Is Harley Davidson riding off into the sunset?
Today's Financial News - Posted January 13, 2009
The financial situation is bleak. But at least some consumers can justify buying new cars. Imagine the situation at Harley Davidson (NYSE:HOG), the manufacturer of the ultimate discretionary item.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): If I were a General Motors (NYSE:GM) dealer, I would be holding onto every penny I have and praying it gets better. If I were a Toyota (NYSE:TM) dealer I would be saying, “So this is what it feels like to be from Detroit.”
But if I were a Harley Davidson (NYSE:HOG) dealer, oh boy, I would checking the value of my property and working my way into a new franchise. Even during a severe repression, consumers and businesses need new cars and trucks. But almost nobody can justify a must-have motorcycle.
Before I go any further, I have to tell you I hail from the town that hosts Harley’s largest manufacturing plant. And I have spent many nights studying the world of business and manufacturing operations with its engineers and managers. So I have the right to say what I am about to say.
Harley Davidson is in big trouble.
The Big Three may be getting the majority of the media’s attention, but the Milwaukee-based bike maker has many of the same problems. In fact, many of its problems, like demand for its motorcycles, are even worse.
First, Harley’s assembly line is filled with union workers. That means the same expensive labor costs and burdensome contracts that are destroying Detroit are pulling down Harley’s bottom line.
Sadly, if the company could afford to de-value its brand by moving operations offshore and cutting labor costs, I am positive it would have done it ages ago.
Borrowing a hog
We have all heard of the problems facing GM’s lending arm, GMAC. It is much the same at Harley, but bikes are even harder to finance and securitize. Lending is tight and the riders that do qualify for loans are paying higher interest rates.
Proving the difficulties of the current market, the company’s head of its financial services unit, Sy Naqvi, jumped ship last week and is headed for less stressful territory.
This news comes just less than a month after the company’s CEO, Jim Ziemer, announced he is leaving Harley. This turnover creates yet another major obstacle as the company moves forward.
All of this should be a sign that the world of chrome exhausts, leather jackets and oil puddles is not exactly revving up. As the Baby Boomer generation trades its bikes for wheelchairs, demand will slow even further.
The company has relied on its powerful brand for nearly a generation. As that brand power diminishes, shareholders will see the value of their company drop just as quickly.
Over the past 12 months, shares of the company have dropped from over $40 to under $14 today. The decline is not over. Just like a Honda at a Hog rally, this will not be pretty.
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22 Responses to “Is Harley Davidson riding off into the sunset?”
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January 14th, 2009 at 9:23 am
As I read your post, it came to me that you have hit Harley’s nail on the head. I can see where everything that besets the Big 3 is hitting Harley also, and probably more severely. They have survived tough times; whether they survive this time remains to be seen…might we see a chain of franchises that sells Harley shirts with logos, “We Were Here?”
Warmly,
Jim
http://www.JamesOatesIII.com
January 14th, 2009 at 1:44 pm
Are we talking about the same company that survived the great depression? The author may know Harley engineers, but he doesn’t know squat about Harleys. Oil puddles? Hasn’t been a problem for the last 25 years. Article should have been titled, “The sky is falling, the sky is falling. Harley will still be in business when Todays Financial News is a distant memory.
January 14th, 2009 at 1:54 pm
Yes, I also think that the Harley-Davidson is in trouble. When you consider the quality issues and the cavalier way that customers have been treated for years, there is a lot of anti Harley sentiment. Now throw in the tailspin the economy is in and I think anything that may fall in the category of “I WANT it, but don’t NEED it” could most definitely be in serious jeopardy…..including H-D. I’ve owned Harleys for over 35 years and hope to for as long as I can throw a leg over them, but as I’ve read many times in comments here and elsewhere…..it’s the bike, not the company that keeps me coming back. It’s an American icon and a tradition like very few others, but I think the message in this article is very accurate. I sincerely hope I’m wrong, but I won’t be surprised if it happens
January 15th, 2009 at 2:19 pm
I believe an essential problem that has escalated in most if not all unionized industries is the demand for higher wages and overtime pay that keeps a company’s bottom line high, thus prices for models are higher than most competitor comparable models. Does this mean if Harley employed nonunionized workers that it would not be in difficult times…? No. All industries that provide such commodities as motorcycles will be going through lean times this year. Harley is tough and it will survive somehow. The amount of new styles may diminish, but the designs out now have changed little from once they began. H-D has stayed true to their origins and it has paid off ten fold. Like everyone else they will pull in the belt and lean out what ever needed so that they may thrive another day.
