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| Ducati In Lock Step With Fans: Soup Interviews CEO Michael Lock
by dean adams Wednesday, August 08, 2007 Q If someone were writing your bio regarding motorcycles, how did it all begin? A I joined Honda from college on their student induction program. I got to do six or seven different jobs in four years. They move you around, and they see where you stick best, and I stuck in motorcycles because that's what I wanted to do. I did market analysis, product development in the UK, and then went to work in Japan for a while, which was fascinating. Then I got headhunted by Triumph as they were coming back with a new company, to head up the export sales and development of the brand across the world. I did that for three years. They asked me to come and set up a subsidiary in America in '93, to re-import Triumphs, so I did that. That was a great opportunity. I did that for three years, got exhausted and burned out, pissed off. Went back to the UK, went back to college and did a few things, a bit of consultancy for a couple years, and ended up at Ducati UK, because I knew Federico Minoli quite well, and they wanted somebody new to come in. So I did that for a little while. And then Ducati North America imploded. They moved from Jersey to California, and it just got screwed up. They lost their way a bit, and they asked me to come back over because I knew the US as well as I guess a European would do. And that was four and a half years ago. I've been here ever since.Q While you were at Honda, you worked with Mitch Boehm, didn't you? He worked for American Honda for a few years. A I did. That was funny, because we used to meet in Tokyo and argue. He was representing the American market, I was representing several of the European markets. We'd have a bike wheeled in to an R&D room, and we'd be there, and they'd take the cover off the bike and they'd say, "So, how's it going to do in Europe?" And I went,... and Mitch would say... I remember they brought in the VFR750FH, which was the first redesign of the VFR750F. We're looking at it, and he said, "It's just plain white!" And they said, "Yes, Mitch-san." And he said, "Hell, man!" And he said, "It's got a clock in it!" So that's the argument. I go, "What's wrong with a clock? It's a sport-tourer." And this went backwards and forwards. In the end the Japanese say, "Okay, okay." Because they hate confrontation, you know, the Japanese hate public confrontation. And the head of R&D said, "So. Michael-san. How many will we sell in Europe?" And I'm going, "Well, Germany, Italy, France, oh, we'll probably sell about 3,500, 4,000 a year." "Ah. Mitch-san, how many for US?" He goes, "Oh, maybe 800 a year." He goes, "We have the clock." Japanese are very pragmatic. We used to spar a bit. We were good buddies. Then, of course, he left and joined Petersen, and I left and joined Triumph. We sort of hooked up again when I got back to the US. He's a good guy. I saw him Friday night. He's still the same guy. Q The Triumph years, it was rising from the burning ashes, almost literally. Where were you in the timeline?A I joined six months before production re-started, so I was in at the ground floor. John Bloor had deliberately not brought any commercial people in until he'd got the factory built. Because he said the commercial people would just screw it up. "Yeah, they'll argue 'this thing needs changed, that thing needs changed.'" So he kept everybody out, and brought us in, really, once the factory was built and we were ready to start thinking about production. I was there from 1990 until '97, a long time. Q What was it like? A It was a rollercoaster. It really was. Because we had no rulebook for anything. We started the project deliberately not to make too many direct references to the past. Because the past had failed. We wanted to resurrect the name, because it was a famous name, but we didn't want to resurrect any of the practices. None of the technology, none of the manufacturing, none of the commercial side. We wanted to do it fresh. So we had this clean sheet of paper, which was an amazing opportunity. But every day we woke up and we said, "So, what are we going to do today?" It was a bit like that, it really was. No, it was good fun. I loved it. Q Bloor is infamous—accurately or not—being a skinflint. There aren't a great deal of resources there as compared to a Japenses company. I wonder if there's any synergy with Ducati, where it's a small market, the budgets are small, you've got to make do. A Yeah, that's certainly a parallel between the two. The brand names are big, and have extraordinary reach, and so people make an assumption that we have huge resources and departments of people. And we have nothing. We have nothing. So yeah. But I think the approaches between Triumph and Ducati are different. Ducati tries to do things on a glamorous scale. We feel that's part of the DNA of the makeup of the brand, that we should be living large, and we should be doing things for the pinnacle of achievement; whereas John Bloor's a lot more pragmatic than that. John says, "It better earn its own place in the sun or else we're not doing it." Hence not really getting involved in racing, because that's glamour. That's about selling the mystique of the brand rather than selling actual motorcycles. Which they're very realistic about at