PROJECTIONS: Revenues will grow from $5.4 million in 1998 to $284 million in 2002
Where to locate? Bidding War
What happens when the cities and states of America learn that a start-up company is shopping for a site for constructing a 160,000-square-foot, $30-million factory and corporate headquarters that will eventually employ 450 people? A bidding frenzy, that's what.
Just ask Dan and Dave Hanlon. The U.S. economy may be in one of its most prolonged economic expansions; yet in 1996, when the Hanlons announced plans for the Excelsior-Henderson Motorcycle Manufacturing Co.'s factory, their phones started ringing and ringing. All told, they received from 20 states more than 200 proposals for tax incentives and other enticements, many unsolicited. "We were literally deluged with offers," says Patrick Pelstring of Public Resource Group, the Minneapolis-based consulting firm that advised the Hanlons.
Among the most alluring offers:
- Twin carrots from North Dakota and the city of Minot, including a $4.4-million grant for job training and other purposes, plus $1.7 million in tax credits and abatements and up to $6.7 million in financing.
- An Ohio package featuring $3.2 million in job-training grants and tax abatements, as well as up to $10 million in state financing.
- A Kansas sweetener of up to $2.3 million in job-training funds and loans, up to $3.9 million in tax abatements and enterprise-zone tax credits, and up to $7 million in state and local financing.
The ardent courtship of a fledgling motorcycle manufacturer reflects not just the aggressiveness of economic-development agencies, says Lee Peterson, president of the Minot Area Development Corp. It also has much to do with the kind of jobs Excelsior-Henderson is creating, jobs for "machinists and the like, the kind of positions everybody's looking for today," he explains.
The Hanlons visited 20 sites in 12 states before deciding on what at first they had vowed not to do. They picked their sentimental favorite: their hometown of Belle Plaine, Minn. (population 3,300), which offered a $2.3-million grant and a $40,000 low-interest loan, with the state of Minnesota kicking in an additional $7-million low-interest loan and $200,000 for job training. "Every other place was better," Dave Hanlon says, "but Belle Plaine won our hearts."
Feedback: What the Experts Say
THE FINANCIALS
Shawn Milne, a research analyst at Hambrecht & Quist LLC in San Francisco, who covers Harley-Davidson
The Hanlons are going to spend in excess of $50 million before rolling a bike out the door. That gives you an idea of just how capital intensive the business is. They have little margin for error. If there is a major glitch as they ramp up, they don't have a lot of capital to fall back on. And it could become far more difficult for them to raise money in the future. The stars may need to be all aligned for them to pull this off. Still, they've persuaded people to ante up $28 million in the IPO without having sold a bike. Certainly, that's how great companies can begin--by getting investors to believe in them and share their passion.
THE MARKET
Bob Moffit, a vice-president at Kawasaki Motors Corp. USA, who met with the Hanlon brothers in 1994
The market is growing. There is room in it for a new player such as Excelsior. But these guys have a rough row to hoe. The Hanlons' central assumption was that Harley was leaving a lot of business on the table. But Harley has recently expanded production and is getting ready to significantly increase its manufacturing capacity. Furthermore, the introduction by Polaris of its new motorcycle is probably the largest single obstacle that will confront Excelsior. Polaris will very likely clothe itself in the made-in-the-USA label, and that means Excelsior will no longer be the only so-called American alternative to Harley. I question whether Excelsior can sell 20,000 bikes a year, but I wish the company luck.
THE FOUNDERS
Robert Evans, a senior research analyst for Minneapolis-based Miller, Johnson & Kuehn Inc., who covers Excelsior-Henderson's stock, which he recently gave a "Buy" rating
With any start-up, the heart and soul and energy of the company come from the founders. If you spend any time with Dave and Dan Hanlon, you quickly realize just how passionate they are. They strongly believe in what they're doing. To succeed, you need to have people who can somehow find a way to get the job done if they hit a roadblock. I've been around Dave and Dan Hanlon for about three years now. They've hit their milestones every step of the way. That's rare for development-stage companies. The Hanlons do what they say they're going to do.
THE COMPETITION
Howard Kelly, editor of Hot Bike magazine, a publication for Harley enthusiasts
It seems impossible to compete against Harley. The media and Hollywood have glamorized Harley. It's become hip to have a Harley. If you watch a television show or a movie, and a motorcycle appears in it, it's always a Harley. It's become a part of the American culture. How can you compete against that? Rather, the Hanlons have to create a hook, a compelling reason why people would want to own their motorcycle.
