Here is a common joke that you will often hear: “How do you make a small fortune in the motorcycle industry? Start with a large one.” Well, the next time you hear the lead-up, here is a new punchline for you: “Sell a limited edition model.” Motorcycle manufacturers have been onto this gag for a while now, offering limited edition, numbered for collectors, pure unobtanium motorcycle models to the well-heeled masses. There may not be that many people that can afford a motorcycle that costs as much as a modest house, but there enough of these people in the world that selling a couple hundred expensive superbikes a year is a pretty trivial feat – it helps too that many of these enthusiasts are return-customers too.
It has been a busy month since our inaugural edition of “What We’re Reading” column, so there is plenty to catch-up on reading-wise. Again, our reading list spans stories that go between the motorcycle industry and also non-endemic media outlets.
This edition focuses heavily on the racing world, and in it we get a glimpse into the world of the MotoGP Championship, from the riders’ perspective. We also see what’s happening in the automotive industry, as well as the media landscape as a whole.
Many of our stories can be brought back to the motorcycle industry, as our industry faces analogous problems to other sectors. Of course, some of the pieces made our list simply because I thought they were interesting and thought-provoking.
Part clearinghouse for stories that we will never get our full attention, and part book club for our loyal readers who are doing their best to survive the work day, say hello to the next installment of the “What We’re Reading” column series.
The Volkswagen Group got a new CEO last week, and in less than seven days, that news has already sparked renewed rumors in the German automobile conglomerate divesting itself of Ducati Motor Holdings. For those who have been following Ducati’s saga, there was much talk last year of Volkswagen selling off a number of its other brands, all under the reasoning that the German company would need to raise capital to cover its mounting Dieselgate liabilities. The logic for that reasoning wasn’t sound, but the actions were certainly there, with Volkswagen tendering offers from a number of would-be suitors. There was a fly in the ointment though: Volkswagen’s labor unions, who control half of the VW Group’s board seats, and were vehemently opposed to any brand divestitures.
The Yamaha Corporation announced today that it will be selling 8 million shares of its holdings in Yamaha Motor Co., a movement of shares that will see roughly 2.3% of the voting power in the powersports company changing hands. This deal is expected to close on December 4th, and the Yamaha Corporation says that it will be selling its position to various unnamed securities companies, presumably to then be sold on the open market. At the current market price for Yamaha Motor stock, this deal should be worth close to ¥26 billion, and ¥18 billion after tax expenses have been factored. The news means that while the Yamaha Corporation will remain the single largest shareholder in Yamaha Motor Co., its ownership position as a shareholder will drop from 12.22% to 9.93%, as a result of the divestiture.
For the past few months, talk of Ducati’s divestiture from the Volkswagen Group has grabbed the attention from news outlets and Ducatisti alike, as the future of the Italian motorcycle company seemed uncertain. Internally, a power struggle was a play, with Audi keen to unload Ducati from its books, but lacking the support from upper management in the Volkswagen Group. Talks reportedly hit the skids once it was realized that the Volkswagen labor unions, which control half of the seats on the Volkswagen Group management board, weren’t onboard with divesting Ducati from the holding group. This is probably information that investors would have liked to know, before they spent the time and resources putting together purchase proposals for Audi’s consideration.
According to several reports in the financial sector, the investors behind Dorna Sports S.L. are readying themselves for another sizable payout from the media rights holder for the MotoGP and WorldSBK Championships. Using a bit of financial finesse, the move would see Bridgepoint Capital and the Canada Pension Plan Investment Board (CPPIB) – the two major investors in Dorna Sports – taking roughly €889 million off the books of the Spanish media company, according to Reuters. As such, today’s news would make this the third time that Bridgepoint and the CPPIB have raided the piggy bank for motorcycling’s premier racing series, having done similar deals in 2011 (€420 million) and 2014 (€715 million).
If you have had your eye on a Norton V4 superbike recently, you might not have to wait as long for it to arrive, as the British marque has secured £3 million from the Santander Corporate & Commercial bank. The debt investment will allow Norton to triple its production rate on the V4 SS and V4 RR models, and also allow for the company to hire 40 new employees for the job. Additionally, according to Norton this will allow the company to increase its production volume to 1,500 motorcycles per year. “Having developed and pre-sold a huge number of bikes, we needed the funding to be readily available to pay for tooling, stock and people to allow production to move from 40 bikes per month to in excess of 130 bikes with effect from summer 2017,” said Stuart Garner, CEO of Norton Motorcycles.
Ducati released a new financing program this week, maybe you saw the announcement already. If you even bothered to read one of the copy/paste jobs on this announcement, you probably got three sentences into it, and then realized you just lost a minute or two of your life, which you will never get back. It is hard to make this topic sexy, and motorcycle journalists are lazy creatures (myself included)…which is why you probably just saw the press release reprinted on a website, with some Ducati advertising placed next to it, just for good measure. The Ducati Premier Financing program is a big deal though, just not in a way that is immediately sexy to the casual motorcycle buyer.
Last week, I was ready to start polishing the obituary for MV Agusta – the Italian company seemingly in an impossibly terminal state. Now it seems MV Agusta’s fortunes are changing, with the Italian motorcycle maker signing an agreement with the Black Ocean investment group to recapitalize MV Agusta. Details of the pending transaction haven’t been released, but we can assume that the increase in capital will help ease MV Agusta’s relationship with suppliers, get workers back on the assembly line, and continue the development of new models. The €20 million question though is whether Black Ocean’s investment will mean the departure of AMG, the German auto brand acting now like an albatross around MV Agusta’s neck.
With all the new motorcycles for the 2017 model year debuting right now, it might seem counter-intuitive that this would be the right time to make a trip down to your local motorcycle dealership, but it is. Let me explain. After seeing a modest rebounding of sales and momentum from the recession, this year has been a stumbling block for the motorcycle industry, with sales at the beginning of the year building slowly, before tapering off later in the summer and early fall. Economic indicators are up, unemployment is down, but the third quarter results from around the industry are pointing to the US motorcycle market taking a market contraction for 2016. The reason for this is uncertainty.
If you believe the rumors coming out of Italy, Polaris is poised to save acquire ailing motorcycle manufacturer MV Agusta. We have documented MV Agusta’s precarious financial troubles already in great detail, and how MV Agusta CEO Giovanni Castiglioni is between a rock and a hard place with his main investor, Mercedes-AMG. According to the Italian media, and those who repeat their words like parrots, Polaris represents an escape from MV Agusta’s difficult position with the German automobile-maker, though the reality is that nothing could be farther from the truth.