Harley Holding On

July 31, 2017

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Harley Holding On

The headline in the Harley-Davidson press release two weeks ago said “Company Delivered Strong Margins, Retail Sales Lower Than Expected.” What that means is that sales of Harleys continues to decline and the company is trying to compensate by squeezing ever more profit out of every sale.

“We are pleased with our ability to deliver strong margins in the quarter despite challenging market conditions, particularly in the U.S.,” said Matt Levatich, president and CEO of Harley-Davidson. “Given U.S. industry challenges in the second quarter and the importance of the supply and demand balance for our premium brand, we are lowering our full-year shipment and margin guidance.”

The Aging Rebel predicted the motor company’s demise in 2010 and again in 2014.  Somehow, someway, the company keeps putt, putt, putting along. Here is how the most iconic American brand is doing in mid-summer 2017

Numbers

The company makes money from two, main profit centers. The first is sales: The sale of motorcycles, of genuine Harley parts and accessories and of genuine Harley branded crap like tee-shirts and shot glasses. The second profit center is the interest earned from lending you the money to buy the things Harley sells. That part of the business is called Harley-Davidson Financial Services. That was the Harley business that went south during the great financial crisis of a decade ago.

Last year Harley had motorcycle sales of $4.122 billion. It sold $843 million in parts and $285 million of genuine Harley bandannas and so on. Through the end of June, Harley sold 82,984 motorcycles in the United States. That was about eight percent less than the first six months of last year. There are 245 million adult men and women in the United States. About one in 3,000 of them bought a new Harley in the first half of this year.

Worldwide, Harley sold 136,437 motorcycles in the first half of the year and that is down about six percent from last year. Financial Services earned about $361 million in the first half of the year and that is down slightly from last year. The company has about a billion dollars in cash and liquid assets which is about $100 million more than a year ago. Harley credits the $100 million to “operating activities.” Harley expects to ship 241,000 motorcycle worldwide this year which is 19,300 fewer bikes than in 2016. That’s a sales drop of about 7.5 percent. Sales of genuine Harley general merchandise is down almost 20 percent so far this year.

Shrinking Market And Share

The survival of Harley-Davidson boils down to two facts. First, the market for motorcycles is shrinking and at the same time competition from Indian and other motorcycle manufacturers is shrinking Harley’s share of that market.

An investment management and research firm named Alliance Bernstein downgraded how they thought the motor company would do in the next five years. Alliance Bernstein noticed the obvious. A decade ago, at the end of the Harley Boom, the number of motorcycle riders was growing by three to five percent a year as aging boomers cashed out the surplus equity in their homes to buy grotesquely overpriced Harleys. Now an Alliance Bernstein analyst named David Beckel thinks, “If our back-tested model is predictive of the future, we expect rider growth will dip into negative territory in 2017 and stay in negative territory for at least the next five years.”

“Our data suggests the younger Gen Y population is adopting motorcycling at a far lower rate than prior generations. Gen Y’s are aging into the important ‘pre-family’ cohort of riders and boomers are increasingly handing over their keys to the smaller Gen X population.”

Milwaukee Eight

CNBC reported the research firm “also adjusted its optimism toward Harley-Davidson’s hoped-for sales bump following Donald Trump’s election. With unrelenting gridlock in Washington, the analyst doubts the new administration’s ability to advance on infrastructure spending, middle-class tax cuts or corporate tax cuts.”

The company’s new, gigantic, Milwaukee-Eight engines are not the boomer draw the company thought they would be. When the new engine was announced a year ago, one press release enthused, “with the entire touring line upgraded to the Milwaukee-Eight Big Twin, and an electric motorcycle on the horizon, what it means to be a Harley is something that’s roaring into the future.” Earlier this month, Harley announced it would be laying off workers at its Menomonee Falls powertrain plant where the engne is assembled.

Possibly worst of all, there is increasing interest in selling Harley-Davidson stock “short.” A short sale is a bet that the value of a stock will go down. If the price of a stock goes up, the better loses. If it goes down the better wins. As of last week, about 12.5 percent of Harley’s stock shares were sold short.

Building Riders

Meanwhile, company CEO Matt Levatich is not worried. In multiple interviews he has pointed out Harley’s “strong margins.” The idea seems to be make up for declining sales by charging more for the same motorcycle. The bikes have become almost an afterthought.

