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A Mid-Year 2014 Road Glide?

A Mid-Year 2014 Road Glide?

The Harley-Davidson Road Glide is different.  

Different design, different ride and the motorcycle has incredibly loyal customers.

Customers who appreciate the wind control and handling that comes with a frame mounted fairing are not typically going to switch to another model.  However, the Road Glide does take people off competitive brands and without it in the H-D line up dealers are missing an opportunity or worse, will see erosion of market segment share.

Sales numbers do talk and during the last earnings call, CFO John Olin stated that the Road Glide represented approximately 9% sales volume and would be back from its temporary hiatus.

And now in the buzzfeed there is more speculation about what the 2015 Road Glide fairing may look like.  Thanks to Worth Harley-Davidson, the Kansas City, MO., dealer posted photo’s on a Facebook page.  

Why wait for the 2015.  This nice custom fairing could hold all your aftermarket Project RUSHMORE electronic purchases?!

UPDATE:  July 8, 2014 – “Official” spy photos of the 2015 Road Glide are HERE.

UPDATED: August 1, 2014 – Harley-Davidson officially reveals the 2015 Road Glide.

Photo courtesy of Worth H-D.

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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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Santa wasn’t good to the motorcycle industry in 2009.  A weak economy, company layoffs, a housing melt-down, credit freeze, higher manufacturing costs and an ever discriminating consumer to boot.  As Harley-Davidson executives ponder over what happen this year, I can’t help but believe there are some major things on their wish lists to Santa.  So I’ve taken a scientific (parody alert!) guess of what some of H-D’s top executives want for Christmas:

Keith Wandell, CEO, Harley-Davidson: I got the head honcho job with the industry’s most iconic motorcycle manufacture in history, that has a cult-like following, with vendors tripping all over themselves to copy what we’ve done and I didn’t even have a motorcycle endorsement. I can’t think of anything more to ask for.  Oh wait, all those government stimulus funds – listen up Santa, I’ve been to the White House twice for dinner.  Have I not been nice enough?  Please let the spinner land on my project.

Mark-Hans Richer, Sr. VP & Chief Marketing Officer:  What the ho?  Please, Santa send us Tiger Woods!  As the leader of the world’s foremost authority on brand marketing, our team of cutting edge hoo-ha marketers developed a new strategy with Tiger as the spokesperson!  It’s set to appeal to the outlaw in every man.  We plan to dump that “ludicrous” campaign in favor of “Night of the Tiger”…complete with an exclusive Elin ghost flame paint scheme…

Bill Davidson, VP Core Customer Marketing: Please Santa let 2010 be the year for H-D in professional motorcycle racing.  Nothing but wins – in the dirt or drag or NHRA Pro – whatever it says on my t-shirt. Wait, can you also help people forget about that botched firing of Anne Paluso.  Really our plan is to go racing – go “team scream” or something like that.

John Olin, CFO: Motorcycle sales!  Santa it’s not my fault.  Please let me milk this “new in my job” for just a while longer.  What do they expect?  Miracles on Juneau Avenue!  Doesn’t it matter that I’ve been here less time than Keith?  I do have a motorcycle endorsement.  And, my calculator is newer than Lawrence’s!

Matthew Levatich, President & COO: Santa please get the Wisconsin Department of Transportation to approve and recognize my heroic role in getting the special license plate commemorating Harley-Davidson through the political red-tape as the state’s official motorcycle.   Yep, 2010 is shaping up to be a good performance review!  Memo to Enrico… get the bottle of Chianti ready!

Lawrence Hund, President & COO of H-D Finance: A new platinum edition HP 12C calculator.  The minus button on my last one quit working.

Gail Lione, EVP & General Counsel: Santa please tell us who is behind that NWHOG?!  Send us that macrant email address.  We have an important legal document gift we wish to serve send over to Northwest Harley Blog.

Paul James, Harley-Davidson Company Spokesperson: Please let me graduate the training class called “If the dream is big enough, the facts don’t matter” — a.k.a. the Mohammed Saeed al-Sahhaf school of bubbling optimism to distract the media and bloggers with superfluous BS so they ignore our fundamental problems.

