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BITW-HelmetAs I write this I’m reminded that I was flying home from Barcelona, Spain about this time last year after a long work week at an industry event and that every year in business is different.

A few years are easy, some are hard, and most are somewhere in between. Each year you face a different set of circumstances: changing economic, political, social and what’s cool in the billet industry.

We know from the Discovery Channel which scripted a mini-series project about the history of Harley-Davidson, that in the early years the company really struggled to survive. From month to month, they worked hard to keep from getting further behind and sinking further into debt.  There were the AMF years and then came the housing bubble.  Those of you who have tried or are establishing a little business of your own know that success is much harder than you envisioned it should be. Many folks think there must be “one big thing” they are missing that if discovered and remedied would turn things around and put them on the path to major prosperity.

Clearly, that isn’t the case, and over the course of a few startup years often you learn that rather than “one big thing,” there are many functions throughout the business that had to get established in good working order for the business to really succeed.

After 114 years, this still holds true for Harley-Davidson. There are no guarantees or shortcuts to success. There is only doing the hard work that needs to be done, doing it to the highest standards, and identifying the next area to establish or improve in order to build the next generation of Harley-Davidson rides and riders to control their destiny.

All of this became acute over the last week when Harley announced their Q4 and full-year 2016 financial results (HERE).

Words like “intense competition, flat market, soft sales, and earnings miss” ruled the day.

These are just words.  I’m of the viewpoint that how well any company performs is a key factor in how well they succeed compared to their competition.  Since we’re a few days before Super Bowl — a sports analogy is in order — how well a team executes ALL aspects of their game has everything to do with whether they win or lose.

Obviously taste in motorcycle brands, styles, or in paint schemes, is subjective. Some in the press have beaten down the overall market with reports that seem to indicate the riding “fad” has ended. Granted there’s been negative publicity with Polaris shutting down the Victory Motorcycle brand and overall motorcycle industry earnings not being great, but there are many very nice motorcycles being made, and WE the riding enthusiasts/public have lots of choices.

Why do I bring this up?

I’ve notice in my travels that many successful companies have a sense that they are masters of their own fate; their success is within their control. They know it’s a myriad of little things done well that add up to their success. And no matter what their size, they realize that a company always has the resources at hand to take their next step. Isn’t that really the “art” of it: to creatively employ existing resources to advance the ride, the employees and the company?

Most of us know the answer to a problem is rarely found outside the company; it usually comes from within.  I’m confident that Harley-Davidson will find the answers and simply function better as an organization.  I predict they will do a more thorough job of performing the functions a successful motorcycle company needs to and roll out compelling new products that will be industry hits.

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screen-shot-2017-01-09-at-11-15-09-amPolaris, the MN-based maker of motorcycles and all-terrain vehicles announced today that it’s winding down the Victory brand effective immediately to concentrate on its better-performing Indian Motorcycles business.

Polaris said it will assist dealerships in liquidating inventory and will supply parts for another 10 years and honor warranties in place.  Victory motorcycles are primarily manufactured in Spirit Lake, Iowa.

The first Victory motorcycles rolled out in 1998, yet never took much market share from Harley-Davidson Inc., in the cruiser-bike category. Indian Motorcycles, which Polaris relaunched after a 2011 acquisition, has performed better, however Harley’s market share remains at 48 percent to Indian’s 3 percent.

Polaris Industries Chairman and CEO Scott Wine stated, “This decision will improve the profitability of Polaris and our global motorcycle business, and will materially improve our competitive stance in the industry. Our focus is on profitable growth, and in an environment of finite resources, this move allows us to optimize and align our resources behind both our premium, high performing Indian Motorcycle brand and our innovative Slingshot brand, enhancing our focus on accelerating the success of those brands. Ultimately this decision will propel the industry-leading product innovation that is core to our strategy while fostering long-term growth and increased shareholder value.”

Photo courtesy of Victory/Polaris.

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Brace

News about Harley-Davidson during the month of August has been a bit of a wild ride.

There was the consent decree and $15M settlement with the EPA. Then the announcement that Harley expanded the list of bikes on recall that may have been built with defective hydraulic clutch systems.  Then the biggest engine-product launch for the company since 1988, when the Twin Cam made its debut.

