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Indian Motorcycle at the End of the Road Again

The Gilroy company halts production and fires its workers after an attempt to revive the nation's oldest bike brand fails.

September 23, 2003|John O'Dell | Times Staff Writer

Investors in Indian Motorcycle Corp. spent more than $145 million to find out there wasn't much demand for its product.

The Gilroy, Calif., company that tried to revive the nation's oldest and once most popular motorcycle brand said Monday that it had halted production late last week and fired 380 employees.

The move came after a decision by the main investor, Audax Group in Boston, to pull out after pumping more than $45 million into Indian Motorcycle over the last two years. Others put in $100 million-plus to bring the old motorcycle firm back to life in 1999 after a hiatus of nearly five decades.

"The board had been out fund-raising," Indian Motorcycle Chairman Frank O'Connell said, "but it was looking difficult."

The first Indian motorcycle hit the road in 1901, and today any early Indian is a collector's item. The original manufacturer went out of business in 1953.

Enthusiasts were convinced that the brand could stage a comeback. In 1998, a group bought the rights to the Indian name and the next year started building a modern line of Indian Motorcycle models.

O'Connell, a former HBO Video president who became Indian's president in 2001 and chairman last year, said the game plan was to design and build a line of big, heavyweight cruisers to compete with similar bikes made by industry icon Harley-Davidson Motor Co.

Harley, which opened in 1903, itself nearly went out of business 20 years ago. But Harley has rebounded to dominate the heavyweight segment of the motorcycle market. Its cruisers are so popular the company is expected to sell 129,000 of them this year -- compared with the 4,000 or so Indian had been on track to sell.

Indian had lined up 200 dealerships across the country to sell its three models, including a top-of-the-line Chief priced at about $24,000.

Despite dealer interest, analysts said the company always faced long odds, given that so few consumers remembered the Indian brand.

"They thought that with the Indian name -- and among enthusiasts it is one of the best and most recognizable around -- that they could replicate the nostalgia and demand" that Harley-Davidson has, said Don Brown, an Irvine motorcycle consultant. "Just because you have the name doesn't mean you can find the same success."

In the end, Indian's management needed at least $150 million just to promote a new brand to compete with Harley, Brown said, and "even then it would have been a risk."

O'Connell said Indian didn't intend to match Harley's sales volume but had hoped to capture a niche market within heavyweight cruising motorcycles, those with engines of at least 900 cubic centimeters.

"But to build your own manufacturing system and do your own product research and development takes tremendous amounts of cash," O'Connell said, "and the process always needs more."

About a dozen employees remain at the company, he said, to oversee the vacated plant and to work with Indian's dealers to sell off an inventory of 1,200 cycles

The original bike maker was founded in 1900 in Springfield, Mass., as Hendee Manufacturing Co. Its first Indian product, a chain-driven bike with a 1.75-horsepower motor, was introduced in 1901.

Indian's sales swelled to 40,000 a year during World War I, when the motorcycles were in high demand as military vehicles by the U.S. and its allies.

By the 1920s, the Indian was the dominant motorcycle brand. The bikes had powerful engines and top speeds approaching 100 miles an hour -- and they cost almost $300, about what Henry Ford in 1923 was asking for a Model T.

Gradually, Indian's sales declined. In 1930, the company's founders sold the firm to industrialist E. Paul duPont. DuPont brightened the motorcycles with two-tone paint jobs, using his company's enamels, and with free-flowing designs inspired by the Art Deco movement.

That didn't help sales, though. After World War II, DuPont sold Indian to investor Ralph Rogers, who built smaller, lighter motorcycles to compete with the British lightweights that were becoming popular.

"It wasn't a good move," said Brown, the consultant. "He was up against Triumph Motorcycles," and the British brand controlled that segment.

Finally, in 1953, Rogers folded Indian. Several attempts to revive the brand followed, and so many different groups argued that they each had rights to the Indian Motorcycle name that one filed a federal copyright suit. It ended in 1998 with the auctioning of the name in federal district court in Denver.

The winners brought the business to California, setting up shop in a 150,000-square-foot warehouse in Gilroy.

Early on, the new Indian Motorcycle set lofty goals, saying it would take on Harley and sell 40,000 of its expensive Indian cruisers every year. But in its first year, Indian built just 1,100 motorcycles. For the first three years, the bikes were outfitted with motors purchased from an outside supplier, which limited their appeal to purists.

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