Harley-Davidson reported its first quarterly loss since 1993!

No surprise given home foreclosures, unemployment fear, stalled economy and ice-cold demand for high-end, premium priced motorcycles.

For Q4’09, H-D reported revenue of $764.5M and a loss of $147.2M.  Affecting Q4’09 results was the previously announced 53.1% reduction in motorcycle shipments from the year-ago period and $167.1M in restructuring, on the Buell end-of-life costs and the MV Agusta discontinued operations.  For all of 2009; revenue was $4.29B compared to $5.58B in 2008, a 23.1% decrease; income was $70.6M in 2009 compared to $684.2M in 2008, a decrease of 89.7%.  And don’t forget all the non-cash charges related to Harley-Davidson Financial Services (HDFS).

There was a surprise in today’s financial call.  Keith Wandell, (H-D President and CEO) stated: “We also feel good about where we’re at.” Huh?

Isn’t that the kind of thinking that would have Kodak saying that they’re relying on film, or newspapers saying they’re relying on print, or music labels saying they’re relying on CDs.  Just because you can’t see the cliff from where you are, that doesn’t mean it doesn’t exist.  Remember when everyone said no one would read a book on a hand-held electronic device, and suddenly now everyone’s saying the opposite, Kindle’s got so many new competitors and Apples yet-to-be released tablet gets more press than a starlet without panties getting into a car outside a pub.

Mr. Wandell may be referring to his reactive changes the past 8 months and the hope they will restore growth. I’m skeptical, and time will tell if they are the right decisions or if management can execute with a renewed intensity.  But isn’t that just the point.  REACTION to events vs. pro-active change?!  From the outside looking in, the majority of action the company has taken seems REACTIVE.  They curb demand, shrink manufacturing, reduce structural costs, pullback on spending, slash and cut employees, sell off businesses based more on profit margins not on the contribution to the customers soul.  Motorcycle sales are down more at H-D than other manufactures.  Why?

There is a saying: “Businesses should concentrate on their customers’ needs, not on specific products.” — “Marketing Myopia” (1960); Theodore Levitt, Harvard Business School

My opinion is that H-D needs to relearn customer needs.  If you desire to appeal to your core fans, then they’ll want to know that you are in it for the motorcycle hobby/sport, not just the money.  Stop calculating how to get to millions of revenue in a spreadsheet by maximizing this and that.  Just create something rawly desirable, then the revenue will come.  A great hit is more powerful than any marketing campaign.  People don’t need motorcycles, but they want one.  When the product is great.  When it speaks to them.  When it’s seen as integral to their lives.  You’ll have something!

Photo courtesy of JupiterImages.

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Out Of Busines

Harley-Davidson has undergone a grueling restructuring over the last year to better compete amid less demand.

The economy and housing bubble depleted consumers’ wealth and left a lot of folks unwilling to spend on Harley’s high-end bikes.  I anticipate that Harley will remain at least three quarters away from achieving positive retail sales trends in the U.S., especially given the companies lapse of a successful promotion in the first quarter.

I’m genuinely concerned.   More so about the decay of prosperity in the local motorcycle shops, parts suppliers, and dealers.  Be it routine service or customization, the local shops most often operate on their ability to make sure YOU are happy. They know if you leave satisfied, you will tell your friends about your experience with the shop.  Word of mouth is an integral part of a shops reputation in the local area and carries a lot of weight in generating new business.  “Giving” local shops rebuild, repair, or service work on your bike, while appreciated, is not going to keep a shop in business.   The industry at large will need sales to rebound or the local motorcycle businesses will lay-off their skilled workers or worse – close down operations.

Unless you own or work in a local shop, you have no idea of what it takes to stay in business.  Facility overhead, staff salaries, phones, heat/electricity and advertising are things everybody thinks of.  But what about insurance, hazmat costs, licensing fees and money paid to local city and state governments for all the TAXES they require?

And speaking of taxes, I’m very skeptical of government spending our way to prosperity.  Increasing the tax liability on small business owners does nothing to encourage businesses to take care of their employees.  In fact, in Oregon there is a special ballot measure on personal and corporate tax increases.  In my opinion this one-size-fits-all legislation may well force motorcycle shops to shut down.  You’ve heard of Measures 66 and 67 and read more about net profits and corporate structures to last a life time so I’ll avoid explaining the details.  Instead, let me ask a simple question.  Did you get a raise last year?  I know I didn’t.  And if you’re lucky enough to still have a job, I’m willing to bet that you didn’t either.  Most likely you took a pay cut.  Or had your hours reduced.  Or were required to pay a larger share of your health insurance coverage.

At the same time you and I were taking cuts the Oregon Legislature voted to increase the tax burden on higher incomes and businesses by $750 million dollars, it also authorized $248 million in pay raises for state employees.  Yep, that’s right.  State workers got raises during the worst economy we’ve been through since the Great Depression.

Still don’t care?  Then how about this.  The legislature approved a budget that increased state spending by 9%.  If I was operating a motorcycle shop I can assure you that if my business increased 9% over the past two years I’d be most happy.  The legislature increase is about $4.7 billion more than the previous two years.  Time for another question.  Do you think state services have improved as spending has increased?  Are the schools better? Is our infrastructure better?  At a time when Oregon has lost over 120,000 private-sector jobs in the past 18 months the state has added 10,000.  It would seem that in Oregon, government has become the ONLY growth industry!

I’m not sure about where you live, but in Oregon during the winter many think about what customization you can do to your bike in the off-season.  Before long you’ll be sitting at your MacBook, surfing the web looking to make some modification dreams come true.  You’ll likely have questions and find yourself on the phone calling the local motorcycle shop trying to get all those questions answered.  Before long you’ll have spent most of an hour discussing scenarios, getting advice and prices from the local shop expert.

