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Posts Tagged ‘Economy’

It started as whispers, but lately we’ve heard more and more about the “R” word.

Recovery of the economy.

Economists are starting to down play the recession and clearly chatter from our D.C. representatives is all about a turning point as retail sales beat forecasts and for the first time in 10 years 160K jobs were created in the month of March.  However, the unemployment rate remains steady at 9.7% nationally and it really looks like the pace of growth won’t drive rapid improvement in the labor market.

And speaking of job growth, Harley-Davidson has taken some of the oxygen out any recovery in Milwaukee.  According to the Biz Journal the motor company filed a mass layoff notice this week with the Wisconsin Department of Workforce Development informing the agency that it was undergoing a permanent reduction in force and will lay off 94 employees at its distribution center in Franklin beginning June 7.  Unemployment remains steady at 8.7% in Wisconsin.  This news was not unexpected as the motor company announced more than a year ago that it was closing the distribution center as part of a major reduction in operations, with a third-party company picking up parts, accessories and general merchandise distribution.

Clearly the labor market distress remains high and I’m not making light of hard working folks difficulties.   But, if it’s any consolation – plus the fact that this week Tiger returned to the Masters, launched a new 3D PGA Online Game and Nike’s greedy geniu$ made us feel CREEPY for the multimillionaire after rolling out a new ad featuring his dead father’s voice – Wisconsin is ranked among the top states for its ratio of golfers to courses and during this most distressful time, might I suggest a round of golf to reduce stress?  Better yet, maybe you could snag a 4-some in the middle of the day with Mr. Keith Wandell (H-D CEO) who according to a number of press reports is an avid golfer and discuss etiquette or share tips!

Photo courtesy of GoGo Caddy and H-D.


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Harley-Davidson reported its first quarterly loss since 1993!

No surprise given home foreclosures, unemployment fear, stalled economy and ice-cold demand for high-end, premium priced motorcycles.

For Q4’09, H-D reported revenue of $764.5M and a loss of $147.2M.  Affecting Q4’09 results was the previously announced 53.1% reduction in motorcycle shipments from the year-ago period and $167.1M in restructuring, on the Buell end-of-life costs and the MV Agusta discontinued operations.  For all of 2009; revenue was $4.29B compared to $5.58B in 2008, a 23.1% decrease; income was $70.6M in 2009 compared to $684.2M in 2008, a decrease of 89.7%.  And don’t forget all the non-cash charges related to Harley-Davidson Financial Services (HDFS).

There was a surprise in today’s financial call.  Keith Wandell, (H-D President and CEO) stated: “We also feel good about where we’re at.” Huh?

Isn’t that the kind of thinking that would have Kodak saying that they’re relying on film, or newspapers saying they’re relying on print, or music labels saying they’re relying on CDs.  Just because you can’t see the cliff from where you are, that doesn’t mean it doesn’t exist.  Remember when everyone said no one would read a book on a hand-held electronic device, and suddenly now everyone’s saying the opposite, Kindle’s got so many new competitors and Apples yet-to-be released tablet gets more press than a starlet without panties getting into a car outside a pub.

Mr. Wandell may be referring to his reactive changes the past 8 months and the hope they will restore growth. I’m skeptical, and time will tell if they are the right decisions or if management can execute with a renewed intensity.  But isn’t that just the point.  REACTION to events vs. pro-active change?!  From the outside looking in, the majority of action the company has taken seems REACTIVE.  They curb demand, shrink manufacturing, reduce structural costs, pullback on spending, slash and cut employees, sell off businesses based more on profit margins not on the contribution to the customers soul.  Motorcycle sales are down more at H-D than other manufactures.  Why?

