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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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: Little Things Done Well

As 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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Polaris Industries Shutters Victory Motorcycle Operations

Polaris, 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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Harley-Davidson Continues Sons Of Anarchy License Deals

Maisto “Sons of Anarchy” 1:18 Scale Bikes

There is now the Sons Of Anarchy collection of die-cast motorcycles.

Back in December, Maisto announced they worked closely with 20th Century Fox and Harley-Davidson to bring fans of the show 1:18 scale die-cast versions of the SOA motorcycles in association with the TV show characters: Jax, Clay, Opie and JT – the SOA Motorcycle Collection.

Not only can you now dress and ride like SOA outlaws, thanks to a flurry of licensing deals that includes everything from actual motorcycles at Bartel’s H-D to hats, games, stationary, jewelry, calendars, stickers, wall graphics and more.   Now while sitting in your work cube thinking about the winter cold you can have your very own die-cast outlaw motorcycle to stare at and think about how you can’t wait to ride in warmer weather!

The Maisto brand name was registered in 1990 by May Cheong, a vertically integrated manufacturer based in Hong Kong. The company has been manufacturing die cast replicas for over 40 years.  They have over 11,000 employees worldwide, and manufacturing facilities covering more than 2 Million square feet.

Sons Of Anarchy merchandise sales have grown 70% year-to-year since 2010.  This is not a U.S. only concept as the TV show is a hit in U.K., Australia, New Zealand, Germany and the Netherlands.  And with the TV show committed through a seventh season merchandise sales will only increase.

Previous SOA/H-D license deals blog post HERE.

Photo courtesy of Maisto, 20th Century Fox and Harley-Davidson.

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Harley-Davidson Licensing Deal With Sons of Anarchy

Limited edition Son’s of Anarchy motorcycles

I called this back in 2009 with a post called Bottling Ideas.  UPDATE: Actually now that I’ve re-scanned the blog it was even earlier with a post in 2008 called Harley SAMCRO Limited Edition Motorcycle HERE.

I’m talking about the FX television series “Son’s of Anarchy (SOA)“, and a new deal with Harley-Davidson for custom motorcycles made by 20th Century Fox Consumer Products as part of a flurry of licensing deals for SOA that includes clothing, leather jackets, hats, t-shirts, games, calendars, stationary and much more.

Thanks to Bartels’ Harley-Davidson the bike maker will produce 100 limited edition Son’s of Anarchy motorcycles that will retail for about $25,000 each at Harley dealers this fall.   Now TV viewers can further tap into the motorcycle club fantasy… who doesn’t want to pretend to be a ‘clubber’ and ride a faux outlaw biker motorcycle, right?

I can’t think of another TV show that cuts across multiple gender identities, social boundaries, is a taboo breaker, a mainstream manufactured product for the rebellious and the dispossessed.  If ever there was a Harley-Davidson brand ambassador it would be Kurt Sutter’s (@sutterink), Son’s of Anarchy!

SOA is about to enter its fifth season, and is now the most-watched show in its history among total viewers 18-49. The most recent season the show averaged 5.5 million viewers per episode. It was also the number three DVD release among TV shows in 2011.  And after growing online merchandise sales for FX’s top-rated show about 70 percent year-to-year since 2010, Fox is shifting to brick and mortar retailers like Spencer Gifts, Transworld/FYE and Hastings.

I wouldn’t be honest if I failed to mention that this feels like a disaster for any person who rides to a rally thinking they’ll have instant club admiration.  However, it could be shrewd marketing of misbehavior and we’ll see a formal offering from the motor company every year!  Any of the “noise” generated in the press and blogosphere helps in terms of show profile, helps H-D reinforce how the middle finger of rebellion built the brand.  And isn’t that all that matters in the end?!

I don’t have a Kurt Sutter man-crush, but he does deserve a big shout-out for remaining true to the setting in the TV show without becoming stereotypical.  We know it’s hard work compared to the Laffing Devils crap the Discovery Channel is trying to pass off as good TV.

Here are some previous SOA blog posts made over the years: OMG New Media Darlings; Men of Mayhem; Bikes, Bullets & Brawls; Mail Room of Life; Bottling Ideas; Be Good & You’re Lonely; Sutter Shout Out; Season 3 Ideas; Working The SOA Trail

Photo courtesy of SOA and RatRodStudios.com.

