Tell me this is late April Fools

[Scott]

Yea, it seems like the longer this takes the worse it is for everyone. Employees are already finding other work, dealers are selling off inventory, hell, there are probably some owners trying to unload their bikes. Fingers crossed that something good comes out of this.

Unfortunately, I think a lot of people are going to lose jobs no matter how this shakes out - and they'll probably be the people who needed jobs the most.

It seems like one of the biggest problems they had was they overproduced bikes, so I'd expect them to downsize to maybe 60 employees even assuming they get back up and running soon. They're going to need to trim things down and let demand catch up with supply and then begin growing again slowly and methodically.

Now I'll preface my following comments by saying again I'm not a lawyer, I've never been through anything like this, I don't have any inside information, I'm simply piling guess upon guess upon guess and applying some common sense. With that said:

I suspect there are probably about 10 people - top engineers and business people - who have a pretty good idea of what's going on and know they'll have a job with one entity or another if they get back up and running. Some of those people may even be employed by the receiver right now.

I suspect there are people right now going through things and counting paper clips so a full report can be generated prior to the start of any bidding. While independent lawyers and accountants could be brought in to do that, it would be a lot more efficient to use people who know where things are. So those people and people close to them probably know, for example: "Yeah, Erik is working with his partner X and he's going to try to make a bid for it and Hero is also going to bid for it and they've both told me I'll have a job with their new company."

In some cases people may know they'll have a job with one entity but not the other so they'll have a rooting interest. And if Hero gets it (and will keep operations in Wisconsin), I suspect we can expect an influx of Indian engineers and managers heading to East Troy to set up camp.

[Hughlysses]

I rooted around at Linkedin.com last night to see what was going on with EBR employees. It's interesting to note that most of the upper level guys haven't updated their listings, while many of the mid-to-lower level guys have already updated their listings to say they're looking for work. Lots of references to the work they've done for Hero, too.

This would seem to go along with what you say in the post above. Over on Badweb, Court mentioned that some guys had bailed in the last month or so, well ahead of the announcement, so the word must have been getting out that their situation was precarious.

[Scott]

I rooted around at Linkedin.com last night to see what was going on with EBR employees. It's interesting to note that most of the upper level guys haven't updated their listings, while many of the mid-to-lower level guys have already updated their listings to say they're looking for work. Lots of references to the work they've done for Hero, too.

Yep, that is interesting. We know that someone gave Larry Pegram "assurances" and I suspect other key people (though probably not the line-workers) have received similar "assurances".

My wife worked for a company once that declared bankruptcy while simultaneously starting a new company. She was 'let go' by the bankrupt company and hired by the new entity so that she never missed a day of work but technically worked for one company one day and a different company the next.

Some key people might already be under contract with Hero. While there are clearly legal restrictions on many elements of the bankruptcy, I believe Hero would have every legal right (and they'd certainly have the cash) to hire key personnel right now. That would give them a lot of leverage in any bidding war (Polaris, for example, would be less interested in the company if they knew top engineering people were under contract with Hero), and if Hero ultimately lost the bidding war, they could always keep those people on to help with their US operations and fill the void that would be left by the loss of EBR.

[Hughlysses]

One other thing I checked yesterday is the EPA listings for motorcycle engines that have been certified to meet current US emissions regulations. I started looking at this site occasionally way back during the early days of EBR to see if they had anything in the works back then. You can find the listings here:

http://www.epa.gov/otaq/crttst.htm

There are separate spreadsheets for 2015 and 2016 (dated March 2015) and there are NO Hero products listed. I'm still wondering if Hero hasn't pushed back their timetable for coming to the US. If so, they may have lost interest in supporting EBR since EBR has already assisted in the design of a new range of Hero motorcycles and scooters AND helped train an in-house design team for Hero.

[Scott]

One other thing I checked yesterday is the EPA listings for motorcycle engines that have been certified to meet current US emissions regulations. I started looking at this site occasionally way back during the early days of EBR to see if they had anything in the works back then. You can find the listings here:

http://www.epa.gov/otaq/crttst.htm

There are separate spreadsheets for 2015 and 2016 (dated March 2015) and there are NO Hero products listed. I'm still wondering if Hero hasn't pushed back their timetable for coming to the US. If so, they may have lost interest in supporting EBR since EBR has already assisted in the design of a new range of Hero motorcycles and scooters AND helped train an in-house design team for Hero.

