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Tuesday, January 29, 2019

HOG provides today's Trumpenfreude

Harley-Davidson has a big problem. Its customers are dying off. People under 60 largely do not want to buy its big roaring motorcycles -- hogs -- the inspiration for its stock symbol, HOG.

All companies have a life cycle. Ask Sears. Woolworth. Packard. Harley nears its end. But Harley CEO Matt Levatich has taken to blaming President Donald John Trump for Harley's woes.

President Trump liked Harley because it built its motorcycles in the good old USA.

CBS reported on February 2, 2017, "Less than a week after Harley-Davidson (HOG) reported earnings that disappointed Wall Street, the motorcycle maker got a pat on the back from President Donald Trump during their meeting today at the White House.

"Speaking to reporters, Mr. Trump described the Milwaukee-based company as 'true American icon -- one of the greats.' He thanked the Harley execs for 'building things in America … I know your business is now doing well.'"

The president even offered to lobby India to reduce its 100 percent tariff on Harleys.

However, the Guardian reported, "Harley skirted 100% import tariffs by opening an assembly plant in Bawal in 2011. Harley’s sales have grown by 30% there in the past two years, according to the Milwaukee Journal-Sentinel. A similar assembly plant system already operates in Brazil."

But the relationship soured when Levatich began attacking the president's economic policies, blaming them for the company's problems.

The company said the president's tariffs on cheap steel and aluminum from overseas caused it to raise its prices. Then the company said President Trump dropping out of the Trans-Pacific Partnership forced it to move some operations to Thailand.

Thailand is not one of the 11 TPP countries, which are Australia, Brunei, Chile, New Zealand, Peru, Singapore, Vietnam, Japan, Malaysia, Canada and Mexico.

Harley also protested that the European Union's raising tariffs on its hogs in retaliation to USA tariff increases.

But Market Watch pointed out, "What the company also failed to mention is that while one Trump policy could cost them money, another saves them plenty of coin. The company could save up to $100 million a year at the lower corporate tax rate under the new Trump tax rules."

Of course, you have to earn money to enjoy a tax break.

Today, Zero Hedge reported, "Harley-Davidson fell over 8% pre-market after the company reported 4Q EPS and revenue that not only missed the lowest Wall Street estimates, but were the biggest miss to consensus since 2009."

Unlike 2009, this comes at a time when the American economy is booming.

Press reports blame President Trump, but the company is failing.

Opening factories overseas to sell motorcycles overseas makes sense. Its USA market isn't dead but dying.

Blaming President Trump for its woes is dishonest. Instead of excuses, HOG should get a CEO who accepts responsibility.

23 comments:

  1. When I went to look at a Harley, the salesmen acted like I was a leper. The Honda I bought was a lot of fun.

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  2. Without the near continuous government handholding this company would've gone away in the 1970's. They refused to change their marketing, choosing "cool" over content. Too bad really. The US market was there for the taking.

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  3. Why spend big bucks on a shiny new Harley Davidson that's loaded down with "safety" and anti-pollution equipment when you can get a good used one for less than half the price without a lot of garbage? Maybe Harley Davidson should start their own Cash for Clunkers program to get used bikes off the market. - Elric

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    1. Thought the same thing. Haven't these guys ever watched an episode of "American Chopper?" There's a HUGE market out there for reconditioned bikes. Maybe they might ask why.....

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  4. If I remember correctly, many years ago when Honda first came on the scene, it embarrassed HD a lot because there was oil on the show room floor at HD but none at Honda. Seems to me that would be a clincher in purchasing one or the other.

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    1. That's not a bug, it's a feature. When your Harley stops leaking oil it means that it's time to add more. - Elric

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  5. I cannot find Harley's publicly-available P&L for 2018. However, there is an analogy out there.

    GM makes a Big Thing about an increase of $1BN in costs for steel and aluminum. What GM does not mention is its overall costs: $130 BN. In other words, there are a metric c&^%ton of costs which are NOT 'tariff.'

    It IS interesting that Harley's SGA expense between 2015-2016 did not diminish at all, but gross sales DID diminish in that time period.

    Perhaps Mr. Levatich should look closer to home, eh?