Note: Just as long as they do not sell out to another bowling manufacturer…
January 15th, 2009 at 3:58 pm
HARLEY-DAVIDSON WAS IN TROUBLE WHEN IT LOST BLUESTEIN AND VAUGHN BEALS (WHO WAS VOTED IN THE AMA HALL OF FAME IN 2008. NOW THE COMPANY IS LEFT WITH ONLY ONE OR TWO PEOPLE WHO UNDERSTAND THE MARKET AND THE BEST WAY TO KEEP THE COMPANY AHEAD. RIGHT NOW THE MOTOR COMPANY IS STILL THE LEADER IN SALES OF CRUISERS AND TOURING BIKES THE ONLY TWO CATEGORIES IN WHICH THEY COMPETE. WHILE THE LEAD THEY LEAD IN THESE CATEGORIES, THESE AND THE INDUSTRY GENERALLY IS SUFFERING FROM THE LOSS OF MAY BABY BOOMER SALES OF YESTERYEAR.
DON BROWN
Autrhor/Editor
DJB Composite Index
Dealernews
January 16th, 2009 at 11:54 am
As a former 1% er I can tell you that there is still a large majority of the public who wants to walk on the wild side. Men and women alike who are willing to trade intimacy for attitude with their Failing domestic partnerships will and are seeking an escape. Harley is not a motorcycle, It’s an attitude. Where else can you spend upwards of $50k and transform yourself into “EASY RIDER”. One moment a C.P.A. and the next….Bad to the bone!
It is the new “Corvette” for the mid life man, or the “buff hot stud” for the aging women, Both of whom are trying to capture or recapture something that they should gracefully let get old with them.
If its about transportation, A motorcycle from any other manufacturer will have the same gas mileage if not better and the service and repair will cost a lot less. Not to mention the aftermarket sales of personalizing parts.
I can remember pulling up to a light with a few of my brothers and the cars on both sides locking the doors and putting up their windows. Now thanks to advertising and those asses on that “world famous” chopper show, new clubs are forming everyday, handing patches out like they are playing card at a poker game.
Be what you are! the world would be a better place!
When I started on motorcycles you bought a Harley from a dealer and he threw in a Jacket, hat, gloves, a shirt, etc.. Now your lucky if they give you a shirt after spending more than the cost of a brand new Scion. Honestly, I do believe it’s time for Harley to take the back seat to some of the more reliable and cheaper companies. Alot of harleys parts are made over seas, and some other companies bikes are more “American”. I think it’s time we wake up!
January 18th, 2009 at 9:38 am
I cannot say when the last Harley-Davidson will be built, but I believe the Last Biker will be riding a Harley…
The Last Biker
Author Unknown
The old ones stand out now, their numbers dwindling down. They’re a sad loss to the American scene, these individualists with the worn down clothes and faces. You can still see them sometimes, the real ones, some in packs, not as large as a while ago, sometimes alone.
The alone one is the best.
One who’s been there a long time, staying in the life he loves, never giving into a system that sucks you up like a vortex if you slip just one foot into it. He’s got his connections – a few like him that care for and protect each other. Hanging onto the only unique lifestyle left, like old dinosaurs, their faces are leathered and rough by forty, but their eyes still sharp and knowing.
Some are gray in the beards and braids, some are limp in the step and some pain in the kidneys. Still they know that no other life is life, but merely a dreary journey into everyone else’s monotony. He looks at the new ones, then turns away, knowing they will never know of life on the road and of the women who can take it. Wild, loving women who’ll hang in with them, because they love it too. A woman with a wild heart and a loyal soul, that’s what’s needed here.
The new ones are shiny and young and a bit too clean. They’re born into a system that has an iron grip now. The new one’s will never know and couldn’t take “the life.”