We are “going from: ‘We build bikes’ to ‘We build riders,’” Levatich told the Milwaukee Business Journal. He said the same thing, less succinctly, in the press release. “Our long-term strategy, focused on building the next generation of Harley-Davidson riders, is our true north. Our new product investment is one pillar of our long-term strategy to build riders globally and we are energized by the strength of our model year 2018 motorcycles coming later this summer.”

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34 Responses to “Harley Holding On”

  1. Shovelhead Says:

    I liked riding Harley’s when the only others riding the bike were Bikers and working class guys…and some women! We were the guy’s that had to work on all our own cars, trucks, motorcycles. So we learned. The square heads couldn’t work on anything, so if they did ride, It was Jap, push the button and go bikes.
    I could still bring my Shovel to a HD Dealership If I had a problem I couldn’t figure out up until the early 90’s I think. Then It all changed. My local dealership no longer wanted to talk to me anymore, or work on my shovel. They catered to Yuppies and started having Fashion shows!! What the Fuck…
    I never spent a dime on anything new from Harley again. Used parts from swap meets or Brothers. I still love Harley’s and will only ride American made, but don’t care what anyone else rides. Personal choice is America!
    russell1946….Ride on Man!

    Respect to 1%ers

  2. Largeandy Says:

    I aint no RUB and I aint in a club, no disrespect to those who are and I dont care if its 1%ers or HOG’s. Biggest reason I ride is cause it is about the motorcycle and throttle therapy, it is not about tyring to look like nor be someone I am not. While I love my old, old Harley RK, I will ride the Indian just cause I do not want to be a poser because that aint my gig and all the comments about so called “RUB’s” seem to involve HD. This is one of HD’s problems with the younger set more than the other mfg’s. Bottom line they all got to sell bikes and sell shit to survive, it is simple Eco 101. I am 63, still ride 20K miles per year on my bikes……

    There also has to be bike population for the aftermarket guys to make stuff for the older bikes….that is important for all the wrenchers.

    We were all fucking “Rookies” at one time……dont forget that regardless of your riding prefernces..

  3. fayettenamhoe Says:

    why would a young person want all the baggage and stereohype that belongs to the name, not the person who rides it?, blah blah, yes officer i built it from a part here and a part there, yes sir, no sir, on your kneez sir, before i lose my loose change digging for the truth, and hand you a get well soon card, and who keeps the joke alive? born to wild? born free? hahahaha, trying to be invisible is like a death sentence, harley forgot the riders when they saw profit in catering to mass hysteria,
    now their motorbikes are technical garbage cans, nothing fits nothing and they all puke the same, variations and commonality is what made harley a motorcycle bike, leave the ingenuity to the riders who made them famous and the true believers that keep them above the company, cheap parts and ugly configurations will not save a dying breed, only the riders, and until the INC. wakes up all the imported parts from hell won’t save them, i guess the big secret that they hate, is that most riders want a fucking bike that they can work on, and new harley just won’t get it, my apologies if i offended any’ones trip

  4. The Kraut Says:

    Had a ’77 FXE new, a ’77 XLH after the Super Glide was ripped off…did 7 years on that torture rack. Got another ’77, an FX…built it to FXE-F/FXS and got a year on it before a left turn Larry nailed me on Dec 7 ’85. Rebuilt that bike to FXWG standard and rode it for 44k before selling it in ’92.

    Got my ’07 Ural in ’07 and still have the Stalin-sickle (trannies on the bench-3rd gear hit the gulag). Bought an ’84 FXST Softail last July and replaced the battery…been rackin’ up miles since…planning some wrench-re-do this winter on the FXST.

    I don’t consider today’s HD the same one I met in the 70’s…today’s dealerships are fuckin fashion emporiums for RUBs and rookies.

    Come what may, water will continue to seek its own level…we wrench’n’riders will be in the future as we are now irregardless if the MoCo exists or not.

    Respect to those who warrant respect

    The Kraut

  5. david Says:

    The demographics of the buying public almost guarantee H-D Inc., ain’t going to hold on.

  6. jhunter Says:

    Wouldn’t ride a Harley, especially in my AO. I wouldn’t want anyone to think I was so stoopid that I would deal with the trash that owns the three local h-d dealerships. If I was going to buy a big bike now, I’d get a used RoadStar.

