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Posts Tagged ‘MV Agusta’

Recently it was reported that the typical CEO at the biggest U.S. companies received an 8.5 percent raise last year, taking in $11.5 million in salary, stock and other compensation, according to a study by executive data firm Equilar for the Associated Press.

Over the last 5-years, median CEO pay has jumped by 19.6 percent not accounting for inflation.  That’s nearly double the 10.9 percent rise in the typical weekly paycheck for full-time employment across the country.

It could be, but this isn’t a rant about the typical line worker vs. CEO wage-gap.

If we’re being intellectually honest, CEOs today are required to master a broader range of skills than in the past, when top executives might have climbed the ranks with just one discipline. Companies are bigger, more global and increasingly complicated, and there’s accelerating competition in countries such as China, India and Brazil. Executives must also adapt to quicker technological change, including shifts brought on by autonomous driving, electric vehicles and the widening use of mobile devices.  And then there is the Board, and the increasing requirement that CEOs push their stock price ever higher to collect their maximum possible payout.

So, who are those CEOs at Harley-Davidson, that made Harley-Davidson?  Below is a historical snapshot of the motor company leadership:

Matthew S. Levatich

Matthew S. Levatich — is the current Harley-Davidson President/CEO which he assumed in 2015.  Mr. Levatich was named COO during CEO Keith Wandell’s tenure.

Mr. Levatich, joined Harley-Davidson in 1994. Prior to becoming COO in May 2009, he held wide-ranging roles in the U.S. and Europe. Those roles included Vice President and General Manager of Harley-Davidson’s Parts and Accessories business, Vice President of Materials Management, and President and Managing Director of the Company’s former MV Agusta business. In addition to an undergraduate degree in mechanical engineering from Rensselaer Polytechnic Institute, Levatich holds a graduate degree in engineering management and an MBA from Northwestern University. He has served on the board of directors of Emerson, a St. Louis-based global manufacturing and technology company, since 2012.

Mr. Levatich is known as an avid rider and an engineer, that demonstrates a clear vision for the company and talks constantly about focus and alignment and helping the organization remain clear on what it is they’re here to do.  No longer is the motor company the “voice of the executive” rather it’s the “voice of the customer.

Interestingly, Harley-Davidson has evolved from platform teams. Dyna platform, Softail platform, which was largely modeled like the automotive industry. Each platform team was competing for the next big capital investment so they could say now it’s Dyna’s turn to have a major refresh. Or now it’s Softail’s turn. Or now it’s Touring’s turn.  And that doesn’t exist anymore.

In an interview with Cycle World Mr. Levatich stated: “We’re not really in the business of manufacturing motorcycles. We’re in the business of building customers.”  

Keith Wandell

Keith Wandell —  hired from Johnson Controls to serve as Harley-Davidson President/CEO in 2009 — retired May 1, 2015 — only 6-years later.

Credited for leading Harley-Davidson back to profitability by cutting jobs and making its production more efficient he transformed manufacturing through a restructuring plan that generated more than $300 million in annual savings.

Mr. Wandell cut millions of dollars in costs and eliminated several thousand jobs in the manufacturing plants. He brought a sense of urgency to the company, saying he did not want it to be like General Motors and the auto industry that had fallen into deep trouble.

Under his leadership, Harley made significant gains in reaching new customers through growth in international markets and sales to “outreach” segments in the U.S., including young adults, women, African-Americans and Hispanics.  Mr. Wandell also was credited with stoking excitement for a planned electric bike, called Project LiveWire.

Mr. Wandell has been the Non-Executive Chairman of Dana Incorporated since October 27, 2016 and served as its Interim Chairman from September 9, 2016 to October 27, 2016.

James Ziemer

James Ziemer — served as President/CEO from 2005-2009.  Retired in 2009.  Mr. Ziemer is a native Milwaukeean who grew up in the neighborhood next to Harley-Davidson’s original Milwaukee factory location on the city’s west side.

He started with the motor company in 1969 as a freight elevator operator while attending the University of Wisconsin-Milwaukee. He worked at Harley-Davidson for 40 years.  Upon earning his undergraduate degree in accounting at UWM, he joined the accounting department where he spent the majority of his career. He was named the Company’s Chief Financial Officer in 1990. In 2005, he was named President and Chief Executive Officer of Harley-Davidson.  When he retired, employees presented Mr. Ziemer with the original wood doors from the freight elevator he operated when he first was hired at Harley-Davidson.

