Ducati Motor Holding SpA

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Ducati Motor Holding SpA

Via A. Cavalieri Ducati, 3
Bologna, 40132
Italy
Telephone: (39 051) 641-3111
Fax: (39 051) 406-580
Web site: http://www.ducati.com

Public Company
Founded: 1926 as Societe Radio Brevetti Ducati
Employees: 1,134
Sales: $402 million (2005)
Stock Exchanges: New York
Ticker Symbol: DMH
NAIC: 336991 Motorcycle, Bicycle, and & Parts Manufacturing; 423110 Automobile and Other Motor Vehicle Merchant Wholesalers; 423120 Motor Vehicle Supplies and New Parts Merchant Wholesalers; 551112 Offices of Other Holding Companies

Ducati Motor Holding SpA produces a range of motorcycles known for their groundbreaking designs and technical excellence. From its earliest years manufacturing motorcycles, Ducati has been recognized for its achievements in racing; Ducati won, among many other prizes, 13 manufacturers’ titles at the World Superbike Championship between 1990 and 2006. Ducati motorcycles have become prized collectors’ items and coveted possessions for motorcycling fans. In an effort to capture some of the marketing flair of rival Harley-Davidson, Ducati has also entered the fashion business, producing clothing and other motorcycling accessories, which the company sells in its own expanding chain of retail clothing and accessories stores in Italy, New York, London, Capetown, and Sydney. While Ducati’s fortunes have ebbed and flowed throughout the decades, its reputation for an exceptional combination of form and function has never faltered.

FOUNDING A MOTORCYCLING LEGEND: 1920S

The Ducati name eventually became synonymous with high-performance racing motorcycles, but the company’s origins were in another industry altogether. In 1926, Adriano Ducati, together with his brother, other family members, and other local investors, founded Societe Radio Brevetti Ducati in Bologna, Italy. As the company’s name suggests, its initial products were based on patents held by Ducati and destined for the developing market for radio equipment and components. Ducati’s first product, the Manens condenser, gave the young company instant worldwide recognition. A string of other successful products followed, making Ducati an internationally recognized name.

By the mid-1930s, the company, despite the worldwide recession, had grown out of its existing facilities. In 1935, the company began construction of its Borgo Panigale factory, on the outskirts of Bologna, a modern production facility that was also designed to attract further industrial and technological investment in Bologna—an early example of the “clustering” found in California’s Silicon Valley and elsewhere.

While construction continued on the Borgo Pani-gale plant, Ducati also began developing an international network of production and service facilities, allowing the company to offer its customers faster and more direct distribution and support services. By the end of the decade, the company had opened offices and subsidiaries in Caracas, New York, London, Paris, and Sydney.

World War II put an end to Ducati’s glowing radio career. Extensive Allied bombing runs completely destroyed the Borgo Panigale factory. By 1944, nothing remained of the Ducati site. While crushing the Ducati family’s business, the destruction of the Borgo Panigale plant would nonetheless give rise to a new opportunity—and a new era for the Ducati brand name.

“VROOMING” INTO THE 1950S

As Italy fought, lost, and then, technically at least, won World War II, Adriano Ducati and his brother began making plans for the company’s postwar future. Reviewing a number of new products, with which the brothers hoped to regain their company’s international position, the Ducati brothers made the rather radical decision of switching product focus altogether. Instead of building radio components, the Ducatis began designing for a different market entirely—and by 1946 the first new Ducati product appeared: the Cucciolo.

The Cucciolo was a small motor designed to be fitted to bicycles. The idea was a quick success, and the Cucciolo soon became one of the biggest-selling motors of its kind in the world. While sold as a kit at first, Ducati soon began marketing its own motorized bike, based on a Capellino frame patent and constructed by Caproni, in Trente. By the beginning of the 1950s, the Cucciolo had graduated from a motorized bicycle to full-fledged status as a motorcycle. With this Cucciolo, the company inaugurated more than 50 years of Ducati motorcycling fame.

