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Posts Tagged ‘Hyundai’

By now you’ve likely read the Q1’12 financial report about how Harley-Davidson Inc. blew away the key financial metrics for the quarter.

You know – Financial Reports – the documents and records pulled together by the motor company to track and review how much money the business is making (or not) with the purpose to update the lenders and shareholders.  These reports are not very friendly or helpful explanations.  More often they require an accounting degree because of the use of financial derivatives, contracts and instruments.

At any rate, not only did H-D report strong gains in earnings for the first quarter of 2012, but motorcycle and related products revenue for the quarter jumped to $1.27 billion, compared with $1.06 billion for the year-ago period.  Consolidated revenue for the quarter, which includes revenue from H-D’s financial services unit, rose to $1.43 billion for the quarter, compared with $1.22 billion in the year-ago quarter.  Most important was the fact that retail sales of new motorcycles grew 20.3 percent worldwide in the quarter compared with the prior-year period and it was led by a strong 25.5 percent increase in the U.S.

Is Harley-Davidson becoming cool to work for again?

It’s a big place and I’m sure some would say yes its cool.  However, what they’ve been through the last couple years has been painful and the process of getting rid of a lot of old bad habits has some maybe thinking no.  The Harley-Davidson chairman, president and CEO, Keith Wandell’s willingness to take on the risks took a lot of courage and it now seems to be paying off.

In other words, it takes 10,000 hours to become world class.  This is a key point in Malcolm Gladwell’s book called “Outliers” which has popularized the theory of 10,000 hours to excellence.  Clearly Mr. Wandell has put in his 10,000 hours, but that doesn’t mean anyone will notice.  Many will just shrug their shoulders at his accomplishments, or they might not even care.

I’ve taken notice and wonder if Harley-Davidson is ahead of its time or is the outlook less optimistic because they’re very good at setting targets that they are confident of being able to hit?

I would suggest that their success this quarter has been largely dependent on “baggers” and the discretionary spending situation improving versus bold new designs.  Meaning the whole motorcycle industry is running on conventional wisdom. People keep doing it the way everybody else is doing it, not expecting a different result so much as being desirous of converting people over to their brand or getting the few remaining conventional buyers left in the business.

You might disagree, but from my vantage Harley-Davidson hasn’t busted out a new “hit” (model) with worldwide success in long time despite the daily onslaught of promotions and publicity.  I’m talking about a stand in the line type of hit!  The conventional orthodoxy of the motorcycle industry is that H-D’s are styled conservatively.  This is typical market research talking.  It’s conventional wisdom saying don’t take a risk on design.  Just accept safe.  A blacked-out bolt here and a new red glitter color there.

Independent of this most recent financial report, the issue is that “safe” doesn’t consistently move the needle in terms of sales.

John Krafcik, President and CEO of Hyundai Motor America

If that were true then Hyundai sales wouldn’t be burgeoning or would they be the most feared major car company in the U.S.  Do you remember when Hyundai’s used to be a joke? Jay Leno said you could double a Hyundai’s value by filling it up with gas.  No one’s laughing now as Hyundai’s John Krafcik steered it from joke to contender. It took a risk.

So, when will we see some of that product “risk” that Harley-Davidson refers to in the quarterly financial reports?  Or has it all come down to being safe and going after the number of “likes” on social networking sites?  Hey, Harley… 1999 called and said they want the true-to-self artistry back!  We can smell the hype.  We know when you’re working it.  What’s sup with all the emphasis on tweeting and hyper-vomiting facebook “fans” over everyone’s networking profiles.  It all adds to the dissonant fray of self promotion and it’s hard to hear when everyone is yelling.

If you have a hot product, people want it.  We know when something impacts us, when we believe it’s great.  And when we find something good, we want to get closer, we want to tell everybody we know.  You don’t have to tweet, you don’t have to Facebook, you don’t even need a website. But it’s got to be different, it’s got to challenge conventional wisdom, it’s got to appeal to people’s hearts more than their pocket books.

Harley-Davidson is at a point where they can make the transformation from the perennial also-ran to a motorcycle industry jauggernaut that pushes the envelope in its designs while other companies try to catch up.  Or the Hyundai equivalent will…

Photos courtesy of H-D and Richard Drew/AP.

