GILROY
– Indian Motorcycle wasn’t turning a profit and didn’t look like
it was going to any time soon.
GILROY – Indian Motorcycle wasn’t turning a profit and didn’t look like it was going to any time soon.
That’s the core reason why Audax Group – a Boston-based investment firm that owned the majority of Indian’s stock – decided last Thursday to stop sinking money into the motorcycle-maker, according to Indian Board Chairman Frank O’Connell.
“The basic problem was, it was costing us more to produce the bikes than we could sell them for,” O’Connell said.
Audax Group had been feeding money to Indian – sometimes on a weekly basis, O’Connell said. With those funds gone, the board had little choice but to shut down Indian’s Gilroy headquarters and lay off its 380-person workforce. The nine board members – six of whom are Audax Group appointees – decided late Thursday they “really must lay off the employees and pay them while the company still has enough money to pay them,” O’Connell said.
As chairman, O’Connell represented management on the board and was a full-time Indian employee. He is also Indian’s second-biggest investor, although far behind Audax Group.
Now Indian is looking for new money and a new direction. Maybe that means someone will buy the company; maybe it means a new location; maybe it means a new kind of motorcycle; maybe it means liquidation, leaving the Indian trademark to Audax Group or whomever wants to buy it. The board is open to any of these options, according to O’Connell.
“We’re getting calls from all over the country,” he said. “The brand is very viable, and the dealer network is strong. … There’s a lot of pieces in place.”
O’Connell said he hopes and believes Indian will be making motorcycles again soon, but it will first have to find a way to cut costs. While Indian saw record sales this year, O’Connell said costs were rising as well, and the company was millions of dollars in debt.
Little chance for reopening here
It’s possible, but unlikely, for Indian to reopen in Gilroy. That would require a private investor to appear here with an immense amount of capital and a plan to massively reduce costs, according to O’Connell.
City officials say there’s nothing they can do to keep Indian in Gilroy.
William Lindsteadt, executive director of the Gilroy Economic Development Corporation, said the “low-eight-figure” amount of capital Indian needs is “far above” any public grants or loans he might be able to secure.
Mayor Tom Springer said he’s “very disappointed” about the slim chance he sees for Indian to return.
“I don’t believe it’s possible for them to re-open and re-establish themselves in the manner they were in Gilroy,” Springer said.
O’Connell said leaving the state is a serious option for Indian. As recently as June, Indian had been considering a move to Birmingham, Ala., although not anymore.
“An active decision was made not to move to Alabama,” O’Connell said, but he noted that other states “provide all kinds of incentives.”
‘Burning’ through capital
Because Indian wasn’t profitable, O’Connell said it couldn’t attract the investors it desperately needed to continue making motorcycles.
“We literally talked to hundreds of (potential) investors,” the chairman said.
In the meantime, O’Connell said the company was “burning” large amounts of capital to produce its 2004 bikes. Fall has historically been Indian’s most vulnerable time of year because sales of current-year bikes taper as money is being poured into producing the next year’s models.
O’Connell said Audax Group decided it would cost too much to get through the “window” of time until the 2004s could be sold. With no new investors in sight, O’Connell called this decision “prudent.”
Audax Group invested $45 million in Indian in 2001 and had since contributed “substantially more than that,” O’Connell said.
In addition to money, “they also committed people and a tremendous amount of time to make this successful,” O’Connell said. “You could not have asked for an investor to do more to try to make this company succeed.”
Nevertheless, the chairman expressed sadness for the nearly 400 people who lost their jobs Friday.
“My heart goes out to all those (who were laid off),” O’Connell said. “What a great group of workers – many of whom I consider to be my friends.”
