The Harley-Davidson Pan America 1250

Manufacturing Plant for Harley-Davidson Pan America™ 1250 – York, PA

As promised, here is a post on the Harley-Davidson Pan America™ 1250.

I’ve previously posted on the Pan America all-new Revolution Max 1250 engine HERE. To recap, it’s a liquid-cooled V-twin with variable valve timing that produces 150 horsepower with 94 pound-feet of torque at 9,500 rpm and is attached to a six-speed transmission. The engine features maintenance-free valves, thanks to hydraulic valve lifters, crankshaft connecting-rod journals, offset 30 degrees creating a 90-degree firing order, forged aluminum pistons, a 13.0:1 compression ratio, which requires 91-octane fuel. The engine is a “stressed member.”  Meaning the front frame, the mid-frame, and the tail section bolt directly to the powertrain. According to Harley, this design results in a stiffer chassis and less weight. The frame is mounted to a cast-aluminum swing-arm that minimizes unsprung weight.

Start of Harley-Davidson Pan America™ 1250 Manufacturing in York, PA

The base Pan America uses conventional Showa suspension with 7.5 inches of travel at both ends, while the Special trim gets an Ohlins steering damper and semi-active electronically adjustable system with Adaptive Ride Height (ARH) technology ($1,000 option), and with Vehicle Loading Control, which senses the rider’s weight, a passenger, and/or luggage to select optimal suspension sag by automatically adjusting rear preload.  It will also lower the bike over an inch when stopped. Once moving again, the bike automatically lifts itself back to an optimal ride height. The Pan America has a bucket load of acronyms: Cornering Enhanced Linked Braking System (C-ELB), Cornering Enhanced Traction Control System (C-TCS), Drag-Torque Slip Control System (DSCS), Tire Pressure Monitoring System (TPMS) to impress all your ADV posse riders during set up of your Jetboil camp stove!

Harley-Davidson Pan America™ 1250 “In the Wild”

The motorcycle has a 19-inch front and 17-inch rear cast-aluminum wheels. Harley-Davidson worked with Michelin to create the Scorcher Adventure tires and the Anakee Wild tires that are also available with a more aggressive block-pattern tread. Tubeless cross-laced spoked wheels (additional $500) are also available. Brembo monoblock four-piston calipers that squeeze dual 320mm discs up front, and a single 280mm disc in back. The motorcycle uses a corrosion-resistant 304-series stainless steel exhaust system that’s Euro 5 compliant and features two mufflers – one below the engine and the other on the right side. The radiator shrouds are guarded by a crash bar and there’s an optional two-inch bar riser that doesn’t require lengthening the cables.

Harley-Davidson Pan America™ 1250

The motorcycle has smart rider aids that are all based on Bosch’s six-axis Inertia Measurement Unit (IMU) that makes the anti-lock brakes, traction control and other safety features lean-sensitive. In addition to traction control and ABS, the Pan America offers electronically controlled linked braking, Harley’s drag torque-slip control (this automatically modulates engine torque to reduce wheel spin) and hill hold control. The base model uses a Daymaker Signature LED headlamp, and the Special is upgraded with the Daymaker Adaptive Headlamp technology, which utilizes the ABS IMU to determine the motorcycle’s lean angle and automatically projects additional light into corners. All other motorcycle lights are LED.

Manufacturing the Harley-Davidson Pan America™ 1250

Electronics are plentiful on both models and include: Four rider modes: Road, Sport, Rain, Off-Road, and Off-Road Plus. The base features one customizable mode and the Special offers two customized modes. Both models use a 6.8-inch TFT touchscreen instrumentation that pairs with your mobile device. The screen’s touch feature is disabled when the Pan America is in motion. Missing is Apple CarPlay or Android Auto integration, but Harley instead chose to handle all the media and navigation integration with Bluetooth and an app.

The four-position windscreen is adjustable in a range of 1.8 inches by using “one” hand.  There are heated grips on the Special model with standard cruise control. Fuel capacity is 5.6 Gallons and the curb weight: 534 pounds (Special: 559 pounds).

Harley is asking $17,319 for the base Pan America and $19,999 for the Special. For comparison, BMW’s base R1250 GS starts at $17,995 with a relatively extensive list of available options. The more expensive GS Adventure starts at $20,345.

Harley-Davidson took a lot of time researching, understanding and developing a motorcycle for the ADV market. They’ve used components from the same trusted brand names that you’ll find attached to a BMW, KTM, Ducati, Honda, Yamaha or Triumph. They’ve engineered a power plant which in of itself is most impressive. They have lineage with building Baja-winning dirt bikes in the 1970s, along with dirt track racing experience and with Buell one could debate that they had a semi-Adventure Touring motorcycle back in the early 2000s.

I imagine somewhere in a Milwaukee conference room a marketing exec said “Bring It On“…  Bring on that competition!

Previous Pan America posts:
Harley-Davidson Explores The Unexpected
Harley-Davidson Announces New Movie Telling Origin Story Of ADV Motorcycles
Can Harley-Davidson Stay Relevant With Pan America and Bronx

Photos courtesy of Harley-Davidson

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Harley-Davidson Dismal Financial Performance

TAKEAWAY: The Q4 2020 Harley-Davidson retail motorcycle sales in the U.S. — the company’s biggest market — fell for the 16th straight quarter!

