Segway Seeks Strategy, Legal Status [Archive]

Casey

10-10-2002, 12:21 PM

quote:Segway Seeks Strategy, Legal Status

Commentary. Doron Levin is a columnist for Bloomberg News. The opinions expressed are his own.

By Doron Levin

Southfield, Michigan, Oct. 10 (Bloomberg) -- It provokes stares, giggles and wonder, along with questions about who would buy it, how it would be used -- and precisely what it is.

It's the Segway Human Transporter (HT), a two-wheeled, battery-operated, one-person people mover that resembles a push lawnmower. It uses gyroscopes, electric motors and sophisticated software to stay upright at rest or at speeds up to 12 miles per hour.

Introduced last December by inventor Dean Kamen, the HT uses electronic wizardry to balance itself, which doesn't help a bit to solve puzzles like distribution and liability.

The HT is not exactly a vehicle, and isn't quite a scooter either.

In the last 10 months, 32 states have passed laws at Segway's urging that exempt the invention from being classified a motor vehicle. That means it can be used on sidewalks unless municipalities or counties decide otherwise. It also means the HT might make potential buyers actual buyers by lowering their concerns about liability if there's an accident.

Legislative Debate

In some ways, the HT overcomes objections some have to the car. It's light, fairly inexpensive, non-polluting and quiet. Still, the legislative debate has been heated. Pedestrian advocacy groups, such as WalkBoston, are asserting that the machine will crowd sidewalks, leading to accidents and injuries.

``People have expressed concerns and we've worked with those citizens to alleviate fears,'' said Tobe Cohen, Segway LLC's marketing director. ``All transportation products have some level of risk. Our job is to make sure the users understand what they are.''

He compares using the HT to jogging. If you don't watch where you're going, you can knock someone down and injure them and yourself.

A few of the remaining 18 states haven't convened legislative sessions since Segway's introduction. A few states have legal codes that don't require special laws. Others, like Massachusetts, haven't yet decided.

Kamen's company -- capitalized with $100 million from him and other investors, including the Kleiner Perkins Caufield & Byers venture capital firm -- needs to make sure legal expenses from product liability lawsuits don't swamp the company.

HT buyers must think about liability as well.

``I don't think you'd want to operate one of these without insurance,'' said Dan McCarthy, a partner in the law firm of Mellon McCarthy PC of Troy, Michigan, who specializes in defending against civil litigation. ``Are these things dangerous or not? There's no track record.''

`Zero Mishaps'

Cohen said there have been ``zero mishaps'' with the Segway so far in its testing.

The company, he said, believes users would be covered against liability in an accident if they carried typical homeowners insurance.

A spokesman for State Farm Insurance Companies said its typical homeowner policy would apply to the HT only if it were operated on the insured's property, meaning not on a public sidewalk. Kip Diggs said the company sells a policy covering recreational vehicles like motorized scooters that does cover the HT.

My insurance agent told me, however, that my policy definitely wouldn't cover me if I hurt someone while riding on a Segway or any other motorized machine unless a doctor had prescribed it to me for medical reasons, placing it in the same category as a wheelchair.

Real-World Experience

To gain more real-world experience, Segway has been leasing its machines to General Electric Co.'s plastics division, the U.S. Capitol police, New York State Electric & Gas and other groups to use in their operations.

``The jury is still out,'' said Marsha Krug, deputy chief of the police force, which has been patrolling the Capitol with them. ``There's the ability to move more quickly. Of course we don't get the exercise we once did.''

Segway-riding meter readers for Energy East Corp.'s New York State Electric & Gas unit discover that people in Mechanicsville, New York ``are stopping us all the time, making runs longer than usual,'' said Barbara Rivera, a spokeswoman. ``We really think there are uses for it.''

About $5,000 Each

The company has the capacity to assemble up to 40,000 units a month, and expects to start production ``in the second or third quarter of next year,'' Cohen said. Each unit would sell for about $5,000.

The maximum rate of production would approximate, in terms of units, the output of two automobile assembly plants, meaning lots of potential customers. A tricky detail in Segway's business plan -- retail strategy -- hasn't been decided yet.

One possibility is to award franchises to automobile or motorcycle dealers, who have experience dealing with retail customers and operate service departments.

A second retail strategy is to sell through an established non-automotive retailer like Best Buy, Wal-Mart or Circuit City. Finally, Segway might open its own stores, which would be more costly, but would give the company closer control over training buyers and teaching them how to use the HT safely among pedestrians.

The U.S. often is criticized as a litigious society. There's little doubt that the money that might be lost from lawsuits -- not just earnings at the cash register -- will shape the way this invention will be sold and operated.