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Matthew S. Levatich

Matthew (Matt) S. Levatich

Harley-Davidson announced that the current CEO of Harley-Davidson, Keith Wandell (age 65) is retiring after taking over the position back in May 2009.  Matthew S. Levatich (age 50), who has served as the President and Chief Operating Officer since May 2009 is scheduled to take over as the next CEO on May 1, 2015.

Mr. Levatich served as President and Managing Director of MV Agusta, a former subsidiary of the Company. In his 15 years at Harley-Davidson, Matt has held positions of increasing responsibility in the U.S. and Europe. He served as General Manager of Parts & Accessories and Custom Vehicle Operations and Vice President of Materials Management.

Matt joined Harley-Davidson in 1994 through its Leadership Development Program and serves on the executive advisory board of the MMM Program at the J.L. Kellogg Graduate School of Management and Robert R. McCormick School of Engineering and Applied Sciences at Northwestern University.  He is a trustee on the Milwaukee Institute of Art and Design and a Regent at the Milwaukee School of Engineering (MSOE). Mr. Levatich holds an Undergraduate Degree in Mechanical Engineering from Rensselaer Polytechnic Institute. He holds ME in Engineering Management and MBA in Marketing, Finance and Organizational Behavior from Northwestern University.

Matt will take the helm of the company at a much better stage than it was during the tenure of Wandell where coincidentally, Harley-Davidson has reported consecutive profits for six years in tandem, which shows how key the effects of Wandell were on the company.

Congrats are in order.  There are challenges ahead which need to be overcome by the company as a whole and it will be interesting to watch advances in the pipeline made by Mr. Levatich.

Photo courtesy of H-D.

All Rights Reserved © Northwest Harley Blog

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Indian TankCoincidence? 

On Friday, August 9th, three days after the Indian launch, the Harley-Davidson Chief Financial Officer, John Olin sold 11,104 shares of HOG stock.  The stock was sold at an average price of $59.00, for a total transaction of $655,136.00. Following the transaction, the CFO now directly owns 12,702 shares in the company. The sale was disclosed in a filing with the Securities & Exchange Commission, at this link.

Just a couple of days later Harley-Davidson CEO, Keith Wandell sold 77,102 shares of the stock in a transaction dated Tuesday, August 13th. The shares were sold at an average price of $58.82, for a total transaction of $4,535,139.64. Following the sale, Mr. Wandell now directly owns 70,545 shares in the company.  Those stock options must be working out for him as he now owns three motorcycles; a Street Glide CVO 2011; Road King Classic; and Dyna Wide Glide. 

Well-heeled Riders

Well-heeled Riders

As is often the situation with an executive selling  stock it was likely in the pipeline for weeks prior to the actual sale.

But, after the Great Recession began, the lingering impact of the worst downturn in a half-century continues to deplete the standard of living on the middle-class American household.  Let’s face it, the big factor in the market for anything expensive nowadays is that the only people who have disposable income are the super-rich… and THEY have more of it than anyone has ever had in all of human history.

Sure it’s become trite to slam the rich and I’m trying not to be repetitive.

But, it’s not about being ostentatious:  the super-rich don’t care about impressing the rest of us, because they never see us. They glide from the gated community to the private jet to the island vacation home without encountering any “downscalers.”  They mix exclusively with the other super-rich, and those are the only people they care about impressing.

And that’s tough, because when you’ve got enough money to buy about anything that’s ever been made without a second thought, you have to realize that the guy living next door to your McMansion can buy it too.  So, you’ve just ordered a one-off custom color CVO with a turquoise ostrich-skin seat with matching hand-made gloves and boots?  He’ll give it a glance and say, “Not bad. I think I’ll get a couple for my kids to use when they’re home from prep school.”

So, if really you want to one-up your neighbors by owning something they can’t, your choices are restricted to items with a built-in limited supply, such as art works, and a U.S. Congressmen. Or in keeping with a narrower interpretation of that custom motorcycle style genre, just minimize the amount of tchotchkes on that bone stock H-D motorcycle.

Simple is the new chrome and when your well-heeled fellow riders guffaw, you just have to learn to smirk in a superior way and say, “I guess you don’t grasp the irony…”

Photos courtesy of Indian Motorcycle and Flickr.

All Rights Reserved © Northwest Harley Blog

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NOAA-MapYou’re the CEO and going down your quarterly earnings check list:

  1. Still in business after 110 years – Check
  2. Secured music talent for 110th Anniversary Party – Check
  3. Number one seller of motorcycles to young adults (18-34) – Check
  4. Increase 2013 first quarter revenue to $1.57B (up 10%) vs. $1.43B a year earlier — Check
  5. Increase 2013 first quarter income to $224.1M vs. $172M a year earlier – Check
  6. HOG shares up 2.1% to closed at $54.31 – Check
  7. U.S. dealers sold 34,706 new motorcycles, down 12.7% from a year earlier – Ooops!

