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Posts Tagged ‘Timpanogo’

About 40 years ago, a social movement arose to destroy the establishment.  People wanted to take on the man and return power to the people, upend the elites and lead a revolution.   Some would argue that today we have a similar movement with the people loosely called the “tea partiers” who today are motivated by runaway federal spending vs. the war during the Woodstock days.

Taking it to “The Man” refers to the government, leaders of large corporations and other authority figures in general.  Sprinkle in an array of conspiracy theories involving the Fed, the big banks and black helicopters and you’ve got Harley-Davidson investing heavily over the last year in what I call taking it to “The Man” advertising.  It’s advertising which appeals to the man who is born free, but he is everywhere in chains…

You see these advertising movements are built by marketing people who hope consumers will put their faith in unrestrained passion and zealotry to buy motorcycles.  The assumption is that the people are pure and virtuous, and that evil is introduced into society by corrupt elites and rotten authority structures so let’s stick it to ‘em.  But, what happens when Harley-Davidson (the motor company) becomes the manipulator and shadowy corporation or the ‘elite and rotten authority figure?’

So it is according to AMC H-D in Albany, OR.  Based on their most recent communiqué, the Milwaukee Motor Company decided that starting in March there would be a policy change which prevents dealers from advertising any sales storewide.  So, taking a page from H-D’s own corporate marketing campaigns and doing their own mini-version of “Stick it to the Man” type of advertising…AMC H-D created their own tea party movement and broadcast there plans to have a 20% off sale (excluding motorcycles) all year long!  If the item you need isn’t in stock then you’ll get a 15% reduction when you place the order.

Talk about counter-establishment.  Pure advertising genius!

So what’s in play here.  First and foremost is a job-less recovery is making it darn hard for any motorcycle dealer.  Second, H-D would like to continue to be viewed as the premium brand or “exclusive” product and thus does not want to be attached to a “sale” image with their brand.  Lastly, the dealers who prefer to operate in the higher margin “dealer markup” mode are likely pressuring H-D to stop the undercutting from lower margin dealers who have yet to succumb to the mega/bistro/resort level expense in renovating a dealership.  Remember Timpanogo?

We all know that if you want service after the sale, knowledgeable and friendly staff, a quality product, and pancakes on Sundays, you’re gonna pay for it!  The question is just how much more.

Photo courtesy of AMC H-D.

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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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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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