Go buy an MV Agusta now....

[FT BSTRD]

Originally Posted by TIGGER

Ummm...Neither HD nor Buell manufacture the frames for Buell,nor the rims,nor the motors,nor the plastics,nor the brakes,nor the electronic components,etc,etc,etc. I thought you owned a Buell. How can HD's "buying power" of raw materials affect the price of a bike when they outsource most of the components? Your proposal COULD make some sense if,as I said,HD got their existing vendors to start making parts for MVs. What you are failing to understand is that most(if any) of the components aren't made by HD, Buell, or MV but by outside vendors. Heck,the motor that is provided by Rotax for the 1125 is ASSEMBLED by Rotax from components sourced from factories from all over the world. Haven't you ever worked in a factory? No company that sells anything of any complicity produces all of the components in house. If MV buys their pistons from factory "A" and HD buys their pistons from factory "B",HD's "buying power" at factory "B" will have no effect on the price they pay for a piston at factory "A". The only way volume could affect the price of MV's pistons is if HD starts having MV's pistons made at factory "A". Btw don't MVs come with Pirelli tires? Are you suggesting that they start putting Dunlops on them so they can get in on HD's volume discount? I've toured the HD factory years ago,guess what? They don't manufacture much of ANYTHING,they assemble parts from various vendors to produce motorcycles that are "assembled in America". You're talking like blocks of steel,aluminum,plastic,etc go in one side of HD's factory and motorcycles come out the other side!

HD and Buell currently contract out with component manufacturers for nearly all of the components for their bikes. The more parts the contract with a manufacturer, frames, plastics, engine castings, rims, etc, the better price break they get per part. MV Augusta doesn't produce EVERY component in house. They do the frames and engines as far as I know. The carbon fiber is probably produced in house, but I'd bet they aren't forging bolts, casting wheels, pouring plastics, or creating electronic components out back. I suspect that the frames will be produced outside as soon as HD can arrange it with their current frame suppliers. Beyond initial R&D, there is no reason not to produce them outside. Mass producing the frames will provide cost savings and volume buying (add 10,000 MV frames to the 500,000 HD frames and a lower per unit price is available). For raw materials, each of these components, engine, frame, plastics, etc., must all come from somewhere. When HD places a large order with a production partner, they in tern go to the open market to find the raw materials they need to produce that part. The larger the order the greater the amount of raw materials that can be ordered at one time. When large quantities are being ordered at a time, volume discounts are given. Think 5 gallon bucket of mayonase at Sam's.

My wife owns a children's clothing line. She produces NOTHING in house. She designs the clothing by creating a prototype. She then designs what the fabric patterns and materials will be. She sends the prototypes and electronic specifications for the fabric to the manufacturer. The manufacturer's minimum order count is 30,000 units. For every 10,000 units ordered over 30,000 there is a volume discount. Why is this? The clothing manufacturer is able to reduce the cost in part because there is less retooling time between sewing jobs. The manufacturer is also able to reduce the cost per unit as a result of the savings provided by suppliers. The manufacturer cuts and sews the garment but doesn't produce the fabrics. The manufacturer receives the fabric from the printer. The printer uses fabric dyes, color fast agents, and softeners. The more of these chemicals the printer can order at the same time, the cheaper per gallon these chemicals are. The larger the clothing order the larger the fabric order the lower the per fabric dying per unit. The fabric printer gets the fabric from the cotton mill. The cotton mill weaves cotton and nylon thread to produce the fabric. The larger the fabric order the more cotton and nylon thread the mill orders at one time. The larger the cotton and nylon thread order the lower the per unit cost of thread and the lower the per unit cost of fabric. The cotton and nylon thread is produced by the thread manufacturer. The thread manufacturer buys raw cotton and synthetic polymers to produce the cotton and nylon thread. The larger the order of cotton and synthetic polymers the lower the per unit price and the lower the thread cost.

Volume discounts are the way companies are able to produce more profit. It's called Economies of Scale. These economies of scale provide for a lower final end unit price. Given supply and demand, the demand for a product increases as the price for a product decreases.

The second the ink was dry on the agreement for HD to take over MV, the procurement department began pouring over the inventory of fasteners, parts, and components for every MV model. Their specific goal is to common source every part possible to provide volume discounts. Similarly, they were eliminating accounting, management, sales, advertising, programming, and executive positions to save costs.

There will be unique parts that MV's have the Buells and HDs don't. I can guarantee, though, that any part that can be sourced from a similar parts supplier will be.


Sorry for the book.

Nearly all motorcycle and automobile manufacturers are "assemblers". Those that aren't are luxury and beyond the reach of most of us.

Even those source parts from everywhere in the world. Why would you not want your manufacturer to source parts from the best suppliers with the highest skills?

If MV didn't produce the engines and frames in house and yet was able to produce a bike of equal or better quality to what is being produced today at 15-25% less price, wouldn't we all win?

The only people who lose are the ones who buy an MV simply BECAUSE it's more expensive. I'm sure we can find them something to spend their money on.