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Harley-Davidson Brand Arrogance

Fritz Clapp Letter to H-D

It takes muscle to avoid.  Not strained, forced muscle; but strength that’s supple, agile, free-flowing: that’s the tone of a healthy brand.

Yet, Harley-Davidson is using all its muscle and threatening people… all disguised as protecting brand equity.  It can only lead to more legal costs and is often the case, bad press.

So what’s the background?  It seems that H-D is fresh off a boot butt kicking contest with the Marlon Brando estate — Brando Enterprises LP — along with Wolverine Worldwide Inc., and agreed to settle a suit over the unlicensed use of the Brando name on a Harley-branded boot that resembled the ones Brando wore when he played Johnny Strabler in the 1953 movie “The Wild One.”  That whole gig had to have cost the company some pocket change just to run it through the court system process only to get to the point of where all parties mutually decided to “agree” that there wasn’t any infringement.

It’s no secret, the motor company has an extensive licensing business, and last year it generated $43.2M selling the rights to use its name on products ranging from jewelry to cake decorations.

Not satisfied with their “boot win” the trademark bloodhounds at H-D decided that a 6-week old forum web site called HarleySpace.com was threatening one of the world’s most recognized brands and told the owner to “cease and desist” using the name because it’s a trademark infringement.  Huh?  Doesn’t this show just how far they’ll go in pursuing the exclusivity of a famous trademark?

In my view this has the markings of a Susan G. Komen for the cure public relations fiasco written all over it.

Mr. Fritz Clapp

The owner of the site, James Coulbourne did what most of us would do and hired an attorney.  Not just any lawyer, but Fritz Clapp, who is most often known for representing the Hells Angels Motorcycle Club (HAMC) in intellectual property cases and goes by the name “lawyer from Hell” on his website.  Having sued the Walt Disney Co., Marvel Comics, and the late fashion designer Alexander McQueen to protect the HAMC name, Mr. Clapp knows a little bit about trademark law/infringement and enthusiastically took on the case at no charge!

If you do a Google search you’ll find that there are many, many other motorcycle blogs and social media sites with the name Harley in them.  They are clearly noncommercial and are easily and immediately distinguishable from the commercial merchandise offered and sold bearing the Harley brand.  So what’s their beef?  It seems that Mr. Coulbourne sent emails to Harley-Davidson dealerships promoting his 6-week-old website and that sent the trademark boys over the abyss. 

As educated consumers we know that great brands have a core clarity to them.  Enthusiasm spreads the message.  It also unburdens the company from having to force-feed passion for the brand and they should no longer be focused on convincing. Instead, their goal should be revealing. Others testify to H-D attributes and for this to happen, they need to give up some control because the core H-D brand identity is firmly in hand.

UPDATE: April 25, 2012 – Last week (April 20th), Mr. Coulbourne changed the name of his biker social-networking site from HarleySpace.com to IronRides.com. 

Photo courtesy of Fritz Clapp, IP Magazine and James Coulbourne.

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It’s How We Roll

Five of a Kind At Grand Canyon

This is a shout out to an extraordinary posse.

Hardly the stereotypical, tatted-up, badass bikers portrayed in pop culture or do we ride the machines of American Chopper — slick and polished.

From the outside looking in you can’t understand it, but there are many benefits to riding a motorcycle with a group.  Aside from the obvious “wind in the face” to take your mind off daily troubles to the cool events that you visit from glitz to back-water destinations.   From the moment you mount the motorcycle the most important aspect from my vantage is the posse camaraderie.

Whether I’m with my family at home or the “family on the road,” the center piece of the posse is the Harley-Davidson motorcycle. Oh sure some lost their way for a time and rode other kinds of bikes, but these days the posse is like a mini-community based on a shared passion and a common interest around the Harley brand.  And while we defend the motor company we haven’t drank the Kool-aid!  We’re a demanding and very vocal enthusiast bunch when it comes to items the company needs to do to please it’s customers.

A Half-Dozen at HCMR

Has the posse always agreed on everything?  No.  We’ve had the typical debates about the merits of camping vs. checking in, riding with a large group or going solo, silence vs. Boom! Audio, up early vs. sleeping in, freeway speed or riding slow back-water roads and the more contentious item of planning way ahead or plan as you go.  We’ve tried them all and each has offered up some unique and fun adventures.  And no matter what the trip or the destination, all a good motorcycle ride needs is camaraderie and fun roads, right?

