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Posts Tagged ‘Jim Ziemer’

MV Agusta - F4

I’m not sure who said it, but there’s an old saying about Harley-Davidson, that goes something like: “if I have to explain it, you wouldn’t understand.

So, on the day I left for Sturgis (August 6th), Harley-Davidson announced it had concluded the sale of its subsidiary, MV Agusta, to Claudio Castiglioni and his wholly owned holding company, MV Agusta Motor Holding, S.r.l.   You may recall that in October 2009, under the new leadership of CEO Keith Wandell, H-D announced its intention to sell MV Agusta as part of a NEW corporate strategy and to focus resources on the Harley-Davidson brand.  In fact, Mr. Wandell was in route to Minnesota on this announcement day so his handlers undoubtedly had everything all wrapped up prior to his departure ride to Sturgis.

The divesting announcement came 2 years (almost to the day) after it completed the $108M purchase acquisition of MV Agusta on August 8, 2008.  Then CEO Jim Ziemer said of the purchase:

“We are thrilled to welcome the MV Agusta family of customers and employees into the Harley-Davidson family of premium motorcycle brands,” … “Our primary focus with this acquisition is to grow our presence and enhance our position in Europe as a leader in fulfilling customers’ dreams, complementing the Harley-Davidson and Buell motorcycle families.”

The divesting announcement didn’t include the sale price but its 8-K filing with the Securities and Exchange Commission revealed the company essentially paid MV Agusta’s former owners to take it back.  In the filing Harley stated it “contributed 20 million Euros to MV as operating capital” that was put in escrow and is available to the buyer over a 12-month period. The buyer was Claudio Castiglioni, who, with his brother Gianfranco, ran MV Agusta for years before selling it to Harley two years ago.  In the filing Harley also said it received “nominal consideration” from the buyer. In a subsequent interview the company said the specific amount it received was $3 Euros (~$3.98 USD)

In 2008 most of us were stymied by the purchase of MV Agusta.  As a maker of expensive and exotic, high-performance sport bikes at minimum it overlapped with the Buell products and even worse was the company never explained how MV could attract younger buyers to H-D.

Here are my questions.  How many laid off workers equal the cost of this poor decision and why hasn’t the Board of Director’s been held accountable for one of the worst business decisions in H-D history?  Yeah, they’ll likely tell me “if they have to explain it I wouldn’t understand…”

I previously blogged about H-D going Italian HERE.

Footnote:  There is a certain level of incompetence from the old time management at H-D and they should-have-known-better.   It’s not the first time Harley-Davidson has had a hard time with an Italian acquisition. In the 1960s it bought a stake in Aermacchi, a maker of small off-road bikes as a way to expand into new markets. Eventually it bought the whole company, but that move also eventually failed and Harley sold Aermacchi in the late 1970s. The sellers and buyers: the Castiglioni brothers.

UPDATE: September 11, 2010 — Not previously made public, but buried in the Sale and Purchase Agreement filed with the SEC is a provision that H-D retains control of any press releases and statements about the sale for a year from the August 6th closing date.  Why?  Maybe the fact that H-D forgave a $103M Euro receivable… basically money it had loaned MV Agusta for operations.  The sale agreement specifies that the receivable transfers to Castiglioni for $1 Euro!!  Shareholders need to hold the board and management responsible for this “BARGAIN:”  H-D paid $108M, then put $20M Euro in escrow for Castiglioni when they “sold” it back; forgave $103.7M Euro’s lent to MV Augusta and wrote off $162.6M on the company.  Q3’10 will include more losses due to tax liabilities…does it ever end?

Photo courtesy of MV Agusta.

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Keith E. Wandell, CEO Harley-Davidson

$6.4M to be exact. 

May 1st through the end of 2009 marked eight months on the job for Keith E. Wandell, the CEO of Harley-Davidson Inc., and for that privilege he was delivered a pay package valued at $6.4 million, according to the Associated Press.  

The company ended the fourth quarter with a loss of $218.7 million, its first quarterly loss in 16 years.  In addition, management spearheaded a slashing strategy which included massive employee layoffs, closing of factories, negotiated union concessions under the threat of plant re-location and shuttered or sold unwanted brands.

But, talk about an obsession with fairness!  

The board delivered a pay package to Mr. Wandell with a base salary of $650,025 from his start date and he received a bonus of $780,030 and stock and option awards valued at $4.9 million at the time they were issued.  He also received other compensation worth $22,515, which includes a cash payment of $19,733 instead of perquisites.  In total it was valued at $6.4M.

For those in the job market who survive on high-end discretionary spending by consumers, might take a moment of pause and wonder if Mr. Wandell’s approximately $26,700 per day compensation package is just a bit tad excessive?

