Kawasaki Hopes Good Times Will Roll Again
Three years ago, one of the nation’s largest Kawasaki motorcycle dealers had a horrible hunch that he was about to become a dealer without a product. “I was worried that Kawasaki was about to pull its investment out of the United States,” said Tom Gobreck, co-owner of Whittier Kawasaki. So he bought a second dealership from the industry’s clear leader, Honda.
His worries appeared to be warranted. In 1982, the company, whose U.S. distribution arm is based in Santa Ana, was rumored to be putting its U.S. manufacturing plant in Lincoln, Neb., up for sale. Its snowmobile division had already been closed, the company was losing millions of dollars annually and salesmen nervously joked that, wheel-to-wheel, the recession-induced inventory of unsold Kawasaki motorcycles in the United States stretched halfway to Tokyo.
But today, Gobreck believes that Kawasaki is here to stay. The company has returned to profitability, it has announced plans to build a $10-million headquarters complex on a 22-acre site near John Wayne Airport in Irvine and it firmly denies having any plans to sell the Nebraska plant. What’s more, Kawasaki is successfully expanding its product line in this country by adapting the motorcycle engine to new uses, such as aquatic bikes.
Still, although Kawasaki’s U.S presence, which includes 400 employees and 1,500 dealers, may seem more secure, new troubles could be clouding its future. Its parent company, Kawasaki Heavy Industries Ltd. of Hyogoken, Japan, is one of the biggest manufacturers in Japan, but its dominant shipbuilding business has struggled and it is counting on the U.S. subsidiary to improve its profits.
At the same time, Kawasaki’s self-proclaimed mantle as the motorcycle industry’s performance king is being seriously challenged. The dogfight for market share in the $3-billion industry has never been fiercer.
That competition, in fact, has forced Kawasaki to expand its line of more-powerful and more-expensive motorcycles. It has also prompted the company to explore new products that will appeal to young professionals with lots to spend on recreation.
Yuppies don’t buy too many motorcycles, but they do buy jet-powered water skis and aquatic bikes--motorcycle-like vehicles that spin in the surf. (Kawasaki, the only company that makes the aquatic bikes, sold $40 million of them last year.)
As a result, Kawasaki is busy working on other marine-related recreational products that can be propelled by the company’s most valuable asset, the motorcycle engine.
Kawasaki’s Jet Ski and aquatic bike are evidence of the motorcycle industry’s search for ways to sustain itself during its evolution beyond two-wheeled motorcycles.
Other manufacturers have taken similar routes, with Yamaha now ranking among the largest manufacturers of snowmobiles and Harley-Davidson Motor Co. studying production of three-wheeled vehicles that would look and act more like cars than motorcycles.
“We don’t even know what industry we’re in anymore,” said Don Brown, president of Hancock-Brown Corp. His Irvine consulting firm has worked with all the major motorcycle manufacturers.
New Demographics
All sorts of new motorized machines--for land, sea and air--are being studied by motorcycle makers, Brown said.
Hastening the scramble to build these products are the new demographics of motorcycle buyers. The Hollywood image of the 25-year-old motorcycle renegade is mostly a thing of the past. Kawasaki says a growing number of its customers are older than 30--sometimes much older.
This runs contrary to motorcycle marketing lore, which warned that, after the typical motorcyclist reached age 30 or got married--or both--the motorcycle ended up as a relic in the garage.
Despite the changing market, American Honda Motor Corp. still manages to increase its share of the U.S. market each year.
Honda, with a 58% share, has more than lapped the competition, well ahead of second-place Yamaha Motor Corp. U.S.A.’s 17%.
Other contenders don’t come close: U.S. Suzuki Motor Corp. holds 10%, Kawasaki 9% and Harley-Davidson about 4%, with the remainder holding less than 1%, according to R. L. Polk & Co., a Detroit-based research firm.
But even Honda has suffered as industry sales have slumped from a peak of 1.5 million in 1973 to about 1.1 million last year, according to the Motorcycle Industry Council.
After grossly misreading the U.S. market, an oversupply of more than 1 million motorcycles was locked in manufacturers’ U.S. warehouses by mid-1983.
To rid themselves of this inventory, the Japanese began selling bikes for a song. This nearly drove the lone U.S. motorcycle manufacturer, Harley-Davidson, out of business. Then, with pressure mounting in 1983, the government slapped a 50% tariff on imported bikes.
The tariff was devastating to most Japanese motorcycle importers and might have severely strained Kawasaki had the company not used it to its own advantage.
Kawasaki’s best-selling motorcycles here, the heavyweights, also carry the biggest price tags. Kawasaki avoided the tariff, and potentially huge price increases, by producing its heavyweights (engines of 750 cubic centimeters and up) only at its U.S. plant.
