HRE Performance Wheels expands its upscale niche

It’s a given that the best luxury vehicles already come with the best of everything, including the wheels. But stock parts aren’t good enough for some aficionados, even when the car costs more than $100,000.

HRE Performance Wheels caters to that kind of automotive perfectionism. The company, based in the San Diego suburb of Vista, manufactures flashy wheels to order for owners of fancy rides at a cost of $3,000 to $20,000 for a set of four.

But a business built on the vanity or performance needs of a relatively small class of consumers doesn’t get to cruise unscathed through the twists and turns of international economies.

“We are a discretionary, expensive product,” Chief Executive Chris Luhnow acknowledged.

And HRE endured some tough years. So the company retooled itself, changing the way it manufactures and markets its wheels, bringing HRE back to profitability in 2012 after three years of losses, Luhnow said.

Last year, the company sold fewer than 10,000 wheels, and Luhnow said sales are running 40% higher this year. The private firm, owned by Luhnow and investor Phillip Hillhouse, doesn’t divulge revenue figures, but industry insiders estimate HRE sales at $7 million.

Count Jim Powell as a fan. The owner of a Southern California import-export business and a string of apartment complexes already has sets of HRE wheels on 17 of his 20 exotic cars. He’s waiting for another set from HRE’s new line of carbon fiber and aluminum wheels — the $20,000 ones.

“I can afford anything I want, but HRE are what I want,” said Powell, 57. “They are tested to the limits, and their quality is always absolutely top-notch.”

HRE can also depend on a loyal following among professional racing teams, which buy as many as eight sets of wheels at a time. A set of HRE wheels was on the rare Gumpert Apollo, which hit speeds exceeding 220 mph, when it set a track record on the famous Nurburgring in Germany in 2009. HRE wheels were also on the Shelby Ultimate Aero twin turbo when it set a speed record of 256.15 mph in 2007.

As the recession loomed, HRE executives realized that there might not be enough buyers like Powell in the U.S., which was home to more than 80% of their customer base.

Consumers were far less likely to buy luxury and performance vehicles. They would be even less likely to tack on the added expense of the company’s then $5,000-to-$10,000 custom aluminum wheel sets. Sure enough, U.S. sales dropped by more than 40% during the recession.

But, “we were not taken by surprise,” said Luhnow, 48, who comes from the world of investment banking. “A good portion of 2008-2009 was spent making sure we were prepared to last through an extended recession.”

President Alan Peltier, 41, who joined HRE after working as an engineer for Northrop Grumman, added: “We had to reinvent our business, and it was a big, big risk.”

First came an increase in capital improvements and increased automation.

Each wheel starts as a dull gray cylinder of aluminum weighing about 100 pounds. Through a combination of heat and pressure, the aluminum is forged into the shape of a solid wheel.

The same heat and pressure also alters the structure of the aluminum. “It allows you to refine the crystalline structure, making it much, much stronger,” Peltier said.

From there, the unfinished piece is “flow formed” and the barrel — the broad surface that supports the tire — is slowly spun out. “It’s like a potter’s wheel with your hands, except it’s done by a huge hydraulic machine,” Peltier said.

The wheel is lathed to further refine its shape. In the milling machines, the style of the wheel is defined. The last step is prepping and powder coating, resulting in a wheel that weighs 20 to 25 pounds.

The company also produces three-piece versions consisting of the wheel’s center and the inner and outer rim, allowing for increased customization.

The production work these days is done with fewer people because HRE spent millions to automate with sophisticated lathes and milling machines that cost up to $400,000 each.

HRE’s 60,000-square-foot factory and office complex had about 40 employees before the recession. It has 45 now, but the mix has undergone a significant change, with fewer devoted to production.

“We have been able to invest in the front office, which allowed us to add a creative director who has a marketing team,” Peltier said. “We doubled our sales staff to bring a lot more capability to the sales and marketing side.”

HRE executives figured that international sales, never higher than the single digits as a percentage, had to improve substantially.

“No. 1 was go international,” said Luhnow, who earned a degree in economics from Stanford University and a master’s degree in business administration from the Wharton School of Business. “We were mostly opportunistic. We had some relationships but we didn’t have a focused and concerted effort.”

Luhnow said that he and Peltier traveled to China several times in 2009 and 2010. They opened an office in Stuttgart, Germany, to handle European sales.

“We went to Singapore, Japan, the Middle East,” Luhnow said. “We spent about six months in China over a two-year period.”

“We were both flying at least 70,000 miles a year,” Peltier said. “That was really to create an international footprint that was significant.”

International sales now account for about 40% of HRE’s business.

The company also sought to buff its image in advertising and social media, pushing more than just performance specifications.

HRE “had a great product, but the brand really needed an infusion of sizzle,” said Patrick Moran, the 37-year-old marketing and art director for HRE. The graduate of the Art Center College of Design in Pasadena began his career in the automotive industry.

Case in point: a print advertisement, re-purposed as giant art in the company’s headquarters, that could be a movie screen grab. At twilight in downtown Los Angeles’ Arts District, a man in his 30s leans casually against a late- model Porsche, lighting a cigarette, “selling the cool of HRE wheels,” Moran said.

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