Financial Troubles Ahead For Harley Davidson?
04-02-2009, 02:16 PM
#1
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Financial Troubles Ahead For Harley Davidson?
I saw this article today and wanted to post it up for the Members here. I know we have alot of DTR Members who own and ride Harley-Davidsons. It is a real shame to see this trend starting, but I know Harley-Davidson has faced some tough times before and hopefully can get through this economic downturn too.
________________________________
IS HARLEY-DAVIDSON OVER THE HILL?
As boomers have aged, the motorcycle that once represented all-American cool has been losing prestige, sales and market share.
Like many Americans in their 40s, Michael Bogart is thinking about aging.
In the 1980s, when Bogart first started working at the Harley-Davidson (HOG, news, msgs) motorcycle dealership in Long Island City, N.Y., his average customer was between 25 and 35. Today, he says, it's more like 45 to 55.
He's got nothing against his older customers, the dealership's general manager says, but that shift illustrates a big problem for the iconic motorcycle brand: "Guys don't want to be riding this bike that looks like their grandfather's bike."
Bogart isn't the only one worried. Harley-Davidson might be one of the best-known brands in the world, but it's perceived, at least in some circles, as the motorcycle of choice for aging baby boomers. Now the motorcycle giant confronts a double whammy: Its aging customers are facing physical challenges that could keep them off their bikes for good and financial troubles stemming from the recent market meltdown. On top of that, luxury brand Harley is itself struggling to get through a broad, deep recession and credit crisis.
"People walk through the front door looking to buy a bike because they want it, not because they need it," says George Dennis, the dealership's business and finance manager. "How many people have the disposable income to dump $20,000 on a Harley?"
In January, Harley-Davidson sold Warren Buffett's Berkshire Hathaway (BRK.A, news, msgs) $300 million of unsecured notes; it offloaded an additional $300 million of such notes to Davis Selected Advisers. Both sales were part of an effort to raise $1 billion in cash to solidify Harley's financial-services division, which had lost $25 million in the last quarter of 2008.
Then in early March, Harley-Davidson announced that global sales for its motorcycles had fallen 13% in the first two months of this year. U.S. retail sales -- which accounted for almost 73% of the company's sales -- were down 9.4% in the same period; international sales dropped by 21.5%. The 105-year-old company's stock, which was trading at $42.80 as recently as six months ago, is now barely in the double digits.
Harley isn't the only motorcycle maker in trouble: The entire industry is feeling the pinch of the economic downturn and the aging rider population. After several years of steady increases, total U.S. motorcycle sales dipped in 2007 and 2008; estimated sales for last year were 9% below the 2006 peak, according to the Motorcycle Industry Council, a trade group.
And according to a J.D. Power and Associates report from December, the average age of all motorcycle riders is increasing. In 2000, the average age of motorcycle riders was 40; in 2007, the average age was 47, said J.D. Power researcher manager Tim Fox.
But amid the challenging overall market, Harley's position is particularly precarious as younger riders choose sport bikes -- sleeker, more aerodynamic, high-performance motorcycles made by manufacturers such as Honda Motor (HMC, news, msgs), Suzuki Motor (SZKMF, news, msgs) and Yamaha Motor (YAMHF, news, msgs) -- over classic Harley cruisers.
Harley's market share has slipped 3 percentage points just over the past year, falling to 45.6% from 48.8% in 2007, notes Robin M. Diedrich, a senior consumer analyst for investment company Edward Jones. "The customer base isn't growing," Diedrich says.
"The big boom in the motorcycle market was the baby-boom generation," adds J.D. Power's Fox. "Now those people are exiting the market. The industry needs to refocus their efforts to attract first-time buyers."
Trouble is, it's growing harder to attract new customers. Unlike consumers of, say, beer or automobiles, motorcycle riders stick with their preferred brands. "It's similar to the auto industry, but there is more brand loyalty in the motorcycle industry," Fox says.
