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-Davidson Q2’11 Financials

H-D announced Q2’11 financial results this morning.

In a word – Booyah!

By every financial measure Harley-Davidson generated improvements in the second quarter of 2011, with strong earnings growth, increased shipments and growth in its dealers’ new motorcycle sales both in the U.S. and globally.  Here are some of the stats that CEO Keith Wandell and CFO John Olin reviewed from Anaheim, CA. where the annual dealer meeting and new product launch was in progress:

• Revenue in Q2’11 was $1.51B (up 15%) with income up 36.8% to $190.6M
• Motorcycle shipments up 7,769 in Q2’11 vs. Q2’10; Motorcycle segment revenue up $204.6M (18%) vs. Q2’10
• Touring motorcycle shipments made up 38.3% in Q2’11; up 3.6%
• International shipments were 36.2% in Q2’11 vs. Q2’10 at 42.5%
• Shipment forecast for 2011 rose by about 8% and now H-D expects to ship between 228,000 and 235,000 motorcycles worldwide
• Market segment share (651+cc) is 53.8%; up 0.2% from 2010
• U.S. dealer network sales of uses motorcycles up 11% through May; Used bikes sales continue to firm up (meaning they offer the dealer a method to help offset the “sticker shock” of new bikes)

Did anything go less positive?  Well that depends on your viewpoint.  From a shareholder’s perspective it’s “Houston, we’re ready to throttle up”!   Stock price set a new 52-week high at $46.88.

As a rider/layman the touring motorcycle shipment increases were offset by the decreases in Custom and Sportster declines.  There were no age demographics quoted in the analyst call, but we’ve been told that typically “youngsters” don’t buy the higher priced baggers.  In addition, the new 2012 touring models that were announced earlier in the month have… shall we say… “lean” engineering innovation compared to previous years.  In a number of cases there we’re only paint palette changes and price increases made up the so-called “new” touring models.  There was about a 1% price increase in the U.S. market.  The lack of innovation is especially troubling (to me) given that product development spending was up $7M in the first half of 2011 which was described as a continuation of their strategy and focus on leaner engineering.  Sure metals and fuel costs are up, but the lack of stronger product changes is not always a recipe for long term success.

Nothing was noted on the call about the recent expansion in India.  Not sure why given that SG&A expenses were up about $13M on the strategy to grow 100 – 150 international dealers by 2014.  Latin America saw a decrease in retail sales which was largely due to all Brazil dealers being terminated.  There was a restart in that country and the new dealers (6) were coming up to speed.

Congrats to H-D on a great quarter!

UPDATE: Full transcript of the analyst call is HERE courtesy of SeekingAlpha.

Photo courtesy of H-D.  Full Disclosure: I don’t own H-D stock

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Harley-Davidson 2012 – Same As It Ever Was

2012 Paint Palette

Have you been reading the headlines? There was a big earthquake in Haiti. Some men were rescued from a mine in Chile. Oh, and apparently there was a gigantic oil spill in the Gulf of Mexico.

What’s that you say? This all sounds like last year’s news?

Well, don’t tell that to Harley-Davidson. The motor company recently introduced 15 new models, which it considered innovative and groundbreaking  products:  a “tubeless” laced wheel option, and six new colors or color combinations on the touring models!   Then in a déjà vu lapse they announced the retention of last year’s integrated branding firm Graj + Gustavsen Inc. to continue advising the company on strategic branding initiatives related to apparel and apparel-related accessories.

It would seem that even Harley-Davidson understands that the touring models have so few innovations that their only hope of differentiating itself from the other players is through paint palettes…. So, the only buying question you’ll have to ask yourself, then, is: Does H-D make a convincing enough “color case” that you should invest about $20K in a “new” touring model?

