Cycle News - Archive Issues - 1970's

• A candid conversation i John Penton and Jack Lehto CN: Please outline the steps that led to the recent Penton/KTM change. John Penton: By God . I'll tell it to you exactly like it is. You m ight as well get l!')~ the whol e con cep t correct or we might C'l as well not talk . I started Penton s-, Mo torcycles 10 yea rs ago. I contacted I-. a gu y in Austria and he made us a C'\S cou ple of bikes. At that time he told us ~ that 'You guys are wacky because these 1::= bikes will have to sell for so much C'\S money that you a ren' t going to be able - , to sell them.' Well, the way the market was in the States versus the market in Europe we could' sell them and he slowly began to realize this . We made the first two bikes in November of 1967 and then in January of 1968 we made 10 more bikes and shipped them over here and they sold very well . We tested them and everything seemed to be a go so we had the first container sent over. That container held 98 125cc motorcycles and a few parts. The cost at that time was $37,700. That was financed on what is called a 90 day trade note. Our business started to go and it thrived. We were profitable right up to about February of 1972 when President Nixon devaluated the dollar. To understand what this does let me use an example. Let's say we owed a million dollars on a 90 day note. It's a revolving thing so that when it came up we'd pay it . Those notes were in the currency of origin ( Au st ri a n Shillings) . Now we devaluate the dollar and it costs that million dollars plus one hundred thousand dollars more Now you have the basis that led up to the change. Our business was profitable enough at first to cover this (problem). We worked and continued to move forward. Now we come to today and the dollar keeps devaluating. To combat the process of devlauation we have to keep raising the price (of the motorcycle), but our net profit , because of operations , keeps diminishing. For the last three years the motorcycle operation has lost money. Today that container wh ich cost $37,700 in 1968 on a 90 day trade note would cost the equi vilent of $144 ,000 in Austrian Shillings. There is another thing that gets into this. In the years from 1967 through 1969 we had very little competition from the Japanese. ' Our competition was Maico and a few other brands that we re making this specific type of motorcycle . Today; I think you could say that we have some competition from the Japanese. They make a good unit , I know that. Maybe they don't make th eir bikes as good as ours or maybe the European promotion over here is a little bit better and that's why we're able to sell at such atrocious prices. There is only one possible way that I could have competed in the market as it is today . and I could have com peted. That was to make the motorcycle exactly as I would order it with the best available parts and the best p ossible quality control possible . However, that was not economically feasibl e or accepta ble to KTM . There was one other thing. T he European market is so lush and strong today that they (KTM) don't have to do that. That , basi cally , is what led up to this transaction change. The transaction was very . very smooth. The people that I deal with at KTM I th ink of more highly than anyone. They didn't screw John Penton. There was no hard 20 The following conversation with John Penton and Jack Lehto, formerly an employee of Penton's and now the manager of newly formed KTM America,.concerns Itself with the recent change In the manner In which KTM motorcycles were Import ed and distributed. In addition, the pair discuss the future of Penton, HI· Point and KTM and " Uncle John" throws In some Pentonlsms free of charge. lIThe name Penton will never be phased out, unless someone gets a gun and shoots me. " John Penton, January, 1978 feel ings . T hey d id what I requested or rather wh a t I had to do and went right along with it. T hey even came over here to finali ze th e transaction . They wer e very good to me. We are not trying to interrupt the dealer anymore than we ca n possibly help or the personnel involved . This means that the parts are available for th e; Penton Motorcycle . Eventually the name will change over to KTM , but we're carrying the name for the benefit of the dealer. We won 't just start coming with KTM motorcycles. T he dealer who has been selling Penton will have a month or two before that happens. The name is going to change as the containers come in and the new bikes are fed into the market . T he tra nsition should be smooth because -those dealers have always been fait hfu l to me. We want to follow every one of our responsibilities and our liabilities as closel y as we can. I've chosen what I think are the best personnel to do this . Instead of firing all those people th at we wouldn't need with the change, we've been able to move them ove r to KTM to insure an orderly change. The trade name Penton Motorcycle is registered in every state and will not go to KTM . It will only be used for the time that has been agreed upon as the transitional period. The name Penton will never be phased out, unless someone gets a gun and shoots me. It is not economically feasible or profitable at the present time for Pen ton to market motorcycles. But, I'll tell you that someday if it becomes economically feasible and profitable then Penton will be back in the business of marketing motorcycles . Penton is always going to be in the m oto rcycle business. CN : Could you outlin e the dec isions behind KTM u nder ta kin g the set-up of their own distribution networ k in t h e U .S. • Jack Leh to : KTM realized that the product development and everythi ng was the responsibility of J oh n and h is staff; people th at he has had in Penton Im ports for many years. That was also reflected through the dealer network · in the imput from the dealers on the product. KTM realized that there was a va lue to this and sought to utilize th at value. They felt a responsibilit y and obligation, being the rnanufacturer, to dealers and cust omers as well as to Penton Imports of cont inu ing thi s in a sm ooth way without upsetting it. One m ajor problem was that when the decision was made it was the second week in December and that left us on ly two weeks to become operational and begin to get the '78 models out to the dealers without the help of Penton Imports. They (KTM) knew that other transitions such as this have disrupted dealer networks and caused instability in them . So they came over here to talk to John and ask him if he could provide a facility . John gave them several choices. The one that was chosen was a building that John owns which was formerly the home of Husqvarna years ago . The plan decided u pon included that the building wou ld be work ready to help myself and KTM get operating as quickly and as smoothly as possible. This was a big benefit in making the transition . CN : What a r e the obj ectives of KT M America, I ncorporated? J ack Lehto: Simply stated our objectives are that we have a responsibil ity

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