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Polaris CEO, No.1 Indian Dealer Talk Acquisition

Wednesday, April 20, 2011
The winds of change were blowing. What exactly those changes were, Indian Motorcycle Charlotte owner Mark Moses wasn’t sure, but he had a gut feeling something was coming. That feeling was confirmed yesterday with the
We bellied up to the bar for a pint of sarsaparilla at Deadwoods infamous Saloon No. 10.
Polaris Industries, parent company to Victory Motorcycles, yesterday announced it has acquired the Indian Motrocycle Company. We talked to the owner of the leading Indian Motorcycle dealer in the world and listened in on a conference call with Polaris CEO Scott Wine to dig up more information on the transaction.
announcement Polaris Industries acquired Indian Motorcycle. The iconic motorcycle brand, founded in 1901, has a rich and storied history. Not all of that history has been good. But since Stellican Limited bought the rights to Indian in July of 2004, the company has been back on the path to respectability. Now that a major OEM is taking the reins to Indian Motorcycle for the first time in almost 70 years, the brand’s future has even more potential to return to its former glory.

“In a conference call between Indian dealers today, the tone was positive and very upbeat. Long-term, this is a phenomenal, great thing to happen. Obviously there will be a little transition period for all of us to get through right now,” Moses said.

Moses confesses he has been an Indian proponent for the last 30 years who is driven by his passion for the Indian brand. He owned a Top 100 dealer in Ohio during the Gilroy Indian years and his Indian Motorcycle Charlotte dealership is currently the “No. 1” retailer in the world for the Indian brand. When asked about the recent acquisition, Moses stated:

“In regards to the brand, I’m extremely pleased. I think long-term this is probably a marriage made in heaven. We’ve got a powerful brand name and brand recognition of Indian Motorcycle teaming up with an absolute expert in motorcycle production. As long as they treat the brand as a stand-alone and don’t try to merge it into Victory, I think it’s a win-win and it’s my understanding that the brand will be held alone. I think it’s critical that they proceed slowly and pick some of the best dealers. I think the Indian dealers will be fine, there’s obviously just not enough of them. We just need to cover more markets and offer better level of service to our retail buyers so I’m excited from that perspective. The new marriage answers a lot of those questions that we had about the future of the brand.”

Models like this 1946 Chief with signature styling cues like its deeply valanced fenders helped Indian at one time claim its share of the American-made heavyweight cruiser crown. With Polaris' resources, will Indian once again see its return to glory?
In Polaris’ presentation on its First Quarter 2011 Earnings Results, the company charted out its plans for Indian’s development, starting initially with product improvement, progressing to a heritage bike re-launch and culminating in global distribution expansion. Development of new, iconic Indian motorcycles fits directly into Polaris’ strategy and corroborates Moses’ opinion as to ways the acquisition can help Indian.

“For future product development, research and development, I think it can give Polaris the brand recognition that they so desperately need. It puts them on the fast track to utilize the power of the Indian brand and then use the power of their resources in regards to engineering and quality. For Indian, more products to market and a wider range of price points I think are critical,” Moses said.

Speaking of price points, everybody is curious how much the acquisition of the Indian Motorcycle Company cost Polaris Industries, to which Polaris replied “Unless required to, we will never disclose what we paid for an acquisition.”

We had the opportunity to sit in on a conference call discussing the acquisition today and here’s what Polaris CEO Scott Wine had to say.

“Yesterday Polaris closed the acquisition of the Indian Motorcycle Company, one of the most storied brands in heavyweight motorcycles. By uniting the Indian brand with the capabilities Polaris has developed in its 13 years with Victory, we are confident over time that we will accelerate the growth and profitability of both brands and our overall motorcycle business. A brief review of history will show that Indian built the first American motorcycle in 1901 and the world’s first V-Twin engine in 1907 and went on to become one of the great motorcycle companies in America in the first half of the 20th Century.”

“We have no intentions of living in the past and fully recognize that the brand has had many ups and downs over the past 60 years but the heritage and style that Indian brings to Polaris significantly expands our target customer base. As we look at the breakdown of motorcycle consumers, Victory has established a strong brand position with the performance enthusiast segment where customers are most interested in our modern styling, performance, quality and value of the bike. With the Indian brand in our stable, we will gain access to what we call the “die-hard” segment where riders look for classic styling and iconic brand. This acquisition more than doubled the scope of our target market.”

We couldnt think of a more fitting motorcycle to visit the Crazy Horse Memorial on than one of the new Indians.
The die-cast console on the tank includes a speedo and multi-function displays like a low fuel light and neutral indicator.
The Chief Roadmaster we tested came with a nifty chrome luggage rack and a small passenger backrest.
The acquisition of Indian Motorcycle expands Polaris' presence in the heavyweight cruiser division. Will there be any conflict in owning two American V-Twin manufacturers that were competitors before? Time will tell.
“With that said, there’s a distinct difference between having access to and actually penetrating any segment of the highly competitive heavyweight motorcycle market. We made this investment to pursue the capabilities, including a world-class engineering team and a demonstrated ability to execute new product introduction that are strongly correlated to what the Indian brand needs for success. Polaris can provide the short-term support to improve and maintain production of their current product line. Currently we will leverage our talented engineering, sourcing and design team to create an Indian lineup that is true to the rich heritage of the brand with the performance and quality that people expect from a premium motorcycle.”