Here’s the crux of H-D’s argument.  First of all, the new colors or color combinations are beautiful. The mostly unchanged motorcycles from 2011 are even more beautiful in 2012.  The unchanged frame is beautiful, too. It’s graphically coherent, elegant, fluid and satisfying. That, apparently, is the payoff when a single company designs and builds both the engine and frame housing?  The ‘advanced’ Harmon/Kardon radio retains its 1970’s BMW inspired ‘red’ glow and that glossy Vivid black paint — continues to be a magnet for fingerprints, boot scuffs, and unfortunately looks wicked great only in the dealer showroom. I think the words in the H-D press release were “The Legend Lives On.”  The band, Talking Heads, said it best… in the song “Once In A Lifetime.”  The “same as it ever was, same as it ever was” lyrics… really resonates for the 2012 touring models.

It’s been a while since I’ve had a good, proper, Harley-Davidson rant. Part of that has been the adventures of this year; I think it’s softened me and given me more patience, made me a little more graceful. Another part of it, probably closer to the heart of the matter is that I’ve been busy doing other things and a good rant takes time to incubate.

Well a rant has been building and I finally snapped as I read an article in last week’s “Wall Street Journal” (subscription required) where there was a front page story on Hyundai. How it went from a laughingstock to a runaway success in the car market. Now that they’ve solved the quality problem, now that they’ve caught up with Toyota and Honda, the company is confronted with a huge issue going forward, creativity. How do you lead when you’ve spent your entire manufacturing life following? Read WSJ article HERE.

The new Elantra is so far ahead of the market that Corolla sales have stalled and the new Civic has been blasted by critics as it fails to fly from the showroom. Instead of focusing on the econo box look, Hyundai imitated BMW and Mercedes-Benz. And the model was redesigned in four years instead of five, trumping its competitors in the marketplace.  The success of the Elantra is testimony to the change in culture at Hyundai. To one now focused on leading, on creativity.

This leads me to the question of is there a culture of innovation at Harley-Davidson?  When talking about innovation we often define the term too narrowly. In fact, innovation can – and does – occur in every industry of our economy, from consumer electronics to health care.  Yet, when I re-review the 2012 touring models, instilling creative thinking must be a work in progress.

For comparison, a few times a week, video screens around Hyundai’s headquarters in Seoul show a one-minute clip that has become a favorite. It shows an open office where workers wearing the same shirt and haircut are “beavering” away (that’s Oregon slang). Then a new person arrives with a different hair cut. Each time he voices an idea, the others shout him down. Eventually he gets the same haircut and everybody likes him. Then a question appears: ‘Aren’t we stuck in conventional thinking?’

I don’t know if a video loop like that would necessarily fly in a Milwaukee plant with the union workers, but that’s not the point of this post.

It’s about how most every American business is in a mad dash to innovate except for H-D.  The only answer can be the titans at the top are traffic cops sans creativity?  Don’t blame the public or the economy, blame the fat cat executives who are denying they’re the problem like the honchos at Goldman Sachs. What makes the rich believe they’re invulnerable, always right and entitled?   Somehow in the “dash-for-cash”, it’s all about shooting low, to the sweet spot, where most people live so the purveyors can make money.  Good enough just doesn’t cut it and of course there are exceptions, but generally speaking we’re in a low point for H-D touring motorcycles.

It’s a new game. No one gets to rest on his laurels. Making it today is no insurance you’ll thrive tomorrow, look at the carcasses strewn along the highway… OCC, Indian, or Big Dog.

We’ve got endless hype and yet sales are anemic.  Mediocrity thrives at Harley-Davidson because it’s all about the money.  About playing it safe… with new paint palettes!

Photo courtesy of  Hyundai and H-D.

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Harley-Davidson 2012 Models

They’ve launched!  Well sort of…

H-D announced a 2012 product launch on their web site HERE.

What could be described as a new “slow drip” marketing campaign vs. previous years where it was a rolling thunder.  Today they drip, drip, dripped 15 new models (Touring, Trike (U.S. only) and Sportster) onto dealers.  Additional 2012 models will be announced on July 20th at the H-D summer dealer meeting in Anaheim, CA.

