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Closure Notice at AMC

The American Motorcycle Classics (AMC) Harley-Davidson dealer in Albany, OR., is going out of business at the end of the month.  They’ve called it quits.

Years ago the business was run by John Lewis, Sr.  He retired, moved to Las Vegas and sold the business to his son, John, Jr.   The G.M. was Joe Saltarello.  Was it the poor economy?  Sure didn’t help.  Were other H-D dealers complaining how Albany was cannibalizing their business which is only good for the consumer?  Did they invest in the business?  Depends on your definition of “invest.”  Maybe John, Jr. was having problems making the payments to Sr., who may have held on to the real estate and now decided to liquidate the assets, cut his losses, sell the real estate and call it a day?   Or, maybe they were FORCED out by the H-D motor company?

Hey, now that is an interesting question.  Maybe it’s a combination of all of the above.  Who knows?  If you do know send me a note.  I’m discreet.

Here is what we do know.  Over the last two years H-D is trying to consolidate its dealerships one way or another.  H-D may have just sent a letter of retirement to Albany/John Jr.  In essence it withdraws approval for the H-D franchise.  I called and spoke to the finance manager at AMC earlier in the month and he indicated that H-D was “forcing them out.”  Similar to the Chevrolet and Chrysler dealership forced closings.  Maybe it was sour grapes, but his statement went something like “HD was demanding they expand the store” and while they had committed a half-million $$ in infrastructure investment to H-D in what could be viewed as mini “Super Store” … they just didn’t have the sales revenue for such an investment, essentially being forced out by the manufacturer.  It’s not clear if AMC was selling a reasonable volume of licensed products, but I think it’s unlikely given the location.  The finance manager also stated they were doing about half the motorcycle sales volume they once garnered 4 years ago so clearly the economy has had a relevant impact.

Businesses fail all the time so what’s the point of this post?

Well, AMC H-D is well known in the northwest for being the cheapest H-D dealer in Oregon.  If I had interest in a new motorcycle I would always call or drive down and get pricing whether it be a motorcycle or parts.  That then became my new starting price to leverage any deal at a local dealer closer to the Portland metro area.  I never did purchase a motorcycle there,  but I have 4 buddies who all purchased motorcycles during the last 2-4 years from Albany.  They obtained below MSRP on every purchase, including additional discounts on aftermarket parts and walked away saving $1000’s and big smiles!

And even though they saved all those $$’s… cheapest does not always work.  You can’t always make it up on volume and it now seems that little was dropping to the bottom line to keep the doors open and make the payments.   We’ve seen this behavior in other type businesses.  A person will throw an “open sign” up in a strip mall and offer cheap prices — way below the current market — but in less than 24 months they disappear.  It means they were not making enough money, and just screwed up the market for everyone else.

AMC H-D had a “No pancakes, No S*****t, no rock band, no bull” slogan which was essentially an anti-social slam toward other dealers who subscribe the post-sales mantra.  But you know what?  That doesn’t work for some folks.  Yeah saving a few bucks is important (always!), but many of us are motorcycle enthusiasts and are looking for a dealer that will be in business (long-term), one that’s like a social “club” to hang out, talk shop, talk custom modifications and they are willing pay a little extra $$ to have that option.  Personally I like the fact that Paradise personnel (Mike(2)) know who I am and will call me by name when I walk into the dealer.  We’re not BFF’s, but I know, that they know, that I over paid a few hundred $$ for that privilege on my last motorcycle purchase, and for me it’s more than just a money transaction – its genuine relationship building – AFTER the sale.

Maybe this is what happened at Albany?  They had “A Beautiful Mind” moment.  Did you see the movie?  In the movie Russell Crowe plays John Nash, a mathematician who won the Nobel Prize for developing the concept of non-cooperative game theory.  In case you’re not familiar with the theory, it roughly means that to make the best decisions, you have to consider the actions of your competitors.

