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Posts Tagged ‘Chapter 11’

About 40 years ago, a social movement arose to destroy the establishment.  People wanted to take on the man and return power to the people, upend the elites and lead a revolution.   Some would argue that today we have a similar movement with the people loosely called the “tea partiers” who today are motivated by runaway federal spending vs. the war during the Woodstock days.

Taking it to “The Man” refers to the government, leaders of large corporations and other authority figures in general.  Sprinkle in an array of conspiracy theories involving the Fed, the big banks and black helicopters and you’ve got Harley-Davidson investing heavily over the last year in what I call taking it to “The Man” advertising.  It’s advertising which appeals to the man who is born free, but he is everywhere in chains…

You see these advertising movements are built by marketing people who hope consumers will put their faith in unrestrained passion and zealotry to buy motorcycles.  The assumption is that the people are pure and virtuous, and that evil is introduced into society by corrupt elites and rotten authority structures so let’s stick it to ‘em.  But, what happens when Harley-Davidson (the motor company) becomes the manipulator and shadowy corporation or the ‘elite and rotten authority figure?’

So it is according to AMC H-D in Albany, OR.  Based on their most recent communiqué, the Milwaukee Motor Company decided that starting in March there would be a policy change which prevents dealers from advertising any sales storewide.  So, taking a page from H-D’s own corporate marketing campaigns and doing their own mini-version of “Stick it to the Man” type of advertising…AMC H-D created their own tea party movement and broadcast there plans to have a 20% off sale (excluding motorcycles) all year long!  If the item you need isn’t in stock then you’ll get a 15% reduction when you place the order.

Talk about counter-establishment.  Pure advertising genius!

So what’s in play here.  First and foremost is a job-less recovery is making it darn hard for any motorcycle dealer.  Second, H-D would like to continue to be viewed as the premium brand or “exclusive” product and thus does not want to be attached to a “sale” image with their brand.  Lastly, the dealers who prefer to operate in the higher margin “dealer markup” mode are likely pressuring H-D to stop the undercutting from lower margin dealers who have yet to succumb to the mega/bistro/resort level expense in renovating a dealership.  Remember Timpanogo?

We all know that if you want service after the sale, knowledgeable and friendly staff, a quality product, and pancakes on Sundays, you’re gonna pay for it!  The question is just how much more.

Photo courtesy of AMC H-D.

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GM, Rick Story and Owner, Dave Tuomisto

GM, Rick Story and Owner, Dave Tuomisto

It’s starting to look a lot like a “job-less recovery”… and the R-word continues to take a toll as bankruptcy filings nationally surged past the 1 million mark during the first nine months of 2009.  Many states have similar statistics, but in Utah the U.S. Bankruptcy Court received 10,706 bankruptcy petitions in the first nine months of this year — a 62% increase from the same time last year.

And speaking of Utah, the owner of Timpanogos Harley-Davidson (Dave Tuomisto) filed for Chapter 11 bankruptcy protection last month to help stall an acrimonious legal battle over millions of dollars in alleged unpaid debts to several lenders.  I previously blogged on the July 2008 opening of the mega-dealership HERE and it’s unique history after a $16 million renovation complete with green building awards.

The 6-acre complex and building was resort-like and often written about in a very positive profile that focused on Harley-Davidson’s growth strategy, branding efforts, and future opportunities.  Overall, it was a great story and a source of pride as a memorial to the Geneva Steel power plant.  For the city it was a way to talk up the merits of building green and reusing historical icons.  It was like a mini-museum and it’s very unfortunate to witness its rapid fall – again.

