A lot has been written about the acquisition of the Indian brand by Polaris Industries last week, and for good reason. The American motorcycle industrial landscape is in tatters, with the wreckage of failed dealerships, recently deceased OEMs and radically reduced unit sales littering the country. Not one area of the US market is secure, not one corner has shown significant cause for cheer. Everyone, from the local helmet distributor to Harley-Davidson are in damage control mode, waiting. Waiting for a sunnier economic climate; waiting for a sign pointing to the next green pasture. But, instead of waiting, Polaris just did something. Here's what the Indian purchase means.
Polaris is in a unique position. As I have pointed out on HFL in the past, particularly when HD was making loud noises in press communiques about fantastic turnaround sales and profits, it has been Polaris Industries that quietly got on with the job of simply making good motorcycles, and more importantly, selling them. Victory seems to be a favourite punching bag for many in the mainstream of American cruiser culture, often derided for bland styling, a foggy brand message and lack luster total volume sales (it took Polaris a decade to sell the first 50,000 – a figure so petty as to put in the realm of boutique brands). However, eleven or so years on, Victory is shaping up to have grown into something that most brands fight long and spend obscene advertising dollars for: namely a brand known to a few, happy and devoted customers as trustworthy.
Victory, and its successful parent Polaris Industries, are now poised to do something truly remarkable in American motorcycling, which is to redefine what American motorcycling actually is, as well as what it can be. With the fabled Indian brand in the fold, the group now has the one element that no amount of innovation or stolid success can bring. They now own myth. In buying Indian Motorcycles, Polaris can leverage the fantastic brand equity that a century of roller coaster history has wrought, and marry it to the best run company in the American motorcycle industry. Perhaps now the public will finally be able to see past the faded glamour of Harley-Davidson's tired myths, and create something new.
It Is What It Was
Indian Motorcycles, sadly like many of its namesake peoples, have not had a easy recent past. The original company, founded by performance oriented enthusiasts, won over millions of fans in the 50 years or so that it operated. The decline of motorcycle sales in general after the Second World War pur the final nails in the coffin of many OEMs, and Indian felt the squeeze like all the rest. While Harley-Davidson tried vertical expansion to escape oblivion -they purchased Aeremacchi of Italy to get into the burgeoning two stroke sport bike market, and even attempted scooters- Indian stoically continued with what industry and consumers where starting to call “heavyweight” touring bikes like the famous Chief, with its comically flared fenders, tassels and plastic native American head ornament. It was not the right decision.
Over the past 40 years, the brand has been bought, sold, bankrupted and rehashed so many times and with so many different levels of incompetence that it is hard to believe that anyone would consider it worthwhile to try again. In brand equity terms, it has been dragged through the mud, with lots of the smell and dirt of previous sick incarnations clinging perilously on. I first became aware of Indian when in the early-mid 90's some Canadians re-launched the brand as a clothing company, opening a flagship store/restaurant/lounge in a renovated old textile factory in Toronto's club district. They had a low number of actual motorcycles made, I believe using catalogue parts from OEM suppliers like S&S and the aftermarket, and hung them from the walls and on copper topped counters behind the bar. Briefly, wearing a t-shirt with the Indian logo and the slogan “America's First Motorcycle” became a must have basic in clubland and trendier venues, of which the Indian bar was one.
Predictably the good times did not last. Once the yuppies all had their $40 dollar t-shirts and had sufficiently mooched off the rebel glow that comes when associating with motorcycles, the party was over. It didn't help that the owners had no idea how to run a motorcycle company, or any industrial enterprise for that matter, and that the bikes they did sell were rotten. The final insult happened when a group of aboriginal Americans sued – successfully – for infringing on their identity. As a long-time supporter of native rights this final twist warmed me, but it spelt the final death warrant for a company that was very sick, tied up in litigation and up to its eyeballs in debt.
Normally, one would think that after an episode like that, investors would be cool to a restart. But you would be underestimating the persuasive powers of a well presented Excel spreadsheet, and the undeniable lure of the vast amounts of money that was being raked in by Harley-Davidson over in Milwaukee. For a long time in those heady days of the late 90's and the first decade of this new century, HD was peddling the same fat, heavy, antiquated war surplus designs it had for decades, made with tooling that remembered the Eisenhower administration, and charging a fortune for them. HD was rich, and getting richer all the time because with all that filthy lucre they invested not in new motorcycle technology but in a vast brand building exercise, the likes of which had never been seen in the industry before.