James McCaslin, EVP Corporate Product Planning:  Santa can you get me a copy of Keith’s industry information?  I’ve never heard of “vendors tripping all over themselves to copy what we’ve done?”  I do remember a blogger at the 105th Anniversary trying to take a photo of a plant tour and we ran his butt right out the building before he was able to take pictures of the lunch room.

Karl Eberle, Sr. VP Manufacturing: Please make Indian go away. We are tired of being embarrassed in our own back yard when it comes to American cruisers and we don’t want that company bragging about their superior performance anymore.

Enrico D’Onofrio, Managing Director – MV Augusta: I already got what I wanted. Thanks for the early Christmas present H-D!  That sale notification surprised Wall Street… as you say in your home land… my golden shute is priceless. All this talk about motorcycles when the grape reigns supreme here in the zone of Tuscany… please pass the Chianti.

Jon R. Flickinger, President & COO of Buell: A job!  Also could you unload some of those dusty Buell’s in the warehouse?  My exit bonus is on the line.

Thanks for your readership during this past year. You may not have agreed with what I had to say at times, but it made for some lively discussions nevertheless. Merry Christmas, happy holidays and best wishes to you in 2010.

Photo courtesy of Flickr.

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Lawrence G. Hund

Lawrence G. Hund

H-D announced the hire (or is it re-hire?) of Lawrence G. Hund as President and Chief Operating Officer (COO) of Harley-Davidson Financial Services, Inc. (HDFS), effective June 29.  HDFS is a wholly owned subsidiary of H-D and provides wholesale financing to dealers and retail financing to customers.

Mr. Hund comes from Tygris Commercial Finance Group, Inc. where he worked the last 8 months as its Chief Financial Officer (CFO). Yes, you read that correct — EIGHT months!  With over 25 years in the commercial finance industry, Mr. Hund oversaw Tygris’ treasury, accounting, tax, planning and analysis and financial operations.   The company was founded in 2008 and from background research it reads as if the company was on a hiring binge of executive talent for much of last year with specialist’s in asset based credit facilities, turnaround and bankruptcy/exit financing to mid-market companies.  In addition, Mr. Hund was hired at Tygris after only 11 months as CFO of Bridge Finance Group.  Rotating through two CFO positions in less than 19 months may not mean anything other than validation of the malaise in the credit markets.  Both companies were deep in the banking and commercial finance sector and served the automotive industries.  Lastly, Mr. Hund was CFO of HDFS from 2002 to 2007 and it’s likely he was either instrumental to the negative asset quality/performance or deeply involved in setting financial strategies which accounted for over $3 Billion in debt at HDFS and nearly $1 Billion of debt at HOG at the start of 2009.

The lingering issues with the credit market and the recessionary economy will continue to haunt HDFS.  Let’s hope that Mr. Hund can create a leading commercial finance franchise and avoid using any of his bankruptcy skills!

Photo courtesy of Tygris.

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pink_slipI’m fascinated by the decline or some might say the “fallout” of the Harley-Davidson management team.

HD announced a couple days ago that effective immediately the CFO, Tom Bergmann was leaving the company.  Labeling the hasty departure with the all too familiar and politically correct words; “seeking other career opportunities” to describe his abrupt exit.   Mr. Bergmann had been CFO since 2006 and in January 2009 it was announced he would take on the additional responsibility as president of Harley-Davidson Financial Services (HDFS) after Sy Naqvi’s sudden departure.  So it’s rather odd that on the very first day that the new CEO, Keith Wendell comes to work Mr. Bergmann would choose it as the most optimal time to leave?! 

I smell “Mr. Clean”… and I even provided Keith a 10-step success plan, but forcing out the CFO in the first 8 hours on the job was not on the list!