FINANCIAL PERFORMANCE DETAILS: Yesterday, I posted that Harley-Davidson unveiled “The Hardwire” — a new 5-year strategic plan.  My snarky responses were largely based on what I viewed as the motor company ‘selling the news’ with a lack of granular detail or disclosure around a growth path forward. It was a brutal Q4’20 and full-year financial result. Followed by executive management’s murky 2021 outlook.  The street wasn’t happy and the result was a 17% drop in share price followed by another 2% today.

My blog post today will be on the fourth-quarter and full-year 2020 financial results with less commentary.

The Hardwire Highlights 

• The Hardwire includes investing in the Touring and heavyweight Cruiser segment, expanding into untapped segments of Adventure Touring and creating a new division dedicated to electric motorcycles.
• The motor company views Inclusive Stakeholder Management in the context of people, planet and profit, as all three are now embedded in the past and future success of the company.
• The motorcycle maker plans to give stock grants to its employees, inspired by a program devised by KKR & Co Inc. executive Pete Stavros.

Q4 2020 Highlights

• Reported fourth-quarter adjusted loss of 44 cents per share. A big miss and notable executive mismanagement of expectations as the street consensus estimate was for a profit at 24 cents.
• The revenue decreased by 32% at $725 million compared to previous year.
• The company suffered a net loss of $96 million compared to the previous year’s profit of $13 million.
• The loss per share was 0.63 and the adjusted loss per share was $0.44.
• Total revenues from the Motorcycle and Related products segment, which constitute the bulk of the firm’s overall revenues, plunged 39% year over year to $531 million in the reported quarter.
• For Q4’20, Harley-Davidson retailed 33,925 motorcycle units globally, down 14.1% year over year. The company’s retail motorcycle units sold in the U.S. slid 14.5% from the year-ago quarter to 17,274. Sales in the Middle East and Africa, Asia Pacific, Canada and Latin America declined 2.2%, 9.6%, 30.2% and 50.9%, respectively, from the year-ago period.
• Revenues for Parts & Accessories (P&A) were up 13.3% from the prior year to $146.4 million. However, revenues for General Merchandise (GM) — including Motor Clothes apparel and accessories — dropped 13% from the prior-year quarter to $49.7 million.
• The selling, general and administrative expenses (SG&A) increased to $276.4 million from the $266.4 million compared to fourth-quarter 2019.

Full-Year 2020 Highlights

• Consolidated revenues for 2020 came in at $4,054 million, declining 24% from the prior year’s $5,362 million. Moreover, the company’s adjusted earnings per share for the year came in at 77 cents, tanking 77% from the $3.36 per share reported in 2019.
• The motor company streamlined the product portfolio, reducing the planned number of models by almost 30%.
• Paid dividends of $0.44 per share for the full year
• Re-set motorcycle model year launch timing to align with beginning of the year seasonality
• Exited 39 markets to focus on the approximately 50 highest-potential markets
• Reduced total dealer network by approximately 160 net global dealers in 2020

Jochen Zeitz, chairman, president and CEO, Harley-Davidson summarized the financial call: “The entire Harley-Davidson team put forth tremendous effort in 2020 and we now have the right organization, structure and strategy in place to make step changes in our performance and enhance our position as the most desirable motorcycle brand in the world.”

DISCLOSURE: The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Harley-Davidson.  The author does not own or does the author plan to purchase and/or sell any $HOG stock.

Photo courtesy Harley-Davidson.

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The Harley-Davidson “Hardwire”

Drum roll please…with a rim shot!

Harley-Davidson released the secret recipe for “The Hardwire” — a new 5-year strategic plan rolled out oddly on Groundhog Day.  You can read the press release HERE.

Groundhog Day, the comedy film starring Bill Murray, Andie MacDowell and Chris Elliott portrays a cynical TV weatherman covering the annual Groundhog Day event in Punxsutawney, Pennsylvania, who becomes trapped in a time loop forcing him to relive February 2 repeatedly.

I reviewed the Harley-Davidson press release and like the film, the motor company seems to be in a time loop spewing marketing or business verbiage that doesn’t mean anything. The release reads like quotes from the books “Crossing the Chasm“/”Blue Ocean“/”Good To Great” / “Tipping Point” / “Outliers.”  I’ve never read all of these books, but I sound MBA literate if I quote them. And, besides, most biker enthusiasts probably never read them either to call me out on it.

Below are the main topics of Chairman, President and CEO Jochen Zeitz’s, The Hardwire = with my snarky management euphemisms added for clarity:

The Hardwire Strategy

Profit Focus: Don’t leave money on the table = Be as greedy with them as possible.
Selective Expansion and Redefinition: We’re all about value-add = Unlike our competitors who seek to add no value.
Lead in Electric: It’s best-of-breed = We hired a market research firm to say that.
Growth Beyond Bikes: This is the next big thing/new thing = Some of our 20-somethings have told me this is really cool.
Customer Experience: We’re customer-focused/proactive/results-oriented = That can’t be bad, right?  This is motherhood and apple pie stuff.
Inclusive Stakeholder Management: We need to monetize/strategize/analyze/incentivize = When in doubt, stick “-ize” on the end of a word and it will sound action-oriented.
People: I know you’ve been burning the candle on both ends = Get ready to do some more.
Planet: It’s basic New Green Deal blocking and tackling = How could you screw this up? I also played high school football and those were the best days of my life.
Profit: We want this to move up and to the right = I failed high school algebra but someone said this means we’ll be making a lot of money if this happens.
Financial Targets: It’s about synergies/1 + 1 = 3 = I don’t get the math either, but it sounds like more and more is better, right?