  7. rw Says:

    Was out on my 79 FX last evening and had the electronic ignition take a shit. Only the 2nd time in 37 years it had to go home on a tlr. Hell that’s the original box can’t bitch to much.

  8. russell1946 Says:

    Always enjoy Shovelhead’s posts…

    I’ll be 71yrs old in a couple of months.

    Had 4 Shovels along the way… 1979 Low Rider, 1981 Wide Glide, 1982 FXR, 1982 FLHP (cop bike with a solo seat).

    Then I acquired a couple of rigid-frame choppers…a few years apart… one with an EVO and a hand-jammer, and the other with a Pan bottom/Shovel top with a magneto, which was a nightmare from Hell to kick-start in cold weather.

    Life changed when my family got larger (grandkids), and I had to take a break from riding for several years.

    When the money got right, I went to the local HD shop and laid eyes on an ’06 Softtail Standard, and rode it home.

    30,000 miles later, I was hearing bad things about chain tensioners, and such… so I had my local wrench put in the S&S cam gear drive, and now, my odometer currently shows 59,000 miles

    Like many others in here, I’m happy with what I’ve got… and have no intention to step up to a disgusting bagger.

    My little 88 has taken me from Florida to West Penn, Niagara Falls, Virginia Beach, Kansas City, and Milwaukee… with nary a problem.
    I’m currently considering a ride out to Arizona in early October… a 4,000 mile round trip.

    foot-pegs forever!

  9. fayettenamhoe Says:

    they forgot how to make a motor bike, now they sell ego’s

  10. fayettenamhoe Says:

    harley INC. lost me miles ago

  11. fayettenamhoe Says:

    harley hasn’t built a rebuild bike in decades, fuuue on them

  12. ed Says:

    Indian Scout 1st, 2nd and 3rd in all the AMA flat track events so far this year. Piece of shit XG. They are missing the market. All the folks that buy their bikes are getting old and not even riding anymore. Just look at all the low mileage garage queens for sale, even late year evo’s. The best engine ever built.

  13. Shovelhead Says:

    Johnny Rotten
    Great Pics. Shovelheads forever!

    Respect to 1%ers

  14. Meh Says:

    In inflation-corrected dollars Low Rider prices have stayed flat since I bought mine new ’88. It went for 8400 and 2017 MSRP is about 14 grand. That’s not a lot of money today.

    Plenty of folks in their twenties can swing that much if they want to, but what REALLY turns them off is the old Boomer poser cosplaying fucks who think buying a Harley makes them bikers. They don’t just make bikers puke, they make non-bikers puke.

    Harley now has to overcome an image it created to sell motorcycles. It could start with a new XLCR since cafe racers are in fashion (and built better than they were the first time). Adventure rider Sportster conversions work surprisingly well for the reasons Sportsters worked in the first place. HD are missing out on those easy markets for styles they created.

    Any MoCo executive who even mentions buying another Italian brand needs to be drawn and quartered. Aermacchi and MV Agusta should be lessons learned. Stupid marketroids cratered Buell (he was warned not to sell out to HD) because they are congenitally unable to understand anything not a big twin or sportie…

  15. ChoppersOnly Says:

    I can’t understand how Harley can claim that they “Build Riders.”

    Selling overpriced bikes with warranty plans that actually force riders to keep their hands off their bikes when it’s time for maintenance…that’s how you build a rider? By making sure they never learn how to work on their scoot?

    Lots of fuss in here about younger riders not taking to motorcycling and how that’s hurting the industry but these sales numbers only tell the story of NEW bikes from the dealer. Some of the comments in here are so far from the point it’s almost unbelievable.

    They’re talking about people who buy brand new bikes from Harley directly. How many 20 something’s can shell out 20-30K for a brand new bike? Not many, unless they’re dumb enough to fall for the never-ending payment plan so they can ride something that doesn’t even belong to them for the next 10 years. The younger generation is waking up from the insanity that comes with a 500 dollar monthly payment and another 500 dollar service bill for your next fuckin oil change.

    I’m 27, and I’ve gotten all my bikes from private sales. I can’t understand why you’d do it any other way. Unless you don’t know how to work on em.

    As for all the milennial speculations and talk about participation trophys, it’s funny how the older generation loves to forget who decided to give those out in the first place. But I guess as the old saying goes…shit slides downhill. It wasn’t YOUR fault! lol

  16. Shovelhead Says:

    I for one don’t care if Millennials ever ride Harley’s. Matter of fact, I’m hoping this whole fake Biker lifestyle goes out of style!! Won’t be so many assholes revving up their new Harley’s trying to look cool.

