The Closure of the Gilroy Indian Factory as Reported by the Gilroy Dispatch Newspaper

Indian shuts its doors

Monday, September 22, 2003
By Eric Leins
 

Chris Riley/Staff Photographer
Employees of Indian Motorcycle carry boxes of personal belongings after being let go Friday as the company shut its doors.
 

Photo by: Peter Crowly
Don Nofrey says he’s not ready to close his Indian Motorcycle dealership in Gilroy, at 7191 Monterey Road.

By PETER CROWLEY and ERIC LEINS

Staff Writers

GILROY - Only hours after telling dealers to cancel their flights to Las Vegas for the unveiling of Indian Motorcycle’s sporty, redesigned 2004 models, officials from “America’s first motorcycle” company told its 380 employees Friday afternoon they were out of work. The Gilroy-headquartered company was out of money.

The icon brand that began in 1901 and produced the motorbike Arnold Schwarzenegger rode in the sci-fi “Terminator” movies is terminated.

The Indian factory - one of the top-five Gilroy employers - closed its doors Friday because an eight-figure investment deal fell through earlier that week.

The deal had been crucial to the company’s future, Executive Vice President Fran O’Hagan said. It didn’t matter that 2003 was on track to be a record sales year.

“It came as a complete surprise to everybody, including the top management,” O’Hagan said Friday.

For the workers whose careers are now on hold, the shocking news left them feeling “burned-out,” in the words of veteran employee Daniel Tice.

“It’s a real drag,” said Tice, who had been with the company since it roared back to life in late 1998 - 45 years after the original Indian Motorcycle folded in Springfield, Mass. “I was a real motorcycle enthusiast, and this was a real dream, reviving Indian.”
 

What happened?

The company needed enough money to carry it just a few more months, until its 2004 bikes were ready to be sold. Without the investment it was counting on, O’Hagan said Indian didn’t have the cash to finish building the 2004 models and plan its future products. Even if the company had stopped its product-planning to fund 2004 production, it “would go another six months, and then it would close,” O’Hagan said.

“The motorcycle industry is not for the faint of heart,” O’Hagan said. “(It) takes an awful lot of capital to succeed. ... In the end, the company didn’t have the money.

“On the other hand, our 380 employees and 200 dealers have something to be proud of, and that’s 13,000 beautiful Indian motorcycles driving around the country.”

More Indian motorcycles have been selling than ever before. May was the firm’s best sales month ever, although September was on track to beat it. This year, O’Hagan added, Indian was on track to sell 4,500 bikes, compared to 3,822 last year. Indian planned to build 6,000 machines for 2004.
 

What’s next?

O’Hagan said Indian Motorcycle’s assets will soon be returned to its creditors, and it’s possible bankruptcy will be claimed. The company is not in a position to be bought, he said.

The future of its trademark - purchased for $18 million in 1998 - “remains to be seen.” While there is no plan to reopen the plant in the future, O’Hagan wouldn’t rule out the possibility.

“If you study the history of Indian, there are plenty of twists and turns, so I’m sure there will be another chapter,” O’Hagan said.

Indian’s approximately 200 dealers will have to fend for themselves. Some may close when they sell their current stock. Others might switch brands or sell custom or vintage cycles.

Don Nofrey, who owns Gilroy’s Indian dealership, said he isn’t ready to close his shop doors yet and will hold out indefinitely.

“Indian will be back,” Nofrey said. “It’s not going to die.”

Nofrey figures that Indian bikes will now become collectors’ items.
 

Breaking the news to employees

At the factory, it started out like any other Friday.

“They handed out our paychecks at lunch time, and everything seemed fine,” an assembly-line worker told The Dispatch on condition of anonymity.

Around 2:15 p.m., Indian President and Chief Executive Officer Lou Terhar broke the news to shocked and saddened workers.

“What they told us was, we (the workers) were doing fine, we were doing a hell of a good job, but they couldn’t find anyone to give us money,” the assembly worker said. “People were shocked and sad and a little angry, kind of a mix of all those things. There were tears because we were kind of like a family. I enjoyed working there. Every once in a while you’d see a pro athlete or movie star come by. I had lots of friends there.”

While it’s believed most employees didn’t see the shutdown coming, some said they’d seen the writing on the wall that something big - although probably not this drastic - was about to go down.

“There were rumors going around for about two months or more,” the assembly worker said. According to one of these rumors, Indian was to move its headquarters to a cheaper location. Alabama, with its low property taxes, was a candidate.

Indian’s employment peaked in 2000 with 610 workers. The biggest series of layoffs - about 200 - came in late 2000 and early 2001.

“(By 2003), Indian was producing more bikes with fewer employees,” O’Hagan said.

Finding jobs for Indian’s displaced workers is the first thing O’Hagan personally plans to do until he himself finds another job, he said.

“The employees were doing a wonderful job,” O’Hagan said. “They could work anywhere in the industry.”

A few employees will stay on briefly to help with the shutdown. About 100 of Indian’s employees had office jobs. The remaining three-quarters were involved in production. None received severance pay, O’Hagan said.
 

City stunned

The news sent shockwaves through the community over the weekend as city leaders digested the impact of losing such a large employer and, potentially, a Monterey Street dealership showcased in a downtown that business activists are working feverishly to revive.

Gilroy economic guru Bill Lindsteadt isn’t giving up on the company.

“I want to see what we can do to bring them back,” said Lindsteadt, the executive director of the Gilroy Economic Development Corporation. “They were doing well. Sales were up, production was up. I don’t think the Indian days are over.”

Lindsteadt said the EDC had known of Indian’s efforts to land more capital but had not been approached for help. Lindsteadt said federal and state loan programs could be available to Indian through the EDC.

“My first call Monday morning will be there (to Indian),” Lindsteadt said.

Lindsteadt said he was crushed by Friday’s news.

“It hurt,” he said. “You work hard to bring good jobs to the city and something like this happens. I feel sorry for all those who lost their jobs.

“When you lose over 350 manufacturing jobs, it’s going to have a significant effect on Gilroy, and it will add to the existing unemployment problem we’re having. How you approach this now is to redouble the efforts to continue to bring new manufacturing companies here.”

City councilmembers also absorbed the news this weekend.

“I’m saddened at the loss of nearly 400 well-paying light manufacturing jobs in our town, as well as the death of a nameplate that has been in existence for over a hundred years,” Councilman Bob Dillon said. “I hope someone buys the company and carries on.”
 

Sadness and speculation

The motorcycle company’s demise also hit hard with the man who helped bring it to Gilroy.

“This is horrible. My heart goes out to them,” said Rey Sotelo, former Indian Motorcycle president. “There is nothing positive in this situation for anyone.”

Sotelo left the company in January 2002 over philosophical differences. He wanted to play to the bike’s vintage significance, but the board of directors insisted on making the bike a sportier version of its old self, he said.

“I can’t say I was too surprised,” Sotelo said of Friday’s closure. “The focus was no longer on the motorcycle. ... After a while I realized I was getting in the way. I wished them luck because I still had stock in the company, so of course I wanted them to do well.”

Sotelo is the owner of one or more buildings on Railroad Street that Indian used, and has a brother who was a bike show director with Indian. He hasn’t given up all hope for a rebound.

“The potential for the company is huge,” he said. “The company is perfectly poised for a takeover. ... It would be a good ploy to see what the interest from Harley-Davidson is. If Harley-Davidson could own both companies, it wouldn’t hurt them to have that market share. They have enough money to throw at the situation.”

Sotelo said Japanese motorcycle companies may also be drooling over the opportunity to own the Indian trademark, but that iconic name could lose some of its mystique if owned by a foreign firm.

Indian’s 1953 closing left Harley-Davidson as the only major motorcycle maker in the United States for 45 years. That changed in 1998, when Polaris - best known for all-terrain vehicles and snowmobiles - began building its Victory line of motorcycles. Indian restarted production the following year.

Despite an employee discount of 15 percent below wholesale, only a few of Indian’s employees could afford to buy the bikes they helped make. Indian’s retail prices range from $16,900 to $24,900 - generally beyond a blue-collar income.

“They came out as a premium-priced bike, and in doing that, I think they really screwed themselves,” said Tice, the longtime employee.

“(Indian) should just give all the (remaining factory inventory) bikes to the employees - just one to each one,” said Tony Oldofredi, who works for Nofrey’s Gilroy Indian dealership and had several friends lose jobs Friday.

Life after the failure of Indian Motorcycle

Tuesday, September 23, 2003
By Peter Crowley

James M. Mohs/Chief Photographer
Former Indian Motorcycle employees, including Larry Wiley, center, wait to be let into the building on Tenth Street to collect personal belongings Monday afternoon.
GILROY - Laid-off employees and residents here are still reeling from Friday’s shocking news that the Indian Motorcycle Company has closed the doors of its Gilroy factory.

“People are so stressed out and depressed, they kind of want to take some time off; but a lot of them can’t afford to take time off,” former employee Daniel Tice said Monday. “A lot of my friends, they were literally just paycheck-to-paycheck.”

On Monday morning, some of the 380 people who would normally have showed up at Indian’s Tenth Street factory for work came instead to pick up their final paychecks and personal effects. Security guards escorted them in a few at a time; those waiting to enter formed a line outside the front door.

Some of these former coworkers exchanged phone numbers. Some agreed to meet for lunch. “What are you going to do now?,” was a common question. “Take a vacation,” was a frequent response.

Workers and local employment officials agreed that there aren’t many jobs in this area for those with industrial training. Many may have to look for jobs in other fields. Some will likely leave the area. Tice, who had been a test rider for the Indian factory since it opened in 1998, said he’s thinking of going to Kingman, Ariz., where Ford Motor Company has a plant. If he can’t keep testing motorcycles for a living, he said, maybe he can test cars.

But like his former Indian peers, Tice is starting the process of registering with the unemployment office and searching through job ads. Some have more time to look than others, depending on their financial situation. Indian officials did not say how much its employees had been paid, but Tice said he thought assembly jobs ranged from about $9 to $20 an hour, depending on skill and experience.

“We definitely made less than Harley-Davidson employees,” Tice said, “and when you factor in the cost of living here, we made a lot less.” Harley-Davidson, the biggest American motorcycle maker, has factories in York, Penn., Kansas City, Mo. and Wauwatosa, Wis.

The closing has vastly added to the ranks of Gilroy’s unemployed. Indian executive vice president estimated that the company had recruited only 25 to 50 workers, all white-collar, to Gilroy. The rest of the 380-person workforce had come from within 50 miles of the city, he said.

For these former employees, Indian is effectively finished. Whether the company is gone for good, however - or even gone for long - remains to be seen.

A posting Monday on Business Wire painted a picture that was - from a corporate perspective, at least - decidedly less bleak than had been implied Friday, when Executive Vice President Fran O’Hagan said the company had run out of money and described bankruptcy as a likely next step.

In the Business Wire article, Indian announced it had ceased production and laid off its staff to conserve cash and preserve its assets.

