Illustration for article titled Harley-Davidsons Turnaround Plan Is Beginning To Take Shape
Photo: AP

Harley-Davidson ousted (fired?) its CEO in late February at the urging of at least one shareholder, who felt that the motorcycle maker needed to shift its focus back toward heavy, expensive things that boomers buy instead of aggressive expansion overseas. As it turns out, that is now also Harley’s new plan.

Advertisement

The company released its first quarter financial results yesterday, and they were predictably bad, with a 15 percent drop in motorcycle sales compared to the first quarter last year, or 23,732 bikes. The company’s motorcycle division reported income of $84 million, which was down 22 percent compared to the first quarter.

And since those numbers are only for January, February, and March, they don’t capture the full impact of the coronavirus on Harley’s business, which is very likely significant. For its part, Harley declined yesterday to predict what could happen in the second quarter.

Advertisement

More significantly, Harley’s acting CEO Jochen Zeitz did offer a new vision for the company. The new plan is called The Rewire. Well, actually it’s not much of a new plan. The plan is “let’s double down on selling motorcycles to Americans.”

Or, as Bloomberg more eloquently puts it:

[Zeitz is] dialing back his predecessor’s turnaround plan to focus on expanding U.S. ridership, iconic profitable bikes such as the Adventure Touring and Streetfighter models, and electric motorcycles.

[...]

Harley “has become accustomed to over-committing and under-delivering; we need to set achievable plans and realistic goals,” Zeitz said during the earnings call. “It is clear that our strategy needs to be refocused to better align with our capacity and capabilities and also updated given our new reality.”

Astute observers will note that Harley’s plan for years was “let’s sell motorcycles to Americans,” a plan which was very profitable for them until it was less profitable, necessitating the old plan under deposed CEO Matt Levatich, who thought Harley could survive long-term if it expanded overseas into markets in Europe and Asia as the American market crumbled.

And say what you want about that strategy, but it did seem like a coherent idea, and tried and true for some car brands on their way out in the U.S. (See, for example, Buick.) This new strategy seems designed to mollify those within the company who wish the old times were still here. Or maybe just Wall Street. Per Bloomberg:

“It is clear to us that HOG will be less adventurous in terms of trying its hand at segments and markets where the brand faces extremely low chances of success with high up-front costs and high risks of brand atrophy that could threaten the company’s long-term survival,” [Morgan Stanley analyst Adam Jonas], who rates the stock the equivalent of a buy, wrote in a report Tuesday.

Advertisement

In the very near future, Harley also has plans to borrow money to survive.

The manufacturer said it will save $250 million this year by freezing hiring, reducing salaries, trimming capital expenditures and retiming product launches. It’s also halting share repurchases.

Harley announced it’s in talks with major U.S. banks to secure $1.3 billion in funding and expects to tap capital markets for more in the coming weeks after sales of its motorcycles declined in every mark

Advertisement

Still, Harley sticking with electric motorcycle development is interesting, building on the introduction of the LiveWire, which is a fun bike to ride even if sales apparently haven’t been great. (Harley does not separate out how each model sells.)

Harley will tell you that LiveWire was never meant to be a huge seller anyway, just the flagship to what will be a whole line of electric motorcycles. That may or may not be Harley’s ticket for the future, though the coronavirus pandemic ensures that 2020 will be the sixth straight year of falling sales. This strategy feels like both a concession to that and an admission that Harley’s future is getting smaller.

News Editor at Jalopnik. 2008 Honda Fit Sport.

Share This Story

Get our newsletter