SAN JOSE, CALIF. Financial woes halt Indian Motorcycle production

A company leader was hopeful that the production would be restarted.
STAFF/WIRE REPORT
SAN JOSE, Calif. -- Indian Motorcycle halted production and laid off its entire work force Monday, citing financial troubles that could force the company into bankruptcy.
Indian chairman Frank J. O'Connell told 380 workers at the company's Gilroy plant that they would immediately stop manufacturing the famous motorcycles, including the iconic Indian Chief, after a deal with a major investor fell through.
O'Connell said he has already received calls from dozens of other potential investors, and he remained "hopeful" that the death-defying company would soon roar back to life.
He said that he and other board members were still trying to determine whether the company would have to file for bankruptcy to resume production.
Local dealer
C.J. Marino, an Indian dealer in Boardman, said he intended to call Indian offices today to find out what was happening.
"If this is the demise of Indian, it's an absolute shame," said Marino, owner of South Avenue Cycle and a member of a dealer group that advises Indian.
He said he thinks the company still could be revived with new investment and added that dealers have talked about forming a group to buy the company. Finances had been burdened by too many layers of management, he said.
In June, dealers were told that production was going to be stopped but would be restarted in November to begin making 2004 models, he said.
Marino's dealership, which opened in March 2002, was turning a profit in recent months and September was shaping up to be his best month with nearly $250,000 in sales.
History
Indian went out of business in 1953, but it came back to life in 1999 under the vision of Rey Sotelo, founder of customized bike company California Motorcycle.
In 2001, Audax, a private equity firm in Boston, invested $45 million and brought in new executives, including several with deep ties to the automobile industry in Detroit and Germany. More than 200 dealers were on track to sell 4,500 bikes in 2003 -- a company record. The list price of a new Chief can exceed $23,000.
Expensive to make
Indian was on the verge of profitability when O'Connell and the rest of the board decided last week they couldn't afford to continue manufacturing. Given the steep fixed costs of its assembly line and design studio, O'Connell said, the company was simply not financially viable.
"The company needs to go down a different path with a different cost structure," O'Connell said Monday from his home in Vermont. "It doesn't make any sense to put more money into the current structure."
O'Connell said the company, if it makes a comeback, would "absolutely not" scrap its in-house design or assembly.
Last year the company stopped unveiled an in-house motor, the Power Plus, which gave Indian a unique exhaust tune and vibration dramatically added cost to the business.