“Another key benefit that we bring to the Indian Motorcycle Company is we are a strong network of dealers and suppliers. While we want to make sure that the actual bikes remain distinctly different, the compatibility of the Indian and Victory brand is compelling through offering a stronger motorcycle lineup to the benefit of our current dealers and to our much-needed dealer niche in a division of the most desirable motorcycle market.”

“Indian Motorcycle sales were approximately $11 million in 2010 and we project shipments will decline slightly before they accelerate with the re-launch of the new heritage bikes we develop. This business will be distributed to suppliers as we make these necessary but national investments, but we are confident that in time these investments will yield quite strong returns. We have a detailed plan and a strong team to accomplish the hard work ahead to make Indian Motorcycles the top contender and to continue its legacy.”

When posed with the question of how the dealer network might change over the next couple of years while integrating Indian into it, Polaris replied:

“We put a lot of thought and study into how this might work and our Victory dealer network has done a decent job of expanding over the last 18 months, but we’re still very much under-represented in what I’ll call the top MSA’s or the Top 100 markets in the United States. So we’re not going to try and push Indian into all our of our dealers but we are going to make a concerted effort to improve and leverage the Indian brand and the strength of those bikes with Victory to establish better representation in the top markets for motorcycles in the United States. I think over the next couple of years you’ll see that strategy play out.”

When asked about the cost of the acquisition Polaris replied:

“Unless required to, we will never disclose what we paid for an acquisition. But I think it’s better to say that we’ve got a history of being frugal in most things that we do and I think it’s fair to assume that’s with acquisitions as well. It takes a couple of years in general for us to bring a new bike to market and that’s probably what it’s going to take to get these bikes that we think we can bring out. It’s hard for us to make money in the motorcycle business until we’re shipping any significant volume.”

When asked about what exactly they are buying from Indian, Polaris said:

“We are buying the Indian Motorcycle Company. They’re in King Mountain and they’ve got engineers and assembly guys and we’re buying the entire business. It’s very small at this point so essentially what we’re getting is primarily a very strong brand. But it’s an operating business today with sales and dealers and we’ll have to work from there.”

When talked turned to future production plans and the status of Indian's Kings Mountain assembly plant, Polaris replied:

“It’s just not scaled there right now. We’ve got very good assembly capability and capacity in Spirit Lake but it’s worth noting again that buying this iconic brand, we will be very disciplined to make sure that there’s a very distinct difference between any Indian bike we develop and any Victory bike that comes out of Spirit Lake.”

It’s still up in the air as far as what role the Kings Mountain plant will play, but it’s believed that manufacturing ops will be moving to Spirit Lake and engineering relocated to Minnesota.

“My only disappoint whatsoever are the people who have poured their heart and soul and relocated their families in regards to the staff at Kings Mountain. From the engineers that dropped everything to play a role in the future of the resurgence of Indian Motorcycle only then now to be kind of left aside. So hopefully they’re offered positions that are available or if not, hopefully a good severance package. I know every single one of those people personally and I’ve never seen a more passionate, more driven group of people that came only for the brand. There was nobody that came looking for a job. It was all about the brand,” Moses said.

With company buyouts, inevitably there are always innocent bystanders who get caught in the crossfire. But with the acquisition, Polaris expands its presence in the heavyweight cruiser division with the addition of a strong, iconic American brand. The pairing has a ton of potential. Let’s see if that potential equates to profitability.
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RJ   May 10, 2011 02:33 PM
Attitude is everything, been there and done that in other industries... Acquisitions are messy and beginning responses are measured not to offend the other side except this time it's lacking something. It's not only bulding working relationships, or a new owner/boss, but a merger of business cultures and organizational change is more difficult than anyone can anticipate. That means only over time will the real truth come out and there are always surprises along the way especially in an industry where egos tend to influence some pointed views. I hope they can learn to lean on the strengths of both organizations and have the wisdom to listen to learn those strengths and not only offer a one sided point of view. I'm not certain if the interview directed the conversation, but it almost sounds as if the tone from Polaris is looking down their nose at Indian's efforts. I realize Polaris bought Indian, but the Senior Management also plays a big role in fostering relationships not creating an "us" versus "them" culture right out of the gates. Next, it will be "they didn't want to change" so we had to eliminate them...
roy005   April 26, 2011 02:01 PM
Good story and salvation (hopefully long term) for the Indian marque. I wish them well and I do think Polaris will have what it takes to develop the Indian brand. Interested to see how Victory and Indian will work and develop under the same roof.
sloppy   April 21, 2011 12:38 PM
I think deep down everyone knew that Indian would need to be bought up by a major manufacturer to truly grow and be a viable company. Polaris was the right company. They needed a stronger name and Indian needed a company that can provide deep pockets for R&D, scale of economics in manufacturing, and adequate marketing. Hopefully they can get past the Harley copycat bikes and have uniqueness.
Tessier   April 21, 2011 09:25 AM
Forget the V-Twin and invest some money into a performance minded inline four like what made Indian's really different and famous. The 401's are something that is truly unique and recognizable do something different don't try and be just like Harley it simply won't work.
Mitch   April 21, 2011 07:33 AM
Nice write up. I think this helps to answer a few of the immediate questions people have about the acquisition. I believe Polaris has the right idea going forward. If they can update the engine a little and/or bring the $$$ down without changing the overall look too much I think they will have a potential winner.