Road Glide Absence Impacts Q4 2013 Financials

2013 Harley-Davidson Road Glide

Harley-Davidson Inc. reported it’s Q4’13 financials today posting a 9.7% year-over-year rise in earnings to 34 cents per share from 31 cents in the year-ago quarter.  The year-over-year increase was due to higher revenues and lower operating expenses in the Motorcycles segment.

Revenues improved 1.7% to $1.19 billion and operating income rose 5.1% to $122 million from $116.1 million in the fourth quarter of 2012.  Net income increased 6.8% to $75.4 million from $70.6 million a year ago.

For the 2013 full year results revenues increased 5.7% to $5.9 billion from $5.58 billion in 2012 and net income increased to $734 million from $623.9 million a year ago.

Harley-Davidson shipped 46,618 motorcycles to dealers and distributors worldwide during the 4th quarter which was down 0.95% from 47,067 motorcycles in the fourth quarter of 2012.   In the U.S., shipments improved 6.3% from the year-ago quarter to 27,387 units and commands roughly 50% share of the U.S. market,

Keith Wandell, chairman, president and chief executive officer of Harley-Davidson called the year “outstanding.”

So were there any other highlights?

Well yes… John A. Olin – Chief Financial Officer and Senior Vice President stated, “As we anticipated, U.S. retail sales growth in the fourth quarter slowed from the third quarter’s growth rate, behind 2 key drivers…”   “The second was the impact of the absence of the popular Road Glide models in the 2014 model year.  When you look at Q4 of 2012, the Road Glide represented 9% of that volume, and that Road Glide customers are incredibly loyal to that motorcycle. And that’s probably the biggest impact that we had on our 2013 retail sales in the fourth quarter.”

Mr. Olin also talked about a “fatten the tail” strategy.

Huh?

I’m not 100% sure of the context, but simply put, a financial fat tail describes a rare and extreme event.  On one end of the spectrum, are products like Project RUSHMORE that encourage trade-up at a high revenue and at a very high margin, and typically are aimed at H-D’s core customer. But, Rushmore is selling extremely well with outreach customers. And in addition, the Street Glide is the #1 selling bike to women, young adults, African-American and Hispanic’s.

Suffice to say that the Road Glide was a huge part of H-D sales and it’s no longer there.  Yet, the quarter was great!  Congrats to the H-D team.

Photo courtesy of The Bike Exchange

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Harley-Davidson 2014 Models Launch

2014 Ultra Limited

At the Harley-Davidson dealership meeting in Denver this morning, the company introduced eight new motorcycles for 2014. 

Proclaimed the largest new model launch in the company’s 110-year history, the eight new motorcycles feature improved power and braking performance, enhanced rider ergonomics, and styling updates.  The eight new models are the Road King®, Street Glide®, Street Glide® Special, Electra Glide® Ultra Classic®, Ultra Limited, Tri Glide® Ultra, CVO Ultra Limited and CVO Road King®.

2014 StreetGlide

All these motorcycles fall under a new product development moniker (“Project RUSHMORE“), announced about four years ago, with the intent to bring new bikes and features to the marketplace faster.  The key areas of RUSHMORE are:

Control:  The motorcycles will pass faster, stop quicker and allow riders to see farther at night.  Some models feature the new Twin-Cooled™ High Output Twin Cam 103™ while others get the new High Output Twin Cam 103™ powertrain – both with fuel injection.  Reflex™ Linked Brakes with ABS (Anti-Lock Braking System) is new for all models and the new Daymaker™ LED is also standard on some models while others get new Dual Halogen lighting.  The Linked braking, means braking with the front and rear wheels is synchronized and the system will automatically calculate the amount of braking that’s necessary under the existing conditions.

Infotainment: The Boom! ^™ Box infotainment systems feature voice recognition and touchscreen for music, GPS navigation and phone in motorcycling, with audio, Bluetooth^® connectivity, text-to-speech technology, plus support for intercom and CB communications in a single module.  H-D integrated the vehicle information in a single electronic touch screen.  There are five-way joy sticks on the left and right motorcycle hand controls for most of the system’s functions.

Feel: Aerodynamics and ergonomics are improved – with a new Batwing fairing with splitstream venting, which reduces head buffeting and with wider and deeper seats and new back and arm rests.  The motorcycle hand controls have been redesigned, and the number of dash gauges have been reduced from six to four — with temperature and oil pressure readouts moved to the electronic screen and the gauges made larger for better visibility.

