Alan Cathcart | October 6, 2018
Success Story
Indian Motorcycle President Steve Menneto talks about the recent success of the brand and its future.
Steve Menneto, 52, is President of Motorcycles at Polaris Industries Inc., which recently joined the Fortune 500 list of largest companies in the United States for the first time at number 496, just a few notches down from Harley-Davidson at number 488. The Milwaukee company’s ranking has plummeted from number 435 in the past 12 months, as its sales have slumped in contrast to its resurgent Minnesota-based rival, manufacturer of Indian motorcycles.
Menneto is the man who together with Polaris President/CEO Scott Wine ultimately sold his colleagues in Polaris management the idea of acquiring Indian in April 2011 as a heritage brand to run alongside its much younger Victory marque. Having succeeded in doing so, Menneto was then entrusted with the task of making it work, and returning America’s oldest existing motorcycle company that built its first such machine back in 1901. It’s a task he and his team at Polaris HQ in Medina, Minnesota, have self-evidently discharged pretty well, in developing a strong-selling array of individually styled and distinctively engineered models currently based on two engine platforms. These comprise the air-cooled OHV Thunder Stroke 111ci/1811cc 49º V-twin engine which kicked off Indian sales in August 2014 with the Chief custom and Chieftain bagger, and the liquid-cooled 69ci/1,133cc Scout 60º V-twin eight-valve engine which followed a year later, to provide a less costly middleweight alternative from the tomahawk tribe.
PHOTOGRAPHY BY JAMES CALVERT
After shutting down its existing Victory two-wheeled brand in January last year in order to focus entirely on Indian, Polaris management, headed by Wine and Menneto, have driven their sole motorcycle brand forward with spectacular success. The chance to catch up with Steve to learn how that’s been achieved.
Steve, the overall U.S. motorcycle market suffered a 3.2% drop in 2017, and it’s dropping even further so far this year. How is Indian’s sales holding up in your home market?
I’m happy to say that we’re actually expanding very well—and that means growing our market share and growing our volume, as well. We’re also lifting our dealer count in North America, which is good. No question, the US industry situation is pretty challenging, but Indian’s been able to continue to prosper, and keep growing in the way that our business plan called for it to do.
What’s Indian’s current percentage increase in unit sales?
Year on year, we’re beating the market right now by about 11%.
But that’s against a declining U.S. market. Compared to 2017, how many more actual motorcycles are you currently selling year on year in North America?
On that basis we’re doing even better—we’re in the upper teens in unit growth in the USA, and we’re up over 50% in year on year growth in Europe and in IMEA markets [India, Middle East and Africa]. Our finance guys are going crazy!
What do you attribute the reasons to be for Indian’s ongoing global showroom success?
We’ve always focused on staying true to the Indian brand in a way that defines us compared to our competitors, plus we continue to make quality product with a strong identity, and we’re also trying to be an engaging kind of brand with our customers, too. It’s really been a question of getting out and trying to do different things, to build the customers’ awareness of Indian, but also to build their familiarity with how we want to run it as a brand. We’re doing this around the globe, and now it’s paying off for us as we go full blast into the things that we do, and do them right.
But even you couldn’t have imagined it was going to be so successful?
No, we honestly did not! We said, “If we’re going to get involved in racing, we’re going to commit to it fully.” So with the credibility of our race team—the engineers, the product guys, the riders who took a chance on us and came aboard—plus all the support that we’d get, we thought we’d have a shot at doing well. By that I mean we honestly thought if we could win a couple of races that first year in 2017, that would be a really successful debut season, and we could work hard to build on that for Year Two. We knew we’d have tough competition from teams with a proven winning streak. But it turned out even better than any of us had honestly imagined, winning so many races as well as the AFT Twins Championship. We thought that if we could win maybe four races or so, that would be outstanding, and we could maybe get on any level of the podium about 10 times throughout the season.
Okay, but are you maybe even a little bit embarrassed that Indian has been so dominant in the AFT series from your very first race onwards?