“These steps were taken in order to allow the board time to explore other options that would permit the company to continue as a going concern,” Indian Board Chairman Frank J. O’Connell said. “We have made tremendous progress in the last few years in rebuilding the Indian brand, and we are hopeful that a way can be found to maintain the viability of the Company.

“At present the company is operating with a small group of management in place and will continue to do so until a decision is made concerning Indian’s future,” O’Connell added.

What this decision will be is unknown. Bankruptcy is one option, O’Hagan said, but not the only one. While O’Hagan confirmed that no one has yet offered to buy Indian out, it could still happen - though the firm has no plans to go this route.

“If somebody showed up tomorrow, I imagine (the board of directors) would be very interested in selling to them.”

Businesses near the Tenth Street plant lost a wealth of regular customers with the loss of the Indian workforce.

Indian workers frequented the shopping center across Alexander Street from the factory. Gaeta’s Taqueria owner Maria Gaeta said that on an average weekday, Indian employees made up about 50 of her 100 lunch customers. Soon, she said, she will “probably” have to lay off one or more employees herself to adjust to the smaller crowds.

“I don’t know because this was the first week,” Gaeta said regarding layoffs of her own staff. “After a few weeks, we’re going to see the difference.

“This was something sad,” she added as she closed the restaurant for the night Monday. “Nobody was here today.”

It was 50 years since Indian shut down for the first time. Indian had been America’s first motorcycle maker, with beginnings in 1901 in Springfield, Mass. The company remained closed from 1953 until 1998, when it reopened in Gilroy.

Indian job losses hit home

Wednesday, September 24, 2003
By Peter Crowley
 

James M. Mohs/Chief Photographer
John Pe'a discusses his family's future from his Gilroy home with wife, Vanessa, and 7-week-old baby, Johnny Jr., in the background.
 

James M. Mohs/Chief Photographer
Following her husband losing his job when Indian Motorcycle closed its doors Friday, Vanessa Pe'a will go back to working full-time, despite having a 7-week-old baby, Johnny Jr., and a 1-year-old daughter.
GILROY - Johnny and Vanessa Pe'a have a 21-month-old daughter, a 7-week old son, a rented house, two cars with monthly payments and fees for weekend college classes.

Financially, that’s a lot to support, but they got by on Johnny’s paycheck from Indian Motorcycle Company.

But Indian closed shop in Gilroy on Friday without any notice or severance pay for its 380 employees. Now the Pe'as and hundreds of other area families are scurrying to radically adjust their lives.

Before Indian shut down operations, the Pe'as were living “pretty much paycheck-to-paycheck,” according to Johnny. They have a small fund for emergencies, taken from Johnny’s overtime pay, but it’s not enough to last long.

On Monday, therefore, Vanessa will go back to work on a full-time schedule, the first time she’s done so in two years. She’s lucky to get her old job back - she’s a phlebotomist, someone who draws blood - but her pay will be significantly less than Johnny’s was and without benefits. With Johnny’s unemployment checks, however, she expects their income should be “about the same, maybe a little bit less” than before, after they pay out-of-pocket for health insurance. Johnny’s job at Indian came with a health plan.

They’ll have to live under a tighter budget, they said. Eating out is no longer an option, Johnny said, and they’ll be more frugal with their house’s air conditioning.

It could be worse - and is worse - for some of Johnny’s former coworkers, the Pe'as said. One may have to return a new car he just bought, they said; another recently purchased a house.

Johnny said he feels bitter about the suddenness of the announcement and the lack of severance pay. Employees had proven their commitment to the company by going above and beyond the call of duty in the past, he said, and severance pay would have been a way to return the favor.

Recently, for example, Johnny said Indian had to recall many of its motorcycles’ gas tanks. To fix them, the company asked employees to voluntarily work overtime. The workers agreed. Johnny said he and many others worked 12-to-16-hour days, seven days a week, for about four months.

“When they asked us to bend over backwards for them, the employees did it to fix their messes,” Johnny said. “Now that we’re in a bind from losing our jobs, they don’t seem to be bending over slightly.”

Until Friday afternoon, Johnny worked at Indian’s paint shop on Railroad Street. He had worked four-and-a-half years for Indian and before that for California Motorcycle Company, a custom bike maker that merged into Indian. He was in the middle of a job when he was called away - only to be told he didn’t have a job after all.

“I was getting ready to paint when they told me they were calling an emergency work meeting,” Johnny said.

He and the other Railroad Street workers quickly locked the shop, intending to return shortly. When they arrived at the corporate headquarters on Tenth Street, they found the entire staff assembled in the employee parking lot with Lou Terhar, Indian’s president and chief executive officer, standing in the middle.

Acccording to Johnny and several other former Indian workers, Terhar told the employees their jobs were finished and that Indian had ceased its manufacturing as far as Gilroy was concerned. Terhar said Indian had been negotiating with a large investor for months and that the deal had fallen through earlier that week.

Pe'a said he was shocked. He was still thinking about his work back at the paint shop.

“I asked my boss, ‘Hey, can I go back and finish those pieces?’ ” Johnny said. “I didn’t want to leave this stuff half-painted.”

No more work was done that day, however, and Indian employees were only allowed to return to the building in small, escorted groups to quickly collect their belongings.

“I asked him why he was home early, and he said, ‘I don’t have a job,’ ” Vanessa said. “I said, ‘You’re kidding.’ I didn’t believe him. He said, ‘No, really. Look, here are the pictures from my locker.’ ”

The impact of the situation didn’t hit Johnny until that night, he said. It was hard to deal with.

“I’ve been working full-time jobs since I was 15,” he said.

He didn’t plan on working in a factory his whole life. On Aug. 4, he started classes on weekends at Monterey Peninsula City College. He didn’t plan to leave his industrial job so soon, though, he said. Now more than ever he’s pinning his future on that education.

“This was why I went to school, in case something like this happened,” Johnny said. “This was my back-up plan.”

One good thing about all this, the Pe'as said, is that Johnny will get to spend more time with the children. He’ll be staying home with them on weekdays while Vanessa works.

While Johnny Pe'a is bitter about the layoffs, his response is mellow compared to that of his father, 55-year-old Rudy Pe'a. Rudy angrily said on Tuesday that he considers his time working for Indian “wasted.”

“The worst thing that happened was not getting severance pay,” Rudy said.

The next most offensive thing to him was getting no advance notice about the closure. He said Indian officials could and should have explained the company’s financial crisis before it reached this point. They could have given workers options, like voluntary pay cuts or opportunities to invest in the company. Rudy said he would have taken up to a $2-an-hour pay cut to keep working for Indian and thinks other workers would have, too.

“The thing is, they didn’t come to us and be honest with us,” Rudy said. “We’re not little kids. ... If (employees) give you respect by being there every day and building quality bikes, you ought to give them respect back.

“We’re human beings; we’re not robots.”

Collectors items: a few 2004 Indian models

Thursday, September 25, 2003
By Peter Crowley
 

2004 Indian Scout 2-10 model
GILROY - As motorcycles go, this one could be valuable: an Indian Scout 2-10, a new model for 2004 and one of four that may ever exist.

Indian Motorcycle Company had radically redesigned all its 2004 bikes to counter customer complaints about reliability, and the new, improved machines were expected to sell remarkably well. The Gilroy factory was in the middle of building the ’04s when it shut down - probably for good - on Friday.

Thirty to 40 of the latest models made it to completion, according to laid-off Executive Vice President Fran O’Hagan, but most are prototypes that cannot be sold because they use cheaper parts that don’t meet safety standards.

Only “about a dozen” of the survivors are the real deal, O’Hagan said. According to Indian Board Chairman Frank O’Connell, these and the 200 or so older-model bikes in Indian’s inventory will be sold to the highest bidders among Indian’s 200-plus dealers, who will likely be starving for stock in the wake of the factory closure.

There were also 20 or so bikes that weren’t finished, O’Connell said. Indian will probably either reactivate a few laid-off workers to finish these or else sell them for parts, he said. It’s unknown what will happen to the prototype bikes.

The dozen salable survivors included four Scout 2-10s, according to former company test rider Adam Griffith. While the Scout line dates back to 1920, the 2-10 version was a new direction for Indian. Its sporty styling and a fat rear tire were unique among Indian bikes, which are better known as heavy cruisers. The Scout 2-10 is “a hot ride,” according to Griffith. He should know. As Indian’s head tester for the 2-10, he’s put in about 300 miles on one - more than anyone else in the world.

In general, Griffith said, “the 2004-model bikes were a huge improvement over the ’03s.” This sentiment was shared by other former Indian employees, dealers and fans.

“The ’04 bike is going to be awesome,” said Don Nofrey, who owns Gilroy’s Indian dealership.

“If they release the ’04 bikes, they’re going to turn some heads,” said Tony Oldofredi, who works for Nofrey. “They’re going with what the customers want.”

Indian made America’s first motorcycle in 1901, in Springfield, Mass. It folded in 1953 and was nonexistent until 1998, when it was reborn in Gilroy. While the trademark proved it had maintained its popularity over those 45 years, the Gilroy bikes were plagued with reliability problems.

“It had a bad reputation for quality - bottom line,” said Daniel Tice, another former Indian test driver. “(But) a lot of the stuff was really improving quality-wise.”

“Every new company has to solve bugs,” Griffith said. “It takes 30 years to work them all out ... to really be strong enough to not worry about economic issues.”

Improvements for 2004 included a new engine in the Spirit and Scout models and new braking systems, hand/foot controls, lighting and wheels, according to O’Hagan.

Indian shutdown: no choice

Thursday, September 25, 2003
By Peter Crowley

GILROY - Indian Motorcycle wasn’t turning a profit and didn’t look like it was going to any time soon.

That’s the core reason why Audax Group - a Boston-based investment firm that owned the majority of Indian’s stock - decided last Thursday to stop sinking money into the motorcycle-maker, according to Indian Board Chairman Frank O’Connell.

“The basic problem was, it was costing us more to produce the bikes than we could sell them for,” O’Connell said.

Audax Group had been feeding money to Indian - sometimes on a weekly basis, O’Connell said. With those funds gone, the board had little choice but to shut down Indian’s Gilroy headquarters and lay off its 380-person workforce. The nine board members - six of whom are Audax Group appointees - decided late Thursday they “really must lay off the employees and pay them while the company still has enough money to pay them,” O’Connell said.

As chairman, O’Connell represented management on the board and was a full-time Indian employee. He is also Indian’s second-biggest investor, although far behind Audax Group.

Now Indian is looking for new money and a new direction. Maybe that means someone will buy the company; maybe it means a new location; maybe it means a new kind of motorcycle; maybe it means liquidation, leaving the Indian trademark to Audax Group or whomever wants to buy it. The board is open to any of these options, according to O’Connell.

“We’re getting calls from all over the country,” he said. “The brand is very viable, and the dealer network is strong. ... There’s a lot of pieces in place.”

O’Connell said he hopes and believes Indian will be making motorcycles again soon, but it will first have to find a way to cut costs. While Indian saw record sales this year, O’Connell said costs were rising as well, and the company was millions of dollars in debt.
 