These new 2012 products will go on sale immediately in an effort to capture consumer mind share/interest and provide consumers the newest ride/model for the largest block of time in the riding season.  While that is true I can’t help but think the accelerated shipment of these 2012 models to dealers will get people to the showroom and allows the dealer to capitalize on the peak summer selling season.  Either way if you’re in the motorcycle market its cool to see them launch a month early!

I’ll do a deeper scan on feature/enhancements for a later blog post, but on the surface it looks like only minor adjustments.  On the Touring models all are powered by the 103 cu in with automatic compression release (ACR) and an integrated oil cooler.  Looks like the 96 cu in goes out with little fan fare.  There are 6 new colors or color combinations among the various paint choices.  There is also reference to a new “tubeless” chrome laced wheel option for ease of tire replacement and repair.

There were 6 Sportster models launched.  H-D is using the H-D1™ Bike Builder factory customization process for those who want more control on the customization direct from the factory.  There was a reference to new Michelin Scorcher tires on all Sportster models which have been tested and matched to the motorcycle.  There are 7 new color options and minor tank graphic changes.

Worth a ride into the dealer?  Yeah, I need to pick up some synthetic oil and will check it out any deals on the 2011 model close out.

UPDATE: July 20, 2011 – Got a text this morning from Anaheim, CA., where the annual dealer rollout of new models is in process with the typical business training.  All the new 2012 models are online now.  The “SwitchBack” model is HERE. The CVO’s have new color combinations and H-D dropped the CVO Road Glide Ultra and replaced it with the CVO Road Glide Custom.  Very good looking motorcycle.  The CVO Street Glide gets another 100W power amp to drive 8-speakers.  Two of which are located in the touring bag/lids.  Talk about a “100W Smile”…

UPDATE: July 25, 2011 – Brief update/post on the models and various changes HERE.

Photo courtesy of H-D.

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Harley-Davidson’s SwitchBack

A yet to be announced new 2012 model from Harley-Davidson was inadvertently released to the public by the California Environmental Protection Agency/Air Resources Board.  No details have been released or provided by the Motor Company, but according to CARB’s online listing of 2012 H-D models that the agency approved the new models show up HERE.

If the information is complete it looks like three motorcycles are being discontinued (Softail Cross Bones, Softail Rocker and Street Glide Trike).  There are additional models getting the 103 cu inch and the new “SwitchBack” which is getting its name for the ability to be switched back and forth from touring to non-touring.  Isn’t that the same as a convertible which has been out for 3 years now?  There is also what looks to be a new 10th Anniversary V-Rod model.

Water Cooled V-Twin

It might be premature on my part, but these new models don’t look like a major transformation underway in product development.  It looks more like a really big yawn vs. true innovation.  The fact that Keith E. Wandell (President and CEO), a position he has held since May 2009 has pontificated in every earnings call about the new direction for Harley-Davidson through the development and implementation of a strategic plan based on the core tenets of growth, continuous improvement, leadership development and sustainability…. which includes expansion of the company’s global reach and product development transformations along with manufacturing capabilities for improved responsiveness is lacking.  I’ll reserve final judgment until the actual 2012 release at the end of July, but at this point I find myself asking is “SwitchBack” code word for a return to the old axiom…if it sticks out chrome it, if breaks make it bigger and if it’s ugly paint it black?!

And speaking of innovation, check out this link to Cyril Huze’s blog about a water cooled patent that H-D filed over a year ago… it seems to have resurrected a worldwide discussion on when will water cooled V-twins finally hit the market.  Obviously not in 2012, but maybe in 2013?

UPDATE: June 30, 2011 – Partial release of the new 2012 models occurred about a month early.  See URL HERE.

UPDATE: July 20,2011 – The H-D “SwitchBack” was rolled out at the Anaheim, CA., dealer meeting this morning and the web site is now live HERE.

Photo courtesy of CARB and ICB

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