Indian stalls; seeks restart

Indian Motorcycle Co., fighting to keep the storied brand from fading back into history, is scrambling to find a buyer and reopen after its abrupt and unexpected closure last month. Time is running out.
The company’s assets, which former executive vice president Fran O’Hagan said include “a couple of hundred bikes,” have been assigned to Burbank, Calif-based CMA Business Credit Services.
Seen as an alternative to bankruptcy, CMA’s mission as assignor is to find a buyer for Indian that will continue to “operate the company, maximize its value and preserve its holdings,” according to a CMA spokesman. Failing that, CMA will liquidate its assets and begin paying off creditors, which may include dealers stuck with voided warranties, no access to factory parts and bikes that will be hard to move. The spokesman said Indian was “only weeks from liquidation” unless a buyer is found.
There is some good news: “Confidentiality statements are being signed and due diligence (will begin) sometime this week,” said the spokesman at press time, indicating there is at least one interested party.
Some names have surfaced as potential buyers, most notably Malaysian automaker Perusahaan Otomobil Nasional Berhad, better known as Proton. E-mails to the company were not returned by press time. Proton is a quickly growing manufacturer that acquired British sports car maker Lotus in 1996. Its cars are exported to 50 countries, according to the company’s web site.
The Indian factory in Gilroy, Calif., shut down without warning Sept. 19 after principle owner, the Audax Group, a Boston-based equity firm, withdrew its funding. “We had a rather large investor lined up and had been working on a deal for some months. But time caught up with us and we ran out of cash,” O’Hagan said during an interview with Powersports Business.
The move shocked the industry. According to O’Hagan, Indian was setting company retail sales records and was on target to meet its 2003 goal of 4,500 units sold, up from 3,800 units in 2002. The quality of the 2004 line-up was “dramatically improved,” he added, a smaller, S&S-made variation of the successful Powerplus engine was set for the Scout line, and model prices were cut across the board about $1,000. The ‘04s were to be debuted at the Indian dealer show in Las Vegas, but the event was cancelled less than 72 hours before doors opened.
Prescott Valley Indian of Prescott Valley, Ariz., owner Jerry Wohlrabe said, “The whole thing seems very odd. Confidence in the factory was running high; the bikes were getting better all the time. There were no layoffs, no cost cutting moves, no sense of this whatsoever. And to cancel the dealer meeting at the very last minute didn’t make sense. If you’re looking for a buyer or investor, wouldn’t it help to show him some 2,000 or 3,000 new orders?”
After only five model years, 1999 through 2003, Indian closed 50 years after the Springfield, Mass.,-based Indian Motocycle Co., shut down in 1953 after a 52-year run. Creditors who collectively invested an estimated $145 million into reviving the historic brand saw their money run out, 380 employees lost their jobs, and 200 dealers in the U.S. and Canada are left with no warranties or spare parts and mostly a collector’s market for a once-again defunct brand. Some 1,500 to 2,000 bikes remain in dealer showrooms, O’Hagan said.
Two years ago, the Audax Group committed $45 million to Indian. O’Hagan said the company actually received more. “What people failed to recognize is that after you develop a wonderful product, you need inventory and infrastructure to support the dealers. Ford paid $2.5 billion for Jaguar then put in twice that much in product support programs. Yes, you can make a return, but the figures were daunting. But I would expect some entity to come forward. Indian was moving in the right direction.”
The company, however, couldn’t avoid one big wrong turn. While model reviews were getting better, O’Hagan conceded a large detriment to Indian’s success was cost. “We knew the bikes were overpriced by about 25% (‘03 models ranged from $17,000 to $25,000), but we were working hard to get the price down by trying to bring more manufacturing in-house and improve our economies of scale. It was just a matter of time.”
Jay Jester, senior vice president and director of marketing for Audax, said, “There was nothing sudden about our pullout. We tried to make it go since June of 2001. We tried to bring down the cost of the bikes and make this thing work. The war, the economy, and bad weather in the Northeast, which had the greatest concentration of dealers, contributed to the closure. The fundamental strength of Harley-Davidson was tough to compete with and so was their 100th Anniversary.”
Industry reaction varied. A spokesman for Indian carburetor supplier Mikuni said, “It took a unique individual to want a bike styled like that. It didn’t have the popular styling of a Road King, for example; it didn’t have broad-based appeal. They had found their customer base, serviced it, and now it’s done.”
Rod Kurowski, director of manufacturing for Powerplus 100 engine maker Performance Assembly Solutions (PAS), said: “The shutdown was a total shock. Indian represented 40% of our business and we had a very good relationship with them. They were making good moves.”
“There was no internal struggle, as rumored,” added Jester. “We were trying to find the right partner. We were not going to jeopardize the company and those jobs over control fights. Shutting down production doesn’t kill the brand. Long term, the brand has legs. We hope Indian will carry on.”
Henry Wittenberg, president of Indian apparel supplier Ragtrade International, said, “Here’s a brand that has endured for over a 100 years. It almost has a legendary feel to it. I think there is too much value in the name for it to just die.”