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Posts Tagged ‘Tom Bergmann’

pink_slipI’m fascinated by the decline or some might say the “fallout” of the Harley-Davidson management team.

HD announced a couple days ago that effective immediately the CFO, Tom Bergmann was leaving the company.  Labeling the hasty departure with the all too familiar and politically correct words; “seeking other career opportunities” to describe his abrupt exit.   Mr. Bergmann had been CFO since 2006 and in January 2009 it was announced he would take on the additional responsibility as president of Harley-Davidson Financial Services (HDFS) after Sy Naqvi’s sudden departure.  So it’s rather odd that on the very first day that the new CEO, Keith Wendell comes to work Mr. Bergmann would choose it as the most optimal time to leave?! 

I smell “Mr. Clean”… and I even provided Keith a 10-step success plan, but forcing out the CFO in the first 8 hours on the job was not on the list!

On the day of his departure, Tom had just completed a transaction that would provide about $1B in funding capacity that the company could use for consumer lending in 2009. The new funding was important, since the firm finances roughly one of every two HD motorcycle purchases.  HDFS increased the size of an existing $500 million asset-backed commercial paper conduit facility to up to $1.2B, based on the level of outstanding receivables. The facility expires April 29, 2010.  In addition, Tom negotiated to have replaced a 364-day, $950M bank credit facility expiring July 31 with a new 364-day, $625M credit facility expiring April 29, 2010. Together, the two agreements provide additional available credit of up to approximately $375M over the term of the agreements for the lending activities of HDFS. 

Getting the funding covered is a monkey off their back and a fairly impressive accomplishment to tell the new boss on day #1, but to turn around and say “Hasta la vista, baby”…I’m outta here.  WTF?  Whether Mr. Bergmann was run off the road or decided no more black leather, but instead it’s time for touring suits with leg guards and time to gear-up for a sound different than a low rumble…we’ll never know.

The HD press release stated that Controller John Olin would serve as interim CFO at the company.  Bergmann also served as President of Harley-Davidson Financial Services (HDFS) and Treasurer Perry Glassgow would take over on an interim basis.  Lastly it named Mark Kornetzke, senior director of financial reporting, as the company’s chief accounting officer.

Photo courtesy Henny Ray Abrams/Reuters.

All Rights Reserved © Northwest Harley Blog
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money_stackBarack said yesterday that I should sacrifice, but I need to ask myself to what extent am I willing to go.  And as it turns out the ultimate discretionary item — Harley-Davidson — is in the same situation…determining how willing they are to sacrifice or jeopardize their company! 

I previously blogged about Harley’s inability to securitize motorcycle loans HERE the delinquency rates HERE and the five quarter earnings decline HERE.  Obviously not good times for the company.

But, like a lot of things these days related to financial issues they change weekly.  On behalf of Harley-Davidson, Sen. Bob Casey Jr. (D-Pa.,) wrote a letter on Jan. 16th to the Federal Deposit Insurance Corp. chairman Sheila Blair, saying Harley-Davidson recently inquired whether its financing company and subsidiaries — Harley-Davidson Credit Corp. and Eaglemark Savings Bank — are eligible for the Temporary Liquidity Guarantee Program (TLGP).  The TLGP guarantees a corporation unsecured debt against defaultA bailout?

The Harley Springettsbury Township plant is the largest of the company’s manufacturing facilities and employs more than 2,800 workers as well as supports approximately 1,500 jobs at Harley dealerships in Pennsylvania.  It’s easy to see why Sen. Casey is supporting the eligibility for TLGP due to the potential negative impact to his state’s economy.  And it’s “pile on” season in reference to the challenging economic environment, lower consumer confidence and banking sector meltdown so why not jump on board.

Demonstration Against UK Gov Bailout

Demonstration Against UK Gov Bailout

This sounds a bit like the ‘ol… “It’s not my fault” redirect the blame to the economy trick?  Do you think this a problem of people not being able to get loans to buy motorcycles?  I have no insider information, but I’m inclined to believe it has more to do with delinquency rates and processing bad loans on the part of Harley-Davidson Financial Services (HDFS).  Sure the economy and financial markets being reluctant to fund higher risk loans contributed, but don’t forget about the MV Augusta acquisition which has been described as an over reach by the company execs. 