    No matter what happens to the Company, I’ll still live my life, ride my old scoot and once in a great while…fuck my Wife.
    Life is good.

  17. andy uk Says:

    i am a 66 year young motorcycle rider, started on small (very small) Brit bikes then moved to Japanese big bikes and finally got into the Harley,s . shovels, evo,s and twin cams , i love em all ,but what i dont like is being screwed by the company. When it comes down to increasing the margin it always signals trouble in a business , pricing on the bikes in this country is getting scary and all the man in the shop says “i can do you a great finance deal”, it makes me think i may be riding my last Harley, its a shame.

  18. TexasCarey Says:

    About the only bad taste Harley has left me with isn’t actually Harley Davidson or HDFS. It’s actually the local dealership. One thing I wasn’t aware of was the Bank Rate vs the House Rate. Apparently, when you use HDFS, the Dealership (the house) is allowed to tack on to the Bank Rate what ever they can get away with. The “tack on” is apparently used in the auto industry as a whole and is used to get larger down payments (“if you give us another $1,000.00, maybe we can knock off a point or two”), it’s also used to get other purchase add-ons, Gap Insurance, Extended Warranty, Tire Coverage, etc. The house never tells you about the tack on. This is deceptive and doesn’t help Harley Davidsons image. HD should prohibit this practice.

    As for the Millenials……How do you expect these kids to ever become Good, Solid Men/Women with back bones when they were all given participation cups after a game of soccer, base ball, what ever! Bunch of pussies if you ask me!

  19. Dutchboy Says:

    Damned spell checker, HD. Not HAD.

  20. Dutchboy Says:

    The single cam Evo is my HAD of choice. Of course I enjoy doing my own wrenching, and if money was no objection then there would be a Glide in the shop keeping my hardtail company. Hey, Rebel, how about a page where we can post pics of our rides (parties, old ladies, et al)? Just a suggestion, thanks for another great story. As for the MoCo, I wish them luck but they need more guys in the board room with grease under their nails and fewer getting manicures.

  21. Voltaire Says:

    My first scoot was a shovel. Damn it had soul. Bitch to start at times and only four gears but it was a genuine Harley. Proud to call her mine. Then everyone wanted one so I sold her for 5000. I made as her like a long lost lover. Since then I have married a girl 25 years my younger. She is like these new fuel injected Harley’s, just jump on her and ride. Starts right up, no need to warm her, smooth, sounds ok, fresh paint but damn she isn’t an ole lady. She’s refined and educated and I can take her to all the finest establishments but the soul? Not the same. Never will be. I want my shovel and my soul back. Understand?

  22. Paladin Says:

    In case anyone thought an eight valved Harley engine was something new, Harley raced an eight valved board tracker back in 1927. It was referred to as a”nigger lipped” Harley. https://www.google.com/search?q=eight+valve+harley+davidson&tbm=isch&tbo=u&source=univ&sa=X&ved=0ahUKEwjT2q7T5LbVAhVKl1QKHd20BtEQsAQIbQ&biw=1344&bih=712#imgrc=Ou3P3CFLT4qa8M:

    Paladin

  23. RIDER 1 Says:

    I don’t have a real beef with the MOCO. Sure, I wish they would build better bikes and not charge so much for them. The real problem I have with them is that they jumped on the whole RUB bandwagon and started catering to them. It wasn’t enough to sell you a bike, they had to start pushing the whole clothing line and “lifestyle”. When I walk into the local dealership they don’t see dollar signs because they know I ain’t there to give any of it away!

    RIDER 1

  24. Shovelhead Says:

    I’m with Bone Head. I’ll ride my old Shovelhead till I die. Fuck the company and the Yuppie Dealerships.
    But, I do understand the need for reliability when riding with a Club. We all know the requirements!

  25. Nuke n' Pave Dave Says:

    I’ve got a flathead and a Pan. When the Motor Company returns to supporting their older products again I might start supporting them . . . again.

  26. xplor Says:

    Deader than a Nimbus. In 1969 AMf stuck a fork in the hog and said she was done.
    What remains is the rolling dead.