And now today, the day before the Milwaukee Rally kicks off, Harley-Davidson announced that approximately 200 employees will face layoffs starting in October as the company adjusts motorcycle production due to slower sales.

According to various news reports including Rick Barrett, of the Milwaukee Journal Sentinel, the union stated many of the layoffs will take place at Harley’s assembly plant in York, Pa., and some will occur at the engine plant in Menomonee Falls, where the company employs approximately 1,000 people, as well as in Tomahawk.

Given that the Sturgis Motorcycle Rally attendance was down roughly 40% from a year ago (some of which was expected), suggest that some riders are busy doing other things than throttling down rural America’s roads to a rally which makes the launch of its Milwaukee-Eight engine motorcycles key to amp up any new motorcycle sales.

Photo courtesy of Sturgill Simpson Video.

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"M-8" top view showing tubular rockers

“M-8” top view showing tubular rockers

It happens every year and often it’s big news.

This year the launch of the Harley-Davidson 2017 motorcycle line-up is anchored by the new Milwaukee-Eight™107 and Milwaukee-Eight™114 power plants.

A couple weeks ago I posted about a new eight-valve Big Twin and now we know the rumors are true.  The displacement of the standard version is 107ci (1,750cc) or in the CVO version it’s 114ci (1,870cc). The 2017 touring models get these engines first and may waterfall down to other models later in the year.  The 107 uses precision oil-cooled cylinder heads and will be in the Street Glides, Road Glides, the Electra Glide Ultra Classic, and Freewheeler trikes.  A Twin-Cooled version with liquid-cooled cylinder heads and radiators will be in the Ultra Limited models, the Road Glide Ultra, and Tri Glide models.  The CVO Limited and CVO Street Glide models will have the Twin-Cooled Milwaukee-Eight 114.

M-8: Four-valve combustion chamber and the dual spark plugs

M-8: Four-valve combustion chamber and the dual spark plugs

You might recall that the last major design evolution of the Twin Cam — and a significant part of the Project RUSHMORE and marketing campaign — was anchored on improving power plant cooling.  This took the form of circulating liquid coolant in tubes around each cylinder head’s hot exhaust valve seat and then to external radiators.  Many riders neglected to notice much in the way of decreased heat from this method of trying to get more power out of the 103.

So let’s talk details of the new eight-valve “M-8”.
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M-8:  Cutaway shows cooling areas of circulating liquid (Blue)

The 107 (3.937 x 4.375-inch bore and stroke) is cooled by pumping oil through it and then through a “chin radiator” ahead of the crankcase. In the 107 and 114 Twin-Cooled models (the 114 has 4.016 x 4.500-inch cylinder dimen­sions), water/antifreeze coolant is circulated through a cored heart-shaped passage that encircles the exhaust valves and then through radiators mounted forward to either side of the engine, as we’ve seen.  The new engine uses a nearly flat chamber of minimum surface area with four valves and abandons the large surface area of the traditional deep, modified hemi two-valve combustion chamber found in the old design.  The new engine operates at high compression ratios (as high as 10.5:1).  As a result, the 2017 Touring motorcycles will provide 10 percent more torque.  Harley states that will translate into two to three bike lengths faster from 0–60 mph, and one to two lengths quicker in top-gear 60–80-mph roll-ons along with improved fuel economy.

Overall airflow capacity of the “M-8” is 50 percent greater versus previous Big Twin engines, and the throttle body now has a 55mm bore.  Each cylinder has an acceleration-type knock sensor along with ECM control which protects the engine from detonation.  The new system is an improvement over the previous ion-sensing knock detection.  The exhaust components, including the catalyst, have been relocated to help move engine heat away from rider and the new engines have a single four-lobe camshaft with automatic hydraulic tensioner in place of the Twin Cam’s pair which will help reduced mechanical noise.

