The Cost of Employee Tension At Harley-Davidson

Michelle Kumbier

When handled well, conflict resolution can save a company time and money and help maintain a healthy work environment. Unfortunately, conflict management at Harley-Davidson in the executive staff is imperfect, as they have lost hundreds of thousands of dollars due to workplace disputes.

The latest example is Michelle Kumbier.  

In October 2017, Michelle Kumbier was appointed senior vice president and chief operating officer (COO) of Harley-Davidson Motor Co. with responsibility for overseeing the Milwaukee-based motorcycle manufacturer’s U.S. and international markets in addition to her current responsibilities leading product and operations. Previously, Kumbier served as senior vice president, Motor Company product and operations. In that role, she led a team of more than 4,500 employees worldwide to bring Harley-Davidson motorcycles, parts and accessories and general merchandise to market.

$HOG 10-Q Filing

Obviously she was a failure…  for the new Chief Executive Jochen Zeitz, and wouldn’t be part of getting the company on “a path to winning” —  the ‘scarcity strategy’ called ReWire — so, Kumbier departed Harley-Davidson on April 3, 2020.  In the filing with the U.S. Securities and Exchange Commission, Harley-Davidson did not disclose a reason for her departure.

However, earlier his week, Harley-Davidson Inc. paid the former high-profile executive a settlement of $660,000 after she threatened litigation connected to unspecified events related to her departure, the company stated in a regulatory filing.  I’m not a workplace dispute solutionist, but the reason people sue is often not rooted in money as much as the person does not feel they are being treated fairly.

10-Q Filing Section 10.2

Kumbier, who had been a Harley-Davidson employee since 1997, and the company “have disputes over events that allegedly occurred relative to her resignation from the company,” the Milwaukee-based motorcycle manufacturer said in exhibit 10.2 included in its 10-Q quarterly financial report filed Nov. 5 with the U.S. Securities and Exchange Commission.  

Harley-Davidson said it “has denied and continues to deny Kumbier’s allegations” and also denies that it has any liability to Kumbier on any of her “disputed claims.”

But, went ahead and paid her $660,000 for the general denial of those allegations.

The company will make a lump-sum payment to Kumbier after she signed the settlement agreement that was dated Aug. 14, 2020. The document also states that Kumbier acknowledged the settlement amount is more than she would otherwise be entitled to under the company’s normal policies and procedures and that Kumbier released the company, its executives and its board “from all claims, charges, demands, and liabilities of any kind.”  Kumbier also signed a noncompete clause that prohibits her from working for or consulting with a large list of Harley competitors or potential competitors.

It might be appropriate that Harley-Davidson devise a “conflict calculator” to augment their environmental profit-and-loss accounting method to put a figure on how much the company spends on conflict resolution and executive termination each year.

Harley-Davidson CEO Jochen Zeitz Background

Photos courtesy of Harley-Davidson, Michelle Kumbier and US SECURITIES AND EXCHANGE COMMISSION — FORM 10-Q (November 5, 2020) Filing

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Harley-Davidson Makes Changes At The Top

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.

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Boo! Harley-Davidson Nightmares

Halloween Motorcycle Ghosts

As Halloween approaches, I decided to ponder: What strikes fear into the hearts of Harley-Davidson executives all over the land?

To answer that question, I peeked into a crystal ball, reviewed the Christine O’Donnell ad on “witches” and met with a couple carneys on voo-doo to peer into the subconscious of the motorcycle company’s most powerful execs and see what goes bump in their night.

To be clear: Some of these nightmares clearly stretch the bounds of reality, but some have a level of plausibility. They range from trivial worries to scenarios that could bring down an entire company. Read on to find out about Harley-Davidson executives’ nightmares:

CEO Starts Shooting Black-and-White Commercials: An attempt by Keith E. Wandell (CEO) to humanize the company, explain its brand value and reverse the damage which was done by the glaring hole in his garage when he admitted after being hired in 2009 that he didn’t ride a Harley-Davidson or even have a motorcycle endorsement — he has since rushed out and bought one, placed a yellow one on display in his office, obtained a “Rode Mine to Sturgis” patch and rumors are he’s ordered a 2011 model.  The CEO as pitchman in commercials is not exactly a new concept.  Just look at Sprint who seemingly cornered the market with classy, black-and-white appearances and what it did for them.