Colder temperatures and the wet climate set the stage for the quarterly sales miss.  At least according to Harley-Davidson CEO, Keith Wandell who stated in last week’s earnings call… “By far, the vast majority of the (sales decline) was weather related”.

Temp2-MapInteresting.  The earnings call didn’t signal any major marketing changes for the brand, instead pinning some of the losses on external factors such as rainfall in many parts of the country, the weak economy and the unseasonably cold weather.

Are the only unemployed consumers who keep getting rained on Harley-Davidson consumers?!

Generally speaking home sales and auto sales are up.  It would seem that management neglected to remind us about Superstorm Sandy, how federal tax returns have been delayed and how fuel prices are unsettling to consumers.  To be fair some retail outlets selling spring apparel, home and garden were depressed due to wintry conditions, but looking at the weather for an impact on Harley-Davidson consumer spending seems a bit trivial.

I spent the last week in Arizona and if you plotted temperatures from dawn until noon, you’d observe an alarming warming trend.  If you extended that trend line for the next 4-months, you’ll clearly notice that ice caps will melt and the poor polar bears will be swimming more.

We’ll soon know if the good weather in the upcoming quarter provides a recovery to more normalized sales volume.

Photo courtesy of NOAA

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110th Anniversary Logo

Well not officially, but according to this site, they’ve obtained a double top secret (read: “leaked”) list of the new Harley-Davidson 2013 model lineup.

No sources were provided, no color schemes or was there any validation via a photo or a scanned copy of the leaked list provided so take all this with a grain of salt.

Motorcycle enthusiasts are well aware that 2013 is the 110th Anniversary for the motor company and similar to the 100th and 95th anniversary celebrations there were a lot of special color combinations and special badging on a broad range of models so we can expect the same for 2013.

For 2013 in the top-of-the-line CVO’s, there will be the CVO Road Glide Custom Anniversary Edition, the CVO Road King, the CVO Road King Anniversary Edition and the CVO Ultra Classic Electra Glide Anniversary Edition. The 2012 CVO Softtail Convertible and CVO Street Glide are dropped.

That last one means the price just went up for any stragglers in the dealer showroom floors on this year’s 8-speaker, 1000 Watt, aural bubble machines, i.e., the CVO Street Glide!

Moving down from the CVOs there’s the new 2013 Road King Anniversary Edition and for “trike” crowd there will even be a three wheel Tri Glide Anniversary Edition.

On the Sportster line-up, there is the Sportster 1200 Custom Anniversary Edition, and the Nightster is being dropped.  On the Dyna and Softail lines there’s the new Fat Boy Special Anniversary Edition, Heritage Softail Classic Anniversary Edition and Super Glide Custom Anniversary Edition.  According to the report the “Anniversary Edition” means black paint and some special badges.

In related news, on Monday (June 25th) the Harley-Davidson CEO, Keith Wandell and members of his management team will be in New York to ring the closing bell at the NYSE commemorating the company’s 25th anniversary on the exchange.  It wouldn’t be unheard of them to take Experience Square and transform it into a mini-showroom and have some 2013 models on display.

When I get more information I’ll update this post.

UPDATE: September 9, 2012 – An updated post on the 110th models is HERE.

Photo courtesy of H-D.

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By now you’ve likely read the Q1’12 financial report about how Harley-Davidson Inc. blew away the key financial metrics for the quarter.

You know – Financial Reports – the documents and records pulled together by the motor company to track and review how much money the business is making (or not) with the purpose to update the lenders and shareholders.  These reports are not very friendly or helpful explanations.  More often they require an accounting degree because of the use of financial derivatives, contracts and instruments.

At any rate, not only did H-D report strong gains in earnings for the first quarter of 2012, but motorcycle and related products revenue for the quarter jumped to $1.27 billion, compared with $1.06 billion for the year-ago period.  Consolidated revenue for the quarter, which includes revenue from H-D’s financial services unit, rose to $1.43 billion for the quarter, compared with $1.22 billion in the year-ago quarter.  Most important was the fact that retail sales of new motorcycles grew 20.3 percent worldwide in the quarter compared with the prior-year period and it was led by a strong 25.5 percent increase in the U.S.

Is Harley-Davidson becoming cool to work for again?

It’s a big place and I’m sure some would say yes its cool.  However, what they’ve been through the last couple years has been painful and the process of getting rid of a lot of old bad habits has some maybe thinking no.  The Harley-Davidson chairman, president and CEO, Keith Wandell’s willingness to take on the risks took a lot of courage and it now seems to be paying off.