That tariff is now down to 25% and, pending review by the Reagan Administration later this year, is scheduled to expire in 1987.
By then, Kawasaki hopes its price advantages will have helped it make up for lost ground.
The tariff turned a competitive industry into a cutthroat one. “We’ve had to scramble for business,” admits Masamoto Tazaki, president of Kawasaki’s U.S. distribution arm.
For years, motorcycle manufacturers were usually content to do 70% of their business with repeat buyers. Instead of reaching out for new customers, they relied on motorcycle owners to come back for seconds and thirds.
This long-held philosophy that “once a customer buys a motorcycle, it is always in the blood,” is still repeated by Tazaki today.
Major Restructuring
But no longer does the company rely exclusively on that adage.
Kawasaki was among the first to recognize the changes. The company undertook a major U.S restructuring in 1982, investigating new products outside the motorcycle arena, eliminating all but larger bikes from its line, centralizing operations in California and paring back a number of regional offices.
“I give them high marks,” consultant Brown said. “They’ve been counted out two or three times by the conventional wisdom of the industry. But every time they’ve come back.”
After two consecutive years of losses and a marginally profitable year in 1983, Kawasaki Motors Corp. U.S.A. posted profits of nearly $10 million in 1984 and expects a slight increase in 1985, Tazaki said.
Corporate goals are to increase market share 1% each year for the next five years, Tazaki said. That would recoup the 5% market share that Kawasaki lost--mostly to Honda--during the previous five years.
Although Kawasaki won’t release actual sales figures, a company official said that it has worked off most of its big inventory of unsold motorcycles, and its sales of other recreational vehicles, such as three- and four-wheel all-terrain vehicles called ATVs (which typically cost $1,000) and Jet Skis (which cost $2,500), now account for nearly half of the company’s sales.
In less than 10 years, with the addition of those two products, the company has greatly broadened its general consumer appeal.
Bought Nebraska Plant
Although Kawasaki was the last major Japanese bike maker to enter the U.S. sales market, it was the first to build motorcycles here. That was 11 years ago, when Kawasaki Motors Manufacturing Corp., the company’s U.S. manufacturing arm, purchased a Nebraska plant for $20 million.
Since then, Kawasaki has marketed sophisticated, high-performance bikes with price tags akin to those found on some compact cars.
Tazaki, the 49-year-old chief executive who came to the United States in 1965 as a Kawasaki engineer, said he has no interest in making scooters and small bikes like the ones that bolster Honda’s market share. He said he is content to sell the big bikes that promise higher profit margins.
During the past decade, Kawasaki’s corporate image has been built on performance motorcycles. But that market niche has attracted new competition.
“They really have a run for their money from us,” said Merle J. Karst, senior vice president at Yamaha, which introduced a line of new performance bikes this year.
Paul Dean, editor of Newport Beach-based Cycle World, an enthusiasts magazine, said: “Most people still believe Kawasaki builds the ultimate performance bikes. But actually, that honor changes every year.”
Last year, Suzuki wore the performance crown. This year, the title goes to Honda, Dean said.
Honda continues to determine the industry’s course. It turned the industry around in the 1970s with its fine-tuned dealer network and its ad campaign, “You Meet the Nicest People on a Honda,” which projected a better image of motorcycle riders.
Industry analysts estimate that Honda spends as much as five times more promoting its products than any of the other so-called Big Five motorcycle manufacturers.
Said one industry expert: “Honda has bought the marketplace.”
At the same time, Kawasaki has been lax in promoting its products, critics say, and for almost three years hasn’t advertised on television.
Honda’s huge sales lead is partly the result of its well-financed advertising campaign, Brown said. “If you’re Kawasaki--or any of the other companies--it becomes a war of who can promote the most.”
Robert Moffit, director of marketing and export sales at Kawasaki, said the company will become a more aggressive advertiser in 1985. As the company struggled during the past few years, little money was available for advertising.
But it will return to the television airwaves later this year with the theme “Taking It to the Limit.”
The slogan replaces the very successful one that Kawasaki used in the mid-1970s, “Kawasaki Lets the Good Times Roll.”
Focus on ATVs
Part of Kawasaki’s ad campaign will focus on ATVs, which some industry analysts say could eventually overtake traditional motorcycles as the industry’s main product.
These machines--which look like giant mechanized tricycles--run on snow, mud or sand. They were used by security guards during the Summer Olympics and are big sellers among farmers.
The newfangled machines are also becoming increasingly popular with those under 18--a group that motorcycle makers are hankering to put in the driver’s seat.