What if they don’t answer your call because the parts expert is no longer employed?  What if they’ve gone out of business?

We’re told by the “spinsters” in Salem that the state is making “budget cuts.” Huh?  In fact it means simply they can’t have as much of an increase as legislators would like.  A 9% increase is NOT a cut!  It’s my opinion that the private sector creates wealth.  Government does not.  I hope you’ll join me in voting NO on Measures 66 and 67 to send a clear message to the Oregon legislators that a CUT means CUT.   

Increasing taxes on motorcycle shop owners means more will go out of business.

Source: Statistics from The Oregonian

Photo courtesy of Flickr.

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The U.S. motorcycle market endured some tough times as a whole in 2009.  According to recently released industry sales figures U.S. motorcycle sales declined 41% this past year, however, a couple northwest Harley-Davidson dealers were named among the Top 100:

MONTANA – Beartooth Harley-Davidson/Hi Mountain Recreation (Billings)
WASHINGTON – Downtown Harley-Davidson Renton (Renton)

Non-Harley dealers in Oregon – Bend Euro Moto (Bend), Moto Corsa (Portland) were named to the Top 100 along with Renton Motorcycles (Renton), Skagit Powersports (Burlington), and South Sound Motorcycles (Fife) all based in Washington.  Interestingly there were no dealers from Idaho, Utah or Nevada.

The Annual Top 100 Awards is a juried competition that recognizes dealerships for the achievements in retail design and merchandising, e-commerce, customer service, community involvement and general business management. More information on the competition can be found HERE.

Congrats!

Photo courtesy of Advanstar Communications Inc.

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Marketing theory distinguishes between two kinds of promotional marketing – “push” and “pull.”

A “push” strategy uses the company’s sales force and trade promotion to create consumer demand.  A “pull” strategy is one that requires heavy advertising spending and consumer promotion to build up demand for the product.

It’s the beginning of a new year and the start of a new decade so Harley-Davidson rolled out a new $500 bonus credit for potential consumers to “push-or-pull” a competitor brand trade-in to your nearest dealer.  The offer expires January 31st and covers untitled 2008, ’09 and ’10 models.  Of course read the fine print on the trade-in site for all the details and restrictions.

Photo courtesy of H-D.

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“…They may be disappointed now, but someday they will be able to look back and see what great things were accomplished this season.”

This quote from Harley-Davidson Racing Manager Anne Paluso who this past November was commending the racing team after Eddie Krawiec rode a Harley-Davidson V-Rod to win his fifth NHRA Pro Stock Motorcycle event at the Automobile Club of Southern California NHRA Finals at Auto Club Raceway.

Anne Paluso was laid off Monday.  Harsh!  Ms. Paluso had been involved with H-D’s racing activities for the last 10 years and had been with the company for more than 16 years.  I’ve written about other budgetary racing changes HERE.

Harley-Davidson spokesman Paul James was quoted Monday afternoon to say, “I can confirm her position was eliminated today due to budgetary reasons and that she has left the company,”  and went on to say “Racing teams will continue to report to [Vice President of Core Customer Marketing] Bill Davidson. Our plan is to go racing in 2010 in dirt and drag racing, but final plans have not yet been set.”

At this accelerated budgetary reduction pace it’s unclear if H-D can continue to be an influential motorcycle in the professional sport.

Photo courtesy of H-D.

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H-D announced a recall order that according to the National Highway Traffic Safety Administration (NHTSA) could affect up to 111,569 motorcycles.

Touring motorcycles are manufactured in York County, PA at the Springettsbury Township plant which has been under a lot of pressure to ratify a new labor agreement.  More information HERE on the approval of that agreement.  In addition, H-D announced this week that effective December 16, 2009 Ed Magee would be general manager of the plant replacing Fred Gates who will retire in 2010.

The NHTSA Campaign ID number is 09V457000 and the component effected is the gasoline storage tank assembly/mounting.  The front fuel tank mounts may distort in reaction to severe frame damage from a frontal collision which in turn may cause a fuel leak at the weld of the front bracket to the tunnel.  The result could lead to a fire.  Dealers will install a left and right brace which is intended to reduce front mount distortion during certain crash conditions.  The repair is free of charge and the safety recall is expected to begin on or about December 14, 2009.  Owners can contact H-D at (414)343.4056 or the NHTSA at (888)327.4236.

The models effected are:

1. All 2009 – 2010: FLHP; FLHPE; FLHR; FLHR SHRINE; FLHRC; FLHT; FLHTC; FLHTCU; FLHTCU SHRINE; FLHTCU W/SC; FLHTCUTG; FLHTP; FLHX;
2. All 2010 – FLHXXX; FLHTCUSE5; FLHTK
3. All 2009 – FLTR; FLTR3-CVO; FLTRSE3; FLHTCU4-CVO; FLHTCUSE4

In 2008, H-D announced recalling nearly 47,500 touring vehicles because of a fuel-filter shell issue.  More information available HERE on that recall.  Then earlier this year they announced a 2009 CVO Road Glide recall HERE.

Photo courtesy of H-D

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This is the question I’ve been pondering over after having an opportunity to spend a couple of hours with “No Barriers” founder Neal Petersen.

To save you some time the short version of Neal’s story is — He is a black South African who grew up poor and disabled during apartheid yet achieved his dream of racing/sailing solo around the world.  He now does motivational speaking and is involved in peace talks in multiple countries across the world.  During Mr. Petersen’s speech he routinely ask the audience; “Does what I do on a daily basis at work have a positive impact?”

This resonated with me and while I personally reflect on this I can’t help, but ask the question of Harley-Davidson’s CEO, Keith Wandell.