Little chance for reopening here

It’s possible, but unlikely, for Indian to reopen in Gilroy. That would require a private investor to appear here with an immense amount of capital and a plan to massively reduce costs, according to O’Connell.

City officials say there’s nothing they can do to keep Indian in Gilroy.

William Lindsteadt, executive director of the Gilroy Economic Development Corporation, said the “low-eight-figure” amount of capital Indian needs is “far above” any public grants or loans he might be able to secure.

Mayor Tom Springer said he’s “very disappointed” about the slim chance he sees for Indian to return.

“I don’t believe it’s possible for them to re-open and re-establish themselves in the manner they were in Gilroy,” Springer said.

O’Connell said leaving the state is a serious option for Indian. As recently as June, Indian had been considering a move to Birmingham, Ala., although not anymore.

“An active decision was made not to move to Alabama,” O’Connell said, but he noted that other states “provide all kinds of incentives.”
 

‘Burning’ through capital

Because Indian wasn’t profitable, O’Connell said it couldn’t attract the investors it desperately needed to continue making motorcycles.

“We literally talked to hundreds of (potential) investors,” the chairman said.

In the meantime, O’Connell said the company was “burning” large amounts of capital to produce its 2004 bikes. Fall has historically been Indian’s most vulnerable time of year because sales of current-year bikes taper as money is being poured into producing the next year’s models.

O’Connell said Audax Group decided it would cost too much to get through the “window” of time until the 2004s could be sold. With no new investors in sight, O’Connell called this decision “prudent.”

Audax Group invested $45 million in Indian in 2001 and had since contributed “substantially more than that,” O’Connell said.

In addition to money, “they also committed people and a tremendous amount of time to make this successful,” O’Connell said. “You could not have asked for an investor to do more to try to make this company succeed.”

Nevertheless, the chairman expressed sadness for the nearly 400 people who lost their jobs Friday.

“My heart goes out to all those (who were laid off),” O’Connell said. “What a great group of workers - many of whom I consider to be my friends.”

Indian defends its actions

Friday, September 26, 2003
By Peter Crowley

GILROY - Indian Motorcycle had no choice but to close its doors without giving employees any kind of advance notice or severance pay, Indian Board Chairman Frank O’Connell said Wednesday. Many of Indian’s 380 laid-off employees say they feel betrayed by the company’s quick actions.

The reason Indian’s Board of Directors decided on Sept. 18 to cease production and lay off its staff was that its majority stockholder, Audax Group of Boston, decided to halt its millions of dollars of investment, according to O’Connell. At that point, O’Connell said, the company had only enough money remaining to give its employees one last paycheck and extend their health benefits for another month. Beyond that, preserving the company’s assets for its creditors became its top priority.

“There was no money in the company to pay severance,” O’Connell said. If the company had done so, he said, its creditors could have sued for distributing assets beyond what was expressly required by law. Severance pay is not required by law, according to O’Connell.

Extending employee health insurance through the end of October was an “unusual” move, O’Connell said, which “took a substantial amount of the remaining cash in the company.”

As for advance notice, O’Connell said Indian was exempt from a state labor law that requires 60 days warning when 50 or more workers are laid off. The law exempts businesses that are “actively seeking capital or business (that), if obtained, would have enabled the employer to avoid or postpone the relocation or termination.” In addition, “the employer (must) reasonably and in good faith (have) believed that giving the notice ... would have precluded the employer from obtaining the needed capital or business.”
 

Local bid for Indian

Wednesday, October 08, 2003
By Peter Crowley

GILROY - Indian Motorcycle is selling off its assets. Local resident Rey Sotelo - along with some of the same investors who helped him bring Indian roaring back to life in 1998 - is leading a plan to buy it and once again build bikes in Gilroy.

“We are preparing a bid, and we are actively trying to purchase the company,” Sotelo told The Dispatch Tuesday. “We figure if anyone can make it happen, we have the management team to do it.”

Indian has set a deadline of Oct. 17 on which to bid on its trademark and physical assets, Sotelo said. He said he doesn’t know who else will place bids, but he thinks his will be competitive.

“I think we have as good a shot as anybody,” Sotelo said.

Indian Motorcycle was a top-five Gilroy employer until it laid off its 380 employees and closed its factory doors on Sept. 19. The lack of advance notice has prompted a class-action lawsuit by an employee, and the lack of severance pay has prompted others to lay claims with the state Department of Industrial Relations.

“With some phone calls, I’d like to get that workforce back,” Sotelo said Monday afternoon as he broke the news on Internet radio show American Cycle Talk (www.americancycletalk.com), in an interview with Easy Rider Magazine Managing Editor Scott McCool. Sotelo was speaking about his personal history with Indian, which was rocky at times; Sotelo resigned in 2002.

Indian Chairman Frank O’Connell, Indian’s second-largest stockholder behind Audax Group, is also reportedly putting together a bid, according to American Cycle Talk Executive Producer Jeffrey Najar, who says O’Connell told him so while discussing a possible appearance on the show.

Neither O’Connell nor officials from Audax Group - a Boston-based investment firm that owns most of Indian’s stock - returned phone calls for this story.

Sotelo said Indian’s current headquarters on Tenth Street in Gilroy is his group’s first choice for where to build motorcycles if they get the sale, but they wouldn’t necessarily use it as-is. The large plant is designed to build Indian’s original five-year estimate of 30,000 bikes a year, but Indian was actually scraping to sell 4,000 in its fifth year. Sotelo said his group will take a hard, realistic look at how much space would make economic sense for them.

Bill Lindsteadt, the executive director of Gilroy’s public Economic Development Corp., hadn’t heard of Sotelo’s plan.

“I think that’s terrific news,” Lindsteadt said. “After all, he was the brains behind it the first time.”

Lindsteadt said he didn’t expect Sotelo to ask him about possible state business-startup grants.

“Rey’s pretty self-supporting,” Lindstead said. “I don’t know if he even needs it.”

Indian’s sales were on the rise at the time it closed, but costs were rising as fast or faster, O’Connell said in an earlier interview. In the end, Audax pulled out because it didn’t look like Indian was going to break even anytime soon, according to O’Connell.

Sotelo’s plan for Indian is to not spend money on advertising in lifestyle magazines and product placement in movies and other companies’ commercials. He wants to just build motorcycles that motorcycle people want to buy and rely on word of mouth to do the rest - “guerilla marketing,” he called it.

Sotelo said he also wants to cut costs by having a less top-heavy management structure.

“I think they had something like 11 vice presidents,” Sotelo told The Dispatch. “I knew the salaries these guys were making, and there was absolutely no way that they could support that company paying those salaries. ... Having too many chiefs was definitely a problem there.”

This venture reunites Sotelo with many old friends and business partners, including original Indian CEO Murray Smith, a successful Toronto businessman who started selling Indian Motorcycle clothing in Canada in the mid-1980s and founded the Indian Motorcycle Café in Toronto in 1999. Sotelo described Smith as a “visionary.”

“We both had a common thought pattern, which was to build a great motorcycle to live up to the brand,” Sotelo said, “(Later investors) focused on building up the brand to live up to the old motorcycles. ... It wasn’t what I signed up for.”

Unlike Sotelo, Smith didn’t stick it out. He resigned in 1999 after about four months and now owns the trademark to American Motorcycle Company, another defunct early-20th-century motorcycle company.

On American Cycle Talk, Sotelo said Audax Group went back on the promises it gave him when it bought a majority of Indian’s stock in 2001.

“Battling these guys just got to be an everyday chore with me,” Sotelo said.

The last straws, Sotelo said, were a “quagmire” of repeated part recalls and an influx of executives from the car industry.

“They did not understand the personal relationship motorcycle people have with their motorcycles,” Sotelo said. “The car guys just didn’t get it. ... When they started bringing the car guys in, 90 percent of them didn’t know how to ride a motorcycle.”

Sotelo described the Indian investors he’d worked with originally as “real motorcycle enthusiasts.”

Since resigning, Sotelo said he has done prototype work for Japanese motorcycle makers and became chairman of Revolution Motorcycles in Los Angeles, which is expected to have prototypes ready in about a year. If his group wins the Indian bid, he’s not sure what Revolution’s relationship would be with Indian - likewise for Smith’s American Motorcycle Company.

On board with Sotelo and Smith is Branscombe Richmond, a Native American whom Sotelo said would be “the face of the company.” This could be a savvy move, as Indian has had trademark problems in the past with Native American groups. In March 1999, the Cow Creek Band of Umpqua Tribe in Oregon filed a lawsuit against Indian Motorcycle for allegedly violating the Indian Arts and Crafts Act of 1990, according to which it is illegal to sell or display a product that would falsely suggest it is made by Native people.

Sotelo declined to name his biggest investors, but he said they have been calling him since the day Indian closed up shop.

“I think I got my first call Friday (Sept. 19) at about 3 o’clock” - 45 minutes after Indian President/CEO Lou Terhar broke the shutdown news to employees, Sotelo said - “and I was on the phone until at least midnight.”
 

Auction on Indian’s assets

Monday, October 13, 2003
By Peter Crowley

GILROY - Who will own the third coming of Indian Motorcycle? Whoever wins a silent auction.

No one had actually entered a bid as of this morning, but 17 companies had signed confidentiality agreements and requested detailed information about buying Indian Motorcycle, according to officials at Credit Managers Association of California. Indian has hired CMA to handle its liquidation instead of going through bankruptcy court.

“We’ve told bidders that we need their offers by the middle of October,” CMA Estate Manager Michael Joncich said on Friday. Although Joncich stopped short of giving a final date for bid submission, former Indian President/CEO Rey Sotelo said he’d been given a deadline of Oct. 17.

At present, the potential buyers are appraising what they think Indian’s assets are worth to figure how much they will offer.

Contrary to a previous report, Indian Chairman Frank O’Connell says he won’t be among the bidders. O’Connell said Friday he is not putting together a bid for Indian, nor has he joined with anyone else in doing so. Yet Jeffrey Najar, executive producer of American Cycle Talk Internet radio, maintains that O’Connell told him last week he was planning a bid; it was the reason O’Connell gave for not appearing on the talk show, Najar said.

O’Connell said he’s not yet sure if his relationship with Indian Motorcycle will continue beyond its liquidation. He said he’s pleased there’s so much interest in Indian - the United State’s first motorcycle company, formed in 1901 in Springfield, Mass. and defunct from 1953 to 1998.

“I am very hopeful that the company will be able to restart (soon),” O’Connell said.

The only person to publicly announce his intentions so far is Sotelo, who in 1998 brought the company to Gilroy in place of his Gilroy-based custom operation, California Motorcycle Company. Sotelo announced his plan to bid Oct. 6 on American Cycle Talk; He was Najar’s third choice for a guest after former Indian Executive Vice President Fran O’Hagan and O’Connell declined.

Sotelo said he doesn’t know who else is bidding but thinks the offer he and his team of investors make will be competitive.

