July 28th, 2020: Today’s article from Bloomberg News, “Harley-Davidson Investors Sour on CEO Jochen Zeitz’s Turnaround Plan” confirms what I predicted for the company’s new CEO in my story dated May 10th, 2020 (in its entirety below). After announcing its first quarterly loss in more than a decade, Zeitz’s says that he “aims to increase the brand’s desirability by putting quality ahead of quantity.” Those are not words that growth-hungry investors want to hear. Bloomberg intelligence feels that, “New management may be embracing its history and core rider demographic, while remaining a niche player to attract a larger automotive or motorsports partner.”
I can only hope that a consortium of investors (maybe some of them riders) will take Harley-Davidson private and profitably operate it as the most amazing motorcycle company in the world.
WHAT HARLEY-DAVIDSON NEEDS TO DO TO SURVIVE
May 10th, 2020: Harley-Davidson has taken a beating in the financial press recently and it appears that 2020 is shaping up to be the roughest year yet for the 117-year-old company. The company’s CEO left town in February after the product expansion and new-rider programs he championed failed to ignite investor confidence or reverse (or even stall) the company’s declining sales performance. The news of his replacement, a guy tapped from an athletic shoe company who already sat on the board, has helped the stock rebound slightly, but I predict a very short honeymoon after he announced pulling back on the reins and plans to “reignite Harley-Davidson as one of the most revered and iconic brands in the world.” Earth to Major Seitz (the new CEO), Harley-Davidson is already the most revered and iconic brand in the world. You just identified the only thing that Harley-Davidson doesn’t need help with.
WALL STREET TO THE BOULEVARD
Harley-Davidson shouldn’t be a publicly traded company. It is a motorcycle company. A great motorcycle company. There isn’t an existing motorcycle company that wouldn’t kill for the sales and margins generated from Harley-Davidson’s motorcycles and accessories. Yet Wall Street has an insatiable appetite for growth and Harley-Davidson is not going to be doing a lot of growing in the near future. Or in the distant future.
If Harley-Davidson continues on its current course, their share price will continue to dwindle until a larger company (maybe a sporting goods company?) scoops it up in a hostile takeover with the intention of picking the company clean, like buzzards working on a corpse in the desert. Or maybe worse, the current board will work with a private-equity firm to take the company private and, well, I guess, do the same thing. Sell off the company assets and get out of the motorcycle business. That may be why the new CEO’s first statement is about the company’s iconic “branding.”
ENTHUSIAST OWNED AND OPERATED
It will require deep pockets to take Harley-Davidson from a publicly-traded company to a privately-owned company but those deep pockets are out there. They belong to investors who understand that Harley-Davidson is a very, very valuable motorcycle company even if its sales will remain flat or decline. To Wall Street, that is blasphemy, but to someone who understands Harley-Davidson’s mystique and importance, it can be a tenable proposition. These would be investors proud to own and profitably operate the most amazing motorcycle company in the world.
It will be a shame if Wall Street determines the future of Harley-Davidson instead of riders.