The Harley-Davidson “Hardwire”

Drum roll please…with a rim shot!

Harley-Davidson released the secret recipe for “The Hardwire” — a new 5-year strategic plan rolled out oddly on Groundhog Day.  You can read the press release HERE.

Groundhog Day, the comedy film starring Bill Murray, Andie MacDowell and Chris Elliott portrays a cynical TV weatherman covering the annual Groundhog Day event in Punxsutawney, Pennsylvania, who becomes trapped in a time loop forcing him to relive February 2 repeatedly.

I reviewed the Harley-Davidson press release and like the film, the motor company seems to be in a time loop spewing marketing or business verbiage that doesn’t mean anything. The release reads like quotes from the books “Crossing the Chasm“/”Blue Ocean“/”Good To Great” / “Tipping Point” / “Outliers.”  I’ve never read all of these books, but I sound MBA literate if I quote them. And, besides, most biker enthusiasts probably never read them either to call me out on it.

Below are the main topics of Chairman, President and CEO Jochen Zeitz’s, The Hardwire = with my snarky management euphemisms added for clarity:

The Hardwire Strategy

Profit Focus: Don’t leave money on the table = Be as greedy with them as possible.
Selective Expansion and Redefinition: We’re all about value-add = Unlike our competitors who seek to add no value.
Lead in Electric: It’s best-of-breed = We hired a market research firm to say that.
Growth Beyond Bikes: This is the next big thing/new thing = Some of our 20-somethings have told me this is really cool.
Customer Experience: We’re customer-focused/proactive/results-oriented = That can’t be bad, right?  This is motherhood and apple pie stuff.
Inclusive Stakeholder Management: We need to monetize/strategize/analyze/incentivize = When in doubt, stick “-ize” on the end of a word and it will sound action-oriented.
People: I know you’ve been burning the candle on both ends = Get ready to do some more.
Planet: It’s basic New Green Deal blocking and tackling = How could you screw this up? I also played high school football and those were the best days of my life.
Profit: We want this to move up and to the right = I failed high school algebra but someone said this means we’ll be making a lot of money if this happens.
Financial Targets: It’s about synergies/1 + 1 = 3 = I don’t get the math either, but it sounds like more and more is better, right?

Metaphors or marketing euphemisms are always interesting to me.  Eu·phe·mism — a word or expression substituted for one considered to be too harsh or blunt when referring to something unpleasant or embarrassing. For example, a famous feature of the World Fair in New York in 1964-65 was something called the Dynamic Maturity Pavilion — basically a garden with benches where those of mature years could rest.

Maturity is a positive concept; it implies that a person is fully developed in body or mind. And as a “seasoned” motorcyclist I’ll need to wrap my head around reliving The Hardwire.  We’ve seen this film before. I’ll need to sharpen my pencil and circle back to fully understand the paradigm shift.

In the meantime, I know we’re all on the same team here, rowing in the same direction, and it’s not about me, it’s about us.

Photos courtesy Columbia Pictures and Harley-Davidson.

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Harley-Davidson Announces Layoffs

Specifically, the motor company announced it will lay off approximately 90 employees at the York manufacturing plant and and 50 at the Tomahawk site in Wisconsin as part of an adjustment to its production volume.

The plant in Springettsbury Township just re-opened on May 20th as York County moved into Pennsylvania’s “yellow phase” of COVID-19 mitigation.

You might also recall that the motor company is pivoting from the “More Roads” plan to now focus efforts and energy to appeal to customers of premium-priced brands with limited availability.

I previously posted about this new success formula HERE.

Harley-Davidson has leveraged “scarcity” in the past. Underproduce motorcycles and limit distribution, which creates longer waits that in turn create an exclusivity mystique. Then up-sell consumers on the “premium-ness” motorcycle choice/brand.

As part of the new ‘scarcity strategy’ the company is adjusting its production volume (which to be fair, it routinely adjusts headcount), which will now result in a workforce reduction of York employees.

Previously, Harley-Davidson announced that it was reducing all non-essential spending and temporarily reducing salaries by 30 percent for executive leadership and 10 to 20 percent for most other salaried employees.

This reduction is nothing like the 2009 great recession when Keith Wendell cut the workforce by 2,700 hourly workers and 840 administrative employees.  Unless you are one of the laid off employees…then downsizing feels like cutting into “muscle” and is painful.