Triumph. So the philosophy's different, but the circumstances are the same. Which is what makes it interesting. Q If somebody had to describe your managerial style, what would it be? A I try and lead from the front, meaning I wouldn't ask anybody to do something that I wasn't prepared to do myself. I place a very great emphasis on people understanding why they're doing what they're doing - not only what they're doing. I'm not task-oriented. It's all about goal, it's all about getting people's buy-in, and then getting them to do it, not me to do it. I don't want to do everybody's job. I'm not a control freak. I want to spin people up and let them go. And then they stand or fail on their own two feet. So I would say, intellectually hands-on, but practically hands-off. Q What have the last three years been like at DNA, from your perspective? A Full-on. We knew that the company was in a bad place here in the US. The dealer network was demotivated, the product had reliability issues, we never broke out of this selling 4,000 bikes a year to the same 4,000 people who would buy them whatever we did to them. We had to change that. It started from - it didn't start from the product, because we don't control the product. It started from the relationships. Ducati had a kind of exclusive, kind of nose-in-the-air, if you can't spell "desmodromic" we don't want to talk to you, thing. And that's fine if you're Ferrari, but we're a real company, and so we wanted to make it premium but accessible. That starts with the relationships, of being inclusive rather than exclusive. Getting to that place - which I think we are getting there now - but getting to that place has been tough. It's been a challenge. Because you're up against vested interests a lot of the time, as well. There are people within the Ducati family who don't want it to get bigger. They like it being tiny and exclusive and they're all over there and we're here. I hate that. I want everybody who wants a motorcycle to think they could - they just could. If their numbers came in, or they got a raise at work, or they got some more free time, they could get a Ducati. I think we need to get bigger and more accessible. So it's been maybe a little bit more difficult to get there than I first imagined. Q When you say "bigger," how much bigger do you want it to be?A Oh, well, let me put it into perspective. There will be 700,000 new motorcycles sold this year in the US. We will sell 10,000 out of 700,000. "Bigger," for me, would be 15,000, or maybe one day a dream of 20. I think at 20,000, we're 50% of what the factory can build for the world. North of that, they're not going to give them to us even if we could sell them. But at 20,000 sales a year, I can get revenue for the company of $250-300,000,000. Three hundred million dollars revenue means we can do things here. We can do them properly. Like go racing properly, instead of all held together by Band-Aids and favors. I want to do it properly, like they do it at World level. And I want to put on big events. We've got Ducati Island here, and it's lovely, it's great, I think it's the nicest thing here. But it's tiny, tiny thing. I want to do it bigger and be more inclusive. So yes, so "bigger" for me is 20,000 out of 700,000 instead of 10,000. It's still a drop in the ocean. Q I suggested to a product guy I know that I thought Ducati needs a base motorcycle, a cheaper motorcycle, something that probably doesn't share many parts with what you've got now. What do you think of that? A I think that that--it's not about the practicalities in our place, it's about the philosophy. So philosophically, giving up desmodromic valve actuation; philosophically, giving up trellis frames, or some of the other very expensive to manufacture things, is an internal battle. If one side or other wins that battle, I think it opens up possibilities. Either way. But at the moment, we're in the self-analysis stage. So you'll see more and more bikes, for example, in the range with wet clutches. That was verboten for a long time to even suggest it. Unless, of course, you look in the history and you realize that wet clutches preceded dry clutches anyway. But they're giving ground on some of these things, where they're prepared to listen now to what people really want from us. And it's interesting, if you speak to the public - not the people who are buying the bikes, but the people who aren't buying them - if you speak to them, there are some things that they hold very dear, and some things they don't. And we discovered that a dry clutch? Absolutely essential to a guy that wants to buy a 1098R. Absolutely essential. Guy who buys a Monster 695 has no idea whether it's a wet or dry clutch. What he wants is a Ducati. He wants accessibility to it. So I think the idea of making something that gets people into the family, if it has to sacrifice some of these Holy Grails, it's a valid argument. My job is to bring Ducati to people in America. It's to bring the bike. Not to have a ring fence there with everybody standing outside looking in. My job is to bring it to the people. So yeah, there are some battles still to fight internally on that, but they're philosophical rather than practical. Q. How is your relationship with Claudio Domenicali? Because in my mind he is the guy steering the turnaround at Ducati. A Claudio and I speak all the time. All the