Seeking a splash, Gibbs preps amphibious vehicle for market

Posted on October 18, 2012

A mile into the woods just north of Oxford Township is a working quarry and a small lake. Within view of Lapeer Road, Gibbs Sports Amphibians Inc. tests its first product to go to market since the company’s founding 15 years ago.

The Gibbs all-terrain vehicle, the Quadski, cuts through the emblematic Michigan landscape of tall oaks and firs, over rolling hills to the water’s edge. But here’s where the all-terrain vehicle lives up to its name: The Quadski hits the water, its wheels retract into its chassis, and it blasts off through the water like a Jet-Ski.

The Quadski is a multifaceted power sports machine. And the Auburn Hills company’s pioneering co-founders hope its launch will transform the company into a revenue-generating endeavor.

Gibbs unveils the Quadski Monday at the Detroit Athletic Club and is expected to announce a contract with five dealers, and talks with five more, targeting markets in Michigan, Florida, Texas and New York.

If successful, the Quadski will be the first product Gibbs gets to market after a decade and a half of supplier troubles, a $200 million investment and run-ins with U.S. regulations.

But at $40,000 and a low-volume production run of 1,000, profits are not likely soon. Chairman Neil Jenkins said vehicles will enter dealerships next month, with full production beginning in 2013. He expects to hire as many as 200 at its Auburn Hills plant to support the project.

“There’s an awful lot of water in the world, but the number of rivers, lakes and coastline in America alone is massive,” Gibbs founder and Chief Strategy Officer Alan Gibbs said. “Our products are designed to open up the world to another version of freedom.”

Rommel Dionisio, who covers powersports companies Polaris Industries and Arctic Cat as senior vice president of equity research for New York-based Wedbush Securities LLC, said Gibbs Sports will need to create a whole new market to sell the Quadski.

“This is an innovative product in an entirely new category,” he said. “The price tag sounds like a lot, so it’s going to have to be marketed to a very affluent community. The challenge is for them to create enough buzz around the product.”

Polaris’ most expensive 2013 ATV, the Ranger Crew 800, and Yamaha‘s most expensive 2013 personal watercraft, the FZR, both start at $13,999 — combined, they’re still cheaper than the Quadski.

Dionisio said the average consumer for an ATV is a male age 35-45 with an annual household income of $65,000-$75,000. He also said as many as 70 percent to 80 percent of ATVs are financed.

“We know it’s expensive, but we hope over time and higher volumes, we’ll get the price down,” Jenkins said. “We have decided to be very cautious with our market entry because of the price.”

Mary Knutson, external relations manager for Polaris, said in an email that while the Quadski is unique, a major powersports manufacturer like Polaris doesn’t see enough appeal to be interested in creating a competing product.

“We would not be interested in any powersports product that would retail at $40,000 — there isn’t a market,” she said. “We also are not interested in anything related to personal watercraft; it’s too small of a market with high cost of entry. We were in that business in the past, and it was never profitable.”

Gibbs, 73, a New Zealand entrepreneur and businessman, founded a version of the amphibious vehicle company in England in 1997. Gibbs is known for his envelope-pushing ideas, first with his attempt to launch a New Zealand-made car, the Anziel Nova, in 1967. However, Gibbs was never able to get the fiberglass car through regulators, and the business went defunct.

Gibbs then became a successful merchant banker and investor. He brokered some of the largest deals in New Zealand history, including the $4.25 billion sale of Telecom Corp. of New Zealand. He also owned New Zealand’s largest auto dealer.

Media reports say Gibbs is worth $500 million, with a larger-than-life sculpture park on his sprawling 1,000-acre New Zealand farm, where he decided to invent and invest in amphibious vehicles to traverse the farm.

Gibbs hired British sports carmaker and engineering firm Lotus Engineering in 1996 to determine whether an amphibious passenger car was viable. They did, and Gibbs hired engineering firms in metro Detroit in 1997 to develop his dream, the Aquada amphibious car.

Facing engineering challenges and regulatory hurdles, Gibbs hired Jenkins’ U.K. lightweight vehicle engineering firm Krafthaus — which worked on technology for iconic brands such as Rolls-Royce, Land Rover and Pininfarina — to assist in the project. The two eventually merged companies to form Gibbs Technologies Inc. in 1999, according to its website.

Gibbs and Jenkins moved the company back to England to avoid U.S. auto regulations but lost its engine supplier, MG Rover, when it went defunct in 2005, Jenkins said. With 45 orders, Gibbs and Jenkins pulled the plug on the English operation and moved the company back to metro Detroit in 2007.

Gibbs Technologies returned to the U.S. because it’s the company’s largest market, Jenkins said. More than 60 percent of its million website visitors annually are from the U.S.

“If the States is going to be your major market, you’ve got to be here to understand that market,” Jenkins said.

However, the regulations remain an issue, and so does accessing suppliers.

The National Highway Traffic Safety Administration requires that all cars contain airbags, and Gibbs Technologies can’t find a supplier for an airbag that may get wet, Jenkins said.

“The level of regulation in the U.S. is daunting,” he said. “To be honest, we just weren’t prepared for it.”

Gibbs Technologies spent the past five years with the hiring of more than 100 local employees, spending hundreds of thousands of man hours developing new products, including the Quadski, Jenkins said.

Last month, Gibbs Technologies announced a five-year agreement with BMW to use its four-cylinder K-1300 engines in the Quadski. The company has worked for the past 18 months and more than 75,000 engineering man hours to pair the engine with Gibbs Technologies’ patented amphibious system. Gibbs Technologies holds 300 patents on its retractable tire and propulsion systems.

The company also acquired a 54,000-square-foot plant in Auburn Hills to support production of the Quadski. The plant also serves as its corporate headquarters. Gibbs Technologies maintains an engineering office with 12 employees in England.

Gibbs Technologies will manufacture its own Quadski chassis and propulsion components as it can’t find willing suppliers, Jenkins said.

“Local suppliers just aren’t that interested in us because of the low-volume nature of our products,” Jenkins said.

Gibbs Technologies is also working on seven other product lines, including the off-road Hummer-like vehicle the Humdinga, and the large, military-style amphibious transport vehicle the Phibian. Jenkins and his team were in Washington, D.C., last month shopping the two vehicles around but have not inked any contracts.

Gibbs said despite 15 years of hardships and pouring $200 million into a company that has yet to sell a single vehicle, he’s set on success.

“I’m totally unreasonable,” he said. “All my contemporaries are playing golf and getting bored and old.

“Despite all of the struggles and pain, I’m having fun,” Gibbs said. “We’re nothing if not persistent, and I’m hopeful we’ll get our money back and make a decent profit, but if we don’t, I’ll still be OK. This is what entrepreneurs do: take risks that reasonable people would not.”

Dustin Walsh, Crain’s Detroit.