As a sidebar, also in 2009, eleven years after being bought by Harley-Davidson, Erik Buell leaves the company to establish Erik Buell Racing.

Jeffrey L. Bleustein

Jeffrey L. Bleustein — retired as Chairman of the Board of Harley-Davidson in April 2009.  He was Chairman from December 1998 to April 25, 2009.  Previously, he served as CEO from June 1997 to April 2005.

He served at Brunswick Corp in many capacities and was President of Trihawk, Inc., a subsidiary of Harley-Davidson, 1984 to 1985. Remember Trihawks?

Mr. Bleustein was a technology consultant with American Machine and Foundry Co. (AMF).  In 1969, AMF merged with Harley-Davidson and in 1975, AMF assigned him to help reorganize Harley-Davidson engineering operations.  Led by AMA Hall of Famer Vaughn Beals Jr., and 11 other Harley-Davidson executives (including Willie G. Davidson), Bleustein helped execute an $81.5 million leveraged buyout of the company from AMF on June 16, 1981.

To commemorate the buy-back, approximately two dozen company officers, along with their wives and select motorcycle press, made a cross-country motorcycle trek from the production facilities in York, PA to Harley-Davidson’s main offices on Juneau Avenue in Milwaukee. This 900-mile independence journey was also a ride to support the Muscular Dystrophy Association, now the official charity of Harley Owners Group (HOG). The ride followed a host of ceremonies at York which included the signing of documents that marked the ownership change, and pulling the first “new Harley-Davidson” motorcycle off the assembly line. This 4-day celebration began a new chapter in the company’s “new” future.

Mr. Bleustein was responsible for notable engineering innovations which included the rubber engine mounts, redesign of the V-Twin and introduction of the Kevlar drive belts.

During Mr. Bleustein’s tenure (circa: 1998), Harley-Davidson bought Buell Motorcycle Company and named founder Eric Buell Chairman of Buell Operations. The first Buell’s hit showrooms in late 1999.

Rich Teerlink

Rich Teerlink  — served as Chairman and CEO until 1999 at Harley-Davidson until he retired.  Mr. Teerlink joined Harley-Davidson in August 1981 as CFO where he enjoyed great success over his 18-year career.  He started with the company just two months after the group of 13 Harley-Davidson managers had bought the company from its then parent company, American Machine and Foundry Co. (AMF), in a leveraged buyout.

Mr. Teerlink’s greatest accomplishment was establishing the Harley Owners Group (HOG) in 1983.  Mr. Teerlink joined the Vertex Board in 2002, and while serving on the Vertex Board, he also served on the Boards of Johnson Controls, Snap-on Tools and Quad Graphics.

Mr. Teerlink is also a notable author of More Than a Motorcycle, The Leadership Journey at Harley Davidson book.  Mr. Teerlink retired from the Vertex Board of Directors, effective February 4, 2015.

Mr. Teerlink was inducted to the AMA Motorcycle Museum Hall of Fame in 2015.  Mr. Teerlink was awarded an Honorary Degree, Doctor of Laws from Marquette University on May 22, 2005.

Vaughn L. Beals Jr.

Vaughn L. Beals Jr. — served as CEO of Harley-Davidson from 1981-1989 and as Chairman from 1981-1996.

In June 1981, it was a challenging time as American Machine and Foundry Co. (AMF) wanted to cut and run, but no one wanted to buy a company with a limited line of high-priced, obsolete products and a reputation for unreliability.  Vaughn Beals Jr., and 13-other** Harley-Davidson executives (including Willie G. Davidson), led an $81.5 million leveraged buyout of the company from American Machine and Foundry Co. (AMF).

Mr. Beals previously served as a research engineer for North American Aviation and Cummins Engine Company where he negotiated the purchase of logging equipment manufacturer Formac International as he was a minority owner and CEO.  This proved to be valuable during the AMF Harley-Davidson buyout.  He was named Harley-Davidson CEO after the buy-out option.

In 1982, the motor company won an anti-dumping judgment from the International Trade Commission (ITC). This led then-U.S. President Ronald Reagan to impose additional tariffs on imported heavyweight Japanese models, as allowed by the ITC.  The additional tariffs–45 percent on top of an existing 4.4 percent measure–were meant to decrease gradually over five years, until April 1988.

