Hero's US-based partner files for bankruptcy

Hero MotoCorp's stocks fell over 1% as Erik Buell Racing, in which it had invested $25 mn, ceased its operations

US-based sports motorcycle maker Erik Buell Racing Inc (EBR), in which Hero MotoCorp holds 49 per cent equity, has announced closure of operations and filed for bankruptcy protection from creditors.

Delhi-based Hero had paid $25 million (Rs 148 crore) for the stake two years earlier, with the idea of jointly developing motorcycles and to tap each other's distribution footprint.

Hero had plans to sell its products in North America and Europe through EBR; it also planned to bring the latter's high-end sports bikes to India.

The announcement by EBR founder Eric Buell, to a Wisconsin-based newspaper, is a surprise for industry watchers. According to the Milwaukee Journal Sentinel, the company, once Harley Davidson-owned and now with 126 employees, has about $20-million in unpaid debt.

This is the second time in nearly six months that a partnership has gone bust for the Hero Group. In October last year, Hero Cycles called off plans to acquire German bicycle manufacturer MIFA for Rs 160 crore, after deciding it did not meet the ‘closing conditions’.

“Erik Buell Racing LLC, a limited liability company, has filed an Assignment for Benefit of Creditors under Chapter 128 of the Wisconsin statutes, similar to the federal bankruptcy law of America. Both EBR and EBR LLC have also ceased to undertake any operations,” states a note from Hero MotoCorp.

Both Hero and EBR had committed sales of 20,000 EBR motorcycles by 2017. The average price of EBR’s litre-class bikes was $40,000 each. Erik Buell was chairman and Hero had nominated two people on the board of directors.

Hero was banking on EBR skills to push growth in the premium (above 200cc) segment, to challenge Bajaj Auto, Honda and TVS Motor. While Bajaj Auto has teamed with Austria’s KTM, TVS has one with Germany’s BMW to produce high-end motorcycles.

Honda and a host of other global manufacturers have already launched premium motorcycles in India. These include Yamaha, Harley-Davidson, Ducati, Aprilia, Hyosung, Benelli, Kawasaki, BMW, Triumph and Indian.

“Hero MotoCorp, with strong in-house research & development capabilities, remains confident that its future product line-up would not be affected despite EBR ceasing operations,” stated Hero.

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