This may sound harsh, but in my view, the AMC H-D building was “lipstick on a pig.”  Functional, but not a place you’d socialize or hang-out long.  I’ve been there in the early morning and remember how they didn’t even have coffee for customers?!  Call me Mr. shallow.  From an outside-looking-in viewpoint,  the company didn’t have much of a Facebook presence, didn’t do any blogging or customer outreach, the email system announcing sales totally sucked and defied any reasonable logic from a marketing viewpoint, and did I say the web site was dated?  At the end of the day it just didn’t look like they were putting a lot into promoting the business or appealing to those who were looking for more of a social gathering atmosphere at their local dealer.  Yeah they could “splain” that all off as low overhead giving YOU the customer the best price, but when every other dealer around you is struggling and willing to lower/match prices to compete and your shop has no amenities… you’ve cast your destiny

There are consequences other than it’s “Christmas in July” for Paradise H-D, Salem H-D and Team Latus!  There is the loss of 10-19 people who are no longer gainfully employed – and I’m not trivializing this because the folks there are hard working people and deserve better – but, PowerSports Network (powered the website) loses a customer and AMC H-D also sponsored the Pioneer H.O.G .Chapter (newsletter PDF HERE).  It was the first northwest chartered H.O.G. chapter (#4085), and it now has no home.

I’m sorry to see the dealership close and I’m sure for many of you it feels like losing an old friend.  I’m just glad I don’t have any pre-paid expensive special parts on order!

Photo courtesy of American Motorcycle Classics.

All Rights Reserved © Northwest Harley Blog
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Many of us have experienced EDT and not known it!

Mix that with better, cheaper, faster… a common corporate mantra these days, and you have a catchphrase that leaves out a significant element.  Better, cheaper and faster for whom?  Long term business success means the “whom” must ultimately be your customers yet isn’t it odd how often the existing customers are forgotten in the rush of daily business.  Sales and marketing are about bringing potential new customers into the dealers.  Operations are working to be efficient and fill orders.  Service is busy putting out fires.  Meanwhile existing customers are walking unnoticed and uncared for out the side door.  Customer retention at H-D exceeds the motorcycle industry average, but people will stop patronizing when they feel like their business doesn’t matter to the company.

And that’s my point.  Repeat-purchase loyalty or the erosion (the proportionate fall in repeat-purchase loyalty) at the local dealership.

Even if the Harley dealer does everything right – transforms into a lifestyle destination, offers up camaraderie beyond the parking lot, mixing with customers, first-name greetings, pancakes and music on the weekends, working hard at providing a friendly, at-home atmosphere, low-pressure sales – is there any doubt that a key determining factor for a repeat customer at that dealer during this economic environment be anything other than price, Price, PRICE?  How much more are you willing to pay for the dealer experience?  I would suggest none.  Personal relationships do matter, but over paying to maintain that business relationship is obsolete.

For example below is a repeat-purchase story from a riding buddy (edited for space and used with permission) who just put a new 2010 Street Glide in his garage:

“This purchase was one of the simplest things I’ve done. I called the Sales Manager (Moshonda) at Albany Harley-Davidson (AMC) and asked her for a price. I was really expecting to hear MSRP or maybe $500 discount on a $20.5K price. When she told me $18,519, I said “I’ll take it”. We did some of the transaction over the phone and I went down a couple days later and picked it up. I put down 2/3 cash and financed a third. They made that easy with a good interest rate. They didn’t even try hard to up-sell me on the extended warranty. Simply asked, I said no and we signed.

Went down yesterday and rode it home. Weather cooperated and it was nice having cruise control and 6th gear. The radio is awesome! Candidly I did struggle on not talking to Paradise H-D where I’ve previously purchased.  Bottom line, I sincerely doubt they could or would have even tried to get down to the AMC price. Granted I didn’t give them the chance, but I’d bet Paradise H-D was $1500 over MSRP to start off and now we’re talking about a $4k difference to spend time haggling over. Ultimately I felt that if I challenged Paradise H-D to get down to this price and if we couldn’t and I had to walk there would always be this friction when I went into the dealer.  Frankly I don’t need the stress.  It’s unreal that I paid almost the same amount for my Road King 10 years ago as I did on this new Street Glide.  Clearly it’s a good time to deal!

