Zero Motorcycles has quietly announced some interesting news: that Mark Blackwell, V.P. of Motorcycles at Polaris Industries, will be joining the electric motorcycle company’s Board of Directors. With a plethora of reasons as to why an industry veteran like Blackwell would join Zero’s board, it’s been no secret that the Scotts Valley company has been collecting seasoned industry professionals like pokemon characters, seemingly building a brain trust of people who actually know how to run a motorcycle company.
Blackwell’s addition to Zero is interesting because it could signal a relationship with the Polaris V.P. that goes beyond merely an advisory/visionary position, which is the core responsibility of a companies board. The timing is interesting as well, as Polaris has been on a buying spree, first acquiring the original American motorcycle company brand: Indian Motorcycles, and a few days later electric car manufacturer GEM. With a Polaris executive sitting on Zero’s board almost immediately after these aquisitions, one has to wonder if this isn’t a precursor to some sort of larger arrangement between the two companies.
Reports to Asphalt & Rubber indicate that Zero Motorcycles is in a precarious position financially. Waves of layoffs continue to gut the company of its diligent workers, while the executive and leadership ranks continue to swell. By our estimates the company will be out of cash in less than a year’s time, unless Zero gets another cash infusion. The chances of that occurring are dubious, as we’ve heard credible rumors that the future funding of Zero Motorcycles by its lead, and virtually sole investor, Invus is contingent on the Scotts Valley company ramping up its motorcycle shipments and turning something resembling a profit.
Zero Motorcycles went through a big effort a month ago to announce a $26 million cash infusion by Invus, though the company actually only squeezed another $17 million from the private equity investment group. The missing $9 million we’ve heard is contingent on Zero meeting the above mentioned sales and income goals, which is a strong signal that the well to unlimited funding is running dry for the California company.
Invus, as an investment group, is a long-haul financier, and likes to dominate the funding rounds of its portfolio companies. With over $4 billion in capital under management, the group is funded by the wealth of some of Benelux’s upper-crust, who take a long-term strategy approach to the way they invest their money. Simply put, Invus is not an investment group that pumps and dumps its portfolio companies, but they don’t hang on to dead weight either.
Stuck between a rock and a hard place, the current state of Zero Motorcycles is highly relevant to this latest announcement, as Invus is clearly signaling its discontent with Zero’s performance by not fully-funding Zero’s latest round. The investment group has also already gutted the company’s ranks, replacing them with recognizable industry professionals. The group’s presence at Zero has also been ramped up. Keeping a hand on the tiller at all times, it’s not uncommon now to see a quote from an Invus representative in Zero’s press releases (not that we get sent any press materials from Zero Motorcycles).
With the changes that the company needs to go through in order to turn around its business likely to take over a year’s time, the road for Zero appears to be uncertain. With the announcement that Blackwell will be joining the Board’s ranks, a new avenue for Invus unfolds that previously seemed to be off the table. It’s entirely possible that Blackwell’s addition to Zero Motorcycles Board of Directors is precursor to the electric motorcycle company getting acquired by Polaris Industries, as Blackwell would be able to see the inner-workings of Zero. Such an act would allow Invus to unload a company that’s cost the investment group nearly $50 million in capital invested, with roughly only a million dollars in total sales since its inception.
Already reducing staff to a bare minimum, and securing a bevy of industry veterans, Zero could be trying to improve its desirability on paper, while showing a roadmap for future success under new capital investment. In fact, it’s not uncommon to see layoffs before an acquisition, as the move helps boost the bottom line value of the company, which could have an exponential factor on the purchase price. Unlikely to turn itself around before it runs out of cash, Zero would have to sell itself to a potential buyer on a vision of what the company could be (ironically the same pitch it gave journalists at its 2011 product launch), which likely would include the notion that the company now has the team necessary for future success.
As Zero has begun to transition its science project motorcycles into a more polished offering, the company also has designs to finally start utilizing a proper dealer network. Both items are critical to a sustainable business plan, but both also take a considerable amount of time to undertake — time of course being a commodity the company is in short supply of at the present juncture.
The Diet-Coke version of this speculation is that Blackwell’s presence could signal simply a partnership between the two motorcycle companies, with Zero presumably helping Polaris with its electric drivetrain needs. While there are varying shades of how this would work, the biggest kibosh on the notion is that Zero’s drivetrain technology isn’t terribly compelling compared to some of the other firms currently circulating in the EV field, making their candidacy for a partnership dubious for a company like Polaris.
Then again with Blackwell quoted as saying, “I am delighted to join the Board of Zero Motorcycles. I have tracked the progress of the company from afar and been impressed with its growing product line and its increasingly well-established brand, channel, and supply chain,” the Polaris executive may not have taken a close look at Zero Motorcycles before joining up with them, as the Scotts Valley company’s biggest weakness are its sales channels and supply chain, which have had detrimental affects on the company’s brand.
The third possible purpose for this announcement is that it generates paper. Sometimes companies appoint members to its Board of Directors purely for marketing reason, an act we wouldn’t be surprised to see Zero try at this point. Time will tell what this announcement truly means for Invus, Polaris, and of course Zero Motorcycles. Until the augurs become more clear, we’ll leave you with the obligatory press release quote from Invus Group Managing Director Aflalo Guimaraes.
“My colleagues and I have known Mark for a while and we greatly value his industry insight, knowledge of motorcycles, and years of managerial expertise. We are excited Mark has elected to join the Board of the company and we know his contributions and talents will make an enormous impact on our business moving forward. We look forward to a close and productive relationship with him.”
Source: Zero Motorcycles