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Screen Shot 2016-07-10 at 3.41.17 PMI’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.

41300152_obBut, 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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Saddlebag Drawing

Saddlebag Sketch

This is more than a simple saddle bag retaining clip that takes less than 10 minutes to replace.

Harley-Davidson is facing steep competition.  Not only from less expensive motorcycles imported from Asia, but electric motorcycles from Zero, Brammo (now owned by Polaris) and also from core customers who look for a mainstream gasoline cruiser from Indian and Victory.  Polaris will undoubtedly be first to market with a chrome-plated electric cruiser given the previous discussion by CEO Matt Levatich.

In addition, it’s not clear that Harley-Davidson is getting much of a sales bump from the decision to double-down on support of outlaw biker gangs as part of their marketing pitch.  The hard-edge reference is NOT about the one-percent patches, rather licensing support of TV shows like Sons of Anarchy (SOA) and other Hollywood fluff.  Trying to appeal to people who don’t have much adventure in their lives with a TV show prescribing on the road escapism… well it escapes me!   Meanwhile they try so hard to alienate and re-write the Baby Boomer chapter!

But I’ve digressed.

Harley-Davidson reported slipping revenues for Q2 2015.  U.S. market share is below 50% for the first time ever!  The company is betting on its name recognition and motorcycle quality.  They even choose to muster up some brash swagger and declined slashing prices as a subtle way of saying “our bikes are better!”

And on that quality topic, Harley recently issued a saddlebag recall – campaign number 15V-427.  The motor company is the poster child for the “land of recalls” sans Chevy.  So many, that owners find it difficult to recall when their bikes didn’t!

Snarky comments aside, all manufactures have issues, but Harley-Davidson is unique in acknowledging and using quality as a key differentiator and strategy for increasing sales.  I’m not sure how well that will work for them.

Meanwhile the Dealers are replacing the 4 (2 on each side) saddle bag pin retaining clips free of charge. The motor company issued a recall stating that the saddlebag mounting receptacle, P/N 10900009 on some model year 2014 and 2015 Touring family vehicles (see drawing #1 above) may not adequately secure the saddlebag to the motorcycle during use.  If this condition remains undetected, the saddlebag may become separated from the motorcycle while it is in motion, possibly creating a hazard for other motorists including your riding buddy’s in formation behind that “separated” bag.

If this happens there is a good chance you’ll be picking up a new “road rash” painted saddlebag and dirty laundry strewn across the roadway!

UPDATED: July 23, 2015 (1:40pm PDT) — the recall effects 185,000 motorcycles which covers certain 2014 and 2015 Road King, Street Glide, Electra Glide Ultra Classic, Ultra Limited, Police Road King, Police Electra Glide and CVO Ultra Limited bikes. Also affected are 2014 CVO Road King and the 2015 Electra Glide Ultra Classic Low, Ultra Limited Low, Road Glide, CVO Street Glide and CVO Road Glide Ultra motorcycles. No injuries or crashes have been reported due to the saddlebag issues and no information has been provided on the number of “separated” bags.

UPDATED: July 29, 2015 — Polaris introduces its 2016 line up which includes the Victory Empulse TT ($19,999), an electric model which rolls out way ahead of H-D’s LiveWire.  It’s based on the Brammo Empulse R motorcycle produced by the electric motorcycle division of Brammo Inc., which was acquired by Polaris earlier this year.

Photo courtesy of H-D.

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Purpose-2012With a cocktail of high-strength steel, aluminum, magnesium, rubber and plastic Harley-Davidson adds flexibility, functionality and refreshed paint schemes to their model lineup each year.

By the numbers, 2012 was a pivotal year for Harley-Davidson.  Earnings per share up 16.7%, revenue growth up 6%, $280M annual savings from restructuring, sales outreach with the 18-34 demographic grew at twice the rate of core customers, but in the first ever Consumer Reports’ motorcycle reliability survey, conducted by the Consumer Reports National Research Center about 1-in-4 owners of Harley-Davidson motorcycles reported experiencing a major problem with the motorcycle in the previous four years.

Twenty-five percent had a major problem!

H-D Executive Leadership Team

H-D Executive Leadership Team

It turns out that BMW motorcycles were even less reliable than a Harley-Davidson with about 1-in-3 owners reporting problems in the previous four years.  How did the Japanese manufactures perform?  Only about 1-in-10 Yamaha owners experienced issues during that time, followed closely by Kawasaki and Honda.

