Very informative post, but not surprising. About 10 months ago I posted on the old Duc-MS that Ducati had secured about a 100 million Euro syndicated loan for operating capital. I noted that the $ came from a number of banks, not just one. Indicated to me, at least, that Ducati's future was risky, so much so that one bank did not want to fund the entire loan.
IMHO from the consumer side there are a number of reasons why Ducati is tanking [yes boys, take the pain, Ducati is tanking]:
1) Some bad designs. People in here can say what they want in defense of their particular favorite, but considering how many bikes are sold in the U.S. market, one has to ask "Why aren't Ducati's selling?"
IMHO design is part of the problem. For example, the 999 looks nice and it has grown on Duc fans, but many have gone on to other brands because the 999 looks kind of like the Japanese bikes. As to the biggest market for the 999, the regular Joe, that shopper is not going to appreciate the cachet and history of a Duc, they will simply say "Gee, the R1, Honda, or Suzuki look kinda the same as the 999, might as well go with the Japanese bike for $8000 less."
2) Which brings the next reason sales are down. I went looking at the 2006 R1's [I have an 02]. I am always SHOCKED at the prices, having been so used to Duc prices.
A new 2006 R1 for $10.5k out the door. What's a 999, $19-20k out the door? Assuming the biggest market for superbikes is the casual rider, meaning "non-track day" types, IMHO they will not see any reason to shell out 80 to 100 percent more for a Duc. And as to the salesmen who actually has to "sell" his brand, I can just imagine what they say when the guy looking at a Honda asks the Honda sales guy "I am thinking about this Honda or the Ducati 999, what do you think of the Ducati?"
3) Ducs also have a horrible reputation for good customer service. Ducati does not stand behind the product. The Net is overflowing with horror stories of former Duc owners who have told thousands on the Net that their Ducs broke down, and when they did, the dealers looked for ways to get out of having to honor the warranty, and when they could not, repairs took weeks to months for the buyer to get the bike back. And worse, if owners complained to Ducati North America, DNA would do nothing to help.
Those kinds of stories have circulated for so long, IMHO such have destroyed Ducati's image. Basically, Ducati's image is that 1) Ducs break down; 2) they are expensive to repair; and 3) if they do break down, dealer service is horrible. Even on Duc-MS these types of stories are commonplace.
And compounding the problem, Ducati has completely failed to do anything to improve it's image. It's almost as if they have their heads in the sand and refuse to believe their is a problem.
Consider this: Duc-MS has about 5000 members. That's a lot considering how few Ducati owners there are. You would think DNA would have one of its employees become a liaison and Duc-MS member. That person could field questions and address people's concerns. Could even do some
PR. But there are no DNA reps on this site. If there are, they do not publicize it. To me, that shows their lack of vision and business sense.
4) Lastly, Ducs have a poor reputation on upkeep. The average Joe knows two things about $, a Duc will cost a lot to buy and will cost a lot to maintain. Any other bike can run 30,000 miles with only oil changes. But not a Ducati.
Label all this gossip, rumor or unfounded assumptions, it does not matter, for this is what the majority of bike purchasers know when shopping on a Saturday for that mid-life crisis superbike or the fastest/coolest bike on the road. [albeit, as far as I know, guys in their twenties are not buying $20 thousand bikes just to be cool, they cannot afford them].
So that is how I see it. I said before that Ducati was in financial trouble because of the way its syndicated loan was structured. Your post validates what I said 10 months ago.
I hope I am wrong when saying that in a few years, Ducati may not even be around. Sounds ridiculous, but as company size goes, it is not that big a business. I think before I said it was just barely above mom & pop size corporations. So it going under is not like imagining Ford or GM tanking [and heck, even GM may bust based on recent events].
With car manufacturers and airlines tanking every six months or so, it should not be that difficult to picture Ducati going the way of Pan Am or American Motors, especially with such piss poor numbers [that you posted].
