On a Friday morning in late March, Tom Hanagan was startled to
see two county sheriff’s officers at his family’s Corbin Motors
plant.
They waited, holding a sheet of paper with an inventory of every
possession in the building. Following a court order, the officers
had temporarily seized all Corbin Motors’ property.
On a Friday morning in late March, Tom Hanagan was startled to see two county sheriff’s officers at his family’s Corbin Motors plant.
They waited, holding a sheet of paper with an inventory of every possession in the building. Following a court order, the officers had temporarily seized all Corbin Motors’ property.
Former Corbin President Ron Huch possessed a $625,000 lien, an owed debt, from the company. He had petitioned the order and requested his money by the following business day.
Corbin Motors couldn’t afford the payment. So Hanagan and his father, Mike, who founded the company in 1999, met with their lawyers and decided to file for Chapter 7 bankruptcy.
“Corbin Motors as a corporate entity,” the younger Hanagan recently said, “will end in the next month to 10 months.”
And so will the Hanagans’ dream of mass-producing the Sparrow – an electric-powered, three-wheeled vehicle, bearing bright colors, eco–friendly amenities and small enough to squeeze four into one parking spot.
The Sparrow had also been a hopeful vision of 400 or so investors and their combined $11 million – about $1 million of which came from local residents, according to the Hanagans.
The Hollister family recently spoke to the Free Lance about its once-mighty aspirations for Corbin Motors, early enthusiasm for the Sparrow, depleted investor relations, a state lawsuit against the company and the future for Corbin Pacific – the motorcycle parts manufacturing company Mike Hanagan founded 35 years ago, and what the family calls “the parent company.”
With virtually all their emotional and physical energy put into the Sparrow division during the past seven years, every ounce of passion, the Hanagans now say they neglected Corbin Pacific. But they’re ready to reinvest themselves into the brand name that brought the family its first trace of worldwide notoriety.
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Mike Hanagan grew up the son of Irish immigrants in East Hartford, Conn. In his early 20s, he often worked on motorcycle seats for friends in the neighborhood. Before long, he formed Corbin Manufacturing – after randomly seeing the Corbin name on a street sign while stopped at an intersection.
Soon after, he adopted Mike Corbin as an alias. And when his son Tom joined on, he also started going by the Corbin namesake.
Under a slightly changed company heading, Corbin Pacific prospered in Watsonville and Castroville during the 1980s and 1990s before moving to Hollister in 1998. The Hanagans’ interest in the city sprouted in 1996 – when the company largely contributed to the first Hollister Independence Rally.
“We were the ones that actually funded the first rally in 1996,” said Mike Hanagan, 59.
With Corbin Pacific outgrowing its Castroville plant, the Hanagans floated into Hollister on a wave of rally enthusiasm. Corbin Pacific, which manufactures motorcycle accessories, brought its employee base of 125 to San Benito County, while investing about $6 million into a new building and equipment.
The Hanagans also ushered in high hopes for the Sparrow, development of which had been under way since 1995.
The vehicle was touted as saving time, money and the environment. It had two wheels in front and one in back, and was powered by a 156-volt battery. The mini-vehicle, which included many basic features of an automobile, was a zero-emission vehicle.
The Hanagans took the first Sparrow to the 1996 San Francisco Auto Show, where, Mike Hanagan said, they were prepared for rejection.
“And just the opposite happened,” he said. “People wanted to buy them. People wanted to invest in them.”
The first morning of the auto show, they took orders for about 100 vehicles, which hadn’t even been built. From there, enthusiasm snowballed. They built a 40,000 square-foot facility for $3 million and in March 1999 incorporated a second company just for the Sparrow – Corbin Motors.
“It was unbelievable. We were in the world news all the time,” Mike Hanagan said. “It was a constant parade of investors coming here, a constant parade of people who wanted to buy cars. It was easy money times, the dot-com era.”
In June 1999, Corbin Motors merged with MCM Engine Technologies. Its CEO, Ron Huch, was appointed president of Corbin Motors.
With a single Sparrow costing $70,000 and selling for about $15,000, the Hanagans sought investors to offset the difference, hoping eventual mass production would lower its cost below the retail price tag.