Today, Harley-Davidson reported out the Q3’09 quarterly results and announced a massive 21.3% decline in revenue for the 3rd quarter and an 84.1% decline in net income from a year ago quarter.  Apparel and general merchandise represents 23% of H-D revenue to date.  Then the news got interesting.  They announced that 14 dealers have closed year-to-date and set the expectation that 15-30 additional dealers will close in the next 6 months as the company reduces inventories to match sales.  They discussed the HDFS bad loan/delinquencies and financial progress.  The Harley-Davidson brand value (note: its moved down from 43 to 71 position) and the more important announcement was to shutter the Buell product line as well as divest its MV Agusta unit.  A busy day of spin as Mr. Wandell went on to discuss the going forward 4-piller strategy of: growth; continuous improvement; leadership development and sustainability.

On the Buell front I can’t say that I’m not surprised because it was reported a couple weeks ago in the Milwaukee Journal-Sentinel that Erik Buell didn’t renew his employment contract with the motor company and there were a number of rumors circulating as to what that might mean.  I want to personally thank Erick Buell and the Buell employees.  I believe what they did on a daily basis at work had a positive impact.  They should be proud of what they accomplished.  They are an American innovation poster-child and represent what passionate and inspired people can do through engineering and manufacturing some of the best-handling bikes in the world.  But, in biker speak… it’s WTF?  An American designed and manufactured motorcycle that out performed Asian manufactures all year in the AMA Pro Roadracing circuit and Mr. Wandell dumps it?  This is forward thinking?  2009 marked the first year H-D had a non-motorcycle enthusiast running the company and I have to ask if he really got out there to see what all that (Harley) race stuff was about and how it enhanced the brand?

Since I was rather harsh in a blog post last year about the $108 million MV Agusta deal and describing it as a train wreck, I agree with the decision to abandon it.  Sure this happened under ex-CEO James Ziemer shift who retired shortly after cutting the deal, but the board members clearly approved Mr. Ziemer’s compensation package who walked away with only $5.6M compensation, up 26.5% from 2007.   And in part the compensation was based on the boards admiration of the MV Agusta deal, right?  The board members should be put on notice as there are now another 180 employees set to hit unemployment due to the management of the company and we all know they had line of sight just 12 months ago to the economic issues.

The shocker in the financial call was the statement of investing more in emerging markets up to and including local market design and manufacturing!  Is this a precursor to moving manufacturing off-shore?  A lot of talk about taking Hogs to China and India, but nothing about how well the strategy has worked to woo women, African-Americans and Latinos.  The value of the brand was weaved into the growth strategy, but nothing about why it dropped 43% in 2009.  They’ve talked for two quarters about reducing inventory yet made little progress.  And loans made to iffy borrowers aren’t just taking down housing.

The push by H-D corporate for dealers to build increasingly larger and high-end-glamorous retail outlets meant more dealer debt and subsequent failures.   Chapter 11’s continue to stack up across the northwest.  Three locations of Shumate H-D with one in Kennewick (owner hub), another in Spokane and a satellite location in Lewiston, ID.  I blogged earlier this week about Dave Tuomisto’s, $16M and 6-acre mega-expansion at Timpanogo, UT which went under.  It’s not clear when or if any of these dealers will reemerge and the real downside will be H.O.G. groups folding, lengthy drives for service or to hang and drop in which overall effects customer service and having a healthy Harley community.

Harley is in major trouble.  The spin, baby, spin from Mr. Wandell is not good enough, my friend.

Photo courtesy of H-D.  Financial call transcript courtesy of SeekingAlpha.  Disclosure: I have no investment in HDI

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GM, Rick Story and Owner, Dave Tuomisto

It’s starting to look a lot like a “job-less recovery”… and the R-word continues to take a toll as bankruptcy filings nationally surged past the 1 million mark during the first nine months of 2009.  Many states have similar statistics, but in Utah the U.S. Bankruptcy Court received 10,706 bankruptcy petitions in the first nine months of this year — a 62% increase from the same time last year.

And speaking of Utah, the owner of Timpanogos Harley-Davidson (Dave Tuomisto) filed for Chapter 11 bankruptcy protection last month to help stall an acrimonious legal battle over millions of dollars in alleged unpaid debts to several lenders.  I previously blogged on the July 2008 opening of the mega-dealership HERE and it’s unique history after a $16 million renovation complete with green building awards.

The 6-acre complex and building was resort-like and often written about in a very positive profile that focused on Harley-Davidson’s growth strategy, branding efforts, and future opportunities.  Overall, it was a great story and a source of pride as a memorial to the Geneva Steel power plant.  For the city it was a way to talk up the merits of building green and reusing historical icons.  It was like a mini-museum and it’s very unfortunate to witness its rapid fall – again.

As the economy continued to falter, the overextended Mr. Tuomisto structured an agreement with Nu Skin founder Blake Roney (Tupelo Investments LLC) to transfer the dealership to them after getting bailout assistance to keep the dealership’s assets from being seized and shut down by Harley-Davidson Credit Corp.  Tupelo Investments LLC owns the 60,000 square-foot building and the motorcycle-themed restaurant called Marley’s. In bankruptcy court filings the list of creditors include: Harley Davidson Credit, which is owed $4.3 million; Monarch Recreation Sales is owed $760,922; Scrub Oaks is owed $400,000; the Utah State Tax Commission is owed $151,363; and millions more owed to hundreds of other businesses and individuals.

But wait, there’s more… quick to smell a deal, Joe Timmons (Owner of H-D Salt Lake, South Salt Lake) is trying to buy the building which housed Timpanogos H-D.  Likely for pennies on the dollar.

Photo courtesy of H-D.

