Will Hero MotoCorp be affected by Erik Buell Racing's bankruptcy?

Hero MotoCorp’s American ally Erik Buell Racing (EBR), in which it had bought a 49.2 percent stake via an investment of US$ 25 million over CY 2013 and 2014, has filed for bankruptcy on April 16, 2015 in USA.

An announcement made by Hero MotoCorp on the Bombay Stock Exchange conveys that “On April 16, 2015 the board of directors of EBR has passed a resolution for an assignment for the benefit of creditors under Chapter 128 of the Wisconsin Statutes for itself and the subsidiary and to direct the proposed assignee or his counsel, to file such assignment in the Court for the County of Walworth, State of Wisconsin. EBR and Subsidiary will also be ceasing their operations with effect from April 16, 2015.”

It can be recalled that after its separation with Japan’s Honda Motor Company, Hero MotoCorp had entered into several international tie-ups in order to develop its technological capabilities and extend the same in its product lines. These tie-ups included Hero’s investment in USA’s EBR, and its partnership along with Austria’s engine-developing company, AVL LIST GmbH, and Italy’s Engine Engineering.

Earlier in 2012, Hero MotoCorp had joined hands with EBR with plans to borrow technology. However, in 2013, it went ahead and made investments in the company to position EBR as Hero’s extended R&D arm in North America.

Hero’s partnership with EBR, which was also expected to set up an assembly line at its facility exclusively for Hero’s products, was understood to be for paving the way for the Indian bikemaker to enter the lucrative North American and European markets. The company was, reportedly, expected to use EBR’s distribution network in the North American and European markets for its own products.

Several industry experts had then pointed out that Hero MotoCorp’s move to invest in EBR and its R&D was to help fuel Hero’s own plans of developing performance bikes in the near future.

Later at last year’s Delhi Auto Expo, the company did unveil a host of new products and concepts that primarily included the serial electric Leap hybrid scooter, a 250cc sportsbike named HX250R and a 620cc, 79-bhp streetbike concept named Hastur, among others.

“Erik is going to play an integral role in giving shape to some of my dream two-wheelers for the discerning youth of today. So my R&D team and Erik’s team together have made some definitive progress in this direction,” Pawan Munjal, MD and CEO, Hero MotoCorp, had commented then.

Both the companies had planned to sell close to 20,000 EBR bikes by 2017.

However, after the bankruptcy of EBR, Hero MotoCorp’s plans of making inroads into the North American and European markets will surely see changes. Interestingly, the company had plans of launching the Leap scooter in some European markets before introducing it in India. The company will now likely have to rework its strategy.

“Hero MotoCorp is expected to be quick enough in drawing up new plans of pursuing its growth in the international markets. It cannot be ruled out that the cash-rich company may step up and purchase 100 percent stake in Eric Buell Racing,” voiced a veteran expert, aware of the recent development.

A press release uploaded by the company on BSE, says “Hero MotoCorp, with strong in-house R&D capabilities, remains confident that its future line-up would not be affected despite EBR ceasing operations.”

The company is known to have made hi-profile appointments last year that included hiring Dr Markus Braunsperger from BMW, Germany as HMC’s Chief Technology Officer (CTO) and Markus Feichtner from AVL to lead the Engine Design & Development team.

Hero MotoCorp’s R&D centre at Kukas (near Jaipur) is expected to commence operations soon. The centre will house around 600 engineers from India and abroad.

Also read: Hero MotoCorp surpasses Honda to become India’s largest scooter exporter