And in a first for the rubber-mounted Big Twin is a single counter-rotating internal balancer.  It’s meant to eliminate 75 percent of the engine’s primary shaking force.  In addition, idle rpm has been cut from 1,000 to 850 rpm all in a effort to give riders improved engine smoothness.  Other engine items of note is a new higher capacity alternator along with a new 1.6 kW (2.14 hp) starter that replaces the previous 1.2 kW (1.6 hp) units.  There is a self-torque-boosting clutch with Brembo hydraulic actuation for a lighter lever pull and the engine ECM has been changed from a mapped system to torque-based which will be interpreted as a call for a specific torque level, not a specific throttle angle.

On the motorcycle side, the front and rear suspension is new.  The new 49mm fork contains “dual bending valve fork technology” and uses cartridge-style variable-orifice damping valves, which Harley claims will deliver improved control at low speed without harshness over sharper bumps.  This wasn’t achievable with the old system of fixed damping.  Touring fork travel is 4.6 inches on standard models and 3.9 inches on low models.

After doing a quick H-D web site scan on the CVO Street Glide and CVO Limited models — it looks like the MSRP price went up $1K from 2016 ($36,799) to 2017 ($37,799).  The same $1K increase is also shown for the CVO Limited ($39,999 to $40,999).

Only you can decide if the new 117 engine, the new suspension along with the radio power adjustment warrants the price increase.

Photos courtesy of H-D.  Engine detail/stats courtesy of Cycle World.

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Screen Shot 2016-08-10 at 11.42.14 AMI’m a bit late getting this information out, but you can read the company press release HERE.

From my experience you know it’s going to be a long day when the financial perspective includes statements about how we’re in challenging times…  “Political, economic and cultural forces working against the confidence and security for people everywhere in the world” — whoa, roll the eerie and scary sound effects!

Here is a quick synopsis:

The Bad:

  • Worldwide sales for the quarter were down due to significant declines in the U.S. industry which was a surprise and far weaker than expected. Worldwide retail sales of new Harley-Davidson motorcycles in Q2 were down 1.9%.  U.S. retail sales were lower than expected on surprisingly weak industry results.  Q2 retail sales in the U.S. were down 5.2% versus prior year, behind weak U.S. industry sales.
  • U.S. retail inventory was up at the end of the second quarter.
  • Manufacturing expenses were higher than expected, driven by startup costs related to the implementation of a new ERP system in Kansas City, and costs associated with plant retooling.  In addition, plant efficiencies were lower than expected due to lower production given soft sales in Q2.  This is an overly simple statement because in reality it’s complex planning and execution, including numerous down days, inventory bridges and careful new model ramp plans.
  • The motor company stated they are taking steps to lower expected 2016 shipments which is largely due to continued pressure on industry growth in the U.S.  Third quarter shipments are expected to be approximately flat to down 9% versus 2015 third quarter.

The Good:

  • Revenue was up slightly.  Net income was $280.4 million on consolidated revenue of $1.86 billion compared to net income of $299.8 million on consolidated revenue of $1.82 billion in last year’s second quarter.
  • Q2 market share of 49.5% in the U.S., was up a strong 2.0 percentage points. The gains came in all segments, Touring, Cruisers and the Street/Sportster segment size of motorcycles. And it came from all seven sales regions in the U.S. The market share gains were over double the nearest competitor and came largely at the expense of Japanese competitors.
  • Retail sales in international markets were up in Q2 in all regions except Latin America (Brazil).
  • The company added six new international dealerships in the second quarter and has a goal to add 150+ international dealers over the next 4 years.

Given this current environment one could wonder if Harley-Davidson is positioned appropriately for the flat/declining industry which seemed to surprise them in Q2 — management states they are prepared.

Full Disclosure:  I have NO personal stock holdings in HOG or plans to procure any.

Some parts of the above text are attributable to the Seeking Alpha transcript on July 28, 2016.  Photo courtesy of Harley-Davidson.

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Screen Shot 2014-06-04 at 2.35.53 PMDo you agree with the adage — “You are what you ride?”

While I don’t claim the axiom is foolproof, there are many observable examples that support the concept — from the successful lawyer driving to the office in a tire-shredding German sedan and then rides a chopped and stripped down Forty Eight on the weekends, to the general contractor who most days is in a tool-ridden F-250, but prefers to ride a CVO Limited, the grand American cruiser for the long road trips.

