Federal Investigators Knock On Harley-Davidson’s Door

I’ve never been ask this question, but I was curious how you know if you’re under Federal investigation?

In Harley-Davidson’s case it might have been a knock on the door of the Milwaukee HQ.

As it turns out, the U.S. government is investigating complaints from Harley-Davidson owners who say their motorcycle brakes failed without warning.  The National Highway Traffic Safety Administration (NHTSA) states the investigation covers 430,000 motorcycles with model years from 2008 through 2011 and the investigation stems from motorcycles with an anti-lock braking system.

A common motorcycle maintenance task is to replace the hydraulic fluid in the brake system.  Check your service manual, but for many Harley-Davidson models it’s recommended to change the D.O.T. 4 fluid and flush the brake system every two years.

Did you know brake fluid can collect condensation over time from the outside air?  Brake fluid collects water in a similar fashion as your McDonald’s soda cup has water droplets on the outside. Hydraulic fluid will over time absorb water which causes the fluid to boil when the brakes are applied and will reduce effectiveness of the system.  A spongy brake feel might be a combination of contaminated brake fluid or air in the system. Either way, changing the brake fluid is often recommended.

But, I’ve digressed.  Motorcyclists have reported that the brakes on the hand lever and foot pedal did not work, causing one driver to crash into a garage door.

Government regulators said they’ve received 43 complaints, three reports of crashes and two reports of injuries.  The NHTSA said it is possible that some riders who experienced brake failure did not change the motorcycle’s brake fluid every two years as recommended by Harley-Davidson Inc.  The old fluid may corrode valves in the anti-lock braking system, but even if riders did not change the fluid, the sudden brake failure “is a concern.”This is not a motorcycle product safety recall as of yet.

Harley-Davidson stated it was aware of the Federal investigation and that it was cooperating with regulators.

Photos courtesy of H-D.

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The CanAm Fire Controversy

Can-Am Spyder

Hype, or is Bombardier taking a gamble?  But, lets start at the beginning.

U.S. safety regulators are investigating two reports of fires in the Can-Am Spyder three-wheeled motorcycles.

The motorcycles are made by Bombardier Recreational Products Inc.  (BRP) of Canada and the probe covers about 52,000 motorcycles from the 2008 through 2014 model years and they are looking into what is causing the fires.

Bombardier has had three recalls to date in 2012 and 2013, and all involved the risk of fires. Last year, the company recalled about 8,200 Spyders because brake fluid leaks could cause fires. In 2012 it recalled about 34,000 because fuel vapors could leak due to an ill-fitting gas cap. It also recalled 9,600 because fuel vapors could exit a vent hose in the engine compartment.

I don’t want to draw any similarities because these are very different situations, but many of you might recall the Ford Pinto.  It was one of the biggest continuing automotive news stories in the late 1970s with dramatic tales of exploding Fords on the highway and considerable awards from civil-court juries that were presented to victims of accidents involving the cars.

At the time, experts calculated the value of a human life at around $200,000, while a serious burn injury was worth about $67,000. Using an estimate of 180 deaths and 180 serious burns, someone at Ford put on paper that the cost to redesign and rework the Pinto’s gas tank would cost close to $137 million, while possible liability costs worked out to around $49 million.

Ford’s corporate legal machine went to work, however, when the memos regarding the liability assessments were leaked and entered into evidence, the cases were as good as over and Ford paid dearly in civil claims, public image and as a brand for product safety.

Former Ford exec Lee Iacocca reflecting on the Pinto incident and Ford’s attempts to control the damage, made this summation in his book Talking Straight: “Clamming up is what we did at Ford in the late ’70s when we were bombarded with suits over the Pinto, which was involved in a lot of gas tank fires. The suits might have bankrupted the company, so we kept our mouths shut for fear of saying anything that just one jury might have construed as an admission of guilt. Winning in court was our top priority; nothing else mattered.”

BRP is a world leader in the design, manufacturing, distribution, and marketing of motorized recreational vehicles and powersports engines.

The term “transparency” means much more than the standard business definition and its my hope that the company will be candid with the motorcycle riding public beyond the narrow interpretation of legal compliance on the risk of fires.

Photo courtesy of BRP.

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Pony Express Ride – TBT

It was a 10-day, 1,900-mile motorcycle journey across seven western states from St. Joseph, Missouri, to Sacramento, California, and took place September 15-24, 2009.

The Pony Express occupies a disproportionate part of the history of the American West.  Cruel hours, terrible weather, life-threatening hostility in every direction, and poor prospects for retirement.   Yet folks lined up to ride uncertainly through trackless and forbidding territory, to sleep on a hard, cold dirt pile and be awakened by the sound of gunfire.

