Southland Automaker Keeps Fast Company
It might be the ultimate product placement. In the hit movie “Bruce Almighty,” actor Jim Carrey’s character trades places with God and has his pick of the world. His choice for a car: the sleek, carbon-fiber two-seater Saleen 7.
No one was happier about that than Steve Saleen and his 125 employees in Irvine, where the $395,000 S7 is painstakingly hand-built alongside the explosively fast Saleen Mustang, Saleen Inc.’s staple product.
The company’s heightened visibility -- its super-modified Ford Mustangs also have appeared in the recent films “Hollywood Homicide” and “2 Fast 2 Furious” -- couldn’t have come at a better time.
Executives at Southern California’s only automaker have been pounding the venture capital circuit, from Movie City to Motor City, to raise money for a major expansion of the 20-year-old company.
Privately held Saleen recently landed a contract to build the new Ford GT sports car. The firm just branched into Canada by opening a specialty car division in Montreal. Now the bespectacled, 53-year-old Steve Saleen -- a former race driver who started the business with his winnings -- has visions of developing, manufacturing and modifying a wide range of vehicles for Ford.
But Saleen needs money. The company’s coffers have been drained by the costs of outfitting a new factory in Detroit to assemble the Ford GT as well as the continued development of the S7. At the same time, sales of the Saleen Mustang -- it retails for $35,000 to $65,000 -- have slumped along with the sluggish economy.
Saleen executives won’t reveal sales or other financial details. But Chief Financial Officer Roger Monaco said the firm had been financing operations with money that could have been used to pay bills. “We’ve been growing on the backs of our suppliers for the past two years,” he said.
In recent months, at least half a dozen creditors have filed suits against the company, for amounts in the $30,000 to $50,000 range. The depth of the company’s financial hole is hard to assess, but some longtime Saleen dealers suggest the problem isn’t dire.
Saleen reportedly is seeking to raise $10 million to $20 million, some of which will go to paying off creditors. Monaco said he hoped to be able to close the deals this month.
One potential investor is John Davis, chairman of Davis Entertainment Co. and producer of dozens of films, including this year’s “Daddy Day Care” starring Eddie Murphy. Davis said he was interested in the automaker as an investment opportunity for his Century City-based Stone Canyon Ventures, a capital fund backed by the U.S. Small Business Administration.
Taking the plunge “depends on a couple of things yet,” he said, including a rising comfort level in the quality of Saleen management, which could be in for a change. Steve Saleen says he and other top managers are reviewing his role as president and have discussed whether the company should bring in another executive to handle day-to-day management duties.
Of the company, Davis said, “They have great products and some very interesting research and development capabilities and manufacturing processes.”
Saleen’s 150,000-square-foot complex at the Irvine Spectrum, Orange County’s tech center, doesn’t have clanking assembly-line conveyor belts. When brand-new stock Mustangs arrive at the plant, they’re disassembled, stripped of their engines, drive trains, suspensions, seats and instruments. The cars then are shifted on gurneys from one station to the next, where teams of workers reconstruct the vehicles, installing Saleen-designed parts and components that give them a new look and high performance.
Ford is a supplier but doesn’t have any investment or management involvement in Saleen. Still, the Irvine company sells its Mustangs through dozens of Ford dealers, and the Michigan automaker is critical to Saleen’s future. When Ford began heavily promoting the 2005 Mustang, even though the model won’t be available for a year, it had a notable effect on Saleen.
Enthusiasts know that the present-generation Mustang is built on a platform developed in 1978, so many have decided to skip the last of the ’03 models and the ’04 models as well, instead holding out for the all-new 2005 model -- which is expected to have far better handling and performance.
“In a good year, we would sell 40 Saleens, and we haven’t sold 10 yet this year,” said John Graham, owner of Santa Margarita Ford in South Orange County and one of 10 authorized Saleen dealers in the state. Stock Mustang sales are off as well, he said.
Since its inception, the company has sold more than 9,000 Mustangs. This year, it expects to move about 700, down from 1,000 a couple years ago.
Steve Saleen says he’s confident that demand will rebound once the ’05 models are out. By then, he expects Saleen to be modifying the more mainstream Ford Focus and Thunderbird lines as well.
Meanwhile, Saleen says, sales of the S7 are on track. Since the model was unveiled about three years ago, the company has delivered 25 of the 500-horsepower exotica and has orders for 40 more. Saleen has the capability to build one S7 every four weeks, but production has been slowed by its cash problems.
The S7s are sold in the U.S., Mexico and Canada by 17 exotic sports-car dealers whose other franchises include Lamborghini, Ferrari and Aston Martin. “It’s hard when you told customers a year ago that the cars were coming and they still haven’t arrived,” said Sparky Gullo, a Saleen dealer in Conroe, Texas.
Saleen also had a cash crunch in the early 1990s, during the economic slowdown. In 1993, Steve Saleen sold a majority interest in his company to automotive supply magnate S.A. “Tony” Johnson, chairman of Tower Automotive Inc. and Dura Automotive Systems Inc.
Johnson, who became Saleen’s chairman, said he believed the company’s specialty vehicle division, which has the contract to assemble and paint the $150,000 Ford GT due out next year, was in great shape. Ford intends to build and sell about 1,500 GTs a year.
“But the Mustang company in Irvine is struggling,” he said, adding that he had “no doubt that they’ll make it through this” with the anticipated private placement.
At that point, Johnson said, “we’ll sit down with Steve and assess whether we need full-time management in there to free him to do the things he is best at.”
Saleen, who has a business degree from USC, insists that his management skills are just fine, but says that however good his management talents, his product marketing, design and development skills are better.
Gordon Wangers, president of automotive products consulting firm AMCI in Vista, Calif., agrees.
He said there was promise in Steve Saleen’s vision for the firm and that the founder should stick to what he does best and let professional business managers take over the running of the firm.
“Steve’s reputation as a businessman might be mixed, but there’s no question about the value of his taste and feel for what makes a good road car,” Wangers said. “There’s a market for anything he does, as long as he stays true to his vision and makes the cars look good and handle and perform better than their stock counterparts.”
Saleen made its mark re-engineering and redesigning the venerable Ford Mustang into a muscular car lusted after by enthusiasts around the globe. Its owners range from young racers to celebrities including comic Adam Sandler and baseball great Ken Griffey Jr.
Saleen won’t release a list of owners of the S7. Most are thought to be avid car collectors with little public visibility, although there are reports that actor Nicolas Cage drives one. Not that Saleen needs another star endorsement.
After the S7’s appearance in “Bruce Almighty,” Steve Saleen joked that maybe it was time to change the company’s longtime motto, “Power in the Hands of a Few.” A better boost to business, he said, might be: “Hey, God drives a Saleen.”