time. Because he's at the heart of taking us product-wise to where we want to be five, ten years from now; and I run the biggest market. We agree on a lot of things, and we violently disagree on some. But that's good. Because if you really disagree on things, you have to bring out your best arguments. And ultimately, the best argument wins. Thing about Domenicali? He wants to win. More than anything, he wants to win. And if you have to beat him to a pulp over something in order to convince him that the best way of winning is that way, he's open to it. Those are the kind of guys you enjoy dealing with. It's the closed-book guys who are difficult. "No, no, we're not going to look at that, because we've never done that." Those guys are impossible to deal with. But he's not one of them. Q The Classic series that Ducati did last year. Success or failure? A Huge success in America. Huge. I think we ended up selling 40% of all the Sport Classics worldwide. But we marketed them, and we made them seem romantic, and we included people, and we communicated. In Europe, I think they felt they were just novelty bikes, and so you put them in the market, the number of people who wanted to buy them would buy them, and then it was done. So I think we had different approaches across the water, and the approach we had was to celebrate them as a real way of marrying the past to the contemporary. Bear in mind, 20-30 years ago, Ducati sold nothing in America. We didn't really exist over here. Whereas in Europe, they were already strong. So I wanted to work those bikes much harder, because I knew we didn't have a natural base of support for them. And what we learned was, if you really did promote them and take them out there, that people would respond. No one ever knew who Paul Smart was over here. No one knew. And yet we sold 500 Paul Smart replicas in the US. I think 500 was the total they sold in Germany, Italy, France and the UK combined. So that, I think, taught everybody a lesson. Don't take it for granted, and don't hang them out as toys. Make them real bikes, and then you'll do well. So the next generation of Sport Classics you'll see, I think will be promoted and conceived a little differently from the company. So I think it will continue. Q A critic could say that the R&D and other costs that went into the Classic line could have been your base, entry-level, sell-a-bunch-of-them model. A Yes. Q So, how many of them did they sell? A Worldwide, it must have been about 8-9,000. That's all of them. That's the GT and the Sport 1000 and the Paul Smart. But you know, compared to a base model, they're reasonably high margin. The engineering cost to bring those three bikes to market was not considerable by our standards. You look at developing a 1098, or I have to say, even a Hypermotard, which is an air-cooled engine, but is a very high-tech chassis. The R&D costs to bring those to market are very high. So the risk factor's high. Whereas for the Sport Classics, once the Paul Smart had been developed, the Sport was a spin-off from it, and the GT really was a spin-off from that, even though it had a two-seater frame arrangement and twin shocks. It wasn't that expensive to bring them to market. The value in those bikes was in the style. So the margin that the company retains is a bit higher, and from an image point of view, they definitely serve to separate us from everybody else. Because they're bikes only we could make. So from a volume point of view, I think you've got a good point, but from a brand and earnings point of view, they were a smart move. Q My sense of it in Italy is that there's a great deal of excitement and enthusiasm for the short-run GP bike street bike, the Desmosedici. I'm enthusiastic about it as an enthusiast. As someone who's trying to really figure out how Ducati is going to survive long-term successfully, it's an interesting answer for a question that not many people are asking. A Yeah. I think that's true. Will the Desmosedici project be profitable for the company? I have no idea, and we will not know until we've actually built them, delivered them to the customers, and then supported them. You know, the supporting them post-purchase is an important part of the picture, because we're giving a three-year warranty on this bike, and three years free servicing. Now, some of that thinking is predicated on the fact that half of them will be coffee tables. The other half won't be. And certainly, I've met a lot of the guys in the US who've got reservations on them, and they're not coffee table guys. Some of them are collectors, and they'll stick them away. But a lot of them are actually intending to ride them, dread the thought, and take them to track days. So I don't think that we will be able to tell whether it was commercially a successful project until a year or two after we've sold them. But I can tell you from a brand point of view, and from positioning Ducati, it's been an enormous success. We've spent no money whatsoever promoting this bike. We've sold 1,200 of them worldwide at an extraordinary price. And it's served another purpose as well. What it's done--and it was important to us, bearing in mind that the last two or three years life has been difficult-- it's reinforced to everybody we are the premium Italian Superbike manufacturer. That's an important thing back in Italy, because there are