And Harley in particular is identified with a certain generation. "When you buy a Harley, you're not buying a motorcycle, you're buying a lifestyle," says Dennis, of the Long Island City dealership. Harley-Davidson has made some headway in the sport bike market with its Buell brand. Video: Check out Harley's Buell sports bikes
The company bought Italian motorcycle company MV Agusta Group for $109 million last summer in an attempt to increase its share of the European market.
Now Harley has bet its future on what it sees as a particularly desirable market: women. "They've been trying to branch out from the core customers," says Diedrich, the Edward Jones analyst. "And they have done a lot to make Harleys . . . more appealing to women."
To that end, the company has introduced certain features to attract more female riders, including softer clutches and lower frames, to allow a shorter rider to keep her feet on the ground. Meanwhile, Harley has been marketing to women aggressively. "They're the only manufacturer that I'm aware of that has a division solely devoted to marketing to women," says Genevieve Schmitt, whose online magazine, Women Riders Now, gets 80,000 unique visitors a month.
In this at least, Harley's timing is perfect. Last year the Motorcycle Industry Council released a survey that took the industry by surprise: Women's share of the motorcycle-riding population had jumped to 12.4% in 2008 from 9.6% in 2003.
Beyond new customers, Schmitt says, she thinks Harley may gain another advantage in building up a female customer base. "When you convince Mom to ride, she's very likely to give her blessing to a son or daughter or a husband to ride. If you have Mom in your corner, you have the whole family."
__________________________________________________ __________
John_P
________________________________
IS HARLEY-DAVIDSON OVER THE HILL?
As boomers have aged, the motorcycle that once represented all-American cool has been losing prestige, sales and market share.
Like many Americans in their 40s, Michael Bogart is thinking about aging.
In the 1980s, when Bogart first started working at the Harley-Davidson (HOG, news, msgs) motorcycle dealership in Long Island City, N.Y., his average customer was between 25 and 35. Today, he says, it's more like 45 to 55.
He's got nothing against his older customers, the dealership's general manager says, but that shift illustrates a big problem for the iconic motorcycle brand: "Guys don't want to be riding this bike that looks like their grandfather's bike."
Bogart isn't the only one worried. Harley-Davidson might be one of the best-known brands in the world, but it's perceived, at least in some circles, as the motorcycle of choice for aging baby boomers. Now the motorcycle giant confronts a double whammy: Its aging customers are facing physical challenges that could keep them off their bikes for good and financial troubles stemming from the recent market meltdown. On top of that, luxury brand Harley is itself struggling to get through a broad, deep recession and credit crisis.
"People walk through the front door looking to buy a bike because they want it, not because they need it," says George Dennis, the dealership's business and finance manager. "How many people have the disposable income to dump $20,000 on a Harley?"
In January, Harley-Davidson sold Warren Buffett's Berkshire Hathaway (BRK.A, news, msgs) $300 million of unsecured notes; it offloaded an additional $300 million of such notes to Davis Selected Advisers. Both sales were part of an effort to raise $1 billion in cash to solidify Harley's financial-services division, which had lost $25 million in the last quarter of 2008.
Then in early March, Harley-Davidson announced that global sales for its motorcycles had fallen 13% in the first two months of this year. U.S. retail sales -- which accounted for almost 73% of the company's sales -- were down 9.4% in the same period; international sales dropped by 21.5%. The 105-year-old company's stock, which was trading at $42.80 as recently as six months ago, is now barely in the double digits.
Harley isn't the only motorcycle maker in trouble: The entire industry is feeling the pinch of the economic downturn and the aging rider population. After several years of steady increases, total U.S. motorcycle sales dipped in 2007 and 2008; estimated sales for last year were 9% below the 2006 peak, according to the Motorcycle Industry Council, a trade group.
And according to a J.D. Power and Associates report from December, the average age of all motorcycle riders is increasing. In 2000, the average age of motorcycle riders was 40; in 2007, the average age was 47, said J.D. Power researcher manager Tim Fox.
