Distribution move is among first big Polaris-KTM steps – April 3, 2006

KTM-Sportmotorcycle AG has become the exclusive distributor in Germany for vehicles manufactured by Polaris Industries, Inc. The distribution deal started March 1 and is among the first major steps in a strategic partnership the two companies announced in July.
Polaris has wholly owned subsidiaries in the United Kingdom, France, Sweden and Norway, and sells products in virtually all the remaining European Union countries through independent distributors.
The Minnesota-based manufacturer previously distributed its products in Germany through Taubenreuther GmbH, an independent distributor, and supplied approximately 40 dealers there.
“Polaris is excited to leverage KTM’s strong presence and understanding of the German powersports market to further develop the Polaris brand and sales in Germany,” said Mark Blackwell, Polaris vice president, Victory Motorcycles and international operations.
Hubert Trunkenpolz, KTM vice president of marketing and sales, said, “KTM has established a dedicated sales force to manage the Polaris brand and product sales.”
Trunkenpolz said KTM plans to use its “back office operations in Germany to increase sales, build the Polaris brand and increase dealer service and satisfaction while minimizing distribution costs.”
Blackwell said Polaris dealers in Germany will sign a separate Polaris dealer contract with KTM and be managed by a separate sales force dedicated to the Polaris product line.
“While there will be some common KTM and Polaris dealers in Germany going forward, market conditions in specific areas and individual dealer capabilities required for the KTM and Polaris product lines will dictate how many common dealers there will ultimately be,” he said.
The distribution deal will include only ATVs, quadricycles, snowmobiles and RANGER utility vehicles. Polaris’ Victory line of motorcycles, established in 1998, may be on the market in Europe by 2008, Blackwell told Powersports Business during a previous interview.
Polaris officials say they do not expect KTM to become the distributor of Polaris products in any other European market “in the near future.”
“We want to focus our joint cooperative distribution effort on this key market to ensure success and demonstrate the compatibility of our product lines, brand positioning and dealer networks,” Blackwell said.
When Polaris and KTM announced their strategic partnership in July, the companies said the deal was made to “strengthen the competitive position of both companies and provide tangible benefits to customers, dealers, suppliers and shareholders.”
Speaking to Powersports Business at KTM’s annual business meeting in August, KTM North America President Jon-Erik Burleson said the deal further “creates opportunities in new product development, engineering, engine and technology sales, global distribution and global currency risk management.”
At the time, Polaris also said it hoped to use KTM’s facilities in Europe for quad assembly.
As part of the partnership, Polaris Industries Inc. purchased 24.9 percent interest in KTM Power Sports AG, the majority owner of the KTM Group GmbH, the owner of motorcycle manufacturer KTM Sportmotorcycle AG. Polaris made the Euro 62.6 million ($75.5 million) purchase through its Austrian subsidiary, Polaris Beteiligungsverwaltungs GmbH.
One integral part of the KTM/Polaris agreement stipulates that, in 2007, either KTM Power Sports AG may purchase Polaris’ interest in KTM Power Sports AG or, alternatively, Polaris may become the majority shareholder of KTM Power Sports AG. The exercise price under both option arrangements would be determined by market-based, predetermined pricing formulas to be derived from operating results of both companies in 2007.
KTM-Sportmotorcycle AG had sales of Euro 451.2 million ($537 million) in 2005. Polaris had sales of approximately $1.9 billion. Polaris’ international sales accounted for 12 percent of the company’s total sales last year.

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