In June 1986, Harley-Davidson went public with a stock offering to raise capital to help pay off the buy-out option.  This was very successful increasing share price from $11 to $24.  Harley-Davidson  used some of the stock sale revenues to buy Holiday Rambler, a U.S. maker of recreational vehicles, for $150 million.  The Holiday Rambler sale pushed Harley-Davidson into the Fortune 500 category for the first time at number 398.  In March 1987 the company asked the ITC to remove the tariffs imposed on Japanese motorcycle imports a year earlier than scheduled.

Willie G. Davidson, V.P. Styling (Left); Vaughn Beals Jr., CEO and Charles Thompson, President (Right)

Mr. Beals was inducted to the AMA Motorcycle Museum Hall of Fame in 2008.

Charles Thompson — served as President and CEO of the restructured Harley-Davidson after American Machine and Foundry Co. (AMF) buy-out option.

Mr. Thompson was a long-time Harley-Davidson employee, well-liked throughout the motorcycle industry and served as president and CEO of the restructured company until his health failed in 1982.

William Herbert “Bill” Davidson — was president of Harley-Davidson Motorcycles from 1942 to 1971.  He was the son of William A. Davidson who quit his regular paying job with the Milwaukee Road railroad in 1903 to get into the business of making motorcycles.

William Herbert “Bill” Davidson

Bill Davidson, started working on the Harley-Davidson shop floor of the family business in 1928 after attending the University of Wisconsin.  He won the AMA National Enduro Championship in 1930 and when he wasn’t winning motorcycle races, Bill worked his way up through the company, becoming a foreman, manager of many departments, and finally president of Harley-Davidson in 1942.

In 1963, Bill brought in his son William Godfrey Davidson (Willie G.) on to head up the styling department of the company. Willie G. would end up creating some of the company’s more popular designs, including the legendary Low Rider and the Super Glide which was inspired by the ideas of bike customizers.

In 1965 Harley-Davidson went public as the two families decided to give up control and put the company’s shares on the market.

In 1969, Harley-Davidson was bought by American Machine and Foundry Co. (AMF), a leisure equipment manufacturer.  The arrangement proved, at least initially, to be a good one for Harley-Davidson, for it was in the mid-1960s that the company experienced its first real competition after Indian went out of business. The financial resources and stability that AMF was able to provide helped the company battle Japanese motorcycle manufacturers, who had begun exporting their vehicles around the world, placing themselves in direct competition with Harley-Davidson.

Bill stayed on as president under the control of AMF reporting to it’s then current chairman and CEO Rodney C. Gott (Mr. Gott served as AMF president, starting in 1962, and chairman and chief executive, from 1968. He retired in 1978).  Mr. Gott was a Harley-Davidson rider and big motorcycle fan.  As a sidebar: In World War II, Mr. Gott was a decorated veteran who served in Gen. George S. Patton’s Third Army and on the staff of Gen. Lesley James McNair, chief of ground forces, and was also commander of the 79th Infantry Division Artillery.

In 1971, Bill Davidson was made Harley-Davidson chairman, but reported that he had little power while under AMF’s control.  It was noted that he was chairman of the Harley-Davidson board that never met.  Conflicts with AMF’s strategy and chaotic market conditions led to Bill Davidson’s resignation in 1973.

It was a period of high CEO turnover at Harley-Davidson.  During this time, AMF named John O’Brian and then Gus Davis as president, marking the first time someone other than a Davidson would sit in the company presidents chair.  Other Harley and Davidson family members continued on at the company under AMF’s ownership.  Bill Davidson’s son John was vice president of Sales, and then moved up to become president after Gus Davis.  William J. Harley was engineering vice president until his death in 1971.  His brother John Harley remained at the company until his death in 1976 as the last Harley at Harley-Davidson.

In 1975, AMF put Vaughn Beals Jr. at the head of Harley-Davidson, and Jeff Bleustein was named chief engineer. Bleustein was charged with making manufacturing improvements, which had  become increasingly necessary as production grew and quality declined.  A limited line of high-priced products and a reputation for unreliable motorcycles marked this timeframe in history.  AMF began to lose interest in keeping the struggling motorcycle business afloat.

Rodney C. Gott (Left) and John Davidson, President Harley-Davidson

In a bit of irony, (circa: 09/1977), the motor company unveiled a motorcycle museum in York, PA., that was named after AMF’s CEO — Rodney C. Gott Motorcycle Museum.  A video HERE.

In June 1981, to save the company, and to effect a turnaround, thirteen Harley-Davidson executives, led by Vaughn Beals Jr., put together a plan for a leveraged management buyout. With the financial support of Citicorp, the management team succeeded in taking control of Harley-Davidson from AMF on June 16, 1981, at a cost of $81.5 million.