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With the ink barely dry on the new logo Buell, a subsidiary of Milwaukee-based Harley-Davidson Inc., is recalling about 400 units of its 2009 XB12Ss for a front brake line that may contact the front tire.

Obviously contact with the front tire could cause a hole to develop in the front brake line and allow fluid to leak.  The condition would lead to an ineffective front brake and potentially a crash.  Dealers are being asked to inspect the front brake line. If the line is undamaged, a guide will be installed. If the line is damaged, it will be replaced and re-routed.  The NHTSA Campaign Number is: 09V347000 and owners can contact Buell at 1-414-343-8400 if they have questions.

In other Buell news the company plans to shut down its East Troy plant during November and December, resulting in the temporary layoff of 50 employees.  According to a notice filed with the Wisconsin Department of Workforce Development, Buell will pay eight days of holiday pay for the remainder of 2009 and will continue medical benefits during the shutdown. Buell’s last day of production will be Oct. 30th and workers are expected to return to their jobs on Jan. 4, 2010.

The Buell shutdown coincides with Harley-Davidson’s previously announced halt of production at its Wauwatosa plant and other factories for 14 weeks, including the entire fourth quarter, to realign production with the reduced demand for motorcycles.

Photo courtesy of Buell.

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I recently went to the Honda showroom and took the Honda City out for a test drive.

Navajo, or Dine -they call themselves, is the largest tribe of North American Indians.  They used sheep for its wool to make clothes, blankets, and rugs.  They also used the sheep for food.  They traveled by horse back on long distances to trade.  Then Navajo began making items to trade in towns.  There were also trading posts built on reservations to sell their handmade crafts, such as pottery and blankets which continues to this day.

But, I’m talking about the Indian Motorcycle “trading post”.

The “trading” started with the “It Pays to Ride” promotion where you could purchase a 2009 Indian motorcycle and the company would pay the first 6 months of your payments up to $500/month. Basically it’s a $3000 discount (at the $500/month maximum) off the purchase of a new Indian motorcycle.  Now they’ve taken a page from the “Cash-for-Clunker” (C4C) program and in the process Indian out markets Harley-Davidson!  Bring in any motorcycle** and get $3000 trade on the 2009 Indian Chief model.  **The trade in must be street legal, 100 cc or larger and in running and ride able condition.  No mopeds, scooters or dirt bikes and must have a clear title.

The good news here is that taxpayer money will NOT be used to enable the dealers to offer discounts off sticker prices to extract higher profit margins.  I think this is smart marketing on Indian’s part and will likely boost the number of consumers visiting Indian motorcycle dealers.  I’m very doubtful that consumers will buy comparable quantities to the automotive program, but some new motorcycles will be sold to consumers who thought they had a motorcycle clunker to trade in.

Photo courtesy of Indian Motorcycle.

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Once upon a time, a century or so ago, there was actually a shortage of information.  In small towns, people would even interrogate strangers passing through just to find out what was going on in the world.  Those days are long gone and today we have the reverse problem.  There is too much information.

Which brings up Mr. Bogdan Bucurescu, managing director of Harley-Davidson Bucharest, who put out a press release announcing the dealer sold sixteen (16) motorcycles year to date!  Is this what it’s come too?  Motorcycle sales so pitiful that you need to tell the world you’ve garnered a 20% market segment share in a market which dropped 75% — and then explain it as a good result!  Talk about spin.  In 2008, Automotive Trading Services (ATS), the importer of H-D and Buell motorcycles announced that Romania sold 80 motorcycles.  Clearly sales are off this year and using a press release to show “upside” is nothing but a distraction from the bigger picture.

This trend reminds me of a parallel in the music industry where we’ve got aging superstars, overcharging to fewer and fewer people.  And at the other end of the spectrum we’ve got the Top Forty wonders, making ever more boring records for a shrinking market.  At the current Bucharest dealer sales pace will it be long before we read a press release stating 100% market segment share from ZERO sales?   There must be some new type of business model in Romania which enables a dealer to make money with NO sales?!

Back to sixteen… Huh?  A city with 1.9 million people!  Doesn’t that seem low?  Just four months ago the sales manager, Marcel Chiva made projections of selling one motorcycle a week with plans to remain in the top 3 motorcycle manufactures in the above 650cc segment.

With little effort it’s easy to learn that Romania, a communist country until 1989, has the 7th largest population (with 21.5 million people) among the European Union (EU) member states.  Its capital and largest city is Bucharest, the 6th largest city in the EU.  Bucharest is also the center of the Romanian economy, accounting for around 14% of the country’s GDP and about one-quarter of its industrial production. Almost one third of national taxes is paid by Bucharest’s citizens and companies.  Add this to the fact that Romania has a large, upper-middle-income economy, the 15th largest in Europe based on purchasing power parity and the center of Romanian media (read advertising), since it is the headquarters of all the national television networks as well as national newspapers and radio stations… it seems the country’s economic growth is out of sync with motorcycle consumption and no matter how many times I punch in the data on my trusty Tandy desk calculator, it just doesn’t add up.

Despite my bit of Romania/Bucharest boosterism, H-D’s use of fringe markets to project trivial news is a distraction and contributes to information overload.  And yes I’m guilty of finding unusual angles on stories that everyone else is missing.

Photo courtesy of H-D.

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Siemens & OCC Smart Chopper

Imagine for a moment an old chopper guy who has a bike totally torn apart.. totally… split cases, gears out of the tranny etc., and is rebuilding the Linkert carb with new gaskets, running new cables and the lot trying to rebuild the bike while making ends meet with the food and electric bills.

Speaking of electric bills, now imagine a highly customized motorcycle that makes only a “whirly” noise when running, but has the ability to scan the rider and identify if there are certain thoughts taking place within the brain, logs the riders intentions before they become actions and informs law enforcement!  Not in my life you say?   Think again.