But amid the challenging overall market, Harley's position is particularly precarious as younger riders choose sport bikes -- sleeker, more aerodynamic, high-performance motorcycles made by manufacturers such as Honda Motor (HMC, news, msgs), Suzuki Motor (SZKMF, news, msgs) and Yamaha Motor (YAMHF, news, msgs) -- over classic Harley cruisers.
Harley's market share has slipped 3 percentage points just over the past year, falling to 45.6% from 48.8% in 2007, notes Robin M. Diedrich, a senior consumer analyst for investment company Edward Jones. "The customer base isn't growing," Diedrich says.
"The big boom in the motorcycle market was the baby-boom generation," adds J.D. Power's Fox. "Now those people are exiting the market. The industry needs to refocus their efforts to attract first-time buyers."
Trouble is, it's growing harder to attract new customers. Unlike consumers of, say, beer or automobiles, motorcycle riders stick with their preferred brands. "It's similar to the auto industry, but there is more brand loyalty in the motorcycle industry," Fox says.
And Harley in particular is identified with a certain generation. "When you buy a Harley, you're not buying a motorcycle, you're buying a lifestyle," says Dennis, of the Long Island City dealership. Harley-Davidson has made some headway in the sport bike market with its Buell brand. Video: Check out Harley's Buell sports bikes
The company bought Italian motorcycle company MV Agusta Group for $109 million last summer in an attempt to increase its share of the European market.
Now Harley has bet its future on what it sees as a particularly desirable market: women. "They've been trying to branch out from the core customers," says Diedrich, the Edward Jones analyst. "And they have done a lot to make Harleys . . . more appealing to women."
To that end, the company has introduced certain features to attract more female riders, including softer clutches and lower frames, to allow a shorter rider to keep her feet on the ground. Meanwhile, Harley has been marketing to women aggressively. "They're the only manufacturer that I'm aware of that has a division solely devoted to marketing to women," says Genevieve Schmitt, whose online magazine, Women Riders Now, gets 80,000 unique visitors a month.
In this at least, Harley's timing is perfect. Last year the Motorcycle Industry Council released a survey that took the industry by surprise: Women's share of the motorcycle-riding population had jumped to 12.4% in 2008 from 9.6% in 2003.
Beyond new customers, Schmitt says, she thinks Harley may gain another advantage in building up a female customer base. "When you convince Mom to ride, she's very likely to give her blessing to a son or daughter or a husband to ride. If you have Mom in your corner, you have the whole family."
__________________________________________________ __________
John_P
04-02-2009, 08:30 PM
#2
Administrator / Scooter Bum
In today's economy, folks aren't going to buy a $15,000 motorcycle when they're worried about getting a layoff notice before the next paycheck.
Greedy Harley Davidsion Corporate FatCats helped kill the brand by allowing too many dealers into a given geographic area (we USED to have 2 in the DC area, we now have 6), and cranking up the factory production to make the numbers look good as far as the CEO's bonus, but killing the dealers by shipping them excess numbers of bikes in the late fall/early winter season when bike buyers are scarce in order to get the units off of Corporate inventories and onto the Dealer's inventory by the end of the year tax time.
I remember when there were folks sleeping overnight outside the dealers to place orders for bikes to be delivered 3 months later.......now Dealers are cutting prices just to sell bikes sitting in the storerooms before the NEXT truckload of new bikes arrives......
Dealers threatened to take HD to court.....HD has cut back production.
Harley stock was trading @ $65 a share a year ago.....it dropped to $8 a share....now it's back up to $16.
Greedy Harley Davidsion Corporate FatCats helped kill the brand by allowing too many dealers into a given geographic area (we USED to have 2 in the DC area, we now have 6), and cranking up the factory production to make the numbers look good as far as the CEO's bonus, but killing the dealers by shipping them excess numbers of bikes in the late fall/early winter season when bike buyers are scarce in order to get the units off of Corporate inventories and onto the Dealer's inventory by the end of the year tax time.
