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Giovanni Castiglioni Interview
Keeping MV Agusta in the family
Italian boutique manufacturer MV Agusta was hit by a blow when company patriarch Claudio Castiglioni passed away on August 17. The pressure to make MV profitable now falls on Claudioís son, Giovanni Castiglione, who we talked to a few months ago. Read the below interview to find out some insight into MVís future, including some details of the upcoming three-cylinder F3 middleweight. Ė Ed.
Itís a hot day in May at MV Agustaís facility in Varese, Italy, and Iím sat in Giovanni Castiglioniís office, MV Agusta CEO since the buy-back from Harley-Davidson. Iím greeted by a smartly dressed Italian man in a suit and white Converse trainers. Castiglioni, 30, very much looks a younger version of his father. We start talking over an espresso.
Q: How has the time been after the buy-back of MV Agusta from Harley-Davidson?
GC: We took over the company again in August 2010 and we went through serious restructuring of the company, both in terms of products and real structure. We had to reduce the number of employees which was over-structured compared to the size of the business. But not many, Iím talking about maybe 10% of the workforce and only white collar workers. We went through re-structuring of all cost in the company. Everything from general suppliers, not production suppliers, management benefits, car companies, telephones, everything. And we managed to reduce a lot because we reduced between workforce and the structure of the company 50% of the fixed cost. So this is also a different approach to marketing and sales, and this led to a company that was losing money. In the first four months of the new management we reduced the losses by 50%. The first two months of 2011 we cut the losses by half again, and now weíre close to breaking even.
If our company hadnít had the capital R&D (costs) because of the development of the new products, weíd already have been profitable, so the company has made a big step. I think this is great but we didnít only work on the cost structure, we also worked on the product. Weíve been able to reduce through 2011 by 8% the cost of goods without specific bike but working with the supplier through new design of parts or renegotiating deals with suppliers, and this 8% is another 1.5 million euro that weíve saved per year. And we can do better. And then first approach resizing the business and restructure and then looking at the product and repositioning the product a little bit. This is why we got into the market with the new Brutale 920. MV Agusta was always positioned between 15.5-18.5K euro, and this is a small part of the market, and as the market decreased in general, this part of the market shrunk.
So we said letís introduce a bike that doesnít offend the other bikes but is cheaper and more affordable. But itís not a cheap bike in terms of looks or in terms of real price because this price at 11.9K is for the Brutale 920 and this bike brought us many sales. We were planning to produce 1,500 units and we think weíll do more. The bike is great and very driveable. And it is less extreme than its two sisters and itís affordable in direct competition with the Monster and Triumph and so on. So this is the first thing we did to create an entry-level bike.
We follow the Porsche method, not only because Porsche developed our facility and production line but because we believe that they have a very good philosophy with products. They have their 911, which is our 4-cylinder F4 and the Brutale family. They have the Cayman which is our Brutale 920, so a bit below the top models. Then we introduced the F4 RR which is our 911 Turbo at 23K euro. In these months we have managed to pass from a 15-18K euro range to 11.9-23K euro range, and itís already broadened the market. Then we have all the three-cylinders coming, so this is briefly what we did in these last six months, a bit of restructure and repositioning.
Q: Is the four-cylinder range now complete with standard F4, an RR version, plus three different Brutale models?
GC: Yes, we will always keep developing the F4, the Brutale and the engines, but we have consolidated our four-cylinders. We will not make a four-cylinder sports tourer or something like that. We have the three-cylinder platform for the other products. This is our top range and itís completed.
We will start pre-series of the F3 in September and full production at the end of November. We will produce the first 4-500 units this year, and by Christmas the first customers will have their bikes more or less all over the world. This is good news because we managed to anticipate a bike that was planned for the first quarter of 2012 and we did that. Plus the bike is a great bike and we have a 10-hp range more than the actual leader of the market (Triumph Daytona 675), 125-126 horsepower, and we have 10 more which is a lot for a bike like this. We set the standards in the 600s with this bike. I rode the bike myself, I was one of the lucky few, and the bike is fantastic. And then there is the Brutale 675 that we will present at the Milan show in November.
Q: It all starts now with the midrange?