The Cucciolo was quickly joined by other motorcycle models. In 1952, the company unveiled its Cruiser, featuring a 175cc engine, electronic ignition, and automatic transmission. The following year saw a more conventional bike, with a small 98cc (quickly increased to 125cc) engine, designed as an affordable, if stripped-down, motorbike. Together with the Cucciolo, these models brought Ducati back to the forefront of the international manufacturing scene and helped make the company a leading name in cycling.

Yet the company’s greatest successes would come with the arrival of the legendary Fabio Taglioni as the company’s chief design engineer in 1955. Taglioni brought an avant garde approach to motorcycle design, seeking revolutionary solutions for both technical excellence and high performance. Taglioni also understood the need to demonstrate the excellence of his designs, and he led the company onto the racing circuit, particularly long-distance competitions like the Giro d’Italia.

Taglioni’s influence quickly produced a new generation of Ducati motorbikes. In 1956 the company debuted a four-stroke, 174cc engine, available in touring and sports versions, that could reach speeds of up to 135 kilometers (approximately 70 miles) per hour. These models, the Tourist, Special, and Sport models, were joined by the America model the following year.

By 1958 Ducati had begun producing the 200cc-powered Elite model, which also featured, for the first time, the Taglioni-designed “desmodromic” valve gear system. The desmodromic system would remain an integral feature of the Ducati design through the 1990s, and would provide the launching pad for the company’s great racing successes.

RACING CHAMPION IN THE 1960S AND 1970S

The desmodromic system paved the way for a new 250cc model, a twin-cylinder cycle specially ordered by racing great Mike Hailwood in 1960. The 250cc engine was soon adapted as a single-cylinder powerhouse for such models as the Diana, Monza, Aurea, and the later GP models, providing speeds up to 170 kilometers (100 miles) per hour. The company would produce still more single-cylinder models, including the famed 250cc, 350cc, and 450cc Scrambler models, which found great success in the U.S. market. Meanwhile, Ducati was building its reputation among the racing world, with the Mach 250 providing a breakthrough in 1964. This bike was soon followed by the 450 Mark 3D model, introduced in 1968, which pushed the speed limit beyond 170 kilometers per hour.

COMPANY PERSPECTIVES

Ducati is motorcycles. Ducati produces racing-inspired motorcycles with unique engine features, innovative designs, advanced engineering and overall technical excellence. Ducati offers a range of the most highly sophisticated and sought-after bikes ever created for the road.

The arrival of the Japanese motorcycles, including Honda, Yamaha, Kawasaki, and Suzuki, soon challenged the Western market leaders and inaugurated a new category of bikes, the so-called maxi-bike, featuring large-displacement engines of 750cc and more. While Ducati would remain synonymous with high-performance, small-capacity motorcycles, the company raced to join the maxi-bike competition, producing a twin-cylinder 750cc engine incorporating the desmodromic valve system. The new motorcycle would make its debut in April 1972, when it captured first and second place at the Imola 200. This bike would give rise to a new Ducati series, the Supersport, a line that would continue for decades. In 1978 the Supersport captured world attention when Mike Hailwood came out of retirement to capture both the Tourist Trophy and the Formula 1 TT on a 900cc Supersport.

1983 PURCHASE BY CAGIVA GROUP

In 1983 Ducati was purchased by the brothers Claudio and Gianfranco Castiglioni, who placed the motorcycle company under their growing Cagiva Group conglomerate. Described as passionate racing fans, the Castiglionis allowed Ducati to remain on the sports bike track, setting the stage for the company’s string of 1990s victories. The Castiglionis also expanded the company’s line of motorcycles, introducing more models and adding a wider selection of—and higher production volume for—the large displacement motorcycles by then leading the entire market. One of the architects of this new Ducati era was Massimo Bordi, who joined the company as design engineer in 1983 and who quickly made his mark on the company’s racing production.

