Harley-Davidson Achieves Enlightenment Without Zien

Ray Jordan (Salem, OR) – 105 flags at the H-D 105th Anniversary Parade

There is an inane concept in America that the customer is always right.

And in the motorcycle community managing owner expectations through proactive communication and providing personal service has a considerable positive impact on overall satisfaction with the motorcycle ownership experience.

At least according to this J.D. Power and Associates report.  Two of the best practices, which are common among high performers, are managing owner expectations through proactive communication (including following up after a sales visit) and providing personal service (including a fluid and seamless process in servicing their motorcycle).  In the luxury motorcycle segement confronted with limited consumer spending, it is to the advantage of motorcycle manufacturers and dealerships to identify and implement the best practices that satisfy owners that may lead to higher revenue.

But, someone at H-D believes the world is just full of bullies who believe if they rant loud enough, they’ll win and that’s not gonna happen on their shift!

Dave Zien, cruising with patriotic flags.

I’m talking about Milwaukee-based Dave Zien, aged 64, who has been cruising around the country with patriotic flags on the back of his new Harley-Davidson Trike which has accumulated approximately ~15K miles.   Mr. Zien was rejected a warranty repair for a broken clutch—the dealer citing his flags “drag” (the flags create) on the engine and transmission as the cause of the failure.  In fact, Mr. Zien is a good customer and rode into the Motorcycle Hall of Fame in 2000 by logging more than a million miles on his 1992 Harley motorcycle.  Mr. Zien voiced his displeasure throughout the motorcycle community and telling the local Fox News station that the motor company initially informed him he was “blocked” because of his flag displays and can never get any warranty work for seven years.  H-D later recanted that statement and said his motorcycle is still under warranty, but they would not cover the clutch failure.

This is a mysterious approach to that “seamless process” in servicing motorcycles.  The JD Powers report clearly points out that sales volumes and revenue of ancillary goods and services tend to be considerably higher—at motorcycle dealerships that provide a highly satisfying experience.

It’s this writers view that H-D should apologize for wasting Mr. Zien’s time and take the appropriate corrective action under warranty.

Ray Jordan photo courtesy of MKEimages.com and Mr. Zien photo courtesy of Yahoo.

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Harley-Davidson Project RUSHMORE Trike Recall

2014 Tri Glide Ultra Trike

Harley-Davidson has issued another safety recall on its 2014 Project Rushmore motorcycles.

This time it’s for a defect that could result in the loss of brake fluid.  It potentially affects 436 trikes manufactured from July 24th through September 2nd.  It’s due to an incorrectly machined part, and the trike may have an excessive steering angle that allows the inner fairing to come into contact with a brake fluid reservoir, resulting in a loss of fluid.  The steering damper may also be damaged.

The result could be a loss of brake fluid from the rear reservoir which would reduce brake performance.  The steering damper damage could reduce the rider’s ability to control the motorcycle and either condition increases the risk of a crash.

This is the second recall of Project RUSHMORE motorcycles. Last month, Harley recalled about 29,000 bikes and trikes for hydraulic clutch system problems (HERE).

The information listed at NHTSA is:

NHTSA Campaign ID Number :13V491
Subject : Fork Stem Bracket may cause Loss of Brake Fluid
Manufacturer: Harley-Davidson Motor Company

Harley-Davidson is in the process of notifying owners, and dealers will inspect the trikes and replace the fork stem bracket, as necessary, free of charge.

The recall is expected to in late November 2013. Owners may contact Harley-Davidson at 1-800-258-2464. Harley-Davidson’s recall number is 0152.

Photo courtesy of H-D.

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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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