The H.O.G. touring rally retraced the historic route that the original Pony Express riders followed in 1860-61 as they moved mail through America’s Wild West.  Points of interest included various museums tracing the history of the famous ride, and actual Pony Express Station facilities and monuments as well as the opportunity to stand on the original Pony Express trail in several locations.  Ride activities included seven dealer-sponsored events along the route.  Rally attendees covered territory that tested the endurance skills of Pony Express riders on horseback nearly 150 years ago.

 

Pony Express Ride Map

There were a number of special events to highlight on this ride.

The first was at Flaming Gorge Harley-Davidson in Green River WY., where Willie G and his wife Nancy participated in a Friendship Dance with the Native American dancers from the Wind River Indian Reservation.

There was also a 500–mile riding stint from Salt Lake City to Carson City, Nev., that was recognized with a unique “500-mile” pin commemorating that segment of the rally.

In addition, all the riders and HOG general manager Benny Suggs along with Nevada Governor Jim Gibbons visited the Northwest Territorial Mint in Dayton, NV on September 23, 2009.  They presented Suggs with a silver medallion along and approximately 500 HOG members also received a version of the national HOG challenge coin which featured the official Harley Owners Group logo on one side and the HOG shield on the other.  Each was uniquely edgemarked with the text, “Pony Express Ride 2009” for the event.  No other HOG challenge coins have been edgemarked, making them prized Harley-Davidson collectibles.

There are a number of ways to enjoy the Pony Express National Historic Trail these days, but not many can say they rode with Willie G on the Pony Express ride!

Photo courtesy of Harley-Davidson.

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Harley-Davidson Brake Light Recall Effects Thousands

H-D Brake Light Switch

Harley-Davidson issues a recall notice, NHTSA Campaign ID Number 11V506000NHTSA, earlier in the week.  The component in question is the brake light switch.

According to the recall report excessive heat from the exhaust may cause the switch to not activate the brake lamp or activate the brake lamp when no brake is applied and/or cause a brake fluid leak at the brake light switch.  H-D is recalling certain model year 2009 – 2012 Touring, CVO Touring and Trike motorcycles manufactured from June 6, 2008 – September 16, 2011.

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The list of affected models is significant and the potential number of units is over 250,000.  H-D will notify owners and dealers will install a rear brake light switch kit free of charge.  The recall is expected begin on or about October 31, 2011.  Owners may contact H-D at (414)343-4056 or go to NHTSA for more information.

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Photo courtesy of H-D.

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Dancing With The Heat Dragons

No, it’s not a new motorcycle club.  It’s not even a reference to the 40+ continuous days of 100°+ temperatures in Texas.

I’m talking about litigation “heat” for the motor company.

Recently a Federal Court Judge has denied a Harley-Davidson motion to dismiss Harley bikers’ claims for fraudulent and unfair business practices, violations of Consumers Legal Remedies Act (CLRA), and unjust enrichment. As a result a class action lawsuit** will now go forward against Harley-Davidson alleging certain Harley motorcycle engines produce severe, and excessive heat causing burn injuries and clothing to catch on fire.

Class action lawsuit filings are nothing new to Harley-Davidson.   Back in 2005 there was a lawsuit/complaint against the company alleging securities law violations.  Of course the company believed that that lawsuit was without merit and vigorously defended against any action just like they will on this latest case.  Talk about keeping the legal department busy, this class action suit adds to another lawsuit by Brando Enterprises HERE on the “Brando Boot.”

At any rate last week, a federal judge ruled that a class action overheating & burn lawsuit against Harley-Davidson could go forward, siding with four bikers who claimed their Harley-Davidson motorcycles were defectively designed because their engines ran so hot as to pose a constant danger to riders of being burned and were therefore not fit for their intended use.

The complaint alleges that since 1999, Twin Cam 88, 96, 103 and 110 cubic inch engines in Harley motorcycles produce severe, excessive heat causing clothing to catch on fire, burn injuries and the danger of burn injury to riders and passengers as well as overheating causing premature engine wear and is in models manufactured after 2006, transmission failure.  Although Harley-Davidson asked the Eastern District of California court to throw out the claims under state law, the U.S. District Judge sided with the plaintiffs.

Harley-Davidson will now face a Class Action Certification process at the end of the month.

**Case No. 2:10-CV-02443-JAM-EFB in the Eastern District of California (Plaintiff’s represented by Owen, Patterson & Owen)

Photo courtesy of Jeff Hoffman.net

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Sodium Chloride

Triumph -- Jolie -- Salt

The persona projects a take-no-prisoners ferocity along with unapologetic James Bond intelligence.