Laying off employees is difficult in normal times; but amidst the COVID-19 pandemic can magnify the tension and make coping with the turbulence very difficult. I hope Harley-Davidson makes the process equitable and those laid off have a soft landing.

Photo courtesy of Bradley Staffing Group.

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Harley-Davidson New Reality

COVID-19 Cancels Business

Recall back on March 19, 2020,  Harley-Davidson announced the closure of most U.S. production until March 29th.

The facilities that temporarily ceased production were York Vehicle Operations in Pennsylvania, as well as two Wisconsin operations, including the powertrain operation.  The majority of its global production employees continue to be on temporary layoff.

Today, Harley-Davidson announced additional actions it is taking in response to impacts of COVID-19 on its business:

• Significantly reducing all non-essential spending
• Temporarily reducing salaries
– CEO and the Board of Directors will forgo salary/cash compensation
– 30 percent reduction for executive leadership
– 10 to 20 percent reduction for most other salaried employees in the U.S.
– No merit increases for 2020
• Implementing a hiring freeze

The press release stated that medical benefits remain intact for all global employees.  Outside of the U.S., the motor company will take similar actions as based on regulations governing each of its operating locations. Salary reductions will be reassessed at the end of the second quarter as the company continues to closely monitor business conditions.

Not included in this announcement was information related to dealerships.  To my knowledge few if any have suspended operations.  The mandates and closures of nonessential businesses, left the question of whether dealerships, sales rooms, or repair shops should be included as the various city, county and state rules have been ambiguous.

More background reading at:

H-D Executive Mass Exodus
H-D MIA with Coronavirus Response Ads
H-D Entrepreneur and New Mastermind

Photo courtesy of Instagram

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April Fools 1983

President Ronald Reagan With CEO Vaughn Beals

In 2020, April Fools is passé and pranks are out.  The pandemic crisis has changed humor!

The popular metaphor for speech is “Shouting fire in a crowded theater,” which may cause panic.  The seriousness of COVID-19 has the capacity to frighten in a visceral way the public and dedicating a blog post to misleading people just seems like a very bad idea.

Do you remember a long time ago in a galaxy far far away, when tariffs were being used to control unfair trade practices (labor, environment and other issues).

Former H-D CEO Matthew Levatich With Recode’s Kara Swisher Discussing Tariff’s

Recall the hysteria of — Tariffs bad, Harley good?

Harley-Davidson execs and investors panicked when the European bloc raised its 6% tariff to 31% on motorcycles. That made each motor company motorcycle about $2,200 more expensive to export, and forced the company into opening another manufacturing plant in Thailand.

Thirty-seven years ago today, President Ronald Reagan took bold steps to protect Harley-Davidson from foreign competitors.  It was April 1, 1983, when Reagan ordered massive tariffs on large Japanese motorcycles to help the last surviving maker of American-made motorcycles.

President Ronald Reagan at H-D York, Pennsylvania on May 6, 1987

I’ve previously written about how during the 1970’s, Japanese motorcycle manufacturers flooded the U.S. motorcycle market decreasing Harley-Davidson’s market share. It had only been a few years since Harley-Davidson executed the epic buy back from AMF.  Their sales hadn’t reached the levels they envisioned, in part, because the AMF era was famous for shoddy quality, bikes requiring a lot of maintenance and the Milwaukee motor company was getting knocked down publicly and in need of some sunshine.

With poor quality and high-maintenance requirements, Harley was skiding toward bankruptcy.  In 1982, Harley-Davidson sought protection from the International Trade Commission (ITC) and requested a tariff on all overseas heavyweight motorcycles. This was the first and only time such a request was made to the ITC. They also lobbied the Reagan administration to raise tariffs on Japanese manufacturers because of “Dumping,” which in this context refers to exporting a product at a lower price than is charged in the home market, or selling at a price that is lower than the cost to produce it.

President Ronald Reagan and CEO Vaughn Beals at H-D York, Pennsylvania on May 6, 1987 — Recieving Appreciation Award

It was a different time and President Reagan used tariffs, versus tweets, to change the course of the American motorcycle industry.

