Posted on: Tuesday, September 23, 2003

Indian Motorcycle pulls plug on revival

By John O'Dell
Los Angeles Times

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 United States' oldest and once most popular motorcycle brand said yesterday that it had halted production late last week and fired 380 employees.

The move came after a decision by the main investor, Audex Group in Boston, to pull out after pumping more than $45 million into Indian Motorcycle over the past two years. Others put in $100 million-plus to bring the old motorcycle company 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 Indian is a collector's item. The original manufacturer went out of business in 1953.

Enthusiasts were convinced 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 itself nearly went out of business 20 years ago. But Harley, which opened in 1903, has rebounded to dominate the heavyweight segment of the motorcycle market. Its cruisers are so popular that 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 dealership across the United States to sell its three models, including a top-of-the-line Chief priced 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, a motorcycle consultant in Irvine, Calif. "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 hadn't intended to match Harley's sales volume but had hoped to capture a niche market within heavyweight cruising motorcycles.

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