confederate. "It was a very raw, very purposeful, very artistic machine," he says. "I was beyond impressed."

In late 1997, Atchison traveled to Louisiana, where he and Chambers fell into feverish conversation. "I could see he was not in it for the bucks," says Atchison. "We never talked about cost of goods sold or price points. The words I kept hearing from him were 'simple,' 'organic,' 'uncompromised."

Atchison, a former executive, was stoked. He told Chambers that he wanted to distribute the Confederate and sell the bike as if it were sculpture. Chambers thought that was a cool idea.

In February, Atchison, 33, opened Iconoclast Motorcycles in downtown Denver. He has since sold 25 Confederates, making him the company's top dealer. "It's an awesome, awesome store," says Chuck Gilchrest, a sales rep for Vanson Leathers Inc., in Fall River, Mass., which sells racing apparel to Iconoclast.

Resembling an art gallery, Iconoclast carries such items as $2,500 "industrial" Swiss watches, quirky self-portraits by an eccentric Hungarian, and funky French leather couches that resemble oversized Air Jordans. And, of course, anchoring that artful array are Mat Chambers's gleaming creations. Steve Baker, a thoughtful Harley-riding customer in his mid-fifties, marvels at the Confederates on display. "They look outrageous to me, incredibly interesting," he says, unable to take his eyes off the bike before him. "I've never seen anything like it."

Atchison started the store with four maxxed-out credit cards, two personal loans, and a second mortgage. Chambers respects that and calls Atchison "my man in Denver" and "my best dealer."

And yet, Chambers has never been to Denver to see the store. "I keep begging Mat to come out, but he stays holed up in the factory," says an exasperated Atchison. "You gotta love the guy, but sometimes I could strangle him."

Atchison asserts that the ideal way to sell a hand-built high-end bike like the Confederate is through a handful of specialty stores like Iconoclast that accent its exclusivity. "Don's right," Chambers concurs.

Yet Chambers's former sales-and-distribution manager, John Kidd, was excited to sign up 30 or more dealers, even though most carried multiple lines and had scant passion for the Confederate product. "I don't have any problem putting our bike on the floor next to a Harley or any other kind of motorcycle," Kidd said, shortly before he left the company.

That kind of statement is like the sound of fingernails on a blackboard to Atchison. "You don't go to a Chevy dealer to buy a Ferrari," he says. "With each new dealership they open, it just muddies the brand that much more."

If Chambers would help him, Atchison knows he could roll out other Iconoclast stores. "Ideally, I'd like to have worldwide distribution rights," says Atchison. In fact, "Mat said he was going to give us $800,000 to support us," he says, adding that the offer was made to help Atchison expand his Denver showroom.

Chambers says that Confederate needs to get its product out into the market and "see which dealers perform for us." LaRue seconds that. "Right now," he says, "if a dealer wants the bike, we're going to sell it to him. We need to get our bike out there in the most inexpensive way possible." LaRue even sees Confederate selling motorcycles directly to consumers over the Internet, with buyers able to custom-assemble their bikes.

"We are going to get shopped," says Marcia Zanetti, another die-hard Confederate dealer, worriedly. Chambers persuaded Zanetti and her partner, Hector Valdes, to move from Albuquerque to Los Angeles so they could open a Confederate-only store in the Iconoclast mode, right across the street from one of the largest Harley-Davidson dealers in southern California. She stuck her neck out for Chambers, and she wants him to return the favor. "He's got to protect his dealers," she says.

Zanetti says that Chambers gets swept away by grand visions, which take his eye off the ball. "I tell him, 'Mat, you can control your future if you are willing to delegate," Zanetti says. She recalls that at a recent trade show (which she calls "a motorcycle rally with booths and beer") in California, a customer came by the booth, asking her if the motorcycle could be customized in a certain way. Chambers, who happened to be there, jumped in and said that was impossible. "He killed the sale for us right there," says Zanetti.

Force of personality
Perhaps every entrepreneur walks that line between dream and delusion. When Mat Chambers says, "I'm one of the most flawed people you'd ever meet," it's hard to tell whether that's false modesty or an honest admission.

On the factory floor, where his gleaming motorcycles take shape each day, the dream is palpable. The lead time for one of those $30,000 creations is two months and counting. "Every bike we build is spoken for," says Chambers. People want this motorcycle -- people like Nicolas Cage, who owns two, and Bruce Springsteen, who bought one. Even if the company is flawed, perhaps the motorcycle is too good to fail.

Either way, Mat Chambers won't give up on his stubborn devotion to the product, no matter what the cost is. When tweaking the design for the next model year, "we redesigned and retooled every jig in the shop. That obsoleted 100,000 parts," he says. "That shows our commitment to the product."

Chambers vows that his company will earn a long-term profit not just by building a superb machine but by "taking it slow and laying down some deep roots." He refuses to suffer the fate of the South, "colonized" by the mercantilist North, which was simply eager "to get the fruit off the vine and eat it. All those guys were fighting for was the digestion of the South. And once they had it in their belly, everything was just about money."

Edward O. Welles is a senior feature writer at Inc.


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Last updated: Dec 1, 2000




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