U.S. Firm Readies Dirt Bike Market Entry
Mario Galasso watches a motocross racer roar around a track outside the Cannondale Corp. plant. Keith Johnson is on a prototype of the company’s new motorcycle, which screams and howls--BZ-BZ-BZZZZZ!--kicking up clods of mud.
At a steep hill bikers named “The Elevator,” Johnson guns the engine, soars into the air and comes down for a smooth landing.
“Awesome! That was huge!” yells Galasso, a 34-year-old vice president who helped design the bike.
A few feet away, company founder Joe Montgomery laughs and smiles at onlookers.
Moments like these have driven Cannondale for the past few years. A company known for making high-end bicycles, Cannondale is leaping into motorcycles this spring with the release of a series of new off-road bikes made in the United States.
It has taken a couple of years longer than they expected, but Montgomery hopes the venture will double sales and turn around a stock languishing at under $7 per share, down from $25 in late 1997.
To do that, the company will have to steal a bit of the market from serious competition, the Big Four of the dirt bike industry: Yamaha, Suzuki, Kawasaki and Honda. Cannondale is the first major American company to get into motorbikes since North Centerville, Utah-based ATK in 1987.
“The point of riding and racing is trying to make your bike lighter, faster, trying to get an edge over a guy,” said Galasso, a racer himself. “You don’t get into this if you don’t think you can do it better.”
Boosting Cannondale’s confidence are projections that 180,000 dirt bikes will be sold in 2000, up 23 percent from 1999. Don Brown, an Irvine analyst for the motorcycle industry, sees double-digit percentage gains in the next two years.
The recreational off-road boom is being fed by television coverage of motocross competitions--particularly ESPN’s broadcasts of the freestyle acrobatics.
“It’s become NASCAR-like,” Galasso said. “The whole thing is kind of going crazy.”
Cannondale is hoping to sell a few thousand in its first year. Its brand name should help: Market research shows that many mountain bikers--core Cannondale customers--ride dirt bikes too.
Cannondale, founded in 1971 as a maker of bike bags and clothing, turned itself into one of the world’s leading manufacturers of high-performance, aluminum-frame bicycles in the 1980s. The company, based in Bethel, Conn., sold $176 million worth of bikes and clothing last year, its best year.
But with bicycle sales flat and the company flush with money after going public in 1995, Montgomery went searching for something new.
The company has spent more than $20 million in start-up and built a second plant in Bedford, where about 600 employees have been hired to build the new bikes. The MX400 is the first model to be produced; two other motorcycles and an all-terrain vehicle are still in development.
That a bicycle company would try motorbikes surprised followers. Montgomery says it is natural.
“This is what we’re good at,” said the 60-year-old former Wall Street analyst, who flies his own jet from Connecticut to Pennsylvania twice a week. “We’re good at the challenge, the being too dumb to know better.”
Company confidence aside, the venture is not guaranteed to succeed, dirt bike riders and analysts said.
“It’s all going to depend on how good the bike is. People aren’t going to buy it just because it’s made in America,” said Scott Hoffman, a Dirt Rider Magazine editor.
It may not help that the bikes are expensive: At about $8,000, they’re $2,000 pricier than the competitors’. The company’s defense is that its bike is race-ready, while other bikes often need upgrades.
While many bike magazines have praised the bike in their early reviews, Hoffman noted that the MX400 has been long delayed--it originally was supposed to have been in stores by the summer of 1998--and it will have to meet high expectations.
The major holdup has been the engine, which engineers have redesigned twice. At first, Cannondale asked consultants to design it. Early results were lousy: The engine wasn’t reliable or powerful enough.
“We didn’t know we could do it ourselves,” Galasso said. “Once we got design, manufacturing and testing in-house, we got the thing on track.”
The engine is a four-stroke, which refers to the number of strokes a piston makes. Most racers use two strokes for the bursts of acceleration they need to explode out of turns and up hills, but the motorcycle industry is concerned about possible laws against two-stroke engines, which pollute more than four-strokes.
Cannondale has some four-stroke competition--Yamaha recently introduced a four-stroke model that has proved itself on race courses. The four-stroke also is easier to handle and more comfortable to ride--more suitable for consumers who might be scared off by a two-stroke’s power, Dirt Rider’s Hoffman said.
The bike is lighter and includes some departures from the Japanese competition. The big question is whether Cannondale’s bike is good enough to chip into the foreign juggernauts’ sales.
