By: DAVID ORLOFF on September 18, 2000

After Revving Up Mustangs, Saleen is Building Its Own Speedster

It’s good to have deep pockets when you want to sell a $375,000 car.

That’s why Steve Saleen said he is happy to have industrialist S.C. “Tony” Johnson as a partner in his Saleen Inc. of Irvine.

For more than a decade, Saleen’s company has bought Mustangs from Ford Motor Co., souped them up and turned them over to dealers who sell them as big-ticket toys to wealthy speed demons.

Now Saleen is crafting from scratch a car of his own that he hopes will rival the Ferrari and Lamborghini. While Saleen’ s Mustangs go for $30,000 to $50,000 apiece, the asking price for his new S7 is nearly $400,000.

Johnson is the president and chief executive of Minneapolis-based Hidden Creek Industries, a holding company specializing in the automotive industry. Hidden Creek counts about $6 billion in annual revenue from portfolio companies such as Dura Automotive Systems Inc., Tower Automotive Inc. and J.L. French Automotive Castings Inc. Johnson’s companies make engine components, windows, doors and other auto pans.

Johnson became an investor and partner in Saleen Inc. in 1993. Saleen, the company’s founder, president and a former professional race car driver, said he needed some capital to help the company out after recession a decade ago.

“To withstand for a longer time, I needed to have better capitalization,” Saleen said.

Back then, Saleen Inc. sold off one of its parts divisions “to keep the company going,” Saleen said. “That’s when I looked for a partnership.’s’

Saleen didn’t have to look beyond his own client list. Johnson is a car enthusiast and bought a Saleen Mustang in the early ’90s.

When the time came to make a deal, Saleen chose Johnson, who now serves as Saleen Inc.’s chairman.

“We are fifty-fifty partners,” Saleen said.

The Saleen Mustang is a high-performance version of the Ford sports car. The Saleen version has more horsepower, a racing suspension, new body trim and other custom pans. Saleen Inc. is considered a specialty vehicle maker under federal government guidelines and has put more than 7,000 vehicles on the road to date.

The company is 10 months into the development of its new S7, a 550-horsepower supercar.

“It’s a very fun project to do,”

Saleen said. Saleen designed the car with Phil Frank, a longtime product designer and consultant. The company used Ray Mallich Ltd., an English automotive company, to develop the car’ s chassis and recruited the University of Glasgow in Scotland to handle the car’s aerodynamics.

Unlike the development process for most cars, Saleen skipped the clay model step and went straight from computer-aided drawing into production. A number of manufacturers are interested in how he developed the car, he said, since skipping the clay model brought down the cost.

“It saved time and money,” Saleen said.

Saleen’s bid to make his own car grow out of his 16 years of bolstering Mustangs. Saleen Inc. designs, develops and makes a specialty product line with 2,000 performance and custom automotive products ranging from engine components and body pieces to floor mats and speedometers. For the body of the S7, Saleen incorporated the carbon fiber technology used in the Formula One race cars.

The S7 was unveiled last month at a car race in Monterey, Calif.

Saleen now is testing the vehicle for proper engine function and throttle response as well as the temperature and cooling systems. It will start speed tests this month and should finish testing by the end of the year, he said. Saleen will produce about 100 cars per year and they will be on select showroom floors in the second quarter of 2001.

As for the demand for the S7, Saleen already has orders for eight cars, he said.

Demand is “a lot higher than anticipated,” Saleen said.

Saleen said he expects to produce and sell 300 to 400 of the cars in the next four years.

The S7 will also be sold in 15 exotic car dealerships around the nation, he said.

All of the manufacturing and tooling of the vehicle is being done in Irvine, but to do so, the company needs more space, Saleen said.

It is currently looking for a 125,000-square-foot facility in Irvine to consolidate its six facilities. It has two buildings in Lake Forest, two in Huntington Beach and two in Irvine, including its headquarters, assembly line and showroom. The main building also houses the design and engineering operations as well as the customer service center and parts distribution facility.

“Irvine has turned into Detroit West,” Saleen said. Orange County is now home to the headquarters for 10 automotive brands, while Los Angeles boasts a few carmakers as well.

“We like Southern California. It is a hub of automotive enthusiasts and a supplier base,” Saleen said. Plus, he added, “Orange County is a very nice place to live.”

The move will come at the end of the company’s lease in March and will give Saleen Inc. about 25,000 more square feet of space. Saleen has 115 employees, a number that won’t change much when the full-scale production of the S7 begins. Saleen said the current staff can handle most of the work.

The company’s operations produce five Saleen Mustangs per day. Saleen has made a few hundred performance Ford Explorers and a few Ford Contours. Saleen also made a performance minivan out of a Ford Windstar for comedian Tim Allen.

“We’ve done a number of items for him,” Saleen said.

Allen is a racing enthusiast. The star of “The Santa Clause” is a partner with Saleen in Saleen/Allan Speedlab, a racing team and development division of Saleen Inc.