Magazine: FORTUNE August 3,
1998
Section: Industrial
Management
GEARING UP FOR THE CRUISER
WARS
-------------------------------
Upstarts
with new factories are invading the hot market for low-slung
motorcycles, where Harley-Davidson rules.
Gleaming two-tone in black
set against Antares Red or KYSO Blue (for "knock your socks
off"), big Victory V92C motorcycles are coming off a new assembly
line in the prairie town of Spirit Lake, Iowa. If sales goals are met,
between 1,500 and 2,000 customers will have thrown a leg over Victory
bikes by year-end.
Less than 100 miles away as
the crow flies, designers and engineers at the Excelsior-Henderson
Motorcycle Manufacturing Co.'s spiffy new plant in Belle Plaine, Minn.,
are laboring to bring their Super-X into mass production. Like the
Victory, it has an imposing engine and nostalgic, made-in-U.S.A. lines.
Victory
and Excelsior-Henderson are the most ambitious of a flock of homegrown
startup motorcycle companies that want to cash in on America's, and the
world's, lusty appetite for cruiser bikes. These comfortable,
chrome-bedecked machines are better suited to chuffing down the highway
than blitzing around back-road curves. The bikes feature
hard-to-overlook "V-twin" engines--with two big pistons in a
V-for-victory configuration--and typically achieve lower top speeds than
the latest racer-replica crotch rockets.
The
upstarts are taking on the big kahuna of cruising and touring bikes,
Milwaukee's Harley-Davidson, which waxes ever richer on machines that
glow with American nostalgia like no others. (Unlike cruisers, touring
bikes have windshields, fairings, and luggage compartments.) With record
1997 sales of $1.75 billion, Harley sold 132,000 motorcycles and
commanded a lucrative 48% share of the North American market for heavy
road bikes, which has been growing in dollars by 8% to 10% a year.
The
attack on the cruiser market, as well as Harley's own expansion plans,
offer fascinating glimpses into how U.S. manufacturers design and gear
up in the 1990s to make glamorously durable goods. For now, Victory and
Excelsior-Henderson are assembling their bikes mostly from outsourced
parts. Harley, a serious metal cutter that machines most of the parts
for its revered V-twins, has shelled out $478 million for big-league
capital expansion in the past three years and plans to spend at least
$180 million more this year.
The
dominance of what Harley faithful call The Motor Company doesn't faze
the Victory people. Most of their customers, they say, can be lured from
four Japanese cruiser makers: Yamaha, Suzuki, Kawasaki, and Honda.
Though Kawasaki and Honda make some of their cruisers in the U.S.,
Victory aims to exploit the feeling that Japanese-brand bikes are
somehow not "authentic."
Victory
Motorcycles is a division of Polaris Industries of Plymouth, Minn., a
publicly held company that got its start in 1954 building snowmobiles,
and branched into personal watercraft and all-terrain vehicles. Eager to
diversify further, Polaris was swayed in the early 1990s when a bunch of
dealers said they'd like to have street motorcycles to sell. "We
bought a Harley and a Honda cruiser and took them apart," says Matt
Parks, Polaris' general manager for motorcycles. "Our assessment
showed there was good money to be made."
For
engineering boss, Parks recruited Geoff Burgess, a British-born former
off-road racer who had worked at the old Norton, BSA, and Triumph
motorcycle companies in England. His small, clandestine
motorcycle-development team rounded up a fleet of cruisers built by
Harley, the four Japanese makers, and BMW, and headed to Arizona to put
them through their paces. They also brought along an Italian-built
Ducati Monster the team admired for its sweet handling. Thrashing
through the warm deserts, they compiled a list of traits they liked or
deplored in the bikes.
Burgess
& Co. decided that Victory needed to develop its own engine
in-house. Talks with U.S. and European consulting firms with power-plant
expertise convinced them that designing an engine would provide know-how
for later, when Victory Motorcycles hopes to broaden its model line to
include other classes of bikes. In 1995 the company hired engine
designer Mark Bader, then with Kohler, a maker of industrial engines in
Kohler, Wis.
The
first power plant Bader conjured up on his computer-aided-design screen
was a tall, 1,507-cc V-twin with a 55-degree angle between its
cylinders. When this design proved too big to fit in the frame, he
narrowed the angle to 50 degrees. Since rows of cooling fins are an
essential part of the cruiser look, Bader rejected the idea of using
liquid cooling as cars do. Instead he designed a system that employs
extra volumes of oil to supplement the fins' cooling effect.