some other companies out there who build very expensive Italian bikes--in fact, considerably more expensive than Desmosedici, except with no pedigree. Very, very important to after the 999 four-year period, when commercially, we struggled. I think it's no secret that it's a great bike, but it was not as commercial a success as we'd planned. And during that time period, some other companies have come along, European companies with high-end bikes, who have tried to establish themselves as the Superbike company. Well, it's very important that we're the Superbike company. So the Desmosedici has fulfilled another role as well. It's restored our credibility. No question. Q I'm curious as to how much market research was done for the price of the street GP bike. How did they come up with the number? Because, I'll tell you, I think it was low.A Well, you'll find some people in the company who would now agree with you. Q I think it's a deal for what the buyer is getting.A It really is. Q It's $70,000, or something like that?A Well, most of them we will supply at $65,000, because when we launched it was $65,000. It only went up to $72,500 February this year. We'd already taken 400 reservations in the US by then. I think we've only taken 50 or 60 since then. So most people will get them for $65,000, because we honor the price.Q The goofy Hailwood bike Ducati did a few years ago, its price was what, $25,000? A It was priced in Euros, which made it a little difficult to pin down, because at the time, obviously, the dollar/euro exchange rate was different. But it was around $20,000, and that was a relatively low-tech bike. If you went front to back, and you looked at suspension, brakes, engine, and you added it all up, you were paying a lot for the style. I think almost the reverse is the case with the Desmosedici. Just look at the front forks. And look at the rear shock. And look at the throttle bodies, and the electronics. If you add it up component-wise, you could probably reach $70,000 before there's any design element or any assembly in there. Q That was my next question. This is a model they're trying to make money on, right? A It was the intention. Whether we achieve it or not, I think - let's see. Let's see. But I tell you, if there is a second generation, if we do a limited edition second generation replica of a Grand Prix bike, we will have learned a tremendous amount from the first. So. That's the way it goes.Q Pierre Terblanche is the most controversial designer in the motorcycle industry today. My contention is, if he worked for a Japanese company and he came up, largely, with the 749 and 999 projects, and they went over as well as they did, he'd now be working in a distributorship in Iceland. It's just interesting that you guys have kept him on. I guess he's got a contract. A I don't think it's that. He's a difficult character. Everybody who knows Pierre knows that he's passionate and intense, and if he believes something, it's going to take you 14 days to talk him out of it, and even then you'll lose. But he brings a lot to the party that's perhaps not seen in the outside world. Pierre is a motorcycle stylist-designer who understands engineering. I've worked in three different motorcycle companies, I have not met many bike stylist-designers who have any concept of geometry, of suspension travel. So Pierre brings a lot to the party to R&D beyond penning the lines of the bike. Like I say, the 999/749 was not a commercial success. Very easy to shoot the designer for that, but designers don't bring bikes to market. They have to get through a whole bunch of hurdles before they get to market. So there were a lot of people in the company who signed off that project. Commercial people who signed off the project. And every now and then you get it wrong. The Hypermotard is selling quicker than we can make them. That's a Pierre bike. Pierre wasn't even briefed to make that bike. He did it in his own time. And wheeled it into R&D one day and said, "You think we could make that?" And they're like, "Wow!" So, the guy is definitely in credit, still, in the company. He's not in debit.Q Really?A Yes.Q Because you could really look at the 999/749 situation and how it all played out, and if it would've been worse, it really could've sunk the company. Because the decision to green-light that thing is a reason the stock tumbled, and worldwide Ducati hit a big speed bump because of that bike. A Well, the Superbike is not traditionally our largest volume seller, but it's certainly our biggest earner. So if you wobble on the Superbike family, not for a year or two, you wobble for four years on sales, it disproportionately hits the earnings of the company. Monsters sell fantastically every year, but they're relatively low-margin bikes for us. The Superbikes should be high-margin bikes. So yeah, I think you're correct in saying that the management environment that brought that bike to market affected other things in the company as well, which all contributed towards a lack of confidence on the stock market, and our parent company at the time, our controlling stock interest TPG, very driven by the numbers, and if the Superbike's not delivering the numbers, that creates a tension and anxiety in the company. It did do that. Q I was surprised that TPG didn't do enough market research to know that the 999 was going to be controversial, to