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From now on, only PDAC members in good standing will receive the newsletter and informational updates directly via email. PDAC will continue to post each month’s newsletter and important information on its website: www.pdaco.org for those non-members who wish to keep up with what PDAC is working on and accomplishing.

Please join our organization because we can influence the future of the powersport industry in Colorado and it is vitally important to all of us that we do.

From the Chairman's Perspective
Annual Member Meeting

On Monday August 13th PDAC held its annual member meeting. We had a good crowd of association members and even a few potential dealer members who wanted to get a closer look at exactly what we've been up to, and at least as importantly, what we will be up to in the year to come.

We began the meeting by reviewing the powersports dealer licensing legislation that PDAC was instrumental in helping to pass in the legislature this year. The new law regulates and deals with powersports vehicles (ATVs, dirt bikes, personal watercraft and snowmobiles) in much the same way as the dealer licensing laws for cars, truck and street motorcycles. This legislation adds real value to every franchised retail powersports shop in the state by assuring that only quality manufacturers offer products for sale in the state, by leveling the playing field among competitors, by providing franchise and territorial protections for retailers and by establishing a standard of trust and competence the public can believe in.

One long-time dealer at the meeting said he thought that of all the association has accomplished in 20 or more years, that this year's powersports dealer license legislation was by far the most significant. And, the new laws will benefit every dealer in the state, whether they have supported the dealer association or not.

I would have to agree. But we're not done yet.

Special Guests

Our keynote speakers were Bob Sexton and Jerry Smith, the Executive Director and Compliance Chief, respectively, of the Department of Revenue's Auto Industry Division, which is the part of the state government responsible for implementing the new Powersports Dealers Licensing legislation that was effective on July 1st of this year.

Bob and Jerry emphasized that there will be a period of transition while the Division creates the rules and regulations and then asks dealers to comply. In fact, PDAC has been able to provide its industry knowledge and know-how to Division personnel as this very large task gets under way. In the last few weeks, Bob and Jerry said they have come to more fully realize the full length and breadth of the powersports industry and are eager to get the new law up and running.

The first task is to identify powersports manufacturers who sell their products in the state so that they can be registered and approved. Next up will be an effort to get out to dealers the new powersports dealer applications so they may apply for their powersports dealer license. Powersports dealers who are already motor vehicle dealers have already met the essential criteria for their powersports license. Powersports dealers who are not currently motor vehicle dealers will have some work to do to get their licenses.

Bob and Jerry emphasized that the Division will keep dealers informed of the progress they make and what is expected from powersports dealers as the process moved forward. There were several questions and we had a great discussion during lunch with our guests.

Financial Review

Financial statements of the association were reviewed at the annual meeting. For 2007, PDAC has budgeted revenue from member dues at about $78,000 with total association expenses for the year at just over $68,000. Major expenses are the contracts for the executive director and the stipend for lobbying assistance during the January through May period when the state legislature is in session. Member communication and office expenses make up nearly all of the rest of the association's expenses.

Through July, total dues revenues were just over $44,000, which was about $28,000 lower than during the same period in 2006. Despite that, we believe annual revenues will come in close to the budgeted amount by the close of 2007. Total expenses through July were running about $2,700 less than budget for the period and within $100 of the same period last year.

Legislative Issues

Those at the meeting discussed the upcoming legislation and regulatory priorities for PDAC in the upcoming year, including:

  • Sales tax and titles for powersports vehicles

  • Increasing the GAP cap

  • OHV/Snowmobile noise

  • Municipal exhaust and emission laws for street bikes

  • Strengthening franchise laws

  • No fault/emergency provider insurance

  • Motorized bicycles/scooters

  • Board of Directors

    The members attending the meeting elected the following individuals to the PDAC board of directors:

    Brian Harris Fort Collins Motorsports 2 year term
    Kurt Finley Colorado Powersports 2 year term
    Jason White Fay Myers Motorcycle World 2 year term
    Bill Comegys Grand Prix Motorsports 2 year term
    Steve Larsen Greeley H-D, Honda, Yamaha 2 year term
    Marshall Van Thorne Interstate Honda 2 year term
    Gary Wilkinson Handlebar Motorsports 1 year term

    Continuing Board Members (terms expire Summer 2008)

    Jack Starr RPM Motorsports
    Dave Burke Sun Enterprises
    Donavon Facey Xtreme Performance
    Mike Hendry Foothills BMW

    The newly elected board of directors also elected Jason White as vice-chairman and treasurer and myself as chairman.