There is a saying: “Businesses should concentrate on their customers’ needs, not on specific products.” — “Marketing Myopia” (1960); Theodore Levitt, Harvard Business School

My opinion is that H-D needs to relearn customer needs.  If you desire to appeal to your core fans, then they’ll want to know that you are in it for the motorcycle hobby/sport, not just the money.  Stop calculating how to get to millions of revenue in a spreadsheet by maximizing this and that.  Just create something rawly desirable, then the revenue will come.  A great hit is more powerful than any marketing campaign.  People don’t need motorcycles, but they want one.  When the product is great.  When it speaks to them.  When it’s seen as integral to their lives.  You’ll have something!

Photo courtesy of JupiterImages.

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Out Of Busines

Harley-Davidson has undergone a grueling restructuring over the last year to better compete amid less demand.

The economy and housing bubble depleted consumers’ wealth and left a lot of folks unwilling to spend on Harley’s high-end bikes.  I anticipate that Harley will remain at least three quarters away from achieving positive retail sales trends in the U.S., especially given the companies lapse of a successful promotion in the first quarter.

I’m genuinely concerned.   More so about the decay of prosperity in the local motorcycle shops, parts suppliers, and dealers.  Be it routine service or customization, the local shops most often operate on their ability to make sure YOU are happy. They know if you leave satisfied, you will tell your friends about your experience with the shop.  Word of mouth is an integral part of a shops reputation in the local area and carries a lot of weight in generating new business.  “Giving” local shops rebuild, repair, or service work on your bike, while appreciated, is not going to keep a shop in business.   The industry at large will need sales to rebound or the local motorcycle businesses will lay-off their skilled workers or worse – close down operations.

Unless you own or work in a local shop, you have no idea of what it takes to stay in business.  Facility overhead, staff salaries, phones, heat/electricity and advertising are things everybody thinks of.  But what about insurance, hazmat costs, licensing fees and money paid to local city and state governments for all the TAXES they require?

And speaking of taxes, I’m very skeptical of government spending our way to prosperity.  Increasing the tax liability on small business owners does nothing to encourage businesses to take care of their employees.  In fact, in Oregon there is a special ballot measure on personal and corporate tax increases.  In my opinion this one-size-fits-all legislation may well force motorcycle shops to shut down.  You’ve heard of Measures 66 and 67 and read more about net profits and corporate structures to last a life time so I’ll avoid explaining the details.  Instead, let me ask a simple question.  Did you get a raise last year?  I know I didn’t.  And if you’re lucky enough to still have a job, I’m willing to bet that you didn’t either.  Most likely you took a pay cut.  Or had your hours reduced.  Or were required to pay a larger share of your health insurance coverage.

At the same time you and I were taking cuts the Oregon Legislature voted to increase the tax burden on higher incomes and businesses by $750 million dollars, it also authorized $248 million in pay raises for state employees.  Yep, that’s right.  State workers got raises during the worst economy we’ve been through since the Great Depression.

Still don’t care?  Then how about this.  The legislature approved a budget that increased state spending by 9%.  If I was operating a motorcycle shop I can assure you that if my business increased 9% over the past two years I’d be most happy.  The legislature increase is about $4.7 billion more than the previous two years.  Time for another question.  Do you think state services have improved as spending has increased?  Are the schools better? Is our infrastructure better?  At a time when Oregon has lost over 120,000 private-sector jobs in the past 18 months the state has added 10,000.  It would seem that in Oregon, government has become the ONLY growth industry!

I’m not sure about where you live, but in Oregon during the winter many think about what customization you can do to your bike in the off-season.  Before long you’ll be sitting at your MacBook, surfing the web looking to make some modification dreams come true.  You’ll likely have questions and find yourself on the phone calling the local motorcycle shop trying to get all those questions answered.  Before long you’ll have spent most of an hour discussing scenarios, getting advice and prices from the local shop expert.

What if they don’t answer your call because the parts expert is no longer employed?  What if they’ve gone out of business?

We’re told by the “spinsters” in Salem that the state is making “budget cuts.” Huh?  In fact it means simply they can’t have as much of an increase as legislators would like.  A 9% increase is NOT a cut!  It’s my opinion that the private sector creates wealth.  Government does not.  I hope you’ll join me in voting NO on Measures 66 and 67 to send a clear message to the Oregon legislators that a CUT means CUT.   