Inspired by Formula 1 racing, and by the Ford Cosgrove engine design, Bordi set to work designing a new series of high-performance motorcycles. For this, he incorporated the desmodromic valve and distribution system to a four-valve, air-cooled motor based on the Cosgrove engine. The result was the “Desmoquattro,” which debuted as the heart of the 748 model in the Grand Prix of 1986. Two years later, the 851 model would usher in the era of the Ducati dominance of the Superbike circuit: after that bike won its first championship, in 1990, other Ducati bikes—the 888 in 1991, the 916 in 1994—went on to win six of the next eight races, firmly establishing Ducati as the category leader. At the same time, Ducati premiered the Monster, a legendary entry in the fun bike category. The Monster was an example of what has been described as a “naked” motorcycle, one that has been pared down to just the essentials.

While Ducati was winning races, however, it was losing money. That is, the Castiglioni brothers, in attempts to resuscitate the Cagiva conglomerate, had been draining Ducati’s revenues. Production—in the company’s now ancient factories—had begun to slow, dipping to a low of just 12,500 motorcycles in 1996. Ducati faced financial ruin.

A NEW LEASE ON LIFE

The struggling Cagiva empire caught the attention of Texas Pacific Group (TPG), a U.S.-based buyout specialist. Hiring Federico Minoli as Ducati’s chief executive officer, TPG negotiated the purchase of the Ducati business, initially buying 49 percent of Ducati for some $43 million in 1996. Under the terms of the purchase agreement, an additional 2 percent was placed in a trust held by TPG, which gave the company control of Ducati. In August 1998, TPG bought out the rest of Ducati, paying the Castiglionis $174 million.

KEY DATES

1926:: Societe Radio Brevetti Ducati is founded in Bologna, Italy, to sell radio equipment.
1946:: Ducati releases the Cucciolo, a small motor designed to be fitted to bicycles.
1952:: Ducati begins selling the Cruiser, its first motorized scooter.
1955:: Legendary design engineer Fabio Taglioni joins Ducati.
1958:: Ducati produces its first model featuring Taglioni-designed “desmodromic” valve gear system.
1978:: Motorcycle racer Mike Hailwood wins Tourist Trophy and Formula 1 TT on a Ducati 900cc Supersport.
1983:: Claudio and Gianfranco Castiglioni purchase Ducati, making it part of their Cagiva Group.
1996:: Texas Pacific Group (TPG) purchases controlling stake of Ducati.
1998:: TPG buys the rest of Ducati.
1999:: TPG floats Ducati on the New York Stock Exchange.
2005:: TPG sells its controlling stake in Ducati to an Italian private equity firm, Investindustrial Holdings.

Meanwhile, Minoli worked to turn around the famous motorcycle company. One of his immediate moves was to make heavy investments in refitting the company’s production lines, adding automation, while also negotiating with the company’s suppliers to improve efficiency. Not content simply to increase production levels, Minoli greatly expanded the company’s range of models, more than doubling the number of production designs and introducing the Ducati name into new categories. Minoli also replaced most of Ducati’s management, putting in place a largely young team. As production levels rose, Minoli set to work streamlining Ducati’s distributor model. He instituted a two-tiered system of exclusive dealerships, with some 40 Ducati-only shops, and some 900 store-in-store shops selling Ducati products in third-party dealerships.

Minoli also worked on revitalizing the Ducati image. Following the Harley-Davidson model, Minoli sought to make Ducati a brand as much associated with a lifestyle as it was with high-performance racing. A new line of Ducati-labeled clothing and biking accessories appeared, and the company launched a high-fashion ad campaign, selling the ads to such publications as GQ and For Him magazines. The company also hired clothing designer Donna Karan to create some of its biking outfits. The Ducati dealerships underwent radical design changes; as Phil Patton described in the New York Times, “the company transformed its gritty garage-style shops into spic-and-span boutiques.” Ducati underwent its image changes at an opportune time, when increasing numbers of motorcycle fans developed a heightened appreciation for well-designed bikes as collector items. A 1998 show at the Guggenheim Museum, called “The Art of the Motorcycle,” as well as headline-making sales of classic motorcycles at tony auction houses cemented this trend.