say the least. A Well, when the 916 came out, it was controversial, just in a good way. And it's a fine line. I remember being in Pro Italia in Glendale the day the first two 916s pulled up. I was working for Triumph at the time, trying to convince Pro Italia to become a Triumph dealer. And this truck turned up and they wheeled out these two crates. No one had seen the 916 in the US. And I waited while they unboxed them. And two of the techs in Pro Italia, two of the experienced guys, stood and looked at the bike and said, "You know? Looks like a girl's bike." Because what they were used to was the 888, 851. These were muscle bikes. These were hard to ride bikes that really hurt you if you got it wrong. And now came the 916, that was small and dainty and exquisite. But the initial reaction from the Ducatisti was "It's a girl's bike. What the hell's going on here?" Now, okay, 18 months later, it was the greatest thing we'd ever made, and went on to forge a dynasty for a decade. But it is a fine line. Q Two memories that I have in my head, that I witnessed: Jerez Grand Prix, 1994, the first 916 I saw with my own eyes was in the parking lot, someone had ridden it over from Bologna. It was Saturday morning at the Grand Prix and Kenny Roberts and four other guys from his team were standing around it, looking at it for 25 minutes, thoroughly enamored. Fast forward to 2001, Imola. The 999 was there, the first 999 I saw. There were probably 45,000 people at Imola, and there was nobody standing around that bike. These things seem a whole lot more obvious than some would like to admit. A Well, very often they're more obvious outside of a company than in it, because people are doing it seven days a week in the company. And during an R&D project, you look at so many clay models and so many CAD drawings that you desensitize. It's wrong to desensitize, but you do. It's inevitable. You have to take a step back. I ride the competitors' bikes as much as I can, because you have to. It's easy to become navel-gazing in a company like Ducati. We have such a strong image, and like I say, we're all so committed and dedicated to it, to the point we don't do anything else, that it is easy to lose your sense of perspective. I think that the last four or five years in the company have really made people go back and look at that: that we cannot just operate inside our own little world, that we have to be sensitive to what the world wants from us, how it's going to react, and so on. You'll see it play out, but I think you'll see over the next three or four years, every new bike we bring to market has really been thought out. The 1098, you know, is a much safer product than the 999 was. Everybody loves the 1098, and it's a gorgeous bike, but we have not pushed ourselves and the design envelope with that bike as much as we did with the 999. And yet it's a huge commercial success. What does that tell you? It tells you that there is an expectation of what Ducati brings to market. They want us to be different and unique, but in a particular way. And I think that's a maturing that the company has to do. The Hypermotard is a very radical bike for us. We knew it'd be a commercial success before it came out. We knew. Because we'd done our homework. We had done our homework on that. And bikes you'll see at Milan this year for next year will be huge commercial successes, very popular with the press and the public, and we know that in advance. So, we learned something. Q Conventional wisdom would seem to indicate that what should come next is a 749-style 1098, and a smaller Hypermotard. Any comment? A You'll see one of those at Milan. Q Looking at the company on the whole over the last year, Ducati has really become more of an Italian company, again after TPG left. They're off the New York Stock Exchange, they've got another silver-haired Italian running the place, and it seems like the whole machine is being internalized. I'm not sure what to make of that. It's a lot like 1967 in some ways. A That's an interesting observation. It could easily look like that. It could easily look like that. But I can tell you that in the last three or four years of the TPG era, there was very little TPG input. They had checked out. They had checked out, mentally. I think that you look at private equity firms, they have a very specific brief. Buy low, stop doing the dumb stuff, make investments that will increase the value of the company, and then sell it. That never lasts ten years. It's unheard of. It lasted ten years with Ducati for a number of reasons. We were in transition, and there was 9/11, and all kinds of external things, stock market crashes, that made the sale difficult. So I think they were in it longer than, perhaps, they would have chosen to be. Which meant that the input radically went down. It became much more Italian in the last three or four years of the TPG era. Now, okay, they've sold it, but they've sold it to Investindustrial, who are a very savvy company. They are Italian, but they're no dummies at all. They're quite international in their thinking. Other companies in their portfolio are successful internationally. And [Gabriele] del Torchio, who's come in, I've met twice now, has traveled the world. He's very familiar with America. He comes to talk to me first. Whenever they want to do anything new, he says, "How would it play