I think it’s a mystery, even to the old ones, why this life is theirs, but it is, and it’s the only one.
When the last biker falls, like the dinosaurs, the sun will go down on a breed of heart-of-gold, tough as nails, free spirited men, who even at their worst, love what’s theirs and protect it. In a world-wide system that is making all people as alike as manufactured dolls, the earth will be a duller place….
When the last biker falls.
January 18th, 2009 at 9:12 pm
Whatever! You corporate shill! Offshoring to devalue the brand? you’re the problem with this country. the type that kills off union jobs and feeds the bankers. one of the money pimps. Your feeble understanding of what it is to be a harley rider is as half baked as your article.
harley will survive. just like the riders who ride em!
January 23rd, 2009 at 5:14 pm
I went into a Harley/Star dealership last year with full intentions of purchasing a Harley, just because I wanted one. When I looked at a Star, the salesman snubbed me and walked away. I found another salesman and bought the star because he said they are honestly great bikes. The dealerships need to wake up and act like salespersons and lose the attitude if they want to sell bikes. They lost me forever as a customer!
January 24th, 2009 at 8:56 pm
Oh hell no!!! HD is THE American ICON, Willie G. and the boys will figure it out and make it right. We have been through touhger times…Have faith fellow Harley brothers!!!
January 28th, 2009 at 8:26 pm
I think you call this greed!
February 17th, 2009 at 2:25 pm
Bill Telle Says. Just to clerify a little bit of history for you Harley Davidson [ did not survive on there own ] survived the depression by selling out to the Jappaness in the mid 1930’s to get money to survive. Harleys great mistake. Then again sold out to AMF , because the Davidson family no longer believed in the Co.
Willy G was inticed to come along with the new investor to help shore up the name. If one believes that Willy G is a big decision maker in the Co then you are playing into the hands of the Pide Piper HD .
If you are questioning me let me say that I still own my first harley 49 PAN, my third and My latest 02 duece. I just don’t like being patronised by any one including Harley Davidson. Walking into a HD dealer is like saying here comes another sucker ,screw him good. I have my own independent mechanic who treats me right.
February 18th, 2009 at 11:43 pm
Panhead says: Harley didn’t survive because of the sale of manufacturing rights to the Japanese, they survived by cutting costs and production. You can’t clarify history you don’t know. My Harley dealer treats me with dignity & respect and I do all service work myself.
February 23rd, 2009 at 6:55 pm
“Harley Davidson is in big trouble…First, Harley’s assembly line is filled with union workers. That means the same expensive labor costs and burdensome contracts that are destroying Detroit are pulling down Harley’s bottom line.”
It is amusing how the author of this article first targets labor unions as the cause of Harley Davidson’s (and probably all of America’s) financial woes. I guess he must be forgetting the fact that this is a global recession stemming from widespread corrupt or just plain boneheaded lending practices in the financial sector. Those would be white collar folks, not blue collar. Japan’s economy and their heavy manufacturing companies aren’t faring better than ours at the moment so I’m not sure how you could possibly draw a conclusion that America’s unions are somehow to blame for this mess.
The American people don’t buy more American cars because of a real or perceived deficit in quality, reliability, economy, or social status when compared to imported cars. Every one of those issues is related to the design, engineering, management, and marketing of the company and its products, not assembly or manufacturing. Non-union, white collar executives are responsible for these decisions, not the union workers who ultimately build the car they are instructed to build. If Detroit designed better cars than Japan, and perception is reality, then the big three would be in much better shape than they are. People who are about to spend $20k and up on a new car aren’t going to care about $800 in extra labor related costs for that car if they believe they are ultimately getting a better car for it.
Harley Davidson will survive this recession because ultimately they are not only selling a motorcycle, they are selling a sub-culture. The contention that this sub-culture is somehow dying out as Baby Boomers age is simply ridiculous. As the population continues to swell in this country and more Americans reach retirement age there is a larger market for the lifestyle that Harley markets, not a smaller one. Also, the lifestyle that Harley offers is not exclusive territory of Americans as Harley Davidson has gained market share internationally, particularly in Europe, over the last few years as well.
