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We Don’t Need Another Hero

I like Erik Buell, the man. Many years ago I had the opportunity to talk to him at the Intermot motorcycle show in Germany, when Buell Motorcycles was still a part of Harley-Davidson. He was warm, genuine, and listened to those speaking to him.  The last part is what stuck with me most, because in an industry full of egos, and who’s very purpose is often not about much more than satisfying them, it was thoroughly refreshing to meet a player who was more interested than interesting.

That was 2002, and Buell had just released the Firebolt, a punchy muscle bike that was in many ways the embodiment of what an American sport motorcycle should be. The “XB frame” was the centerpiece, an exquisitely cast aluminum item inside of which was carried the fuel, liberating the space normally occupied by a tank for an translucent plastic air box. The usual Buell novelties were present, from the rim-mounted front disc brake, to a belt drive, to the air/oil cooled V-twin engine from Harley-Davidson. The styling featured beady looking projector lights set in a fairing that stretched over the mechanicals like a tank top on a wrestler.

Buell seemed to be happy that day, and no wonder. After many years of hard graft his brand was building unique bikes while under the stable umbrella of the most profitable motorcycle company in history. The press were kind, tuners and Buell fans fawned, and with two all-new models on the stand, things could only get better.

Perhaps following some rules would have been ok.
Perhaps following some rules would have been OK.

Only they didn’t. But then they did. And then they got indeterminably worse.

Buell Motorcycles closed down in 2009, a casualty of the recession said parent Harley-Davidson. Buell the man went on YouTube and in a tearful address, thanked the world and won more adoring fans. Harley-Davidson was painted as Judas, according to commentators and armchair enthusiasts alike. Wild talk of a big corporate savior lasted for months but none came forward, so it looked as though the end had come. But Erik re-emerged, phoenix-like, with a new company: Erik Buell Racing.

EBR, as it was known, launched from the ashes of Buell Motorcycles a year after the video farewell address with a promise to build America’s superbike. The product in question was the 1190RS, an ultra exclusive, track-only exotic based on a stillborn production model from the Harley-Davidson era. It featured acres of carbon fibre bodywork, top-of-the-line suspension parts and other racing motorcycle porn. With a price tag around $40,000 USD, it aimed high, but according to company information in 2013 they sold 65 of them. Erik, it seemed, was back in business.

Pretty finishes and high expectations were the order of the day for the EBR 1190 RS
Pretty finishes and high expectations were the order of the day for the EBR 1190 RS

If hopes were high in 2011 then they shot into the stratosphere in 2013 when Indian motorcycle manufacturing giant, Hero Motor Corp, purchased a 49% stake in EBR for $25 million. Windy press communiques talked at length about long term partnerships in R&D and future distribution of advanced Hero bikes in the US, possibly under the EBR brand. Hero, the third largest motorcycle maker in the world by volume, was a former contract manufacturer for Honda so they had the scale, quality and business acumen to be the ideal home for Erik Buell’s small but ambitious project. Hero, meanwhile, could use Buell’s cult-celebrity brand name to lend street kudos to their mass market motorcycles in America. A match made in heaven, things looked secure.

Then the news hit the world, only last month, that EBR was in receivership, and history once more repeated itself. Not long after the announcement, Erik was making another heartfelt press release and comments from motorcycle bloggers and readers vilified Hero, some calling them vampires, others accusing them of deliberately torpedoing EBR so they could buy a controlling stake for pennies on the dollar. The truth behind the failure of EBR has nothing to do with sinister plots and everything to do with the company’s misdirected use of precious resources, the deployment of which are sole responsibility of the CEO and majority stake holders, not Hero. In Erik’s own words :

“Unfortunately, in the end, we tried to do too much with too little funding.”

Erik Buell established a racing culture at the company which made a lot of sense at first. Because of the enormous cost and complexity of delivering street-legal motorcycles, EBR focused on track bikes only for its initial offering. But after the Hero deal the company was supposed to be working on a litany of new EBR branded street bikes at lower price points. Parallel to this, it was said that EBR was contracted as an R&D partner for Hero’s own products. These revenue generating activities were to replace racing products as the company’s core business.