The role of the new officers after the company buy-out option included: Charles Thompson, president and chief operating officer; Jack Hamilton, Chris Sartalis, Jim Paterson, Kurt Woerpel, Peter Profumo, Jeffrey Bleustein, Thomas Gelb, William Davidson, and Tim Hoelter, all vice presidents. The president of the various divisions were: John Davidson, golf; David Caruso, parts and accessories; Ralph Swenson, York; and David Lickerman, Harley-Davidson International.

Even though he was no longer actively involved with the company, Bill Davidson lived to see the renewal and success that Harley-Davidson enjoyed starting in the late-1980s.

Bill Davidson died in 1993.  He was inducted into the AMA Motorcycle Museum Hall of Fame in 1999.

Walter Davidson — was president from 1907 to 1942.  Bill Harley was chief engineer and treasurer. Author Davidson is secretary and general sales manager and William A. Davidson is the works manager.

In 1936, six sons of the founders are working at Harley-Davidson.  Walter Davidson’s sons Gordon and Walter C.; and William Davidson’s sons, William Herbert “Bill” and Allan; and Bill Harley’s sons, William J. and John.

In 1942 from his death bed,  Walter Davidson named his nephew William Herbert “Bill” Davidson as president and his own eldest son Gordon, as vice president of manufacturing.

Historical Principal H-D Subsidiaries: Holiday Rambler Corporation; Utilmaster Corporation; B&B Molders; Creative Dimensions; Nappanee Wood Products.

Article References:

Vaughn Beals Jr. – Wikipedia
Growing Up Harley-Davidson – Jean Davidson
Harvard Business Review – Harley Leadership U-Turn
Jeffrey Bleustein – Wikipedia
The Morning Call – Harley Is A Classic Turnaround Story
Rodney C. Gott Obituary
Gus Davis Obituary
Cycle World Magazine – Interview with CEO, Matthew S. Levatich
Cycle World Magazine – Rodney C. Gott Motorcycle Museum
Chicago Tribune – The Real Harley-Davidson Story
James Ziemer – Northwest Harley Blog
People – Buy Back Article
Rick Barrett – Journal Sentinel

Harley-Davidson (Buyout) Management Team

**The Harley-Davidson managers post buy-out option: left to right standing: John Hamilton, Dr. Jeffrey Bleustein, Kurt Woerpel, Chstopher Sartalis, and William G. Davidson.  Left to right, seated: James Peterson, Timothy Hoelter, David Lickerman, Peter Profumo, David Caruso, Ralph Swenson, Charles Thompson, and Vaughn Beals Jr.

 

Photos courtesy of Harley-Davidson

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The 2012 Progressive International Motorcycle show will soon hit the northwest on December 16-18th at the Washington State Convention Center in Seattle.

Attendees can check-out new bikes from Aprilia, Beta, BMW, Brammo, BRP, Darwin, Ducati, Erik Buell Racing, Gas Gas, Harley-Davidson, Honda, Husqvarna, Indian, Kawasaki, KTM, Moto Guzzi, MV Agusta, Norton, Star, Suzuki, Triumph, Victory and Yamaha.  There will also be the latest aftermarket parts and accessories.

Not only will there be new bikes, but the show is jammed pack with other events and activities.

There is the Learning Curve – an interactive stage with industry experts presenting a variety of motorcycling topics for both new and experienced riders including adventure riding, motorcycle maintenance, increasing bike performance, seminars for women riders and more.   There will be Demo Rides for licensed motorcyclists.  There is the Custom Bike Show – where motorcycle builders will showcase elite-level custom motorcycles competing for a piece of a $90,000 cash purse prize and a chance to compete in the U.S. Championship, at the Daytona Beach Motorcycle Show, in March.

The Smage Bros will have a motorcycle trials stunt riding show and attendees will also get a chance to create their own motorcycle design at the Kawasaki Design-A-Bike kiosk, featuring a brand new digital spray-painting technology available only at these shows.

See you there!

Photo courtesy of Progressive.