Also we should not forget the sudden “personal” decision of Sy Naqvi (HDFS President) two weeks ago to immediately resign.  Mr. Naqvi was HDFS president for 23 months when Harley announced that Tom Bergmann (CFO Harley-Davidson) would assume the the additional responsibilities of HDFS president.  Naqvi joined HDFS from DeepGreen Financial, Inc., an online home equity lender, where he was CEO.  DeepGreen was acquired by Lightyear Capital and had a somewhat sorted history with operations in Cleveland while Naqvi worked out of Chicago.  Efforts to turn DeepGreen into a brick and mortar bank failed.  Is HDFS next?

But let’s think positive.  If Harley obtains eligibility status from the FDIC it (really taxpayers) will guarantee unsecured corporate debt against default.  In addition, Harley would get federal funds if a customer defaulted on his or her motorcycle loan.  Nice!  How do I sign up?

It will be hard to calculate Naqvi’s impact on/at HDFS or what role if any he played in its current set of troubles.  I wonder if the company is “positioned appropriately” for the faltering economy or if it’s another bailout on the list of so many?

Harley-Davidson is expected to report fourth-quarter results this Friday and I’m not hopeful of Q4’08 results.

Photo courtesy Flickr.

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Harley-Davidson reported out on Q1’08 earnings.  They had net income of $187.6 million or 79 cents a share down 2.5% from $192.3 million or 74 cents a share in the prior period despite revenue rising 11% to $1.31 billion, from $1.18 billion in 2007.

The impact of the economic slowdown was felt mostly at U.S. retail as dealers’ new motorcycle sales declined 12.8% compared to a year ago. As a result, Harley has taken steps to significantly reduce shipments for the rest of this calendar year and reduce the workforce.  It now plans to ship 23,000 to 27,000 fewer Harley-Davidson motorcycles in 2008 than it did in 2007.

And did you know that ALL of Harley-Davidson’s top execs including current CEO James Ziemer, were NOT paid any bonus for 2007?  It’s true!  Recently released documents show it’s the first time in several years that Harley execs have not received a bonus and is a result of the company failing to meet financial performance targets in a year in which the sales and earnings dropped.

But, before you start singing praises for the top brass let’s get the 411 (lowdown)…Harley has distributed substantial bonuses to its top execs in recent years. For example, in 2006, Ziemer was awarded a bonus — referred to as non-equity incentive plan compensation in the regulatory filing — of nearly $1 million.  A whopping $1M bonus, wow!  But wait, it gets even better because that bonus was teeny tiny in comparison to what the previous CEO, Jeff Bleustein and now chairman of the board of directors received.  Here are the numbers from the filing documents:

Year              Exec                      Amount

2007             James Ziemer          $0

2006             James Ziemer          $1 million

2005             James Ziemer          $600,000

2004             Jeff Bleustein           $3.5 million

2003             Jeff Bleustein           $3.5 million

2002             Jeff Bleustein           $3.5 million

2001             Jeff Bleustein           $2.0 million

So, how does this compare with other companies?  These obscene bonus amounts sadly aren’t a wild exception. In fact, Harley bonuses were “modest” according to a study by Graef Crystal, a business columnist and compensation expert, where CEO pay rose 22% last year, while the average worker’s pay rose by around 3%.   For further proof, it doesn’t take much of a Google search to learn that Viacom CEO Sumner Redstone took home about $28M, including a bonus of $16.5M, even as his company’s stock dropped 11% during the fiscal year. Applied Materials CEO Mike Splinter got a tidy $5M bonus, despite a stock slide of more than 22%. Rick Wagoner, CEO of General Motors, saw GM stock plunge 25%, yet he still pocketed a $2.5M bonus.

I don’t like “busting” on Harley especially when they are down, but knowing bonuses were “modest” just didn’t make me feel better.  Ziemer mixed words like “challenging” and “no signs when things will turn around” frequently during the last analyst call.  I’m not sure how a person making $480/hour from their annual bonus alone can say “challenging”…oh, wait he’s talking about the company, not his personal struggle to make ends meet!

And speaking of struggle, what about those positions getting “downsized”?  Well Thomas E. Bergmann (CFO), quantified the reduction of headcount as 370 or approx 6.5% of the N.A. workforce or if you look at it from the non-production workforce of 360 positions it’s approx 10% of the Harley’s N.A. motorcycle operations being let go.

It’s not exactly clear, but it looks like the overweight, mid-life testosterone driven, on your 3rd marriage with a trophy wife buyers are really drying up and so goes the potential profit gains of my HOG stock portfolio.  

I think it’s time to pull my shares and let the Eagle “go it alone”

 

Photo courtesy of the HD Museum.  The 1981 ad represents the company buyback from AMF ownership.

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