I’m not sure who said it, but there’s an old saying about Harley-Davidson, that goes something like: “if I have to explain it, you wouldn’t understand.”
So, on the day I left for Sturgis (August 6th), Harley-Davidson announced it had concluded the sale of its subsidiary, MV Agusta, to Claudio Castiglioni and his wholly owned holding company, MV Agusta Motor Holding, S.r.l. You may recall that in October 2009, under the new leadership of CEO Keith Wandell, H-D announced its intention to sell MV Agusta as part of a NEW corporate strategy and to focus resources on the Harley-Davidson brand. In fact, Mr. Wandell was in route to Minnesota on this announcement day so his handlers undoubtedly had everything all wrapped up prior to his departure ride to Sturgis.
The divesting announcement came 2 years (almost to the day) after it completed the $108M purchase acquisition of MV Agusta on August 8, 2008. Then CEO Jim Ziemer said of the purchase:
“We are thrilled to welcome the MV Agusta family of customers and employees into the Harley-Davidson family of premium motorcycle brands,” … “Our primary focus with this acquisition is to grow our presence and enhance our position in Europe as a leader in fulfilling customers’ dreams, complementing the Harley-Davidson and Buell motorcycle families.”
The divesting announcement didn’t include the sale price but its 8-K filing with the Securities and Exchange Commission revealed the company essentially paid MV Agusta’s former owners to take it back. In the filing Harley stated it “contributed 20 million Euros to MV as operating capital” that was put in escrow and is available to the buyer over a 12-month period. The buyer was Claudio Castiglioni, who, with his brother Gianfranco, ran MV Agusta for years before selling it to Harley two years ago. In the filing Harley also said it received “nominal consideration” from the buyer. In a subsequent interview the company said the specific amount it received was $3 Euros (~$3.98 USD)
In 2008 most of us were stymied by the purchase of MV Agusta. As a maker of expensive and exotic, high-performance sport bikes at minimum it overlapped with the Buell products and even worse was the company never explained how MV could attract younger buyers to H-D.
Here are my questions. How many laid off workers equal the cost of this poor decision and why hasn’t the Board of Director’s been held accountable for one of the worst business decisions in H-D history? Yeah, they’ll likely tell me “if they have to explain it I wouldn’t understand…”
I previously blogged about H-D going Italian HERE.
Footnote: There is a certain level of incompetence from the old time management at H-D and they should-have-known-better. It’s not the first time Harley-Davidson has had a hard time with an Italian acquisition. In the 1960s it bought a stake in Aermacchi, a maker of small off-road bikes as a way to expand into new markets. Eventually it bought the whole company, but that move also eventually failed and Harley sold Aermacchi in the late 1970s. The sellers and buyers: the Castiglioni brothers.
UPDATE: September 11, 2010 — Not previously made public, but buried in the Sale and Purchase Agreement filed with the SEC is a provision that H-D retains control of any press releases and statements about the sale for a year from the August 6th closing date. Why? Maybe the fact that H-D forgave a $103M Euro receivable… basically money it had loaned MV Agusta for operations. The sale agreement specifies that the receivable transfers to Castiglioni for $1 Euro!! Shareholders need to hold the board and management responsible for this “BARGAIN:” H-D paid $108M, then put $20M Euro in escrow for Castiglioni when they “sold” it back; forgave $103.7M Euro’s lent to MV Augusta and wrote off $162.6M on the company. Q3’10 will include more losses due to tax liabilities…does it ever end?
Photo courtesy of MV Agusta.