Indian gave the Burbank-based CMA its Gilroy factory/headquarters, its inventory of about 200 motorcycles and its leftover cash; CMA took possession of these on Sept. 25. Indian retains its trademarks and logos, which were worth about $18 million when Indian consolidated them in 1998. Together, Indian and CMA are offering the plant and trademarks as a package deal to the highest bidder.

CMA is auctioning the motorcycles separately, taking bids from Indian’s 200 or so dealers. On Thursday, CMA announced to dealers that since demand for the bikes was high, the deadline would be extended to Oct. 13. Since the factory is no longer operational, the bikes will be sold without warranties.

These sales are for assets only, not stock - meaning that the buyers will not inherit Indian’s mountain of debt and liabilities, according to Joncich and O’Connell. Unless the company sells for much more than expected, the proceeds won’t be enough to fully pay off Indian’s debts.

“(Debts) are much higher than what we estimate the assets to be,” Joncich said.

In that case, as in bankruptcy court, creditors would receive a percentage of what they’re owed.

Before the stockholders would receive any payoff, the company would have to sell for enough to pay off the creditors with money to spare - not likely, O’Connell and Joncich indicated.

“It only goes to the stockholders if the creditors get paid off,” O’Connell said.

O’Connell is Indian’s second-largest stockholder. Boston-based investment firm Audax Group is the majority owner.

Among the creditors will likely be Indian’s 380 or so laid-off employees, who will be represented by a lawsuit filed by former Indian quality-control inspector Russel Frost, of Hollister, if a judge approves the suit’s class-action status. Frost claims Indian broke state and federal law by not giving employees a 60-day notice before laying them off. Indian says it qualifies for an legal exception for failing companies.

Frost’s attorney, Bill Marder of the Hollister-based Paxton-O’Brien firm, said he would have preferred that Indian go through bankruptcy court to CMA. He’s afraid that Indian will be able to hide some assets from its creditors more easily via CMA, whereas “a judge takes a harsh view” toward disclosure.

“I disagree with that contention,” Joncich said, stating that CMA is there to serve the creditors. “We are responsible for hidden assets. ... If we make a mistake, creditors can look to us to make a remedy.”

Joncich said CMA’s liquidation process is quicker and more flexible than bankruptcy court, but it’s just as thorough.

“We frequently do it more efficiently than does a bankruptcy trustee, but we follow the same bankruptcy priorities as does a bankruptcy trustee,” Joncich said.

CMA’s job, as Joncich sees it, “is to liquidate assets, collect claims from creditors and distribute the liquidation proceeds to the creditors. ... (Indian) agreed to pay a fee for our administration of the assets.”

CMA is a nonprofit entity affiliated with the National Associations of Credit Management.

Local Indian dealer adding a brand

Thursday, October 16, 2003
By Peter Crowley

GILROY - By the time Indian Motorcycle might get back in business with a new owner, dozens of its dealers - including its hometown salesman - may have started carrying a competing brand of American cruiser.

Victory Motorcycles’ wooing of Don Nofrey, who owns Gilroy’s Indian dealership and custom shop, has been successful. If all goes as planned, Nofrey says, he’ll be changing the name of his Monterey Street shop to “Victory-Indian of Gilroy” in six weeks or so. Victory hasn’t asked him to sell their bikes exclusively, he said, and he wouldn’t want to anyway.

“I’m going to still carry the Indian flag as long as humanly possible,” Nofrey said - but he won’t put Indian first in his shop name because the Gilroy-based company “wasn’t a victory.”

Indian shut down operations without warning on Sept. 19, laying off about 380 workers. Its headquarters/

factory and its trademarks are now up for sale to pay off a long list of creditors.

Nofrey still hasn’t been accepted by Victory’s parent

comp-any, Polaris - more famous for snow-mobiles, all-terrain vehicles and personal watercraft

than for motorcycles - but he doesn’t foresee much of a problem with their final line of questioning, which concerns his financing.

Victory is making the most of its West Coast competitor’s absence, targeting many of Indian’s 200 or so dealers and trying to sway them into selling Victory bikes. The same day Indian called it quits, Nofrey said he got a call from Victory. Eight days later, he was at Polaris’ corporate headquarters in Minnesota, a guest of the company along with about 40 other Indian dealers.

“I went out there with a closed mind,” Nofrey said. “I was very, very skeptical.”

The Polaris people proved they had done their homework, giving each dealer an individual chart showing his sales, market share and market penetration.

“I was so impressed with their organizational ability; it just floored me,” Nofrey said.

Then he got to ride Victory’s bikes, and that’s when he really got excited.

“I was very impressed by the performance, the handling,” Nofrey said.

Victory, billed as “the new American motorcycle,” was until recently the third-biggest U.S. motorcycle maker behind Harley-Davidson and Indian. Its name recognition appears to be lower than its competitors’; a poll the Victory people shared with Nofrey showed that 100 percent of people asked knew of Harley, 54 percent knew of Indian and 34 percent had heard of Victory.

Polaris began full-scale production of Victory bikes at a designated factory in Iowa in 1998 - a year before Indian came back in Gilroy after 45 years of dormancy. Polaris came into being in 1954 - a year after the original Indian Motorcycle Company closed in Springfield, Mass.

Nofrey said he thinks Victory’s target customer is the same as Indian’s: “someone that wants something different from Harley, wants something American, something powerful.”

The Gilroy dealer also thinks he’ll be able to sell more bikes with Victory’s top-end retail price of $14,900 for a non-custom bike. Non-custom Indians start at $16,900.

One more week to bid on Indian

Tuesday, October 21, 2003
By Peter Crowley

GILROY - Due to a glut of interest in buying the Indian Motorcycle Company, the organization handling the auction has postponed the bid deadline by a week, to Oct. 24.

As of Friday, 60 potential buyers had approached the Credit Managers Association of California about buying Indian Motorcycle, according to Indian Chairman Frank O’Connell. About half of these had entered confidentiality agreements to get detailed Indian business data that would help them figure how much to offer, O’Connell added. That’s up from 17 confidentiality agreements a week before.

CMA expects to receive multiple bids but hadn’t received any by Friday afternoon, Estate Manager Michael Joncich said.

The only prospective buyer to go public has been former Indian President/CEO Rey Sotelo, who is part of a diverse investment coalition that plans to bid on Indian. Sotelo steered Indian to Gilroy when the historic motorcycle maker was reborn in 1998 after 45 years of being defunct. His Gilroy-based California Motorcycle Company, begun in 1995, merged into Indian at the time. Quite a few of the 380 Indian workers laid off when the company shut down on Sept. 19 had previously been CMC employees. Sotelo resigned from Indian in 2002.

Sotelo has said his company would build Indian motorcycles in Gilroy again if it wins the bid, hiring back at least some of the former workforce.

Indian asset sale stalled

Monday, October 27, 2003
By Peter Crowley

GILROY - Seven companies entered bids in an auction for the Indian Motorcycle Company that ended Friday. Of these, two are known: one a retail liquidation CEO and motorcycle collector from Michigan and the other a local motorcycle designer who was Indian’s first president/CEO when the company was resurrected in 1998.

But it’s not that simple. Each of the seven bids was for a different selection of assets, a fact that is complicating the process of figuring which bidder takes the prize. Indian Chairman Frank O’Connell, Credit Managers Association executive Chuck Klaus and several CMA lawyers reviewed the bids over the weekend but provided no updates Monday morning.

And what is the prize? The trademarks and factory of America’s first motorcycle company, begun in 1901 in Springfield, Mass., and a popular icon despite 45 years of nonexistence (1953 to 1998). After five years of building high-end cruisers in Gilroy, Indian shut its doors without warning Sept. 19, leaving about 380 employees out of work. Despite rising sales, the company wasn’t making money and didn’t expect to any time soon.

CMA of California has guaranteed bidders confidentiality, but two - Bill Melvin, of Grand Rapids, Mich., and Rey Sotelo, of the Gilroy area - opted to reveal themselves. Indian hired CMA to handle its liquidation process instead of going through bankruptcy court.

CMA Estate Manager Michael Joncich described the bid discrepancies as “a problem” Friday after the 5 p.m. deadline.

“None of them are for the same thing,” Joncich said of the bids. “Some include the real property in Gilroy, and some don’t. ... Some of this is for equipment only.”

Indian and CMA officials had expected (publicly, at least) companies to bid on a package deal of its factory and trademarks. Some of the seven bidders did this, Joncich said, although he did not say how many.

CMA’s plan had been to take the five highest offers (if they got five on both trademarks and factory) and invite them to bid against each other in a second round of auction, Joncich said.

The focus, Joncich said, will be on the bottom line - whatever maximizes the sale price of all Indian’s assets so that total can be passed on to Indian’s long list of creditors. Unless the company goes for far more than expected, however, CMA officials don’t expect the revenues to fully pay off Indian’s enormous debts. In that case, creditors would get a percentage of what they’re owed, depending on how much money there is to distribute.

Indian was one of three large-scale American motorcycle makers. The biggest and best-known, Harley-Davidson, did not return weeks’ worth of phone calls by The Dispatch inquiring whether it would bid on Indian.

The other, Victory Motorcycles, had no plans to bid on its West-Coast competitor, Polaris Industries spokesman Pat Bourgeois said Tuesday. Victory is a product of Minnesota-based Polaris, which is better known for snowmobiles, all-terrain vehicles and personal watercraft.

CMA and Indian gave tours of the Gilroy plant to at least 10 interested companies in recent weeks, Joncich said. CMA signed 47 confidentiality agreements with companies to discuss Indian’s finances (although some were with agents acting on behalf of bidders, not bidders themselves) and sent out 90 auction information packages (although some were unsolicited, to parties CMA guessed might have an interest).
 

Bill Melvin’s ‘quest’

In his extensive personal collection of motorcycles old and new, Melvin has many antique Indians. Now he’s jumping at the chance to return the brand to its pre-World War I glory days.

“I want to return Indian Motorcycle to its top position in the industry,” Melvin said in a press release Friday. “I envision a line of revamped and revitalized Indian motorcycles built for riders by riders - and to very exacting standards.”

Melvin said he wants “to reopen the factory and continue production” in Gilroy, although not without changes to the Tenth Street factory, designed to build 30,000 bikes a year. (In 2002, Indian built less than 4,000.)

“We’d love more than anything to see this company continue on in Gilroy,” Melvin told The Dispatch this morning.

Despite the fact that Melvin’s announcement was titled, “One man’s quest to keep the legend alive,” he is joined by several financial partners, including the Great American Group, a name matching a national asset-management corporation.

Based in Grand Rapids, Mich., Melvin is CEO of National Retail Equipment Liquidators and has become successful through 25 years in the liquidation business. NREL also makes shopping carts.

“Bill Melvin appreciates the irony of a liquidator like himself trying to rebuild and renew a company - instead of cleaning out and dispersing its assets,” the announcement read.
 

Rey Sotelo’s Matrix group

Sotelo’s group of investors now has a name - Matrix Capital - and an ambition to restart motorcycle production within 30 days of being chosen as the winning bid.

Both of these Sotelo announced on the American Cycle Talk Web site Oct. 17.