in America?" So yes, it looks very Italian, but it's 21st-century Italian. It's smart Italian, definitely. I feel very optimistic about things we can do for America, because they recognize the importance of this market. I have my boss, Cristiano Silei, here this weekend. He hasn't come here for five years. I've got del Torchio coming over in September for our big dealer conference, because he wants to get to the heart of it. So I wouldn't be concerned about that. I think that they're grown-ups, these guys. Q If they're a global company, why request to be de-listed off the New York Stock Exchange? A Actually, that's quite simple. It's a pain in the ass to keep up with all the regulations, the paperwork, the reporting. It's horrendously expensive. They haven't de-listed from the Italian Borsa. You can still buy Ducati stock. You just can't buy it in New York now. And if you've followed the stock at all, it was trading at $8 August last year; it's trading at $21 now. We're still a public company. I don't think - I can't speak for Italy, but I don't think there are any plans to de-list from the Borsa. And this is the 21st century. You can buy and sell stock anywhere in the world now. Q Regarding racing, the new AMA rules package that they threw the pass out there for everybody to make comment on. It looks like you guys are back in the game if you want to be, with the rules that you want. Right? A Nearly. Q Well, what else do you want? A We've got a little bit of a discussion going on between Ducati Corse and the AMA at the moment, concerning really only one issue. There's lots of little minor ones, but there's one major one which is a sticking point at the moment, and that's the issue of the pistons. We race internationally, and we don't record many DNFs. We make motorcycles that race and win, and finish races. The AMA rules package is suggesting that the pistons need to be homologated pistons, i.e., stock street bike pistons. Ducati Corse have said that's madness. We don't do that at World Superbike level. We are able to change pistons, as everybody else are, at the pinnacle of racing. We're not looking to develop a completely different bike for AMA. We want to develop a bike that can win, which means it's based on the World Superbike development, and they want us to put pistons in that will work on the street and on the racetrack, and Ducati Corse don't believe that that's possible. So it's a relatively small thing, but from the race point of view, it's a big thing. I think otherwise, the AMA have been very sympathetic to what we've asked for, and have made all the necessary allowances that we asked for, so we're nearly there. We're nearly there. But the piston issue is a live, problematic issue for us at the moment. Q Paolo Ciabatti was a huge supporter of AMA racing, and he extracted money from the World Superbike budget most years to go racing in America. Some years it was a lot of money. He's gone now. I'm curious as to what you think the mood is at Corse regarding racing Superbike in America now, with Tardozzi running the World Superbike program. He's not the most Americanized Italian. A No. He's not. Q I really don't think racing in America is that important to him. A I think the perspective in Corse always is that they want to win races, and that their responsibility is to compete and win at World level. I think they've always felt that. Paolo was a unique guy, quite frankly. Paolo was a diplomat and ambassador as well as a hands-on manager. The job to convince Corse that racing in the US is imperative for our future is my job, and I work on the commercial side of the company. But we've got a much better link between Corse and the commercial side of the company now than we have had before, at the top level, because Claudio Domenicali has got a foot in both camps. And I, at every possible opportunity, remind him and reinforce to him that if they see America as being a strategic market for the future - which is already is, but for the future - and that we fully intend to break into the sportbike market in America - and the 1098 has skimmed the surface, but that's not it. That's not the endgame. The endgame is to be a player in the sportbike market here. That's what we do well. So if they want to break into the sportbike market and have real credibility, beating James Toseland's great; beating Mat Mladin's really important to American motorcyclists. So that's my argument. I will keep bashing that, and we will keep going, and I will secure Corse backing as quick as I can. It's an important part of my strategy. Q My sense of it is that they're going to let you go racing for all the racing you want to pay for.A That would be their default argument. But on everything else we do in the company - everything else - it's a partnership between Italy and North America. We never get anything right over here unless it's got their buy-in. Because we need their buy-in. They're the parent company, and they have access to everything. So if we're to return to AMA Superbike racing, there is no way I'm interested in doing it as a customer team. We either do it factory backed or we don't do it at all. So my job is to get factory backing. We'll do it, or I'll die fighting. Q DNA is located in the middle of many very lucrative companies up there in Cupertino, Apple, etc. The SanDisk guys are very enamored with the MotoGP