As the economy continued to falter, the overextended Mr. Tuomisto structured an agreement with Nu Skin founder Blake Roney (Tupelo Investments LLC) to transfer the dealership to them after getting bailout assistance to keep the dealership’s assets from being seized and shut down by Harley-Davidson Credit Corp.  Tupelo Investments LLC owns the 60,000 square-foot building and the motorcycle-themed restaurant called Marley’s. In bankruptcy court filings the list of creditors include: Harley Davidson Credit, which is owed $4.3 million; Monarch Recreation Sales is owed $760,922; Scrub Oaks is owed $400,000; the Utah State Tax Commission is owed $151,363; and millions more owed to hundreds of other businesses and individuals.

But wait, there’s more… quick to smell a deal, Joe Timmons (Owner of H-D Salt Lake, South Salt Lake) is trying to buy the building which housed Timpanogos H-D.  Likely for pennies on the dollar.

Photo courtesy of H-D.

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GTOI’m fascinated by the rapid decline of the American car industry. 

And given Harley-Davidson’s consideration of closing its main assembly facility in Pennsylvania and moving production elsewhere is it déjà vu all over again?  GM and Chrysler went through the same China and Mexico facility debate to lower cost and cope with sales downturns now H-D wants the same experience?!  Huh?

A couple weeks ago there was an interesting article in “New York Times” on the GTO.  I recall hearing the Ronny & The Daytona’s song, but didn’t truly appreciate the “goats” until several years later when the Pontiac was a sleek ride on the boulevard.  At the time I had no idea that Jaguars were an exclusive make.  I’d see an XKE now and again, but if you wanted a real car, a hot rod, one that sparkled in the sunlight and impressed the girls, you got an American car.

In our family we had an string of American cars.  Trained as an engineer, my dad started off with GM/Chevy.  He purchased a sporty rear-engine Corvair Monza that caught fire on the way home from the dealership, but that’s what the brand stood for, great engineering.  There were several models purchased after, but not before the in-line six cylinder C-10 Chevrolet pickup that we must have drove 89,000 miles.  No matter how hard it was driven it got 9 MPG’s!  I remember a partially dismantled block in the driveway at one point theorizing how to boost the gas mileage with a timing belt change. At the end of the sixties and armed with a premonition of gas station lines my dad purchased a new 1970 Toyota Corona.  A Canary Yellow practical four door for a family of four with a dog.  A 1900cc (1.9L) 4 cylinder (3R-C) engine with a 2-speed Toyoglide automatic transmission.  After that Corona purchase I don’t remember much in the way of American car’s in our family.

My love affair with the automobile was not that much different from what I suspect was many of yours.  I studied “Car and Driver.”  I debated buddies what machines we were going to own.  Had friends with Cuda’s and “Stangs.”  But with the early-70’s oil embargo, Yom Kippur War and then later on with Jimmy Carter inflation and national energy policies… I went foreign and never looked back.   People made fun of that Fire Engine Red Corolla that looked like a thirty year old vehicle, even though it was brand new.  But then almost overnight the Datsun 510, 240Z and Celica converted the masses.  Who knew driving could be so much fun?

The usual suspects at GM have run that outfit into the ground.  And it’s hard not to compare analogies to the current state of the Harley motorcycle business.

Detroit said it was just giving the public what it wanted.  So let’s slap the backs of all those Detroit execs for ignoring the coming rise in the price of oil, the environmental concerns and just sell more SUVs.  It’s taken years.  But the Harley-Davidson world seems to be in a similar place as Detroit.  After years of coasting, it’s collapsing, and it’s not sure what the path out is.   Could it be that the blame lies on the pros who drove the business to the cliff, milking millions all the way, believing they’re entitled to their riches?  Is it union busting or “negotiation tactics?”  Where is the next act that H-D can rally around and declare great?  Not marketing noise.  Or accountant speak….like saying Britney might book revenue, but you’ll have a hard time finding any believer in her music.  Her music is not seen as necessary to most people’s lives.  It’s too discordant, or made for the cash register, not humans.  

Be it GM, H-D or Britney…until they change the product, we’ll remain in the doldrums.  It can be done, but only if the execs stop worrying about their lifestyle and get honest.

Photo courtesy of NYT.

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