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Think Snow Bumpersticker - HD Advertising (circa: 1972-74)

It was a big year for Harley-Davidson as they shifted from downsizing, labor agreements and weathering the recession to now looking forward to growth in 2011.  With freezing temperature and snow falling in many parts of the U.S., I’ve compiled some 2010 highlights to provide you some entertainment as you warm up with hot chocolate:

January
1.    Downtown H-D Renton, WA., one of the northwest dealers named among top 100 (Link: HERE)
2.    H-D reported its first quarterly loss since 1993 (Link: HERE)
3.    H-D announces the new, but “old” Forty-Eight Sportster (Link: HERE)

February
1.    H-D donates 28 new Buell and H-D motorcycles to assist in the earthquake disaster (Link: HERE)
2.    H-D marketing continues to pitch brand with young-rebel-with-tats ethos (Link: HERE)
3.    H-D internal documents indicate 382,000 absenteeism hours in the factories (Link: HERE)

March
1.    H-D promotes danger as Seth Enslow breaks Bubba Blackwell’s jump record (Link: HERE)
2.    H-D dealer (Shumate) in Kennewick, WA., closes under a mountain of debt. (Link: HERE)
3.    H-D CEO, Keith E. Wandell 2009 compensation package becomes public as the $6M dollar man (Link: HERE)
4.    H-D marketing pulls out all stops on innovation and launches Super Ride II (Link: HERE)

April
1.    H-D consolidates motorcycle testing in Arizona Proving Grounds (Link: HERE)
2.    H-D files mass layoff notice with Wisconsin department of workforce development (Link: HERE)
3.    H-D CEO, Keith E. Wandell is “encouraged” as Q1 motorcycle sales revenue declines 20% YOY (Link: HERE)
4.    After 26 years of service Bill Davidson is put in charge of the Museum (Link: HERE)

May
1.    H-D CEO, Keith E. Wandell states in interview that H-D is like GM…a fading American industrial might (Link: HERE)
2.    H-D threatens to leave the state of Wisconsin (Link: HERE)
3.    H-D CMO, Mark-Hans Richer is no man crush of this blog (Link: HERE)

June
1.    H-D launches XR1200 Refresh (Link: HERE)
2.    H-D launches Wii based-game: “Road Trip” (Link: HERE)
3.    H-D at the National Law Enforcement Museum (Link: HERE)

July
1.    H-D opens Hyderabad, India showroom to pandemonium (Link: HERE)
2.    H-D reports Q2 earnings with financial services being largest money maker (Link: HERE)
3.    H-D launches the 2011 model lineup of 32 bikes vs. 38 the prior year (Link: HERE)

August
1.    H-D announces closure of sidecar business which operated since 1914 (Link: HERE)
2.    H-D announces 1-MILLION fans on Facebook (Link: HERE)
3.    H-D sold back MV Agusta to its previous owners (Link: HERE)
4.    H-D announces that after 31 years they’ve parted ways with PR firm Carmichael Lynch (Link: HERE)

September
1.    Erik Buell releases teaser ads promoting a new street bike based on 1190RR (Link: HERE)
2.    H-D gives away free posters of any of their 32 models (Link: HERE)
3.    H-D under threat of moving out of state announces ratified 7-year labor agreement (Link: HERE)
4.    H-D “spins” the fact that massive branding efforts result in a 24% brand value decline (Link: HERE)

October
1.    H-D reports Q3 earnings with motorcycle sales declining 7.7% worldwide and 14.4% in the U.S. (Link: HERE)

November
1.    H-D management “negotiates” with Kansas City plant to accept a new labor agreement or we’ll leave state (Link: HERE)
2.    H-D turns down a $25M tax credit deal by Wisconsin State (Link: HERE)

December
1.    H-D never disclosed a $2.3 BILLION deal with Federal Reserve (Link: HERE)
2.    H-D announces first ever “Crowd Sourcing” for new marketing ideas (Link: HERE)

Photo courtesy of H-D.

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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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First was a slam about H-D imitating and going down the General Motors path.  Then there were calls for a Lazarus-like resurrection!

Not my words, but direct from Mr. Keith E. Wandell (Harley-Davidson CEO and President) who states; “Look in a mirror – Harley was already so far down that same (GM) path it wasn’t even funny.” More talking point nuggets from his first in-depth press interview HERE and HERE.

I’m not sure about you, but I’ve never thought of my Harley as a “Chevy” and I own both!  Never mind that many GMs are made in Mexico or Canada.  The public perception of GM is that it stands for overlapping product lines with bland differences and the “bigger is better” mantra is followed to extreme, and then a crash diet when fuel prices soar.  This has lead to a sea of monstrosities as well as a few genuine moments of clarity and even a hint of brilliance.  But in total, the brand is most often marred with an indifferent quality perception and inexpensive or cheap label.