Testing the cooling system
fell to development manager Steve Weinzierl. Working on a tight budget,
Weinzierl strapped a Czech-built Velorex sidecar onto a prototype
Victory bike and, with colleagues, took it to Death Valley, Calif., for
worst-case cooling trials. For this kind of testing, one guy rides the
bike, which is studded with temperature-sensing thermocouples like a
patient prepped for an electrocardiogram. Wires from the thermocouples
lead to the sidecar, where a second guy records the temperatures.
One
day Weinzierl decided to use the instruments on the Victory bike to
record the oil-sump temperature of a Ducati Monster, which he sees as
the benchmark for this sort of cooling system. "We drilled a hole
in the Monster's oil plug and put in a thermocouple," he recalls.
"It was 121 degrees in the shade. I rode the Ducati, and while we
were rolling I'd pull over to about ten inches from the Victory and hand
the guy in the sidecar the wires from the thermocouple. This was at
speeds up to 90 mph. It wasn't entirely legal, but we got the
data."
The
result of all this designing and testing, as this reporter can state
after a few miles astride a preproduction Victory, is an engine that
pulls with authority while leaving one's dental fillings in place. Not
bad for a snowmobile maker.
The
Victory's motors are assembled at a Polaris plant in Osceola, Wis.,
where steel tubing for the bike's frames is also bent. Then the engines
and frame parts are trucked to Spirit Lake, where a pair of robots weld
up the frames before they are painted black in a powder-coat process.
Making the frames in-house is essential, the company believes, to ensure
the consistent geometry required to make each bike behave as the
designers intended. Engines and other parts come together on a
slow-moving assembly line staffed, at least in July, by just nine
two-person teams that move from station to station, each building an
entire motorcycle.
Polaris'
business plan anticipates recouping the Victory's miserly $20 million
development cost in three years. If the bikes take off as hoped, Parks
says, more operations may be moved in-house, such as metal stamping and
machining--all of which Polaris does in making other products. A
billboard outside Polaris headquarters shows a pair of Victorys against
the dramatic backdrop of Monument Valley, Ariz. The message: "It's
a free country. Act like it."
Unlike Victory Motorcycles,
which can draw on the experience and resources of its corporate parent,
Excelsior-Henderson is booting up operations from scratch. The
enterprise was started several years ago by two brothers who were
longtime bikers. Dave Hanlon, 45, is a wiry goateed dude with a
background in managing truck-leasing operations. Brother Dan, 42,
previously founded a company that made biodegradable packing peanuts.
Since 1993 the Hanlons have raised more than $60 million, partly through
private equity placements. They've poured the money into product
development, staffing up with management and erecting a
170,000-square-foot plant.
On
the manufacturing floor, about 80% of the machinery needed to build the
Super-X had been installed in July, with the first production bikes
scheduled to be built by the end of the year. In charge of the
equipment's selection is vice president Allan Hurd, a Briton who played
a large role in getting manufacturing operations off the ground at the
reborn Triumph. Hurd's presence greatly enhances the credibility of this
somewhat quixotic venture, which is founded on the assumption that each
year 20,000 Harley types will part with about $18,000 for a righteous
cruiser with modern features and an instant "heritage."
The
original Excelsior-Henderson motorcycle company folded in 1931, and the
trademark fell into disuse after its parent went bankrupt in 1992. That
left the Hanlons free to dust off the bikemaker's respected name and
register it. There aren't yet any factory-made Super-Xs to scrutinize,
but hand-built prototypes convey the direction in which Excelsior is
going. The frame draws its curves from the past, but in the engine
compartment lurks a 1,386-cc V-twin with double overhead camshafts,
four-valve cylinder heads, and fuel injection.
The
people at Harley-Davidson in Milwaukee aren't taking this new action in
the cruiser segment lightly. Harley's capital spending program is aimed
at raising production capacity to 200,000 bikes a year by 2003, when the
company will party hearty in celebration of its 100th anniversary. Much
of Harley's spending has gone into its secret weapon: the New Motor.
By
the time you read this, fanatics around the world will be poring over
technical specifications and pictures of the long-rumored power plant,
the Twin Cam 88. The first totally new Harley engine since 1936, it's
designed to win back some of the sales the company has been losing to
after-market companies. These outfits make hot-rodding parts and bigger,
go-faster knockoffs of Harley's Big Twin 1,340-cc engine. With
displacement increased to 1,450 cc, the Twin Cam 88--which rumbles with
the cherished Harley "potato potato" exhaust note at
idle--delivers about 10% more horsepower than the Big Twin.
"This
is only the beginning," says engineering vice president Earl
Werner, as if to strike fear into competitors. "We are also
offering a factory-warranted, EPA-legal 1,550-cc big-bore kit, and we
have built variants of this engine with well over 1,550 cc. We are The
Motor Company, and our goal is to provide the customer with hardware
that he doesn't have to go elsewhere to improve."
~~~~~~~~
By Stuart F. Brown