Harley had figured out that the one thing it had in its possession that had any value was the myth, the image that owning a Harley-Davidson seemed to project on a large number of Americans of all stripes, and a significant number of people around the world. Theirs was the “American Dream” vision of motorcycling down a desert highway, tearing a strip of asphalt up with a colossal sized V-twin. It appealed to people on a basic, analogue level in a world that was increasingly sanitized and complex. Harley moved into this space with the gusto of a wild western settler, staking claim to the whole thing and pouring out tons of products that reenforced that image. In the end, owning the brand was more important than owning the motorcycle, so an industry mushroomed around licenced merchandise that allowed anyone with ten bucks to spend on a Harley headband could buy into the myth. The best part? The merchandise was largely made by third party companies that absorbed the development costs, and they paid HD royalties for the privilage. By the time the Great Recession hit, Harley was making all its big money in accessories and financing. The bikes themselves were just a necessary evil.
With this business model in mind, many investors flocked to vintage OEM restarts like dirt attracts children. In Europe, TPG was doing its level best to convert Ducati into what the CEO called “Disneyland” and float an IPO, while in America Henderson-Excelsior, Indians 5 through 7 and even obscure names like Crocker found cash to buy 50,000 square foot premises, hire bodies to man desks and attend events at Pebble Beach to launch their “new” motorcycles. All the time, the eyes were on the prize: build up the brand, get people talking, get into the accessory business to build the momentum, and one day, we'll list on the stock exchange in New York and you're made.
Attention! Extremely Fragile! Bubbles Inside
Ducati's IPO in New York was a smashing success. For a while anyway. It took most investors who stayed in past the first quarter years just to recover the money they put into it, and then very quietly without so much as a whimper, in 2006 Ducati closed down, was sold for ten euros and re-privatized. The hard lesson was that a brand, no matter how deep and delicious is meaningless for an industrial company if the core products and product sales aren't there. If Ducati, with its stellar history, fanatical devotees and the benefit of some hard core, sexy and high performing motorcycles couldn't pull it off, then probably no one other than Harley-Davidson could. How do you think Indian and Crocker faired?
Indian, the current, new and improved Indian motorcycles is different, or so they say. Cycle World magazine praised the bikes and offered a healthy prognosis when they featured them last year, and indeed from the way the company has unfolded, it seems that they are at least trying to make a professional go of it. On the bike show circuit last year, I grew suspicious when the stands were filled once again with an excess of accessories including fantastically over-priced leather jackets and hats. More than that, as with any designer or enthusiast, I was hoping to see the next thing in American cruisers, not another regurgitation of an antique theme, thrown together with parts from the usual suspects. In other words, I was looking for another Victory, a genuine OEM that made its own bikes its own way, and actually, you know, designed them.
Victory at Last
When Polaris announced that it had bought Indian, most of the media, including HFL, made the obvious conclusion that Polaris, with its lackluster Victory brand and identity, made Indian an ideal takeover target. I agree that buying into an established brand is the easiest way for any company to gain overnight credibility, and the world is full of examples to support this – such as India's Tata Group buying Jaguar and Land Rover; or VW's takeover of Bentley and Lamborghini – but this is not, I believe, the whole story.
Victory is itself established and respectable. Simply applying the Indian nameplate on some full bagger Victory-derived machine and calling it an Indian may work for a short while, but this is not historically been the way that Polaris operates. As a company, they seem to use a cautious, incremental approach to expansion, and always with an eye on keeping the books in the black. Polaris has had many opportunities in the credit-bloated past to over-expand, over-promise and under-develop products, but never did. When a product or even a whole line of products started to hurt the business too much, they weren't afraid to kill it, as they did with their personal water craft, a sector they had occupied successfully for years. Similarly, when the going got tough and competition increased, as it recently did in the side by side ATV market, Polaris has applied resources and fought it out. My point is that given this past performance as a guide, it is unlikely that they acquired Indian simply to mooch off of what's left of the brand's heritage.
It is my belief as a professional industry analyst that in buying Indian Motorcycles, Polaris has made a masterstroke. The scale, industrial and managerial prowess of the company will finally, after a half century of bunglers, provide Indian with an environment in which to flourish properly. For Victory, the pressure to somehow compare with Harley-Davidson is finally off, and that brand can veer off into the vast unclaimed spaces of American motorcycling, such as naked, sports and entry-level motorcycles. This is a direction I suspect the brand has wanted to follow for some time, if past concept models have been any indication. With Indian occupying the “American Myth” domain, with arguably a greater store of history and authentic prestige than Harley-Davidson can itself muster, the stage is clear for a new like of innovative, dynamic and new century American motorcycles, backed by modern engineering and with those boring two things many non-Japanese brands lack but Victory has in spades: established and respectable.