AMC is definitely a small town laid back feel. No pressure.  I’m fairly certain the knowledge base at Paradise H-D is better. AMC sales didn’t strike me as deep experts. Remember these are the folks who didn’t think the Oregon bikes had catalytic converters.  Yet, it’s a good store and I liked how they promote themselves to “the working man”.  As you’ve said on your blog, Harley may be pricing themselves out of the market with those CVO’s. When you can draw a price correlation between a motorcycle and a Lexus, well then the issue speaks for itself. At the end of the day, it is just a motorcycle.

The other advantage at AMC for me is they seem to have perpetual sales on accessories.  I don’t think it will cost me an arm and a leg to do the  customization I want. I had a little sticker shock on the quote for Vance & Hines pipes, which looks to be all you can get for the 2010 right now at $1475. Too high, but it included a number of items (fuel tuning/dyno etc.) in addition to the pipes themselves.

Looking forward to summer!”

I’m not advocating one dealer vs. another.   But, the economy is changing the way riders interact with dealerships.

Photo courtesy of H-D.

All Rights Reserved © Northwest Harley Blog

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amc-hdAnyone can purchase Harley-Davidson industry reports which discuss motorcycle demand and forecasts.  Topics often include market size, product segmentation, technology trends, environmental and regulatory factors, trade, market environment, product forecasts and the like.

Or you can wait and watch your inbox as the news or sales promotions roll in for an indicator on the state of the state.  Statistically motorcycle sales are way off.  Tell me something we don’t already know!  Yet adding to this drum beat was the announcement and regulatory filing from Harley last week that worldwide sales by its dealers fell 13% in the first two months of the year, a clear sign that the recession continues.  In the U.S., which represent nearly two-thirds of the company’s business, sales were down 9.4% and international sales were down 21.5% compared with 2008.  All this after the “We Ride Free” campaign where its message is: trade up!

The latest Harley deal to arrive in my inbox was from American Motorcycle Classics (Albany, Or.).  It’s a $3679.00 discount on a 2009 FXDFSE CVO Dyna Fat Bob.  Does that pull on your heart-wallet string?  I’m not so sure!  Because $22K is still a lot of coin in this time when so many are in dire need of cash.  The 90% of the population who are employed and can afford it know the value of money in these dicey times and those who don’t are unlikely to qualify for a loan.

HOG

HOG

Maybe Harley-Davidson should consider the possibility of selling off some of their brands?  The Buell and MV Agusta Group would be likely candidates for the “selling block” and might help restore the company or remove massive debt loads?  Just a short seven months ago Harley paid $109 Million for the Italian motorcycle maker to increase its presence in Europe.  This was somewhat logical back when stock was in the mid-$40’s and sales in the European market were increasing 16%-20% every quarter, but clearly HOG shareholders would like a “do-over” as sales are in the tank and the stock has now closed below $8 a share!  It’s interesting that Harley exec’s got this deal through the board at a time when Harley’s 2008 sales were down more than 7% and after a 5.3% drop in 2007.

Now the trouble is, does anyone have interest in Harley – or the equity – to make a deal?  That doesn’t bode well for the company unless they are looking at efforts to turn themselves around with the help of taxpayer cash?  Think about it: well-financed Asian motorcycle companies like Honda (NYSE: HMC) or Tata Motors Ltd. (NYSE: TTM) could pull the Harley nameplates off the scrap heap for next to nothing — without having to take on burdens like massive debt loads or union pension obligations. But even they are not willing to because they don’t think they can make money with it.

Yet, somehow we’re supposed to look the other way after reviewing Harley’s dreadful balance sheet and debt situation and continue to believe those same managerial geniuses will turn around the brands without shedding their massive debt obligations?

It just doesn’t make any sense at all.

Photo courtesy AMC

Disclosure: Author has no ownership in HOG.

All Rights Reserved © Northwest Harley Blog

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