And speaking of roads, one common thread is that we all have plenty of time to ride.  That is to say, we make time to ride.  As much as we have in common, all of these accomplished riders is also entirely unique.  Each has his own set of experiences, his own philosophy of life and riding, and his own collection of interesting stories about life on the road.  I especially look forward to riding in the dry hot desert while others think a misty Highway 101 ride down the coast is “just perfect.”

I’ve been riding with this group for many years and everyone adjusts.  In fact, some of the members have history back to the coastal range and the dirt bike days at Lee’s Camp before a Harley-Davidson motorcycle stirred up any emotions.

The remainder of the posse at the CCA Ride

I’ll often get ask how we do it.  How do we handle riding all those miles.  I’ll typically just say that if you string a few 300 mile days together, one day at a time, then you’ve got a Posse Ride!

We’ve enjoyed following the “road less traveled” as so many other riders do.  It made us appreciate how divvied up this western part of the U.S. is, with dozens of valleys separated by mountain ranges, woven together by asphalt strips. These roads are really three-dimensional curves, and a rider will certainly get longer life out of the Dunlops, wearing out the sides as much as the middle.

As the years fade away — I’m reminded of winding our way along the back roads of the countryside – and it made me appreciate how rich the memories are of the years riding with an incredible group of friends.

Thank you all for the memories!

Photos taken by author

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Harley-Davidson Q2’11 Financials

H-D announced Q2’11 financial results this morning.

In a word – Booyah!

By every financial measure Harley-Davidson generated improvements in the second quarter of 2011, with strong earnings growth, increased shipments and growth in its dealers’ new motorcycle sales both in the U.S. and globally.  Here are some of the stats that CEO Keith Wandell and CFO John Olin reviewed from Anaheim, CA. where the annual dealer meeting and new product launch was in progress:

• Revenue in Q2’11 was $1.51B (up 15%) with income up 36.8% to $190.6M
• Motorcycle shipments up 7,769 in Q2’11 vs. Q2’10; Motorcycle segment revenue up $204.6M (18%) vs. Q2’10
• Touring motorcycle shipments made up 38.3% in Q2’11; up 3.6%
• International shipments were 36.2% in Q2’11 vs. Q2’10 at 42.5%
• Shipment forecast for 2011 rose by about 8% and now H-D expects to ship between 228,000 and 235,000 motorcycles worldwide
• Market segment share (651+cc) is 53.8%; up 0.2% from 2010
• U.S. dealer network sales of uses motorcycles up 11% through May; Used bikes sales continue to firm up (meaning they offer the dealer a method to help offset the “sticker shock” of new bikes)

Did anything go less positive?  Well that depends on your viewpoint.  From a shareholder’s perspective it’s “Houston, we’re ready to throttle up”!   Stock price set a new 52-week high at $46.88.

As a rider/layman the touring motorcycle shipment increases were offset by the decreases in Custom and Sportster declines.  There were no age demographics quoted in the analyst call, but we’ve been told that typically “youngsters” don’t buy the higher priced baggers.  In addition, the new 2012 touring models that were announced earlier in the month have… shall we say… “lean” engineering innovation compared to previous years.  In a number of cases there we’re only paint palette changes and price increases made up the so-called “new” touring models.  There was about a 1% price increase in the U.S. market.  The lack of innovation is especially troubling (to me) given that product development spending was up $7M in the first half of 2011 which was described as a continuation of their strategy and focus on leaner engineering.  Sure metals and fuel costs are up, but the lack of stronger product changes is not always a recipe for long term success.

Nothing was noted on the call about the recent expansion in India.  Not sure why given that SG&A expenses were up about $13M on the strategy to grow 100 – 150 international dealers by 2014.  Latin America saw a decrease in retail sales which was largely due to all Brazil dealers being terminated.  There was a restart in that country and the new dealers (6) were coming up to speed.

Congrats to H-D on a great quarter!

UPDATE: Full transcript of the analyst call is HERE courtesy of SeekingAlpha.

Photo courtesy of H-D.  Full Disclosure: I don’t own H-D stock

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Harley-Davidson 2012 – Same As It Ever Was

2012 Paint Palette

Have you been reading the headlines? There was a big earthquake in Haiti. Some men were rescued from a mine in Chile. Oh, and apparently there was a gigantic oil spill in the Gulf of Mexico.

What’s that you say? This all sounds like last year’s news?