In other words, it takes 10,000 hours to become world class.  This is a key point in Malcolm Gladwell’s book called “Outliers” which has popularized the theory of 10,000 hours to excellence.  Clearly Mr. Wandell has put in his 10,000 hours, but that doesn’t mean anyone will notice.  Many will just shrug their shoulders at his accomplishments, or they might not even care.

I’ve taken notice and wonder if Harley-Davidson is ahead of its time or is the outlook less optimistic because they’re very good at setting targets that they are confident of being able to hit?

I would suggest that their success this quarter has been largely dependent on “baggers” and the discretionary spending situation improving versus bold new designs.  Meaning the whole motorcycle industry is running on conventional wisdom. People keep doing it the way everybody else is doing it, not expecting a different result so much as being desirous of converting people over to their brand or getting the few remaining conventional buyers left in the business.

You might disagree, but from my vantage Harley-Davidson hasn’t busted out a new “hit” (model) with worldwide success in long time despite the daily onslaught of promotions and publicity.  I’m talking about a stand in the line type of hit!  The conventional orthodoxy of the motorcycle industry is that H-D’s are styled conservatively.  This is typical market research talking.  It’s conventional wisdom saying don’t take a risk on design.  Just accept safe.  A blacked-out bolt here and a new red glitter color there.

Independent of this most recent financial report, the issue is that “safe” doesn’t consistently move the needle in terms of sales.

John Krafcik, President and CEO of Hyundai Motor America

If that were true then Hyundai sales wouldn’t be burgeoning or would they be the most feared major car company in the U.S.  Do you remember when Hyundai’s used to be a joke? Jay Leno said you could double a Hyundai’s value by filling it up with gas.  No one’s laughing now as Hyundai’s John Krafcik steered it from joke to contender. It took a risk.

So, when will we see some of that product “risk” that Harley-Davidson refers to in the quarterly financial reports?  Or has it all come down to being safe and going after the number of “likes” on social networking sites?  Hey, Harley… 1999 called and said they want the true-to-self artistry back!  We can smell the hype.  We know when you’re working it.  What’s sup with all the emphasis on tweeting and hyper-vomiting facebook “fans” over everyone’s networking profiles.  It all adds to the dissonant fray of self promotion and it’s hard to hear when everyone is yelling.

If you have a hot product, people want it.  We know when something impacts us, when we believe it’s great.  And when we find something good, we want to get closer, we want to tell everybody we know.  You don’t have to tweet, you don’t have to Facebook, you don’t even need a website. But it’s got to be different, it’s got to challenge conventional wisdom, it’s got to appeal to people’s hearts more than their pocket books.

Harley-Davidson is at a point where they can make the transformation from the perennial also-ran to a motorcycle industry jauggernaut that pushes the envelope in its designs while other companies try to catch up.  Or the Hyundai equivalent will…

Photos courtesy of H-D and Richard Drew/AP.

All Rights Reserved © Northwest Harley Blog

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I was in L.A. last week driving down part of Route 66 towards the Santa Monica pier and through Beverly Hills enjoying the nice California  weather.

There were more yet-to-be licensed Benzes, Ferraris and Porsches over a three-mile stretch than I’ve seen in the past year.  And here I was in an ultra-cool Nissan Cube rental, arm out the window and for a few blocks co-mingling with the rich and famous.

Speaking of… did you read that the Harley-Davidson president and CEO, Keith Wandell, opted not to have his base salary increased in 2011, according to a proxy statement filed with the U.S. Securities and Exchange Commission.

On the surface this – “we’re all in it together” – grand gesture would make a person believe that a CEO who accepts a ZERO increase in salary is saying they’re a team player who wants to make a sacrifice for the good of the company.  After all wasn’t it Harley-Davidson management that laid-off hundreds of workers, closed plants and obtained impressive union concessions in a new multi-tiered workforce structure for the survival of the company?

Call me cynical, but when I hear about these it seems more like “camouflage” to deflect scrutiny off the extraordinary set of CEO benefits or at minimum to get publicity and produce significant positive short-term market reaction.

In fact, there are a number of reports which suggest these type of salary tactics are nothing but a ruse or smokescreen as a number of CEOs have adopted these pay schemes.  It’s the kind of opportunistic behavior from those wealthier, more confident, influential CEO’s rather than sacrificial acts they are ‘projected’ out to be.

I certainly don’t know if or what Mr. Wandell’s intent was, but we do know his total compensation in 2011 rose nearly 13% to about $7.2 million, compared with $6.4 million in 2010.  We also know the motor company paid Mr. Wandell a bonus of $365,639 in 2011.  He also received a base salary of $975,037 in 2011, equal to his salary in 2010.