I don’t hang on Mr. Wandell’s every word, but his point above is an interesting way to send a condescending comment to the Harley-Davidson employees and buying public.  Does the Harley Chief really want his current customers to associate their recently purchased premium ride with GM?  It seems disingenuous to compare GM to the state-of-state at Harley-Davidson or use them as the poster child for everything wrong at H-D.  Wasn’t it just a little over a year ago that H-D management and the board approved what many would consider the equivalent of GM buying Ferrari (H-D acquires MV Augusta)?

Keith E. Wandell - CEO Harley-Davidson

The implication from the CEO interview is that H-D, like GM is a fading American industrial might, one that offered up a motorcycle to feed every market segment which has since degraded into exuding minimal coolness from contrived models.  Many others with little identity and somehow you’ve been duped into paying a premium price for indifferent quality.  This doesn’t seem intellectually honest or make for good PR!

The mind-set reminds me of an article in yesterday’s Wall Street Journal about plastic corks and how they’ve made major inroads into the 400 year-old world of wine-corks.  One quote rang especially true and reminded me of the Harley motorcycle business.

“By the 1990’s, retailers and wineries were clamoring for a solution to wine taint, but the cork industry didn’t respond.  No industry with 90% market share is going to see its propensity to listen increase – and that’s what happened to us,” stated Mr. Carlos de Jesus (Head of Marketing, Amorim Group (largest cork producer in Portugal)).

The bottom line is corks didn’t work that well and wine ended up contaminated/bad because of cork deficiencies.  No cork manufacture believed there was a problem and didn’t see the opening for an entrepreneur.  In less than 10 years, plastic corks account for about 20% of the bottle stopper market.  They changed the way winemakers think about making and closing wine.

Lessons for Harley?

  1. Never lose focus on your core mission.  Which is bringing great quality motorcycles to the public.  Some motorcycle manufactures have tumbled into the abyss because it became more about hip-hop star alignment, brand marketing, finding a tiny niche and filling it, oblivious to the point most of your market just doesn’t care.  Oldsters and hipsters are both confused.
  2. Don’t be inured to nostalgia or old technology.  The public is more open to innovation than the supplier.  People are not married to the old ways, they’ll embrace new ideas even if not every innovation triumphs.
  3. Success breeds complacencyAll most innovation in the motorcycle business is by the independents or custom shops doing it outside of the system.  To say you need a major motorcycle company to triumph is to say plastic cork suppliers can’t win unless they align with real cork suppliers in Portugal, who after all are fluent in distribution and have pre-existing relationships with wineries.  But, the plastic cork guys went it alone.
  4. Efficiencies and price. We’re not talking virtual here, corks are physical whether real or plastic.  The future is lower priced motorcycles and the cycle time for new models can’t be like harvesting cork from a tree every 9-to-10 years.  The fundamental measurement of lean manufacturing is cycle time.  It doesn’t matter how many “Kaizen” events or “six sigma” projects a company holds. Cycle time is to lean what weight is to a dieter.  You can get all the bean counters to measure inches lost or reductions in calorie intake, but at the end of the day the bottom line is determined when you step on the scales.
  5. Multiple answers. There is always more than one answer which can take hold.  Screw caps are triumphant ‘down under’ in Australia and New Zealand.  Who will develop the next “screw cap” for the motorcycle industry?

The point is not to be weighted down by your presuppositions.  Don’t think that you’re operating in a world of immutable laws.  And to realize that trying to hold back the future is a losing proposition.  The only way to maintain your share is to improve what you’ve got. Concentrate research dollars on fewer models, pack them with the latest features and technologies, manufacture them in low-cost, U.S. factories (non-union?) and update them relentlessly on rapid fire engineering design cycles.

Schematic photo taken at H-D Museum; Keith Wandell photo courtesy of Tom Lynn/JSOnline.

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Ice Racing -- Franky Zorn

Yes, it’s been ten years!

Magazines and newspapers with decade-ending rankings have started to appear.

Over the next month, we’re going to be deluged with statistics.  Telling us who the winners were.  People who provided fodder for the system, that you consumed, and forgot.  Best movies, best athlete, best TV shows, best songs, best companies etc.  So, I thought it would be good to go back and compile highlights on the Harley-Davidson decade.