I fell hard for Harley-Davidson (over 20 years ago now) and it took me more than three models later to acquire the current riding spirit of the Road Glide.

I’ll admit it.  I enjoy the attention that comes with owning motorcycles of the Harley-Davidson caliber — parking lot discussions and drive-by salutations from strangers.  Sure it sounds pretentious, but I’ve spent way too much time behind the handle bars of a Honda and Yamaha to resist metaphorically blowing my own horn.

Right or wrong, many of us place a great deal of importance on what we ride. Critiquing others freely, we are likewise judged by the sheet metal of our ride.  Because, like it or not, motorcycles are a reflection of ourselves — a view into our wind in the face wandering soul.

Think about it.

We often purchase what fits our current character and life status. Everything from the color to the style and model is carefully and deliberately selected.  Much of our riding and our life for that matter, is spent developing this ride persona — and it evolves as we do.  Our environment may change from year to year where a mortgage or a kid in college influences what sits in the garage — as would the line of work, the economy, the community and our circle of friends.  Whether we currently own the motorcycle of our dreams does not mean the statement is any more or less true.

As we know, not everyone can live with a Harley-Davidson status symbol — whether they intended to or not. Just go to any dealer and look at the low-mileage castaways in the used area. Those owners moved on to a more practical ride or abandoned the entire motorcycle “lifestyle.”  An association with a Harley-Davidson motorcycle is an extension of ourselves and a natural consequence of the freedom of the road culture. Like clothing, we dress in leather, steel and rubber, the same as we do with cotton or silk. Color, texture, design and shape — we’re being seen in public with our best “outfits.”

But, there is one great equalizer for all this pomp and circumstance activity — the gas station!  It’s the one place where we gather like creatures in the desert at the waterhole, replenishing empty tanks. The perfect spot to critique both motorcycle and rider while staring through polarized shades at the others from a distance.  I might dismount and swipe a credit card at the pump as fellow bikers draw conclusions based on my re-fueling habits.  I’m not bothered by that — after all, I’m doing precisely the same thing they did just minutes earlier.

Vanity comes in many forms, and even the modest will present their motorcycle with some defiance — like wearing blue jeans to a formal event.  It’s just a different perspective.

You may deceive society by how you look and the way you dress, your manner of speech and education, the neighborhood you live in or the reach of your bank account, but none of this really matters in a material world.  Because in that moment of judgement, you are inevitably what you ride.

Photos courtesy of H-D
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Indian Motorcycle 2017 Line-Up

Indian Motorcycles

Could this be a historic mark on Sturgis?

Seventy-five years after Ed Kretz dominated the first motorcycle race on the sands of Daytona Beach, Indian Motorcycle announces the 2017 line-up just days before the start of the 76th Sturgis Motorcycle Rally and just hours before Harley-Davidson’s Q2’16 financial results.

Indian states the 2017 lineup includes the recently released Scout Sixty, Indian Springfield and Chief Dark Horse models with new color choices.

A new and the industry’s largest and brightest touch-screen information and entertainment system has a 7-inch display with turn-by-turn navigation, Bluetooth audio and USB flash drive support. The Chieftain bikes come with 100 watts of audio, while the more expensive Indian Roadmaster has 200 watts.  The screen is glove compatible with two-finger touch capabilities, according to the company.

Indian has grown at a brisk pace, introducing nine new models since its relaunch in August 2013.  The motorcycle industry is looking to be flat this year, so Indian and Harley-Davidson are in a share battle.  For the full year, Polaris sees motorcycle sales increasing in the high teens on a percentage basis.

Time will tell if it’s a brand, a dealership or a bike thing as the two companies slog it out in the back half of the year.  On the surface it looks like Indian will once again challenge its main rival.

If you are headed to the 76th annual Sturgis Motorcycle Rally,  riders can view the entire new 2017 lineup at the Indian Motorcycle Factory display on Lazelle St. or experience them firsthand with a Factory Demo Ride at 2100 Whitewood Service Road (I-90 at Exit 30) from August 6 – August 12 from 9 a.m. – 5 p.m. daily.

Photo courtesy of Indian Motocycles.

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