If there was ever an American icon on wheels it’s the Harley-Davidson motorcycle. Back in 2003 the company celebrated its 100th anniversary and announced record sales and profits.
A lot has changed since then. Consumers have deserted its premium-priced, heavyweight motorcycles and the company has become a takeover target after a string of layoffs and factory closures. In January, 2010 Harley-Davidson reported its first quarterly loss in 16 years.
But this isn’t the first time that the company has seemed to be on its way out the door. In the early 1980s Harley-Davidson was selling every bike it could make - but at a loss.
Harley Davidson’s Quality was an Issue
Harley had speeded up their production volume to meet challenge posed by Japanese manufacturers, but as output went up quality went down. As a classic example of manufacturing failings, the 1976 model Cafe Racer had so many faults that it cost over $100,000 to get the first 100 bikes ready to ship to dealers.
At one stage in 1981 the company was just one week from bankruptcy, but by 1987 it was back in the black. It took a Harley designer, the now-legendary Willie G., to redefine Harley-Davidson.
Willie G. Saves Harley
William G. Davidson was the grandson of one of the company's founders. He "found himself" with Harley, and established a rapport with customers that enabled him to design a new generation of red-blooded American motorcycles that sold more units and finally generated profits for the company.
Willie G. designed Harleys that broke the mould and opened up untapped markets. As a talented designer he still managed to retain the Harley-Davidson image in all his models, yet his creative abilities came up with features that appealed to new generation of motorcyclists.
Business journalist Peter Reid interviewed Willie G. for his book Well Made in America (McGraw-Hill, 1990). He asked him what he had learned from his interactions with Harley customers that inspired his new designs.
Willie G. explained: "Our customers really know what they want on their bikes...Harley riders see their bikes as art objects and they want them to look a certain way."
Harley formed riders' groups to establish closer bonds with its customers. The company was able to translate the findings from rider groups into product improvements that found their way onto the market in a remarkably short time.
One of their most important findings from mixing with their customers was that Harley riders put a lot of money into customizing their bikes. If Harley-Davidson could build these customized attributes into their factory models they'd get a better price and greater customer satisfaction.
The Company and Products Changed
Harley-Davidson initiated employee involvement in company planning, inventory control, and ways of measuring output per employee. Giving the customers both quality and the products they wanted became corporate goals.
By the late 1980s the showroom of a typical Harley-Davidson dealer had many different models on display, each appealing to a different segment of the motorcycle-buying market, from corporate executives to hard-core bikers.
Willie G’s new models appealed to the customers - not to factory accountants or production planners. That's why they sold. And they kept selling well in the first decade of the 21st Century, until the global financial crisis threw a huge spanner into the works.
Since 2008 the company’s financial difficulties have become more apparent. By mid-2009 worldwide retail sales of Harleys had decreased 30 percent compared to the year before which resulted in a 27 percent decrease in revenues.
Now Harley Davidson is in real trouble. Finance for motorcycles is hard to get, and in times like these it’s pretty difficult to justify the purchase of a pure lifestyle product like a Harley.
Harley’s Uncertain Future
An article on investor blog Stock Wizard aptly summed up the present situation: “Harleys continue to be largely recreational luxury vehicles not typically used as a primary method of transport. The vast majority of customers are essentially middle-aged, middle to upper class males. The average age of a Harley owner is 47 years. The major problem for Harley is that these older riders are not being replaced by a fresh batch of younger riders.”
In 2010 both the company’s CEO and CFO hopped off their hogs and headed for rides on other corporate highways.
Sadly, the value of the Harley brand has suffered badly and stockholders are feeling the pain. This time, there may be no Lazarus-like resurrection of the iconic brand, but loyalists around the world can still hope another Willie G. will emerge and prevent Harley-Davidson from running out of road.
Philip Keeffe - Phil Keeffe is an Australian journalist originally from California who has lived in Sydney since 1968. His communications background ...
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