Car Parts Cataloger Seeks Chapter 11 Revival

Despite filing for Chapter 11 bankruptcy protection on Jan. 24, Chris Nowak, president/CEO Rocky Mountain Motorworks, is confident that his company will survive and thrive.

Sales for the Woodland Park, CO-based cataloger topped out at $12.5 million in 1998. In 1999, its most profitable year, Rocky Mountain Motorworks netted $500,000. That same year the company, whose core catalog sells accessories for older Volkswagens, launched two spin-offs; one sold products for new BMWs, the other sold items for newer VWs. The company, which Nowak launched in 1986 with $30,000 of his own money, also invested heavily — about $500,000 worth — in Y2K technology and its Website.

During the past three years, the cataloger “tried to do too many things at once,” Nowak concedes. “So when the economy started turning over in 2000, we got caught short on cash.” And by mid-2000, its lending institution, Vectra Bank, had cut off its credit line.

Worse yet, after the Sept. 11 terrorist attacks, sales plunged 25%, and the company’s cash flow dried up. To add insult to injury, Volkswagen, which for years allowed Rocky Mountain Motorworks and other marketers to use its logo in advertising, changed its policy, and in January 2002, VW sued the cataloger for using its logo. (At press time, the suit remained unsettled.) “At that point, our bank got nervous and began foreclosure on us,” Nowak says.

The company, which did $10 million in sales in 2001, has cut its employee base from 112 to 45 since 2000. Since Sept. 11, Nowak has slashed circulation 50%. “When your capital is as slim as it has been for us,” he says, “you can’t afford to prospect. So we’re doing a minimal amount of it. We’ll spend less money on catalog marketing and try to get customers to shift to the Web by promoting it more heavily in the catalog.”

A clean slate

With the Chapter 11 filing, Nowak plans to restructure the company’s debt and shore up its Website, which accounts for 20% of revenue. And in a move that Nowak expects will both reduce expenses and improve Website performance, Rocky Mountain Motorworks is looking to outsource Internet functions such as upgrading, backing up, and maintenance of its site’s software. “It doesn’t make sense to have that asset here,” Nowak says, “because we can’t afford to make it run 24/7.”

In addition, Nowak says that he will further try to reduce expenses by relocating. He will likely sell the company’s headquarters facility in Woodland Park and move to a less expensive facility in Colorado Springs.

Nowak has also been in discussions with several investors whom he says are interested in buying a majority share of the company. At press time, he hoped that a deal could take place by March.

Opting to look on the sunny side of the situation, Nowak believes the company will bounce back better than ever. The Chapter 11 filing, he contends, enables Rocky Mountain Motorworks to “start all over again with a clean slate.”

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