US-based sports bike maker Erik Buell Racing (EBR), in which Hero MotoCorp invested two years ago, has declared bankruptcy and shut down its operations, the Indian company said in a stock market disclosure.
The board of directors of EBR has passed a resolution for an assignment for the benefit of creditors under Chapter 128 of the Wisconsin Statutes, which is similar to US federal bankruptcy law. Both EBR and its subsidiary have ceased their operations, it said.
In 2013, Hero MotoCorp through its US-based wholly owned subsidiary HMCL (NA) Inc, had bought 49.2 per cent stake in EBR for Rs 150 crore.
EBR, which has 126 employees, has more than $20 million in outstanding liabilities, according to its attorney and is seeking court protection from creditors.
EBR is a five-year-old firm started by Eric Buell, a former executive with the iconic motorcycle maker Harley Davidson. Buell had earlier formed Buell Motorcycle Company, but eventually sold it to Harley Davidson. After Harley Davidson shut Buell Motorcycle a few years ago, Buell moved out to start up again. Harley Davidson continues to hold the brand rights for Buell but EBR is an independent venture of its founder.
Both the companies had plans to enter North America and Europe market and to export 1 million two-wheelers by 2017. EBR had also hired engineers from Yamaha, Boeing Corp and General Motors and it also had plans to introduce some of those bikes in the US market.
The deal was also to bring capabilities to Hero MotoCorp in the higher end of the product offering. The world's largest bike maker by volume currently banks on its mass-end motorcycles.
Hero MotoCorp said it has built strong in-house R&D capabilities and remains confident that its future product line-up would not be affected despite EBR ceasing operations.
Hero MotoCorp's centre for global innovation, research & design in Rajasthan is expected to begin operations in 2015-16. It will have around 600 engineers from India and around the world.
Last year, Hero MotoCorp hired Markus Feichtner from Australian firm AVL to lead the engine design and development team. It had also brought in Markus Braunsperger from BMW as chief technology officer.
The company counts Bain Capital and GIC as its shareholders.
(Edited by Joby Puthuparampil Johnson)