All Rights Reserved © Northwest Harley Blog
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2012 Paint Palette

Have you been reading the headlines? There was a big earthquake in Haiti. Some men were rescued from a mine in Chile. Oh, and apparently there was a gigantic oil spill in the Gulf of Mexico.

What’s that you say? This all sounds like last year’s news?

Well, don’t tell that to Harley-Davidson. The motor company recently introduced 15 new models, which it considered innovative and groundbreaking  products:  a “tubeless” laced wheel option, and six new colors or color combinations on the touring models!   Then in a déjà vu lapse they announced the retention of last year’s integrated branding firm Graj + Gustavsen Inc. to continue advising the company on strategic branding initiatives related to apparel and apparel-related accessories.

It would seem that even Harley-Davidson understands that the touring models have so few innovations that their only hope of differentiating itself from the other players is through paint palettes…. So, the only buying question you’ll have to ask yourself, then, is: Does H-D make a convincing enough “color case” that you should invest about $20K in a “new” touring model?

Here’s the crux of H-D’s argument.  First of all, the new colors or color combinations are beautiful. The mostly unchanged motorcycles from 2011 are even more beautiful in 2012.  The unchanged frame is beautiful, too. It’s graphically coherent, elegant, fluid and satisfying. That, apparently, is the payoff when a single company designs and builds both the engine and frame housing?  The ‘advanced’ Harmon/Kardon radio retains its 1970’s BMW inspired ‘red’ glow and that glossy Vivid black paint — continues to be a magnet for fingerprints, boot scuffs, and unfortunately looks wicked great only in the dealer showroom. I think the words in the H-D press release were “The Legend Lives On.”  The band, Talking Heads, said it best… in the song “Once In A Lifetime.”  The “same as it ever was, same as it ever was” lyrics… really resonates for the 2012 touring models.

It’s been a while since I’ve had a good, proper, Harley-Davidson rant. Part of that has been the adventures of this year; I think it’s softened me and given me more patience, made me a little more graceful. Another part of it, probably closer to the heart of the matter is that I’ve been busy doing other things and a good rant takes time to incubate.

Well a rant has been building and I finally snapped as I read an article in last week’s “Wall Street Journal” (subscription required) where there was a front page story on Hyundai. How it went from a laughingstock to a runaway success in the car market. Now that they’ve solved the quality problem, now that they’ve caught up with Toyota and Honda, the company is confronted with a huge issue going forward, creativity. How do you lead when you’ve spent your entire manufacturing life following? Read WSJ article HERE.

The new Elantra is so far ahead of the market that Corolla sales have stalled and the new Civic has been blasted by critics as it fails to fly from the showroom. Instead of focusing on the econo box look, Hyundai imitated BMW and Mercedes-Benz. And the model was redesigned in four years instead of five, trumping its competitors in the marketplace.  The success of the Elantra is testimony to the change in culture at Hyundai. To one now focused on leading, on creativity.

This leads me to the question of is there a culture of innovation at Harley-Davidson?  When talking about innovation we often define the term too narrowly. In fact, innovation can – and does – occur in every industry of our economy, from consumer electronics to health care.  Yet, when I re-review the 2012 touring models, instilling creative thinking must be a work in progress.

For comparison, a few times a week, video screens around Hyundai’s headquarters in Seoul show a one-minute clip that has become a favorite. It shows an open office where workers wearing the same shirt and haircut are “beavering” away (that’s Oregon slang). Then a new person arrives with a different hair cut. Each time he voices an idea, the others shout him down. Eventually he gets the same haircut and everybody likes him. Then a question appears: ‘Aren’t we stuck in conventional thinking?’

I don’t know if a video loop like that would necessarily fly in a Milwaukee plant with the union workers, but that’s not the point of this post.

It’s about how most every American business is in a mad dash to innovate except for H-D.  The only answer can be the titans at the top are traffic cops sans creativity?  Don’t blame the public or the economy, blame the fat cat executives who are denying they’re the problem like the honchos at Goldman Sachs. What makes the rich believe they’re invulnerable, always right and entitled?   Somehow in the “dash-for-cash”, it’s all about shooting low, to the sweet spot, where most people live so the purveyors can make money.  Good enough just doesn’t cut it and of course there are exceptions, but generally speaking we’re in a low point for H-D touring motorcycles.

It’s a new game. No one gets to rest on his laurels. Making it today is no insurance you’ll thrive tomorrow, look at the carcasses strewn along the highway… OCC, Indian, or Big Dog.