As far as I know, the 250 hasn't started production yet, so I think step 1 is get the thing rolling off the line. Step 2 - start selling in India and other markets Hero is already in. Step 3 start selling in Europe, US and other new markets. So I don't think getting it certified by the EPA is a top priority (though that is very interesting information). I wouldn't be surprised if Hero and EBR had already decided they would want a 300 cc version to sell in the US and that might be part of the delay on the US side.

Hero's schedule for the 250 may be changing as they work things out (in India - probably unrelated to anything happening in the US), but I think the concept of Hero 'losing interest' in EBR (as many people seem to infer based on the events of last week) is a near impossibility.

You simply don't invest $25 million to buy 49% of a fledgling company one year and then, less than 2 years later when the company is much more established walk away without paying the $20 million debt you'd need to pay off to own the more established company outright. Companies like Hero make long-term investments and long-term plans and those plans don't shift and drift with the wind.

But when a company like Hero is in a position in which they will be forced to bid on an entity that they consider crucial to their future plans, they are savvy enough not to let everybody else know how crucial that entity is to their future plans, and I suspect that's why they haven't made any statements yet. They're probably still working on their strategy, but I'll bet there are a lot of people at Hero who aren't getting a lot of sleep these days.

[Hughlysses]

But when a company like Hero is in a position in which they will be forced to bid on an entity that they consider crucial to their future plans, they are savvy enough not to let everybody else know how crucial that entity is to their future plans, and I suspect that's why they haven't made any statements yet. They're probably still working on their strategy, but I'll bet there are a lot of people at Hero who aren't getting a lot of sleep these days.

I can't find the quote right now, but one of the articles in the Indian press quoted a Hero executive who basically said "we aren't worried about it as we have our own in-house design capability now". Like you say though, this may well be "blowing smoke" on Hero's part.

[Scott]

I can't find the quote right now, but one of the articles in the Indian press quoted a Hero executive who basically said "we aren't worried about it as we have our own in-house design capability now". Like you say though, this may well be "blowing smoke" on Hero's part.

That was likely an attempt to halt the stock freefall. But if that's really true and nobody else is interested, that's great news for Erik Buell. He'll be able to get his company back.

[Hughlysses]

Cross-post from Badweb; teaser from Australian Motorcycle News:

---

quote:AMCN can confirm EBR falling under receivership was all part of a carefully planned strategy for Indian giant and 49.2 percent part-owner Hero MotoCorp to gain full control of the company.
As reported by AMCN, Erik Buell’s company EBR went into receivership last Wednesday, is now bankrupt, and under the control of a court-appointed liquidator. However, all is not what it seems.
Don’t miss next week’s issue of Australian Motorcycle News for all the dirty laundry as to why the world’s biggest motorcycle maker decided this was the best way forward, on sale Thursday 30 April.

---

http://www.amcn.com.au/news/1504/ebr-receivership- is-part-of-the-plan!

[Scott]

Cross-post from Badweb; teaser from Australian Motorcycle News:

---

quote:AMCN can confirm EBR falling under receivership was all part of a carefully planned strategy for Indian giant and 49.2 percent part-owner Hero MotoCorp to gain full control of the company.
As reported by AMCN, Erik Buell’s company EBR went into receivership last Wednesday, is now bankrupt, and under the control of a court-appointed liquidator. However, all is not what it seems.
Don’t miss next week’s issue of Australian Motorcycle News for all the dirty laundry as to why the world’s biggest motorcycle maker decided this was the best way forward, on sale Thursday 30 April.

---

http://www.amcn.com.au/news/1504/ebr-receivership- is-part-of-the-plan!

That will certainly be interesting to read. I'm a little skeptical that receivership was actually part of the plan. I suspect the actual plan was to starve EBR of cash, not market the bikes and put minimal effort into racing with the expectation that Erik would sell his portion when things got tight.

I doubt receivership was actually Hero's plan, but now that it's happened, I'm sure they're prepared to deal with it and get the company.

. . . and then I think we'll start seeing the kind of investment in marketing and racing that they should have had over the last year and a half.

I just hope when everything is done, Erik still has a meaningful role.

[Hughlysses]

Receivership would be one way to settle any dickering over the acquisition price. Perhaps Hero tried to low-ball Erik, and he said "Fine, we'll let a court decide what EBR is worth."