Metaphors or marketing euphemisms are always interesting to me.  Eu·phe·mism — a word or expression substituted for one considered to be too harsh or blunt when referring to something unpleasant or embarrassing. For example, a famous feature of the World Fair in New York in 1964-65 was something called the Dynamic Maturity Pavilion — basically a garden with benches where those of mature years could rest.

Maturity is a positive concept; it implies that a person is fully developed in body or mind. And as a “seasoned” motorcyclist I’ll need to wrap my head around reliving The Hardwire.  We’ve seen this film before. I’ll need to sharpen my pencil and circle back to fully understand the paradigm shift.

In the meantime, I know we’re all on the same team here, rowing in the same direction, and it’s not about me, it’s about us.

Photos courtesy Columbia Pictures and Harley-Davidson.

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The H-D 21 Virtual Launch

H-D 21 Virtual Broadcast

The H-D 21 virtual broadcast was an all digital event to announce new 2021 motorcycles, parts and accessories.

The new model launch yesterday came less than a year after the motor company reported plans to streamline its product portfolio by 30% while overhauling its launch timing (historically every August) and go-to-market practices for maximum impact.

As soon as the media, dealers and consumers logged into the Harley-Davidson online portal, I knew this year’s product launch was going to be … different.

The event opened with a long video montage on the joys of the motorcycling experience.  I watched Jason Mamoa gush about his Harley family, or “Ohana” — you’ll remember him as Aquaman.

As someone who has served time in the trenches creating marketing campaigns, this was the traditional entertainer-as-a-promotional vehicle initiative.  The idealized figure introduced Harley-Davidson CEO Jochen Zeitz who teased the audience with a number of motorcycles and projects that he apparently can’t speak about yet.

Huh?

As the motorcycle launch wore on, with a selection of motor company smooth-talking prognosticators from various departments sharing bits of information about updates to Cruiser, Touring and CVO models, the value of an all-virtual Harley-Davidson product roll-out actually became less clear. The new products, which we usually look forward to, felt less exciting. It’s hard to determine the viability of any product by watching a slick video about it in a browser. The discussions about the Harley-Davidson future of motorcycling felt less like revelatory conversations and more like a TED Talk that I’d scroll past in my Twitter feed.

For me the serendipity of discovery was gone. One of the most exciting parts of a product launch has been finding out about something or learning about something new through pure chance. At a virtual H-D 21, that’s a virtual impossibility.

Street Bob 114

But, I’ve digressed.

Cruiser Updates
Harley stated that the Street Bob 114 is the lightest Softail model to be equipped with the Milwaukee-Eight 114 engine. The legendary Fat Boy receives refreshed styling for 2021, getting brilliant chrome instead of satin chrome on the engine and exhaust, the front end, the rear fender struts and console.

Touring Models
The 2021 Touring lineup includes three baggers that feature the Milwaukee-Eight 114 motor: Road King Special, Road Glide Special and Street Glide Special. The Street Glide Special and Road Glide Special get new two-tone paint options, and a choice of a blacked-out or bright chrome styling treatment – a choice between dark and sinister, or brilliant and more traditional.

Fat Boy

Road King Special and Street Glide Special models get a new brilliant Daymaker LED headlamp. All Harley-Davidson Touring models that are equipped with the colour touchscreen Boom! Box GTS infotainment system that now have Android Auto and Apple CarPlay compatibility. The feature requires a wired connection to a smartphone rather than going through Bluetooth.

CVO Models
Custom Vehicle Operations (CVO) motorcycles are the poster child for Harley-Davidson’s styling and performance. The Milwaukee-Eight 117 V-Twin engine is exclusive to CVO models as standard equipment. For 2021, the CVO Street Glide and CVO Road Glide models receive all-new Harley-Davidson Audio provided through an exclusive partnership with Rockford Fosgate.

CVO Limited

The audio systems, featuring speakers and amplifiers, were designed specifically for Harley-Davidson motorcycles. These components will also be made available through Harley-Davidson Genuine Motor Parts & Accessories for 2014 and newer Touring models equipped with a Boom! Box infotainment unit.

The 2021 CVO models (CVO Street Glide, CVO Road Glide, CVO Limited and CVO Tri Glide) all feature new paint options and styling features. All four CVO models are also equipped with RDRS safety equipment, including Cornering Enhanced Electronic Linked Braking, Cornering Enhanced ABS, Cornering Enhanced Traction Control, Drag-Torque Slip Control, Vehicle Hold Control, and Tire Pressure Monitoring System.

Pan America 1250

Pan America Global Reveal
The upcoming and over exposed Pan America 1250 adventure tourer was previewed in the virtual launch broadcast, but the most important details weren’t provided as it’s official launch is set for February 22nd. Mark your calendar and register for the event HERE.