No, I’m not embarrassed about winning, because we can only control what we do at Indian, not anyone else! We have a great bike, a great support team, and great riders, and that package is what’s delivering the wins. Plus, we have a really good contingency package for our customers to purchase the FTR750 and race it against us—pretty successfully, it seems! Gary Gray, our VP Racing, has been doing a phenomenal job with our entire race program, and it’s thanks to him and his team we’ve been so consistent. And isn’t racing about striving to finish consistently, and win races consistently? I mean, when you see the privateers coming to Indian now, and the success that they’re having with our bikes, our team’s got to keep on working super hard to stay ahead of them. They’re pushing us all the time to keep getting better!
You’ve now confirmed you’re going to be building a street spinoff of the FTR750. What can you tell me about it?
The FTR1200 is indeed born out of the race program—that was one of the things we were always being asked, “When are you going to get that bike to production?” Back in the early days, if you recall, our engineering focus above all else was, “Let’s get this range of street bikes out,” and so that’s why we waited until we went racing. But racing is in Indian’s DNA, so then we did go racing, but having done so with such success we realized, “Wow, we’ve got something here.” I mean, when you look at the response that the FTR has received, it was, “Oh, this is a bike we’ve got to bring to market.” However, like other dedicated oval track racers from other companies, it was designed as a racer through and through—so it wasn’t just a question of just hanging lights and a horn and an electric starter on it. But after we displayed the Custom concept bike at the Milan Show last November and it was so well received, we had to go to market with a bike that was as close as possible to it, while still meeting all Indian’s standards for performance and practicality.
So our development team’s been really focused in evolving the FTR1200 in a hurry—although we’re not going to short ourselves in terms of quality just to bring it out quickly. But it’s exciting how we’re going to stretch Indian way beyond Cruiser/Bagger/Tourer—and the FTR1200 is a perfect example of how stretching beyond that is going to happen.
Have you developed an entirely new engine for this model?
Yes, it’s a totally different engine than what the Scout’s is.
So will there be other motorcycles built around the FTR1200 engine?
I think you could say that it’s a very flexible platform for us to go forward with!
Would it be right to term this as the Indian Sport Platform?
I don’t think we’ve coined that phrase yet, but yes, this is our Indian FTR platform. And we do indeed have many opportunities in front of us with this potential family of models.
Maybe something of a more European style model, like a Café Racer—or an Adventure Tourer?
I think we have a lot of options, so let me say this. As you know, our focus is not only on the North American market, but we’ve talked earlier about Indian being a global brand. And for us to be a credible global brand, we know that we have to go over and enter the European market with great motorcycles that are tailored towards what the customers in those countries are looking for. I think the FTR and any other spinoff models from that platform are going to help achieve that. I think you also can see with our decision to hire Ola Stenegärd as our director of product design to help us to expand our brand globally, that we’re serious about bringing great bikes to different markets.
An American manufacturer hires a Swedish designer with a successful track record with a German brand—that’s a pretty positive statement of intent, I guess.
Yes, we like to think so, and it speaks highly of Ola that he wanted to join us on what I’m sure will be an exciting adventure with so many forthcoming new products in quite different segments.
One area that hasn’t, however, as yet proved successful for you, is electric. You purchased Brammo outright in January 2015, but would it be fair to say that project has short-circuited?
The electric side with Brammo was a great learning experience, that’s how we look at it—we really did learn a lot. But with Indian having Polaris as a parent, we are able to leverage our parent company’s expertise in working with electric off-road vehicles and other applications.
Polaris has two subsidiary companies manufacturing electric vehicles, doesn’t it?
Correct, GEM and Goupil. So in order to continue that learning, we’ll access their expertise before coming to market at some point in the future with an electric Indian. But we’re not in a rush to do that before getting practical benefits from what we’ve learned. However, look at our timing—we acquired Indian in April of 2011, and we brought an all-new motorcycle to market barely two years later. Today, we’re only four years on from when we re-launched the Indian brand in Sturgis back on August 3 of 2013. I always remind folks about this, because it’s been such a short while—we’re only four model years in from re-establishing Indian from ground zero, so we’ve come a huge long way in a short time. We’ve gotten 450 new dealers in 45 different countries in four years. We’ve launched 15 models, three different platforms, and we had to restart a brand. So we think that when the timing’s right, electric could be part of that portfolio.
Does the fact that Harley-Davidson is apparently going to bring its LiveWire EV to market put any pressure on you to produce an Indian rival?
No, not at all. We have no particular time schedule on our EV project.