GC: Yes, because the midrange will enable us to double sales easy, in minimum double sales. One thing I didnít say is that the F3 will be priced below 12K euro, so it will be in direct competition with the Triumph Daytona 675 or even with the Japanese.
Q: And where lays the Brutale 675 in price?
GC: We will be at 11.9K euro with the F3 and 8.8-8.9K euro for the B3, so direct competition with the Triumph R and Ducati 796, this is our target. Well, itís not the Gladius or Hornet, but with this brand you canít go there, that low. Itís already a stretch and the price range in 7-8 months will be from 8K-23K euros.
Q: The F3, Brutale 675 we know about. What about other Triple projects?
GC: The 675 is a very good project and as a platform we can work on different bikes. At the moment we are focusing on the F3 which is finalising the industrialisation for production and also the B3 which is in industrialisation now. We are also working on a third bike which is an MV Agusta interpretation of what could be a motard.
Q: So CRC in San Marino has something motardy we might see in 2012?
GC: If we work well, thereís a good chance we see it maybe at Eicma 2012. So yes CRC is working very hard now, we have 40 people down there and theyíre managed by our President which is head of R&D now and of design.
Q: This is Claudio Castiglioni, your father?
GC: My father, yes, and they (CRC) are working really well and I think they proved it with the F3.
Q: The F3 is Adrian Mortonís design?
GC: Adrian is a great designer and worked on the F3 under my fatherís directions and he interpreted the bike, he got all the points for this bike. Itís difficult because some clients criticise us and say you always do the same bike. Itís much easier to create a brand new bike and say to the designer: ďDo something crazy than to step by step make your bike better without offending the old bike, the old customers and without loosing your identity.Ē
Take a bike, any bike you want, and cover its brand and tell me which bike it is. 90% of the time you donít know. With an MV Agusta, you know, you say this is an MV. Some competitors have strong identity and itís very bad to lose your identity. We keep working on that, like Porsche does, evolution not revolution.
Q: Are you open to other big companies for investment or partnerships, Porsche or big German car firms?
GC: No not really, because I think if you want to serve this company well. I mean weíve experienced it now with Harley-Davidson. I had to experience it. Small companies like MV Agusta should remain family owned. If you go big corporation, the company and structure goes heavy.
Harley-Davidson, Iím not saying they did badly for this company Ė they did incredibly well for this company. But on the financial side and other sides, everything went slower and a bit more bureaucratic. So to answer your question, I think there could be an interest for VW or for groups that want this. BMW has bikes the others havenít, so it could be interesting, but they should manage it a bit differently than a big company.
Q: How has it been for you to grow up with the MV Agusta brand as its 20 years since Cagiva first bought MV Agusta?
GC: I grew up in the motorcycle world since I was born really. The Cagiva Company was established in 1978, and I was born two years later so I am almost as old as the brand. And then we purchased Ducati, my father did a great job with Massimo Bordi to re-launch that company when it was finished with bikes like the Monster and 916, then Husqvarna when we re-launched that brand as well.
Iíll tell you a story. I have the first F4, I have a collection of bikes and I have the first F4 but not the one presented to the public. The development bike was a 916 with a four-cylinder engine with a Cagiva logo. It should have been a new Cagiva because Cagiva at the time was racing in the GP 500s. It would have been a new Cagiva 4-cylinder special bike, a sport bike. Then we sold Ducati and a few years back MV Agusta was acquired but was in the wardrobe. The importance about the logo when my father and Massimo Tamburini developed the first F4, we had two options, the Cagiva logo or the MV Agusta logo and it was something different already. And so it was in 1997 MV Agusta started this adventure.
To tell you the truth it was a bit strange because I am young and I didnít know MV Agusta well, although of course I knew something because Giacoma Agostini is a friend of ours and I knew that he won a lot with MV Agusta and Agusta made helicopters so I knew this about the company and that weíd acquired this brand. But I wasnít sure that this brand could be successful because I didnít know as much about the history as the people in their 50s. And itís incredible how this brand has been re launched. The first target customers were in their 50s, the generation that loved the MV Agusta racing when MV Agusta was a myth. Now our core customer is in their 30s and with the 600 it will be from 20 and even 18. And itís very difficult to launch a brand. There are many brands in the world and many are more historical even than MV Agusta and didnít achieve success. Itís not easy, a brand canít go without a product and a product canít go without a brand. It was a good MV Agusta experience for me.
