Indian Motorcycle Corp. on Monday halted a four-year effort to revive the oldest U.S. motorcycle brand, suspending production of its heavyweight cruisers after losing its biggest investor.
The company shut the Gilroy, Calif., factory where it turned out $25,000 Chief, Scout and Spirit motorcycles with lighted Indian-head logos on the front fenders, and fired its 380 workers. Indian Motorcycle in 1999 began the effort to revive a brand that dates to 1901, two years before Harley-Davidson Inc.
The original maker of Indian bikes went out of business in 1953, and its motorcycles became collectors' items. Investors including Rey Sotelo, a California builder of custom cycles, brought the brand back and drew celebrity riders, including actors George Clooney and Arnold Schwarzenegger, who rides an Indian Chief in the movie "Terminator 3."
Closely held Indian Motorcycle probably took on too strong a competitor in Harley-Davidson, said Geoff Rehnert, a partner in Audax Group, the Boston-based private equity firm that last week decided to end funding for Indian. "The better Indian did, the stronger Harley reacted."
Gilroy-based Indian said in a statement that it was stopping production "to conserve cash and preserve its assets" and that its board would "explore other options that would permit the company to continue as a going concern."
Audax, started in 1999 by former Bain Capital Inc. partners Rehnert and Marc Wolpow, invested $45 million in Indian in June 2001 to expand the company's product line and hire dealers and employees. Audax manages $500 million in private equity funds and has a stake in the daily tabloid Boston Herald.
"We're disappointed. Indian is a terrific brand," Rehnert said in an interview. "We just got hit by a lot of unfortunate developments. The past winter was particularly tough, and of course there was also the war and the economy."
Indian sought to capture as much as 5 percent of the U.S. market for large cruiser motorcycles by 2005, hoping to sell as many as 14,000 luxury bikes a year. The company sold 3,800 last year and expected a rise to 4,500 this year.
Milwaukee-based Harley-Davidson, which sells almost 300,000 of its namesake motorcycles a year, has more than half the U.S. market for cruiser models.
Indian's backers "believed they could pull out of the past a name that's been dead for more than 40 years, and recapture the spirit of a great old brand," said Don Brown, whose DJB Associates consulting firm in Irvine, Calif., forecasts sales for motorcycle makers, including Indian. "They thought the name alone, the nostalgia factor, would be enough."
Indian's decision to shut down operations is the latest failure in efforts to revive vintage motorcycle names that include Excelsior-Henderson and Norton Motorcycles.
"This confirms what we've believed all along: The other names, while having a certain place in history, do not strum the chord of nostalgia that Harley-Davidson does," said Dan Poole, a vice president of equity research at National City Corp., which manages $23 billion, including Harley-Davidson shares.