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Posts Tagged ‘Recession’

Slowly but surely, things are getting better—or so we’d like to believe.

The unfortunate truth is the recession has sent an alarming number of families into financial distress for the first time. Unemployment remains high. Home foreclosures continue. The Portland Police Bureau respond to what seems like an ever increasing number of calls involving people struggling with mental health crisis, including suicides.  Visits to food banks have reached record levels. The increasing demand for services—and diminishing state and local resources—is straining the community safety net for people in need.

I don’t have answers to the economic issues.  But undeniably, the sensation of air molecules colliding with one’s face is refreshingly life-affirming.  To be in the wind: Free. Untethered. Sans obligations, financial, agendas, appointments, offices, annoyances.  Life’s problems just don’t seem as bad…

In part, it’s the reason for the tag line of this blog Whatever it is… it’s better in the wind” which I created back in July 2007.  The thinking was all a person needs is a few bucks for a used bike, $20 bucks for some fuel, a couple t-shirts, some free time, and a couple like-minded friends to enjoy the sensation. If you can’t scrape that together, then at least roll down the windows on the SUV, and enjoy a few moments of well-deserved Wind.

And speaking of wind in the face… a couple years ago I blogged (HERE) about Scott G. Toepfer — an emerging documentary photographer with a love of motorcycles and adventure.  His posse set out across the Western U.S., to experience the spaces between here and there, and to see what becomes of them on the road.

It turns out that Mr. Toepfer finally aggregated the content he captured from their rides over the last two years and release the short film (HERE – 17 min) which tells the story of their adventures.  It’s certainly worth a watch and may even be an inspiration for getting out in the wind!

Photo courtesy of Scott Toepfer.

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A long time ago… back in 2010, Victoria Doyle, who along with her husband Mike owned Doyle’s Harley-Davidson in Eugene, Oregon (aka Duck Country).  They had recently closed their store in Roseburg because of the economy and were in a meeting at the Oregon Election Station talking about the impact to their Harley-Davidson business if Measures 66 and 67 passed.

You remember those “tax fairness” measures, right?

It was a special election where the public employee unions spent millions on “yes” campaigns to raise taxes on what they deemed were the wealthy.  Unlike previous failed tax measures, 66 and 67 was positioned to pit the financially challenge against the wealthy.  The wealthy should pay even more tax because there was a need to fix the broken tax system and funding structure in the state – it was portrayed as a “fairness issue” which resonated with many who were un/under-employed at the time because it would not affect them.

In the meeting hall, Victoria Doyle boldly stated “we’ll either lay people off or raise prices.”  At the same time, H-D corporate was pressuring Doyle’s to upgrade the building of which they didn’t own to come more in line with their other dealer “mega stores.” All this pressure had to create anxiety for the owners on whether the business could remain profitable given the weak sales environment.

Steve Dorn (L) and George Latus

Jump ahead a couple years and the dealership was sold last month to George Latus of Latus Motors.

On my recent trip to the Street Vibrations  we rode past the dealer and noticed the temporary Latus signs on the building.  As we rolled by on I-5 I was reminiscing about my Road Glide purchase from Mark Doyle last August.  He and his wife Janie were absolutely a joy to work with and Melody McCauley made signing the paperwork quick and easy.  This would have been Doyle’s 18th year anniversary celebration and I’m sure it was a difficult decision to sell the business.

There was a part of me that was sad for the Doyle’s, but I’m sure the new owner will do right in Eugene.

Back in the 80’s Mr. Latus was a motorcycle mechanic and Harley-Davidson had suffered a very bad decade.  It was an era when you could waltz in from Montana and open a dealership in Spokane and then later in Portland/Gladstone with relative ease.  Mr. Latus is  heavily involved in various racing activities from sponsorship of racers on the AMA Flat Track series and is the primary sponsor of Steve Dorn, Top Fuel racer for the All Harley Drag Racing series.  He is passionate about motorcycles and has established a good reputation with customers in all his dealerships.

I wish the Doyle’s the best of luck and much success in whatever they decide to pursue.

Photo courtesy Shetech/Flickr, and Latus Motors.

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Huffington Post Slams Harley-Davidson

I’m talking about the Huffington Post (“Huff-n-Puff”) who went to DEFCON 4 as they strike out against business, again.

