Harley Is Doomed

January 28, 2010

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Harley-Davidson Incorporated, the iconic American motorcycle manufacturer is doomed.

The confidant pitchmen now running the company into the ground understand that something has gone terribly, terribly wrong but they have absolutely no idea what the real disaster might be. Not even Willie G. Davidson, who has often been lionized as the savior of the company, knows. So the company is doomed.

Harley-Davidson is a deaf and blind man in a minefield. And, if you are a sentimentalist, if you are one of those people who got Harley-Davidson tattooed on your arm way back in the long ago, now you get to watch. Just watch. You can also jump up and down and scream, “Oh no, Harley! Don’t do that! No! No!” But it does not matter what you scream. Harley cannot hear you anymore.

Latest Bad News

Last week Harley announced that it lost $218.7 million between Labor Day and New Year’s Eve. Last year, when the economic meltdown had everybody in a panic, Harley made $77.8 million during the same three months. Sales were 40 percent lower this autumn than last year. Retail sales of “authentic Harley-Davidson” overpriced stuff fell 28 percent in the United States and 10 percent overseas. Twenty-eight Harley dealers closed in 2009. The company expects 15 more dealers to close in the next three months. Earlier this year the company dropped its Buell sport bike line and announced it was laying off half the workers at its York, Pennsylvania plant.

But the problems are really much worse than that because selling you a motorcycle and plastic bags full of “authentic Harley-Davidson” overpriced stuff is only half of the company’s business. The other half of the business is called Harley-Davidson Financial Services or HDFS. HDFS is the friendly “folks” who lend you the money you need to purchase a new motorcycle or an “authentic Harley-Davidson” leather jacket or whatever it is that the dealer has that you want. And, as sales income drops interest income drops, too.

“As we look at the year in front of us, we expect 2010 to continue to be challenging,” Harley boss Keith Wandell told investors last week. This week Wandell very publically demonstrated his confidence in Harley’s robust future by buying a thousand shares of his company’s stock, which probably cost him something like one half of one percent of his annual salary.

Outlaw Machine

Back in the 1990s Brock Yates, the screenwriter who gave the world Cannonball Run, very memorably named Harley-Davidson motorcycles the Outlaw Machine. It was a brilliant and incisive turn of phrase that described both the motorcycle and the real subject of Yates’ book which was actually “the long ride of the Harley-Davidson into the mainstream.”

That long ride began after the Second World War when restless and edgy veterans bought war surplus Harleys. The bikes were dirt cheap, easy to work on, went anywhere, ran pretty good and they were American. Some of these edgy veterans joined or formed clubs. Hollister happened and the more freewheeling clubs came to be called outlaws.

Which was also a brilliant and incisive turn of phrase. America still loved the idea of outlaws in the conformist 1950s. Bikers became outlaws because that was what the rest of the country really wanted bikers to be. Our tolerance for “outlaws” was one of the things that separated the good, old US of A from the “totalitarian states.” And, in the 1950s America still longed for the days of the frontier. The predominant television genre until about 1965 was called the “Western.”

Americans also still adored the idea of personal freedom, of just being able to take off and go somewhere without being tied down. America was the land of the fresh start before it became corrupted into the nation of free credit report dot com. One of the iconic TV shows of that era that was not a Western was called Route 66. It was about a couple of drifters who collected a lot of stories and broke a lot of traffic laws.

One of the best known novels of the 1950s was called On The Road. In 1960 the last, great, American champion of the common man, John Steinbeck, went on the road with a dog named Charley. He announced he was looking for the “real America.” In mid-decade Simon and Garfunkel released a hit song about going to “look for America.” And, none of this was ever considered pathological.

Motorcycle outlaws were all part of that vanishing Americana and Harley-Davidson more or less tagged along with its customers. The rule for the first patch holders was that prospects had to own a bike “manufactured by one of the allies in World War II.” Beezers, manufactured by British Small Arms, Trumpets and Indians were all okay. The Pagans started as a Triumph club. Harleys were the cheapest. After the hated Japanese started selling cheap bikes in the United States in the 1960s the rule eventually became you had to ride an “American motorcycle.” It was common in the sixties to hear, “I would rather see my brother dead than on a Jap bike.” After Indian went out of business that more or less meant you had to own a Harley.

Don’t let people kid you. The first two decades after the Second World War were a great time. At least compared to now. People still long for the country that America was before Vietnam ruined everything. Some people born after 1980 are still trying to live up to 1965.

Subcultural Commodification

One of the things that fell apart after Vietnam was Harley-Davidson’s business. All those war surplus bikes got used up. The new bikes were no longer cheap or particularly good. Only the outlaw mystique endured and when Harley came back to life in the 1980s it was because the company was selling the idea of the outlaw as much as it was selling motorcycles. Harleys became the Outlaw Machine because that is what Harley-Davidson wanted you to think.

If you couldn’t afford a motorcycle, the official outlaw company would sell you a tee-shirt. They cost more than just ordinary tee-shirts but that was only because they included a magic ingredient. The magic was, when you put them on you became an outlaw, too.

The simple fact is, Harley stopped being a motorcycle manufacturer long ago. For decades Harley has been a company that sells magic on credit.

Anthropologists call this magic business “late capitalist subcultural commodification.” And they aren’t just talking about making some money from the “biker lifestyle.” “Gangsta Rap” is probably America’s most important subcultural commodity. A close cousin of the ‘biker lifestyle” called “the counterculture” has become a most excellent way to sell boomers everything from organic produce to investment plans. An MTV show called Jersey Shore is currently hawking the “Guido lifestyle.”

The problem is that “subcultural commodification,” the selling of an instant identity, is at heart a pyramid scheme. The American economy is now largely based on credit and magic. And, that is the economic minefield through which the deaf and blind Harley-Davidson Company is now wandering. This magic minefield is the big picture Harley cannot see. All of those layoffs and unemployment numbers and diminishing wages are the big booms Harley cannot hear.

What Blind Men See

In the mirror of its own mind, Harley-Davidson thinks you are the problem.

If you work for Harley-Davidson you are the problem because you make too much money, your health plan costs too much and you take too long to build a motorcycle. If you want a big salary and health benefits why don’t you get a job as a prison guard?

If you are everybody else you are the problem because you are exactly who Harley still aims its motorcycles at. So you are too old.

“The Easy Rider Generation Is Aging” an investment newsletter recently advised its subscribers. The “massive drop in sales underscores Harley’s main problem; the company’s key Baby Boomer customer base is aging to the point where they’re trading the experience of roaring down an open road on a ‘hog’ for something more sedate like tooling around the links in an electric golf cart.”

Harley intends to “streamline its manufacturing” and what that means is the company intends to put more people out of work and cut the wages and benefits of the workers it keeps. The company also intends to “boost sales” by exploiting two new markets.

The first new market is women, and Harley doesn’t mean your woman. The company means women like Carrie Bradshaw and all the gang from Sex in the City. It has to be those women because those are the women who can afford to buy a Harley.

And, the second market is India. Harley is going to introduce twelve models for sale in India. India, makes sense because that is where at least a million American jobs in engineering, computer programming, customer service, phone sales and even the law have gone in the last few years. On the other hand, India does not make sense because the average salary there is only about $1,000 a year.

So the company’s future would seem to boil down to the question of just how much middle class Indians and upper class career women will be willing to spend for 600 pounds of outlaw magic? And, the obvious answer is Harley is doomed.


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251 Responses to “Harley Is Doomed”

  1. Rebel Says:

    Dear Harold Eugene Johnson,

    Harley’s don’t leak. They mark their spot.


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