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Cannondale Chapter 11

11618 Views 37 Replies 18 Participants Last post by  sarnali
Too bad, but I saw it coming.

As some of us here were saying a few weeks back, introducing a new motorcycle company is a huge endeavor even for a large, established company (eg Polaris) with access to capital and manufacturing technology.

I have to believe that the size of the market for high-end 4-stroke dirt bikes is sufficiently small that it would have been a real uphill battle for even a really well funded venture. ATK seems to be making it work,although I have no idea of how financially successful they are with it. They also outsource motors to Rotax, which cuts their own exposure.

Possibly if they had actually been able to get bikes to market when originally planned (when the dotcom and high tech boom created enough paper millionaires in the market for high-end toys) they might have had a shot.

Too bad, they had some really innovative ideas.

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right on the money, bob. you would think that someone on the management team would have known better.
Oh come on, we all know how bad everyone needs a $12,000 Quad or $10,000 dirt bike...

I just hope I can still get rebuild kits for my Moto 120 downhill forks in the future. (Mountain bike)
It seems to be a modern business maxim that a failure to be constantly expanding is tantamount to total failure of the company. In reaction to that badly flawed business maxim, companies in stable markets with loyal customers are often all too desperate to bet the entire company on poorly chosen acquisitions or a risky entry into markets far from their core competencies.

Double digit revenue growth every year is not an achievable goal. Pursuing that goal at all costs will literally cost it all. Staying "totally safe" while markets shift around you won't win the race either (Norton vs. 3M), but when I saw a Cannondale sticker on a dirt bike, I admired the Ohlins shocks and then shook my head in dismay.

Venture capitalists are the worst of this kind of decision maker, but there are plenty of fresh faced MBA's in the world who have been convinced that lack of constant growth equals death. One wonders how many negative case studies they would have to see before considering the broader view.


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"In reaction to that badly flawed business maxim, companies in stable markets with loyal customers are often all too desperate to bet the entire company on poorly chosen acquisitions or a risky entry into markets far from their core competencies."

I guess you just summed up in a nutshell why Harley isn't making sportbikes. Next person that asks, I will show them this.
Harely is making sportbikes. It owns Buell doesn't it?
An unwarranted, aggressive attack against people who haven't said squat in this post. You taking lessons from KPaul?

Longride, I think what you aren't realizing is that 90% of the people who want Harley to make a sportbike want them to because they would LIKE TO OWN A HARLEY SPORTBIKE.

Sportbike mafia guys like to pose just as much as cruiser riders, and would forgive a little softer performance (a la Ducati) as long as there were redeeming benefits to the design (Ducati's chassis stability and nearly flawless HP and torque curves). Most people would be happy to buy a Buell, if it said Harley Davidson on the side and had an engine, not a boat anchor, in the middle. The xb9r is a masterpiece of high tech engineering and innovative design with an engine so old that Fred Flintstone would question it's age. That's why it's not being purchaced.

Can anyone here imagine a Firebolt with the engine from a Superhawk or R6? Can anyone imagine an xb9r with a 998 knockoff inside?Holy cats, you wouldn't have to train salesmen, you could pluck homeless people off of alleys for salesmen and people would buy it.

Do you remember the VR1000, and how people here were so sad when they called it quits? That's because everyone wanted the pride of having an American bike on top of the podium.

Besides, I saw pics of a V-Rod engined standard that looked a lot like a monster about a year ago, with rumormill saying Harley was looking at ideas. Why not? I'd buy it, especially considering that the V-Rod engine is proven and hasn't had any recalls. That is, if I could cough up the cash...

--The Fox

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Whoops, forgot to thank KPaul!

Forgot to add onto the end: KPaul, don't take offense at my have done nothing wrong for like a week. All your posts have been reasonable and well thought out recently. Thank you for making my life easy! =)

That's too darn bad. I friend of mine runs a little motorcycle shop. He just got a Cannondale dealership this past year. I wonder how the dealers will fair in the end?

Take care,

I think you hit the nail on the head, I'd love to have a performance oriented Harley, as it is when I'm in the market for a touring/cruiser, I'll buy a Road Glide, but it would be nice to have a Harley that was more of a sport standard, other than the 1200 Sportster Sport, Dyna Superglide sport, or V-rod, there really isn't anything, and none of those really fit the bill as an alternative to the Speed Triple, or Bandit or Z-REX. The XLCR was cool as hell, but they made them for what? one year? I know "Harley sells every bike they make, if you have to ask, you wouldn't understand," blah blah blah, but really, they're missing a market here, I don't really want a full-on sports bike anymore, but a cruiser is not going to work for me either, Buell's are neat, but I'm concerned about their reliability record, Harley wouldn't have to beat the Japanese or European bikes, but something along similar lines would be a good alternative.
Maybe now Cannondale can concentrate on it's bicycles again. A local bicycle shop that had sold Cannondale bikes for years dropped them because of rising costs, lower component quality, and poor sales.
Cannondale let the bicycle division fall to concentrate on motorcycles. Many long-time Cannondale bicycle shops dropped them because of poor sales due to higher prices and lower component quality.