And to be clear this post isn’t about wealth envy or whining about how it must be nice to be rich.  We all know that rich people and bankers are beating the system.  They’re writing off multi-thousand dollar meals with rare wines at places with unlisted phone numbers that you/I can’t get into.  Unless you just woke up in North Korea, then you know that in America, if you don’t like what you earn, where you work or what you do for a living then you’re entitled to leave (quit) and go start a company, further your education or do whatever the hell you want.  It’s clear that company’s exist to make a profit for their shareholders and if the shareholders don’t like what the CEO is doing, or earning then they can fire the board of directors to include the CEO.

But wait there’s even more.  Mr. Wandell received total cash bonus payments, both discretionary and performance-based, totaling more than $2.8 million in 2011, compared with cash bonus payments of about $2.3 million in 2010.  His stock awards were valued at $1.5 million, compared with $1.4 million in 2010, while his option awards were valued at $1.7 million, compared with $1.6 million the previous year.  He also received “other” compensation totaling about $175,000 in 2011, compared with about $84,000 in 2010. The payments included $29,600 in lieu of receiving certain perquisites and personal benefits, nonqualified deferred compensation plan contributions of $68,466, 401(k) plan contributions of $31,850, and life insurance premiums of $13,727. He also received additional benefits that totaled $25,478 consisting of financial planning services, personal use of company aircraft and clothing.

What’s the punch line?

Well given that Mr. Wandell has made things happen, meaning that as “Head Honcho” he made moves that H-D insiders historically shied away from.  He played hardball with dealers, shed crappy brands, cut labor contracts, made major job cuts and closed plants. Some folks were let go just prior to Christmas, but unfazed he continued to trim the fat and raised cash by selling some old investments, like Harley’s semi-secret test track in the Everglades.  He also challenged Harley’s own traditional norms by altering its marketing strategy to attract non-traditional segments, like women and minorities.  He also embarked on an international growth strategy that will eventually bring the all the products, the parts, the lifestyle, and the American V-Twin to enthusiasts worldwide.  The financial numbers speak for themselves.

All this from a guy who came to the Motor Company and did not even ride any kind of motorcycle!  He’s earned a raise.  How hard is it to understand… Harley success = Industry success.

Photo taken by author’s iPhone and post-processed in Snapseed (Nik Software).

All Rights Reserved © Northwest Harley Blog

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Northwest Riding Season's

As I sit down and write this post, it is 45 degrees with rain and wind.  I spent the last week at NAMM in Anaheim, CA where it was sunny.  Today is one of those gray winter days that make me wonder what I’m doing here.

Then I remember driving in L.A. traffic during rush hour and thinking this is nuts. Or rolling through Furnace Creek on Hwy 190 last April watching it approach 90 degrees and thinking that’s nuts.  Or even a couple summers ago rolling across Alberta where it was super flat and you’d ride 20+ miles between curves in the road.  That’s when I remember why I’m here…

The northwest has some of the best riding roads in the country and we actually have seasons.

And speaking of seasons, it’s earning’s ‘season’ and Harley-Davidson announced a profit versus a year ago loss.  Harley’s sales of motorcycle and related products grew 13% in 2011 and the recent quarter marked its third-straight increase in U.S. sales.  The result is remarkable given that most financial analysts see a continuing “trough” in the U.S. economy, which is beset by a weak recovery and a jobless rate that is likely to remain in the 8% range for 2012.

Harley’s motorcycle and related product revenue rose 12% to $1.03B.  Retail sales of new motorcycles grew 11% worldwide and included a 12% increase in the U.S.  International sales rose 9.7% and included a 5.8% increase in Europe, even though consumer confidence has been shaken by the current economic crisis.  The motor company shipped 50,730 motorcycles to dealers and distributors during the quarter, compared with 44,481 in the same quarter last year. For the full year, shipments rose 11% to 233,117 bikes.  Even Harley’s financial services division got a boost from improved credit conditions. New motorcycle loans jumped 14% to $349.5 million and represented about half of the company’s retail sales.

Keith Wandell (H-D CEO and President) credited the Q4 sales jump to improved consumer confidence in the U.S., along with key growth investments overseas.  However, in Europe, the Euro-zone is facing its own, even larger, economic crisis and Mr. Wandell reminded the  analysts with, “We will continue to keep a close watch on the marketplace and remain cautious in our expectations of retail given the degree of continued economic uncertainty including regions like the Euro zone.”

For all of 2011, Harley reported net income of $599.1 million, or $2.33 per share, up from $146.5 million, or $1.11 per share, in 2010.  Motorcycle and related product revenue increased to $4.66B from $4.18B.

Photo taken by author.

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