Style: The function of several components are improved such as the larger Tour-Pak^® and saddlebags with convenient One-Touch latches, sleeker fenders, lighter cast aluminum wheels and intuitive hand control switches.

Other changes in the 2014 lineup include anti-lock brakes on all five Sportster models, a new CVO Softail Deluxe that comes with a detachable windshield with GPS navigation, Daymaker LED lighting and detachable saddlebags.  Also, the Twin Cam 103 engine is now standard equipment on the Street Bob and Super Glide Custom models.

On the surface the changes look positive and bring H-D more in alignment with the competition.  It’s peculiar that the motor company goes to great lengths to hype part of the “new” development process that now includes formal focus groups and events like motorcycle shows and music festivals, and simply chatting with customers!

Huh?  Is H-D marketing implying they didn’t have product focus groups prior?

I’m looking forward to getting a look at the bikes at the 110th Anniversary in Milwaukee.  I wonder how much difference the additional head cooling makes on the engine?  The new Boom! ^™ Box infotainment radio with improved connectivity and text-to-speech technology is a welcome update because the old radio was dated and in serious need of an update.

Photos courtesy of H-D.

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The Harley-Davidson 100W Smile

Not so long ago the saying among motorcyclists was “there is no replacement for displacement.”

In fact, on CVO models the 1800cc (110 cu in) engine produced copious amounts of torque and high horsepower numbers… it was the key to happiness and a big smile.  It’s H-D’s analog approach to a mostly digital world.

But, let’s start from the beginning.

Remember the day you sat in your basement, in your bedroom with the lights off, driving the stereo speakers to the point of distortion, listening to music that energized you and soothed your soul at the same time?

Well get READY!  Along comes the 2012 models and we’re talking about a one-hundred watt smile which emanates from the Harman/Kardon Advanced Audio system.  The kids these days might be listening on earbuds, but the H-D creators are clearly freaks for sound.  Who says high-end motorcycle audio has to be difficult?!  What’s coming out of the speakers on the new models is positively mind-blowing.

I’m financially challenged, but even I was doing the calculation on a new 2012 CVO Street Glide from Harley-Davidson…  New this year is a second 100W per channel amplifier and bridged tweeters mounted in the saddlebag lids.  That’s a total of eight speakers and two power amplifiers kicking out 400W of lower mid-range and crisp highs of crashing cymbals.  Not quite the gut-kicking bass of JBL concert speakers during a U2 concert, rather it’s like a warm ooze embrace of a digital sound field.  It’s the aural grease you’ll need to make it through the day!

The new 2012 CVO Road Glide Custom gets a boosted 100W (up from 80W) amplified Harman/Kardon system too.  The speakers are not the $3000 a pair Dynaudio BM15A’s you’d find in a music studio, but new this year are the two-way 5×7’s for booming down the boulevard.  If I had either of these motorcycles I’d park it in the garage and shut all the windows because the music tracks on this system mean you’ve got to crank the volume – up enough – that you’d be in the same room with the band.  Yeah, it’s that good.

For many riders they will stop right there when reviewing the new 2012 models and look for the check book.  But there is more…  H-D standardized on the Twin Cam 103 engine (with automatic compression release) as standard equipment on Softail, touring and most Dyna models.   H-D launched the V-Rod 10th Anniversary Edition and the new Dyna Switchback.  Some additional 2012 highlights include:

• A Security Package that pairs Anti-lock Braking System (ABS) with Smart Security System with proximity-based, hands-free security fob is available for all 2012 V-Rod, Dyna, Softail, Touring and CVO models. The Security Package is standard equipment on CVO models and on the Road Glide Ultra, the Electra Glide Ultra Limited and the Road King Classic. The Security Package is a factory-installed option for all other models.
• The Night Rod Special is updated with new tapered tail section, lighter-weight wheels, an inverted front fork and improved ergonomics. Harley-Davidson celebrates a decade of power cruising with the V-Rod 10th Anniversary Edition motorcycle, finished in Brilliant Silver Pearl bodywork.  All V-Rod models will carry V-Rod 10th Anniversary badges.
• The new Dyna Switchback combines hard saddlebags and a windshield with the eager handling and Twin Cam 103 performance of the Dyna chassis. It’s a custom-touring bike ready for a long weekend trip, until the detachable bags and windshield are removed.
• The Fat Boy and Fat Boy Lo have a new reduced-reach handlebar for more-comfortable ergonomics. The Softail Deluxe and Heritage Softail Classic will be available with a new optional “tubeless” Chrome Aluminum Profile Laced wheel option for ease of tire replacement and repair.
• On Touring models, the Twin Cam 103 is equipped with an oil cooler. All Touring models except the Ultra Limited will offer a new “tubeless” Chrome Aluminum Profile Laced wheel option.
• The Sportster line cuts across a broad range of riders with models ranging from the XR1200X to the SuperLow to Dark Custom roadsters like the Iron 883, Nightster and Forty-Eight. The Sportster 1200 Custom can be personalized for fit, function and style with H-D1 factory customization, and new 1200 Custom color options have been added to Bike Builder this year.