When the global financial system stabilizes and the economy as a whole starts to recover, God help us all if it doesn’t, Harley Davidson will be back in the black.
March 1st, 2009 at 10:40 pm
Bill Telle .
Your allegiance falls short of the truth. Check the real history of the Company.
Yes, production was cut short along with cost for the simple reason that the Company was short on cash and couldn’t afford to pay the employees who worked for little or nothing to help the Company survive.
Fact: Harley engineers , metalurgist and assembly infrastucture employees went to Japan to set up plant facilities, [Sankyo Co Ltd ] Later becoming Rikuo motorcycles.
The sad part of all this is that the technology was observed by many Japanese companies that were gearing up for the war. This is why Japan shunned Harley after the factory was set up and running and refused Harleys attempt to retool for their new engines which, by the way, was made possible with the monies that were received from Japan. A little point of interest , Rikuo motorcycles incorporated foot shifters and telescopuc forks before Harley did . FACT!
I am not trying to hurt your pride, but, just making a point about the true history of the Company. If this does not clarify history for you, then I will send information to you.
=======
Bill Telle Says:
February 18th, 2009 at 11:43 pm
Panhead says: Harley didn’t survive because of the sale of manufacturing rights to the Japanese, they survived by cutting costs and production. You can’t clarify history you don’t know. My Harley dealer treats me with dignity & respect and I do all service work myself.
March 8th, 2009 at 1:42 pm
I ride a Harley, and when I am dead who cares what happens to Harley?? It seems now the whole country is going to hell anyway with its own citizens ready to sell out to germany and japan to save a dime or join a fad because is the sheik thing to do. Yep buy anything as long as it ain’t American, because American ain’t cool. What a bunch of brainwashed sell outs.
March 22nd, 2009 at 2:30 pm
Bill Telle: Are you ready to have harley history [ pre war and post war ] put on a platter for your consumtion? I’am refering the history that HD prefers not to talk about.
I can give it to you in small pieces for better consumption.
May 13th, 2009 at 3:04 pm
I got a harley you got a harley everybody got a harley.This harley bike market is flodded with harleys/Why would anyone go buy a new harley right now.Ask yourself this question.with the economy the way it is what is the first thing your old lady is going to want you to sell when the money gets tight and you are a weekend yuppie rider like most of you are.This aint brain surgery people. with all the used (like New)bikes out there for sale you would have to be a lunatic to buy new in this market.
SUCCARS.
October 21st, 2009 at 2:47 pm
i agree with most harley is and will be in trouble, not because they don’t build a good bike, but think about the other manufactures, they have other lines to prop them up when one line sales are down.
and i do agree with the one artical, every one has a harley…. is bad enough pulling up to stop light and an identical car or truck pulls up beside you. i think harley is it’s best and also it’s worst enemy…so time will tell
December 24th, 2009 at 7:29 pm
Harley has been on my bucket list because I have done most that was on the list. I have had a Corvette,Colts a Shiloh Sharps and dated a woman 24 years my junior. Its only a small Sportster 1200 but its a harley through and through.At 59 it gives me reason to live,and say scew you “old folks home .” This is the way I choose to live and the way I choose to die. If I follow the Valkyries to Valhala it will be on my Harley.
January 9th, 2010 at 7:24 pm
Harley Davidsons these days are almost always for posers that spend more time polishing than riding. Not always-yet this is usually the case. A Harley Davidson is a lifestyle accessory for a poser.
January 26th, 2010 at 7:08 am
I’ll start by saying Harley flooded the market .Only do to bike builders like jesse jame billy lane ect. people wanted a bike awsome bike .Yet also they didnt want to do their own maintnece.Thats why they choose Harley do to the availbility of service. Ive been riding since ten years old street bikes not mini bikes .Ya Ive been in body cast from waist down.But till this day it doesnt matter weather on my HOG or any other bike .The feeling remains the same. As i head down the road the longer the run the more fun it is.Harley dosent really protect your rights .It those who the public have choose to hate due to media.That keep the govermnt from shoving their laws down every citizens throat.Posers are out their for the feel of the freedom.But to scared to fight their goverments own antics to controll them like pupets.What you ride doesent matter its what you stand FOR…….