Another thing Harley-Davidson has done is to establish a manufacturing operation in India, with another coming online soon in Thailand. Is Indian considering manufacturing offshore? Polaris has plants in Poland and Mexico, so it’s something your parent company has already decided to do.
We continue to look at that as an opportunity for us. Honestly, it starts with the customers first, and then our dealer base, and then how we look at it in light of that. Right now, you could say that where we’re at in the life cycle of our brand, we don’t necessarily need to produce all of our stuff in Spirit Lake, Iowa. So we’re assessing that opportunity as we grow. The issue will be, is speed to market going to be critical in the future, and personalization or customization for a given market, and so on? We want to grow our brand globally, but we know that when customers around the world demand something we’re not making in America, then we need to be able to respond to that. So if it starts to makes sense for our brand to produce around the world, as well as in the USA, then we’ll assess that, and make sure we make the right decision. But we’re not pressured by the tariff issues that have raised their heads to do anything right now
That’s the big question. The EU has retaliated to President Trump hiking tariffs on its steel products by increasing taxation on U.S.-made motorcycles from 8% to 31%. Harley-Davidson has responded by saying that they‘ll be manufacturing in greater numbers offshore. What’s Indian’s response to the EU’s tariff hike, which I understand will cost you as much as $40 million this year alone?
Right now, we’re still assessing how that’s really going to impact our business. Let’s fully understand what’s going on, how it’s going to affect us, how long is it going to be there, what’s truly going to happen? As I just said, we’re growing, we’re going to continue to grow, and we’re up over 50% in year on year growth in Europe. Tariffs are tough. As a business person you have to look at the whole landscape and react to changes in that. I can’t change what’s going on, so we’ll just make the assessment on how to react to that, and take it from there.
If you have this consistently increasing demand for your products, will production at Spirit Lake be able to keep up? And is it a problem getting the workforce there? It’s only a small town.
No, right now we employ about 800 people in our Spirit Lake facility, which measures 130,000 square feet. We just actually put on a new Experience Center, and did a nice redo of the whole facility and now we’re starting to build up a collection of history, and people are donating stuff, and we have old bikes there, and new bikes, and FTR bikes. So not only is it our manufacturing facility, but now it’s becoming our Indian Experience Center, as well. But yes, we have the capacity there, and we have the ability to gain the people to continue expanding.
Do you feel you’ve achieved that expansion reasonably well without sacrificing quality?
That was our biggest thing, is we knew we had to go with speed and quality, and it cost a lot to do that, but we cannot waver on quality at all. And that’s at the forefront of our mind in trying to build a premium brand, we have to make sure quality is first.
Now so far, you’ve only made twin-cylinder engines. Indian didn’t really do much with singles, but they did make fours. When are we going to see an Indian Four again?
Well, we indeed made Fours, and we also have singles in our history portfolio, so we’re not limited in what we can do.
Shutting down Victory was a tough call. How has that worked out for you?
It’s been 18 months since we announced that decision, and since then we’ve been trying to do everything we can to try to take care of our Victory customers. I think it’s gone pretty smoothly.
Having shut down one brand, would Polaris ever be interested in acquiring another motorcycle company besides Indian, especially if it was maybe in a different sector of the market?
Yes, indeed we might—but in a different sector. If you look at Polaris, last year we completed the acquisition of Transamerican Auto Parts, which provided us with an immediate leadership position in a growing market, and allows us to accelerate Polaris’ growth and profitability. And then, just now on July 2 we acquired Boat Holdings in the United States, which is a leading manufacturer of pontoon boats and pleasure boats, and so forth. So as we continue to look at our corporate portfolio, we look at what’s good for the customer, and what’s good for our overall business strategy as we expand in the outdoor recreation industry. We don’t have an acquisition strategy, but we have a business strategy, which is about fueling passion. So if there’s another motorcycle brand available, which allows us to continue to fuel the passion of riders around the globe, it’s an opportunity for us that we’ll certainly consider. I’m not saying we’re going to do anything specific as yet, but I’m also not saying we wouldn’t do anything if that situation arose.
So, if for example, Volkswagen decided after all to sell Ducati, would Polaris be interested in acquiring it?
(Smiling) I’ll say no comment at this time on that, but—no, we’ll leave it at that! CN