team. From an outsider's standpoint, it doesn't really seem to be the biggest hurdle in the world to find somebody who can underwrite a $4,000,000 Superbike budget. A There are three challenges here, okay. Three challenges. Challenge number one is to have the right bike and technical support. Challenge number two is to have enough clout and pull with AMA to be able to keep the circumstances conducive to us racing. And number three is the cost. I'll get killed for saying it, but the cost is not the most important one. Q I would disagree. I think if you went to Claudio Domenicali and said, "Listen, we have to do this," and pause, and you can see the wrinkle on his forehead forming—but if you then said, "and I've got a sponsor who's going to pay for all of it"—I think you'd get his signature. A It would certainly get their attention. But I'm reasonably confident that we can get the sponsorship. People we've spoken to in the last 12-18 months, and that's a growing number of people as we raise our profile on the street and on the magazine covers and in the fashion world, we're getting a tremendous number of interesting opportunities. The cost was traditionally the biggest problem, and still remains a challenge. We need a sponsor to come up with $5,000,000, really. Five million dollars will cover our basic costs. But I think $5,000,000 is available out there. But what I need to do is, I need to look a sponsor in the eye and say, "Your sponsorship dollars are safe, because you will be treated with the same respect as the World Superbike team." I need to be able to do that. And that's the biggest challenge, because it's about splitting limited resources. To have a team of people at Corse who only think about AMA Superbike racing, that's their job, that's what I need. And that's a challenge. If I put $5,000,000 on the table, I think they'll all sit up straight and sound very interested. But the two things are both important. We've been speaking to a potential partner here about running a team, who's got the money, but wants to win. Wants to win on Day One. And that's possible to deliver, but that needs Corse to say it's as important as World Superbike. And patently, for them, it's not. And arguably, it's not. Q And becoming less so as time passes in the current climate at Corse. A Yes. Yes. So that's tricky. That's tricky. And you know, the success in the GP program is creating challenge for me. It's creating opportunity, but challenge. The fact that we're doing well, we could win here. We could actually win here, which no one ever thought possible at Laguna Seca. We could win here, we could win the World Championship this year. It's a possibility, it's in sight. What that's done is it's massively focused attention on Corse, because that's the Holy Grail for racing guys: to take on the might of Yamaha and Honda at what they're really good at, and be up there with them. What that does is, it narrows the resources. The really cool engineers, the talented guys at Corse, all migrate towards [Grand Prix]. Of course they do, because it's the pinnacle of achievement. So that doesn't help in terms of getting resources for North America. Which as far as Corse's concerned, let's face it, is a national championship. It's a provincial championship. Just the biggest province, but it's still provincial, as far as they're concerned. The market here now is about the size of two-thirds of Europe, but racing is perceived very differently. You know it's perceived very differently in the US. You go to a small village in Italy, and they know the names of all the Grand Prix riders. And this is the over-60s. In America, roadracing has not hit that sweet spot yet. And that's a challenge for us when it comes, not so much to getting the sponsorship, although that is a challenge, but getting Corse to understand why it's important to do that. We've more than doubled our size in the US in the last four years without any successful local racing. So their argument, on one level, is "Look, the racing's not that important. What's important is lifestyle and brand and communications and a good quality dealer network and, and, and ... . Racing, you guys could win or not win and no one would notice." Well, that's a strong argument, but it's one that I've got to defeat. And we've got to do it in conjunction with taking AMA Superbike racing to a wider audience. I view the success of Supercross with great interest. I'm not a Supercross guy at all. For me, motorcycles really ought to have two wheels on the ground. But I go and see what's happening in the paddock, and I look at the audience and the people who are turning up, and the size of it, and I think, "Roadracing's far more exciting than this." But how do we get in? It's a complicated picture. Q That's a quagmire I'm unwilling to get into, because the AMA is running it. You only get one life and I'm not going to waste any more time trying to get them to see things that are obvious. How long have you been at Ducati? A Five years. Q You're an executive. How long are you going to hang in here before you do something different? You've got to have headhunters calling you to do something else. A Sure. Q So? It's difficult work. A It is difficult work. Q I know the resources that you're dealing with. You've got to make $100 look like $1,000 on a good day and $10,000 on a bad day. A Indeed. Indeed. In