New engine, frame at core of Indian Motorcycle's future

GILROY, Calif. -- The latest chapter in the long, checkered history of the Indian Motorcycle Corp. has brought a new fragrance to a town long known as the "Garlic Capital of the World."

It's the smell of exhaust fumes and, the company hopes, money, with the introduction of the first new Indian engine in decades.

The company, started in 1901 by bicycle maker Oscar Hedstrom and entrepreneur George Hendee, played a key role in the advance of two-wheeled transportation.

Indian introduced the first motorcycle with an electric starter and complete electrical system in 1913. Before World War I, the company was the largest motorcycle maker in the world, producing more than 20,000 bikes a year.

While Indian was founded two years before Harley-Davidson, the company actually went broke almost 50 years ago, when it lost its battle for the nation's motorcycling dollar to the Milwaukee-based manufacturer.

"It basically went out of business in 1953 and then, for 45 years, nothing was produced," said CEO Frank O'Connell in his small office at the factory.

O'Connell said Indian made a strategic error during World War II. While both Indian and Harley-Davidson supplied bikes to the military, Harley continued to feed its domestic dealers and was ready to seize the market when the war ended.

In the decades since the doors closed on Indian's Springfield, Mass., factory, several groups tried to revive the brand. In 1998, a judge awarded it to a group including Canadian investors and Gilroy-based California Motorcycle Co., a maker of Harley "clones" -- bikes that look like Harleys, with H-D lookalike engines made by outside companies.

'The only company'

CEO O'Connell brings considerable business experience to the Indian operation. Before joining the revived company, he was chairman, president and CEO of Gibson Greetings Inc., and held senior management positions with Reebok, Marvel Entertainment, HBO Video and toy maker Mattel.

He's also a veteran rider who owns 1939 and 1947 Indians, has crossed the country on one of his company's machines and clearly sees a future for the brand.

"Indian is probably the only company that can share with Harley-Davidson in the growth of the American cruiser market," O'Connell said.

Cruisers, which offer a relaxed seating position and extra comfort for leisurely riding, are the fastest growing segment of the motorcycle market.

Detailed sales figures by type aren't available, but Mike Mount, senior communications manager at the Motorcycle Industry Council, said street bike sales hit an estimated 563,000 units last year, up almost 20 percent from 2000.

The reincarnated Indian began production in 1999. In the first year, some 1,100 bikes rolled out of the 500,000-square-foot factory, but they were Indians in name only, and motorcycle purists were critical.

"The group went to CMC in Gilroy and said, 'Build us an Indian clone' based on your Harley clone," said Dave Edwards, editor of Cycle World magazine. "It was very much a stopgap measure, a kit bike."

The most frequent criticism of the fledgling company focused on its use of engines built by S&S Cycle Inc. S&S makes excellent engines, but pundits said Indian could never call itself a manufacturer unless it built its own.

'Hearing decent things'

But the company responded -- a new Indian engine made its official debut on Feb. 15, installed in a newly framed Chief as a 2002 model.

"To be considered a legitimate manufacturer, you have to be able to make your own engines," said senior vice president Fran O'Hagan.

While the 100-cubic-inch, air-cooled engine breaks no new ground, it does offer some styling cues from Indian history, with rounded cylinders and carburetor mounted on the left rather than the right, as with Harley-Davidson.

The Indian engine is being assembled by Performance Assembly Solutions in Livonia, Mich., then shipped to the former grocery warehouse that houses Indian's assembly line. The rest of the important details -- paint, seats, assembly -- are done in Gilroy.

"We're hearing decent things about them," said Timothy A. Conder, an analyst who watches the motorcycle industry for brokerage firm A.G. Edwards & Sons. "We'll have to see how quickly they get the new motor up and see what impact that will have."

On a recent visit, the warehouse factory was bustling. Air compressors hissed and groaned as frames mounted on wheeled carts wended their way from station to station.

New bikes were lined up inside and out. Each gets a test ride before being shipped to one of Indian's 200 U.S. dealers.

An hour's ride on a pair of last year's Chiefs with the new engine showed its promise. The engine is powerful, relatively smooth and caused no problems along the twisting roads through the hills around the town.

The list price of the new Chief will range from $20,495 to $22,995. Indian also sells the sporty Scout and the midlevel Spirit, which will continue to use the S&S engine for now.

O'Connell said he expects the factory to produce about 3,000 Chiefs this year. That's about half the factory's planned production of 6,000 bikes overall.

Edwards agrees Indian is heading in the right direction.

"I certainly think this redesign now gives them a viable shot at success," he said. "Still, you're talking about a $20,000 motorcycle, and when you get in that range, your audience shrinks dramatically."

------

On the Net

www.indianmotorcycles.com

www.newchief.com

www.harley-davidson.com