I remember when there were folks sleeping overnight outside the dealers to place orders for bikes to be delivered 3 months later.......now Dealers are cutting prices just to sell bikes sitting in the storerooms before the NEXT truckload of new bikes arrives......
Dealers threatened to take HD to court.....HD has cut back production.
Harley stock was trading @ $65 a share a year ago.....it dropped to $8 a share....now it's back up to $16.
04-03-2009, 02:53 PM
#3
Just a plain ole guy
Again, if the dern things wern't so expensive, I'd have one. Another case of sellers pricing themselves out of available markets.
And whoever wrote this needs to get out of the office more often. All ages ride Harley's. Not just old timers. But those old timers have got the bucks to keep them in business. They all have their bikes, and all the bling they can find to go with them.
And whoever wrote this needs to get out of the office more often. All ages ride Harley's. Not just old timers. But those old timers have got the bucks to keep them in business. They all have their bikes, and all the bling they can find to go with them.
04-03-2009, 06:16 PM
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I respect thier plight - it's really not all that diferent than what most other companies are facing these days. Hopefully, they will pull through this alright.
That said, I really don't feel that bad for them. Within the last two decades, the cult following H-D has attracted are the middle-aged professionals, those with a 6-figure income, and to do this most of the H-D dealerships have had to change. Take a look at what an H-D dealership was 20 years ago: Probably a small, musty little shop with a showroom just large enough for 8 - 15 bikes, a small service shop area, some accessories & jackets on the walls, and lots of posters hung, well, wherever the owner had room.
Fast forward to today: all except one of the H-D showrooms I've been to are literaly modern-day museums now. Multi-million dollar architecural masterpieces designed to draw in the crowds - and wow the heck out of them. It's the whole "lifestyle" thing again. They often have 50 - 100 bikes on the floor, rows & rows of massively overpriced - "Made in China" apparel sections, and parts & service areas that nearly look like Starbucks designed them. I'm sure many of these previously simple dealers are in debt big-time over thier new facilites which parent company Harley likely mandated that they build. And I'm sure more than a few of them would be happy to go back to thier little, run down shop they sold for 80k to make into a resturant. Guess it's a great example of modern American "Progress" ???
That said, I really don't feel that bad for them. Within the last two decades, the cult following H-D has attracted are the middle-aged professionals, those with a 6-figure income, and to do this most of the H-D dealerships have had to change. Take a look at what an H-D dealership was 20 years ago: Probably a small, musty little shop with a showroom just large enough for 8 - 15 bikes, a small service shop area, some accessories & jackets on the walls, and lots of posters hung, well, wherever the owner had room.
Fast forward to today: all except one of the H-D showrooms I've been to are literaly modern-day museums now. Multi-million dollar architecural masterpieces designed to draw in the crowds - and wow the heck out of them. It's the whole "lifestyle" thing again. They often have 50 - 100 bikes on the floor, rows & rows of massively overpriced - "Made in China" apparel sections, and parts & service areas that nearly look like Starbucks designed them. I'm sure many of these previously simple dealers are in debt big-time over thier new facilites which parent company Harley likely mandated that they build. And I'm sure more than a few of them would be happy to go back to thier little, run down shop they sold for 80k to make into a resturant. Guess it's a great example of modern American "Progress" ???
04-03-2009, 07:43 PM
#5
Top's Younger Twin
In today's economy, folks aren't going to buy a $15,000 motorcycle when they're worried about getting a layoff notice before the next paycheck.
Greedy Harley Davidsion Corporate FatCats helped kill the brand by allowing too many dealers into a given geographic area (we USED to have 2 in the DC area, we now have 6), and cranking up the factory production to make the numbers look good as far as the CEO's bonus, but killing the dealers by shipping them excess numbers of bikes in the late fall/early winter season when bike buyers are scarce in order to get the units off of Corporate inventories and onto the Dealer's inventory by the end of the year tax time.