It will be interesting to compare how this virtual launch broadcast performs in attracting potential motorcycle buyers and if it will drive demand for products or make an emotional connection to the Harley-Davidson brand.

It’s been my experience that: “People don’t buy “what” you do, they buy “why” you do it.”  — Simon Sinek

Photos courtesy of Harley-Davidson

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Harley-Davidson Q2 2020 Financial Results

Jason Momoa (i.e. “Aquaman”) collaborates with Harley-Davidson

How often have we recently heard… “We continue to face challenges during these unprecedented times.” — Harley-Davidson CEO Jochen Zeitz opening statement during the July 28, 2020 financial call.

I’m not a grammar nerd, but “unprecedented times” is a tiresome word.  Stop saying it Mr. Zeitz – and it’s also inaccurate!

We are not in an “unprecedented” time.

This isn’t the 1930’s Great Depression, the worst economic downturn in the history of the industrialized world. There’s been no dot-com bubble (i.e. Internet bubble) that was caused by excessive speculation in Internet-related companies in the late 1990s. It’s not the real estate bubble of 2008 and the follow-on market crash, recession and unemployment that was linked to the “subprime mortgage crisis.” There is no automotive industry crisis of 2008–2010 where declining automobile sales and scarce availability of credit led to General Motors, Chrysler, and Ford facing insolvency without major government intervention. It’s not the 1918 flu pandemic, which killed 675,000 Americans and the worldwide death toll was estimated at 100 million. One pandemic death is too much, but the COVID-19 deaths are currently nowhere close to that, thankfully.

Q2 2020 HOG Earnings Report

So, stop using these new most-hated sayings: “unprecedented” times, it’s the “new normal” and “we are in this together” mantra.

And, who’s the “we” here? The point is “we” are not all on the same team in this pandemic. Everyone is dealing with it in their own way. The restaurant employee who’s been unemployed for months isn’t in this together with a Fortune 500 CEO.  The nurse on the front-line treating pandemic patients isn’t in this with the marketing manager who can work from home.

It’s not “unprecedented” for me to rant about something while being largely sequestered at home for nearly five months. But it is what it is, I guess.

Back to the Q2’20 financial call… and some key comments made during the call:

• The Harley-Davidson culture has suffered. The company has seen five consecutive restructuring’s every year in order to basically chase the downward trend in sales.
• “The Rewire” strategic vision is now being replaced by “The Hardwire.” (more on this at the bottom of the post)
• Extending the 2020 model year through fall (historically launch was late August) and now new bikes will arrive in dealer showrooms early 2021.
• Used motorcycle pricing increased about 6% throughout Q2, certainly, higher than Harley has seen in any previous quarter.
• Harley continues to see strong potential in Adventure Touring and will launch Pan America globally in 2021.
• Harley has streamlined the structure, which now requires approx 700 fewer positions and approximately 500 employees laid off.
• H-D is not willing to sacrifice the strength of their legacy in a quest for pure volume growth going forward.
• Increased recognition on the role of digital technology as a critical priority in the future for Harley-Davidson.
• H-D will focus on roughly 50 primary markets that generate the vast majority of their retail sales and shipments.
• Surprise!  Planning to add a Sustainability Officer to the team who will further H-D commitment to the planet and to society.
• New brand building approach and social media campaign directed by “Aquaman” i.e. Jason Momoa (video of Mr. Momoa touring H-D Museum)

Q2’20 Numbers:

• Harley-Davidson posted a loss of $0.60 per share for Q2’20
• Worldwide retail sales of new motorcycles were down 26.6% versus prior year and Q2 revenue of $865 million was down 47% year over year.
• U.S. retail sales in Q2’20 were down 26.7% versus prior year.
• EMEA declined 29.8%, Asia Pacific was down 10.2%, and Latin America saw declines in Mexico and Brazil and finished the quarter down 51%.
• U.S. market share of new bike registrations was 38.5%, down 8.1 percentage points
• Motorcycle mix shifted from touring to cruising versus Q2’19, which reduced average motorcycle revenue per bike.
• Credit losses were down due to lower delinquencies and lower repossessions helped by H-D offering of payment extensions to certain customers.
• While Q2 results were again terrible, Harley-Davidson was still able to sell over 31,000 motorcycles in the U.S. during a global health crisis that closed off its retail stores.

During the financial call, Mr. Zeitz announced Harley will have yet another roadmap to follow: “The Hardwire,” the motor company’s third visionary plan in two years.

You might recall “The More Roads to Harley-Davidson” plan unveiled in July 2018 which stated the development of 100 new models over 10 years, giving more attention to international markets than in the U.S. market, and putting a much greater focus on electric vehicles.

That plan was largely abandoned earlier this year when then CEO Matt Levatich abruptly left the company and was replaced by chairman Zeitz. The “More Roads” was replaced by the vague and loosely defined “The Rewire” plan, which incorporated some of Levatich’s plan, but would instead focus more on key markets and products to drive the bike maker’s profitability and growth potential.

Now we can look forward to a new 5-year strategic plan; “The Hardwire,” which will be grounded in enhancing the desirability of Harley’s brand and protecting the value (i.e., keep pricing elevated) of the iconic products.” The Hardwire roadmap is expected to take over in the fourth quarter and serve as the strategic plan for the company to follow through 2025.