this country there's a lot of opportunity. People stand in front of you and say, "What do you want to earn?" Wow. No one does that in Europe. But you're right. You only have one life. What do you want to look back on and say you did? I'm realistic enough to know that this is not like the cure for cancer or world peace. But this is a full-on life. Working in a small motorcycle company that's prestigious, in a market like America where people are so enamored. Spend a weekend on Ducati Island, and you talk to regular Joes who love what we do, and are involved, and follow it all in the media, read your website religiously for every snippet. That's valuable, as well. That is valuable. And doing it on no resources can be a real drag sometimes. But achieving it on no resources? That's not a drag. That's cool. And I've got a good team of people around me who will work for nothing, as well. If you think I work for nothing, they really work for nothing. I don't know. You do it as long as you think you're achieving something and growing and having an opportunity to do some cool stuff. I went riding last Sunday for five hours in the Santa Cruz Mountains on a brand-new Hypermotard, and went GSX-R hunting. How cool is that!? Q As a motorcycle executive and industry insider, what do you think of the China threat? Not as it pertains to Ducati, but as it pertains to the entire industry? A You go back 40 years, and there were a number of little companies emerging from a country called Japan. They made motorcycles that people laughed at. In fact, one of the companies I used to work for, Triumph, actually invited their dealers in America to put Hondas in the showroom so they could sell to the kids. The Japanese have transformed the motorcycle business for the better. They really have. They squeezed all the existing brands, and some of them went out of business because they were lousy and complacent. Some of them struggled for 20 years and are now much better companies than they were before. I work for one of them. Ducati is a much better company than it's ever been. It's more ambitious, it's more creative, it gives back more than it ever did. The Japanese transformed the business. Who's to say the Chinese couldn't do it as well? Who's to say? We don't know very much about them. And we didn't know anything about the Japanese 40 years ago. But they brought more to the sport than they took out. I think the Chinese could do the same thing. And you know, who's really got to worry about the Chinese? The Japanese. Because the Chinese can become the new Japanese, so the Japanese have to wonder who they want to become. I think these are interesting times, and good times, for motorcycling. I always put a positive spin on it. I work for a little company with no money. I have to put a positive spin on it, and look at opportunity rather than threat. I don't see the Chinese as a threat. I think that if they take motorcycling to a whole new bunch of people, and they make good quality product, that doesn't break, that's affordable, they bring people into our sport. One day, those people will want to buy a Ducati.Q. Last question: Buell Motor Company recently debuted their 1125R, which received a lot of help from Rotax in both the design and in building it. I'm curious as to what you think of this machine. If Buell is not tied to the Harley-Davidson engine, but he still has access to their millions for R&D, Buell could really be a player. A. I think the Rotax tie-up was a smart move for them. Buell needed a breakthrough bike in order to be taken seriously by a large chunk of the audience and this could be it. From our point of view it's going to be a good thing. Raising the profile of non-Japanese originated sport bikes is good for all of us. Buell has got a reach, particularly through middle America, that we can only dream of. So if they can get particularly middle America thinking about non-Japanese motorcycles, sport bikes, it's got to be good. Good for them primarily, but also good for us. As for Buell having the money to pay for R&D on many different things where perhaps Ducati doesn't, we're well used to that. (laughs) We have to be fleet of foot in other ways. Their news comes hot on the heels of us winning the MotoGP race at Laguna Seca—on network television. That did more for us in a positive manner than any single new model could bring because it took us to a much wider audience as winners. Buell is not the threat or the enemy here, really. It's people's preconceptions about who we are that's our enemy. Things like winning the GP and bringing out cool bikes that go to a wider audience, that's what gives Ducati success. The Hyper-Motard is what we call in England a "pot-noodle". It answers a question nobody asked. And it answered the question in a way that no one anticipated. We're going to end up with it being our number two selling bike this year. Which is unbelievable considering it only arrived in the second half of the year. On a platform where it replaces nothing in our range, it cannibalizes nothing in our range. So Buell can do what they like. I retain a positive attitude about Buell, because they take the non-Japanese sport bike message to a whole lot of people who would have never been getting it from us, necessarily. We can all benefit from a rising tide on that.
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