Siemens (the German engineering company) is a mega-giant in the field of industrial-equipment which few people know about.  They have a deep portfolio of technology as well as significant background in magnetic resonance and MRI medical devices to perform brain scans. It’s well known that researchers have placed volunteers in MRI machines and asked them to decide something while pushing on two different buttons.  Meanwhile in another room scientists are looking at scans of the brain and using the MRI data to figure out what the volunteer intends to do before it is done!  Still a skeptic, then do a “Google” on Bernstein Center for Computational Neuroscience or look up Dr. Paul Wolpe’s work at the University of Pennsylvania.

MRI Brain Scan

It’s called predictive behavior and wouldn’t you know the sleeveless dudes at Orange County Choppers (OCC) worked with Siemens to develop that highly customized “ecobike”… an electric motorcycle that has zero emissions.  OCC used recycled materials, water-based paint and lots of Siemens’s electric motor technology, LED lights, and high-tech 12-volt batteries. The bike is estimated to go 60 miles before it needs to be plugged in for a charge and can reach speeds of 100MPH.  And while on the subject of ‘intentions’… it’s smart-grid ready and has the ability to tell the motorcyclist when electricity is cheapest.  Siemens calls the bike the “Smart Chopper” and plans to show off their technical prowess at energy/industrial trade shows and conferences over the next year.

Props to Siemens and the Teutul’s!  I previously blogged on a desire to see Harley-Davidson experiment with and showcase their engineering prowess re; electric motorcycles, but clearly they are not listening to my idea of an American motorcycle manufacture investing in this future technology.  I also provided information on the Zero and the Ashland, OR-based company, Brammo, who announced it was selling an electric motorcycle with an estimated 378 miles per gallon and cost $11,995.

Don’t get me wrong, the OCC/Siemens electric chopper is cool enough, but it looks like an industrial-sized MRI machine between your legs! And, what if I’m correct about those “scans?”  Siemens made special arrangements to have a lot of its products used in the bike and what if that “whirly” sound is determining your intentions – reading your mind – as you throttle on the built in wi-fi relays predictive information to some authority?  Maybe my prediction is off a year or two?  But, at minimum this complicated electronic chopper should provide practical applications such as an understanding of subjective thought and help people change radio channels!

Clearly the technology is moving at a pace which gives any ethicists something to think about.  If you ride the “Smart Chopper” and are accused of a crime please contact me for a complimentary consultation.  I’m not an attorney, but I will blog for your best interests and try to help ensure that you are not wrongly punished for thinking!

Photo courtesy of OCC and Siemens.

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SOA FXD Dyna Superglide

I was flipping TV channels last night and landed on FX during a commercial.

Nothing so special about that… WAIT… they’re advertising a Sons of Anarchy custom Harley-Davidson FXD Dyna Superglide motorcycle with a Custom Reaper paint job!

THAT… idea seems very familiar.  Sure enough, I blogged last year about how H-D marketing ought to consider developing a SAMCRO Limited Edition motorcycle and now they are doing it.

I don’t know if Eagle’s Nest Harley-Davidson (13900 Harlan Road, Lathrop, CA) saw the post and acted on my idea, but they indeed developed a promotional giveaway campaign with the SOA producers and created a unique branding tie in to the television show.  In my view, that’s creative marketing!  Or rather its good strategic co-branding/partnering with the right ingredients that make sense for the manufacturer and producer.   Kudo’s H-D!

Before you haters get tripped up on this idea and launch a barrage of poser comments…  Let’s maintain perspective here as the “Reaper” bike is like co-branding NASCAR merchandise.  It’s an “ingredient brand” motorcycle that will appeal to enthusiasts who like and/or identify with the show.  Think about the Indianapolis 500 and the Indy 500 themed or co-branded pace cars with GM.  Just because you wear a race t-shirt and drive a 1989 Pontiac Trans-Am Pace Car does not make you an Indy 500 race car driver!

I’m sure anyone who rides the “Reaper Bike” knows who they are and what they are about and wouldn’t pass themselves off as a club affiliated biker.

Photo courtesy of SOA web site.

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HURRY– OUR HONDA CLEARANCE ENDS SEPTEMBER 8, 2009! VISIT KLEIN HONDA TODAY!

It is Honda Clearance time at Klein Honda and this summer we are offering our customers a tremendous reductions on all our best models including the Honda Accord, Pilot, & Odyssey on!

Even in these tough economic times, Klein Honda has continued to register great success – all due to our loyal customers’ continuous support. Our mega summer clearance has something for everyone, where you are sure to find the vehicle that best fits your style and at unbelievably low prices.

Make sure that you get the best pick of your choice of car, because with pricing that low our inventories will go fast. So HURRY, get a move on and come on down NOW before all the 2009 models disappear from our inventory!

In addition to the manufacturer’s clearance specials, we are also offering across the board large discounts on all models in our inventory. You can pick your choice from an Accord, Civic, Fit, Ridgeline, Odyssey, Pilot, Hybrids, Element or more.

Don’t miss out on this super opportunity! Visit our dealerships TODAY! We serve Seattle and the surrounding areas of Everett, Lynnwood, Bellevue Edmunds and Kirkland in Washington!

Call: 1-800-343-4324

Visit: www.kleinhonda.com

Klein Honda
10611 Evergreen Way South
Everett, Washington

I called it – sort of!  I questioned Harley-Davidson’s marketing tactics HERE and HERE in rolling out a guaranteed trade-in value program on its Sportster model.