Q: Your family is well known for re-launching, now maybe Cagiva?
GC: Cagiva is a sleeping brand. If you asked me what I wanted to do with Cagiva I would say I would re-launch the Elefant, Cagiva Elefant 1200 twin-cylinder, good price ratio, quality. Itís an option but at the moment we canít. We are small and if we do many things at a time we end up in problems. Itís better to have a successful product at the right time even if itís at a later point. Cagiva we will see. I think MV Agusta have a better chance at being successful than Cagiva so first we do this. When this project is finished in five years then we can think about it.
Q: How about racing?
GC: Iím someone a little bit against racing, well not against it but not supporting of racing because there is no correlation between racing and sales. Why I say that, Valentino (Rossi) won many championships with Yamaha and R1 and R6 sales went down as the market went down. Thereís no correlation. It is a great thing that racing are bringing brand awareness and image to the group and also a lot of development and engineering carried out on the racing bike and then implemented on the normal bike. But I must say that both my father and Massimo Bordi are really exciting about racing. They have convinced me that we have to look at superbike racing and we are looking at this. It would be a project of minimum two years. I think MV Agusta can do World Superbike with the right partner of course.
Prototype racing isnít for us, itís a big show but we canít afford MotoGP Ė itís not for a small company. Almost nobody can. Superbike racing is right for us. I donít want to make the Porsche comparison all the time, but Porsche does not race. Well in GT and that kind of championship, but not in F1. Ferrari spends a lot of money in F1 and they are a world famous brand, but they donít sell 100,000 units. They still sell 5-6.000 units. And I think Superbike is good for MV. It takes time to be there, itís difficult the brand wants so much. We donít go racing to finish between 5th or 10th place, we go to win.
Q: How do you explain the BMW S1000RR success then? Do you think the racing gives their solutions more credibility?
GC: No, I think if BMW hadnít raced they would have sold the same amount of units. They sell units because the bike is a good bike. Thatís it. BMW with that bike made a step forward in the electronics and in the world of supersports in the terms of electronics and the engine is a very good engine. I think racing is a great support for production, but I think the F4 RR is a Ďrealí bike still. The electronics is really important if you want to go really fast. But if you want to have fun, the rider should be there, 200hp. The F3 will have all that.
Q: Letís talk about numbers? The fastest most powerful motorcycles sell better than others. Kawasaki had some trouble with their numbers initially with the Ninja ZX-10R. How are the MV numbers? Are you worried something like this could happen to MV Agusta or are all the bikes to specification?
GC: No because we tested the first ten F4 RRs and they ranged between 197 and 202 horsepower which is less than a 5% difference. Not every bike will be 201 horsepower exactly but this is normal. It has minimum 13 horsepower more than the standard F4. When you take an engine from the production line thereís always one that performs more or less than the other. The least performing one was 197 hp and the best one was 202-point-something. It still is 15 horsepower more than the standard F4, the bike is very fast.
Yes, numbers and performance are important because MV Agusta is something different and should always be on top of the others. In every bike we make we have to be the most beautiful, have one horsepower more and the best specification. This is our job, but I donít think thatís all important and essential, the brand and design is important when you have an MV Agusta. Yes, it has the power and performance but most of all you have an MV Agusta which is different from the rest. So our politics are for power and performance but also satisfying the customer, to have something thatís lasting in time. This is different from the rest. Youíre buying a Japanese bike and after one year itís old. The design is old everything is old.
We did a dealer panel with the main dealers. And my suggestion was: Why donít we do the F4 similar to the F3, lighter in the back no under seat exhaust but below the fairing like on the F3? No, they said, this is the F4. In 20 years time it will be more modern but it will be like this. With the four exhausts under the seat, this is what we have to focus on and never go away from, we will get people bored. We will do our design and our strategies like this. I donít believe in futuristic bikes, they can last a while and then itís gone. Classic beauty never goes out of fashion.