“We figure if anyone can make it happen, we have the management team to do it,” Sotelo told The Dispatch Oct. 7.

Sotelo has said Gilroy is his first choice for an Indian headquarters and factory, and he’d like to rehire at least part of the recently laid-off workforce.

Sotelo’s stated plan for Indian is to not spend much on advertising in lifestyle magazines and product placements. As with his pre-Indian custom brand, California Motorcycle Company, he just wants to build motorcycles that motorcycle people want to buy and rely on word of mouth to do the rest. He also wants to cut costs by having a less top-heavy management structure.

In a separate CMA auction, Indian dealers bought all of the company’s remaining 2003 inventory of about 150 bikes, O’Connell said.

For now, the company is withholding the dozen or so 2004 bikes that made it through production and testing before the plant closed. These might be very valuable to Indian’s new owner, O’Connell said.
 

Indian support ride set

In an unusual move, O’Connell announced Friday a ride and media event Nov. 1 in support of the Indian Motorcycle brand.

O’Connell, an avid motorcycle rider and collector, and his wife, Barbara, are personally funding the “Indian ... Ride On!” event. They intend it to “galvanize grassroots support” for the faltering, but iconic, company.

California Gov.-elect Arnold Schwarzenegger, who rode an Indian in the third “Terminator” movie, will receive a special invitation to attend a celebrity press conference and ride in Los Angeles. O’Connell also is pushing Indian dealers to organize rides that day in their areas, especially to “national landmarks, symbolic of American values.”

Indian bids still being narrowed

Friday, October 31, 2003
By Peter Crowley

GILROY - The winning bidder for Indian Motorcycle’s assets won’t be determined before late next week, according to company Chairman Frank O’Connell.

In the meantime, prospective buyers will get to see a national show of support for the brand as riders and dealers come out for a promotional ride on Saturday.

The seven bids received Oct. 24 reportedly weren’t all for the same combination of assets, so now O’Connell, officials from Credit Managers Association of California (hired by Indian to handle its liquidation process instead of bankruptcy court) and several attorneys are deciding which interested parties to invite to a second round of bidding next week. A final decision will quickly follow the second round, O’Connell said.

“I think we had apples and oranges and kumquats,” O’Connell joked, referring to of the differing bids. “We’re trying to get it down to just apples and oranges, and then just apples.”

O’Connell and his wife, Barbara, are personally funding Saturday’s ride and Los Angeles press conference. Celebrities have been invited to join the ride, including California governor elect Arnold Schwarzenegger, who rode an Indian Motorcycle in the third “Terminator” movie.

The ride “above all is for riders and for dealers (and) anybody who is interested in seeing the company survive,” O’Connell said Thursday, but the timing of it - right before a second round of bidding - suggests it’s also a ploy to drive up the price. O’Connell doesn’t deny this.

“What better way to understand the strength and power of the brand than by seeing the riders and dealers come out?” O’Connell asked. “This is the company. The riders are the company. The dealers are the company. ... So if it influences the bidding process ... wonderful.”

Indian is using a Long Island, N.Y., Indian dealer’s Web site as a rallying point for the event, dubbed “Indian ... Ride On!” A statement on the site Thursday said, “You may remember the difficult time that Harley went through when it was bought by AMF. Many of us who owned their bikes stood by them. So let’s make a difference on November 1st. Attend one of the national events to demonstrate that the passion for Indian Motorcycle is still there.”

Bay Area Indian dealers, including those in Gilroy and San Jose, are planning to join the ride in Los Angeles, an Indian public relations agent said Thursday from New York.

For more information on “Indian ... Ride On!,” see www.rampindian.com/rideon.

Second-round bids jump for Indian Motorcycle

Tuesday, November 11, 2003
By Peter Crowley

GILROY - It’s been two-and-a-half weeks since the deadline to bid on Indian Motorcycle’s trademarks and factory, and still no winner.

Indian probably won’t have a new owner before the end of this week, company Chairman Frank O’Connell said Monday. Some or all seven bidders are now upping their offers in a second round of the auction. O’Connell wouldn’t say how many bidders there are.

“It’s pretty active,” O’Connell said. “The bids are definitely up ... substantially.”

As for the delay, O’Con-

nell said Indian and its liquid-ation agent, Credit Man-agers Assoc-iation of Califor-nia,

wanted to give the bidders enough time to carefully review their and Indian’s finances and arrive at a final offer.

“We’re making it very clear that this is it,” O’Connell said.

One of the reasons the auction has taken so long is that the seven original bids were not all for the same package of assets. Some bids were for the Gilroy factory only, some were for the trademarks only, and some were for both.

For the second round, Indian is not requiring companies to bid on the same thing. If it makes more money to accept one bid for the factory and another for the trademarks, CMA would do that, O’Connell said.

“CMA’s job is to best represent the creditors,” O’Connell said.

As well as being Indian’s chairman, O’Connell is also its second-leading stockholder, after the Boston-based investment firm Audax Group. Stockholders will get no money from the auction unless the sale amount is enough to pay off Indian’s massive debts with money left over.

On Nov. 1, O’Connell and his wife organized and bankrolled a media event and a series of nationwide rides to “galvanize grassroots support” for the Indian brand.

In the Bay Area, there wasn’t much response. About 18 riders, including four from Gilroy, crossed the Golden Gate Bridge without the news coverage they were hoping for, according to Gilroy Indian dealer Don Nofrey, who did not attend.

Nationwide, attendance was “great, ... everything we expected,” but media coverage was hard to come by, according to event spokesperson Stephanie Blank. Gov.-elect Arnold Schwarzenegger, who rode an Indian in the third “Terminator” movie, was invited to the press conference in Los Angeles but did not attend.

Indian closed its Gilroy factory without warning on Sept. 19, laying off about 380 employees. Of these, about 100 had Gilroy addresses, according to Bill Lindsteadt, executive director of the Gilroy Economic Development Corporation.

The two known bidders for Indian’s assets are Bill Melvin, a retail liquidator and motorcycle collector from Michigan, and Matrix Capital. Matrix’s frontman, Rey Sotelo, was a bike builder in Gilroy who became Indian’s first president and CEO when it came back to life in 1998. He resigned in 2001.

Indian bidders share common goal

Monday, November 17, 2003
By Peter Crowley

GILROY - The only two bidders for the Indian Motorcycle Company who’ve gone public might team up after the auction if one of them wins.

Matrix Capital, fronted by Gilroy resident Rey Sotelo, and Bill Melvin, a retail liquidator and motorcycle collector from Grand Rapids, Mich, are both still in the running to buy Indian.

“We’ve thought of possibly partnering up with Bill, but we haven’t yet reached the right terms with which to consummate the (deal),” Sotelo said Friday.

“We had talks about that two weeks ago,” Melvin said. “It’s possible, but I really don’t know. We’ll have to wait and see who’s successful with their bid.”

Both bidders have a common goal of reopening the Indian factory/headquarters on Tenth Street and rehiring at least some of the 380 workers - 100 with Gilroy addresses - Indian laid off when it shut down without warning on Sept. 19.

“If anybody but us gets it, I don’t think it’s going to stay in Gilroy,” Sotelo said.

Nevertheless, Melvin said, “To reopen the factory and continue production is a major undertaking.”

Their competition has thinned as some bidders have dropped out, Melvin said. Bidding is still intense enough, however, that auction officials won’t say when they expect a winning bid.

Chuck Klaus, an executive with the Credit Managers Association of California, declined Friday to predict when the auction would conclude but said it would probably not be done within the next few days. CMA is overseeing Indian’s liquidation and is now in the process of selling its trademarks - bought for $18 million in 1998 - and its factory.

Klaus said CMA will keep bidding open as long as there is still a possibility of driving the price up, as that’s what Indian hired them to do. A second and supposedly final round of bidding began more than a week-and-a-half ago.

Melvin said a confidentiality agreement he signed prevented him from naming which bidders have quit. Whether he even knows for sure who they are is uncertain; Sotelo said he and his partners haven’t been told who they’re bidding against, although they have some guesses.

Sotelo said Friday he and his partners were “still reassessing where we’re at and how far we’re going to take this.”

The proceeds from the asset sale will go to pay off Indian’s long list of creditors. Among these are its employees, represented by a class-action lawsuit filed by former Indian quality-control inspector Russel Frost. According to the suit, Indian violated state and federal law by not giving notice 60 days before the mass layoff.

Sotelo’s group loses backer in Indian bid

Wednesday, November 19, 2003
By Peter Crowley

GILROY - Gilroy resident Rey Sotelo’s bid to purchase the Indian Motorcycle Company was endangered over the weekend when his group lost one of its most prominent backers.

Nevertheless, Sotelo’s group has four more potential investors on the line and is still in the running to buy Indian as long as the motorcycle-maker’s liquidation agent, Credit Managers Association of California, gives them a few more days to line up a replacement.

“If I have until the end of the week, I think I could get all the pieces in place,” David Hunnington, owner of the Matrix Capital investment firm in Newport Beach, said on Tuesday. Sotelo, Hunnington and their associates submitted their bid under the Matrix Capital name.

Their wish has been granted. CMA executive Chuck Klaus does not expect to have a final auction winner this week. He now hopes to announce a winner before Thanksgiving, Nov. 27 - more than a month after the Oct. 24 bid deadline.

“The process is designed to keep the parties competitively bidding against each other,” Klaus said. This raising of offers is still happening, but he also feels pressure to end the auction soon, he added.

If the auction had ended Tuesday, the Matrix group would be “a dead player,” Hunnington said. The backer who backed out wasn’t the Matrix group’s biggest in terms of money, but he was their first and most prominent - as well as bringing a significant amount of money to the table, according to Hunnington.

“We thought he was going to write the check, and he got cold feet at the last minute,” Hunnington said.

Seven companies submitted bids in the Indian auction, but the Matrix group’s only publicly acknowledged competitor is Bill Melvin, a retail liquidator and motorcycle collector from Grand Rapids, Mich. who, like Sotelo, aims to restart production in Gilroy.

The other involved parties are anonymous, but rumors abound that they may include the only two major U.S. motorcycle makers other than Indian.

“We think Harley (-Davidson) was in there and may still be involved, and we think Polaris may be involved,” Hunnington said.

Harley-Davidson officials have not responded to The Dispatch’s inquiries on this matter for more than a month. Polaris spokesman Pat Bourgeois claims his company never submitted a bid on Indian. Polaris, based in Minnesota, makes the Victory line of motorcycles but is best known for snowmobiles, all-terrain vehicles and personal water craft.

Now, Hunnington said, Matrix needs time to go over “due diligence” with its potential investors - essentially, verifying and evaluating what each investor would get and what each has to give.

One of these four possible backers Hunnington is talking to would require that Indian stay in Gilroy. This national community-development agency has applied for a New Market Credit through which the federal government would add 39 percent to the value of the investment if the bidder promises to keep 40 percent of its assets and 50 percent of its revenues in Gilroy, Hunnington said. Gilroy qualifies for the credit by being a “depressed area” in comparison to nearby cities, Hunnington said.