However, reliability problems don’t seem to affect the satisfaction scores of owners and their bikes.  When asked whether, considering everything, they would buy their bike again if they had to do it over, 75% of Harley-Davidson owners said definitely yes, closely followed by 74% of BMW owners and 72% of Honda owners.  In contrast, only 63 and 60% of Yamaha and Kawasaki owners, respectively, would buy their bike again.

Both BMW and Harley-Davidson riders have segments that skew more toward the enthusiast and hardcore, meaning they tend to keep bikes longer and I wonder if this says something about the riders than the bikes.  Could H-D riders be more critical about problems?

AZ Proving Grounds Video

AZ Proving Grounds Video

In 2012, the average U.S. retail purchaser of a new Harley-Davidson motorcycle had a median household income of approximately $89,500. The Company defined its U.S. core customer base as Caucasian men over the age of 35 and its U.S. outreach customers as women, young adults, African-American adults, and Latino adults. (Sources: 2012 Company 10K and 2012 Annual Review)  The motor company no longer provides data on age demographics which had been rising in recent years.

Reliability is only one of several factors buyers consider when purchasing a Harley-Davidson motorcycle.  Among the bikes that needed repairs, survey respondents reporting having the most trouble with accessories, such as lights, instruments, switches, and radios (21 percent), brakes (20 percent), the electrical system (16 percent), and the fuel system (15 percent).  Most of the repairs were fairly inexpensive, but for a company whose reputation relies heavily on the quality of its products the 1-in-4 number is perplexing.

The survey results can be viewed by subscribers at the ConsumerReports.org web site and in the May issue of Consumer Reports.

Photos courtesy of H-D.  

H-D Executive Leadership Team photo: (Left to Right — Tonit Calaway (VP, Human Resources); John Olin (Sr. VP and CFO); Keith Wandell (Chairman, President and CEO); Lawrence Hund (President and COO HDFS); John Baker (GM, Corp Strategy and Business Development); Joanne Bischmann (VP, Communications); Paul Jones (VP, General Counsel))

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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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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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HD_MCThis is the question I’ve been pondering over after having an opportunity to spend a couple of hours with “No Barriers” founder Neal Petersen.

To save you some time the short version of Neal’s story is — He is a black South African who grew up poor and disabled during apartheid yet achieved his dream of racing/sailing solo around the world.  He now does motivational speaking and is involved in peace talks in multiple countries across the world.  During Mr. Petersen’s speech he routinely ask the audience; “Does what I do on a daily basis at work have a positive impact?”

This resonated with me and while I personally reflect on this I can’t help, but ask the question of Harley-Davidson’s CEO, Keith Wandell.

Today, Harley-Davidson reported out the Q3’09 quarterly results and announced a massive 21.3% decline in revenue for the 3rd quarter and an 84.1% decline in net income from a year ago quarter.  Apparel and general merchandise represents 23% of H-D revenue to date.  Then the news got interesting.  They announced that 14 dealers have closed year-to-date and set the expectation that 15-30 additional dealers will close in the next 6 months as the company reduces inventories to match sales.  They discussed the HDFS bad loan/delinquencies and financial progress.  The Harley-Davidson brand value (note: its moved down from 43 to 71 position) and the more important announcement was to shutter the Buell product line as well as divest its MV Agusta unit.  A busy day of spin as Mr. Wandell went on to discuss the going forward 4-piller strategy of: growth; continuous improvement; leadership development and sustainability.

On the Buell front I can’t say that I’m not surprised because it was reported a couple weeks ago in the Milwaukee Journal-Sentinel that Erik Buell didn’t renew his employment contract with the motor company and there were a number of rumors circulating as to what that might mean.  I want to personally thank Erick Buell and the Buell employees.  I believe what they did on a daily basis at work had a positive impact.  They should be proud of what they accomplished.  They are an American innovation poster-child and represent what passionate and inspired people can do through engineering and manufacturing some of the best-handling bikes in the world.  But, in biker speak… it’s WTF?  An American designed and manufactured motorcycle that out performed Asian manufactures all year in the AMA Pro Roadracing circuit and Mr. Wandell dumps it?  This is forward thinking?  2009 marked the first year H-D had a non-motorcycle enthusiast running the company and I have to ask if he really got out there to see what all that (Harley) race stuff was about and how it enhanced the brand?

