Is Harley-Davidson Punking Us?

York, PA Harley-Davidson Plant

Harley announced back in May a major restructuring of its operations in York, Pennsylvania and the possible move to another U.S. location.

The two plants in York employ more than 2600 employees.  I previously posted a bit of a tongue-n-cheek letter that was picked up in the local York, PA., press which recommended H-D to consider coming to Oregon, but I never heard back from the company…

At any rate, the reasons cited (my interpretation of reports) for a potential H-D move from York were:

1. Inefficiencies – it takes too many employees too long to manufacture a motorcycle
2. Salaries – cost structure is too high, meaning lower wages are needed to reduce the overall cost structure
3. Economy – declining sales mean further job cuts required as production/output needs to align with sales
4. IAMAW – in 2007 the York plant went on strike and negotiated a 12% wage increase over 3 years.  H-D received few concessions and lost 16 production days which disrupted other assembly lines. At a time when they need to reduce the cost structure by $100M one of the largest cost contributors (wages) is set to steadily rise.

Arial of Springettsbury Township H-D Plant

For those of you unfamiliar, the plant in York opened in 1973, however, some of the buildings date back to World War II.   It is the largest H-D manufacturing facility and the Softail factory recently received a $145M upgrade investment. The plants cover 230 acres and have over 1.5 million square feet under roof where the workers assemble the Touring and Softail models as well as “SE” limited production factory-custom motorcycles.  This plant also has the dubious honor of being the most visited by a sitting U.S. President  (Bush and Clinton) who’s administration’s leveraged the plant for free-trade discussions.

It’s been reported that after a week of H-D executives visiting various locations the short list was announced as four possible sites. Drum roll please…… they are:

1. Shelbyville, Kentucky, located between Louisville and Lexington;
2. Murfreesboro, Tennessee, located just southeast of Nashville;
3. Shelbyville, Indiana, located southeast of Indianapolis;
4. Kansas City, Missouri where Harley already has a major facility

It’s no accident that two of the four states (Tennessee and Indiana) vying for the new factory are right-to-work states and will have offered H-D numerous incentives to relocate.  I would imagine items like Investment Advantages which allows for the waiver on income/excise/sales taxes etc.; Enterprise Zones which provide property tax incentives or abatement; Vocational Rehab Services for employees who need relocation training etc., and the concession list surely goes on.  And at the same time officials in PA., are working feverishly to convince H-D to stay although they don’t have a blank sheet of paper to work from and it may limit what they can offer up.  In 2008, Harley employees paid over $2M in local taxes and should the plant relocate it would be a major budget hit to the municipalities.  The H-D “spin machine” continues to state that staying in Pennsylvania is the preferred option, yet in the same breath they also cite inefficiencies and cost structure issues with the York facility.

You know the mood these days isn’t just about banks or exec bonuses being Public Enemy No. 1.  I think what disturbs Americans of all ideological persuasions is the fear that almost everything, not just government, is fixed or manipulated by some powerful hidden hand, from commercial transactions as trivial as the sales of a Seahawk football ticket to cultural forces in the news media.  What this recession has crystallized for many of us is the sinking sensation that the American game is rigged — that the system is in hock to “the interests of powerful lobbyists or the “wealthiest few” who have run the “system” too long.

It’s hard to avoid the sense that H-D is wasting time trying to appease people who can’t be appeased.  Is H-D really committed to moving the York plant or is this about the art of a negotiation… where they preview and think about taking every new concession.  Isn’t it really just an indicator that any state can be punked?

York Plant photo courtesy of H-D.

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Harley-Davidson Mistake Part Deux

I called it – sort of!  I questioned Harley-Davidson’s marketing tactics HERE and HERE in rolling out a guaranteed trade-in value program on its Sportster model.

I disagreed because I just didn’t see the value prop or customer pull this program offered in these difficult economic times.   Especially when you compare it to other “protection” programs (Hyundai) which garnered the public’s attention span and given the massive layoffs across the country.  I did miss the uptick of non-buying people the program brought into the dealer, however.  But, the end result is that people are not going to go for a less-expensive Harley-Davidson model just because it has a guaranteed trade-in value when what they really want to ride is a Street Glide, FatBoy or Trike.  Buy a Sportster because it’s cheaper, ride it for a year and then trade-up, huh?  There were NO provisions for incremental custom modifications or enhancements and I don’t know about you, but I rarely see a bone stock Harley.  This was innovation at it’s worse — a re-do of an ‘80s program and then 6 months after the initial roll-out the marketing department rereleased it again with date changes… sort of a Hollywood sequel mentality… Sportster: Part Deux!

Sure I’m being a bit harsh, but it wasn’t a big surprised to read in The Business Journal that Keith Wandell, President and CEO, “threw marketing under the bus”… saying the company mistakenly thought the recession would push consumers toward Harley’s Sportster and other less expensive motorcycles. It also turns out that Harley management stepped up the Sportster production line even though retail sales didn’t materialize.  Now dealers have a glut and plant slow downs are the theme of the day.

Motorcycle enthusiasts will rarely purchase a model they don’t want just because of a discount.  Would it have made a difference had Mr. Wandell come to the CEO position with leathers and at least one motorcycle in his garage prior to re-approving the Sportster program?  I suspect yes, but we’ll never know.  At any rate, this is a fairly significant miscalculation and the pool of talent seems to be limited to people who are used to thinking alike and are doing things the same way.  It’s time to shake things up and catch people’s attention.  My suggestion is to make the Harley buying experience less like going to the DMV and more like going to the Apple “Genius Bar!”

Photo courtesy H-D and Flickr.

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Bush Pushes Harley At Columbian Trade Agreement Speech

Every time a U.S. President wants to demonstrate the benefits of free-trade, they hold up poster child Harley-Davidson, who was yanked from the Japanese jaws of death and a shrine for the ever faithful.

Today was no exception as Bush stumped on global trade and discussed how it “mostly helps” American workers during his speech on the Columbian Trade Agreement.  

The Wisconsin 6^th District Congressman Petri was in attendance because he believes that Harley’s are a product that people around the world ought to be able to drive by making it more affordable.

Then pointing to the Motorcycle on the South lawn – Bush stated;

“…that motorcycle right there — 20 percent more expensive in Colombia, 8 percent more in Korea, and 15 percent more in Panama.  And so the purpose of a trade agreement is to reduce those tariffs; is to make the products less expensive.” He continued with “So if we get the deal done with Colombia, that motorcycle will be $4,000 less expensive,” Bush said. “The great quality of Harley will be the same. There will be no diminution of how cool one is when they drive a Harley. (Laughter.) But it’s going to be easier for somebody to buy it.” 

In his second year serving on the Bush appointed International Trade Advisory Board, Harley’s CEO Jim Ziemer must be feeling pretty special that his company is sharing the international presence spotlight!  All of this is like a perfect storm…Harley announced plans to reach out to customer groups that were not its traditional fans – women, young people, and minorities along with a shift from “pull” to “push” marketing. 

I would anticipate that South America has just as many mid-life testosterone driven, on their 3^rd marriage buyers as the U.S. so why not push a policy of price parity?

 

Bush touring York, PA plant courtesy of USA Today – Eileen Blaas.

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