Anxiously awaiting the Indian winner

Tuesday, November 25, 2003
By Peter Crowley

GILROY - From all over the country, Indian Motorcycle riders, would-be riders, dealers, former employees and creditors are anticipating a new owner for the iconic American brand, expected to be announced this week.

There’s hope among interested people nationwide that the new owner will be one who plans to restart motorcycle production. Beyond that, however, opinions differ on who should win an auction for the company’s assets.

Fourteen people - dealers and Indian owners - responded to an informal Dispatch questionnaire seeking opinions on the future of the storied motorcycle company.

Many - especially here in the company’s home town - are rooting for Rey Sotelo, a Gilroy resident who brought Indian here in 1998 after joining it to his California Motorcycle Company. The former Indian president/CEO - often billed locally as Indian’s “founder,” despite the fact that the company began in 1901 - is now trying to buy the company with a group of investors. Keeping production in Gilroy is one of his top priorities.

“He’s a biker himself,” former Indian paint-shop worker Johnny Pe'a, of Gilroy, said Monday. “What better person to build motorcycles than a biker?”

“Mr. Sotelo is a very straightforward type of guy,” Jim Greaney, who sells Indians at a dealership in Corona and rides one from his home in Chino, wrote in an e-mail message to The Dispatch.

Many of these Sotelo supporters find resonance in his comments that Indian failed because slick marketers took over from motorcycle people. Many agree with Sotelo that the company would be better off if it stuck to producing quality bikes and left marketing at a more grassroots level.
 

Start-up vs. deep pockets

Others say they won’t feel comfortable with the historic brand again in the hands of a start-up business. They say an established company with infrastructure and deep pockets would have a better chance of keeping Indian alive - a company like Harley-Davidson or Polaris, the two major, surviving American motorcycle makers.

“Two hundred million dollars pumped into Indian over five years, and still not within spitting distance of profit! Were it otherwise, I’d hope Rey Sotelo’s Matrix Capital group (possibly in partnership with bike enthusiast Bill Melvin) would recapture ownership of Indian,” Ray Seidel, an Indian rider from Temecula, wrote via e-mail. “No, best that its old rival Harley-Davidson be the winning bidder, with Indian now in a safe and happy home with people who truly have a 100-year history of making quality, historic American iron.”

“It would be best for America if (Polaris owner) Tom Tiller would buy it and merge it with Victory (Polaris’ motorcycle line), maintain both brands, both styles and produce the product at his facilities,” Kurt Mechling, an auto and motorcycle dealer from Seneca, S.C., and a voice on Indian’s Dealer Advisory Council, e-mailed.

Others disagree angrily.

“If Harley were to be the lucky bidder, they would simply put the Indian product line in a bank vault, never to be built again,” wrote Mike Dreon of the San Jose Indian Riders Group.

“This is a stand-alone company, not a stepchild,” wrote Angelo Pacilio of Bayonne, N.J., who rides two Indian Chiefs: a 1948 and 2003.

“I would rather see the Indian name die than to see HD get it,” wrote Wade Dickens, an Indian enthusiast from Austin, Texas, pulling for Melvin, a retail liquidator from Grand Rapids, Mich.

As the decision approaches, unsubstantiated rumors swirl more fiercely that Harley and Polaris are among the bidders. Harley officials resolutely declined to comment on the matter Monday, and a spokesman for Polaris - which also makes snowmobiles, all-terrain vehicles and personal watercraft - has denied his company is involved.
 

Anxiously awaiting a decision

Monday marked a month since seven companies - five of them anonymous - entered bids for Indian’s trademarks and its Gilroy factory. Officials from Indian and Credit Managers Association of California - hired to handled Indian’s liquidation - have since sent the bidding into subsequent rounds, driving up the price. CMA Estate Manager Chuck Klaus said a week ago he expected to announce a winner by Thanksgiving. He hasn’t returned phone calls since.

Sotelo’s Matrix Capital and Melvin are the only bidders to acknowledge their aims. Both said Monday they’re still in the running, despite rumors they’ve dropped out.

Here in the city Indian called home until Sept. 19, when it shut its doors without warning, there’s strong support for the local man, Sotelo. Employees like Pe'a, who worked for CMC before Indian came to town, say Sotelo treated the workers better than subsequent managers. Former Indian welder Victor Valdez Jr., also of Gilroy, said Sotelo appreciated workers’ craftsmanship more than later managers.

Others here say Sotelo’s ownership would be the best outcome for the local economy, which took a blow when Indian suddenly laid off 380 workers, approximately 100 of whom lived in Gilroy. Sotelo has said he’d like to hire back at least some of those workers, many of whom are still languishing on the unemployment rolls.

“I think that if there’s anybody who has the knowledge and ability to get it started again, he’s the one,” said Bill Lindsteadt, executive director of the Gilroy Economic Development Corporation. “I’m hoping that it’s not another motorcycle company like Harley that’s just trying to buy out the competition.”

Not every former Sotelo employee hopes he takes over again. Gilroy resident Daniel Tice, who was a test rider for CMC and then Indian, hopes Polaris takes the prize.

“I think if someone tries to reopen the factory making motorcycles in Gilroy, they’re just going to throw away several million dollars. I think we proved that. ... The cost of doing business in California is too high.”

One thing most Indian enthusiasts agree upon is that the company shouldn’t be sold to a foreign firm. It was only six years ago that Harley was the lone American motorcycle maker, and when that company showed signs of strain in the 1980s, bikers across the nation were scared.
 

Squandered customer goodwill?

Many Indian riders don’t care who wins; they’re just waiting to see who will fix their bikes. Indians had a reputation for unreliability, fed largely by a host of part recalls. While riders agree the company made improvements in recent years, there are still repairs to be made on new bikes.

“I purchased my (2003) Indian in June 2002 and no longer have a warranty as a result of the closure,” Kevin Donoghue wrote from Thousand Oaks. “I am currently facing a warranty repair costing over a thousand dollars. My (dealer’s) extended warranty will not start until June 2004, so now I need to decide whether or not to wait it out or pay for the repair myself.”

Dealer Richard Keck, of Evansville, Ind., felt “totally left out in the cold” by Indian and said several of his customers are angry over warrantee failure.

“We have had several people jump ship and want to get rid of their Indian, not knowing what was going to happen,” Keck said.

Indian officials have confirmed that among Indian’s numerous debt creditors - who will inherit the proceeds of the auction - are many warrantee claimants.

At least three bidders still vying for Indian

Thursday, December 11, 2003
By Peter Crowley

Winner should be announced by year’s end
 

GILROY - It’s been seven weeks since seven bidders made offers on the defunct Indian Motorcycle Company’s assets, and the leading auction official now says a winner will probably be announced by Christmas or New Year’s Eve at the latest.
 

“I can’t imagine it going any further out than the end of the year,” Chuck Klaus, estate manager for Credit Managers Association of California, said Wednesday. Indian hired CMA to liquidate its trademarks and Gilroy factory and pass the proceeds on to its creditors - an alternative to bankruptcy court.

Klaus has predicted sell-by dates before, to no avail. The auction keeps being extended, Klaus maintains, because the price keeps rising, but rising from what, and how much? These are questions neither he nor Indian Chairman Frank O’Connell have answered, for fear of jeopardizing the final price.

O’Connell’s responses indicate, however, that Indian and CMA officials may have found the original seven bids disappointingly low on Oct. 24. While O’Connell wouldn’t go so far as to acknowledge that Wednesday, he came close.

“I don’t think anybody knew what to expect in the original bids,” O’Connell said, “but I think we’re encouraged by the fact that, as time has gone on, the bids have gone up.”

Klaus refused to say whether he found the original offers disappointing.

Asked if offers have been in the $25 million range, both Klaus and O’Connell declined comment. Could the company sell for $50 million? No comment from Klaus. Seventy-five? O’Connell said he wouldn’t speculate because last-minute offers can always be surprising. One hundred million? “Very doubtful,” O’Connell said.

Klaus did confirm that some of the original bidders have dropped out and that the field continues to narrow.

At least three bids are still alive, however, and perhaps more.

There’s at least one offer on the table from someone who plans to resell Indian’s assets and not restart motorcycle production, O’Connell acknowledged. He also confirmed that there is at least one offer from a company that plans to build motorcycles again in Gilroy, and at least one from a firm that plans to restart production elsewhere.

Klaus and O’Connell have publicly said they would prefer to sell to someone who would restart motorcycle production, but they haven’t revealed how much this promise would be worth to them monetarily. This outcome would be better for Indian’s vendors, who would have someone new to sell to, and for Indian’s dealers, who would have a new source of inventory, according to Klaus.

Vendors and dealers are believed to be among Indian’s many creditors, as are the 380 or so employees Indian laid off without warning when it shut down on Sept. 19.

Of the original seven bidders, five were anonymous. The two known ones are the Matrix Capital group, fronted by Gilroy resident Rey Sotelo, and Bill Melvin, a retail liquidator and motorcycle collector from Michigan. Neither could be reached for comment as of press time.

Hopes fade for Indian

Thursday, January 15, 2004
By Peter Crowley

GILROY - It’s unlikely whoever buys Indian Motorcycle’s trademarks will build bikes in this town, a liquidation official hired by the company said Tuesday.

Meanwhile, after 12 weeks of negotiations with little to show for them, Indian Motorcycle’s asset sale is heating up.

Bill Melvin, a motorcycle collector who owns a retail liquidation firm in Grand Rapids, Mich., announced this morning he has reached a deal to purchase all Indian’s equipment. He is still negotiating to buy the company’s real estate and trademarks, he said, but he now effectively owns all the contents of Indian’s buildings.

“We’re not sure what we’re going to do with it yet,” Melvin said of the equipment.

Melvin does, however, plan to pick up a piecemeal property auction that the Credit Managers Association of California - which Indian hired to broker the sale of its assets to pay off its massive debt load - is expected to cancel today, Melvin said.

“It’s out intention to sell any of the assets that aren’t necessary to a manufacturing operation,” Melvin said.

A showing for the auction items will still be on Jan. 19 and 20, and the auction will still begin on Jan. 21.

Meanwhile, discussions today are expected to determine whether the Matrix Capital investment group will drop out of the bidding or further engage in pursuing the trademarks of the oldest American motorcycle company, one of Matrix’s partners said Wednesday. Matrix has vowed repeatedly to build new Indian motorcycles in Gilroy.

Since Oct. 24, CMA estate manager Chuck Klaus has been negotiating with parties interested in buying Indian’s trademarks and its physical property in Gilroy. Indian hired CMA to sell its assets in order to pay off its massive debt.

Asked Tuesday if there is any chance of Indian’s third incarnation basing itself in Gilroy, as the second Indian did for the past five years, Klaus said, “I don’t think so.

“I rather doubt it,” Klaus said. “That could change, but ... it doesn’t look like it right now.”

Although CMA is still negotiating with several potential buyers, one - which Klaus would not name - now stands out as the front-runner.

“We are working toward closing with a particular buyer,” Klaus said. “Right now we plan on closing some time in February.”

