Steve Saleen, Mustang, and the Next Chapter

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Source: Saleen

Carmakers young and old have learned the hard way that automotive flops tend to be particularly spectacular. The industry has a natural mandate for quality, both in terms of performance and safety, and vehicles that violate this mandate have become legendary examples of bad design — think along the lines of the Ford (NYSE:F) Pinto or the Cadillac (NYSE:GM) Cimarron.

If an automaker is lucky, a failed model goes down in history as simply a blemish to the brand and is buffed out over time. If they are unlucky, above and beyond a bunch of lost money, a failed model is a permanent scar on a brand, and in the case of a vehicle like the 1991 Chrysler TC by Maserati, can damage business relationships. But while quality may be a top concern for large car manufacturers, it is a matter of life and death for the myriad specialty manufacturers who compete in the high-performance market. Among the throngs of active tuning firms, a few names stand out more than others — names like Hennessey, Roush, and Saleen.

Wall St. Cheat Sheet was fortunate enough to get on the phone with Steve Saleen, the founder of Saleen Automotive, to find out where he is going with his brand. The last several years have been nothing short of tumultuous for both Mr. Saleen and his firm, but with his recent debut at Laguna Seca, it seems he and his crew are getting back to what really matters — making powerful, raw performance machines.

Steve Saleen was pretty much built from the ground up to be the man behind a high-performance vehicle manufacturer. He began his racing career behind the wheel of a 1956 Porsche Type 356, worked his way through the Formula Atlantic Series, captured a title at the SCCA Trans-Am Championship (also winning the 1991 SCCA Race Truck Championship), and competed in the 1989 CART/PPG Indy World Series.

“I got involved with Pontiac Motor Company in the early 80s, and it was there that they started doing special edition vehicles. I was racing on the weekends, but during the week we were able to work on special edition vehicles,” says Mr. Saleen. “In ’82, we beat Ford and won the championship with the team I was with.” From there, he “got to know the guys at Ford,” and as it so often happens in good stories like this, “one thing led to another, and I had the opportunity to start my own company.”

He founded his company, called Saleen Autosport in its first iteration, in 1983, and immediately set to work building the special edition Mustangs that he ultimately became famous for. In 1990, he built the first Saleen Mustang, the vehicle for which he is arguably most well-known. In 1996, Mr. Saleen was inducted into the Mustang Hall of Fame.

Saleen continued to grow the business through the 90s, and in 1997, competing in and winning the 24 Hours of le Mans with the signature Mustang. Five years later, he became Ford’s point man for the GT, playing an instrumental role in designing, developing, and assembling the vehicle. Anyone familiar with this (highly abridged) story knows that this is where things begin to get a little bumpy.

“In the middle 2000s,” says Mr. Saleen, “we had the opportunity to expand the business. In doing so, we were able to take some private equity capital in and help expand the business.” After the commencement of the GT, Mr. Saleen got involved with Hancock Park Associates, a private equity firm. The firm infused Saleen with cash and the company prospered, but at the end of 2004, the corporate structure of the company had began to change.

“Subsequently, as some of these stories go, we ended up with a disagreement on the direction of the company.” A new chairman and CEO was appointed in 2007, and that same year Steve Saleen, along with some other senior executives, resigned. There was a period of transition, the details of which are somewhat interesting but ultimately superficial for those on the outside. Mr. Saleen announced the formation of SMS Supercars in 2008, a business that focused on the design and production of higher-end vehicles. In 2012, Mr. Saleen regained control of Saleen Automotive, and by July of 2013, the entire operation was once again banded together under his leadership.

We feel like it’s worth rewinding the clock a couple of years to 1988 to highlight one of the achievements that permanently etched Mr. Saleen and his flagship Mustang into the collective consciousness of the automotive world. In that year, Saleen Mustangs finish first, second, and third at the 24 Hours of Mosport, claiming not just a sweep of the top three and a third consecutive win, but Ford’s first 1-2-3 finish since the late 60′s, when the LeMans was temporarily dominated by Shelby and the Ford GT40.

To put it another way, Saleen makes Ford look good. Really good. But what does the company look like now? In July, Saleen finalized its ticker change to SLNN, and in August reported first-quarter fiscal 2014 (the quarter ended June 30, 2013) financial results. The numbers show that while Saleen’s business engine is coming to life, costs are still high relative to revenue. Management expects this to reverse as sales growth outpaces cost growth. Here’s a breakdown of the results.

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Source: Securities and Exchange Commission

The new company raised $3 million from investors, and what Mr. Saleen plans to do with that money is anybody’s guess. Since we’re somebody, we’ll give it a shot.

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Source: Saleen

There are four doors to Mr. Saleen’s Paddock on the website — one for the Challenger, one for the Mustang, one for the Camaro, and one with the label “under development.”

It’s possible, but unlikely, that this slot is reserved for Saleen’s next super car. The company announced the S5S Raptor, designed to be a follow-up to the S7, at the 2008 New York International Auto Show. But with wanton and undiscerning financial destruction, the late 2000′s crisis forced the project into limbo.

If you want to know why people are still hoping that Saleen will go ahead with the Raptor, you should understand what was so exciting about the S7. It’s the kind of car that Tony Stark — the genius, billionaire, playboy, philanthropist behind Iron Man — keeps in his workshop, right next to a Shelby Cobra and a Tesla Roadster. It’s also the kind of car that the mad men over at Total Race can tune up to an astonishing 2,282 horsepower. If you haven’t seen it, here it is (and if you have, watch it again). Heads up for volume.

So a supercar is a possibility, but so is a different, more accessible (cheaper) vehicle. ”As we’ve come into the public market the opportunity to raise a little bit of money will allow us to expand our product line beyond, if you will, just the muscle car,” Mr. Saleen said.

Perhaps the most interesting (or, at least, tantalizing) piece of information that could be juxtaposed right here is this exchange that happened at the 2012 Los Angeles Auto Show, and was reported by Auto Week.

“We’re working on an electric car,” Mr. Saleen said in Los Angeles, dropping the biggest news bomb of the environmentally friendly show.

An EV from the most horsepower-hungry name in all of the aftermarket?

“I’ll tell you more about it later,” Mr. Saleen said.

Wait, you can’t just toss that out and not follow up.

“Yes I can,” he said.

He can — and he did. Mr. Saleen has been pretty quiet about the subject, but we pressed him about it anyways. ”Electric vehicles,” said Mr. Saleen, “are not a fad. That is a trend.”

“Tesla has demonstrated that the opportunity for companies, like ourselves, in the electric segment certainly exists,” Mr. Saleen said. ”And I think we have a unique skill set, based on our knowledge of the automotive industry, our ability to convert existing chassis, as well as to create ground-up new ones, that could serve us very well as this new industry emerges.”

With the 2013 Motor Trend Car of the Year going to the Model S, Tesla (NASDAQ:TSLA) has certainly knocked down a few walls and let the industry know that the world is ready for electric vehicles. The technology is here — it may be just tripping onto the market, but it’s here. Fast-forward a few years and we can expect to see electric vehicles, Tesla or otherwise, not just on the road around town, but on the race track — competing with internal-combustion vehicles.

It’s a big, interesting space and Mr. Saleen could certainly do it justice — but it’s important to remember that this is a man who made a name for himself building Mustangs and world-class super cars. Expect the next thing he does, whatever it is, to be a machine of pure performance.

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