It wasn’t all good news—marked by the roughest economy since the Great Depression.  In pulling together the data I was reminded of a song by James McMurtry’s “We Can’t Make It Here”.  It’s a favorite and one I would vote as the “best” song of the twenty first century, yet it never seems to get air play.  But, this isn’t a rant about how they killed radio and now have us anesthetized in front of the flat screen, selling us products we don’t need, that we put on credit cards that charge 29%.  Sure, McMurtry’s lyrics are poignant, but there’s a hypnotic groove that hooks the listener.  It makes me want to play the song again and again.  But, I’ve moved a little off topic… here is a look back:

2000 — The Softail Deuce is introduced.  All 2000 Softail models have the Twin Cam 88B engine, a counter-balanced version of the Twin Cam 88.

2001 — The V-Rod is introduced for the 2002 model year. Inspired by the VR-1000 racing motorcycle, the V-Rod is H-D’s first motorcycle to combine fuel injection, overhead cams and liquid cooling.  It delivered 115 horsepower.

2002 — The all-new Buell Firebolt is launched.

2003 — Buell launches the Lightning XB9S.  More than 250,000 people come to Milwaukee for the final stop of the Open Road Tour and the H-D 100th Anniversary Celebration.

2004 – The Sportster family models receive rubber engine mounting, a new frame, and a wider rear tire. The Road King Custom is introduced with a low rear suspension and wide handlebars it brings a beach cruiser look to a classic motorcycle.

2005 — The XL 883L Sportster 883 Low brings a lowered seating position to the Sportster line.  H-D and the Muscular Dystrophy Association (MDA) mark the 25th anniversary of their partnership.

2006 — The first of the 6-speed transmissions are made available on 2006 model year Dyna motorcycles. The 2006 model year includes the all-new Street Glide, a lower profile touring motorcycle. H-D appoints Beijing Feng Huo Lun (FHL) as the first authorized H-D dealer on mainland China.

2007 — Union rejected a proposed new collective bargaining agreement for employees and went on a strike at its final assembly operations in York, Pa.  H-D launch the Sportster XL 1200N Nightster. The H-D Foundation and the Disabled American Veterans (DAV) Mobile Service Offices (MSOs) launched the Harley’s Heroes Tour.  H-D celebrated 100 years of Police Motorcycle Sales.

2008 – H-D teamed up with the Ultimate Fighting Championship (UFC).  H-D holds its 105th Anniversary Celebration and the H.O.G. 25th Anniversary.  H.O.G. launched the Million Mile Monday ride. A H-D Softail stars in the new Indiana Jones movie. H-D acquires MV Agusta Group expanding presence in Europe.  The H-D museum opens to the public. H-D introduces the 2009 Tri Glide Ultra Classic motorcycle (3-wheel).  For 2009 touring models H-D introduces the all-new frame, swingarm, engine mounting system, wheels and tires and new chassis.   The H-D XR1200 is launched in the U.S.

2009 — CEO James Ziemer retires and is replaced by Keith Wandell. H-D reports decreased revenue, net income and diluted earnings per share and provides a new strategy and restructuring update. Buell named Official Pace and Safety Bikes of AMA Pro Road Racing. H.O.G. set a 5 Million Mile Monday goal, but falls just short of the goal. H-D launched the Ride Free II Guarantee program.  H-D rolls out nine new motorcycle models for 2010 across six model platforms. H-D formally enters the motorcycle market in India. H-D unveils long-term business strategy after poor Q3 revenue and announced the discontinue of its Buell product line and plans to divest its MV Agusta unit.  Erik Buell leaves the company to establish Erik Buell Racing.  H-D announced it will keep its motorcycle operations in York, Pa., that includes a restructuring plan which eliminates almost 50% of the workforce.

H-D Revenue: 2000 = $2.24 Billion (2000 was the 15th consecutive year of record revenue); **2009 = $4.08 Billion (back-to-back yearly declines — in ’06 revenue = $4.55B)

H-D U.S. & Canada Market Share (651+cc): 2000 = 45.9%; **2009 = 45%

H-D Gender:  2000 = Male (90%); Female (10%); **2009 = Male (89%); Female (11%)

H-D Median Age: 2000 = 44.2; **2009 = 48.1

H.O.G. Membership: 2000 = 582,400; **2009 = 1.3 Million

Unit Shipments: 2000 = 204,592; **2009 = 225,000

(** indicates estimates as final results not tabulated/reported and subject to change)

From record revenue and income to record downsizing and decline.  I didn’t mean to get you reaching for the Prozac, but it’s not all that bad.  Just like ice racing in winter months can be slippery with the occasional crash, H-D will continue to modify, adapt and adjust to come out on top.