The EBR 1190 RS all dressed up and ready to enter the fray in the 2014 World Superbike Championship
The EBR 1190 RS all dressed up and ready to enter the fray in the 2014 World Superbike Championship

But the siren song of racing proved irresistible. Forays in to AMA superbike series eventually led to the announcement that EBR would field a factory team in the World Superbike Championship (SBK) for 2014. The 1190-RS race bike was dutifully manufactured in their hundreds, as the championship’s production guidelines stipulate, and promised for sale at eye watering prices. Meanwhile, the EBR street models that made it to showrooms were derivative designs of mediocre quality and uncompetitive pricing compared to mainstream alternatives.

International racing is a money pit into which endless sums can be lost, and has been the kiss of death for small brands for decades. In the late 1990’s Bimota was profitable, building 3500 bikes a year and en route to launching a model with its first indigenous engine, the V Due, when it decided to enter World Superbike racing. Amazingly, they won their first race causing a sensation, but when the V Due had problems causing production delays requiring significant retooling, resources were stretched to the limit. The racing team failed to deliver results after the lucky start and began consuming cash as sponsors vanished. Bimota ran out of money by the end of that year, ironically just as they cured the V Due, but too late to forestall bankruptcy.

For very large, healthy manufacturers, racing can be a cost effective marketing tool because it represents a small percentage of their total budget, plus they have the R&D depth and business infrastructure to support it. Conversely, for or a small and as yet unprofitable company it is hemorrhaging experience. They struggle just to get to the starting line, under perform and market results poorly. Inevitably, it smears mud on their brand instead of adding value or prestige. It has happened many, many times.

Wheels up if you want to go faster
Wheels up if you want to go faster

It was difficult to watch EBR go through this cycle. The EBR-RS looked terrific in it’s Hero livery but the machines had no chance against even second tier privateer teams running mainstream brand bikes. In the end the EBR motorcycles featured old technology, essentially the same XB frame, in fact, that was launched at Intermot in 2002. Back then it was novel for a street bike but made no sense on a track more than ten years later. That it may have had potential is irrelevant, because off season testing, the locus of successful racing, was insufficient. At the world level, new racing motorcycles need at least two years development time and many data technicians per bike just to be able to play. Against the big factories the best EBR could hope for was not embarrassing themselves. How much company money was lost on racing we will likely never know. Whatever the sum, it was cash that was sorely needed on revenue generating activities.

Erik Buell and the original investors in EBR are squarely to blame for this. They controlled 51% of the enterprise and as such had full authority on spending and setting operational priorities, which, should have been 100% focused on delivering production street bikes at prices the public were willing to spend. Additional factors must be considered, the superbike segment they chose to enter was exploding with rapid advances that were unforeseen in 2011, and currency fluctuations suddenly made previously
exotic fair like Ducati, Triumph and BMW more cost competitive. But in the end, as one major American blogger put it, the products just did not match market expectations.

The old Buell Motorcycle company was a very popular brand, but suffered years of poor sales because of inconsistent design and quality. That could be blamed on Harley-Davidson. EBR on the other hand was Erik’s to mold. His personal brand and credibility were what set the tone for the company, and influenced the team as they mapped out the business strategy. That they burned through millions of investor dollars in two short years with such weak growth is revealing, either of distraction or misjudgment. Zero Motorcycles, another American startup, managed to consistently increase revenue, quality and grow into a stable manufacturer in about the same time and for similar investment, and that in the totally unproven electric drive segment.

A real loser in this sad drama is Hero Motors. A large, credible company has had its brand name tarnished in America, a very lucrative market it has been keen to enter for years. Finding new partners there will be a little harder now, and winning the hearts of American motorcycle enthusiasts even harder. Their part in the failure is unlikely to be revealed publicly, but suffice it to say the brand has been embarrassed on a very public stage.

I like Erik Buell, and think he and his passion ought to be celebrated. But as popular as men like him, who lead with their hearts, are, they might not always be the best at leading industrial enterprises, which is what motorcycle manufacturers are. EBR may come back in some way, or it may not. Erik will doubtless return with another exciting motorcycle project in the years to come. The take away for the industry and enthusiast alike is that Buell is a dreamer and an inspirational figure. What he does not need, however, is another Hero.