Increasing taxes on motorcycle shop owners means more will go out of business.

Source: Statistics from The Oregonian

Photo courtesy of Flickr.

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Meetings.  Talking.  Meetings.

We’re always being reminded that political leaders, policymakers and industry leaders are “gathering” to hash out ideas on how to get the mojo back and what the key is to unlocking innovations and jobs of the future.  We’re suppose to feel good, but from my vantage there is little visible in the way of action.

The White House has made a quiet but extensive effort to reach out to corporate executives in a series of dinners and lunches at the White House with President Barack Obama.  Attendees have largely been kept secret or at minimum very quiet… until now!

Politico.com states Keith Wandell (Harley-Davidson CEO) had dinner with Obama’s chief of staff Rahm Emanuel and other top White House officials.  Another comprehensive list is available HERE.  It’s not clear if it was at an off-site local restaurant or something more elegant in the White House.  Given the state-of-the-states, I seriously doubt the motor company will be creating any new jobs soon. In fact, the recent ratified agreement calls for a drawdown of nearly 50% of the employee’s base at the York, PA operations.  Asia or India look like expansion alternatives and I suspect it won’t be long before we hear about plants being set up there.  So, what did Mr. Wandell share w/ the White House chief of staff?  Would H-D coming to the government to offer ideas on how they can help be a startling conversation changer?  Does H-D have eyes and ears on future trends that they can grab and then be able to exploit?

I’m not sure, but do you think the U.S. is still the world’s center for innovation, or is it falling behind countries such as India and China?  Fueling the debate is a new poll on innovation published by Newsweek. One interesting finding: while 82% of Chinese citizens believe the U.S. remains a technologically innovative country, only 74% of Americans feel the same way.

At any rate,  the other industry officials who joined Mr. Wandell at the June 16, Rahm Emanuel dinner were:

Penny Pritzker, CEO, Pritzker Realty
Mark Gallogly of Centerbridge Partners
Mike Fascitelli, CEO, Vornado Realty Trust
Klaus Kleinfeld, CEO, Alcoa
Dave O’Reilly, CEO, Chevron
Richard Smith, CEO, Realogy
Mike Ullman, CEO, J.C. Penney
Keith Wandell, CEO, Harley Davidson

I’m not attacking or implying that only favor-curriers are “sitting at the presidents table” but I’m not reading a lot about how the voice of the average lower and middle class American are being heard.  As the White House National Economic Council Director Lawrence Summers has recently urged attendees at these dinners to “think about what your institution should be called on to do, not in its own interest, but in the broader national interest.”

Photo courtesy of Presidential inauguration.

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EmpireOnce upon a time, a century or so ago, there was actually a shortage of information.  In small towns, people would even interrogate strangers passing through just to find out what was going on in the world.  Those days are long gone and today we have the reverse problem.  There is too much information.

Which brings up Mr. Bogdan Bucurescu, managing director of Harley-Davidson Bucharest, who put out a press release announcing the dealer sold sixteen (16) motorcycles year to date!  Is this what it’s come too?  Motorcycle sales so pitiful that you need to tell the world you’ve garnered a 20% market segment share in a market which dropped 75% — and then explain it as a good result!  Talk about spin.  In 2008, Automotive Trading Services (ATS), the importer of H-D and Buell motorcycles announced that Romania sold 80 motorcycles.  Clearly sales are off this year and using a press release to show “upside” is nothing but a distraction from the bigger picture.

This trend reminds me of a parallel in the music industry where we’ve got aging superstars, overcharging to fewer and fewer people.  And at the other end of the spectrum we’ve got the Top Forty wonders, making ever more boring records for a shrinking market.  At the current Bucharest dealer sales pace will it be long before we read a press release stating 100% market segment share from ZERO sales?   There must be some new type of business model in Romania which enables a dealer to make money with NO sales?!

