Harley-Davidson: What Happened

It could be the title of Harley-Davidson CEO, Matt Levatich’s memoir on his failed 2017 year while in charge of the Motor Company.

I happen to be riding with the HOG Lewis and Clark Expedition last week when Harley-Davidson announced their disappointing Q2’17 financial results and late to weigh in:

* Harley-Davidson net income dropped 7.7%. Sales in the U.S. were down 9.3% and 6.7% worldwide.

* Harley-Davidson now expects to ship 241,000 to 246,000 motorcycles to dealers worldwide in 2017, which is down approximately 6% to 8% from 2016.

* Harley-Davidson expects to ship 39,000 to 44,000 motorcycles in Q3’17, which is down approximately 10% to 20% from 2016.

* Approx 180 U.S. based manufacturing jobs will be cut in Menomonee Falls and Kansas City.  This in addition to the 118 workers who were axed back in April this year at the York plant as some positions were being shifted to Kansas City.

For those keeping track, this is a continuation of a three-year slide by the motor company.  However, during the call Mr. Levatich described what can only be called an “alternative reality” in hopes (I assume?) to reassure the financial markets and stated “we are going to build bikers first, add 2 million new Harley-Davidson riders and launch 100 brand new models during the next 10 years while growing the international business by 50%.”

Huh?

I’m being a bit snarky here, but his statement appears either woefully naïve to the point of negligence or a continuance of marketing spin.  Proclaiming an unprecedented future result of this magnitude smells like stunningly wishful thinking at best or at worst plain lying.  For reasons I can’t explain, why would Mr. Levatich climb up on a high-wire without a net given such an overly-optimistic prediction?  Even with nearly 8-million Americans that are “sleeping license holders,” — those who have motorcycle riding credentials, but don’t own a bike — it doesn’t pencil and seems unobtainable.

I don’t know if the boardroom folks in Milwaukee read the NW Harley Blog on a regular basis and/or  hang on its every word.  But, we know the motor company has been continuously producing motorcycles for more than a century,  yet seemingly everyone on the internet with a keyboard thinks they can do it better.

And it’s a well-established fact that internet bloggers and commenters are geniuses. They definitely know how to run a business better than a company that has been constantly producing motorcycles through two world wars, the Great Depression, and roughly 20 U.S. recessions.

Sure the motor company needs our help and I’ve got some feedback and plenty of comments.  But, until the motor company calls me asking for it, I’ll look for Mr. Levatich’s memoir, which will certainly be “a deeply intimate account and a cautionary tale on the world’s most iconic motorcycle brand.

Slightly modified book cover courtesy of Simon & Schuster.

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Brace For Impact As Harley-Davidson Announces Layoff

News about Harley-Davidson during the month of August has been a bit of a wild ride.

There was the consent decree and $15M settlement with the EPA. Then the announcement that Harley expanded the list of bikes on recall that may have been built with defective hydraulic clutch systems.  Then the biggest engine-product launch for the company since 1988, when the Twin Cam made its debut.

And now today, the day before the Milwaukee Rally kicks off, Harley-Davidson announced that approximately 200 employees will face layoffs starting in October as the company adjusts motorcycle production due to slower sales.

According to various news reports including Rick Barrett, of the Milwaukee Journal Sentinel, the union stated many of the layoffs will take place at Harley’s assembly plant in York, Pa., and some will occur at the engine plant in Menomonee Falls, where the company employs approximately 1,000 people, as well as in Tomahawk.

Given that the Sturgis Motorcycle Rally attendance was down roughly 40% from a year ago (some of which was expected), suggest that some riders are busy doing other things than throttling down rural America’s roads to a rally which makes the launch of its Milwaukee-Eight engine motorcycles key to amp up any new motorcycle sales.

Photo courtesy of Sturgill Simpson Video.

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Every 89 Seconds

Harley-Davidson's new factory in York, Pa.

A new Harley-Davidson motorcycle rolls off the assembly line in York, PA.

You might recall that one of the first moving assembly lines was at Ford Motor Company in 1913.  Until this time automobiles were built one at a time and were quite expensive.  With the Model T, they began experimenting with different production techniques and the conveyor belt system was born.  At its peak a finish Model T came off the assembly line every 10 seconds.

Workers could not stop the line even if parts were wrong.  Workers were not allowed to think on the job.  They were allowed to only do their assigned task and do them ever quicker.  They required almost no skill to perform and were highly repetitive.  Many workers were unfulfilled and became bored and dissatisfied with their jobs.  As a result, absenteeism rose and employee turnover became high.

Fast forward 100+ years and everything has changed, right?.

The “New Factory York” is Harley-Davidson’s largest motorcycle factory.  Once there were 41 buildings on the huge 232 acre plot, but most have been demolished along with 2300 jobs.  The entire manufacturing facility is now housed in one building.  It’s a model of efficiency which H-D plans to “copy-exact” in Menomonee Falls and Tomahawk.  The process is centered on advanced manufacturing techniques that are used at Toyota and Caterpillar that are well known for their quality and efficiencies.

The Milwaukee changes are a com’in… because effective this month adjusted labor contracts went into effect giving the company more flexibility with the workforce.  Similar to the York plant there can be the use of seasonal employees who are not entitled to medical or retirement benefits and receive less pay for the same work done by regular employees.  While still unionized they are paid about $16.80 to $26 per hour versus $30.50 to $38 per hour for regular employees.

But, just like in 1913 not all the workers seem to be infatuated with the changes.  There is a great article written by Rick Barrett at the Journal Sentinel which captures the mixed opinions and whether the transformation has resulted in a better workplace.   We all know that change is messy, but some of the comments had me wondering if some in the workforce would prefer a return to the Model T era.

Photo courtesy of H-D

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