13 thoughts on “We Don’t Need Another Hero”

  1. Relic

    It was going to work the same way FIAT, manufacturer of cheap mass transportation and commercial vans for Europe and South America, owns and operates Ferrari, maker of unobtainable exotica.

    FIAT bought Ferrari in the late 60’s and has squeezed a lot of profit from it, whilst Ferrari occasionally pillages the FIAT cupboard for basic R&D and carry over bits (all the switches and interior vents from Magnum P’I’s famous Ferrari 308 GTS come straight from the FIAT Ritmo, which was quite possibly the worst car ever made in Italy, which is saying a lot).

  2. Fantastically written article. I wasn’t aware of the whole story behind the Hero EBR bike until reading this. I’m watching the WSBK closely this year since the racing is so good, and was pleasantly surprised to see a Buell. Revenue before racing.. revenue before racing…

  3. Am interested in the Hero HX250R that EB had a hand in designing 40 lbs. lighter than the Honda CBR 300 with a couple more horsepower(31ps) great looks and features was shown like 2 years ago to be released last year rumored to be coming to North America doesn’t seem to be available even in India.Was going to be cheaper than CBR 250.Where are you my beauty?

  4. Very good article and oh so true. I myself am a Buell fan, but hope was fading fast as no new products appeared and the ones that did, didn’t meet the quality & price point they needed to be successful.

  5. A shame, I saw one of the latest last year in a dealer and thought it looked pretty good and I did not like the old ones. Racing in America may have given them too much confidence, they weren’t close to ready for the big stage.

  6. Really enjoyed the article. Owned two Buells over the years. The first being one of the old tube frames, then loved my XB Lightning. The Sportster based engine was a great street engine with low maintaince demand, and a wonderful torquey nature. The quality did step up from the tube frames when the XB’s were released. I saw the Buells as fun and unique, also very importantly affordable. The EBR’s struck me as more a vanity show for wealthy track patrons, or the moto-journos.

  7. Erik’s persistence is admirable, if not his belief in what he wants to achieve. Buell faced a high degree of disdain at the dealer level (not nearly as profitable Harleys, carrying parts inventory that didn’t move very well, hardly any accessory sales after the fact) and as a sport bike guy, I could never bridge the gap of a Harley V-twin being “sporty”.
    I agree about EBR and Hero. EBR contributes tech, R&D in exchange for capital…..OK. But, WSBK? I guess that’s where the 51% factored, because Hero was clearly all about affordable and closer to entry-level product.
    I am cheering for Erik (he’s a racer type, after all) and look forward to seeing news about him in his next chapter.

  8. The challenge for any business in the initial explosive growth stage is to make the transition from plucky startup into a structured organization. Erik is wildly successful at the former, but clearly Hero, as a major stakeholder and with board seats, needed to demand a more qualified CEO or at least COO.

    Good luck with the EMBA dissertation, Joel.

  9. Hero mass produces cheap transportation for the Indian market. Buell builds.. built low volume, high spec track bikes. How did anyone expect this marriage to work?

  10. Jeez, that was a pleasure to read. Not necessarily just about the subject but the whole “feel” and cadence of the article. MU Laid out the history, the present, the analysis and then finished it beautifully. I’m trying to write my final project for my EMBA and reading Michaels’ article was a great reminder about what structure means to the readability of a piece.

    Regarding EBR, I’m with TK4 (and Michael). He needed to “colour within the lines” to contribute to the viability of the company. He didn’t, choosing to focus on racing, a game he couldn’t win with outdated or flawed designs. He may be a talented engineer and/or designer but he has proven to be incapable of running an “industrial enterprise” successfully in that capacity.

    Maybe his celebrity status (thus inflating his ego) within the industry is his downfall.

  11. “Unfortunately, in the end, we tried to do too much with too little funding.”

    I read that as “nobody bought them so we had to fold the tents”.
    What Eric Buell must do is colour inside the lines – perimeter brakes, fuel in the frame, oil in the swingarm – nobody cares.
    If he doesn’t, I fear he’s done…

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