Photos courtesy of Asphalt & Rubber and Harley-Davidson

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Harley-Davidson Eye Chart Logo

1919 Harley-Davidson Logo

When the original is framed and seen up on a wall, a person might think ‘abstract art’. On closer inspection, you’d recognize that it’s an engineer’s effort to illustrate creative design elements. Call the original Harley-Davidson drawing engineered art.

Fast forward a 100+ years.

Carefully sequestered away, in an attic far from the light of day, a pair of courageous hands, intent on saving a fragment of the brand—unearthed a refreshed version of the Bar’n’Shield company logos.

To motorcycle purists, the new version might be compared to that mystery of the Al Capone Vault, hosted by Geraldo Rivera.

New “Eye Chart” Lettering Logo

A nothing burger!

Back in Q4 2019 and with little commotion, Harley-Davidson replaced the Bar’n’Shield artifact with a new Shield and Strip. The refresh started with the introduction of the 2020 model range and the rolling thunder style refresh (Rolling Thunder, contrasts the traditional lightning bolt launch process with a more gradual, momentum-building process) of the new “brand language” and visual concepts will be completed by 2025.

Refreshing a logo is less dramatic and the makeover designer works with creative elements that are already in place and will typically make small shifts to what’s already there by adding messaging, updating colors, or simplifying the look and feel.

In fact, the motor company stated; “The well-known shape has undergone a change in the proportions and angles of inclination of the curves, the main lines forming the logo have also become thinner and lighter. The minimalistic and clean design looks more balanced and modern. It also fits perfectly into the logo using both on motorcycles and Harley-Davidson accessories.”

H-D Classic Bar’n’Shield Logo

The classic orange and black Bar’n’Shield Motor Cycles logo is being retired to the category of “historical logos.” On occasion it might be used as a tribute to the company’s heritage, but its use will be limited.

I’m of the opinion that Harley-Davidson should avoid directly comparing the renewal options or visual concepts to their old design as a measure of success.

Instead, focus on how the new brand lauguage represents your brand or speaks to your customers. Clearly, the intent of the logo refresh is to show existing customers that we’re modern and up-to-date and prospective customers that we are worthy of being considered for your next motorcycle purchase.

Solely refreshing the name of a company does not change their historical reputation.  It will not save the company, but at least it is a try!

Photos courtesy of Harley-Davidson.

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Harley-Davidson Thinks Of Success Differently

According to an article by @bob_tita in the Wall Street Journal (WSJ – Paywall), Harley-Davidson plans to reopen its factories this week at lower production rates and stated it will be sending dealers an attenuated range of new motorcycles — meaning, time for a COVID-19 course correction.

You may recall that Harley’s U.S. assembly plants and most of its dealers closed in March as part of a nationwide effort to slow the spread of COVID-19.  Currently, as many of the company’s 698 U.S. dealers make plans to reopen, Harley’s director of product sales, Beth Truett, stated in a memo, which was viewed by the WSJ, that about 70% of them likely wouldn’t receive any additional new motorcycles in 2020.

The motor company is pivoting from the “More Roads” plan to now focus efforts and energy to appeal to customers of premium-priced brands with limited availability.

Speaking of availability… By definition, excellence is scarce.  Harley-Davidson has leveraged “scarcity” previously. Underproduce motorcycles and limit distribution, which creates long waiting lists that in turn create an exclusivity mystique. Will it work again?

And speaking of premium positioning…

Harley-Davidson Eau de Toilette – Example of brand dilution!

Price alone won’t make a brand premium and few companies can thrive on limited market coverage and low volumes by commanding premium prices in a particular niche.  One thing is sure: motorcycle customers are price-sensitive, even if they are ready to pay a premium price for a … Harley lifestyle.

This means Harley-Davidson has to be able to truly earn the added value.

Data supports what we already know to be true about premium brands: people with lots of money buy nice things. Whether you’re talking apparel (i.e. Phat Farm, Polo, Timberland and Tommy Hilfiger), Tequila, hand bags (i.e. Gucci, Fendi, Louis Vuitton and Prada), restaurants or footwear, it’s easy to recognize the pattern that the nicest, most expensive brands are favored by consumers with the highest household income. What is less obvious, are the fewer instances when wealthy people opt for the less-expensive, or when average-income people make deep trade-offs to purchase really pricey things.  There are a whole lot more average-income people than there are excessively wealthy ones.

Strong brands have a strong identity. Mediocrity doesn’t captivate or win the motorcycle sales race. There is a rule of thumb that says that a company ought to be able to explain its brand identity in seven words, give or take a couple.

The clock is ticking Harley-Davidson!

So, what is it about “premium-ness” brands that are able to inspire consumers to say “no” to some things so they can say “yes” to a brand that’s often or slightly out of financial reach? That’s the Harley-Davidson opportunity.  Finding the nooks and crannies to up-sell consumers on “premium-ness” choices—especially a candy coated brand in the top tier of the motorcycle pack.

The Harley downside risk is the “Porsche Effect“… becoming known as an SUV manufacturer that also produces a few sports car models rather than the premier sports car brand that also makes SUVs.