GOING PUBLIC FOR THE 21ST CENTURY

The revived Ducati continued to win races and attract new motorcycling fans willing to pay up to $25,000 for a Ducati bike. The company’s revenues began to rise, topping $280 million in 1998, and approaching $300 million for 1999. With Ducati back on track, TPG cashed in, taking Ducati public in March 1999 with a listing on the New York Stock Exchange. TPG, nevertheless, remained Ducati’s majority shareholder. Soon after Ducati’s public offering, industry rumors began to suggest that a merger might be in store for the famed Italian manufacturer, with Milwaukee’s Harley-Davidson. The company immediately denied the rumors.

Two months after going public, Ducati opened its first showroom in North America, on New York City’s West Side. Featuring the Donna Karan clothing designs, including leather motorcycle jackets with price tags of $1,200 and higher, the store also highlighted Ducati’s new line of “naked” sport motorcycles. To help promote the image of the Ducati lifestyle, the company launched its first-ever television commercial in the spring of 2000, with a 30-second spot to run on American stations during televised motorcycle races. Ducati motorcycles appeared in high-end catalogs with models atop them; glossy magazines featured photographs of celebrities such as Nicole Kidman and Tom Hanks astride their Ducatis. Ducati welcomed the 21st century by embracing Internet sales, offering its MH900e for sale exclusively online.

While at the dawn of the 21st century Ducati continued to enjoy the success engendered by its image renewal and overhaul of business practices, by 2004 the company had again begun to lose money. In the midst of these financial struggles, TPG announced, in late 2005, that it would sell its controlling stake in Ducati to an Italian private equity firm, Investindustrial Holdings. While other prospective buyers had offered higher prices, Ducati executives persuaded TPG to accept the bid from Investindustrial because that firm pledged to preserve the Ducati brand and to invest capital into the company. As CEO Minoli explained to Neil Pascale of Powersports Business, the Investindustrial firm was “buying the brand and buying our dream.”

Two straight years of losses prompted Ducati executives to formulate a new business plan based on decreasing costs, improving production efficiency, and increasing sales of the products with the highest profit margin. The company focused its promotional efforts on emphasizing the Ducati brand as a symbol of unparalleled performance in sport motorcycles. Ducati began to yield results from its new strategy in 2006, with slight increases in sales and reductions in costs. In an interview with Powersports Business, CEO Minoli indicated that the company expected North America to account for much of its near future growth, describing the U.S. market as Ducati’s second largest behind Italy.

Regardless of its financial performance, Ducati continued to earn praise for its product lines and unswerving devotion from its customers. Its Hypermotard model was named “Best Bike for 2005” by the Motorcycle Design Association, and a survey among thousands of visitors to the 2006 EICMA motorcycle show in Milan, Italy, resulted in the Ducati 1098 being named “Most Beautiful Motorcycle of the Show.” The unveiling of a new motorcycle, the Desmosedici RR, at the Italian Grand Prix in June 2006 caused a stir among Ducati enthusiasts. The 2007 model, a limited-edition replica of Ducati’s famed MotoGP, was priced at $65,000, and within a few hours of taking orders, the company had fielded enough orders to cover the forecasted North American production for the bike’s entire first year.

M. L. Cohen
Updated, Judy Galens

PRINCIPAL SUBSIDIARIES

Ducati North America; Ducati France S.A.S.; Ducati Motor Deutschland GmbH (Germany); Ducati North Europe B.V.; Ducati Japan Ltd.; Ducati U.K. Ltd.; Ducati Corse.