I remember when there were folks sleeping overnight outside the dealers to place orders for bikes to be delivered 3 months later.......now Dealers are cutting prices just to sell bikes sitting in the storerooms before the NEXT truckload of new bikes arrives......
Dealers threatened to take HD to court.....HD has cut back production.
Harley stock was trading @ $65 a share a year ago.....it dropped to $8 a share....now it's back up to $16.
Greedy Harley Davidsion Corporate FatCats helped kill the brand by allowing too many dealers into a given geographic area (we USED to have 2 in the DC area, we now have 6), and cranking up the factory production to make the numbers look good as far as the CEO's bonus, but killing the dealers by shipping them excess numbers of bikes in the late fall/early winter season when bike buyers are scarce in order to get the units off of Corporate inventories and onto the Dealer's inventory by the end of the year tax time.
I remember when there were folks sleeping overnight outside the dealers to place orders for bikes to be delivered 3 months later.......now Dealers are cutting prices just to sell bikes sitting in the storerooms before the NEXT truckload of new bikes arrives......
Dealers threatened to take HD to court.....HD has cut back production.
Harley stock was trading @ $65 a share a year ago.....it dropped to $8 a share....now it's back up to $16.
Its not like you like bikes or anything. 
Thats a massive drop on stocks. Its amazing just how much of a massive ripple all of this economic turmoil has created.I still don't get the 'logic' of throwing borrowed money at a problem too far gone.
04-03-2009, 08:07 PM
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The reason younger generations buy the "sleeker" performance bikes is not the look, it's the price. I paid $10,200 out the door for a brand new 2008 Kawasaki ZX-14. If a brand new Harley Softail cost $10,200 out the door I would have been all over it. I know they aren't even the same as far as bikes, but I'm a motorcylcle enthusiast. Which means I like all motorcycles regardless of brand or intended purpose. Harley's arent' competitive as far pricing goes anyway. If you go model to comparable model, Harley's don't stand a chance since there anywhere from $2,000 to $4,000 higher than there counterparts. I see this as an opportunity for Harley to reduce there price and start catering to the common man like they did when they started out.
04-03-2009, 08:52 PM
#7
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The reason younger generations buy the "sleeker" performance bikes is not the look, it's the price. I paid $10,200 out the door for a brand new 2008 Kawasaki ZX-14. If a brand new Harley Softail cost $10,200 out the door I would have been all over it. I know they aren't even the same as far as bikes, but I'm a motorcylcle enthusiast. Which means I like all motorcycles regardless of brand or intended purpose. Harley's arent' competitive as far pricing goes anyway. If you go model to comparable model, Harley's don't stand a chance since there anywhere from $2,000 to $4,000 higher than there counterparts. I see this as an opportunity for Harley to reduce there price and start catering to the common man like they did when they started out.
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04-03-2009, 09:34 PM
#8
Administrator / Scooter Bum
My "local" dealer is one of the original ones in the area.
Still had that Old Scooter Shop look, and smell......
Harley Corporate DEMANDED that the owner upgrade both the inside AND outside to conform with H-D's new "Boutique" styling, or they'd pull the franchise.....the same has happened with all the other smaller Harley shops.
I miss the OLD one.
We're getting ready for the Rolling Thunder Inc. group to make it's annual cross country pilgramage to DC on Memorial Day weekend.
We are the host Dealer for R.T. Inc every year.
We usually get at least 5,000 riders (record was 12,000+ in 2002) on Sunday Morning for a police escorted ride through DC to the Pentagon parking area where they meet up with the other 2-300,000 riders for the ride to the "Wall".
Still had that Old Scooter Shop look, and smell......
Harley Corporate DEMANDED that the owner upgrade both the inside AND outside to conform with H-D's new "Boutique" styling, or they'd pull the franchise.....the same has happened with all the other smaller Harley shops.
I miss the OLD one.