On the day of his departure, Tom had just completed a transaction that would provide about $1B in funding capacity that the company could use for consumer lending in 2009. The new funding was important, since the firm finances roughly one of every two HD motorcycle purchases.  HDFS increased the size of an existing $500 million asset-backed commercial paper conduit facility to up to $1.2B, based on the level of outstanding receivables. The facility expires April 29, 2010.  In addition, Tom negotiated to have replaced a 364-day, $950M bank credit facility expiring July 31 with a new 364-day, $625M credit facility expiring April 29, 2010. Together, the two agreements provide additional available credit of up to approximately $375M over the term of the agreements for the lending activities of HDFS. 

Getting the funding covered is a monkey off their back and a fairly impressive accomplishment to tell the new boss on day #1, but to turn around and say “Hasta la vista, baby”…I’m outta here.  WTF?  Whether Mr. Bergmann was run off the road or decided no more black leather, but instead it’s time for touring suits with leg guards and time to gear-up for a sound different than a low rumble…we’ll never know.

The HD press release stated that Controller John Olin would serve as interim CFO at the company.  Bergmann also served as President of Harley-Davidson Financial Services (HDFS) and Treasurer Perry Glassgow would take over on an interim basis.  Lastly it named Mark Kornetzke, senior director of financial reporting, as the company’s chief accounting officer.

Photo courtesy Henny Ray Abrams/Reuters.

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money_stackBarack said yesterday that I should sacrifice, but I need to ask myself to what extent am I willing to go.  And as it turns out the ultimate discretionary item — Harley-Davidson — is in the same situation…determining how willing they are to sacrifice or jeopardize their company! 

I previously blogged about Harley’s inability to securitize motorcycle loans HERE the delinquency rates HERE and the five quarter earnings decline HERE.  Obviously not good times for the company.

But, like a lot of things these days related to financial issues they change weekly.  On behalf of Harley-Davidson, Sen. Bob Casey Jr. (D-Pa.,) wrote a letter on Jan. 16th to the Federal Deposit Insurance Corp. chairman Sheila Blair, saying Harley-Davidson recently inquired whether its financing company and subsidiaries — Harley-Davidson Credit Corp. and Eaglemark Savings Bank — are eligible for the Temporary Liquidity Guarantee Program (TLGP).  The TLGP guarantees a corporation unsecured debt against defaultA bailout?

The Harley Springettsbury Township plant is the largest of the company’s manufacturing facilities and employs more than 2,800 workers as well as supports approximately 1,500 jobs at Harley dealerships in Pennsylvania.  It’s easy to see why Sen. Casey is supporting the eligibility for TLGP due to the potential negative impact to his state’s economy.  And it’s “pile on” season in reference to the challenging economic environment, lower consumer confidence and banking sector meltdown so why not jump on board.

Demonstration Against UK Gov Bailout

Demonstration Against UK Gov Bailout

This sounds a bit like the ‘ol… “It’s not my fault” redirect the blame to the economy trick?  Do you think this a problem of people not being able to get loans to buy motorcycles?  I have no insider information, but I’m inclined to believe it has more to do with delinquency rates and processing bad loans on the part of Harley-Davidson Financial Services (HDFS).  Sure the economy and financial markets being reluctant to fund higher risk loans contributed, but don’t forget about the MV Augusta acquisition which has been described as an over reach by the company execs. 

Also we should not forget the sudden “personal” decision of Sy Naqvi (HDFS President) two weeks ago to immediately resign.  Mr. Naqvi was HDFS president for 23 months when Harley announced that Tom Bergmann (CFO Harley-Davidson) would assume the the additional responsibilities of HDFS president.  Naqvi joined HDFS from DeepGreen Financial, Inc., an online home equity lender, where he was CEO.  DeepGreen was acquired by Lightyear Capital and had a somewhat sorted history with operations in Cleveland while Naqvi worked out of Chicago.  Efforts to turn DeepGreen into a brick and mortar bank failed.  Is HDFS next?

But let’s think positive.  If Harley obtains eligibility status from the FDIC it (really taxpayers) will guarantee unsecured corporate debt against default.  In addition, Harley would get federal funds if a customer defaulted on his or her motorcycle loan.  Nice!  How do I sign up?