I’m talking about Angelina Jolie and her movie ‘Salt‘, a spy thriller where she plays Evelyn A. Salt, a rogue CIA agent who tries to clear her name after being accused of being a Russian sleeper spy.  The movie released this past weekend to fairly positive reviews and attendance figures.  Being a mom of six you’d think taking the kids to see Toy Story 3 would be the goal of the day vs. getting back to gunslinging and fistfighting while clinging to the side of a building, leaping from a balcony or racing a motorcycle.  But actors need to earn a living too and this is a chance to show off the action-star talent again in what many see as another franchise – can you say ‘Salt 2’?

Scoring a major product placement opportunity in the film was motorcycle manufacture Triumph.  Jolie was filmed in a motorcycle chase scene as the ‘Salt’ character rides a 2009 Triumph Street Triple R in the film.

Photo courtesy of Triumph

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It’s A Summer Thing

Auction Preview

“The sun is get’n ripe and the water’s get’n warmer”
“The days are get’n longer , them shorts are get’n shorter, you won’t hear me complain”
“It’s a summer thing”

It’s the lyrics from country’s new comer, Troy Olsen who sings a song which highlights friends, beverages and flotation devices on the water.

And speaking of flotation…it’s well known that most Harley buyers use financing from Harley-David Financial Services (HDFS) when they purchase a new ride.  Not so long ago, H-D applied logic to its loan portfolio that was eerily similar to the housing bust.  The company used its in-house finance unit to chase after subprime borrowers, making it easy for them to buy $20,000 chrome-sters with no money down.  The risky lending—which later forced Harley to take million dollar write-downs — along with rising default rates created major problems.  Customers with low credit scores weren’t the only issue for HDFS.  Turns out those “creditworthy customers” walked from those no-money-down financing offers and along came the delinquencies as repossessions reached new levels.

Silvio Perez (Manheim) - Starts The Auction

In steps Manheim — a worldwide leader in the sale of used vehicles.  Being reported as a first, Manheim Seattle helped execute a massive auction sale of Harley-Davidson motorcycles which were ‘rounded up’ from the various repossession parts of the U.S.  The auction occurred last week and we had a man on the inside watching some of the action.

Essentially two auctions took place over a two-day period.  The first day was exclusive to H-D dealers and the second was open to any type vehicle dealer.  Of the 60+ motorcycles on day #1 about 40 sold with the remainder falling short of the minimum required bid.  Tells you a little about where the dealers are in terms of inventory and price right now.  The GM from Downtown H-D picked up a great buy on a Springer Screamin Eagle.  The 20 or so unsold were added to the second day of bikes scheduled for auction to all vehicle dealers.  The second day motorcycle inventory list were older bikes vs. the first day.  However, most but not all sold.  Several stalled at the minimum required and the auctioneer prompted the lady from HDFS as to any movement on the minimum bid as she looked to be pulling her hair out with the fast action pace of the event.

Crowds Swarm the Auction Motorcycles

The motorcycle repossession/auction business is somewhat of a hidden market business which the general public knows little about. Given that the housing market remains stressed with foreclosures and short-sales being high we can expect motorcycle delinquencies to remain high and as a result firms like Manheim will continue to flourish.

Photos courtesy of John (aka.“Burn-Out”) and Manheim.

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More Vintage

Springfield-era Indian Motorcycle

Back in 2004, Stephen Julius, a British-Italian financier with a talent for extracting valuable brands from the junkyard (remember Chris Craft?) did just that as he scooped up the Indian Motorcycle marquee and brand rights.  Partnering with Mr. Julius would be his Harvard Business School classmate Steve Heese.  The two would be the 5th set of entrepreneurs who purchased the intellectual property rights and have tried to resurrect the iconic Indian nameplate.

Last week I received an email from Indian Motorcycle.  They plan to provide an exclusive VIP space in downtown Sturgis for any motorcyclist who rides/trailers a Springfield-era Indian motorcycle to the mother of motorcycle rallies.  It’s a cool idea to reinforce the relationship and I would anticipate that rally attendees will be able to stroll through the area and gawk at the vintage motorcycles.  I’m planning to attend the rally and hope to snag a couple of photo’s.  You can participate by sending an email to Etracy at indianmotorcycle dot com if you plan to attend Sturgis and want to participate in the VIP area.

The email message led me to do a quick scan of the Indian.com web site to see what’s new.  What I found was shocking.  Marketing heads should roll!

The main page is stuck in 2009!  Yeah, I know they aren’t on the same release schedule as other motorcycle manufactures, but the view is the same as it ever was.  The news/press release page is stale.  I’m not talking about “brown bananas” stale here… it’s full on AWOL.   Not a single press release since January 2009?  That’s 17 months?!   In April they re-launched on the West Coast and posted some Facebook banter along with tweets, but the lack of any pure play press release boggles the mind.  This is at best a scattershot approach and I don’t know any 20-something willing to shell out $30,999 for a Bomber in this current economy.  This “new-wave” thinking to do all your evangelizing via Facebook is… well ‘da bomb… not meant in a good way.