  27. Rashomon Says:

    I read somewhere a few weeks back that they were bidding to buy Ducati which struck me as odd – maybe they’re trying to build up a non-US base although that may not work out too well for them

  28. TX_Biker Says:

    I don’t know about y’all but my Harleys run great. I ride them very hard and yes shit breaks. But mostly things that would wear out anyway like stators, cam tensioners, seals etc. But then I don’t ride any of the injected Harleys, all mine are older and carbureted. Though I am planning to buy a new Road Glide in 2018. I think that also might be the reason for the lull in sales. Most of us know that new models have some problems the first year or two, that’s exactly why I am waiting. I don’t think Indian is much competition in reality. I have seen very few here. One of my brothers bought the Chieftain and couldn’t wait to get rid of it. I can’t speak to whether or not millennials or hipsters are buying them in this part of the country as those two groups are small here.

  29. Bolo Says:

    The problem is millennials don’t ride motorcycles. They’re scared of them. The new generation are weak, effeminate beta males that have never been in a fight and would never dream of doing something as dangerous as get on a motorcycle. And the Vets in that age group, who actually have a pair can’t afford to spend 20K on a bike and aren’t going to spend their money on something as hideous as the “India manufactured” Street line.

  30. Bone Head Says:

    The Motor Company has taught me to hate them for the last 30 years or so. Shitty Quality Control, piss poor engineering, and a fuck you attitude towards those who ride the old iron. I’m 68, and those who taught me, those who I ride with are the ones who made Harley what it pretends to be today. I expect to join the Old Ones gone ahead in the coming years, or even tomorrow. Until then I will keep my pan, wrench on it and ride it. Harley might do well to build the old iron again. It had a soul.

  31. Paladin Says:

    We are “going from: ‘We build bikes’ to ‘We build riders,’” Levatich told the Milwaukee Business Journal.”

    Actually, Harley has gone from building crap to building even more crap. Harley’s Milwaukee Eight engine is nothing more than the copying of Yamaha’s Roadliner and Raider engines. But, because Harley still insists on using their weak, roller bearing, male / female rod setup instead of a much stronger automotive, plain bearing, side by side rod / crank assembly, their Milwaukee Eight engine is just more of Harley’s same old crap, just with a different topping. You can get better quality, but you can’t pay more.

    Paladin

  32. Roswell Says:

    I don’t understand this. It’s as if people on here want HD to fail and go out if business. Why, because they sold bike to yuppies? They’ll sell them to anyone they can, that’s what their in business to do. People on here likes to come and spout off about how they know better what HD should do but keeping a company in business over decades is damn near impossible to do. Indian couldnt do it, Triumph and none of the other brits could do it. Xerox, Kodak, American motors, and on and on couldn’t do it. HD has done it. Who gives a shit what you or I think about how they do it, their job is to survive.

    The reliability issue? I can only speak for my self but my two most recent bikes a 2014 limited with 30k miles and my 2017 road king with 7 k miles have had zero problems. The Milwaukee 8 is a hell of a fine running engine that the 103 and earlier cannot keep up with.

    People can bitch about HD all they want but it is an American company that employees thousands of Americans (and people in other countries that likely live a better life working for HD) and builds bikes that I like.

    Do they want every penny in my pocket? Course they do but nobody decides where my money goes but me. If I don’t want stupidly expensive t shirt I won’t buy it. But if there are people out there that do want to buy that stuff what business is it of anyone else’s?

    I’m rooting for HD. Period.

  33. Iron Rider Says:

    We are “going from: ‘We build bikes’ to ‘We build riders,’” Levatich told the Milwaukee Business Journal.

    So basically what Levatich really is saying is that ” Yes we know are bikes break down more often now and spend more time on a lift then they do on the pavement but that’s okay we can still charge even more for a shitty product” ” Not only do we have fewer and fewer parts at our dealers but that’s ok we have mugs and t shirts you can buy so when your ride breaks down for the 6th time and your standing there on the side of the road you can still look good in one of our many t shirts waiting for your friend to come and trailer your ride for you”

    ” We plan on using the mantra of we build riders because SOA was great for sales and we are hoping that the Mayans MC show on fox will get more yuppies who want to play bikers coming into to buy our t shirts and overpriced chinese bikes”

    “So please excuse our lack of a quality built rides like in the old days for our newer models that love to be in the shop and our drive to become more of an accessory fashion outlet then a motorcycle shop all in the name of sacrificing quality and customers for the almighty dollar.”

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