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Italy’s Malaguti Scooters on the Brink

Friday, April 29, 2011
One of the most historic brands in the Italian scooter industry is reputedly on the verge of collapse. Malaguti needs an investing partner to save it from financial ruin, the Bologna-based company already halting production and laying off employees. A family-owned firm, Malaguti’s fortunes have waned in recent years as control has passed from the now retired Learco Malaguti, to the grandsons of the company’s founder, Antonio and Marco Malaguti. Prior deals to find a partner for the brand, including a much-rumored acquisition by fellow Bologna neighbor Ducati, have come to naught.

Malaguti factory
Founded in the 1930's Malaguti survived WWII to develop its brand in to one of the most respected in Italy.
One man not content to sit idle as the brand teeters on the brink is scooter industry insider Joel Martin. The owner of Martin Racing Performance has a vested interest in Malaguti’s success, being the sole parts importer for the Italian firm. Martin is also emotionally invested, his own Miami-based family company being the importer for Malaguti from 2001 to 2005. He doesn’t want to see the brand die and on his MRP blog, Martin has championed the Malaguti woes. Amazingly, there seems little interest in saving the brand, at least on the Italian side.

Martin asserts he’s been actively brokering aid for the failing company, in an exhausting effort that’s included contacts with Chase Bank and other investment groups. He even claims to have found liquidators that can sell the remaining Malaguti inventory. Said Martin in reference to his efforts: "I can't get a loan for my small business like many American companies in this market, but I put the word out I need $30 million to buy a manufacturer and people are interested. But the Italians don't seem to move quickly to make this happen."

Read more on the Malaguti saga at the MRP blog. Martin’s most impassioned plea is re-printed with permission below
– MCUSA Ed:

By Joel Martin

Dow Jones is finally reporting on the situation at Malaguti this morning. (www.borsaitaliana.it/)

So more drama in the quest for Malaguti as Chase pulled out or more like they lost interest because nobody picked up the phone. None of the U.S. distributors have the cash to help re-start the brand. I gave the ex-employees at Malaguti and the Regione Emilia Romagna the contact info for the one company that might buy the 6000 scooters they have sitting in a warehouse and nobody has done anything. The venture capital people looking at this couldn't get a phone call back, so I've pretty much just decided to step away and let the Italian government handle it.


Malaguti
Malaguti is looking for an investing partner to salvage its fading fortunes as an Italian scooter manufacturer.
It's funny I try to get a small investor or loan in the USA and nobody calls me. I say I have a great opportunity here to buy a multi-million dollar company that needs a turnaround plan and my phone starts ringing. I get consultants from Europe, lawyers from California who speak Italian, everyone calling. I ask for a small loan for MRP nobody calls. I ask for $30 million to help restructure a firm and the phone starts ringing. I'm starting to think I'm in the wrong business. So how do I feel about all this? I don't know honestly. It's easier to raise $30 million for a bankrupt company in Italy than it is to raise $500,000 for a small business in America is what I'm starting to realize, but it does you no good if the people in Italy don't answer the phone and the workers are out protesting in downtown Bologna.

Back when I was in my early twenties I met a great scooter guy named Learco Malaguti. He took his father’s bicycle company and made it into the third-largest powerhouse in the historic world of mopeds and scooters in Italy. At one point in the early 80s he had over 90 companies competing with him to some degree. All of them making mopeds, bicycles, and motor-scooters using components from such famous brands as Minarelli and Moto-Morini.

In the late 1990s at their height Malaguti was on the verge of reaching the number two spot in Italian production. Its closest competitor Aprilia expanded into motorcycles and later took out massive loans even buying Moto Guzzi in a quest for market-share. The market fell as quickly as it had risen and by 2003 famous Italian staples such as Italjet were closing, companies like Benelli were sustained by family fortunes, and even famous makers such as Beta faded from the scooter scene. Some bikes were merely produced as showpieces like the last line of Cagiva scooters in 2002-2003. Only Piaggio Group seemed to be doing well quickly buying the Spanish market Derbi and later on Aprilia as they went bankrupt ( with massive assistance from the state and lenders).

All this happened just as Learco was retiring and passing the business to his sons Antonino and Marco Malaguti. I got involved in this murky world at the very end of the height of the Italian scooter boom (much like someone buying a house in the USA at the height of the housing market). The nature and the speed at which this business has changed in Italy can be overwhelming. Things changed there twice as fast as they did in America. The boom and bust of 2008 for the American scooter dealers, with over 350 shops closing, is nothing compared to what has happened in Europe. In Europe many scooter shops had been around for over 20 years and many of them extremely profitable, not relying on the boom and bust of U.S. gas prices.

To see those stores fold, to see all production in Italy and Spain close has been quite sad.

Malaguti has been unable to find a European partner as of right now parts are still being distributed. Dow Jones today reported that the company finally laid off the remaining employees and the rest will leave on October 31.

When I met the company, sales were 100,000 units or more. Production last year was less than 20,000 pieces with a third sitting in a warehouse. Over 200 part-time employees would work there in the summer bringing the total employees well into the 400-plus range. As the years went by in they sold 60.9 million Euros in 2008, which fell to 47 million in 2009, and only 24.2 million Euros, this fell to 13.7 million in 2010.

Now the thing about Italy is that all the companies seem to under-report gains and over-report losses. Just ask the Prime Minister how nobody in Italy pays taxes, but what happens when you have a true economic crisis so the companies that claimed they barely make a profit finally really stop making a profit. So the shady accounting in Italy finally caught with the country.

You have a situation now where you have the last manufacturer of scooters in Bologna. Once these jobs are gone - they will never come back. The local government needs to put the incentives to bring back production, especially the EV side of the business. If not, I hope the people of Bologna like driving Asian products, because eventually even Ducati will move production to Thailand.

It ends with a whimper because there is no decisive action in Bologna only some mild letters that don't lead to any action.

"The Province of Bologna is interested in finding a solution for the Malaguti Spa which will enable to keep the manufacturing hub in our territory and provide employment opportunities to highly skilled workers from the manufacturing point of view;

We are immediately willing and available to arrange a meeting with Malaguti Spa and with any interested investors."

Ok, show you are ready to deal. Match the U.S. investors dollar for dollar like the Chinese will, take out a full-page ad today in the Wall Street Journal, save the company. Put the same enthusiasm you put in into financing Aprilia to Piaggio because you didn't want a Taiwanese firm to buy them. Show some courage here. The EV project at Malaguti had a lot of potential and you killed it before the gas prices came back. Had those hybrids gone into production last year this would be a different story.

I've learned something today.

If you keep your eye solely on soccer you might not realize your scooter industry just fell apart in less than 10 years.

Also, when a bank calls you with investment money. Make sure someone in Italy is there to answer the phone.

View the original article:
martinracingperformance.blogspot.com/2011/04/how-100-million-dollar-company-ends-up.html
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