HUSQVARNA'S SALE

 
(2/4/2013)

 

 
Husqvarna has been sold to Austrian company Pierer Industrie AG. Pierer is owned by KTM CEO Stefan Pierer.  KTM is partly owned by an Indian manufacturer Bajaj.  What will be the relationship between KTM and Husqvarna?   While the CEO of KTM will own Husky, does that automatically mean the two companies will share resources? KTM in the U.S. and Husqvarna in the U.S. are currently in the dark about future plans.
 
BMW had been the owner of Husqvarna for seven years, and in that time had heavily invested in the Italian brand, building a new factory near Varese. But the only word from BMW about the sale came in the form of what might be the worst press release ever:
 
 The BMW Group is realigning its BMW Motorrad business. In the context of changing motorcycle markets, demographic trends and increasing environmental demands, BMW Motorrad will expand its product offering to exploit future growth potential. The focus of the realignment will be on urban mobility and e-mobility. By restructuring the segment, the BMW Group will concentrate on expanding and utilising the resources of the BMW Motorrad brand. Therefore the BMW Group signed a purchase agreement with Pierer Industrie AG (Austria) for the acquisition of Husqvarna Motorcycles. The acquisition will proceed subject to approval by anti-trust authorities. Both companies have agreed not to disclose the purchase price...

 
The Indian firm Bajaj Auto, however, is acting like they are the new owners of Husky.
,
 Below is the edited transcript of an interview between Rajiv Bajaj, MD, Bajaj Auto and CNBC-TV18.


Q: Six years after you first bought a stake in KTM, the company has gone onto acquire BMW's Husqvarna. What does it mean for Bajaj Auto?


 A: Our increase in the equity position at KTM is a reflection of our belief that we are a motorcycle specialist. We see ourselves as a power house of motorcycles. We like to be present in every meaningful segment of the motorcycle market across the world. To be present in very premium space, we knew that it is almost impossible to create a new brand which can successfully compete in the premium space.


So, we thought that the inorganic route would be a better way, the more successful way to do that. So in 2007 we purchased 14.5 percent stake in KTM. Over the years that has grown to about 47-48 percent now. Everything that strengthens brand KTM, product portfolio, distribution, technology, economies of scale KTM, everything that strengthens KTM along all these parameters is good for Bajaj.


 Q: Take us through the brand strategy because in the case of Bajaj and KTM there is a clear brand differentiation but in the case of KTM and Husqvarna they are not only both off-road motorcycle bikes brands but also compete in exactly the same segment?


A: Let me give you two analogies. Let us say, Mercedes and BMW. They may both be in the same segment and they may both essentially be luxury cars but they are very different kind of luxury cars. Second example is, Volkswagen and Audi. They are not in the same space, Audi is one step above Volkswagen.


While they are quite different at the front end they do share the platform and therefore they do share a lot at the backend right from product development to supply chain to manufacturing. With these two analogies we can venture to say that what can happen in the case of KTM and Husqvarna is one at the front end and this is my personal opinion, KTM and Husqvarna should retain their individual brand identities because even today both brands have place in the marketplace.


Last year KTM sold 100,000 motorcycles and Husqvarna sold about 10000, a little less than their peak volume of 15000. So, this figure implies that there exists a position for Husqvarna. So, I would expect that in the future every attempt will be made only to strengthen the two individual positions, otherwise what is the reason to have two brands. However, at the backend, both essentially are off-road motorcycles one can expect or anticipate that there can be very useful synergies in terms of product development and manufacturing.


Q: We saw lot of joint development work between Bajaj and KTM over the last few years. What kind of synergies do you expect between Bajaj and Husqvarna if any at all? Can we also see Husqvarna bikes being co-developed or co-manufactured at Chakan for instance as is the arrangement currently with KTM?


 A: I can’t comment. But today if Bajaj is poised to develop, produce and distribute KTM motorcycles ranging from 125cc to 400cc out of India I don’t see any reason why in principle we are not best suited to do the same when it comes to a brand like Husqvarna as well. With KTM, we are already manufacturing the 125cc and 200cc. It will be a matter of months before the 390cc is introduced, that is no secret. So, we are a proven partner for this purpose. If it makes sense from the point of view of manufacturing synergy then that this would be a consideration that in the near future we would see a few Huskys roll of the line in Chakan.
Stay tuned...

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