Harley-Davidson’s (Harley) 2020 Q1 financial report shows that the moto manufacturer continues on hard times.  For the full first quarter, U.S. retails sales fell 15.5% year over year.  It’s U.S. heavyweight motorcycle market share fell 2.2 percentage points to fall to 48.9%.

Internationally, the story is even worse.  International retail sales are down 20.7% year over year.  And, in the first quarter, its European market share is only 7.6%.   All up, motorcycle and motorcycle related products are down $100M year over year.

All of this is against a backdrop of four straight years of falling sales.  Frankly, that’s pretty dire news for any company.  And, the impact of COVID-19 will likely sour Harley’s financials for at least the next quarter as well.

New course

The current management of Harley has to do something to chart a new course.  Fast.  They continue to face pressure from investors, including Impala Asset Management, over the MoCo’s finances and management.  So with the rollout of its 2020 Q1 finances, the MoCo rolled out some fairly extreme measures to deal with its financial picture.


Just a few weeks ago, Harley announced some cost-cutting measures aimed at reducing costs associated with its employees and management.  Acting President Jochen Zeitz and the Board of Directors all agreed to forego any salary or cash compensation temporarily.  Executive management is taking a 30% salary cut, and salaried employees will take a 10 to 20 percent salary cut.  These changes had little effect on Harley’s stock price as it continued to sink.

Of course, cash is essential, and Harley says it is taking steps to address the impact of COVID-19 on its business.  According to a Harley statement, it is reducing planned capital spending and spending “across every part of the organization, including freezing hiring, temporarily reducing salaries and eliminating increases for employees in 2020.  These moves will reportedly save the company $250M of cash during 2020.  In other cash-saving actions, Harley slashed its dividend to $.02 per share for the 2nd quarter of 2020.  That, down from the previous quarter’s dividend of $.38 per share.

Jochem Zeitz Harley

The acting CEO of Harley-Davidson, Jochem Zeitz is making big moves at Harley-Davidson. Photo credit: Harley-Davidson

Further cost measures

While all those measures affect Harley’s cash, they don’t do anything to change Harley’s sales and future product growth.  To that end, the MoCo is announcing a “set of actions” that call for a new strategic plan.  Harley refers to the plan as “The Rewire.”  While that name is descriptive, one can’t help but wonder whether naming the new plan “The Rewire” is a smart choice.  Especially considering Harley’s first electric motorcycle, the LiveWire is for all intents and purposes a failure for the MoCo.

Resetting Harley’s operating model

Harley says its goal is to “…reset the company’s operating model to reduce complexity, sharpen focus and increase the speed of decision making.”  OK, that sounds good, but how does Harley intend to accomplish those goals?

Let’s talk about some of them and decide what the move means and whether it will be good for the MoCo.

Focus, prioritize, reset production

  • Narrow focus and invest in the markets, products, and customer segments that offer the most profit and potential. This includes building on Harley-Davidson’s strong position in the U.S.
    • Harley seems to be saying, “stick to what we know and what makes us money.”  That sounds good, but with a dwindling rider base, will the move help Harley grow long term?  We’ve already seen the effects of Harley’s aging riding population, hitting Harley’s bottom line.
  • Re-evaluate strategies to reach new riders and build ridership.
    • Is Harley saying that it is abandoning/adjusting its “More Roads To Harley-Davidson?” Indeed that program is expensive, and investors may be happy to save the cash.  But will killing or reducing the program bring new riders to the brand?
  • Prioritize the markets that matter.
    • Does this mean that Harley will invest less in Europe and Asia?  The move saves cash, but is Harley giving up on the rest of the world?
  • Reset product launches and product line up for simplicity and maximum impact.  Simplify and re-time product launches to reflect the new reality, align with the start of riding season, and better suit the capacity of the company and dealers.
    • This seems to indicate that there may be delays for new products.  Is Harley saying that the launches of the Pan America and Bronx models be pushed back?  Perhaps until next spring, when dealers often see more floor traffic and sales?  If Harley pushes back its new models, until 2021, how will it help them right the ship this year?
Pan America Harley

Will Harley’s latest move push back the rollout of the Pan America?  Photo credit: EICMA

Stick to what we know

  • Expand profitable iconic motorcycles to excite existing customers. Remain committed to Adventure Touring, Streetfighter, and advancing electric motorcycles.
    • This one is a bit of an enigma.  First, Harley says it wants to expand profitable iconic motorcycles.  This would seem to mean to make more models of the bikes that earn the MoCo the most profit.  But they also say that the move is to excite existing customers.  Well, that customer base is dying off (literally) and financially, so what about the future? How Harley will remain committed to Adventure Touring, Streetfighter, and electric motorcycles is not mentioned.  But it is interesting to note that Harley’s commitment is to adventure touring.  Does this mean that they don’t believe that the Pan American will be a significant competitor in the more off-road oriented competitors?  It’s also notable that electric motorcycles are ranked 3rd in Harley’s list of commitments even though that model is already in production and available.  Being third in line doesn’t seem like a significant commitment considering the model (Livewire) is already in production.
Livewire Harley

Harley’s LiveWire has met with mixed reviews because of its high cost and low range.  Photo credit: Harley-Davidson

  • Return focus to the strength of brand and company, starting with dealers, customers, stronghold products, and committed employees globally.
    • This seems like a statement saying that Harley wants to return to its old way of doing business.  Saying they want to focus on the strength of the brand implies that they will cater to existing customers and follow older business models.  Interestingly, their concentration will be on dealers first, not their customers.  Is Harley facing pushback from not only its customers but its dealers as well?  Don’t customers always come first?

More info coming

Harley says it plans to share more about “The Rewire” plan in its second-quarter update.  Hopefully, we will be able to understand Harley’s plans once it is released.

Will the plan work?

But what investors want and motorcyclists want may be two different things.  Riders want excellent and exciting motorcycles, and investors only care about making money often in the short term.  Apparently, investors really like Harley’s plan since its stock has recently shot up about 30% after the announcement (it has since fallen a bit).   Can Harley’s new strategy, keep both happy?

In my opinion, Harley’s latest plan is a short term one that will appease investors. Will it come at the expense of riders, product, long term vision, and product growth?

What do you think?  Do you think Harley’s new plans are a recipe for ultimate success or one for long term decline?  Or is this the start of its salvation? Let us know in the comments below.


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