I disagreed because I just didn’t see the value prop or customer pull this program offered in these difficult economic times.   Especially when you compare it to other “protection” programs (Hyundai) which garnered the public’s attention span and given the massive layoffs across the country.  I did miss the uptick of non-buying people the program brought into the dealer, however.  But, the end result is that people are not going to go for a less-expensive Harley-Davidson model just because it has a guaranteed trade-in value when what they really want to ride is a Street Glide, FatBoy or Trike.  Buy a Sportster because it’s cheaper, ride it for a year and then trade-up, huh?  There were NO provisions for incremental custom modifications or enhancements and I don’t know about you, but I rarely see a bone stock Harley.  This was innovation at it’s worse — a re-do of an ‘80s program and then 6 months after the initial roll-out the marketing department rereleased it again with date changes… sort of a Hollywood sequel mentality… Sportster: Part Deux!

Sure I’m being a bit harsh, but it wasn’t a big surprised to read in The Business Journal that Keith Wandell, President and CEO, “threw marketing under the bus”… saying the company mistakenly thought the recession would push consumers toward Harley’s Sportster and other less expensive motorcycles. It also turns out that Harley management stepped up the Sportster production line even though retail sales didn’t materialize.  Now dealers have a glut and plant slow downs are the theme of the day.

Motorcycle enthusiasts will rarely purchase a model they don’t want just because of a discount.  Would it have made a difference had Mr. Wandell come to the CEO position with leathers and at least one motorcycle in his garage prior to re-approving the Sportster program?  I suspect yes, but we’ll never know.  At any rate, this is a fairly significant miscalculation and the pool of talent seems to be limited to people who are used to thinking alike and are doing things the same way.  It’s time to shake things up and catch people’s attention.  My suggestion is to make the Harley buying experience less like going to the DMV and more like going to the Apple “Genius Bar!”

Photo courtesy H-D and Flickr.

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Harley-Davidson announced the recall of 1,759 CVO Road Glides (FLTRSE3) equipped with the Blade rear wheel accessory kits.

The problem is some of the wheels underwent a secondary heat treatment process which may have caused a crack in the wheel and may result in wheel failure.  Wheel failure is very serious and could result in injury or death of the rider.

The NHTSA Campaign Number is: 09V267000 and the recall was expected to start on or before July 20th.  Dealers are being ask to remove the real wheel and inspect the manufactures code.  Any wheel that underwent a secondary heat treatment process are to be replaced free of charge.  Wheels that do not have the suspect code will be reinstalled.

Owners can contact their local dealer or H-D directly at: 414.343.4056  or the NHTSA.

Photo courtesy of H-D and Kevin Wong.

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Hwy 97 near Shaniko, OR

Like most riders, I’ve tried on every type of jacket I could get my hands on over the years. Deciding what to wear is a combination of the riders personality, fashion, who they ride with and for some it’s also about motorcycle safety.

My primary riding jacket is a Harley-Davidson “Rocker” classic with a fold back-collar, a snap-removable thermal insulation lining along with an assortment of pockets and zippered sleeves.  The style was made famous before my time in the “Brando” days of The Wild One, and more currently with the Ramones who played a lot of clubs.  That H-D Rocker jacket is one of the best I’ve ever owned.  It is exceptionally comfortable and has endured more than a decade of serious road use proving to be most reliable.

FXRG Perforated Leather Jacket - Front

Harley-Davidson is known for quality bike clothing and recently I had an opportunity (thanks Laura!) to evaluate one of their new FXRG® Perforated Leather Jackets.  I’ve been thinking about a lighter weight (2-season) riding jacket and I thought how timely!   Historically I’ve shied away from the Motocross or Motorad style jackets which are popular in sport bike circles, but now I would have a chance to try one out.  When it comes to motorcycle garments I’ve defaulted toward the old-school functional vs. new technology.  That isn’t to say I’m so arrogant as to think there is nothing over leather or there are no other reputable manufactures who can build quality jackets.   There are many options, but for me it’s difficult to find an “off the rack” quality leather garment which can accommodate both a fit that’s right for riding and walking around vendor booths on a cool autumn day.

FXRG Perforated Leather Jacket - Back

The Marketing Stats: the FXRG® Perforated Leather Jacket is designed to enhance comfort and rider performance. It has a heat and sunlight deflecting diamond plate pattern that supposedly deflects up to 80% of sunlight allowing the rider to stay cooler longer. The jacket has a reinforced Cordura® mesh backing for additional durability and abrasion resistance.  It also includes a fixed CoolMax® lining and a removable, windproof liner that features Gore-Tex® Windstopper® technology.  It also has removable, CE-approved lightweight body armor at the elbows, shoulders, and back. The jacket has a Mandarin collar, YKK® Finguard® front zipper with a newly designed zipper pull and a removable kidney belt. It has pre-curved sleeves with zipper cuffs, two zipper hand-warmer pockets and an assortment of interior pockets.  For added safety there is the 3M™ Scotchlite™ Reflective Material piping and the jacket comes with a 5-year warranty.

FXRG - Mandarin Collar

My Initial Reaction: FXRG® stands for “Functional Riding Gear” and the jacket certainly fulfills that promise.  The logo branding is understated by design which likely broadens the appeal beyond H-D loyalists.  My reaction in removing it from the shipping box was the weight — its heavier than I anticipated for a summer jacket, but once I removed a couple of optional items it was less of an issue.  The jacket has a semi-tailored fit.  It’s not tight, but not baggy or does it have a restrictive feel.  I was impressed by the quality of the leather as it is softer than my Rocker.  The jacket comes with a combination of linings designed to be windproof and to stabilize temperatures across a range of riding conditions.  According to H-D the lining has “membranes” or pores which open as the level of body moisture rises.  The wicking properties of the lining help keep the body cool in the summer months and during cold weather the membrane condenses to retain the heat.  The northwest has been under a heat advisory for several days and “comfort” is relative when the temperature is in the 90’s!  It was a bit of a mental challenge to put on a jacket being a t-shirt and vest person.  I can say that my pools of sweat were kept to a minimum after reaching 35-40 mph.  The large perforated panels or mesh design allowed the air to freely flow through the jacket and cool me down.

