EBR is in receivership, despite receiving twenty million in capitalization from a bunch of foreign investors who traded half a million in “green” apiece for a green card assuring themselves and their families a lifetime pass in the United States. That’s on top of Indian motorcycle maker behemoth Hero dropping twenty five million into EBR in return for a near half share of Erik Buell Racing, LLC. This 45 million dollar capital infusion doesn’t include the “flooring” (financing of unsold dealer stock) provided by GE Capital and whoever else’s dollars were sunk into EBR… It’s an LLC and not a public company, so we may never know just who all has skin in the losing game that EBR has become.

So how did EBR, in barely five years and after building a mere couple thousand bikes, manage to blow through at least forty five million? Unlike previous failed wannabe bike builders like Excelsior-Henderson, EBR rented their digs instead of soaking the investors and local governments to build a Taj Mahal factory/museum and finance multiple junkets to Daytona and Sturgis. Granted, rent may have consumed a couple million. The head count peaked at a bit over a hundred towards the end, so figure a payroll that went from zero to five or six million a year. Figure worst case of $10k per bike in raw materials for the couple thousand EBR’s built and there’s twenty million sunk in materials… But GE Capital has effectively bought the dealer stock of perhaps a couple hundred EBRs, and at least a few hundred more EBRs have actually been sold to hard core customers. So EBR has probably spent a couple million on rent, fifteen million or so on the help,  case maybe ten million on materials, and the odd couple million on ads, web presence, and paper clips. We’ve accounted for barely half of the known capitalization of EBR, what happened to the rest?

I know about EB-5 from the mismanaged state immediately to the west, the southern of the Dakota twins. South Dakota had a very active EB-5 program, so successful that the state employee administrator in charge of it sold it to himself and made it his private company. Where was the official oversight? He up and blew his head off when the media started looking for explanations of why so many EB-5 funded companies went under… Just like EBR. And after being blessed with those millions in EB-5 capital, how could a string of thousand head and up dairies and a giant beef packing plant in Aberdeen not succeed?

Well, their business plan sucked for a start- The market for milk and beef isn’t growing, as consumers shift from milk to soft drinks and now overpriced water, while beefeaters are defecting to poultry and tofu. And the Dakotas, hundreds of miles from major markets, are a poor logistical choice. EBR made similar mistakes, offering a raw boned traditional race bike with a license plate while Yamaha with the R1 and BMW with the SS1000 have changed customer expectations to include a bit of riding civility. That limited EBRs market to the couple hundred remaining hard core “race bike with a plate” buyers a year. Building there own engine when no less than premier supplier Rotax would supply it was a questionable move too.

But boss of record Erik Buell isn’t the kind of guy to worry about budgets… Would you expect anything less from a brilliant engineer who quit Harley to build race bikes, even after Harley offered him the job of chief engineer! Reputedly “hard to get along with”, A glance at court records in his suburban Milwaukee county finds him named in no less than three divorce proceedings, and at age 65 he still hasn’t acquired the exurban estate expected of Harley execs… Heck, he even allowed a lean on his modest home to get Harley to acquire Buell Motors two decades ago, a deal his own lawyer advised against. And shortly after Harley shut down Buell and tossed him, he put aside starting EBR for a couple days to pour new babbitted main bearings for a couple Norwegians riding half century old Danish bikes cross country in the middle of winter. Clearly, Erik Buell is the guy you want to keep comfortable in front of a CAD terminal, and let someone with more appropriate talents handle the money.

So were the millions in EB-5 largesse legally wasted on dumb business plans, or was there sinister and perhaps even criminal intent? We’ll probably learn first from South Dakota, where an open criminal investigation of the EB-5 program continues. We do know that a whole industry has fed off the EB-5 program, and while the dairies and beef packing plant went bankrupt, the wheelers and dealers that put together these questionable deals are doing very well. In Wisconsin the same wheelers and dealers that sold green cards to raise green for EBR and themselves did the same for a company that’s trying to build and market a two stroke diesel aircraft engine. That’s a business plan that makes EBRs look sane… But makes money for the wheelers and dealers just the same.

So while EBR and Erik’s dream may be dead, forty foreigners and their families got green cars, and the wheelers and dealers made big bucks… “There oughta be a law”, or did they break laws we already got?

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