Nevertheless, Klaus said, there is no commitment yet.

“I’ll talk to anybody until the day we say ‘sold,’ ” Klaus said.

Klaus’ statements indicate that Matrix Capital has fallen out of favor, since Matrix’s spokesmen continue to say that they would restart production in Gilroy. Gilroy resident Rey Sotelo is fronting the Matrix group, which takes its name from one of its partners, an Orange County venture capital firm.

The owner of that firm, David Huntington, said his group is still very much in the running.

“Chuck is responding to (the offers) he has in front of him at the moment,” Huntington said Wednesday, in response to Klaus’ statement about Indian’s chances in Gilroy fading.

Huntington would not clarify this statement except to say that he expected to know by this afternoon whether Matrix will stay in the bidding or drop out.

The 12-week-old Indian asset sale could wrap up equally soon, Huntington said.

“Everything is very close to consummation here,” Huntington said. “We’re within a couple days here of saying whether, ‘Yeah, we’re ready to open here on a certain date,’ or, ‘We’re not.’ ”

Klaus declined comment on who the leading bidder is. Sotelo expressed confidence two weeks ago that Matrix was the front-runner at that time.

Sotelo also said at that time that Matrix can begin building motorcycles within 30 days if it buys both the physical property and the trademarks or within 90 days if it buys only the trademarks.

Several potential buyers are still interested in Indian’s intellectual property - that is, its trademarks and logos - but they are no longer interested in buying a package deal of these and the physical property, Klaus said.

Huntington said his group may pursue some of Indian’s physical property as well as the trademarks - “whatever’s necessary to get it into production,” he said. Conceivably, he said, this could pre-empt the Jan. 21 auction.

Susan Valenta, director of the Gilroy Chamber of Commerce, was saddened to hear Klaus’ statement that a Gilroy reopening is unlikely for Indian.

“If that is the case, it would be a disappointment,” Valenta said. “We really embraced the company. They provided a lot of nice jobs for people. ... Indian Motorcycle was very highly regarded and a very highly valued business in Gilroy.

“I have an emotional attachment because I really like the company,” she added.

Many of Indian’s 380 former employees have been out of work since then-President/CEO Lou Terhar gathered them together at lunchtime on Sept. 19 to tell them that the factory was shutting down, effective immediately. The workers had no prior warning.

Frances Poling, of Gilroy, is one of the few former Indian workers who has since gotten a full-time job working with motorcycles - Indians, no less. She now sells bikes at the Indian dealership in Gilroy, and she’d rather keep working there than go back to work in the factory. However, she’d like to see Indian restart locally on behalf of its other former employees who really want their old jobs back.

“I would have hoped it would have happened because there are a lot of people out there who want it to happen,” Poling said, “but I wouldn’t have gone back there. Been there, done that.”
 

On the Indian auction block

Tuesday, January 20, 2004
By Peter Crowley
 

James M. Mohs/Chief Photographer
Engines sit on the show floor waiting to be bought.
 

James M. Mohs/Chief Photographer
Martin Mendoza of Morgan Hill looks over the frame of an Indian motorcycle during the preview of items to be sold at Indian Motorcycle, starting Wednesday.
GILROY - After a day of showing equipment at the former Indian Motorcycle factory, Michigan businessman Bill Melvin met with local resident Rey Sotelo Monday evening to talk about teaming up to buy the Indian brand.

“We’re talking; we’ve been talking for a long time,” Melvin said Monday afternoon, confirming what Sotelo announced early Monday. “I’m very open to any legitimate proposal to help us accomplish our common goals.”

Those goals include restarting Indian Motorcycle production in Gilroy, something both men have named as a priority since announcing their intentions to buy the historic motorcycle company in October.

Sotelo brought the company’s headquarters to Gilroy in 1998. At the time, he was an up-and-coming custom bike builder and Indian motorcycles hadn’t been built in the United States since 1953. The 200 East Tenth St. building that Indian would occupy was the abandoned former headquarters of the Nob Hill Foods chain of supermarkets.

Whether that building will again house motorcycle production is very much in doubt. Credit Manager’s Association of America - which Indian hired to liquidate its trademarks and Gilroy factory - set Wednesday as the day it will auction off the 154,000-square-foot structure and the 274,000 square feet of land it sits on. The auction will begin at 1 p.m. at the Strand Theater, 7588 Monterey Road, according to the auctioneer, Mario Piatelli. CMA now owns the property, which Indian assigned to the firm late last week. Piatelli claims on his Web site that the property has been valued at $10 million.

“We have maybe 10 or 12 people interested, and we think it’s going to be sold,” Piatelli said Monday.

Also on Wednesday, Melvin will begin selling off many of the contents of the Tenth Street headquarters - contents which he bought last week through his Grand Rapids, Mich.-based company, National Retail Equipment Liquidators.

Meanwhile, the sale of the Indian brand - that is, its collection of trademarks and logos - is still wide open, although CMA and Indian officials are in active negotiations with two bidders, according to Indian Chairman Frank O’Connell and CMA Estate Manager Michael Joncich.

Both O’Connell and CMA Estate Manager Chuck Klaus said they expect to sell the trademarks by late February.

The auction for Indian’s assets began three months ago, with CMA and Indian trying to sell the brand, the factory and its contents as a package deal to a single company that would restart production in Gilroy. That plan was scuttled earlier this month when CMA officials “recognized that we were going to be unable to find an acceptable offer for all of the assets,” Joncich said.

Therefore, CMA scheduled an auction for the real estate and inventory. Melvin pre-empted this, however, by buying all the inventory for an amount neither he nor CMA officials would disclose.

CMA canceled its auction, but Melvin decided to sell a large portion of the inventory beginning on the same day, Wednesday. Melvin, in Gilroy this week, expects this negotiated sale - not an auction, he pointed out - to last “weeks and weeks and weeks” until everything he wants to sell is sold.

The things he doesn’t want to sell, he said - despite his admission that they were still on display Monday - include any equipment needed to restart motorcycle production, as well as all 38 of Indian’s 2004 motorcycles.

“We’re thinking that we may just retain all of those (2004) bikes for a collection,” said Melvin, an avid motorcycle collector. “I don’t think anyone else in the world has an entire year’s production of motorcycles in their collection.”

“He’s a big motorcycle collector from way back,” Matt Steers, one of Melvin’s NREL employees, said of his boss Monday at the Indian plant. “I personally think that’s why he bought the place, is to get those bikes.”

Melvin may not have every single 2004 Indian. Missing on Monday was a red Scout 2-10, a new model, seen in promotional photos. O’Connell said Indian held back a handful of 2004 bikes for whoever buys the trademarks.

Inventory dealing is right in Melvin’s line of work, but building motorcycles - which he still says he hopes to do - would be new. Right now, the only vehicles NREL makes are shopping carts.

On Monday at the Indian factory, people checked out the goods. One room contained parts: motors, fenders, frames, gas tanks, kickstands, transmissions, tires, wheels and handlebars. Another room contained heavy machinery, tools, computers and bin after bin of bolts, washers and clamps. A third contained clothing and accessories. Parked outdoors were trucks and trailers for sale.

There were also leftover motorcycles, the 2004s plus 21 others. Among these were some oddities: a lavender, police-style Chief with a “City of Anville Traffic Officer” badge on the gas tank and two other police-style Chiefs - one wrecked, one whole - used in the Arnold Schwarzenegger movie, “Terminator 3: Rise of the Machines.”

While some people were looking at machinery or tools for use in their own businesses, Lonnie and Deborah Ashton of Palo Alto came more out of curiosity than anything else. They found it a sobering experience.

“It’s just a shame that there are so many people out of work,” Lonnie said, pointing to a row of work stations. Indian laid off about 380 employees when it closed its doors Sept. 19.

“It was such a good bike,” Deborah said. “I’m surprised it went out of business.”

Viewing of the sale items also takes place today until 4 p.m. The sale begins at 9:30 a.m. Wednesday.

Selling off a legend

Thursday, January 22, 2004
By Peter Crowley
 

James M. Mohs/Chief Photographer
Ken Gimelli, left, listens to the auctioneer before placing the winning bid on the property on Tenth Street.
 

James M. Mohs/Chief Photographer
Bill Melvin, top right, owner of the Indian Motorcycle factory’s contents, talks to the crowd of people waiting to get in for the sale Wednesday.
GILROY - It was “Going once, going twice,” and the Indian Motorcycle factory on Tenth Street was sold to a Hollister developer and vineyard owner for $3.35 million.

After signing the papers to seal the deal, Ken Gimelli told reporters he planned to rent the building to anyone who is interested. He had no particular tenants in mind, he said, and none had approached him.

Gimelli said he would be open to a new Indian Motorcycle owner occupying the space, but he would not play a role in encouraging a new owner to build bikes in Gilroy.

Gimelli entered the only bid from the floor in an auction for the single piece of real estate Wednesday afternoon at the Historic Strand Theater, in downtown Gilroy.

“I think it’s a buy,” was Gimelli’s only comment afterward.

The only other bid was a written submission for $3.3 million - the “absolute minimum” the auctioneers were willing to accept to clear liens on the property, according to Fred Havens, vice president of marketing for auctioneer Mario Piatelli’s Beverly Hills-based firm.

On top of Gimelli’s bid offer, he paid a 6 percent “buyer’s premium” for the auctioneer’s commission and expenses, bringing his total payment to $3,551,000.

Gimelli is an industrial developer in Hollister and owns a portion of the Hollister Business Park. He also owns Gimelli Vineyards in the Hollister area, which sells grapes to large-scale wine maker Kendall-Jackson, according to Havens, who said he knows this from recently selling a Kendall-Jackson winery in King City.
 

‘Everything must go’

Meanwhile on Wednesday, at the 200 E. Tenth St. factory Gimelli bought, Michigan retail liquidator Bill Melvin opened a piecemeal sale of the building’s contents, which he now owns: from gaskets to gas tanks, computers to clothing.

Crowds greeted Melvin and his staff, starting more than an hour and a half before the sale’s 9:30 a.m. opening.

“I got here at 8, and there were already quite a few people (waiting outside the door),” said Kim Forest Barbosa, of Gilroy, a receptionist at Indian for four years whom Melvin hired temporarily to welcome customers.

By noon, people were still waiting in lines for more than a half-hour to negotiate prices and pay for the things they wanted. Some pushed racks of fenders and wheels. Others bought tools or industrial equipment. Some carried cases of Indian brand motor oil. Jesse Cruz, of Salinas, was buying a stack of Indian-labeled coveralls and work shirts, like those he used to wear when he worked in the company’s paint shop. He called them “souvenirs.”

“It’s kind of sad to see (the factory) in this state,” Cruz said, looking around as he waited in the long line.

Cruz and Barbosa were among about 380 employees laid off when Indian closed its doors Sept. 19 due to a lack of capital.

Melvin wandered the factory floor Wednesday, negotiating with one customer after another. He said he was satisfied with the sale thus far, although he hadn’t known what to expect. He made a point of apologizing to his customers for the disorganization. He said he was “really happy that so many people showed up” but sorry they had to wait in such long lines.

