(FORTUNE Magazine) – Gleaming two-tone in black set against Antares Red or KYSO Blue (for "knock your socks off"), big Victory V92C motorcycles are coming off a new assembly line in the prairie town of Spirit Lake, Iowa. If sales goals are met, between 1,500 and 2,000 customers will have thrown a leg over Victory bikes by year-end.

Less than 100 miles away as the crow flies, designers and engineers at the Excelsior-Henderson Motorcycle Manufacturing Co.'s spiffy new plant in Belle Plaine, Minn., are laboring to bring their Super-X into mass production. Like the Victory, it has an imposing engine and nostalgic, made-in-U.S.A. lines.

Victory and Excelsior-Henderson are the most ambitious of a flock of homegrown startup motorcycle companies that want to cash in on America's, and the world's, lusty appetite for cruiser bikes. These comfortable, chrome-bedecked machines are better suited to chuffing down the highway than blitzing around back-road curves. The bikes feature hard-to-overlook "V-twin" engines--with two big pistons in a V-for-victory configuration--and typically achieve lower top speeds than the latest racer-replica crotch rockets.

The upstarts are taking on the big kahuna of cruising and touring bikes, Milwaukee's Harley-Davidson, which waxes ever richer on machines that glow with American nostalgia like no others. (Unlike cruisers, touring bikes have windshields, fairings, and luggage compartments.) With record 1997 sales of $1.75 billion, Harley sold 132,000 motorcycles and commanded a lucrative 48% share of the North American market for heavy road bikes, which has been growing in dollars by 8% to 10% a year.

The attack on the cruiser market, as well as Harley's own expansion plans, offer fascinating glimpses into how U.S. manufacturers design and gear up in the 1990s to make glamorously durable goods. For now, Victory and Excelsior-Henderson are assembling their bikes mostly from outsourced parts. Harley, a serious metal cutter that machines most of the parts for its revered V-twins, has shelled out $478 million for big-league capital expansion in the past three years and plans to spend at least $180 million more this year.

The dominance of what Harley faithful call The Motor Company doesn't faze the Victory people. Most of their customers, they say, can be lured from four Japanese cruiser makers: Yamaha, Suzuki, Kawasaki, and Honda. Though Kawasaki and Honda make some of their cruisers in the U.S., Victory aims to exploit the feeling that Japanese-brand bikes are somehow not "authentic."

Victory Motorcycles is a division of Polaris Industries of Plymouth, Minn., a publicly held company that got its start in 1954 building snowmobiles, and branched into personal watercraft and all-terrain vehicles. Eager to diversify further, Polaris was swayed in the early 1990s when a bunch of dealers said they'd like to have street motorcycles to sell. "We bought a Harley and a Honda cruiser and took them apart," says Matt Parks, Polaris' general manager for motorcycles. "Our assessment showed there was good money to be made."

For engineering boss, Parks recruited Geoff Burgess, a British-born former off-road racer who had worked at the old Norton, BSA, and Triumph motorcycle companies in England. His small, clandestine motorcycle-development team rounded up a fleet of cruisers built by Harley, the four Japanese makers, and BMW, and headed to Arizona to put them through their paces. They also brought along an Italian-built Ducati Monster the team admired for its sweet handling. Thrashing through the warm deserts, they compiled a list of traits they liked or deplored in the bikes.

Burgess & Co. decided that Victory needed to develop its own engine in-house. Talks with U.S. and European consulting firms with power-plant expertise convinced them that designing an engine would provide know-how for later, when Victory Motorcycles hopes to broaden its model line to include other classes of bikes. In 1995 the company hired engine designer Mark Bader, then with Kohler, a maker of industrial engines in Kohler, Wis.

The first power plant Bader conjured up on his computer-aided-design screen was a tall, 1,507-cc V-twin with a 55-degree angle between its cylinders. When this design proved too big to fit in the frame, he narrowed the angle to 50 degrees. Since rows of cooling fins are an essential part of the cruiser look, Bader rejected the idea of using liquid cooling as cars do. Instead he designed a system that employs extra volumes of oil to supplement the fins' cooling effect.

Testing the cooling system fell to development manager Steve Weinzierl. Working on a tight budget, Weinzierl strapped a Czech-built Velorex sidecar onto a prototype Victory bike and, with colleagues, took it to Death Valley, Calif., for worst-case cooling trials. For this kind of testing, one guy rides the bike, which is studded with temperature-sensing thermocouples like a patient prepped for an electrocardiogram. Wires from the thermocouples lead to the sidecar, where a second guy records the temperatures.

