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NEWS – KTM Officials Explain Polaris Deal

November 28, 2005
Filed under Features

KTM officials explained the Polaris deal to many of the Austrian brand’s 435 U.S. and Canadian dealers during KTM North America, Inc.’s (KTM NA) annual business meeting, held here Aug.21-23.
Speaking to dealers, KTM NA Vice President of Finance Jon-Erik Burleson said potential benefits to KTM NA dealers include the opportunity to retail complimentary product lines, not the competition; to have an opportunity to expand product offering and reduce seasonality; and to gain access to a broader, more diverse customer base.
The partnership forms what KTM calls “the world’s largest non-Japanese powersports group.” Speaking to Powersports Business following his presentation, Burleson said the deal further “creates opportunities in new product development; engineering; engine and technology sales; global distribution; and global currency risk management.”
The North American market – U.S. and Canada – represents nearly 25% of KTM’s worldwide business. KTM NA consists of three facilities – Amherst, Ohio; Temecula, Calif.; and St. Bruno, Quebec – 15 satellite offices; and 135 employees. “The exchange rate and the fluctuation of currencies has made the biggest impact on our business here in North America during the past couple of years,” said Scot Harden, vice president of media relations.
“So, most definitely we look to this new relationship as a way of managing some of our global risk,” Burleson said. “You have to proactively manage your risks, produce natural hedges against currency fluctuations.”
A major concern shared by many of the dealers assembled in Ohio was the possibility that the brands would share vehicles and simply re-badge the product, thus forcing increased competition on the showfloor.
“That is definitely not going to happen,” Winfried Kerschhaggl, KTM director of worldwide marketing, told Powersports Business. “It would not make sense to have one product with two different names. We don’t want to lose credibility.”
“It’s natural for dealers to be concerned about the possibility that a competing dealership is going to spring up nearby, but with KTM and Polaris that absolutely is not a part of the plan,” said Harden.
Kerschhaggl confirmed that KTM spoke to other OEMs prior to agreeing to a deal with Polaris. “When you go through a deal like this, it only makes sense to talk to more than one company,” he said, refusing to name the companies.
Kerschhaggl was part of a KTM team that attended the Polaris’ annual dealer meeting, held in July. At that event, he said, the team informed Polaris dealers about KTM product, and about how they could become a KTM dealer.
“We have a very good dealer network in North America, and we don’t have any regions where, I’d say, there’s any wholesale opportunity to put in new dealers,” said Burleson. “But, if we were to need a new dealer in a particular market, one of the opportunities with Polaris is to know of a dealer that may be a fit for what we are looking for. What this relationship with gives us is a greater sense of security from a pool of dealer applications.”
A half-dozen representatives from Polaris attended the KTM event. Among those making the trip was Mark Blackwell, general manager of the company’s Victory motorcycle division.
“We had quite a bit of interest from KTM dealers,” Blackwell told Powersports Business. “There already are quite a few dealers in the U.S. carrying both brands, but this certainly allowed us to get in closer contact with many of the KTM retailers who want to learn more about us.”
“KTM can learn a lot from Polaris regarding things such as dealer development and ATVs, but I think we have a lot we can share with them,” Kerschhaggl said, pointing out that every engine in a KTM motorcycle comes from KTM with the exception being the 50cc models, which have engines from Beta in Italy. “The shared knowledge, in any area, will increase the quality of both networks and lead to greater success for both companies.”
While Burleson maintained “The most important thing to keep in mind is that we’re going to continue to operate as separate companies,” Polaris has said it hopes to use KTM’s facilities in Europe for quad assembly and, asked whether KTM plans to use Polaris’ infrastructure to produce KTM vehicles in the U.S., Kerschhaggl responded: “It’s too early in the relationship, but we at least have the opportunity to consider it at this point.”

- Guido Ebert

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