I’d like to better understand how Harley-Davidson can retain a premium brand identity if combustion engines, once the top tier of American motorcycle engineering, are being replaced by e-motors (LiveWire) that can be built by almost anyone, and if motorcycles feel and act like smartphones that you no longer even have to own?  It’s likely that the V-Twin motors of the future will no longer be a distinguishing brand characteristic.

New competitors are knocking on the Milwaukee door and customers are better informed, have tougher requirements and are able to interactively rate and influence companies and their products.

In the end, what Harley-Davidson claims about it’s premium brand doesn’t matter. What matters is whether or not consumers believe it enough to pay more for it.

Photos courtesy of Twitter Bob Tita/WSJ and Harley-Davidson.

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Harley-Davidson Rides Across The Rubicon

Jochen Zeitz with an electric Harley-Davidson LiveWire motorcycle – Photo Credit: Joshua Kurpings

He saved Puma. Now he’s going to fix the Harley-Davidson global business!

I’m talking about Jochen Zeitz, the interim Harley-Davidson CEO.

The motor company today announced that Zeitz has been appointed President and CEO, effective immediately. You might recall that Zeitz assumed the role back in February when Harley-Davidson ditched CEO Matt Levatich for years of disappointing sales.

Before we ratchet up turnaround enthusiasm of new leadership, it might be good to peel back a layer on the mysterious Mr. Zeitz.  I’ve written a detailed background post HERE.

It’s been my experience that business leadership works much differently during a turnaround transformation.  Managers are less able to rely on practices that previously insulated them from criticism. In addition, a traditional consumer goods company is research driven, and don’t typically decide on action until research tells them to change – but the reality is that research doesn’t always tell you what the consumer wants.

Let’s check out some of the Zeitz FACTS:

• Zeitz is on a combat mission to make the Harley-Davidson business sustainable in a way that improves both society and the natural environment, and that creates economic growth.
• Zeitz was the driving force behind Harley’s sustainability efforts and approved former CEO Matt Levatich’s desire to “bet the farm” on electric motorcycles.
• It took 8-years and the work of a thousand engineers to fully realize the LiveWire, the company’s first electric model, that finally went on sale at $30K.
• Among the entire Harley-Davidson board of directors, there’s a total of ZERO years of motorcycle industry experience.  Coincidentally, ZERO is the top manufacturer of electric motorcycles for the street and dirt.
• No public (via Google search) photo exist of Zeitz riding a motorcycle, attending a motorcycle rally or HOG event.
• At Kering, Zeitz was known as the “sustainability Taliban” — Kering employees characterized him as impatient and demanding unrealistic standards.
• Lack of gender equality on the Harley-Davidson board, yet Zeitz has been a board director and influential member since 2007.
• Zeitz history of working with unions is murky.  In China workers don’t have the right to Freedom of Association and Asia remains Harley’s strongest sourcing region
• Zeitz gets the gist of enlightenment after a dialogue with Benedictine monk Anselm Grün – yeah, yeah, you let go of attachments, dissolve your ego, and then you get enlightened and write a book.

Let’s gain some additional insight of the Zeitz thinking from his previous statements; “My belief is that every company has an opportunity to innovate by creating business solutions for services or products that significantly reduce your impact and create more demand for your product.”  “Well, unless you are an extracting business. In that case, you’re a dinosaur and you’re dying.”  The solution is to marry sustainability with growth. “It’s a question of what we grow and how we grow, and how we can reduce our impact significantly and still grow,” he went on to say, “We have to grow within planetary boundaries.”

Planetary boundaries?  Huh?

I’m as green as the next fuel/air motorcycle enthusiast, but I had to do a deep dive on this one…  It seems the 11,700-year-long Holocene epoch (“Age of Man”) is the only state of the Earth System (ES) that we know for certain can support contemporary human societies. The planetary boundary (PB) concept, introduced in 2009, aimed to define the environmental limits within which humanity can safely operate.  The planetary boundary (PB) framework contributes to such a paradigm by providing a science-based analysis of the risk that human perturbations will destabilize the Earth system (ES) at the planetary scale.

Whoa, this is heavy!

I would assume that in Harley-Davidson parlance and every day practice, this means that instead of making short-term profits that may incur costs later on (an obvious example being depleted resources leading to higher raw material prices, or social inequalities reducing at-work performances and purchasing power), businesses need to spread some of that growth to the wider world around them, for the sake of the planet – but also themselves.

Who would’ve thought… buy a Harley-Davidson motorcycle for the sake of the planet!

Zeitz might actually be on a path similar to Alfred Ford.  Currently known as Ambarish Das, he is a great-grandson of Henry Ford and heir to the Ford Motor Company who has converted his earthly consciousness to helping build the Temple of the Vedic Planetarium in Mayapur, which was largely funded by Ford’s $35M donation.

I don’t want to appear like I’m self-serving, but as you get gray hair in the beard you tend to focus the “More Roads” plan on which rides you are really trying to accomplish in life.  Maybe it’s time to published a memoir, meet-up in Alachua County, Florida and reflect in one of those “healing” pools.

I hope this transcendental awakening works out for Harley-Davidson.

Photo courtesy of Harley-Davidson.