This time round they demonize Harley-Davidson.  The poster-child of everything that’s wrong with American business.  Disregard the “mother of recessions”… they’re slammed as an irresponsible corporation for seeking profitability.  OMG!  Of all things…imagine an American company wanting to be profitable so they can continue to serve their customer base and shareholders.  What’s the world coming too?!  Then adding insult to injury they suggest that all motorcyclists heading to Sturgis need to send Harley a message – CREATE JOBS – independent of the new normal – just bolster hiring and production!  Wear a “Jobs First” button, post YouTube videos… do anything and everything to send a message is their rally cry.

Bill Scher, Executive editor of LiberalOasis.com wrote the scathing article and cites his partner news publication (a.k.a. NY Times) who reported that H-D had a $71M profit in Q2’10, yet continues to shrink its workforce.  True enough.  Many companies are focused on cost-cutting to keep profits growing, and in many cases the short term benefits are largely going to shareholders instead of the broader economy, as management needs to conserve cash rather than increase hiring and producing more product which isn’t selling.

I don’t often rush to H-D’s defense and I’ve been critical of H-D focusing too much on cost-cutting to keep profits growing at the expense of innovation and new products.  But Mr. Scher and his send ‘em a message drum beat are off tempo.  Nowhere does he state that $60M of the $71M in profits for Q2’10 came from H-D’s financial services arm.  The first time they’ve made money from this division in 2-years!  He doesn’t discuss the union cost issues, the increasing state tax issues and the list goes on and on.  Many have been reported on in this blog.

Bottom line is that H-D is not irresponsible.  For them to stay in business the next 100 years they have to resize to match the realities of the economy.  It’s the “new normal.”  Blame the housing bubble, the economy or the competition, but the fact is Harley-Davidson overall sales have fallen every quarter for 3 years.  Yet, it’s fixed costs like infrastructure, commodities and rent remain the same.  Clearly H-D has yet to crack the code of a successful industrial turnaround and have been in scramble mode.  They need to continue shrinking the business to a size that’s defendable, and growing off that lower base, else they risk being restructured into oblivion.

Sure I’m frustrated over the weak American economy, and angry at the lack of support for manufacturing in America.  I’ll be one of the hundreds of thousands of bikers in Sturgis and will have a chance to send a strong message to Harley-Davidson.   I plan to thank them for doing unnatural acts while trying to remain profitable so they can continue to serve their customer base.  You and I!  Then I’ll remind them they are behind on innovation.

Mr. Scher I’ll be in Sturgis… wearing the “I Heart Harley” button.  If you really want to help “win back America” consider purchasing a new 2011 Harley, ride it to South Dakota and spend some of that ‘how-to” book money at a Sturgis vendor booth.

Photo courtesy of Huffington Post.

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GM, Rick Story and Owner, Dave Tuomisto

GM, Rick Story and Owner, Dave Tuomisto

It’s starting to look a lot like a “job-less recovery”… and the R-word continues to take a toll as bankruptcy filings nationally surged past the 1 million mark during the first nine months of 2009.  Many states have similar statistics, but in Utah the U.S. Bankruptcy Court received 10,706 bankruptcy petitions in the first nine months of this year — a 62% increase from the same time last year.

And speaking of Utah, the owner of Timpanogos Harley-Davidson (Dave Tuomisto) filed for Chapter 11 bankruptcy protection last month to help stall an acrimonious legal battle over millions of dollars in alleged unpaid debts to several lenders.  I previously blogged on the July 2008 opening of the mega-dealership HERE and it’s unique history after a $16 million renovation complete with green building awards.

The 6-acre complex and building was resort-like and often written about in a very positive profile that focused on Harley-Davidson’s growth strategy, branding efforts, and future opportunities.  Overall, it was a great story and a source of pride as a memorial to the Geneva Steel power plant.  For the city it was a way to talk up the merits of building green and reusing historical icons.  It was like a mini-museum and it’s very unfortunate to witness its rapid fall – again.

As the economy continued to falter, the overextended Mr. Tuomisto structured an agreement with Nu Skin founder Blake Roney (Tupelo Investments LLC) to transfer the dealership to them after getting bailout assistance to keep the dealership’s assets from being seized and shut down by Harley-Davidson Credit Corp.  Tupelo Investments LLC owns the 60,000 square-foot building and the motorcycle-themed restaurant called Marley’s. In bankruptcy court filings the list of creditors include: Harley Davidson Credit, which is owed $4.3 million; Monarch Recreation Sales is owed $760,922; Scrub Oaks is owed $400,000; the Utah State Tax Commission is owed $151,363; and millions more owed to hundreds of other businesses and individuals.

