CRAFTING V-VEHICLE

Company leaders work to create a fresh model for an ailing industry

By Greg Hilburn • ghilburn@thenewsstar.com • February 22, 2010


SAN DIEGO — V-Vehicle Co.’s headquarters here is on the second floor of a nondescript converted warehouse on the seedy edge of the city’s trendy downtown Gaslamp Quarter, which was developed around the San Diego Padres baseball team’s new PETCO Park.


While much of the real estate within the center of the district has become a prime tourist playground, it hasn’t yet expanded far enough to take in this upstart American car company’s location.


Founder and chief executive Frank Varasano’s office overlooks a junk car lot, and a block away much of San Diego’s homeless population appeared to have gathered for the day.


“We’re not long for this building,” Varasano said. “But we’re on an every-dollar-counts budget. We don’t want our investors, both private and public, to think we’re living it up.”


But within the modest surroundings is a team with prime credentials, a collection of about 50 engineers and Ivy League business school graduates that clearly believes this company will ultimately become not just successful, but iconic.


The books on the chair-side table at V-Vehicle’s entryway tell of the company’s ambition: “Quotations of Henry Ford”; “Birth of the Beetle”; and “The Model T (A Centennial History)”.


“We believe our concept is revolutionary,” Varasano said. “It’s all about the business model. Think of what Amazon is to books, Southwest is to airlines and Walmart is to retail.”


Those are lofty comparisons, considering V-Vehicle hasn’t sold, or even shown, one of its mystery cars or completed construction of its Ouachita Parish assemby plant where the company said it will eventually employ a 1,400-person work force.


V-Vehicle officials agreed to allow The News-Star to tour its headquarters and conduct interviews if it didn’t reveal details about the car, its technology or its distribution model other than what the newspaper has previously reported from details obtained by investors.


Among those details: the V-car is a high-mileage, gasoline-fueled four-door hatchback that will be sold for about $10,000.


Varasano and his colleagues clearly hope a peek behind the curtain will bring the company to life for Ouachita Parish and Louisiana taxpayers, some skeptical, who have committed $82 million in cash incentives toward the project.


V-Vehicle still awaits word on $320 million in low-interest loans from the U.S. Department of Energy’s Automated Technology Vehicle Manufacturing program. If the federal loans are obtained by March 1, the the bulk of that state and local cash will be released.


The company, with the state’s and parish’s help, has also secured a $5 million federal Economic Development Administration grant.


“It’s not a paper car,” Varasano said. “It’s the real deal.”


In fact, the final touches were being put on the first of 55 drivable prototypes Thursday and Friday at Metalcrafters, Inc. in Fountain Valley, Calif., a company renowned for its construction of prototypes for many established auto manufacturers. That original prototype is scheduled to be driven on a test track in Arizona on Tuesday.


“People would be absolutely shocked at the progress,” Varasano said as he examined the prototype.


V-Vehicle’s demonstration vehicle was built in one of many confidential cubicles within Metalcrafters.


“Most of the work we do is confidential, so a lot of people don’t know we exist,” said Metalcrafters owner George Gaffoglio.


Even Gaffoglio, whose family company has built such cars as Ford’s 45th anniversary Mustang and racing legend John Force’s Funny Cars, was taken aback by the speed at which the car has gone from concept to prototype.


“I think what’s quite amazing is that (Varasano) came to me 18 months ago with the project, and here we are with this vehicle,” Gaffoglio said. “I can’t wait to see it in action.”


Varasano and Horst Metz, V-Vehicle’s vice president for assembly, said the reason the car came together so fast is because of the team the company assembled and because of the business model, which included pre-engineering input from V-Vehicle’s group of suppliers.


“We’ve captured the best talent in the industry and cross-pollinated the best ideas, and it’s powerful,” Metz said. “We’ve got DNA from Nissan, Honda, Ford, General Motors and virtually every other manufacturer out there. It’s not like a Saturn start-up with all General Motors DNA. There’s no change in that.


“Every other start-up hired engineers, who then turned over (specifications) to suppliers. We found suppliers and leveraged their capabilities. They’ve been part of the process from the start.”


Those suppliers and V-Vehicle engineers meet twice monthly in a session that Varasano has dubbed carworks, which he believes has vested the suppliers in the company.


“Suppliers aren’t used to being asked questions or for their expertise; they’re used to being handed specs and told to build them,” Varasano said.


Hari Sankara lyer, vice president of engineering and a 20-year veteran in the auto industry, agreed.


“In this project the car is in the center and everything else the spokes,” Sankara lyer said. “There’s a lot of ownership in this car. We knew from the beginning we wanted to bring the suppliers on board. They’re not used to that.”


But some industry analysts are skeptical.


David Sedgwick, editor of Automotive News, told The News-Star last year that V-Vehicle’s venture “could be a bloodbath.”


“The landscape is littered with outsiders that have tried to muscle in on the business with a newer, better, cheaper model,” Sedgwick said.


Yet Varasano and his management team were able to convince enough savvy, high-profile investors like venture capital leader Kleiner Perkins Caufield & Byers, Google Ventures and T. Boone Pickens otherwise, raising about $90 million in private capital.


“We believe this consumer value proposition and the revolutionary business model makes this an extremely powerful sales proposition,” said V-Vehicle’s corporate spokesman Joe Fisher.


Varasano believes the company can tap into American pride to make the car, which company officials like to describe as a vehicle for the American working family, a hit.


“People say, ‘Well, what about these cars from China or India that you’ll have to compete with?’,” Varasano said. “Well, what about them. Are we just going to roll over and turn over the biggest industry in the world to foreign automakers? No.”


But his confidence doesn’t diminish the challenge of breaking into a market dominated by traditional car companies, even if their model is tarnished.

“Nobody here is underestimating the challenge we face — nobody,” Varasano said. “But I believe we can do better. We have to do better.”

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