We're getting ready for the Rolling Thunder Inc. group to make it's annual cross country pilgramage to DC on Memorial Day weekend.
We are the host Dealer for R.T. Inc every year.
We usually get at least 5,000 riders (record was 12,000+ in 2002) on Sunday Morning for a police escorted ride through DC to the Pentagon parking area where they meet up with the other 2-300,000 riders for the ride to the "Wall".
04-04-2009, 01:41 AM
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I've owned a few Harleys over the years. Sold the last one in 2004 and bought a BMW.
Buy a Harley, spend money on gaining HP, then spend money on upgrading brakes and suspension, the having to wash and polish all the chrome to eep the bike looking good.
The beemer has one piece of chrome (tailpipe). The only thing I bought was a radar detector. The bike is plenty fast enough bone stock, heated grips, fairing, and the suspension is superior to anything Harley ever dreamed of making. Top that off with ABS brakes and I believe I made a wise decision.
There are plenty of big bikes not made by Harley-Davidson that are more reliable and much cheaper.
I couldn't care less if Harley-Davidson has financial problems beause folks aren't buying their product..
Buy a Harley, spend money on gaining HP, then spend money on upgrading brakes and suspension, the having to wash and polish all the chrome to eep the bike looking good.
The beemer has one piece of chrome (tailpipe). The only thing I bought was a radar detector. The bike is plenty fast enough bone stock, heated grips, fairing, and the suspension is superior to anything Harley ever dreamed of making. Top that off with ABS brakes and I believe I made a wise decision.
There are plenty of big bikes not made by Harley-Davidson that are more reliable and much cheaper.
I couldn't care less if Harley-Davidson has financial problems beause folks aren't buying their product..
04-04-2009, 01:55 AM
#10
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I sold mine in 2003 when I sort of gave up riding on the street (long story). I now have two Hondas and a Kawasaki. Two of them for off road use only. If Harley had the bikes we needed at a fair price I would have bought them but they didnt. Sure dont want them to go down the tubes but us buyers want what we want.
04-04-2009, 01:33 PM
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The boutique shop thing happened at BMW befor it was forced onto the Harley dealers. I ran Harley for years before I went over to the Germans.
My local BMW dealer was an old time type place which was part of the reason I bought there. It was more like the old chopper shops I was used to hangin around.
The old dealers knew that motorcycles as a matter of history were considered by most to be a luxury item and that any good economic times for them would be followed by a long economic downturn. The only people left at the dealership during tough economic times are die hards and people who can't afford even a car. Doesn't take a rocket scientist to see that all the fancy doodads in the showroom have to be paid for by someone.
The only question left is "Will the Harley and BMW motorcycle factories come back to the dealers they lost, begging them to sell again?"
Not likely...
My local BMW dealer was an old time type place which was part of the reason I bought there. It was more like the old chopper shops I was used to hangin around.
The old dealers knew that motorcycles as a matter of history were considered by most to be a luxury item and that any good economic times for them would be followed by a long economic downturn. The only people left at the dealership during tough economic times are die hards and people who can't afford even a car. Doesn't take a rocket scientist to see that all the fancy doodads in the showroom have to be paid for by someone.
The only question left is "Will the Harley and BMW motorcycle factories come back to the dealers they lost, begging them to sell again?"
Not likely...
04-04-2009, 07:23 PM
#13
Administrator ........ DTR's puttin fires out and workin on big trucks admin
As I have stated in previous threads, I almost pulled the trigger on an 08 anniversary edition Heritage Softail Classic black/copper with a stage one kit put on at the dealer. Had all the financing money down yadayadayada. I just could not part with 21k for the bike. So I kept my 03 Suzuki VL1500LC cruiser. I bought it in 05 with 900 miles on it for 6k out the door. (insert shoulder shrug)
I hope and believe they will weather the storm. They have been closer to going under before.
Tim
I hope and believe they will weather the storm. They have been closer to going under before.
Tim
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