Alan Finden-Crofts flew to America at the weekend to negotiate a severance package with Gary Matthews and tie up other loose ends.
He is openly critical of the way Matthews spent his two years at the head of one of the largest bicycle companies in the world:
I intend to turn the clock back to when this was a company which I had built into the largest group in the world. The underlying business is not bad, it just hasnt been guided as it should have, Finden-Crofts told the Mail on Sunday.
Along similar lines Finden-Crofts told the Nottingham Evening Post: "The business hasn’t done well. I’m going back to run it with common sense and with people who know about bikes.
The head office is virtually closed and staff are working out their notice. We are going back to very low cost."
BikeBiz broke the story about Matthews leaving Derby on Friday but we have been calling for Matthews to resign or be pushed since September. His handling of the Sturmey Archer sale made it evident he had not fully thought through the worldwide ramifications of selling the family jewels.
Employee morale plummeted at the many Derby-owned companies when news spread of how, and why, Sturmey Archer was allowed to collapse. By selling off Sturmeys land and that underneath the Raleigh factory too Matthews was perceived by many of Derbys 3000 employees as a short-termist.
Despite introducing many useful innovations (such as the group buying weeks held in Taiwan) Matthews made enemies in the two years of his four-year Derby contract.
"There was no love lost between me and Gary Matthews, Mark Todd, the former MD of Raleigh, told BikeBiz.
Our relationship was one of mutual dislike. It is galling to think that while hundreds of Sturmey staff struggle by on meagre means, he is likely to walk away with a payoff of over $500 000!
In light of the news of his departure I wish Alan Finden-Crofts every success in bringing Derby back from the brink. Alan is a highly experienced
company doctor and is probably the only person who has a chance of turning the company around."
Finden-Crofts was Derbys CEO and co-owner from 1987 until January 1999. He built up the group after buying Raleigh and Sturmey Archer from Tube Investments (TI) in 1987. In 1998 he and Ed Gottesman sold out to Thayer Capital Partners and Perseus Capital of Washington DC. The new owners installed their own man into Finden-Crofts position despite Matthews having had no cycle industry experience.
He believed in economies of scale and went on the acquisation trail. He soon bought Diamondback for $43m which industry analysts thought too high a price. He also had ambitious growth targets: he famously gave Derby company executives paperweights engraved with $60m in 2001, a reference to his profit target for this year.
But he wasnt operating in the fizzy drinks business any more. This was now the slow-burn bike trade, something he apparently failed to appreciate, bringing standard business models to bear on a business that is anything but standard.
He also made marketing and morale mistakes. He allowed Raleigh to end its 102-year heritage of steel-frame building from Nottingham and he appointed consultants to find the best way of getting rid of Sturmey Archer, which he said was non-core to a bicycle group!
In the meantime, he sold Sturmey and Raleighs factory sites for $14m, a sum which only just covers the annual expenses he was running up at Derbys new corporate HQ in his home town of Stamford, Conneciticut.
His ambitious dream of massively growing the Derby group of companies by both acquisation and better global procurement, needed new and expensive corporate ideas-and-implementation people.
But as he was building up his Stamford HQ, Derby was building up more and more debt, and bit by bit, Standard and Poors, the international corporate credit ratings agency, knocked Derbys rating down and down: its now on credit watch minus status.
Standard and Poors first started knocking down Derbys credit rating because of what it called inexperienced management. That warning about Gary Matthews being wet-behind-the-ears in bike trade terms was not heeded by Derbys owners. As a consequence Finden-Crofts now has to work his magic a second time to keep the whole group from going bankrupt.
After his visit to America, Finden-Crofts is flying to Derby Germany. He is explaining to Derby companies in person his enthusiasm for the Derby brands and his belief the situation can be turned around. But, thanks to Derbys debts, his survival strategy will have to succeed quickly if a break-up of the corporation is to be avoided.