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Covid-19 Bites Harley-Davidson

Q1’20 Harley-Davidson Retail Motorcycle Sales + Motorcycles and Related Products Segment Results

Let’s jump right to that impressive Q1’20 financial result:

• Harley-Davidson (NYSE:HOG) posted earnings of $69.7 million compared with $127.9 million in the same period a year ago.
• The dividend was slashed to 2 cents a share from 38 cents.
• The motor company is in talks with major U.S. banks to secure $1.3 billion in liquidity.
• Harley’s U.S. retail sales were down 15.5% compared with the same period a year ago.
• International retail sales were down 20.7% compared with 2019.
• Harley’s U.S. heavyweight motorcycle market segment share was down 2.2 percentage points, to 48.9%.

Another quarter, another poor performance from Harley-Davidson, though the market seemed to buy into the promise that this time it will be able to turn things around.

Déjà vu…

Management promising to fix things again by “crafting strategy accelerants” to deliver improved sales and better returns.  However, it admitted that its efforts thus far haven’t worked and also said it was “refining” the plans it had already devised, but it wouldn’t reveal how it was going to achieve them until this summer. Granted the financial problems Harley-Davidson encountered this quarter aren’t necessarily all of its own making, though it hasn’t helped itself along the way.

It’s important to note that the Harley-Davidson trends in the U.S. have been weak for years despite the economy being strong for so long. That is a major problem and the acting Harley-Davidson CEO, Jochen Zeitz, remains vague on what the motorcycle company is going to do to change that dynamic.

The “ReWire” Board

The fact that management chose the term “ReWire”, emphasizing the electric future to describe their refining plans reads like a satirical article in The Onion.  It’s as if CEO, Jochen Zeitz said, “I’ve heard some concerns going around, and I want to impress upon each and every one of you that I’m taking every possible step to ensure that we tap into a market that has traditionally been neglected by motorcycle manufacturers, Harley-Davidson is announcing a new line of motorcycles designed specifically for men.”

The “ReWire” plan consists of five main points:

• Enhance core strengths and better balance expansion into new spaces.
• Prioritize markets that matter.
• Reset product launches and product line-up for simplicity and maximum impact.
• Build the Parts & Accessories and General Merchandise businesses to their full potential.
• Adjust and align the organisational structure, cost structure and operating model to reduce complexity and drive efficiency, to set Harley-Davidson up for stability and success.

The ReWire playbook abandons some of the previously ratified “More Roads” plan, but there is so much “CEO Speak” — “designed to address top priority opportunities, drive consistent execution and reset the company’s operating model in order to reduce complexity, sharpen focus and increase the speed of decision making.” — in that investor call its difficult to know what exactly remains “committed” to or what will stop.

Little is certain these days, but there’s one sure thing: in a situation where 30+ million people were laid off or furloughed in the past 6-weeks, people are definitely thinking about their wallets.  And living with ever-present, crushing uncertainty and the knowledge that people all around us are dying isn’t the stimulus to rush out and purchase a new motorcycle.

Let us face facts.  It’s going to be a different world for a while. After all, temperature checks, touch-less payments, masks, wipes, take-out and distancing were not part of the Harley experience before the March closures.

If Harley-Davidson is about anything, it’s about bringing people together. Lots of them. And really, really close — with motorcycle rallies, music festivals, HOG events and all the cross country rides.  Looking at you Sturgis!

The whirlwind of 400,000+ motorcycle enthusiasts half-hearted adherence to CDC guidelines, while gathering all week in a number of local bars, and eating VEGAN-burgers could be viewed as a controlled experiment to determine the virus’s true incubation rate.

I have some gray in my hair and beard, something you will see in a majority of Harley enthusiasts.  I find the idea of a Harley specifically aimed at men deeply patronizing.

Photos courtesy of Harley-Davidson.

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Reactivate Keith Wandell And Mark-Hans Richer

Remember that outsider who kept Harley-Davidson on the road?

Keith E. Wandell (retired H-D CEO) grabbed the handlebars at the company in the heart of the economic crisis in 2009. Harley lost $55 million that year, as buying a motorcycle stopped being an option for many consumers.

Wandell made some big statements. “Don’t let Harley-Davidson become General Motors!” Look in a mirror, he told staff – Harley was already so far down that same path [as GM] “it wasn’t even funny.”

Wandell took bold action and made quick decisions to focused the company on doing what many say it does best: Making big, powerful, premium-priced cruisers.

Keith Wandell

Keep in mind, this was when the great recession and credit crisis sent shockwaves through Harley-Davidson. In less than one year, bike shipments dropped about 25 percent.

Wendell cut the workforce – at least 2,700 hourly workers and 840 administrative employees. The economy was in the tank, the motor company had a big union labor force and old manufacturing processes.  People were just churning and everything was upside down at the company.

Imagine…

I’m not talking about celebrities’ filming themselves singing John Lennon’s ‘Imagine’, from their multi-acre estates and whining about their COVID-19 pandemic isolation.  Never has disproportionate privilege been so apparent and I for one am really fed up with their self-serving need to be in the public spotlight with style-over-substance videos.

But, I digress…

Mark-Hans Richer

It is equally important to recall Wandell’s right-hand “stunt man” — you may remember him as that over-the-top marketing genius who had women screaming, grown men crying and Oprah jumping up and down, chanting: “Everybody gets a car!”

