When Harry Zekelman died suddenly in 1986, his sons assumed control of their father’s Ontario-based steel tube company. In the course of two decades, Barry Zekelman and his brothers built Atlas Tube into the largest manufacturer of steel tubing in the world. In 2006, the Zekelman boys sold a majority stake in Atlas to the huge Carlyle Group, which then merged Atlas with its other steel company, John Maneely Company. Barry Zekelman became the CEO of the combined firm. In 2008, OAO Novolipetsk Steel, part of a Russian conglomerate, agreed to buy Maneely and the Zekelmans’ remaining interest in Atlas. In the financial turmoil of the past year, the deal fell through. Even without it, Zekelman’s not going to miss his next mortgage payment. He and his brothers made about $1.5 billion on the original agreement with Carlyle.
Though Barry Zekelman and his wife try to keep a low profile, some of their purchases were bound to show up in the news. Their vacation home in Paradise Valley set the record for private home sales in Arizona. The Zekelmans also have a Caribbean vacation home, where they keep Man of Steel, their 164-foot Heesen yacht (which replaced their previous 124-foot, $16.3 million boat). They moor their 50-foot twin-turbine-powered 200 mph catamaran speedboat, Outerlimits, at their home on the Ontario side of Lake St. Clair, across from Detroit.
Zekelman’s need for speed is not limited to the water. He’s owned Porsches, Benzes, Lamborghinis and Ferraris, including an Enzo.
Bottom line: Barry can afford a few toys. At the same time, he’s a well-known and generous philanthropist.
The Zekelmans have donated tens of millions of dollars to the Special Olympics and other charitable causes. Even in their philanthropy, they try to avoid the spotlight. A $10 million dollar donation to the Holocaust Memorial Center names not the Zekelman brothers, but rather their grandparents, who were murdered by the Nazis, and their parents, who were survivors.
Recently, the automotive world has been buzzing about a $6 million lawsuit filed by Zekelman against Bugatti for their failure to deliver a 2009 Veyron 16.4. On the face of it, the lawsuit seems pretty simple.
In September 2008, Zekelman went to Bugatti Troy, in suburban Detroit, to purchase a new Veyron. The Bug salesman offered to procure a 2008 model from another seller. But Zekelman wanted an ’09 model. Bugatti Troy agreed to sell him a 2009 Veyron, in Italian red, for $1,553,354.57.
Both Zekelman and the Bugatti salesman signed the appropriate Vehicle Purchase Agreement, Car Configuration Order Form (to specify interior trim, personalization and other options) and Buyer’s Acknowledgement of Special Conditions. Zekelman agreed to pay a $428K non-refundable deposit. The agreements stated that the deposit could only be refunded if the vehicle was not available. Zekelman wired the advance payment. Apparently construction on the car began.
In early December, Zekelman wired the remaining $1.1 million to Bugatti Troy. The salesman promised delivery by the end of March 2009. The moneys were transferred first to Bugatti USA and then to the parent company in Dorlisheim, France.
Once payment was made in full, though, the salesman emailed Zekelman. He notified his customer that the dealer could not deliver a 2009 model, and again offered Zekelman a 2008 model. Apparently the factory had decided to skip the 2009 model year. Zekelman requested a full refund per the terms of the signed contracts. In January, Bugatti Troy informed him that the refund process was “underway”.
When the refund was not paid by late January, Zekelman’s attorney, Steven Z. Cohen, contacted Bugatti Troy, whose lawyer responded by saying that the refund was forthcoming. Eight months later, the refund had still not been paid. Zekelman’s lawyer filed suit for a full refund, plus treble damages.
[Disclaimer: Mr. Cohen is a long time friend of mine and has represented me in a legal matter. I didn’t know of his involvement when I started researching this article, but our previous relationship made it easier for me to pick up the phone and call him about his story.]
According to Cohen, Volkswagen, Bugatti’s parent company, simply refused to honor the signed contracts—other than the offer to substitute a 2008 model. When I said I was baffled by their refusal, since the language in the agreements is pretty clear, he agreed, saying it made no sense, particularly from a public relations standpoint.