H-D Factory Employees Ride BMW: The nightmare manufacturing scenario is this: Matthew S. Levatich (President and COO) calls an all-hands meeting and scores of manufacturing personnel show up riding BMW’s new K1600. Not only would it be a rebuke of the company’s own philosophy, but it would be another sign that H-D’s bet on union workers in WI., was at a dead-end.

H-D Restarts Side-Car Manufacturing and No One Buys Them (Again): John A. Olin (CFO) doubles down on the H-D investment as the marketing efforts were not enough to sell a sidecar-challenged public the first time around, but this time side-cars will have a renaissance comeback.  Or the company hopes so.

H-D Brand Falls Off Top 100 List: Mark-Hans Richer’s (CMO) continued branding efforts to market motorcycles that boasts history over flash results in Harley dropping from the Top 100 Global Brands.  In 2010, H-D went from #73 to #98 — a 24% drop in popularity and brand value. Finding another Malcolm Forbes or Jesse James out there who can provide their personal endorsement will help improve the motorcycle brand value and might keep it on the top 100 list?  In the mean time more advertising is in the pipeline that will lead the public to think that if you own this product you too will be cool.

Fed’s Apply GM Like Pressure On H-D To Be Green(er): Jon Flickinger, (President & COO of Buell) says that H-D being a “tree-hugger” is not the first thing that comes to mind. But, just as President Obama has told our CEO during their lunch meetings, the greenhouse standards will become tougher and H-D will need to aggressively adopt new ‘green’ codes for its factory and dealer network inorder to meet the U.S. Green Building Council’s L.E.E.D. certification.  In addition they will add a new electric motorcycle to their product line, based on the Sportster Family.  Lastly and for good noise measure the company will implement California’s, SB 435 law early — on all 2011 models — which requires all street motorcycles built after 2012 to have EPA-labeled exhausts.

Secret Motorcycle Design Found At Museum Teambuilding Scavenger Hunt: Willie G. (Chief Designer) celebrates his design team accomplishments in an elegant 1920’s style glam and glitter – “the new beginning of the motorcycle” – party with everyone’s family in attendance that was hosted by the H-D Museum.  Some H-D employees dressed in the era of 1920’s to 1930’ in their caps, knee socks and knickers to remind people what it was like during the ‘roaring’ yesteryear. The feeling was eerie and mysteriously exciting all at the same time.  The employee’s children participated in a pencil and paper design contest of which an 8th grader defined the motorcycle shape that will be used to create all future motorcycle styles.

Merger Madness: Joanne Bishmann (VP Communications) is weaving a compelling story and spinning the news how Harley-Davidson is pressured into a merger in order to save the company from further manufacturing cuts and/or collapse.  H-D sells 49% of its shares to Daewoo Corporation in exchange for a much needed influx of capital and to pay off the $6B in debt.  Hyosung Motorcycle director, Mr. Ji Jas Ryong (pronounced “jus wrong”) says “We do not expect to change anything with the famous look of the H-D product, other than the logo, in fact we consider it an honor to include it along side Hyosung premium sport bike line.”

What are your thoughts?  Are there other H-D nightmares out there?

Photo courtesy of Sony Pictures (Ghost Rider) This blog post is satire and entirely fictitious.

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Co-Locating With Losers

Assemblywoman Dede Scozzafava proclaims that Harley-Davidson would see similar results, like those of Advanced Micro Devices (AMD) if they were to relocate the Pennsylvania manufacturing plant to upstate New York.

Scozzafava wrote a letter to Matt Levatich, H-D president and COO, citing all the strengths including skilled workforce, college network, low-cost power and economic incentives as reason to give the area consideration.  She cited AMD as the poster-child of “success.”  The NY Public Authorities Control Board offered up incentives to the tune of $1.2B with a combination of tax breaks and a $650M grant to entice AMD to commit to a $4.6B ‘chip fab’ in Malta/Saratoga Springs that is expected to come on line in 2012 and employ ~1500 people.