I’m talking about Mark-Hans Richer, who was Sr. VP, Chief Marketing Officer at Harley-Davidson, prior to his 2015 departure. Granted, Richer is currently employed at Fortune Brands, but with the mass exodus at Harley-Davidson and salary decreases across the executive staff it’s plausible to pull him back into the H-D team.

Richer, generated the most bankable kind of publicity: controversy.  He made the difference between a motorcycle brand being a rock star versus more employees working in the rental lot.

He’s the charismatic dude that dropped a Dyna Super Glide on Pope Francis at the Vatican.  Then turned around at a press briefing and said, I would be really upset if you felt our strategy was about “meeting the nicest people on a Harley” because I can tell you that ain’t the strategy.  Later he pontificated that a Harley costs less than “another tattoo, a parking ticket, a gas station burrito, and a lip ring” in an appeal to what makes millennials tick.  In 2002, he helped the company get named Company of the Year by Forbes magazine.

110th Anniversary Celebration

In a university commencement speech, he stated: “Everything I ever learned from business, I learned from Willie the Wildcat stuffed animal,” a business he started right out of college.  Richer secured the first major worldwide sports sponsorship for Harley-Davidson at UFC and was instrumental in X-Games marketing.

No, I don’t have a man crush.

Richer was a key contributor of the “Ride Home” anniversary events.  Do you remember when returning to the mecca of motorcycling in Milwaukee was truly an EVENT i.e. the 110th Anniversary festivities featured 60 bands, including Aerosmith, Kid Rock and ZZ Top.  Remember that 3 ½-hour set by Bruce Springsteen and E Street Band at the 105th Anniversary?   How about when Foo Fighters, Dave Grohl, committed a major sin on stage by cracking open a Coors in Miller Town?

100th Anniversary Celebration

There was the surprise headliner (Elton John) and outright disaster for the centennial anniversary. Musical highlights included Billy Idol, Kid Rock, Joan Jett, Poison, REO Speedwagon, the Doobie Brothers and Tim McGraw for the 100th anniversary so, people booing and walking out might have been overstated in the media.

Then came 2018 and time to celebrate 115 years of the open road.  Harley-Davidson CMO, Heather Malenshek tells the media the event is all about returning to its roots with a focus on the motorcycle, not the entertainment.  Huh?!  It was an unmitigated flop for entertainment.  She very quietly departs the company in October 2019.  Coincidence?

Indian is challenging Harley’s cash cow, the Road Glide.  BMW has market segment share in the ADV or “adventure motorcycle” sector and recently introduced the new R 18 touring, cruiser configuration to compete head-on with Harley-Davidson and Indian.  Rumors started circulating recently that Honda is introducing a new 1100 Rebel to compete directly with Harley-Davidson.

Pan American

Harley needs more than anything a fast start for a new model to become a breakout hit.  Is that the Pan American, ADV?

The ADV segment is crowded and entrenched with BMW, Honda, KTM, and newcomer Ducati, among others with decades, of dirt-tested refinement.  Harley doesn’t have the luxury of burning up stacks of cash on a another “vanity project.”

The Milwaukee motor company has a very narrow window to establish that hit. Gone are the days when a slow seller can be nurtured into a hit.  Here’s looking at you LiveWire and the “Field of Dreams” marketing of distressed or stigmatized merchandise!  I truly wonder if acting president and CEO Jochen Zeitz or Harley-Davidson management really understand why the LiveWire product is failing?

It’s logically time to recall Mr. Wandell and “CMO head-honcho,” Richer back from spending their days taking lunch at the Polo Lounge and crank up the H-D buzz machine.

What the media’s hourly drumbeat of “panic porn” on the COVID-19 trauma has shown us, cannot be unseen.  A motorcycle-less Los Angeles.  Coyotes wandering on the empty Golden Gate Bridge.  A quiet New York, where you can hear the birds chirp in the middle of Madison Avenue.

We’re in it. Stores are closed. Restaurants are empty. Streets and multi-lane freeways are barren.  Body bags in tractor trailers.  The Oregon beach is an eerie ghost town.  The economy has collapsed and a devastated 22+ million Americans have lost their jobs in four weeks.  It’s a dark feeling of rust, rot and ruin.

“Illegitimi non carborundum.” The Latin phrase loosely translates to, “Don’t let the [COVID] bastard get you down.”

Motorcycle enthusiasts are the ones who understand why dogs stick their heads out the window.  In the famous words of a previous H-D CEO, Jeffrey Bleustein, “We (Harley) have to pretend ten fiery demons are chasing us at all times,” and “make the right bikes, at the right time, and get them to the right place!”

Let’s all take a deep breath and get ready for a potential Harley-Davidson tsunami. What is about to be unleashed will be the greatest campaign ever created to get you to feel normal again.  Every brand will come to our rescue, dear consumer, to help take away that darkness and get life back to the way it was before the crisis.

The great American return to normal is coming and you won’t be able to ignore that deafening motorcycle exhaust noise.

Photos taken by author and courtesy of Harley-Davidson and Wikipedia.

All Rights Reserved (C) Northwest Harley Blog

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