On April 1, 1983, April Fools Day, President Reagan signed into law an act that imposed draconian import tariffs for a five-year period on Japanese motorcycles with displacement of greater than 700 cc’s.  This would give the American motorcycle maker some breathing room from intense competition to retool, get its act together and turn profitable. While the act was supposed to last for five years, then CEO Vaughn Beals asked that it be lifted a year early in 1987.

It was as good then and just as good today… Remarking about the celebrated Harley-Davidson turnaround in 1987, President Reagan quipped (recorded in this Podcast), “Never bet against Americans.”

If you are in need of some reading humor, check out these previous April Fools posts:
Harley-Davidson Boom Box Infotainment Virus
I Quit
Harley-Davidson Launches Blackline L-Edition
Keith Wandell Retirement Revs Up Harley
Wagoner Tapped As Harley CEO

Bonus:  President Reagan’s Remarks (Video) to Harley-Davidson Company Employees in York, Pennsylvania on May 6, 1987.

Photos courtesy of Harley-Davidson, Recode and Ronald Regan Foundation

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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 And The Goats

I’m fascinated by the rapid decline of the American car industry. 

And given Harley-Davidson’s consideration of closing its main assembly facility in Pennsylvania and moving production elsewhere is it déjà vu all over again?  GM and Chrysler went through the same China and Mexico facility debate to lower cost and cope with sales downturns now H-D wants the same experience?!  Huh?

A couple weeks ago there was an interesting article in “New York Times” on the GTO.  I recall hearing the Ronny & The Daytona’s song, but didn’t truly appreciate the “goats” until several years later when the Pontiac was a sleek ride on the boulevard.  At the time I had no idea that Jaguars were an exclusive make.  I’d see an XKE now and again, but if you wanted a real car, a hot rod, one that sparkled in the sunlight and impressed the girls, you got an American car.

In our family we had an string of American cars.  Trained as an engineer, my dad started off with GM/Chevy.  He purchased a sporty rear-engine Corvair Monza that caught fire on the way home from the dealership, but that’s what the brand stood for, great engineering.  There were several models purchased after, but not before the in-line six cylinder C-10 Chevrolet pickup that we must have drove 89,000 miles.  No matter how hard it was driven it got 9 MPG’s!  I remember a partially dismantled block in the driveway at one point theorizing how to boost the gas mileage with a timing belt change. At the end of the sixties and armed with a premonition of gas station lines my dad purchased a new 1970 Toyota Corona.  A Canary Yellow practical four door for a family of four with a dog.  A 1900cc (1.9L) 4 cylinder (3R-C) engine with a 2-speed Toyoglide automatic transmission.  After that Corona purchase I don’t remember much in the way of American car’s in our family.

My love affair with the automobile was not that much different from what I suspect was many of yours.  I studied “Car and Driver.”  I debated buddies what machines we were going to own.  Had friends with Cuda’s and “Stangs.”  But with the early-70’s oil embargo, Yom Kippur War and then later on with Jimmy Carter inflation and national energy policies… I went foreign and never looked back.   People made fun of that Fire Engine Red Corolla that looked like a thirty year old vehicle, even though it was brand new.  But then almost overnight the Datsun 510, 240Z and Celica converted the masses.  Who knew driving could be so much fun?

The usual suspects at GM have run that outfit into the ground.  And it’s hard not to compare analogies to the current state of the Harley motorcycle business.

Detroit said it was just giving the public what it wanted.  So let’s slap the backs of all those Detroit execs for ignoring the coming rise in the price of oil, the environmental concerns and just sell more SUVs.  It’s taken years.  But the Harley-Davidson world seems to be in a similar place as Detroit.  After years of coasting, it’s collapsing, and it’s not sure what the path out is.   Could it be that the blame lies on the pros who drove the business to the cliff, milking millions all the way, believing they’re entitled to their riches?  Is it union busting or “negotiation tactics?”  Where is the next act that H-D can rally around and declare great?  Not marketing noise.  Or accountant speak….like saying Britney might book revenue, but you’ll have a hard time finding any believer in her music.  Her music is not seen as necessary to most people’s lives.  It’s too discordant, or made for the cash register, not humans.  

Be it GM, H-D or Britney…until they change the product, we’ll remain in the doldrums.  It can be done, but only if the execs stop worrying about their lifestyle and get honest.

Photo courtesy of NYT.

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