BackErik Buell Racing, Hero Motocorp’s US partner, files for bankruptcy
Hero was expected to use EBR's network in North America and create a joint marketing network in Europe
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New Delhi: Erik Buell Racing (EBR), the US motorcycle maker in which Hero MotoCorp Ltd holds a 49% stake, has shut operations and filed for bankruptcy protection from creditors, the Indian company said in a statement on Thursday.
Hero MotoCorp had bought the stake in the Wisconsin-based bike maker and technology provider for ₹ 150 crore in 2013.
One of the products that Hero developed in partnership with EBR is the sports bike HX250 that is slated to be launched in the second half of this fiscal year.
The company is confident that “its future product line-up would not be affected despite EBR ceasing operations", said a Hero spokesperson.
Hero was working on two new platforms with EBR, which include the HX250 and electric scooter Leap, according to two people familiar with the development. Besides, EBR had also worked on the new generation Karizma and the Karizma ZMR, which were introduced in the market in 2014.
The Indian company had expressed its desire to enter the European markets with Leap, which is powered by lithium-ion batteries and an 11bhp traction motor. It houses an all-new 124cc engine to extend the limited range electric vehicles usually provide.
Hero’s investments into EBR is more than one-third of the ₹ 400 crore it is investing in a research and development (R&D) facility in Kukas, Rajasthan. Sure, for a firm with more than ₹ 4,000 crore cash on books and generating a free cash flow of more than ₹ 2,000 crore a year, the outgo was not significant.
The shareholders are unlikely to have an issue, said Shriram Subramanian, the founder and managing director of InGovern Research Services Pvt. Ltd. “ ₹ 150 crore is not huge money. It is risk capital," Subramanian said. “If Hero managed to absorb some technologies, it is well and good, otherwise it has gone for a toss." Hero had plans to enter North America and Europe in partnership with EBR as part of its plan to export one million two-wheelers by 2017, chief executive Pawan Munjal had said in a 2013 interview.
Hero was expected to use EBR’s distribution network in North America and the two partners were to create a joint marketing network in Europe.
The two companies aimed to sell as many as 20,000 EBRs by 2017. EBR’s 1,190cc bikes were sold at $40,000 each.
EBR founder Erik Buell was the chairman of the firm; Hero nominated two directors on the board.
Buell is renowned for his engineering skills in motorcycle racing. In 1983, he started a company to make motorcycles in Wisconsin.
Harley-Davidson Inc. eventually took over the unit, distributing the Buell Motorcycle Co. machines through its dealers.
The global slump saw the Buell division being closed in 2009. Erik Buell launched EBR shortly after that.
Hero’s research and development centre in Rajasthan is expected to start operations in 2015-16. “It will have around 600 engineers from India and around the world," the firm said in the statement.
Hero last year hired Markus Braunsperger from Bayerische Motoren Werke AG (BMW) as chief technology officer.
The company also brought in Markus Feichtner from Austrian engine maker AVL List GmbH to lead the engine design and development team.
Since its separation with Japan’s Honda Motor Co. Ltd, Hero has been seeking technology partners. In February 2012, it had tied up with EBR and later formed a partnership with AVL and Italy’s Engines Engineering.
In 2010, the Hero Group and Honda had agreed to end their 26-year-old relationship, with the Indian partner agreeing to buy Honda’s 26% stake in Hero Honda for ₹ 3,841.83 crore.
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