GILROY
– Indian Motorcycle is selling off its assets. Local resident
Rey Sotelo – along with some of the same investors who helped him
bring Indian roaring back to life in 1998 – is leading a plan to
buy it and once again build bikes in Gilroy.
GILROY – Indian Motorcycle is selling off its assets. Local resident Rey Sotelo – along with some of the same investors who helped him bring Indian roaring back to life in 1998 – is leading a plan to buy it and once again build bikes in Gilroy.
“We are preparing a bid, and we are actively trying to purchase the company,” Sotelo told The Dispatch Tuesday. “We figure if anyone can make it happen, we have the management team to do it.”
Indian has set a deadline of Oct. 17 on which to bid on its trademark and physical assets, Sotelo said. He said he doesn’t know who else will place bids, but he thinks his will be competitive.
“I think we have as good a shot as anybody,” Sotelo said.
Indian Motorcycle was a top-five Gilroy employer until it laid off its 380 employees and closed its factory doors on Sept. 19. The lack of advance notice has prompted a class-action lawsuit by an employee, and the lack of severance pay has prompted others to lay claims with the state Department of Industrial Relations.
“With some phone calls, I’d like to get that workforce back,” Sotelo said Monday afternoon as he broke the news on Internet radio show American Cycle Talk (www.americancycletalk.com), in an interview with Easy Rider Magazine Managing Editor Scott McCool. Sotelo was speaking about his personal history with Indian, which was rocky at times; Sotelo resigned in 2002.
Indian Chairman Frank O’Connell, Indian’s second-largest stockholder behind Audax Group, is also reportedly putting together a bid, according to American Cycle Talk Executive Producer Jeffrey Najar, who says O’Connell told him so while discussing a possible appearance on the show.
Neither O’Connell nor officials from Audax Group – a Boston-based investment firm that owns most of Indian’s stock – returned phone calls for this story.
Sotelo said Indian’s current headquarters on Tenth Street in Gilroy is his group’s first choice for where to build motorcycles if they get the sale, but they wouldn’t necessarily use it as-is. The large plant is designed to build Indian’s original five-year estimate of 30,000 bikes a year, but Indian was actually scraping to sell 4,000 in its fifth year. Sotelo said his group will take a hard, realistic look at how much space would make economic sense for them.
Bill Lindsteadt, the executive director of Gilroy’s public Economic Development Corp., hadn’t heard of Sotelo’s plan.
“I think that’s terrific news,” Lindsteadt said. “After all, he was the brains behind it the first time.”
Lindsteadt said he didn’t expect Sotelo to ask him about possible state business-startup grants.
“Rey’s pretty self-supporting,” Lindstead said. “I don’t know if he even needs it.”
Indian’s sales were on the rise at the time it closed, but costs were rising as fast or faster, O’Connell said in an earlier interview. In the end, Audax pulled out because it didn’t look like Indian was going to break even anytime soon, according to O’Connell.
Sotelo’s plan for Indian is to not spend money on advertising in lifestyle magazines and product placement in movies and other companies’ commercials. He wants to just build motorcycles that motorcycle people want to buy and rely on word of mouth to do the rest – “guerilla marketing,” he called it.
Sotelo said he also wants to cut costs by having a less top-heavy management structure.
“I think they had something like 11 vice presidents,” Sotelo told The Dispatch. “I knew the salaries these guys were making, and there was absolutely no way that they could support that company paying those salaries. … Having too many chiefs was definitely a problem there.”
This venture reunites Sotelo with many old friends and business partners, including original Indian CEO Murray Smith, a successful Toronto businessman who started selling Indian Motorcycle clothing in Canada in the mid-1980s and founded the Indian Motorcycle Café in Toronto in 1999. Sotelo described Smith as a “visionary.”
“We both had a common thought pattern, which was to build a great motorcycle to live up to the brand,” Sotelo said, “(Later investors) focused on building up the brand to live up to the old motorcycles. … It wasn’t what I signed up for.”
Unlike Sotelo, Smith didn’t stick it out. He resigned in 1999 after about four months and now owns the trademark to American Motorcycle Company, another defunct early-20th-century motorcycle company.
On American Cycle Talk, Sotelo said Audax Group went back on the promises it gave him when it bought a majority of Indian’s stock in 2001.
“Battling these guys just got to be an everyday chore with me,” Sotelo said.
The last straws, Sotelo said, were a “quagmire” of repeated part recalls and an influx of executives from the car industry.
“They did not understand the personal relationship motorcycle people have with their motorcycles,” Sotelo said. “The car guys just didn’t get it. … When they started bringing the car guys in, 90 percent of them didn’t know how to ride a motorcycle.”
Sotelo described the Indian investors he’d worked with originally as “real motorcycle enthusiasts.”
Since resigning, Sotelo said he has done prototype work for Japanese motorcycle makers and became chairman of Revolution Motorcycles in Los Angeles, which is expected to have prototypes ready in about a year. If his group wins the Indian bid, he’s not sure what Revolution’s relationship would be with Indian – likewise for Smith’s American Motorcycle Company.
On board with Sotelo and Smith is Branscombe Richmond, a Native American whom Sotelo said would be “the face of the company.” This could be a savvy move, as Indian has had trademark problems in the past with Native American groups. In March 1999, the Cow Creek Band of Umpqua Tribe in Oregon filed a lawsuit against Indian Motorcycle for allegedly violating the Indian Arts and Crafts Act of 1990, according to which it is illegal to sell or display a product that would falsely suggest it is made by Native people.
Sotelo declined to name his biggest investors, but he said they have been calling him since the day Indian closed up shop.
“I think I got my first call Friday (Sept. 19) at about 3 o’clock” – 45 minutes after Indian President/CEO Lou Terhar broke the shutdown news to employees, Sotelo said – “and I was on the phone until at least midnight.”