But wait, there’s more… quick to smell a deal, Joe Timmons (Owner of H-D Salt Lake, South Salt Lake) is trying to buy the building which housed Timpanogos H-D.  Likely for pennies on the dollar.

Photo courtesy of H-D.

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shred_dollarNot to buzz kill the summer riding season, but the current recession is the longest we’ve seen in the post-war period. 

Inclusive of the current downturn, there have been 11 recessions since WWII.  Having officially started in December 2007, this month marks the 19th month of the current “slump.”

As you would expect, cut-backs in consumer spending are visible throughout the economy (see below chart) and Harley-Davidson has felt the weight of the “great recession” too.  The company released its Q2’09 results today and worldwide retail unit sales of new H-D motorcycles were down 30.1% compared to the year-ago quarter. Retail new H-D motorcycle sales in the U.S. were down 35.1% and declined 18.2% in international markets compared to last year’s Q2.  On a “positive” note the company’s earnings were $19.9M on $1.15B revenue and industry-wide retail sales of heavyweight motorcycles in the U.S. declined 48.1% for the same period indicating that H-D performed better than its competition.

In his first quarterly report to the investment community as the new President and CEO Keith Wandell stated:

“While the underlying fundamentals of the Harley-Davidson brand remain strong and our dealers’ retail motorcycle sales declined less than our competitors, it is obviously a very tough environment for us right now, given the continued weak consumer spending in the overall economy for discretionary purchases.”  Wendell went on to say: “We plan to ship fewer Harley-Davidson motorcycles worldwide this year than we anticipate dealers will sell at retail,” which is meant to protect the brand.

consumer_spendingDue to the declines in retail motorcycle sales, the Company has lowered its 2009 shipment expectations by 25-30%.  Because of the lowered shipment volume, H-D announced further headcount reductions of approximately 700 positions in the hourly production workforce and 300 positions in non-production, primarily salaried headcount, including some at HDFS. This is in addition to the previously announced reduction of ~1200 positions bringing the total reduction to approximately 2,200.  H-D started the year with 10,100 employees and of course H-D shares rise on news of the additional layoffs.

Looking forward, the company will introduce its 2010 models on July 25th at its Summer Dealer Meeting in Denver.  I wonder if it’s time again for import duties or a Motorcycle Czar?  For now let’s just hope for a great lineup of motorcycles that will create some riding buzz and motorcycle passion!

Photo and chart courtesy CEA.

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elevator_doorsI’ve alerted people to the fact that the groundwork is being laid for a new kind of Harley-Davidson company in the future.  It’s anticipated they will need to aggressively streamline brands, shrink capacity and either eliminate or phase-out certain poor performing models. 

Then this past weekend while many of us were in the Nevada desert, hundreds of rain soaked shareholders packed the Harley-Davidson Museum in Wisconsin to hear the top executives plans for the company.  Or as retiring CEO James Ziemer put it… “one of the most challenging economic times since the Great Depression.”  The Milwaukee Business Journal has more details HERE.  In short, Barry Allen, a director since 1992 was elected as the new board chairman and shareholders voted to end the class structure of company’s director terms.  Essentially putting the board on notice through an annual re-election process.  Also former CEO and current board of directors chairman Jeffrey Bleustein’s formal involvement in the company came to an end.

Ziemer stated that “the company’s fixed cost structure is simply too high.”  They plan to reduce excess capacity and make changes to be more competitive for the long term.  Several shareholders booed Ziemer on the decision to consolidate factories.  Does this imply Harley will now need to consider new China-based facilities to offer a world-class cost structure?  Would manufacturing motorcycles in China disrespect the rich heritage of the Harley brand and the importance of the Americana culture?  In today’s world I’m not so sure it matters to the price savvy consumer.

And speaking of the economy it’s not a surprise, but odd that Harley-Davidson did NOT participate in the Laughlin River Run last week.  Given that customers are now investing more in their current motorcycle vs. trading up you’d think that the largest west coast motorcycle rally is not an event to be snubbed.  Most all the Asian brands were well represented and HD being absent was clearly noticed.

Lastly, either in a sign of these recessionary times or nostalgic admiration for his remarkable 40 year career, the employees presented Ziemer with the original wood doors from the freight elevator he operated when he first was hired at Harley-Davidson.  Ziemer’s 2008 compensation ($5.6M) should allow him to build a new wooden ‘man’ shack to admire those elevator doors during retirement!

Photo courtesy of HD

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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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