True it was during a time that management seemed caught like a deer in the head light as they watched the company’s outbound shipments decrease by more than 25%!  I’m not taking shots at the employees.  These executive compensation issues have been around for a long time, and much of the company performance blame lays right at the feet of management and specifically the previous CEO, Jim Ziemer, who takes the golden parachute award for world-class nonperformance during his last year.  Talk about setting up his predecessor with competitiveness and cost structure issues. 

But, is it an excuse for the CEO to say, ‘Hey, the board gave it to me.’ Or should CEOs be responsible too and provide leadership when compensation packages defy economic logic?!  Mr. Wandell is a very capable executive who chalked up impressive business success.  Yet, significant rewards for great results can still be attacked. Especially if the rewards for CEOs and their teams become extraordinarily high with no link to performance – and shareholders are left holding the bag – then it undermines people’s confidence in the company itself.

What are the results at H-D?  But, it’s only been 8 months you say.  Exactly my point.  The one bit of positive news on H-D that I found is that the daily average on HOG’s stock value has risen about 20% since Mr. Wandell has moved in and taken the helm.  

Photo courtesy of H-D. 

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jim_ziemer1Harley-Davidson announced that Jim Ziemer (CEO) informed the board he will retire in 2009. 

A 40-year career that started by pushing a broom and running an elevator at Harley-Davidson at the age of 19.  He is one American CEO who started at the bottom.  However, Ziemer elects to retire at a time when the motorcycle company is grappling with a brutal economic climate and is selling fewer bikes while posting lower profits. The news comes on the heals of a loan advance of $500 Million made earlier today from it’s lenders.

Mr. Ziemer received compensation in 2007 valued at almost $4.1 million.  More salary information is available HERE.  Mr. Ziemer has been President and CEO of Harley since April 30, 2005 and served as VP and CFO from December 1990 to April 2005. He has been Director of Harley since December 2004 and Textron Inc., since March 1, 2007. He also served as President of The Harley-Davidson Foundation Inc. from 1993 to 2006.  Ziemer’s was named by President Bush to the Advisory Council for Trade Policy and Negotiations. He also served in the position of vice chair of Junior Achievement, membership on the campaign cabinet of the United Way and was a past committee chair post with the Next Door Foundation.

Mr. Ziemer met his wife, Yvonne during his Milwaukee High School graduation.  They had never met before that day and were seated next to each other. You can read much more about this interesting man and get a personal sense of his accomplishments and philosophy in the May 2008 University of Wisconsin commencement speech HERE (pdf).

Jim will be trading his worries and cares for the adventure of the open road.  Enjoy!

Photo courtesy University of Wisconsin-Milwaukee.

 

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In what seems like the year of voting…I’ve been debating with myself over the last couple days whether or not I should write this post and then I saw some news on Harley sales. Obviously, I outvoted myself and wrote it!

This week the Pope is in Washington, DC., and since the Catholic Church is partly based on symbolism, it’s only fitting that one of America’s most iconic rides – the Harley motorcade – be symbolized too. As thousands of people greet Pope Benedict XVI and he’s schmoozed by President George W. Bush – the Police “Motorcycle Team” always stands ready as a precision motorcycle-cade team made up of officers from all the various Enforcement Groups there to Protect and Serve the dignitaries.  Canada has a similar team.

Given all the symbolism, I found it so very ironic that Harley Davidson decides today is the perfect time to announce that it will cut its work force by 8 percent and trim bike shipments by thousands since domestic sales fell nearly 13 percent in Q1.  These announced layoffs are dramatic and the first of this magnitude in 20+ years! 

It’s no surprise that Harley CEO Jim Ziemer might have something to say about the difficult economy…ya, think Jim?  Could that housing market implosion have anything to do with people no longer pulling equity out of their homes to finance Harley’s over priced “Surrender Your Inner Badness” or “March Badness” hype?!!  Two carnies and a pygmy pony could stomp out better marketing slogans than that.

I’m not sure about you, but I think a new $21K motorcycle (plus another $5K to make it run “nice”) is something people think twice or three times about.  I’ve blogged about arrogant dealers in the past who think people fall over themselves to spend that kind of cash, but with that easy equity cash bucket from the house gone, I think people will either hold on to their current bike for a little while longer or just wait out the “R” (recession thrash-n-crash) until the economy warm up a bit.

I read in several reports that Harley-Davidson has approx 5,600 production workers and 3,500 non-production workers.  Eight percent is approx 800 people impacted by this “downsize” decision and I truly feel sorry for each and every one of those cuts.  I work in an industry that routinely whacks-n-hacks a few thousand heads before morning smoke break so, I know the feeling….

It’s a difficult economic time my friends, but hang in there.

 

Photo courtesy of Philliefan99

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