Car crash

Written by Greg Fjetland

When the U.S. government approved a new class of vehicle for use on American roads in June 1998, Barry Good saw a world of opportunity — and his chance to get in on the ground floor.

With a top speed of 25 mph, “low-speed vehicles” would be allowed on any road with a speed limit of 35 mph or less. Good, a resident of North Vancouver, B.C., believed LSVs would spark a boom business in environmentally friendly electric vehicles for retirement communities, university campuses, destination resorts, industrial complexes and short-haul commuters. “I thought this was something I could do for the environment and something the market would accept,” says Good. Moreover, he adds, “There were no really viable alternative vehicles available.”

So the 30-year automotive sales and dealer-management veteran launched Dynasty Motorcar Corp. to produce an electric car that could travel 30 miles on an overnight charge and could easily be customized thanks to its modular design. However, the company proved to be less adaptable than its product. When production snafus and fickle financial markets failed to co-operate with management’s strategy, Dynasty had to be mothballed. It’s back in business today thanks to a joint venture, but the lesson for other entrepreneurs is clear: always have a backup plan.

Dynasty started off well enough. Good assembled management partners with decades of combined experience in the automotive industry. He hired a well-known Montreal designer who had crafted concepts for Porsche and Bombardier to design Dynasty’s LSV. In June 2000, Dynasty completed the reverse takeover of Attwood Gold Corp., a mining firm trading on the Vancouver Stock Exchange. The deal brought Dynasty $2 million in cash and other liquid assets, while a concurrent private placement of two million shares and a million share warrants injected another $2 million into the coffers.

Dynasty’s next smart move came in August 2000, when it opened its production plant in Kelowna, B.C. (The firm was headquartered in Burnaby.) Staying in Canada would bring huge exchange-rate benefits, as its customers were located in the U.S. Moreover, Kelowna was the home of Western Star Trucks, a sizable producer of trucks and buses now owned by Daimler-Chrysler. The large base of automotive suppliers that had assembled around Western Star would save Dynasty the expense and time of ordering parts from Eastern Canada.

Still, two years after the creation of the business, Dynasty had no revenue and no plans to produce a sellable vehicle before spring 2001. The costs of engineering, testing and developing a U.S. dealer network, however, were piling up. (Dynasty recorded expenses of $3.4 million in the year ended November 30, 2000, and another $1.6 million in the subsequent quarter.) Hungry for cash, Good et al embarked on a roadshow to generate investor interest in a public offering they hoped would raise $10 million — more than enough to cover planned expenses of $7.5 million. “We were looking to establish a financial cushion for dealing with the unexpected,” says Kelly Kennedy, who joined Dynasty in March 2000 and served as its president from May 2001 to August 2002. But their timing couldn’t have been much worse. The tech market was collapsing and taking innovative concepts such as electric cars down with it. When Dynasty’s offering hit the market in March 2001, it grossed only $6.5 million.

Management remained optimistic. Share warrants from the earlier private placement stood to bring in as much as $2 million, provided Dynasty’s share price topped $2. Moreover, Dynasty finally had a prototype to show off. The IT (Innovative Transportation) débuted in February 2001 at the North Carolina International Automotive Exposition. Ultimately, because of the IT’s modular construction, Dynasty would be able to offer the car in a variety of configurations, including a sedan, a van and even a stylized golf cart.

On April 17, 2001, Dynasty shipped the first eight ITs to three dealers in the U.S. It soon had an order backlog of 150 vehicles at $18,000 apiece, a network of 15 dealers, and interest from 170 potential distributors. But after spending $12 million from concept to car, continuing to spend on marketing and carrying as many as 68 staff, Dynasty was running short of cash.

Worse, Dynasty was ill-prepared for the bugaboos that frequent new companies producing new products. Early ITs were returned as fast as they were sold, thanks to faulty window cranks and seals. New cars couldn’t be produced until the problem was fixed, crippling Dynasty’s cash flow. (Whereas the firm’s break-even point was 1,800 vehicles per year, cars never came off the line faster than one or two a day.) Any rainy-day fund had been spent on parts inventories to meet demand that, in the end, couldn’t be met. “We had letters of commitment from large purchasers,” says Good, but they weren’t willing to pay a small, unknown company in advance.

By June 2001, the financial crisis was even more acute. Dynasty’s share price had dropped from a high of $3 to less than $2, the exercise price of the one million share warrants. Kennedy and Good scoured the landscape for bridge financing and managed to secure a $775,000 loan, but it didn’t last long. On July 27, 2001, Kennedy was forced to lay off his staff, shutter the Kelowna plant and begin negotiations with creditors.

Dynasty never struggled for lack of demand. In fact, soon after suspending production, the company received a $1.5-million order from a California buyer for 100 ITs as part of a long-term supply deal potentially worth $40 million. However, the deal came with a unachievable caveat: Dynasty had to prove it could fund production by raising $2.5 million within 30 days.

“Our inability to raise capital was the issue,” says Kennedy in hindsight. “We should have tried to raise more money at the outset, when the timing was better. Instead of a small private placement, we should have tried to do a much larger one. Having the money up front is so important for a startup in the business of developing a new product.”

Luckily for Kennedy, he’s been given the chance to apply the lessons of near-failure. In August 2002, Dynasty found its white knight in Commercial Body Builders Ltd., a Vancouver-based producer of custom vehicles such as armored trucks. The companies formed a joint venture known as Dynasty Electric Car Corp., headed by Commercial president Dean MacKay.

Mackay has his own views on what went wrong at Dynasty the first time around. “It tried to get too big too fast, because it ran out of cash,” he explains. “When you run out of cash, you rush to market with goods that aren’t completely developed. Cars were shipped that weren’t ready.”

Today, Kennedy and MacKay are bullish on Dynasty’s future. “Our cash costs are less because we’re in somebody else’s facility,” says Kennedy, “and we’re ramping up production slowly.” Nine dealers in Canada and the U.S. have signed on, and the car is being made in Delta, B.C. in sport, sedan, convertible, van and golf-cart formats. (An SUV is on the way.)

“I really believe that this car will have a very significant place in the market,” adds Mackay. “It’s 10 times better than it was before.”

© 2003 Greg Fjetland

Originally appeared on