Photo courtesy of Rutger Pauw;  Statistical Sources: H-D; H-D Investor; Google Finance and various analyst estimates.

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HD_MCThis is the question I’ve been pondering over after having an opportunity to spend a couple of hours with “No Barriers” founder Neal Petersen.

To save you some time the short version of Neal’s story is — He is a black South African who grew up poor and disabled during apartheid yet achieved his dream of racing/sailing solo around the world.  He now does motivational speaking and is involved in peace talks in multiple countries across the world.  During Mr. Petersen’s speech he routinely ask the audience; “Does what I do on a daily basis at work have a positive impact?”

This resonated with me and while I personally reflect on this I can’t help, but ask the question of Harley-Davidson’s CEO, Keith Wandell.

Today, Harley-Davidson reported out the Q3’09 quarterly results and announced a massive 21.3% decline in revenue for the 3rd quarter and an 84.1% decline in net income from a year ago quarter.  Apparel and general merchandise represents 23% of H-D revenue to date.  Then the news got interesting.  They announced that 14 dealers have closed year-to-date and set the expectation that 15-30 additional dealers will close in the next 6 months as the company reduces inventories to match sales.  They discussed the HDFS bad loan/delinquencies and financial progress.  The Harley-Davidson brand value (note: its moved down from 43 to 71 position) and the more important announcement was to shutter the Buell product line as well as divest its MV Agusta unit.  A busy day of spin as Mr. Wandell went on to discuss the going forward 4-piller strategy of: growth; continuous improvement; leadership development and sustainability.

On the Buell front I can’t say that I’m not surprised because it was reported a couple weeks ago in the Milwaukee Journal-Sentinel that Erik Buell didn’t renew his employment contract with the motor company and there were a number of rumors circulating as to what that might mean.  I want to personally thank Erick Buell and the Buell employees.  I believe what they did on a daily basis at work had a positive impact.  They should be proud of what they accomplished.  They are an American innovation poster-child and represent what passionate and inspired people can do through engineering and manufacturing some of the best-handling bikes in the world.  But, in biker speak… it’s WTF?  An American designed and manufactured motorcycle that out performed Asian manufactures all year in the AMA Pro Roadracing circuit and Mr. Wandell dumps it?  This is forward thinking?  2009 marked the first year H-D had a non-motorcycle enthusiast running the company and I have to ask if he really got out there to see what all that (Harley) race stuff was about and how it enhanced the brand?

Since I was rather harsh in a blog post last year about the $108 million MV Agusta deal and describing it as a train wreck, I agree with the decision to abandon it.  Sure this happened under ex-CEO James Ziemer shift who retired shortly after cutting the deal, but the board members clearly approved Mr. Ziemer’s compensation package who walked away with only $5.6M compensation, up 26.5% from 2007.   And in part the compensation was based on the boards admiration of the MV Agusta deal, right?  The board members should be put on notice as there are now another 180 employees set to hit unemployment due to the management of the company and we all know they had line of sight just 12 months ago to the economic issues.

The shocker in the financial call was the statement of investing more in emerging markets up to and including local market design and manufacturing!  Is this a precursor to moving manufacturing off-shore?  A lot of talk about taking Hogs to China and India, but nothing about how well the strategy has worked to woo women, African-Americans and Latinos.  The value of the brand was weaved into the growth strategy, but nothing about why it dropped 43% in 2009.  They’ve talked for two quarters about reducing inventory yet made little progress.  And loans made to iffy borrowers aren’t just taking down housing.

The push by H-D corporate for dealers to build increasingly larger and high-end-glamorous retail outlets meant more dealer debt and subsequent failures.   Chapter 11’s continue to stack up across the northwest.  Three locations of Shumate H-D with one in Kennewick (owner hub), another in Spokane and a satellite location in Lewiston, ID.  I blogged earlier this week about Dave Tuomisto’s, $16M and 6-acre mega-expansion at Timpanogo, UT which went under.  It’s not clear when or if any of these dealers will reemerge and the real downside will be H.O.G. groups folding, lengthy drives for service or to hang and drop in which overall effects customer service and having a healthy Harley community.

Harley is in major trouble.  The spin, baby, spin from Mr. Wandell is not good enough, my friend.

Photo courtesy of H-D.  Financial call transcript courtesy of SeekingAlpha.  Disclosure: I have no investment in HDI

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