Well, don’t tell that to Harley-Davidson. The motor company recently introduced 15 new models, which it considered innovative and groundbreaking  products:  a “tubeless” laced wheel option, and six new colors or color combinations on the touring models!   Then in a déjà vu lapse they announced the retention of last year’s integrated branding firm Graj + Gustavsen Inc. to continue advising the company on strategic branding initiatives related to apparel and apparel-related accessories.

It would seem that even Harley-Davidson understands that the touring models have so few innovations that their only hope of differentiating itself from the other players is through paint palettes…. So, the only buying question you’ll have to ask yourself, then, is: Does H-D make a convincing enough “color case” that you should invest about $20K in a “new” touring model?

Here’s the crux of H-D’s argument.  First of all, the new colors or color combinations are beautiful. The mostly unchanged motorcycles from 2011 are even more beautiful in 2012.  The unchanged frame is beautiful, too. It’s graphically coherent, elegant, fluid and satisfying. That, apparently, is the payoff when a single company designs and builds both the engine and frame housing?  The ‘advanced’ Harmon/Kardon radio retains its 1970’s BMW inspired ‘red’ glow and that glossy Vivid black paint — continues to be a magnet for fingerprints, boot scuffs, and unfortunately looks wicked great only in the dealer showroom. I think the words in the H-D press release were “The Legend Lives On.”  The band, Talking Heads, said it best… in the song “Once In A Lifetime.”  The “same as it ever was, same as it ever was” lyrics… really resonates for the 2012 touring models.

It’s been a while since I’ve had a good, proper, Harley-Davidson rant. Part of that has been the adventures of this year; I think it’s softened me and given me more patience, made me a little more graceful. Another part of it, probably closer to the heart of the matter is that I’ve been busy doing other things and a good rant takes time to incubate.

Well a rant has been building and I finally snapped as I read an article in last week’s “Wall Street Journal” (subscription required) where there was a front page story on Hyundai. How it went from a laughingstock to a runaway success in the car market. Now that they’ve solved the quality problem, now that they’ve caught up with Toyota and Honda, the company is confronted with a huge issue going forward, creativity. How do you lead when you’ve spent your entire manufacturing life following? Read WSJ article HERE.

The new Elantra is so far ahead of the market that Corolla sales have stalled and the new Civic has been blasted by critics as it fails to fly from the showroom. Instead of focusing on the econo box look, Hyundai imitated BMW and Mercedes-Benz. And the model was redesigned in four years instead of five, trumping its competitors in the marketplace.  The success of the Elantra is testimony to the change in culture at Hyundai. To one now focused on leading, on creativity.

This leads me to the question of is there a culture of innovation at Harley-Davidson?  When talking about innovation we often define the term too narrowly. In fact, innovation can – and does – occur in every industry of our economy, from consumer electronics to health care.  Yet, when I re-review the 2012 touring models, instilling creative thinking must be a work in progress.

For comparison, a few times a week, video screens around Hyundai’s headquarters in Seoul show a one-minute clip that has become a favorite. It shows an open office where workers wearing the same shirt and haircut are “beavering” away (that’s Oregon slang). Then a new person arrives with a different hair cut. Each time he voices an idea, the others shout him down. Eventually he gets the same haircut and everybody likes him. Then a question appears: ‘Aren’t we stuck in conventional thinking?’

I don’t know if a video loop like that would necessarily fly in a Milwaukee plant with the union workers, but that’s not the point of this post.

It’s about how most every American business is in a mad dash to innovate except for H-D.  The only answer can be the titans at the top are traffic cops sans creativity?  Don’t blame the public or the economy, blame the fat cat executives who are denying they’re the problem like the honchos at Goldman Sachs. What makes the rich believe they’re invulnerable, always right and entitled?   Somehow in the “dash-for-cash”, it’s all about shooting low, to the sweet spot, where most people live so the purveyors can make money.  Good enough just doesn’t cut it and of course there are exceptions, but generally speaking we’re in a low point for H-D touring motorcycles.

It’s a new game. No one gets to rest on his laurels. Making it today is no insurance you’ll thrive tomorrow, look at the carcasses strewn along the highway… OCC, Indian, or Big Dog.

We’ve got endless hype and yet sales are anemic.  Mediocrity thrives at Harley-Davidson because it’s all about the money.  About playing it safe… with new paint palettes!

Photo courtesy of  Hyundai and H-D.

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