FXRG - Understated Branding

In addition I found the jacket packed with cool and useful features. The Kidney Belt provided additional back support and I liked that it could be easily removed.  The interior pocket system included two zipper pockets, a cargo pocket, Velcro-closure cell-phone pocket, and my fav was the eyewear pocket with lens wipe.  Sweet!  My iPhone was a snug fit with the rubber protective cover, and the Velcro-closure headphone cable “routing tab” was a nice touch.   An indicator of the attention to detail that was taken in the design of the jacket.  The Mandarin collar may take time getting use too.  It is short and does not fold over.  When riding with the jacket partially unzipped, the collar (does have a soft lining) had a tendency to rub or interfere with the bottom of my helmet or chin strap.  Not a deal breaker, but it was noticeable compared to a collar style jacket.  I’m planning to wear this jacket during an upcoming Canadian Rockies trip and will have a chance to evaluate it across a broader spectrum of weather conditions.  I’ll update the post with findings later in August.

As a crusty cynic I was impressed with the comfort and functionality of this jacket.  Before you conclude that I’ve been somehow anesthetized by H-D Kool-Aid, I suggest you take the time and ride down to your local dealer and try one on for yourself.  I think you’ll be pleasantly surprised.

More jacket information HERE.  Product Code: 98521-09VM — MSRP: $625-$645 depending on size — Typical internet pricing: $499.95

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The eastern slope of the Sierra Nevada mountains offer motorcycle enthusiasts an interesting blend of motorcycle rides and some of the best scenery in the west.

Unfortunately, Northwestern Nevada is also the location of Harley-Davidson Financial Services (HDFS) who took quick action after the parent company, Harley-Davidson, posted disappointing Q2’09 financial results.   More than 100 employees were laid off of which many came from the facility in Carson City, NV.

HDFS provides financing for H-D dealers to buy inventory for their showrooms as well as loans for customers who are buying motorcycles.  The Carson City facility is co-located on the Western Nevada College campus and one of the largest HDFS facilities.  H-D negotiated a $750K tax break with the Nevada Commission on Economic Development and opened the new 100,000 sq-foot-office in 2005.  Laurie Cole (Director of HDFS Communications) stated that HDFS has 770 employees with the largest number based in Carson City and there were now ~300 employees remaining at the Arrowhead Drive office.

The economic changes have been dramatic and it’s a difficult time for the folks who have made this beautiful area their home.  The process of making H-D leaner and more efficient is filled with painful actions effecting really good people.  H-D is a good company that will continue to deliver great products. It may not feel like it today, but motorcycling enthusiasts around the world are counting on you to bring us the products we want and need in the future.

Photo courtesy of H-D and WNC.

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It’s economics.  You can’t recycle when it costs more to use the existing product than to use the raw material.  You can try, but the economics will likely run you out of business.

And speaking of recycle costs, the H-D marketing folks who are never bashful to re-hash an idea, decided to change the dates and re-roll the Sportster guarantee or “Ride Free” program.  First announced back in January my thoughts on the program were posted HERE.  Dealers reported the initial program provided an uptick in showroom traffic and many requested that H-D corporate create more similar programs which would help drive traffic to the dealer.  Rather than innovate It seems the H-D organization creates ideas via committee because that is not my concept of a “Bold Idea” … to push out program dates through August 31st and if you buy one of the qualifying 2009 Sportster models you’ll get what you paid for it when you trade-in or buy-up to a big-Twin on a Dyna, Softail, VRSC or Touring model is…

“Did that voice inside you say I’ve heard it all before…  it’s like déjà vu all over again.” – John Fogerty

I have a simple suggestion to help the marketing folks solve this classic “need some creative ideas” problem:

1. Locate your PC and bring up a browser
2. Navigate to the Google
3. Select a word, any word at random
4. Remember the word you selected at random?  Now enter/type the word in the blank field
5. Click the “I’m feeling lucky” button

Like magic it will take you to a web site strongly associated with that word and amazing things might inspire.  I know it sounds like I’m taking a cheap shot at the savvy marketing dudes and I can certainly understand a business’s desire to avoid additional expenditures in these trying times.  But, is this truly THE best sales promotion idea out there?

Another ad-hoc suggestion is to ping the Facebook group or independent bloggers and have them share ideas or comments on the best way to spark people’s interest.  Sure it’s subjective opinion, but who knows what ideas it may inspire.  Let me know how it works.

Photo courtesy of Flickr.  Motorcycles recycled into chairs/table in Sass Fee Switzerland.

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Not to buzz kill the summer riding season, but the current recession is the longest we’ve seen in the post-war period. 

Inclusive of the current downturn, there have been 11 recessions since WWII.  Having officially started in December 2007, this month marks the 19th month of the current “slump.”

As you would expect, cut-backs in consumer spending are visible throughout the economy (see below chart) and Harley-Davidson has felt the weight of the “great recession” too.  The company released its Q2’09 results today and worldwide retail unit sales of new H-D motorcycles were down 30.1% compared to the year-ago quarter. Retail new H-D motorcycle sales in the U.S. were down 35.1% and declined 18.2% in international markets compared to last year’s Q2.  On a “positive” note the company’s earnings were $19.9M on $1.15B revenue and industry-wide retail sales of heavyweight motorcycles in the U.S. declined 48.1% for the same period indicating that H-D performed better than its competition.