We’ve got endless hype and yet sales are anemic.  Mediocrity thrives at Harley-Davidson because it’s all about the money.  About playing it safe… with new paint palettes!

Photo courtesy of  Hyundai and H-D.

All Rights Reserved © Northwest Harley Blog

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On a trip to San Francisco a while back I rented a Hyundai.  They pulled up this eggplant colored piece of crap and I winced.  A Hyundai?  So, it’s going to be one of those business trips I said to myself.

 Wasn’t there anything else, I ask?

Nope.  That was it and I’d already waited in line long enough.  So I got behind the wheel and took off down the expressway.

A few hundred miles later, dropping it off at the airport, it wasn’t that I regretted parting with it, but I did have a new found appreciation for this automobile.  Maybe because it was easy to locate in a “sea of rentals” that I became enamored with its quirky color and bonded with this machine which had absolutely no rattles, good sound insulation, decent handling and excellent gas mileage.  That’s right, a Hyundai.

I remember when people started showing up in Santa Fe’s a decade ago, I thought they were just too cheap to buy a Honda CR-V.  Or a Toyota RAV4. That’s how the public knew someone was a cheapskate, they bought a Hyundai. A Korean car.  But that was before Samsung became the new Sony.

These days I no longer wonder why Hyundai has made major inroads into the American automobile market, it’s inexpensive and it’s good!  Why waste all that extra money on a shinier nameplate?  Seems the brand is no longer tarnished and people don’t think twice about buying a Hyundai.   They want something good, at a fair price, and they’re beating a path to the Korean manufacturers door. 

And spare me the old school thought that lowering prices devalues the product.  People aren’t resisting Hyundai’s because they’re too inexpensive.   Hyundai markets the Genesis, an almost as good Lexus/Acura/Infiniti for almost ten grand less.  This is the era of value. Rather than insist that the customer come up to your price point, come down to his.  Meet him halfway.  Show that there’s a partnership, the same way Hyundai agreed to let you return your car if you lost your job.  An idea so good, other manufacturers imitated it.

IF you agree that Korean manufactures have made dramatic inroads with automobiles, is the motorcycle industry and specifically Harley-Davidson touring bikes next to feel the value-based heat?

It would seem so.   Because Georgia-based Hyosung Motors America Inc., a division of S&T Motors, a Korean motorcycle manufacturer is applying value pressure on the heavy-weight cruiser segment.  Foreign-based companies typically complete final assembly operations in the U.S., and according to First Research, the U.S. motorcycle manufacturing industry has a combined annual revenue of about $6B with touring and cruiser motorcycles accounting for 67% of the overall industry revenue.  Clearly that is where the competitors interest will be targeted.  At the Chicago stop of the International Motorcycle Show, Hyosung unveiled the 2010 ST7 cruiser and also display it at Daytona last week during Bike Week.  The ST7 is a classically styled cruiser that is a belt-driven, fuel-injected, has front and rear disc brakes and powered by a liquid-cooled 678cc DOHC V-twin with eight valves. Hyosung claims a maximum torque of about 46.5 ft.-lbs. at 7,500 rpm. And here is the best part.  MSRP is $7,299 and you can pick any color as long as it’s black, red or white.  If my HP 12c financial calculator is correct that’s about $10,000 less than what it would take to maintain brand loyalty with H-D.

One could assume Harley-Davidson is ‘tone deaf’ if they don’t hear Hyosung Motors riding up from behind, but I’ll bet they are reverse engineering one as I write this.  The Korean company is dedicated to making its mark on the international motorcycle market as a globalized brand that is conveying a brand connotation of “fashion, high-tech and elegance” while presenting sophisticated and elegantly made products with excellent price and performance.  They are the “Hyundai of motorcycles.”  It’s not a matter of if, rather when will it impact H-D sales.

It’s a tough economy and many feel priced out by today’s motorcycle industry.  Yeah, some of us marry an Oscar-winning actress or get embroiled in million-dollar intrafamily lawsuits.  But, for rest of us we want more entertainment for our discretionary dollar.  The gulf between the industry and the public, which is sick of overpaying for everything means it’s never too late for Harley-Davidson to regain the hearts and minds of the consumer.  But it must offer good products at fair prices.  It’s really that simple.

Photo courtesy of Hyosung Motors.

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