It will be hard to calculate Naqvi’s impact on/at HDFS or what role if any he played in its current set of troubles.  I wonder if the company is “positioned appropriately” for the faltering economy or if it’s another bailout on the list of so many?

Harley-Davidson is expected to report fourth-quarter results this Friday and I’m not hopeful of Q4’08 results.

Photo courtesy Flickr.

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Harley-Davidson reported out on Q1’08 earnings.  They had net income of $187.6 million or 79 cents a share down 2.5% from $192.3 million or 74 cents a share in the prior period despite revenue rising 11% to $1.31 billion, from $1.18 billion in 2007.

The impact of the economic slowdown was felt mostly at U.S. retail as dealers’ new motorcycle sales declined 12.8% compared to a year ago. As a result, Harley has taken steps to significantly reduce shipments for the rest of this calendar year and reduce the workforce.  It now plans to ship 23,000 to 27,000 fewer Harley-Davidson motorcycles in 2008 than it did in 2007.

And did you know that ALL of Harley-Davidson’s top execs including current CEO James Ziemer, were NOT paid any bonus for 2007?  It’s true!  Recently released documents show it’s the first time in several years that Harley execs have not received a bonus and is a result of the company failing to meet financial performance targets in a year in which the sales and earnings dropped.

But, before you start singing praises for the top brass let’s get the 411 (lowdown)…Harley has distributed substantial bonuses to its top execs in recent years. For example, in 2006, Ziemer was awarded a bonus — referred to as non-equity incentive plan compensation in the regulatory filing — of nearly $1 million.  A whopping $1M bonus, wow!  But wait, it gets even better because that bonus was teeny tiny in comparison to what the previous CEO, Jeff Bleustein and now chairman of the board of directors received.  Here are the numbers from the filing documents:

Year              Exec                      Amount

2007             James Ziemer          $0

2006             James Ziemer          $1 million

2005             James Ziemer          $600,000

2004             Jeff Bleustein           $3.5 million

2003             Jeff Bleustein           $3.5 million

2002             Jeff Bleustein           $3.5 million

2001             Jeff Bleustein           $2.0 million

So, how does this compare with other companies?  These obscene bonus amounts sadly aren’t a wild exception. In fact, Harley bonuses were “modest” according to a study by Graef Crystal, a business columnist and compensation expert, where CEO pay rose 22% last year, while the average worker’s pay rose by around 3%.   For further proof, it doesn’t take much of a Google search to learn that Viacom CEO Sumner Redstone took home about $28M, including a bonus of $16.5M, even as his company’s stock dropped 11% during the fiscal year. Applied Materials CEO Mike Splinter got a tidy $5M bonus, despite a stock slide of more than 22%. Rick Wagoner, CEO of General Motors, saw GM stock plunge 25%, yet he still pocketed a $2.5M bonus.

I don’t like “busting” on Harley especially when they are down, but knowing bonuses were “modest” just didn’t make me feel better.  Ziemer mixed words like “challenging” and “no signs when things will turn around” frequently during the last analyst call.  I’m not sure how a person making $480/hour from their annual bonus alone can say “challenging”…oh, wait he’s talking about the company, not his personal struggle to make ends meet!

And speaking of struggle, what about those positions getting “downsized”?  Well Thomas E. Bergmann (CFO), quantified the reduction of headcount as 370 or approx 6.5% of the N.A. workforce or if you look at it from the non-production workforce of 360 positions it’s approx 10% of the Harley’s N.A. motorcycle operations being let go.

It’s not exactly clear, but it looks like the overweight, mid-life testosterone driven, on your 3rd marriage with a trophy wife buyers are really drying up and so goes the potential profit gains of my HOG stock portfolio.  

I think it’s time to pull my shares and let the Eagle “go it alone”

 

Photo courtesy of the HD Museum.  The 1981 ad represents the company buyback from AMF ownership.

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