“We really didn’t have a lot of time to prepare,” Melvin said.

Melvin pulled many items from the sale between Monday’s viewing and Wednesday, including nearly 60 motorcycles and any equipment he thought might be needed if someone tries to restart Indian motorcycle production in Gilroy. Melvin is one of several parties trying to do this.

First, he would have to buy Indian’s collections of trademarks and logos. Officials at Indian and its liquidation broker, the Credit Managers Association of California, say they expect to sell the trademarks sometime in February.

In front of the factory Wednesday, large signs read, “Cheap!” “Make offers” and “Everything must go.” All four shoppers The Dispatch spoke to, however, said that while discounts could be had, the inventory in general was not at bargain prices. For example, a price list showed that all motorcycle parts valued at less than $2,000 would be sold at original wholesale prices, with 10 and 20 percent discounts coming in as the value rose. Among the clothing, a T-shirt had been reduced to $15, a leather jacket to $450 - less than a motorcycle dealer might sell them for but not drastically cut-rate.

“Some of the stuff is pretty high (-priced),” Cruz said. “But some of it doesn’t have a price (tag), so you can just make an offer.”

The sale will continue until Melvin sells all the items he wants to sell, he said.
 

A quick auction

About a dozen people were present at the Strand Theater for the auction. Conspicuously absent were Melvin and Rey Sotelo, who are leading investment groups committed to buying the Indian brand and restarting motorcycle production in Gilroy.

Piatelli advertised on his Web site that this property was worth $10 million. But he opened the auction by saying, “We think the property is worth $5 million.” He opened the bidding at that amount but got no takers. Hands stayed down as Piatelli dropped the price by $100,000 increments.

When Piatelli got as low as $3.3 million, he announced the written bid and asked for a raise. Gimelli immediately made his offer, which was uncontested.

The auction lasted about 15 minutes.

The 200 E. Tenth St. property consists of a 154,000-square-foot factory on a 274,000-square-foot lot. Gimelli bought it from the Credit Managers Association of California, to which the motorcycle maker assigned the property. CMA will use Gimelli’s $3.35 million to pay Indian’s many creditors, including Manabi Hirasaki, the deed holder for the property, to whom Indian had stopped making mortgage payments. Hirasaki was present at the auction Wednesday but declined comment.

The amount Melvin paid for Indian’s inventory, which neither he nor CMA officials would name, also will go to pay Indian’s creditors.

Indian bidder says Gilroy’s not an option

Wednesday, February 11, 2004
By Peter Crowley

GILROY - Bill Melvin has all but given up on this town, and this state.

The Michigan businessman used to say his goal was to build new Indian motorcycles in Gilroy, as was done for the past five years. Now that’s changed.

“It’s very unlikely that we would be operating in Gilroy,” Melvin said Tuesday. In the midst of selling the former Indian factory’s contents and trying to buy the Indian brand, Melvin and his investors came to the conclusion that California is the wrong state to open an industrial business.

“It’s the workers’ comp, it’s the cost of living, it’s the ecological problems. It’s the bureaucracy of the state of California,” Melvin said. “From the time we’ve been in Gilroy, we haven’t been approached by anyone who was interested in helping us keep the business in California.”

It’s no secret that Indian executives, in the first half of 2003, looked at moving the company to Alabama and South Carolina. Melvin said Indian executives also looked at Indiana, Kentucky and Minnesota. These and other states would welcome Indian “with open arms,” Melvin said.

“In the state of California, there are many roadblocks placed in the way,” he said. “They find it difficult to offer the kind of incentives ... that other states do unthinkingly.”

“If at some point we are able to acquire the intellectual property (i.e. the brand’s trademarks and logos), I would be more likely to restart the company in the Midwest,” Melvin said. “(But) we don’t have a definite plan that says, ‘Hey, were going to open a factory in Michigan.’ We’re going to go wherever the incentives are best, and the workforce is there. ... California would still be considered.”

California Gov. Arnold Schwarzenegger, in his State of the State address last month, acknowledged that California is scaring away businesses. Schwarzenegger, who rides an Indian, promised to change the state’s business climate and actively “sell California” to businesses.

Melvin hasn’t approached the state for help, however, and it hasn’t approached him.

“Certainly it would be difficult for us to talk to the state or the state to talk to us since we don’t have the (brand) yet,” Melvin said. “I really admire the changes (Schwarzeneg-ger) has in mind. They’re long overdue. ... I just wish we could get all the pieces of the recipe in place to make that happen.”

Melvin has until May to sell off the factory’s contents and vacate the premises, based on a use agreement he signed with Indian’s liquidation brokers at the Credit Managers Association of California. Sales are going well, he said, and he hopes to be out by the end of March.

Melvin has been withholding the equipment someone would need to make new motorcycles. Now he has scheduled a March 18 auction for it. He would keep some of this equipment if he buys the brand, he said, but not much.

In December, CMA told dealers it would be selling the factory and its contents piecemeal, separate from the trademarks and logos.

Melvin’s understanding is that the sellers weren’t offered as much money as they wanted.

“The predecessors ... have had a lot of problems,” Melvin said. “I don’t fully understand those problems, ... but for some reason they have chosen to sell the assets as separate items. I have never been able to understand that. ... In the end, it doesn’t appear they have been able get any more money for it.”

Chuck Klaus, CMA estate manager, disagreed.

“The offers that we had on the table for the pieces were greater than for the whole,” Klaus said. “It was very costly to continue to hold this until someone stepped up with a better price.”

Klaus said CMA won’t announce who won the trademarks this month, as earlier promised. But he wouldn’t say when the announcement would be made

On Jan. 21, CMA sold Indian’s 200 E. Tenth St. factory for $3.35 million to Ken Gimelli, a Hollister developer and vineyard owner who was the only live bidder at an auction.

Melvin has never built motor vehicles before and wouldn’t move quickly if he bought the rights to Indian. Prior Indian executives “tried to be too much, too quick,” he said.

Those executives included Gilroy resident Rey Sotelo, a former Indian president and CEO who brought Indian to Gilroy but later resigned in frustration. Like Melvin, Sotelo and a group of investors also want to buy the Indian brand. Sotelo has said he wants to build bikes here in his home town, but he and his team did not return phone calls Tuesday.
 

Indian Motorcycles abandoned

Tuesday, March 09, 2004
By Peter Crowley

GILROY - Michigan motorcycle collector Bill Melvin, who expressed excitement a month ago to restart production of Indian bikes, said Monday he has changed his mind and is no longer interested in buying “America’s first motorcycle.”

“I’ve, at this point, given up any extensive effort to go forward with that,” Melvin said. “Considering the amount of time that has lapsed, our interest has chilled.”

Melvin added that Gilroy resident Rey Sotelo told him a week ago that he, too, has more or less given up on buying the Indian brand. Neither Sotelo nor his partner, David Huntington of the Matrix Capital investment group, returned repeated phone calls for this story.

Both men may have actually changed their minds months ago, according to Chuck Klaus, an estate manager for Indian’s liquidation broker, Credit Managers Association of California. Klaus is handling the sale of Indian’s trademarks and logos, collectively known as the brand or “intellectual property.” He said neither Melvin nor Sotelo has shown signs of interest recently, and his firm is now pursuing a deal with other bidders.

“I haven’t heard from those guys in a long time, ... and I’m the point person,” Klaus said Monday. He said neither Sotelo nor Huntington had contacted him in two to three months. He also said hadn’t talked to Melvin about the intellectual property since mid-January, when Melvin’s Grand Rapids, Mich.-based retail-liquidation business bought the entire inventory remaining in Indian’s factory/headquarters at 200 E. Tenth St.

“We have some serious contenders for the intellectual property,” both from the U.S. and from overseas, Klaus said. “We have one in particular we have been looking at.”

An Indian asset sale began in October - Indian folded on Sept. 19 - and has now dragged on for four and a half months.

Indian and CMA officials originally planned to sell the brand, real estate and inventory to a single buyer who would restart production but not all of the original seven bids went for the package deal. Those that did were too low, Klaus said. So, CMA sold the inventory to Melvin and auctioned the factory buildings and lot to Ken Gimelli, a developer and vineyard owner from Hollister. Gimelli plans to rent the property and has said he would be open to doing so to a new Indian Motorcycle Company.

On Monday, CMA and Indian officials were in the midst of deciding what to do next with the brand.

“There are a number of offers that are on the table, and we will decide whether we will accept one of those offers or whether we will open it up for another auction,” Klaus said. “We tentatively set up March 15th as a drop-dead date to decide on what procedure we will take.”

Melvin said he let go of his dream of building new Indians after the company’s majority owner, the Boston-based Audax Group, was unresponsive to his offer for the brand. Melvin said he could only assume Audax officials wanted more money, but he said they never told him so outright.

“They haven’t been very open,” Melvin said. “We can’t wait forever for them to make up their mind. ... There comes a time when you have to move on.”

Sotelo’s situation is more unclear. On Feb. 19, he excitedly told The Dispatch that he and his partners were not only still trying to purchase the Indian brand, but they were hoping to merge with a “very well known” U.S. motorcycle company. He would not identify this company, although he did say it was not Harley-Davidson or Polaris.

Sotelo said he and representatives of this company hoped to meet with Gov. Arnold Schwarzenegger to discuss tax breaks to keep the business in California - specifically, in Gilroy.

“California is almost the worst place on the planet to do business,” Sotelo said at the time, voicing a popular belief.

Schwarzenegger alluded to this in his State of the State speech in January and vowed to go out of his way to “sell California” to businesses.

Sotelo did not return calls from The Dispatch to follow up on these alleged developments. A spokesperson for the governor said she could not confirm or deny with whom the governor met.

Bill Lindsteadt, executive director of the Gilroy Economic Development Corporation, said, “There wasn’t really much anyone could do” to keep Indian in Gilroy after it closed.

“On the face of it,” Lindsteadt said, the governor’s promise “sounds really good,” but it means little unless the inherent “anti-business” obstacles are removed from state law.

“The toughest thing right now is the workmen’s compensation law,” Lindsteadt said. “It’s killing small business.”

As mandated by the state, businesses in California pay more for workers’ compensation insurance than in any other state.

Locally, Lindsteadt said this city has no monetary incentive to offer a manufacturer. Neighboring cities have redevelopment funds to pull from, and other states offer tax abatement, but “We don’t have some pot of money to give them,” he said.

In the meantime, Lindsteadt said he hopes and believes Sotelo will build motorcycles again in his hometown.

“If he can’t get the Indian brand, (he could) go back and build the California Motorcycle brand,” Lindsteadt said. Sotelo still owns the Railroad Avenue buildings his California Motorcycle Company used in the mid-1990s, when Lindsteadt said he employed roughly 60 people. Sotelo used CMC’s reputation as a custom bike-maker for movie and sports stars to lure Indian here in 1998 and become its first president and CEO.

At its peak, Indian employed about 600 people in Gilroy. When it shut its doors, it laid off a staff of about 380.
 
 

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