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  6. In the 70s i had a hd sportster. I had to buy harley Davidson branded motor oil.

    Hd was the only place to buy 90 weight motor oil.

    I bought it a case at a time and probably used 2 cans a week.

    John Henry

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  7. I gave up on HD when they caused riceburners to double in price (tariffs during Reagan).
    AMF buying them a few years earlier didn't help, either.

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  8. Harley is spending millions on electric bikes.

    Who'd want an electric bike? Not green millennials, they Uber. Not conservatives, they think global warming is BS.

    Signs are HD is infected with SJW disease. Which may well be terminal.

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    1. ...and the people ran for cover as the Hell's Angels whispered into town on their electric Harleys...
      HA! I don't think so.

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  9. Having to take care of multiple organ trauma, espesially head injuries on motorcycle riders during residency made me a bit of an enemy of motorcycles. I used to point at people riding them and tell my kids, "There goes another organ donor," when seeing them on the road. A neighbor used to ride a Harley. Saw a for sale sign on it and mentioned something about it to his wife, who told me he put the sign there without talking to her and she was going to talk him out of it. He died riding it the next summer. My understanding from listening to guys talk is that Harleys don't handle very well in turns and sudden adjustments. It is easier to lose control of them moreso than other bikes. The other thing I notice is that most of the guys riding them are pretty long in the tooth, meaning that reaction times are slow and muscles work less smoothly.

    This is a bad combination, but throw in cash flow trouble and you are looking at a company in need of more than small adjustments to stay afloat. They need new designs and injections of capital, which would likely mean loss of control for those at the top. And maybe that is what all the whining is about anyway.

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    1. They're publicly held, so capital is not insurmountable. The Motor Company's problem is product vs. buyers. The yout's are NOT buying Hogs and the old farts are selling them. Hogs are, to a great degree, "fun money" and the under-40 crowd doesn't have any of that OR they are spending it on other stuff.

      In only the last 30 years they opened and closed the Kansas City plant--which should give you an idea of how bad business really is.

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  10. Tough to look cool when you have a manbun.

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    1. But, but, I thought manbuns were supposed to be cool!

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  11. I have ridden motorcycles since age 23, I am now 70. I have owned large displacement bikes of almost every brand available. My Harley Davidson was the only one I ever had to push because it wouldn't run. Good riddance.

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  12. Harley is expecting a flood of new customers after their new ad campaign: you'll get a free Gillette razor with your new electric ecosaving Harley!

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  13. In the early 2000s when property values were on fire, a lot of people did cash-out-refis to buy toys. HD sold tons of product during that time. The market became saturated, the money (and, in many cases, the house) is gone, and market demographics have changed substantially. A recipe for disaster that they didn't see coming.

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  14. Harleys are more about image than anything else. How many kids today want to be leather-clad bikers when they grow up? Bikers are no longer romanticized and the HD bikes are old fashioned.

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  15. I bought my one and only Hog in the fall of 1990. It was a brand spankin' new Springer Softail. Now, it was no one's idea of a touring bike, but that did not stop me from crossing this magnificent continent ten times over on that thundering beast. I loved it. (and, incidentally, in all those miles I had *ONE* breakdown- alternator & battery)
    But in '91 the Evolution motor was pretty much the same technology as it's 1939 Knucklehead predecessor. A great part of a Harley's appeal was that it was a fundamentally simple machine. Most guys are capable of understanding, and working on it. That is no longer the case. EPA compliance has turned the Harley into just another rice-burner. To hop up the new ones you have to hack the chip. Bikers don't hack chips.

    JWM

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  16. Like all the companies you name, they didn't have to go down. They could've tried to change their business. Make/Sell different stuff. Find a different market and demographic to sell to. But most businesses are hard to change.

    Harley could change selling large expensive vehicles that can only be used intermittently. They could expand into different product lines. Sears should've shrunk their brick and mortar stores and dedicated more to online sales and they did but too late.

    Harley is being hurt because they're being stubborn and refuse to change to adapt to the market. When companies do that they go under.

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  17. The problem with Harley Davidson is that they cost almost twice as much as Rice burners...which are now mostly made here now.

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