    Membership

    PDAC has worked hard for over two years to increase its membership roles, with a goal of recruiting nearly all dealers in the state to join and support the association. To date, 21 dealer organizations and five industry associate member organizations have joined the association. While this is by far the most dealer members the association has ever had, we have been disappointed that even more dealers haven't joined.

    Over the last several months we have been providing newsletters and other critical industry information directly to all dealer organizations in the state in an effort to communicate the important work we have undertaken on behalf of powersports dealers in Colorado. We followed that up with electronic and telephone invitations to dealer principals to join the association and/or to attend the member meeting on August 13th. We saw a few new faces at the meeting and talked seriously with a few new voices and we hope we'll end up with four or five new members very soon.

    At our current level of dealer member support, the association can and will function as an effective monitor and lobbyist of government legislative and regulatory activity concerning the sale and use of powersports vehicles. We will continue that work, embracing the priorities and desires of our dues paying members as we go. While many powersports dealers may benefit from the work the association does, only dues paying members will be able to influence the issues and concerns that receive the time and attention of PDAC.


    Michelin North America Announces Tire Price Increases
    Effective Jan. 1, Michelin North America is increasing prices on Michelin motorcycle and scooter replacement tires sold in the United States and Canada by up to 8 percent, the company announced. All tires delivered after Jan. 1, 2008, will be invoiced at the new price.

    Michelin designs, manufactures and sells tires for all types of vehicles from scooters to the space shuttle. For more information, visit Michelin North America.


    Ticket for Loud Bike DISMISSED!
    By Daniel J. Chacon, Rocky Mountain News
    August 9, 2007

    The first and only ticket that police have issued to a motorcyclist under Denver's controversial new noise ordinance was dismissed Wednesday.

    The city's decision to drop the case highlights a fundamental flaw - Denver police aren't equipped with the $1,000 noise monitors needed to make the charge stick, said Wade Eldridge, lawyer for the ticketed biker.

    "In any case in which it's properly challenged, the city has an impossible burden," said Eldridge.

    The reason Assistant City Attorney April Snook cited in her motion to dismiss the case was the city was "unable to prove charge beyond a reasonable doubt."

    The ordinance, which took effect July 1, was in response to rising complaints about ear-splitting motorcycle noise in areas such as downtown, where more people are living in lofts and high-rise condos.

    It limits noise levels to 82 decibels from a distance of 25 feet and requires motorcyclists with bikes made after 1982 to have a muffler with an EPA noise-certification stamp.

    Ellen Dumm, spokeswoman for the city's Environmental Health Department, said an "oversight" caused the case to be dismissed.

    "The police officer did not inspect the pipes for the required (Environmental Protection Agency) sticker," she said.

    Dumm also said she thinks the dismissal was a "one-time" thing and that the ordinance's enforcement will result in quieter streets.

    Eldridge's client, Stuart Sacks, was stopped in LoDo near Little Raven and 20th streets at 5:25 p.m. July 2. He was ticketed for having an "unlawful modified muffler," records show.

    Eldridge said he believes Sacks was initially pulled over for making an illegal lane change.

    "Basically, they had no noise meter and no visual inspection in this case," Eldridge said.

    "So the most they would have had was the officer's gut feeling that it was too loud, which is not enough."

    Eldridge said he wasn't "at liberty to comment" about whether his client's motorcycle had an EPA noise-certification stamp.

    "But," Eldridge said, "I'd be surprised if he did."



    Analyst: Housing Sector Woes Spreading to the Garage
    www.dealernews.com

    Powersports industry stocks had a rocky road this week after a financial analyst report that revealed higher dealer inventories and the marketwide credit squeeze are taking a toll on powersports sales.

    Bank of America Securities analyst Michael Savner sees a challenging model year ahead for Harley-Davidson (HOG) and Polaris (PII).

    In a note to investor clients, Savner said broader economic woes are putting pressure on powersports manufacturers and retailers as consumers and banks tighten their purse strings.

    "Our view is that powersports companies are the hardest hit by macroeconomic headwinds and are currently negatively impacted by housing market decline, higher gas prices and low consumer sentiment," he wrote. "Besides, there is maturation of domestic motorcycle markets [and] secular decline in core ATV business."

    While Polaris is getting a great response to its new RZR model, that demand appears to be cannibalizing the market for older and more expensive ATVs as cost-conscious consumers move down the price scale.

    "We believe the mix shift from slightly higher ASP [average selling price] products to lower, as well as lower margins for RZR could pressure near-term earnings," he wrote. "While ATV inventory seems to have improved, we are still tracking old inventory with dealers, which might pressure new model pricing."