In his first quarterly report to the investment community as the new President and CEO Keith Wandell stated:

“While the underlying fundamentals of the Harley-Davidson brand remain strong and our dealers’ retail motorcycle sales declined less than our competitors, it is obviously a very tough environment for us right now, given the continued weak consumer spending in the overall economy for discretionary purchases.”  Wendell went on to say: “We plan to ship fewer Harley-Davidson motorcycles worldwide this year than we anticipate dealers will sell at retail,” which is meant to protect the brand.

Due to the declines in retail motorcycle sales, the Company has lowered its 2009 shipment expectations by 25-30%.  Because of the lowered shipment volume, H-D announced further headcount reductions of approximately 700 positions in the hourly production workforce and 300 positions in non-production, primarily salaried headcount, including some at HDFS. This is in addition to the previously announced reduction of ~1200 positions bringing the total reduction to approximately 2,200.  H-D started the year with 10,100 employees and of course H-D shares rise on news of the additional layoffs.

Looking forward, the company will introduce its 2010 models on July 25th at its Summer Dealer Meeting in Denver.  I wonder if it’s time again for import duties or a Motorcycle Czar?  For now let’s just hope for a great lineup of motorcycles that will create some riding buzz and motorcycle passion!

Photo and chart courtesy CEA.

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Today is the Million Mile Monday ride.

H.O.G. members around the world ride together for the purpose of logging 5 million miles in a 24 hour period.

Why?  Because they can!!

So, to support the ride call I took some extra time today and rode beyond any normal commute to work.  The weather at lunch was a perfect clear-blue-sky,  in the mid 70’s with a light on-shore breeze from the pacific ocean.  It doesn’t get any better than this…unless it’s a day off and work issues are a distant memory.  And I sure thought about a sick day…

I think the reality of the second anniversary of the Million Mile Monday will be how many miles beyond the 5M target will H.O.G. members go?  I registered my 57 miles and got the certificate.

Photo courtesy of H-D/H.O.G

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My how things change.

A year ago with gas prices jacked to the $4.00 a gallon level scooter sales exploded.  Especially the 51 cc-to-155cc category as it was a break out year.  Dealers over ordered and now inventories are high.  2009 predictions seem to indicated the scooter party is over.

And speaking of party over… That “hissing sound” from UBS analyst, Robin M. Farley was the air deflating the motorcycle maker’s tires… i.e. earnings and stock price when she stated that Harley-Davidson’s spring sales have hit a wall.  Sales plummeted 35% in April/May compared to a year ago in this critical time of the year.  UBS isn’t without its own set of issues though.  Late last year Sr. Executive Raoul Weil, head of wealth management division was indicted for helping 20,000 clients conceal assets and avoid paying taxes so, one has to keep a wary eye on these so-called banking/finance veterans!

I’m sure the skillful press and public relation folks at H-D are digesting all of this and taking some of Robert S. McNamara (Secretary of Defense during Vietnam War) advice… “Never answer the question they ask; only answer the question you want to talk about.” It’s the language of sales and selling on message.  It feels like we’ve been mugged and drugged by marketing to the point we should question any manufactures trustworthiness.  But, that’s me.

Adding insult to injury, Harley along with other motorcycle manufactures can’t catch a break by the feds and were excluded from the ‘Cash for Clunkers’ bill.  The bill looks to favor owners of pickups and SUVs…just what Detroit needs to unload those overstuffed lots.  Of course the new vehicle needs to be more fuel-efficient (2 MPG) than their old guzzler to receive the $3500 credit/coupon and if you can find something that is 5 MPG higher you’ll get $4500 credit.

Now about McNamara…

Photo courtesy Wikispaces.  Full Disclosure: Editor has no investment in H-D stock.

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Carl (CJ) Hanlon

I’m talking motorcycles not the sought-out customizers that make – “grills” – you know it as mouth bling or Rapper Grillz…i.e. gold teeth!   Sometimes referred to as plates, shines or caps that glitter with diamonds on a person’s upper teeth.

But I’ve digressed… a couple weeks ago I posted an article about Hispanic Trends at H-D and received several comments.  One in particular which was well written and concise came from Carl (CJ) Hanlon of Orlando, FL-based Guilty Customs.  I made a mental note to do more research when I had time on the company and the person behind the custom choppers.

Previously an ex-banker and marketing exec at Disney, CJ spends time these days building affordable custom bikes .  I like their work which is artistic yet not overdone and functional everywhere you look.  CJ doesn’t describe himself as a “master builder” or does he make comparisons with the industry icons, but claims to be just a “Joe builder” with a lot of passion for the industry, a skillful team and a ‘dab’ of talent.

Similar to how music sounds different in everyone’s ears, I’m of the viewpoint that bike style – design, colors and proportions – the overall looks — is a personal matter and is what influenced the custom scene in the first place.  I’m not a fan of $100K+ “theme” bikes from OCC that the corporate world can’t seem to buy enough.  But, good for them as I need something to watch during summer re-runs.  Personally I like old school bobbers that are not overweight or over-hyped, but to each his own.

According to the Motorcycle Industry Council the top 7 commercial bike builders accounted for 91% of all cycles sold in the U.S.  It’s no wonder that today’s custom builders either suffer the fate of a dying breed on one end of the spectrum or go the corporate empire of cookie cutter “choppers” who try and saturate the market on the other end.  Maintaining a profitable middle-ground looks to be a challenge which few seem to achieve.  However, in spite of the economy, Guilty Customs has increased their bike builds.  No assembly line here and the customs are meant to be ridden, not sit in a showroom.

I can only wish for a custom at this point since I’m heavily invested in the Road King, but if and when I make a chopper commit I’ll be considering Guilty Customs.  Keep up the great work CJ.

Photo courtesy of PRWeb and CJ Hanlon.

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