Holden started out as a family saddlery in 1856 called JA Holden & Co and eventually made two big mistakes: first, it moved from saddles to car seats to making actual cars; and second, it kept on manufacturing in Australia.
Of course we wouldn’t have had the FJ Holden, the Kingswood or the Commodore, and we wouldn’t have had a local manufacturing industry – or Peter Brock for that matter – but we also wouldn’t have had $1.8 billion in taxpayer subsidies and yesterday’s anguish over Holden’s long, drawn-out closure, either.
This week’s family business profile is about another Australian saddler that didn’t make those mistakes: Bates Saddles of Perth, est. 1934, still makes nothing but saddles – no cars – and is now the world’s largest saddler, making them in Vietnam.
Ron Bates, the third generation descendant of George Bates who now owns the business, says that if he had kept manufacturing in Australia the business would have been wiped out by the exchange rate long ago.
Of course there were no government subsidies for a Perth saddler, and when he decided to shift the manufacturing to Vietnam in 1999 there was no difficult press conference with hard questions about local suppliers (he was already getting all the leather from Germany and Austria, where the tanneries produce a better product).
It just happened, nobody noticed, and life in Australia went on without a saddle industry.
These days Ron Bates doesn’t complain about Australia’s high costs or the high currency. Instead he complains about Australia’s 5 per cent import tariff on saddles, which exists even though we have a free trade agreement with Vietnam, and he complains about the high cost of freight into Australia, which he says is double what it is elsewhere.
Nevertheless, Bates Saddles is “significantly profitable” even though sales have fallen about 30 per cent from a peak of $30 million and 50,000 units a year before the GFC, thanks to the extra margin available from having the saddles made in Vietnam.
Now, all Bates’ R&D and marketing is done in Perth, but the saddles are sent directly from the factory in Vietnam to dressage and recreational horse riders around the world.
The other interesting thing about Bates Saddles is that in just three generations there have been four cash buyouts that have removed the potential for the sort of conflicts that often beleaguer family businesses as they spread through the generations.
George Bates started the business in 1932 after he was sacked during the Great Depression from his job as saddler, by borrowing £100 from his sister and buying an industrial leather sewing machine.
He ran up the saddles on the porch and as soon as his son Donald could remain upright on a bicycle, he delivered them by bike. Apparently Don’s record was five saddles at once.
His other son Gordon worked outside the business as an accountant and did the books for his dad at night. Eventually Don bought George out, so that when Gordon’s son Ron joined the business 50 years ago, his uncle Don was the sole owner and George had retired, sort of. He was still running up saddles at home on his old sewing machine.
Oh, and it turned out that Gordon and Don had been pretty fine boy sopranos, performing all over Perth until their voices broke, at which point Gordon became a pianist and Don a drummer.
They were pretty good musicians as well, and played at weddings and parties in their spare time. Eventually Gordon started his own wedding reception business and left Bates Saddles to his brother.
The wedding receptions business went quite well, so that when Don was getting snowed under by the growth of the saddle business, Gordon was able to sell the wedding business and use the money to buy 50 per cent of the business from Don and join him in running it.
Don had two daughters, Carol and Lyn; Gordon had two sons, Ron and Ken. The two girls both married and their husbands, Ian and Ray, both joined the business. Ron was called up for national service in Vietnam but Ken stayed home because of chronic hay fever and worked upstairs at the saddlery, making saddles. After two years in Vietnam, Ron returned home and joined the business as well.
It’s now 1983. Don and Gordon own 50 per cent each of the business and have both retired. Their sons and sons-in-law are running the business, but that can’t last long. Ian and Ray hadn’t grown up in the business like Ron and Ken, and hadn’t “done the trade”. Inevitably they fought.
So in 1985 Ron and Ken decided to buy them, and their father, out. They sold the firm’s real estate and took on a mortgage to pay out Don’s side of the family with cash, and then did a deal with their own father, Gordon, to pay him a life pension out of the business (they didn’t have enough cash). The business was then 50/50 Ken and Ron.
Soon after that, the Bates became the world pioneer of synthetic saddles, using the same fabric that wet suits are made from. This cut the price of saddles by half while leaving a good profit margin, and that business took off.
Ten years ago, at the same time as the sewing machines above the shop were turned off and manufacturing was moved to a Taiwanese-owned factory in Vietnam, Ron bought out Ken. Once again Bates Saddles is owned 100 per cent by a Bates.
Ron has two daughters, Ellen and Emily. Ellen works in the United Kingdom for a Melbourne-based company called WeatherBeeta, which is one-third owned by Bates Saddles. It’s a wholesaler of horse rugs and accessories and operates 50 Horseland retail stores around Australia.
Emily is a marketer and was working in the business until a few months ago, when she resigned to have her first child.
Happily Ron, now 65, has a good accountant and a good marketing manager helping to run the business, and has been able to wind down to three to four days a week.
He says he doesn’t want to sell the business, but doesn’t know how the next succession of this iconic 80-year-old Australian business will go. Will Ellen and Emily saddle up, as it were? Time will tell.