A local bicycle shop had some of the highest sales figures for Cannondale in the south and he dropped them about 2 years ago for the previous reasons.
First of all, Fox, go back and read my post again. I was saying the poster was 100% correct. His explination of why Cannondale failed, is a lesson on why Harley would fail, if they entered the sportbike arena. How that is an "unwarranted, aggressive attack" is beyond me, considering that I agreed with what he said, and would use his quote as a response to anyone that wanted Harley to do this. Sadly, the rest of your post is wrong also. You think Harley doesn't know it's audience? Do yo uthink they don't know what would sell and not sell and at what cost? You are assuming that they can sell sportbikes that perform less and are more expensive. Wrong. They know it, but apparently you and many others don't. If Joe Squidly can't brag about the fastest or the "shootout" winner or the "World Champion", they don't buy in sufficient numbers to remain in that market. Ask Triumph, Buell, Kawasaki(zx9 & zx12), and Honda(SuperHawk). Why is every ad touting race wins and shootout winners? How many ads could Harley run touting race wins or being picked a winner among sportbikes? NONE. I like your last sentence in that you would buy a V-Rod sportbike. So you would spend $16,000 for inferior performance to any $10,000 japanese model, because at that point you are competing head to head. And lines would form for this product? Not only not likely, but I would bet the farm against it. You touted Ducati many times in your post. Why don't you go look up Ducati's track record for making profits over the last 20 years. See how many times they got bailed out and bought out. Then compare the Harley balance sheet over the same 20 years and then we will talk about making money in the sportbike arena. Just to recap, I never attacked the first poster, but did agree that he was correct in his asessments. Harley heeding those words will keep them in business.
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I was wondering when MO would give us some information on this since most of the rest of the world knew of Friday when it happened.

Why not mention something about the figures of their 2002 annual report that you can view on Cannondale's website? $24 million loss in the motorsports division. The bike division is highly profitable. Obviously this is a case of completely running the company into the ground through mismanagement. Someone should have started making cuts way before it got to this point. Now all the guys who had enough faith in the company to buy their motorcycles and atv's are basically screwed.
Looks likely. The clear goal of the reorg plan is to protect the (apparently) successful bicycle division. Looks like their main creditors are on board with the reorg plan, so, assuming that the bicycle business itself was financially sound, the Chapter 11 filing should allow that to continue without disruption.
Sorry, but I'm not going to jump on the "serves 'em right" bandwagon and lambaste them for attempting to enter a highly competitive market with a unique entry. They've sold bikes that are expensive when compared to similar products from other companies for years, and had comparable motorcycle models (Husqvarna, Husaberg, KTM, ATK, recently VOR) to base their launch on. Did they make a huge mistake starting with a new from scratch engine? Probably, but they did need something to set them apart from the others. There were rumors of alternate suspensions--maybe they should have done that first and followed up with a proprietary engine at some other point. Heck, even comparative giants like BMW and Aprilia outsourced one engine or another... But from what I read, maybe pure marketing hype, they really seemed to be into it for all the right reasons... like they have been with bikes all along. FWIW, I think they had a better chance and took a better shot than the E-H debacle or any of the harley clone companies, and if SuperMotard takes off, they might even rue the day they sold the motorsports division, their SM bike being compared very favorably to many others in the field.
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I've often wondered why harley didn't label the Buell as its own. Perhaps Harley is waiting to see how it sells first.

I don't know if I agree with your 90% theory. I think a lot of squids here hate Harley and wouldn't buy one no matter what, especially if it offered less performance for more money.

The sportbike field is littered with good bikes that didn't sell because they weren't the "latest and greatest" (Honda Superhawk anyone?). And like longride says, squids are into magazine test numbers. Hell, KPaul keeps magazines in his tank bag I swear!

I'm reminded of a speaker I saw at a business conference a few years back. He was the CEO of a large pizza chain which got into trouble branching out into other markets (extra quick delivery, two for one cheap pizzas, etc.) His point in his speech was "know your niche."

Harley is the absolute definition of that.
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Unfortunately, I have seen that happen far too often in business -- that is one of the big risks in diversifying ourside your core competency. Even if you have the capital etc, the new venture understandably gets most of management's attention and the core business often goes to Hell!

By the way, I LOVE your name!

I would think Polaris might be less at risk because it is better funded, and is closer to the core business.

Still, the economy is not optimum for someone trying to break into an established field, with what are, for most of us, expensive toys. I would not invest my money in a project which was tackling Harley or Ducati head on.

I would not be surprised to see Indian in Chapter 11 (if not 7) in the near future (note, this is not based on any financial analysis, just a sense of the marketplace).

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