To begin with, there are a limited number of people who can afford a million-dollar car. The folks who buy megabuck cars and attend the Pebble Beach and Meadow Brook concourses are a relatively small fraternity. Word gets around about treating customers shabbily. The high-end marques know their customers like to feel cosseted and attended to. That’s why all of them have bespoke personalization programs, of which Zekelman availed himself when custom ordering his Veyron.
[NB: Bugatti Troy is not a party to the lawsuit. When contacted about the lawsuit, Bugatti Troy had no comment.]
Why would VW/Bugatti risk such a black eye? Something Zekelman told me in an email provides some perspective. While he could not discuss the ongoing litigation, he did say the following.
I signed a contract for a 2009, they built the car for me, I have progress photos. Just after I paid the full amount, 3-5 days before shipping they told me it would be titled a 2008, which is when I said, “No way.” Why would I buy a 2008 at the end of 2008 when I ordered a 2009? The rest is self-explanatory. They have since sold the car and have now been paid in full twice! Nice guys.
So this appears to all be about paperwork, how the car would be titled. Bugatti didn’t want to title the car as a 2009 model.
The decision seems to involve other paper, the green kind. At first it appeared that VW didn’t want to refund the money because the car was already built. Since some have suggested that VW loses money on each Veyron sold, it’s understandable they would want the revenue. However, according to Zekelman, the car’s been sold to a different buyer.
So what’s VW’s incentive to dig in their heels, other than the interest earned on Zekelman’s $1.5 mil?
When the Veyron was announced, Bugatti said that they would be building 300 examples of the 1000 horsepower exoticar. According to a press release on the Bugatti website, Number 200 was delivered to a “Middle East customer” this past March. Bugatti has also indicated that the coupe is no longer in production; the remaining 100 or so Veyrons will be the substantially more expensive (by $500,000) open cockpit targa-styled Grand Sport model, apparently to be sold as model year 2010 and beyond. Production on the Grand Sport began in June, with 20 cars already produced at this time.
In addition, many of the final Veyrons in the initial production run of 200 were “special” editions, like the Hermes edition (MSRP $2.4 million) that was delivered to that customer in the Middle East. Bugatti/VW has figured out that $1.5 million just isn’t exclusive enough for some folks who are willing to pop for an additional 6 or 7 figures worth of cachet. When you pay for cachet, especially $900K worth, you don’t like others getting it for free.
It’s possible that there were regulatory reasons for skipping the 2009 model year. But as the ’08 and ’09 cars would have been identical, I doubt that emissions and crash certifications were needed. My guess: between order and delivery Bugatti decided to skip the ’09 MY and then simply wanted to avoid making a 2009 Veyron that would be the only one of its kind.
Sure, each of the Veyrons is effectively a custom car and could be described as one-of-a-kind. But to be one of one 2009 Veyrons would rocket it up the collectibility scale. Perhaps not as exclusive as James Glickenhaus’ one off P4/5 Ferrari, but definitely rarer than the ’08 and ’10 Veyrons.
Letting Zekelman in on such a bargain might upset those Bugatti customers who already paid substantial premiums to buy special editions or the Grand Sport.
When asked for comment, aware of Zekelman’s philanthropic causes and the potential for a PR disaster, Jill Bratina, head of corporate communications for VW of America, said the following.
The Volkswagen Group has the highest personal respect for Mr. Zekelman, but vigorously disagrees with the allegations he made in his lawsuit, and is defending itself against those allegations. It is the Volkswagen Group’s policy, however, not to discuss the substance of any pending litigation.
I’m sure that VW’s and the Zekelman’s respective histories are just a quirk of coincidence. But big companies sometimes accommodate less than noble agendas in the pursuit of profit. Malcolm Bricklin got into the car business with Subaru because Toyota and Nissan at the time adhered to the Arab boycott of companies that did business with Israel. I can’t help but wonder if Volkswagen may have been more eager to accommodate Mr. Zekelman if he was a customer in the Middle East (well, except for one country).
[UPDATE: The parts of this article discussing the potential for anti-Semitic PR have been removed.]