Well, Ms Scozzafava if you’d done “The Google” you would have noticed that AMD has consistently lost money, for so long in fact that AMD spinners now report “profitability” as losing less than the year before!  Pink slips have become more common than “Good Morning” emails!  They are burning cash and bleeding personnel.  So much so that it lead AMD to hold a smaller than expected stake in the NY fab and the creation of a joint venture with Advanced Technology Investment, the government of Abu Dhabi which is capitalized by crude oil.

Cheerleading by the hometown assemblywoman isn’t too surprising, but does she really think H-D wants to co-locate and model success after AMD results?  They have had numerous product introduction slips, 11 straight unprofitable quarters, deep employee cuts for so-called “profitability”, off-shored manufacturing to Dresden, Singapore and Malaysia and now have the Arab government as investment partner.   About the only thing AMD seems to win in is legal litigation.

I noticed that Ms Scozzafava didn’t suggest for H-D to co-locate and take a page from IBM – who took taxpayer assistance ($140M), cut employees and moved jobs overseas.  Experience should teach us about the danger of a bureaucrats zeal — well-meaning but without understanding.

Photo courtesy of Andy Diggle and DC Comics.

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Mango Countdown

In two days the Indian “Alphonso” mangoes will hit the U.S. supermarket shelves for the first time in 18 years!

I’m reminded of that Jimmy Buffett song “Last Mango in…”

I went down to Captain Tony’s to get out of the heat

When I hear a voice call out to me, “Son, come have a seat”

The “seat” in this case is attached to a Harley-Davidson.  In exchange for importing mangoes, H-D will be allowed to launch its 883 Sportster and Fatboy in the “land of a billion people” (a.k.a. India) on August 27th as long they comply with Euro-III emission norms. In a country that snaps up more than 6 million new motorcycles a year, H-D is a bit late to the party, but they have to be optimistic given the successes of Yamaha, Suzuki, Honda and Ducati “superbikes” (anything over 800cc are referred to superbike in India).  The bikes will be shipped to India and available as a CBUs (Completely Built Units).  Previously the Indian government had not specified emission standards for motorcycles over 500cc which effectively prohibited the import of H-D motorcycles who could not meet the standards set for scooters.

Speaking of standards…  I’m talking about a country that after more than six decades of independence, over 55% of the population (~660Million) defecate in the open! Given these statistics it’s no surprise the government was slow to specify emission standards on 500cc motorcycles when they clearly are busy with sanitation issues.

New Deli Traffic

Until this week Royal Enfield (owned by Eicher Group) was the only motorcycle maker to offer cruisers in India.  Consistently large orders from the Indian government led to establishing a factory back in 1955 in the town of Chennai, India.  Even after production stopped in England they continued in Chennai.  Here is a 5 min video of them building a motorcycle.  There seems to be a fondness of following the old British tradition and use of a mallet to assist in the precision parts fitting!

Anyone who has visited India knows that the large cities of New Deli, Bangalore, Hyderabad, or Mumbai have traffic that defies amazing.  It’s extremely densely packed roads with stop-n-go vehicles and engines idling most all of the time.  Then there are the rickshaws (phat-phatis), bicycles, jay-walkers, street-car peddlers, cows, donkey carts and at any given time each traffic lane supporting triple the number of vehicles that it should so, what you end up with is pure chaos.  Even with astronomically high traffic-death rates, scooters and motorcycles are the more practical method of getting around on these packed roads.

Matt Levatich, President and COO of Harley-Davison reportedly will be on hand at the launch and annual Society of Indian Automobile Manufacturers (SIAM) to welcome back H-D to India for the first time since World War II.  At that time thousands of motorcycles were shipped to the eastern Assam state of India with the intention of transporting men and deliver mail.

India is a prime target given the sheer market size and I want to wish them success as they work to diversify their revenue base.

Photo courtesy of H-D India and Flickr.

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Harley Hires Bankruptcy And Exit Financing Expert

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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