Since I was rather harsh in a blog post last year about the $108 million MV Agusta deal and describing it as a train wreck, I agree with the decision to abandon it.  Sure this happened under ex-CEO James Ziemer shift who retired shortly after cutting the deal, but the board members clearly approved Mr. Ziemer’s compensation package who walked away with only $5.6M compensation, up 26.5% from 2007.   And in part the compensation was based on the boards admiration of the MV Agusta deal, right?  The board members should be put on notice as there are now another 180 employees set to hit unemployment due to the management of the company and we all know they had line of sight just 12 months ago to the economic issues.

The shocker in the financial call was the statement of investing more in emerging markets up to and including local market design and manufacturing!  Is this a precursor to moving manufacturing off-shore?  A lot of talk about taking Hogs to China and India, but nothing about how well the strategy has worked to woo women, African-Americans and Latinos.  The value of the brand was weaved into the growth strategy, but nothing about why it dropped 43% in 2009.  They’ve talked for two quarters about reducing inventory yet made little progress.  And loans made to iffy borrowers aren’t just taking down housing.

The push by H-D corporate for dealers to build increasingly larger and high-end-glamorous retail outlets meant more dealer debt and subsequent failures.   Chapter 11’s continue to stack up across the northwest.  Three locations of Shumate H-D with one in Kennewick (owner hub), another in Spokane and a satellite location in Lewiston, ID.  I blogged earlier this week about Dave Tuomisto’s, $16M and 6-acre mega-expansion at Timpanogo, UT which went under.  It’s not clear when or if any of these dealers will reemerge and the real downside will be H.O.G. groups folding, lengthy drives for service or to hang and drop in which overall effects customer service and having a healthy Harley community.

Harley is in major trouble.  The spin, baby, spin from Mr. Wandell is not good enough, my friend.

Photo courtesy of H-D.  Financial call transcript courtesy of SeekingAlpha.  Disclosure: I have no investment in HDI

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HD_StormNow more than ever, Harley executives say that customer experience is critical to how motorcycle firms compete.

They’re right: research indicates a high correlation between good customer experience and increased customer loyalty.

Unfortunately not all dealers get high marks from their customers. And that translates into lower sales, higher churn, and lost business that goes to competitors.  Does the customer experience become less important during an economic downturn? Absolutely not!!  Building loyalty and catering to the needs of customers is even more important in these very challenging times.  And HD is doing much more than paying lip service.

PiperAccording to the newly released (.pdf) 2009 Pied Piper Prospect Satisfaction Index (PSI) U.S. Motorcycle Industry Study, Ducati dealerships ranked highest.  This is one of a series of annual benchmarking studies which measure how consumers are treated when shopping for a new car, motorcycle, RV or boat. The independent study sent 2,100 hired anonymous “mystery shoppers” into motorcycle dealerships nationwide, then used the patent-pending PSI process to compile the results into accurate measurement of how each brand’s dealerships treat motorcycle shoppers.

Following Ducati was Harley-Davidson—whose dealers were ranked first in 2007 and 2008—then BMW, Victory, Buell and MV Augusta all above the industry average. Overall motorcycle industry performance improved from 2008 to 2009, with eleven of the fifteen major motorcycle brands achieving higher PSI scores.  Harley-Davidson dealers performed substantially above the motorcycle industry average, but 2009 marked the first time in three years that dealers from another motorcycle brand were ranked higher.

A powerful brand needs to convey a long list of qualities; often, a brand may find itself stuck trying to represent too many — even conflicting — things. It seems that Harley is faced with this very situation. Social media interaction with the company will continue to grow in this downturn due in part to its ability to reduce the cost of customer acquisition, service, and transactions. Motorcycle consumers have many places to discover products. In fact, consumption of digital media and the Internet is shifting to cell phones and other portable devices. This proliferation adds complexity to an already highly competitive marketplace, and changing demographics. Keeping the customer central in retailers’ strategies will be difficult given the short attention span.

They have yet to ask for my viewpoint, but I believe Harley-Davidson can improve business results by developing deeper connections with us consumers and independent bloggers. It begins with the recognition that blogs are a new motorcycle “voice” and that the customer experience is a wide-range set of activities, not just an isolated event.  It’s a multiyear customer experience with the end result for any organization dependent on how effectively it navigates through multiple stages of the customer experience maturity.

Congrats to Ducati and the HD dealers!

Photo courtesy of PSI and Forester.

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