Back to sixteen… Huh?  A city with 1.9 million people!  Doesn’t that seem low?  Just four months ago the sales manager, Marcel Chiva made projections of selling one motorcycle a week with plans to remain in the top 3 motorcycle manufactures in the above 650cc segment.

With little effort it’s easy to learn that Romania, a communist country until 1989, has the 7th largest population (with 21.5 million people) among the European Union (EU) member states.  Its capital and largest city is Bucharest, the 6th largest city in the EU.  Bucharest is also the center of the Romanian economy, accounting for around 14% of the country’s GDP and about one-quarter of its industrial production. Almost one third of national taxes is paid by Bucharest’s citizens and companies.  Add this to the fact that Romania has a large, upper-middle-income economy, the 15th largest in Europe based on purchasing power parity and the center of Romanian media (read advertising), since it is the headquarters of all the national television networks as well as national newspapers and radio stations… it seems the country’s economic growth is out of sync with motorcycle consumption and no matter how many times I punch in the data on my trusty Tandy desk calculator, it just doesn’t add up.

Despite my bit of Romania/Bucharest boosterism, H-D’s use of fringe markets to project trivial news is a distraction and contributes to information overload.  And yes I’m guilty of finding unusual angles on stories that everyone else is missing.

Photo courtesy of H-D.

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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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cnbcWe don’t need a psychotherapist to confirm what we feel in our gut each morning — it’s unsettling at minimum to outright rage and then add the ‘Bernie’ and AIG hysteria to the mix.

Market volatility, economic instability, double digit unemployment, bailout-i-tis, along with purchasing paralysis — it’s no wonder people are staying home under the covers — if they haven’t lost their home!

In talking with folks who have not yet received a pink slip even they feel trapped in companies where their sort of grateful to still be working, but insecure because no employer is making any type of guarantee about jobs longer than two-weeks. 

But, all of this doesn’t mean we have to slog through the rest of the year in an emotional cellar dweller funk. It’s not easy, but it is possible for motorcyclists to stay up in a beat down economy.  And with minimal $$.

Here are some thoughts on how to minimize the funk:

  1. Return to your motorcycle riding roots — remember why you first got into motorcycle riding? Bring back some of that enthusiasm — maybe even master a new riding skill — do something you’ve never done just for the sheer challenge of it. Commit to finding 10 Best Rides in your local area: 10 best waterfall rides (hint: Multnomah Falls, Bridal Veil Falls); 10 best scenic landscape rides; 10 best coffee shop rides, etc. you get the idea.
  2. Get the most from motorcycle social networking — build and extend your network of motorcycle friends and colleagues. Take full advantage of blogs, social networking opportunities via BB, Facebook, MySpace, Twitter and other online communities. Consider using your motorcycle skills to connect with the world: start a blog, build a Web site, create and post an original video on YouTube of your “10 best”, or share your legislative viewpoints or showcase new riding techniques. Write reviews for Shelfari or Amazon.com — reviews of motorcycle-specific books. Hell, learn and do all of them!
  3. Get out into the motorcycle real world — if you live near a college, check out its motorcycle technology centers. Personnel in these education-technology-transfer centers excel at helping people learn — how to repair/remove a motorcycle engine is a skill that many of us could use.
  4. Improve your motorcycle soft skills — head down to the local H-D dealer to “spar” with sales and work on your negotiation and relationship-building talents — the so-called soft skills — raise your sense of self-worth by working down the prices of motorcycle upgrades and parts. Ask the question, “Is that the very best price you can offer?” Not only will the practice help you payless for upgrades today it will keep you sharp mentally and position yourself for when the economic upturn occurs because consumer prices are increasing.

Sure this is a ride in the wind and ‘feel good’ type post, but aren’t you tired of reading about some reality TV star’s secret marriage to Elvis?!

Photo courtesy Flickr.

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