    The potential cannibalization is priced into Savner's earnings per share estimate for Polaris' third quarter; he reduced that estimate from $3.03 to $2.98 per share, attributing 4 cents of the cut to lower financial service income (HSBC recently discontinued its financing agreement for non-Polaris-based products) and a penny to RZR cannibalization.

    Harley dealers, too, are stocked primarily with 2007 models, Savner wrote. He estimates dealer inventory is 12 percent higher than at the time last year; the estimated mix is 8 percent 2006 models, 79 percent 2007 models and 13 percent 2008 models.

    "Our checks indicate that increased promotional levels continued in July as dealers continue to clear 2007 inventory," he wrote. "Historically, 3Q accounts for roughly 25 percent to 27 percent of yearly unit retail sales, and is the second most important quarter, 2Q being the most important."

    Savner estimates H-D will ship 93,000 bikes in the third quarter, 80 percent of those to domestic dealers.

    "Based on our proprietary inventory survey, we believe inventory levels remain well above optimal levels," he wrote. "Currently, we are tracking 39,496 bikes in the channel, which is up roughly 12 percent from last year but decreased from up 22 percent at the end of the second quarter of 2007."

    Not surprisingly, two of the states with the most harrowing housing markets are also swimming in Harley inventory.

    Savner reports that dealers in Florida averaged 106 bikes at the end of July, compared to 95 at the end of the second quarter; California dealers averaged 46 bikes compared to 39 at the end of June; and Texas dealers averaged 45 bikes vs. 38 in 2007. Inventory in the rest of the country seems to be stabilizing.

    International sales are the bright spot in Savner's Harley forecast, with a projected 12 percent to 15 percent increase.

    Harley faces tough comps this quarter, as the launch of the Twin V Cam 96-based models last year drove a 6.7 percent sales increase.

    "While the recently launched 2008 lineup consists of some impressive new models, but it does not match up to the 2007 changes, in our view. This year Harley is introducing Softail Rocker, Sportster 1200 Nighter, Dyna-glide Fat Bob and CVO models. We believe this tough comp coupled with current domestic softness could impact sales in a seasonally strong third quarter," Savner wrote. "Overall we expect the 2008 performance should be more like model year 2006 i.e. moderate shipment increases, and lower ASP increases."

    Savner lowered price targets Tuesday on Harley-Davidson stock from $64 to $62 a share with a "neutral" rating, and from $50 to $44 a share for Polaris with a "sell" rating.

    Shares of Harley-Davidson opened at $55 Wednesday, and fell to $53.72 before rebounding to $54 in after-hours trading. Polaris shares opened at $45.31 and closed down at $44.97; then staged an aggressive comeback to $46.15 in after-hours trading.



    Board of Directors
    Chairman, Kurt Finley - Colorado Powersports
    Vice-Chairman/Treasurer, Jason White - Fay Myers Motorcycle World
    Director, Donavan Facey - Xtreme Performance
    Director, Dave Burke - Sun Enterprises
    Director, Bill Comegys - Grand Prix Motorsports
    Director, Brian Harris - Fort Collins Motorsports
    Director, Jack Starr - RPM Motorsports
    Director, Gary Wilkerson - Handlebar Cycle
    Director, Mike Hendry - Foothills BMW/Triumph
    Director, Steve Larsen - Greeley H-D, Honda, Yamaha
    Director, Marshall Van Thorne - Interstate Honda

    Executive Director, Jerry Abboud
    Members
    All Sports Honda
    Apex Motorsports
    Aurora Honda
    Colorado Powersports
    Coyote Motorsports
    Davis Service Center
    Fay Meyers Motorcycle World
    Foothills BMW/Triumph
    Fort Collins Motorsports
    Grand Junction HD
    Grand Prix Motorsports
    Greely HD, Honda, Yamaha
    Handlebar Cycle
    Hi Country Motorsports
    Interstate Honda
    Motoadventure
    Motorcycle Accessories
    Pikes Peak Harley Davidson
    Rocky Mountain Kawasaki
    RPM Motorsports
    Sun Enterprises
    Twin Peaks Motorsports
    Vickery Motorsports
    Xtreme Performance Center
    Associates:
    Universal Underwriters
    Tucker Rocky Dist
    PSN
    Western Powersports
    Retail Powersports Mang. Group

    Disclaimer: PDAC is not authorized to dispense legal advice. The information contained in this newsletter is for informational purposes only. PDAC advises that dealers consult legal counsel on the specifics of any law or regulation to ensure full compliance.
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