Volume 9 | Issue 3 | Year 2006

Conventional wisdom has it that the recent woes of General Motors and Ford can in part be attributed to growing consumer disenchantment with once popular SUVs and pickup trucks as the price of gas at the pump approaches $3 a gallon. The problem with conventional wisdom is that it is usually wrong. In fact, although truck sales have declined slightly, SUV sales remain a growth category – GM, for example, reported a 53 percent increase in sales of the Chevy Tahoe last January. Rod McSweeney, chairman and owner of Southern Comfort Conversions, Inc., thinks the big automakers could sell even more of these vehicles if only they could be more like, well, Southern Comfort Conversions, which recently tripled its manufacturing operations to accommodate rising demand for its customized vans, SUVs and pickup trucks.

“The problem with the big three is normality vanilla vehicles,” McSweeney explains. Go into any parking lot and what do you see? Vehicles that all look the same, except that some are white, some black and some gray. That’s why you see people meandering around the parking lot with their key fobs pointing at more than one vehicle because they’re not sure which is theirs.

“Many Folks are tired of having their vehicles look like everyone else’s, that’s why they pick us.”

Indeed, Southern Comfort Conversions, which employs about 250 people, produces 5,000 units a year out of Trussville, Ala. to generate annual revenues of between $50 to $60 million. As an approved upfitter, the company has the ability to make modifications to an automaker’s particular model chasses to add customized interiors and exteriors. These conversions are then sold like any vehicle through an authorized dealer network. In addition, potential customers can inquire through the company’s Web site (www.scomfort.com) about a particular vehicle conversion they are looking for, and Southern Comfort Conversions will match them with the appropriate dealer.

While the company specializes in a sort of “mass customization” in which customers can select specific pre-designed looks and options, McSweeney has no interest in doing individual special orders. “’One-offs’ will kill you,” he says. “There’s no profit in the time and effort you have to expend because some guy may want an ostrich interior dyed orange. The work isn’t going to translate into broader product development to recoup your investment in doing that sort of thing.”

Our typical customer is sufficiently affluent that, as McSweeney describes it, “The price of gas isn’t an issue. They want to go where they want to go, when they want to get there. And they want to do it with a certain added level of style and comfort.” Or if you will “Southern Comfortized!”

One example of the company’s typical customer that is atypical from the mainstream is the membership of the Safari Club International (SCI), a non-profit hunter and wildlife conservation group, with which Southern Comfort Conversions is a licensee to sell high-quality conversion vehicles at special member pricing that reflect the hunting lifestyle featuring SCI’s “lion-and-shield” official seal. For each SCI vehicle sold, Southern Comfort Conversions donates $300 to support SCI programs.

According to McSweeney, about 42,000 of SCI’s 48,000 worldwide membership is in the U.S. “These are big game hunters interested in camouflage exteriors and exotic interiors for vehicles that can go off-road, but in style and comfort. The average net worth of an SCI member if $5 million, and the average annual income is $500,000.”

One of the company’s largest van demographics is Hispanic. “Chicago, Houston and Southern Los Angeles are huge markets for us because of the Hispanic population, which generally speaking seems very interested in something flashy that can accommodate a large family.” A custom van is both accommodating and a great value.

Trend Trailblazer
While it might be argued that success in such a niche market doesn’t necessarily translate to mass production, the fact is that the auto industry has previously followed paths first blazed by McSweeney’s company and others like him.

“The Conversion Industry was the first to put leather seats in pick-up trucks back in the 1980s,” he notes. Back then, the idea of a luxury interior seemed inconsistent with the utilitarian use of a pickup truck. Today, a luxury interior helps define the category. While the big three tries to get on the curve sooner, the problem, according to McSweeney, is that they rely heavily on someone else’s imagination. That’s our role and that’s what makes this business so much fun.