If any of this appeals to you go online to H-D and check it out.

Photo courtesy of RCA/Popular Mechanics (circa: 1958)

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Harley’s Expectancy Disconfirmation Theory

Many of us have experienced EDT and not known it!

Mix that with better, cheaper, faster… a common corporate mantra these days, and you have a catchphrase that leaves out a significant element.  Better, cheaper and faster for whom?  Long term business success means the “whom” must ultimately be your customers yet isn’t it odd how often the existing customers are forgotten in the rush of daily business.  Sales and marketing are about bringing potential new customers into the dealers.  Operations are working to be efficient and fill orders.  Service is busy putting out fires.  Meanwhile existing customers are walking unnoticed and uncared for out the side door.  Customer retention at H-D exceeds the motorcycle industry average, but people will stop patronizing when they feel like their business doesn’t matter to the company.

And that’s my point.  Repeat-purchase loyalty or the erosion (the proportionate fall in repeat-purchase loyalty) at the local dealership.

Even if the Harley dealer does everything right – transforms into a lifestyle destination, offers up camaraderie beyond the parking lot, mixing with customers, first-name greetings, pancakes and music on the weekends, working hard at providing a friendly, at-home atmosphere, low-pressure sales – is there any doubt that a key determining factor for a repeat customer at that dealer during this economic environment be anything other than price, Price, PRICE?  How much more are you willing to pay for the dealer experience?  I would suggest none.  Personal relationships do matter, but over paying to maintain that business relationship is obsolete.

For example below is a repeat-purchase story from a riding buddy (edited for space and used with permission) who just put a new 2010 Street Glide in his garage:

“This purchase was one of the simplest things I’ve done. I called the Sales Manager (Moshonda) at Albany Harley-Davidson (AMC) and asked her for a price. I was really expecting to hear MSRP or maybe $500 discount on a $20.5K price. When she told me $18,519, I said “I’ll take it”. We did some of the transaction over the phone and I went down a couple days later and picked it up. I put down 2/3 cash and financed a third. They made that easy with a good interest rate. They didn’t even try hard to up-sell me on the extended warranty. Simply asked, I said no and we signed.

Went down yesterday and rode it home. Weather cooperated and it was nice having cruise control and 6th gear. The radio is awesome! Candidly I did struggle on not talking to Paradise H-D where I’ve previously purchased.  Bottom line, I sincerely doubt they could or would have even tried to get down to the AMC price. Granted I didn’t give them the chance, but I’d bet Paradise H-D was $1500 over MSRP to start off and now we’re talking about a $4k difference to spend time haggling over. Ultimately I felt that if I challenged Paradise H-D to get down to this price and if we couldn’t and I had to walk there would always be this friction when I went into the dealer.  Frankly I don’t need the stress.  It’s unreal that I paid almost the same amount for my Road King 10 years ago as I did on this new Street Glide.  Clearly it’s a good time to deal!

AMC is definitely a small town laid back feel. No pressure.  I’m fairly certain the knowledge base at Paradise H-D is better. AMC sales didn’t strike me as deep experts. Remember these are the folks who didn’t think the Oregon bikes had catalytic converters.  Yet, it’s a good store and I liked how they promote themselves to “the working man”.  As you’ve said on your blog, Harley may be pricing themselves out of the market with those CVO’s. When you can draw a price correlation between a motorcycle and a Lexus, well then the issue speaks for itself. At the end of the day, it is just a motorcycle.

The other advantage at AMC for me is they seem to have perpetual sales on accessories.  I don’t think it will cost me an arm and a leg to do the  customization I want. I had a little sticker shock on the quote for Vance & Hines pipes, which looks to be all you can get for the 2010 right now at $1475. Too high, but it included a number of items (fuel tuning/dyno etc.) in addition to the pipes themselves.

Looking forward to summer!”