One day Weinzierl decided to use the instruments on the Victory bike to record the oil-sump temperature of a Ducati Monster, which he sees as the benchmark for this sort of cooling system. "We drilled a hole in the Monster's oil plug and put in a thermocouple," he recalls. "It was 121 degrees in the shade. I rode the Ducati, and while we were rolling I'd pull over to about ten inches from the Victory and hand the guy in the sidecar the wires from the thermocouple. This was at speeds up to 90 mph. It wasn't entirely legal, but we got the data."

The result of all this designing and testing, as this reporter can state after a few miles astride a preproduction Victory, is an engine that pulls with authority while leaving one's dental fillings in place. Not bad for a snowmobile maker.

The Victory's motors are assembled at a Polaris plant in Osceola, Wis., where steel tubing for the bike's frames is also bent. Then the engines and frame parts are trucked to Spirit Lake, where a pair of robots weld up the frames before they are painted black in a powder-coat process. Making the frames in-house is essential, the company believes, to ensure the consistent geometry required to make each bike behave as the designers intended. Engines and other parts come together on a slow-moving assembly line staffed, at least in July, by just nine two-person teams that move from station to station, each building an entire motorcycle.

Polaris' business plan anticipates recouping the Victory's miserly $20 million development cost in three years. If the bikes take off as hoped, Parks says, more operations may be moved in-house, such as metal stamping and machining--all of which Polaris does in making other products. A billboard outside Polaris headquarters shows a pair of Victorys against the dramatic backdrop of Monument Valley, Ariz. The message: "It's a free country. Act like it."

Unlike Victory Motorcycles, which can draw on the experience and resources of its corporate parent, Excelsior-Henderson is booting up operations from scratch. The enterprise was started several years ago by two brothers who were longtime bikers. Dave Hanlon, 45, is a wiry goateed dude with a background in managing truck-leasing operations. Brother Dan, 42, previously founded a company that made biodegradable packing peanuts. Since 1993 the Hanlons have raised more than $60 million, partly through private equity placements. They've poured the money into product development, staffing up with management and erecting a 170,000-square-foot plant.

On the manufacturing floor, about 80% of the machinery needed to build the Super-X had been installed in July, with the first production bikes scheduled to be built by the end of the year. In charge of the equipment's selection is vice president Allan Hurd, a Briton who played a large role in getting manufacturing operations off the ground at the reborn Triumph. Hurd's presence greatly enhances the credibility of this somewhat quixotic venture, which is founded on the assumption that each year 20,000 Harley types will part with about $18,000 for a righteous cruiser with modern features and an instant "heritage."

The original Excelsior-Henderson motorcycle company folded in 1931, and the trademark fell into disuse after its parent went bankrupt in 1992. That left the Hanlons free to dust off the bikemaker's respected name and register it. There aren't yet any factory-made Super-Xs to scrutinize, but hand-built prototypes convey the direction in which Excelsior is going. The frame draws its curves from the past, but in the engine compartment lurks a 1,386-cc V-twin with double overhead camshafts, four-valve cylinder heads, and fuel injection.

The people at Harley-Davidson in Milwaukee aren't taking this new action in the cruiser segment lightly. Harley's capital spending program is aimed at raising production capacity to 200,000 bikes a year by 2003, when the company will party hearty in celebration of its 100th anniversary. Much of Harley's spending has gone into its secret weapon: the New Motor.

By the time you read this, fanatics around the world will be poring over technical specifications and pictures of the long-rumored power plant, the Twin Cam 88. The first totally new Harley engine since 1936, it's designed to win back some of the sales the company has been losing to after-market companies. These outfits make hot-rodding parts and bigger, go-faster knockoffs of Harley's Big Twin 1,340-cc engine. With displacement increased to 1,450 cc, the Twin Cam 88--which rumbles with the cherished Harley "potato potato" exhaust note at idle--delivers about 10% more horsepower than the Big Twin.

"This is only the beginning," says engineering vice president Earl Werner, as if to strike fear into competitors. "We are also offering a factory-warranted, EPA-legal 1,550-cc big-bore kit, and we have built variants of this engine with well over 1,550 cc. We are The Motor Company, and our goal is to provide the customer with hardware that he doesn't have to go elsewhere to improve."

Is cruiser lust so prevalent that Harley will still be hauling money to the bank in 2003 as it turns out 200,000 bikes? "Harley is facing a dogfight, primarily because of Victory and also because the Japanese are going to respond to it with improvements in their cruisers," says Don Brown of DJB Associates in Irvine, Calif., which tracks the motorcycle business. But Harley and its challengers are banking on a rising cruiser wave fueled by baby-boomers in their 30s, 40s, and beyond. These riders itch for a mature, post-hellion experience in which you sit upright on a low seat. They're hearing the call of the open road. That adds up to lots of bikes, and gas tanks sporting many badges.