People in San Benito County were behind the idea, according to the Hanagans. And many local investors supported the potential, despite it being an obvious high-risk investment.
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The root of Corbin Motors’ downfall, the Hanagans say, was the timing of a slumping economy. Furthermore, the emergence of mechanical flaws, including faulty controllers and questions surrounding the vehicle’s ability to handle sharp turns, fueled mounting consumer doubt in the investment.
Several lawsuits turned up, most citing the California Lemon Law. And investors started grumbling about mismanagement within the company.
Corbin Motors was forced to downsize. An employee base of 110 shrunk to 10. The company couldn’t pay bills and couldn’t even make rent for two years. In August 2001, the Hanagans fired Huch as president because, they said, he wasn’t gaining enough investors.
Attempting to “save the Sparrow” and wait out the economic downturn, the Hanagans introduced another vehicle – the gas-powered Merlin Roadster – at the 2001 Sturgis Motorcycle Rally.
“People lost their jobs. We lost investors. The debt was building,” Mike Hanagan said. “The only way to save it was the Merlin Roadster.”
Made with fiberglass panels and a Harley Davidson engine, the Merlin cost $14,000 to produce and retailed for $24,000 – potentially an immediate profit.
By 2003, the company had received $20 million in orders. Meanwhile, they had commissioned a German company in this year to correct the Sparrow’s flaws. Toward the end, Mike Hanagan said, the Sparrow’s technical problems had been solved.
“We got the (Sparrow) running, and it worked like a Rolex.”
But it was too late by then. In March, when Huch’s decision to redeem his debt essentially froze Corbin Motors’ operations, mass-production of the Merlin Roadster had been only six months away, they said. The company had delivered only 12 Roadsters.
“We only did the bankruptcy because of (Huch),” Tom Hanagan said. “Now he has all the physical assets.”
Lately, the Hanagans have struggled coming to terms with the Sparrow’s failure. And the residual effects won’t let them move on.
The Hanagans lost millions. And they’re millions more in debt. Aside from investor losses of $11 million, the Hanagans themselves dumped about $4.5 million. And their current debt to creditors is another $3 million, they said.
Meanwhile, they are weathering a state investigation into the company’s stock-selling practices.
According to a state law stemming from the Great Depression, Corbin Motors was allowed to sell stock to a limited number (35) of unaccredited investors. Those are people with an annual income of less than $200,000 and a net worth of less than $1 million.
David Baskin, the Hanagans’ attorney, said the two were “very careful” in verifying each investor as accredited. Others, including investors and dealers, claim Corbin Motors misrepresented the company’s finances. At this point, Baskin said the state’s suit against Corbin Motors may reach $10 million to $30 million.
“At the same time, we don’t know if it will be more than $1 million to $2 million,” Baskin said.
Through all the problems, the Hanagans said they made only one mistake, that they have a single regret. They empowered a couple of people in town to sell stock on commission.
One of those men, who personally invested in Corbin Motors, convinced many other locals to invest thousands of dollars in the company, the Hanagans said. As compensation, the Hanagans guaranteed the man the right to buy additional stock in the future.
Today, regardless of the Corbin Motors’ ultimate downfall, the Hanagans are convinced the company could have flourished if not for the poor economy and, most recently, Huch’s decision to redeem his promissory note.
“It had a really good chance and it’s proportionally related to the curve in the economy,” Mike Hanagan said. “Going back to ’96 and ’98: We said, ‘Man, we’re going to lick the world.’ We thought like that. We talked like that. We lived like that.”
But now, their hopes in business, and futures in Hollister, once again rest with Corbin Pacific. While Corbin Motors continually downsized and eventually went under, Corbin Pacific has followed the motorcycle industry’s gradual ascent, they said.
Corbin Pacific’s employee base has nearly doubled since moving to Hollister and now stands at 225. The company has a payroll of about $9 million, and sales are on the rise, according to Mike Hanagan.
“When the motorcycle company came here, it was already a successful company,” he said. “And it has flourished even more.
“We never got up on any morning and decided to do something wrong in this town. We have our lives invested in this town.”