I’m not advocating one dealer vs. another.   But, the economy is changing the way riders interact with dealerships.

Photo courtesy of H-D.

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The Harley-Davidson Decade

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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Harley-Davidson 2010 Line Up

H-D 2010 Product Launch

Across six model platforms Harley-Davidson introduced nine new motorcycle models over the weekend as part of the 2010 product line launch.  Although rumors circulated about water–cooled touring models none rolled out.  H-D claimed this to be the most expansive new-product introduction in the history of the motor company.   Highlights are:

• The Electra Glide® Ultra Limited received a performance upgrade of a Twin Cam 103™ engine, and features standard equipment items previously offered only as accessories on regular-production Harley-Davidson Touring models.
• The Road Glide® Custom has a slammed suspension, 18-inch front wheel and a new 2-into-1 exhaust system.
• The Wide Glide® returns as an all-new Dyna® model done in old-school chopper style, with black laced wheels, a chopped rear fender, black “wire” sissy bar, 2-1-2 Tommy Gun exhaust and an optional flame paint scheme.
• The Street Glide® Trike brings new styling to the 3-wheel category.
• The Street Glide® gets updates that include a larger front wheel, slimmed-down exhaust, and a new tail light assembly.
• Custom Vehicle Operations™ (CVO™) introduced the CVO Softail® Convertible, a CVO Street Glide, a CVO Ultra Classic® Electra Glide® and CVO Fat Bob® models are refreshed for 2010.

There were a number of additional paint refreshes and styling schemes introduced.  A good write-up on the CVO’s is HERE by Susan Carpenter of LATimes.   You can visit Harley-Davidson’s Web site for more info on the new models.

Photo’s courtesy of H-D.

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I Could Be Wrong

Are you ready?  You are not going to believe this.  You heard it first here on the Northwest Harley blog…Alaska Governor Sarah Palin (and Vice Presidential candidate) had a corn removed from her left foot.  Yes!  You heard correctly she was involved in a non-life threatening, non-surgical incident.  I can’t prove it with photo’s, but I’ve heard from the Rev Wright camp so, if you agree pass it along to 50 people.

So much “noise” being generated about Sarah Palin that the political landscape has become muddy murky with all types of reports being passed off as accurate.  I know we’re all stressed out about the damage of Hurricane Ike, but folks some of us are acting more stupid than others.

Palin SNL Spoof

I saw a report about Palin being a motorcyclist.  Clearly a photo of her sitting on a Harley Street Glide would suggest her persona as an experienced rider extraordinaire…what about those safety patches and ABATE MSF training stickers?  Shall we then jump to a conclusion that she will seek to eliminate helmet laws, smog laws, and noise laws, just for us Harley riders?  Who knows. 

In April 2008 she did proclaim that May would be Motorcycle Awareness Month in this Alaska press release.  But the press even twisted that information!  ABATE is now Alaska Bikers Advocating Training and Education (ABATE)…and here I thought all this time it stood for A Brotherhood Against Totalitarian Enactments (ABATE).  This site in Indiana calls it American Bikers Aimed Toward Education so, it looks like certain regions are making adjustments to sound less subversive?  Here is the site in Oregon. 

Mary Peters Discusses Motorcycle Safety

It turns out that Photoshop is the application of choice for the “disinformation generators” and we’d be hard press to determine fact from invention.  Even the news outlets focus too much on the non-relevant “corn” stories vs. Palin having a life-long motorcycle philosophy or how having a motorcycle enthusiast in the White House would affect anything.  But wait!  Don’t we have a “motorcycle enthusiast” in the current administration…she’s called secretary of transportation, Mary Peters.  Yes, she is an actual Harley rider!  She’s made it her mission to get helmet laws enacted in all 50 states, but has cut training programs.  Not exactly the motorcycle rights advocate we might have been looking for, huh?   Ken Bingenheimer at the Passes and Canyons blog has done a great job writing about Peters.  Check it out if you want more information. 

My point is the political landscape has become so clouded with reports trying to be passed off as accurate in the main steam media that all I can say is good grief… readers beware…

P.S. – Hey did you know that Palin was on SNL and now they are talking about how great of an actor she is…

P.S.S – Hey did you know it was being reported in the blogs over the weekend that when Palin was 5 years old, maybe it was 4½ she was seen playing in a mud puddle!  Now that’s not presidential and if you agree send this on to 22 more people, ASAP!

Palin photos courtesy of NBC and Xanga.

Peters photo courtesy of DOT.

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