I’ve been critical about over hyping products in this new-era of marketing, but if the good folks at Indian plan to make their motorcycle company the de-facto standard in premium cruiser motorcycles a little more press information now and then to let us know you remain alive and well would be a good thing.

Photo courtesy of Indian.

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BMW Recalls Boxer-Engined Models

K1200 GT

This week Toyota paid a $16.7M civil penalty for not notifying the NHTSA of a dangerous pedal defect.

Certainly Harley-Davidson has had its fair share of defects and needed to recall motorcycles in 2008 HERE, 2009 HERE and then again in 2009 HERE.

Now it’s the German motorcycle manufacturer BMW’s turn.

This week they launched a global recall of 122,000 motorcycles owing it to front brake problems.  The company uncovered a risk of leaks in the braking systems on its K1200 GT motorcycles and other models built on the same base.  The recalled models are R1200 GS, R1200 GS Adventure, R1200 R, R1200 RT, R1200 ST, and K1200 GT.  The recall concerns motorcycles built between August 2006 and May 2009, some of which have already been checked, according to a BMW spokesman.

“Over time, it emerged that even corrected braking systems did not resolve the problem 100 percent,”

The culprit seems to be vibration generated by the motorcycle’s operation which were found to cause leaks that affected the front brake.  The company stated that rear brakes continued to function normally.  BMW has not heard of any accidents linked to the problem.

As of this writing, BMW has yet to post information to the Office of Defects Investigation or onto the NHTSA site (Safecar.gov) about this recall notice.

UPDATED: March 17, 2015 — Edward Walker of the About Automotive Industry Action Group provided this:  Complete Road Safety Overview: Global Issues, Safety Laws, New Road Safety Measures, Car Safety Technology, Car Safety For Kids, Teenage Drivers

Photo courtesy of BMW

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Too Big To Fail

Harley-Davidson reported its first quarterly loss since 1993!

No surprise given home foreclosures, unemployment fear, stalled economy and ice-cold demand for high-end, premium priced motorcycles.

For Q4’09, H-D reported revenue of $764.5M and a loss of $147.2M.  Affecting Q4’09 results was the previously announced 53.1% reduction in motorcycle shipments from the year-ago period and $167.1M in restructuring, on the Buell end-of-life costs and the MV Agusta discontinued operations.  For all of 2009; revenue was $4.29B compared to $5.58B in 2008, a 23.1% decrease; income was $70.6M in 2009 compared to $684.2M in 2008, a decrease of 89.7%.  And don’t forget all the non-cash charges related to Harley-Davidson Financial Services (HDFS).

There was a surprise in today’s financial call.  Keith Wandell, (H-D President and CEO) stated: “We also feel good about where we’re at.” Huh?

Isn’t that the kind of thinking that would have Kodak saying that they’re relying on film, or newspapers saying they’re relying on print, or music labels saying they’re relying on CDs.  Just because you can’t see the cliff from where you are, that doesn’t mean it doesn’t exist.  Remember when everyone said no one would read a book on a hand-held electronic device, and suddenly now everyone’s saying the opposite, Kindle’s got so many new competitors and Apples yet-to-be released tablet gets more press than a starlet without panties getting into a car outside a pub.

Mr. Wandell may be referring to his reactive changes the past 8 months and the hope they will restore growth. I’m skeptical, and time will tell if they are the right decisions or if management can execute with a renewed intensity.  But isn’t that just the point.  REACTION to events vs. pro-active change?!  From the outside looking in, the majority of action the company has taken seems REACTIVE.  They curb demand, shrink manufacturing, reduce structural costs, pullback on spending, slash and cut employees, sell off businesses based more on profit margins not on the contribution to the customers soul.  Motorcycle sales are down more at H-D than other manufactures.  Why?

There is a saying: “Businesses should concentrate on their customers’ needs, not on specific products.” — “Marketing Myopia” (1960); Theodore Levitt, Harvard Business School

My opinion is that H-D needs to relearn customer needs.  If you desire to appeal to your core fans, then they’ll want to know that you are in it for the motorcycle hobby/sport, not just the money.  Stop calculating how to get to millions of revenue in a spreadsheet by maximizing this and that.  Just create something rawly desirable, then the revenue will come.  A great hit is more powerful than any marketing campaign.  People don’t need motorcycles, but they want one.  When the product is great.  When it speaks to them.  When it’s seen as integral to their lives.  You’ll have something!

Photo courtesy of JupiterImages.

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