Q: Will you take over more and more of the responsibilities at MV Agusta?
GC: I follow the whole company, I am also into R&D and design and all of that, but we split the work between the three of us (Castiglioni SR, JR and Bordi). For me itís more important that the company does well. For the design itís CRC and my father and we manage to work very well together. Thereís no one-man show.Ē
Q: How do you tell the designers how you want the bike to be?
GC: This is entirely my fatherís area and we donít see the bike until itís completed. We saw the F3 only when it was completed and then we said maybe we can change this or that before production but thatís it. My father is very protective of his work and even the Brutale 675, we saw it last month for the first time, and we saw the development but the real bike only last month for the first time. At the moment I donít think he ever made an ugly bike.
Q: Whatís your take on the dealership situation for MV Agusta?
GC: No dealers can survive only on MV Agusta now with only three models. Maybe with the 920, the RR, F3 and Brutale 675 it could get better. This is always a problem, we did well just this last month in Australia, and we are doing very well. We entered Canada, weíre doing well. We are entering Brazil, and we will be the first Italian supersport producer to enter Brazil and produce in Brazil. We have orders that can make Brazil the second market after Italy for MV. We tripled sales in France, we started from 100 bikes to 200 and in the last three years we did 200 to 400 to 600. Regarding the US we are just reorganising the market and our structure there. In the US we have always lost money because of the exchange rate. You make money in the US only if you produce there or sell a lot of bikes.
Q: What about very expensive bikes?
GC: I donít think the American market accepts the super luxury products anymore, nowhere in the world in fact. Even very rich people donít buy as much anymore. Something big has changed. Of course we sell a bike here at 18,000€ we have to sell for 18,000$ in the US. If the exchange rate is 1.42 we donít touch a 60% margin. Anyway, we restructured the subsidiary in the US but first I want to say that we closed the subsidiaries in Switzerland and Germany and we went the direct sales route like in Italy and France which are the two best performing markets. So from a month ago we are direct in the main countries in Europe; Germany, France, Italy and even Switzerland which is a small market but we still sell a lot in Switzerland.
In the US we cannot go direct; itís too difficult to go direct sales through our dealers. We kept our subsidiary, but we restructured it heavily. So we appointed a new director for the subsidiary, Rob Keef that used to work for Husqvarna so he was working with me 5-6 years ago. Rob is the new head of the subsidiary. I want to increase the number of dealers. We have 20-25 dealers in the US. We have 100 in Italy, which is too many. We need to go down to 60 and up to 50 in the US. Even though in the central part of the US there is nothing, but on the east and west coast we need to increase the dealerships. We are keeping a different philosophy in the US now. We are not pushing bikes into the pipeline for dealers to sell. We keep the demand tight because there is no point in selling so many bikes in a country where you donít make any profit. I prefer not to sell. But we will sell and we will increase the dealerships, and when weíre full package and weíre complete then we will push sales. I think the F3 675ís will be profitable in the US, but the Brutale 675 could be a bit low margin for that market, we will have to wait and see the exchange rates.
Q: How would you explain your personal hopes for MV Agusta. How big do you want the company to become?
GC: Stay small, the company should stay small. The company used to produce around 7.000 units then the markets went down for everybody, now at 4.500 units this year. I think we can double sales with the three-cylinder and the first two three-cylinder models. And then with the developments on the Fours and new models with the threes we can reach 10-12K units. With these units and this structure we will make a lot of money and thatís enough. And to reach 12K units, this is easy with these models. Then if the market stagnates, our business plan might look difficult in if the market doesnít grow, then we will not sell more four-cylinders, but this is not true because we will with the three-cylinders also bring up the four-cylinders because we will get new clients into the MV family. So I think 12K is a good size, and then if we sell 20K units then Iím happy, but I want to keep the structure on these numbers and then weíll see if we can make better. But for sure we are not challenging Ducati or Triumph or anybody else. We do our job and satisfy our clients.
Q: Will this be your work for life?
GC: I would love to, but you never know what happens in life. Iíd like to stay with MV Agusta and work for the brand at least for the next three four years and then weíll see.