In the early 1990s, the company introduced the Chevy S/10/GMC Sonoma as well as the S10 Blazer/GMC Jimmy SUV conversion named “Vindicator” at a dealer product preview show called “The Announcement Show in Las Vegas.” The dealers liked it so well, the company sold a years production in three days. “Mr. Middlebrook from GM had our account representative asked three conversion companies to bring their trucks to Detroit so several engineers could look at the offerings,” McSweeney relates. “We were the conversion of choice. After the review, we were approached to price 25,000 conversions for the year model and we simply could not do those kinds of numbers at the time. Our facility was only 60,000 square feet. That opportunity for us was the platform used for Another Automotive Group to go on and produce several hundred thousand “EXTREME” trucks and small SUVs for GM. Mad about it? Not at all, in fact, the most creative thing about the truck was the custom paintwork. GM will never do what we do as far as paint.”

Imitation being the highest form of flattery, there’s no hard feelings. Anyone can bolt on a part, but painting is an art,” McSweeney says. Hiring companies like South Comfort needs to be explored by the likes of GM and the other domestic automakers. I’m in Detroit a lot and I always tell them, they need to have companies like Southern Comfort Conversions to fill the demand of niche products as well as make the normal products in hopes of having the widest possible appeal. We’re talking about “A new way of manufacturing” where in addition to mass production you go after niches. You can’t have a lot of options within a niche, but it’s better than making everything so vanilla, stuff that some buyers are really tired of.”

A case in point is the new Chevy HHR, a retro car that tries to capitalize on the nostalgia factor like the highly successful DaimlerChrysler PT Cruiser. The problem, as McSweeney sees it, is the HHR “simply lacks enough pizzazz. Put some custom wheels on it, some exterior parts to make it stand out, and upscale the interior, as well as custom paint, and then you’ve got something that people are going to get excited about. Without the excitement factor, some people want buy it.” Another is the Tahoe/Yukon, which McSweeney characterizes as “great but plain to say the least. But we’re about to hit the ground with a conversion that we predict is going to sell out in no time. Because it makes a statement that people are looking for that they aren’t getting, except from companies like us.” Our customers want hard, sharp aggressive lines and looks.

Nimble Manufacturing
Southern Comfort Conversions may have the advantage of relatively small size to capitalize on a niche market – after all, a lot of people buy vehicles simply for transportation and don’t much care about pizzazz – but McSweeney believes it’s not a question of scale. “Until the big automakers streamline their manufacturing and get to market faster, companies like us are going to always sell the really neat stuff that some customers demand. The big automakers have to be more nimble to anticipate trends, even create trends, and not just respond to them after the fact. They need to get to market before anyone else does with what people really want. The imports know this and are rapidly pursuing them. Have you seen the Scion commercials?

He is equally disdainful of focus groups. “Never done one, don’t see any reason to start. The trick is to determine what the latest ‘hot buttons’ and drive the design. I’ve have one of the best-experienced groups of engineers and designers that can take design cues from me and punch it out; the youngest guy on the team has been with us for over 20 years. I personally look at the exotics for styling and performance cues. Our Vindicator trucks and HHR conversions use a Porsche rear end and Corvette-like door designs, as well as BMW-type lower cladding. You take normal vehicles and you make them sporty as well as practical.

Nor is he overly fond of car shows, which the big three use to stir up interest in new products. “Customers respond to good design ideas that they can buy, not just some concept vehicle,” that rarely ever sees the street, he says.

Garage Start-Up
Southern Comfort Conversions originated as a hobby that was true to the original meaning of “garage business.” According to McSweeney, “I had always been interested in street rods, regular cars dressed up with special paint jobs and chrome wheels. I learned to custom paint in high school and one of the first street rods I did for my own use was a van. A friend in the used car business asked me to build one for him, and then gave me orders for 75 in a year. He was selling them faster than I could build them. That’s how my business got started.”

In 1979, as recently noted in “The Flashback Van” in The Wall Street Journal, “custom vans with flashy paint and outrageous interiors ranked high on the cool scale…a resurgence of road tripping and cheaper gas in the 1990s helped push the conversion industry to a peak of more than 180,000 units sold in 1994.” But as noted in “Conversion Vans Attempt to Make a Comeback” in USA Today, customized van sales have fallen 79 percent the past decade. The sharp drop, and tougher quality control by automakers, has cut the number of companies building custom vans to 25 from 200 in the 1980s.”