They need someone to go in there and redo the company from the janitor up to the President. They need to do what Harley Davidson did back in the late 80's and 90's
Harley knew that their bikes sucked and that people were not buying them because they were crap. Sales were way down and the bike was going to go the way of the Indian. HD completely redesigned the engine [Evolution engine] and engineered the product so that things would last.
They then marketed the bikes with an admission their old bikes sucked, but to "try out our new bikes." They even had ads that said "no more leaks" because their old designs had loads of oil leaks.
They then had their dealers provide excellent customer service. I had a friend who had one of the 1994 then-new Harleys. He took it in to get fixed, they were quick to respond and he got his bike back each time in about 2 days.
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Here is what Ducati said in 2005 for their 2004 Annual Report:
Ducati Announces Full Year and Fourth Quarter 2004 Results
Ducati Motor Holding S.p.A. (NYSE: DMH, Borsa Italiana S.p.A: DMH), a leading manufacturer of high performance motorcycles, today announced full year and fourth quarter 2004 financial results.
Revenues for 2004 were Euro 382.8 million, up 1.0% excluding forex effects, (or down 1.4% including forex effects) versus last year. Revenues from motorcycles decreased 4.4% to Euro 302.2 million and represented 78.9% of revenues. Motorcycle-related products, including spare parts, technical accessories and apparel, increased 8.2% to Euro 75.0 million against last year.
Gross margin for 2004 was 36.0% versus last year's 34.7%, thanks to product cost reduction, operational efficiencies and related product sales increase, partly offset by a negative forex effect. EBITDA was Euro 39.1 million, or 10.2% of revenues, up 2.3% excluding forex effects (or down 13.5% including forex effects), versus Euro 45.2 million of the previous yea,. mainly due to increased sales costs.
At EBT level, the result was a loss of Euro 1.8 million versus break-even in 2003, due to a lower EBITDA, which was partially offset by lower depreciation and financial charges.
The Company's net debt on December 31, 2004 was Euro 115.9 million, down against Euro 117.2 million on December 31, 2003. The company's gearing ratio was 75% on December 31, 2004 versus 74% on the same date a year earlier.
Unofficial Ducati worldwide registrations for 2004 were down 5.2% versus last year, with France down 1%, Italy down 6%, UK down 13%, Benelux down 17%, Japan down 19%, Germany down 20%, while Spain was up 33%, the US was up 15% and Australia was up 8%.
"2004 was a challenging year for Ducati. The continuing weakness of the dollar and the difficult market conditions in Germany, France, UK and Japan together with the delay in the introduction of the new Monster S2R weighed heavily on both sales and registrations", said Federico Minoli, President and CEO of Ducati Motor Holding. "However, the company concluded 2004 with excellent fourth quarter results and 2 podiums in the MotoGP championship, which are both promising results for the coming year. The success of the presentation of the new Superbike, the arrival of the Monster S2R and the great excitement around the new Multistrada 620 all give us a year to look forward to with confidence".
"We expect to close 2004 with a net loss of approximately 8 million Euro, due to current and deferred income taxes", added Enrico D'Onofrio, Chief Financial Officer of Ducati. "We are finalizing the refinancing of the bond which is expiring by the end of May 2005. The company is evaluating all possible financial instruments including a new bond issue in the range of 100 Million Euros."
Revenues for the fourth quarter of 2004 were Euro 114.8 million, up 16.2% excluding forex effects, (or up 10.8% including forex effects) over the same period in 2003, due to higher bike sales.
Gross margin for the fourth quarter was 33.4% of revenues, in line with the previous year. EBITDA was Euro 13.0 million, compared to Euro 14.3 million in 2003, due to a negative forex effect and higher sales costs.
Results before tax for the fourth quarter of 2004 were a profit of Euro 8.0 million versus Euro 7.1 million last year. This increase is mainly due to lower financial charges.
Fourth quarter 2004 financial results were approved by the Board of Director on February 10, 2005.
By the end of the year 2004, the Company had re-purchased 3,769,249 shares, equivalent to Euro 3,283,016 or 2.37% of its stock capital.
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