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Archive for August 25th, 2009

2-Day_LaunchIn two days the Indian “Alphonso” mangoes will hit the U.S. supermarket shelves for the first time in 18 years!

I’m reminded of that Jimmy Buffett song “Last Mango in…”

I went down to Captain Tony’s to get out of the heat

When I hear a voice call out to me, “Son, come have a seat”

The “seat” in this case is attached to a Harley-Davidson.  In exchange for importing mangoes, H-D will be allowed to launch its 883 Sportster and Fatboy in the “land of a billion people” (a.k.a. India) on August 27th as long they comply with Euro-III emission norms. In a country that snaps up more than 6 million new motorcycles a year, H-D is a bit late to the party, but they have to be optimistic given the successes of Yamaha, Suzuki, Honda and Ducati “superbikes” (anything over 800cc are referred to superbike in India).  The bikes will be shipped to India and available as a CBUs (Completely Built Units).  Previously the Indian government had not specified emission standards for motorcycles over 500cc which effectively prohibited the import of H-D motorcycles who could not meet the standards set for scooters.

Speaking of standards…  I’m talking about a country that after more than six decades of independence, over 55% of the population (~660Million) defecate in the open! Given these statistics it’s no surprise the government was slow to specify emission standards on 500cc motorcycles when they clearly are busy with sanitation issues.

New Deli Traffic

New Deli Traffic

Until this week Royal Enfield (owned by Eicher Group) was the only motorcycle maker to offer cruisers in India.  Consistently large orders from the Indian government led to establishing a factory back in 1955 in the town of Chennai, India.  Even after production stopped in England they continued in Chennai.  Here is a 5 min video of them building a motorcycle.  There seems to be a fondness of following the old British tradition and use of a mallet to assist in the precision parts fitting!

Anyone who has visited India knows that the large cities of New Deli, Bangalore, Hyderabad, or Mumbai have traffic that defies amazing.  It’s extremely densely packed roads with stop-n-go vehicles and engines idling most all of the time.  Then there are the rickshaws (phat-phatis), bicycles, jay-walkers, street-car peddlers, cows, donkey carts and at any given time each traffic lane supporting triple the number of vehicles that it should so, what you end up with is pure chaos.  Even with astronomically high traffic-death rates, scooters and motorcycles are the more practical method of getting around on these packed roads.

Matt Levatich, President and COO of Harley-Davison reportedly will be on hand at the launch and annual Society of Indian Automobile Manufacturers (SIAM) to welcome back H-D to India for the first time since World War II.  At that time thousands of motorcycles were shipped to the eastern Assam state of India with the intention of transporting men and deliver mail.

India is a prime target given the sheer market size and I want to wish them success as they work to diversify their revenue base.

Photo courtesy of H-D India and Flickr.

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York, PA Harley-Davidson Plant

York, PA Harley-Davidson Plant

Harley announced back in May a major restructuring of its operations in York, Pennsylvania and the possible move to another U.S. location.

The two plants in York employ more than 2600 employees.  I previously posted a bit of a tongue-n-cheek letter that was picked up in the local York, PA., press which recommended H-D to consider coming to Oregon, but I never heard back from the company…

At any rate, the reasons cited (my interpretation of reports) for a potential H-D move from York were:

  1. Inefficiencies – it takes too many employees too long to manufacture a motorcycle
  2. Salaries – cost structure is too high, meaning lower wages are needed to reduce the overall cost structure
  3. Economy – declining sales mean further job cuts required as production/output needs to align with sales
  4. IAMAW – in 2007 the York plant went on strike and negotiated a 12% wage increase over 3 years.  H-D received few concessions and lost 16 production days which disrupted other assembly lines. At a time when they need to reduce the cost structure by $100M one of the largest cost contributors (wages) is set to steadily rise.
Arial of Springettsbury Township H-D Plant

Arial of Springettsbury Township H-D Plant

For those of you unfamiliar, the plant in York opened in 1973, however, some of the buildings date back to World War II.   It is the largest H-D manufacturing facility and the Softail factory recently received a $145M upgrade investment. The plants cover 230 acres and have over 1.5 million square feet under roof where the workers assemble the Touring and Softail models as well as “SE” limited production factory-custom motorcycles.  This plant also has the dubious honor of being the most visited by a sitting U.S. President  (Bush and Clinton) who’s administration’s leveraged the plant for free-trade discussions.

It’s been reported that after a week of H-D executives visiting various locations the short list was announced as four possible sites. Drum roll please…… they are:

  1. Shelbyville, Kentucky, located between Louisville and Lexington;
  2. Murfreesboro, Tennessee, located just southeast of Nashville;
  3. Shelbyville, Indiana, located southeast of Indianapolis;
  4. Kansas City, Missouri where Harley already has a major facility

It’s no accident that two of the four states (Tennessee and Indiana) vying for the new factory are right-to-work states and will have offered H-D numerous incentives to relocate.  I would imagine items like Investment Advantages which allows for the waiver on income/excise/sales taxes etc.; Enterprise Zones which provide property tax incentives or abatement; Vocational Rehab Services for employees who need relocation training etc., and the concession list surely goes on.  And at the same time officials in PA., are working feverishly to convince H-D to stay although they don’t have a blank sheet of paper to work from and it may limit what they can offer up.  In 2008, Harley employees paid over $2M in local taxes and should the plant relocate it would be a major budget hit to the municipalities.  The H-D “spin machine” continues to state that staying in Pennsylvania is the preferred option, yet in the same breath they also cite inefficiencies and cost structure issues with the York facility.

You know the mood these days isn’t just about banks or exec bonuses being Public Enemy No. 1.  I think what disturbs Americans of all ideological persuasions is the fear that almost everything, not just government, is fixed or manipulated by some powerful hidden hand, from commercial transactions as trivial as the sales of a Seahawk football ticket to cultural forces in the news media.  What this recession has crystallized for many of us is the sinking sensation that the American game is rigged — that the system is in hock to “the interests of powerful lobbyists or the “wealthiest few” who have run the “system” too long.

It’s hard to avoid the sense that H-D is wasting time trying to appease people who can’t be appeased.  Is H-D really committed to moving the York plant or is this about the art of a negotiation… where they preview and think about taking every new concession.  Isn’t it really just an indicator that any state can be punked?

York Plant photo courtesy of H-D.

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