As you might expect, Southern Comfort Conversions wasn’t blindsided by this development, having already seen the potential in the growing SUV and pickup truck market. Indeed, in 1986, McSweeney changed the name of this company from AAA Auto Truck and Trailer to the current nameplate to better reflect vehicles of luxury, elegance and versatility beyond van conversion. The name has become synonymous with the image of upscale Trucks and SUVs, so much so that Southern Comfort Conversions was recently recognized as the top manufacturer for GM conversion trucks and SUVs in the country.

This isn’t to say the company has forsaken van conversions. In fact, McSweeney is president of the Conversion Van Marketing Association (CVMA), a consortium of 19 van conversion manufacturers that partner with GM formed both to promote the vehicle and facilitate sales. It is hopeful to help pump van conversion sales over the next several years. People just forgot about vans during the SUV craze. While it was happening vans become great in both chassis and customizing. In fact, the Chevrolet Express and GMC Savana have received the federal government’s highest frontal crash test rating – five stars – for the driver and front seat passenger from the National Highway Traffic Safety Administration, as well as voted the best value in the Detroit Auto Show.

“The advantage vans have over SUVs and trucks is that they can transport more people,” McSweeney explains. “Vans are also built better than they used to be and can certainly make more of a personal statement than the tired old minivan look. A conversion van can also provide all the amenities and good looks of a limousine.”

This makes it ideal for the Middle Eastern market, where royal families like to drive their families in style. And, thanks to the recent acquisition of Centurion Vehicles of White Pigeon, Mich., Southern Comfort Conversions now has an exclusive contract to supply conversion vans to that portion of the world. Via GMODC General Motors Oversees Development Company.

McSweeney also believes that the growing middle classes in other nations will also shift international demand into higher gears. “Asia is killing us with product that we can’t compete with because of the lower cost of labor. But they’re not very good at specialized manufacturing. This a great opportunity for us to correct some of the import/export balances.” CVI had the license agreement to manufacture Starcraft vans. Starcraft is the most recognized name in the export market.

This is not to say that Southern Comfort Conversions doesn’t see the value of sourcing offshore. “We put custom wheels on our conversions, but we can’t compete with the Asian labor force, so we buy them from an Asian manufacturer for much less than we could make them for here,” McSweeney says.

Vertical Integration
In some cases, however, it makes more sense to bring manufacturing in-house. “We’re a vertically integrated manufacturer,” McSweeney explains. “We do the engineering, the design, the tooling and the production here. Twelve years ago, we started designing proprietary plastic parts and having them manufactured by others. But when we were unable to get to market fast enough, we decided to start manufacturing our own. Now in addition to producing the parts we need, our plastics facility makes parts for boating, RV, golf and other industries.”

The company’s expanding product line coupled with its recent acquisition has also caused it to expand its 200,000-square-foot facility to a new 532,000-square-foot plant. “We didn’t consider keeping the Michigan plant open for a number of reasons. For one, we wanted to maintain local control, which you can’t do with plants at almost opposite ends of the country.

Secondly, the Michigan facilities weren’t as up-to-date as ours duplicated a lot of what we already had here. And we wanted to avoid the hassles of integrating two different cultures; I talked to a lot of people, and it just seemed that it takes a while to make an effective integration work. So we decided that we can better achieve economies of scale to just start everything up new down here.”

McSweeney touts the acquisition as establishing Southern Comfort Conversions as the largest in the business and a “pill worth swallowing. Centurion was the license holder of Starcraft Conversions, a long established and well-recognized product. So we bought a good brand name along with expanding our dealer network by 30 percent and gaining export rights that will fuel our future growth and enable us to serve customers even better.”

Other high-octane developments include pool contracts with DaimlerChrysler as well as Ford and the International Truck and Engine “CXT.” McSweeney says he hopes to grow our business in other areas such as Hummer and Medium Duty Trucks.

Hot Mod
“The key to our success was actually summed up pretty much like this! `Hot Mods’ – that sums up the conversion business. What do our customers want? Something that is Hot and that is Modified.” So what does McSweeney drive to work? “A Chevy Avalanche. It’s built on an SUV chassis, and it rides like a dream.” And, of course, it is hot and mod to reflect the guy who helped define the terms.

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