Harley earnings drop 91% for 2nd quarter 2009

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Harley_Gas_Mask.jpgPhoto: Harley-Davidson Archives

Harley-Davidson’s earnings for the second quarter of 2009 are down 91% compared to the same period last year. Most of this is down to the obvious: with the market already saturated with identikit products and their ability to buy expensive, unnecessary lifestyle accessories with home equity loans vanished, baby boomers are no longer buying Harleys. But, The Motor Company’s terminally ill finance wing is also proving a continuing drag on resources, requiring two “one-time” injections of capital totaling $101.1 million. Despite this, Harley says things aren’t rotten in the state of Wisconsin and has no plans to change its business practices. Well, aside from firing a bunch of hard-working Americans and continuing to pursue the shuttering of its York, PA plant that is.
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Harley’s net income for the quarter was just $19.8 million, down from
$222.8 million during the same period back in the halcyon days of 2008.
The total revenue doesn’t look as bad, with this quarter’s $1.15
billion figure comparing less unfavorably to last year’s $1.57 billion
number.

Due to all this, Harley has announced it’ll be laying off a further
1000 workers on top of the 1,400 to 1,500 job cuts already announced.

So what’s new Harley CEO Keith Wandell have to say about all this?

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.

Remind you of any totally accurate statements made by successful politicians?

But don’t worry, despite appearances, Harley has a plan. A three-part one:

1. “Invest in the brand”
“We plan to ship fewer Harley-Davidson motorcycles worldwide this year…
one of our top priorities is to reduce complexity and improve
efficiency throughout our product development and manufacturing
processes,” said Wandell. While it makes sense to cut production to
keep pace with diminishing demand and efficient production processes
always make sense, this doesn’t really sound like investment, it sounds
like cost cutting. Investing in the brand would be developing new ways
to reach an untapped audience. Maybe people under the age of 40.

2. Close plants
“Harley-Davidson has determined that the Company’s York operations are
not currently competitive or sustainable. The Company has undertaken a
“two path” study to determine whether major, additional restructuring
at York can achieve cost and efficiency targets to make the operations
viable, or alternatively, whether the Company will relocate the York
operations to another U.S. location.” It looks like there will also be
plant consolidations and multi-week halts in production elsewhere in
the country.

3. Get some more cash for Harley-Davidson Finance Services
“Harley-Davidson continues to focus intently on the funding needs of
HDFS and, utilizing a variety of funding paths, has provided liquidity
for expected HDFS lending activities through the end of this year and
into 2010.”  We reported earlier this year that Harley struggled to
raise the $1 billion necessary to keep HDFS afloat through the end of
this year and that it’s paying 15% interest on that $1 billion so that
it can continue to finance the purchase of new motorcycles. It remains
to be seen how much the company will need to keep HDFS afloat through
2010 or how much interest they’ll be paying on that amount.

As you can see, that’s not much of a plan. It does nothing to address
the main issue raised by The New York Times back in March; namely that
the company was banking on Boomers providing a growing market for the
next 15 years. With the current recession putting an immediate halt to
that, Harley has found itself up the proverbial
creek and, if these financial results and this lack of a plan are any
indicator, it still hasn’t found the paddle.

Harley-Davidson

  • geonerd

    200 million in the toilet. Awesome. I wonder if the marketing chimps still think “Screw It” is a good motto for the company.

  • robotribe

    No worries. Patriotism will keep them afloat!

    • pie

      and flags, lots of flags. Flags for shelter, clothing and food, what more could they want? Bailouts?

  • http://twitter.com/greatistheworld will

    Stay the course, boys.

  • http://twitter.com/greatistheworld will

    yaaaaaaaaaaaaaaaaaaaand twist that throttle forward.

  • lago

    Have they found a buyer for MV Agusta yet? Selling off foreign brands seems to be the thing to do these days when your automotive company is struggling financially.

    They could also consider making motorcycles that are available with just the engine block and exterior of the drive train, no gears in the transmission, engine internals, or lubricants. The bikes could be made a couple thousand cheaper, people would load them on trucks to take them home just like they normally do, and instead of firing them up the bike could come with a little speaker that makes Harley sounds when you twist the throttle. 90% of the buyers wouldn’t notice the difference and they wouldn’t have to worry about the nasty overheating problems the twin-cam engines have.

  • aeolus

    They could build them in Mexico to cut costs. Outsource the design shop to the UK and administration to India. Like every other manufacturer. But who would have the money to buy them? Move up market and concentrate on the MV brand. The Hayden autographed Duc 848 sold out over a week end. 150 of ‘em. Forget the boomers. The real money is in the hands of a few plutocrats.They demand cachet for their hard earned money.

  • lago

    aeolus: The only redeeming quality in Harleys is that they’re American made. If they moved production outside the US even their prodigious marketing department would be pressed to find people who want them anymore.

  • webbiker

    They will bounce back, every manufacturer is hurting right now. I recently bought my first Harley (wich I swore I would never do) and it has been the best money I have ever spent.

    The brand is still strong and while the bikes are somewhat technically outdated they still have many many things done right.

  • http://muthalovin.com the_doctor

    Wow, 91%?! That is a serious drop from last year. All the baby boomers, which were predicted to keep Harley afloat, saw that their retirements drain and decided that they could retire without a Harley, or work till they die with one. I know which fate I would choose. “Twist the throttle forward.” FTW!

  • http://www.southernhonda.com filmjr

    //Remind you of any totally accurate statements made by successful politicians?//

    Umm…yeah.

    http://www.usatoday.com/news/washington/2009-03-15-dem-economy_N.htm

    To imply that Harley’s current woes are somehow relative to the right-wingery of their politics is inane.

    Harley has two possibly fatal problems: the economy, and an inability to manufacture their best motorcycles cheaply. In most other respects, they are the definition of brand value: no one that’s bought a Harley in the last ten years got the best bike for the money, but rather they spent a premium on “Harley-ness.”

    That consumer act of self-actualization sits too high on the hierarchy of needs to work when one’s ability to provide food and shelter is threatened.

    • http://hellforleathermagazine.com Grant Ray

      filmjr, the link wasn’t so much an attempt at a correlation between H-D and right-wingery as it was an illustration of an individual’s or corporation’s complete fantasy, disregard and inability to accurately address a possibly fatal situation.

  • http://tonyrides.com Tony

    It’s not 90% of Harley riders that don’t ride their bikes, it’s 90% of all bikers. The first 6 bikes (600cc and up) on craigslist this morning had a cumulative age of 23 years and cumulative mileage of 24K miles. That list includes two Honda CBRs, A Triumph Sprint, a Yamaha R1, and two Harleys. If you take the Harleys out of the mix the cumulative age is 11 years and cumulative mileage is 9K miles. Two years into a 5 year loan (no money down) I’ve put 20K miles on my Harley and it’s already worth $5K over the loan balance. Not many other brands (of any product) can provide that result.

    • aeolus

      What is the rate of interest you pay? Over the life of the loan, what will be the % of your total cost for interest? With no money down that could be substantial.

  • Markus

    Harley will be owned by an Indian company by 2011.
    Indian…Excelsior. Harley, see your fate.

    “We have the right strategy, the right dealers, the right employees and the right attitude and spirit to emerge from the recession stronger than ever”

    Remember, we “can file that obituary where the sun don’t shine.”

    HA freaking Harley.

    (way to go HFL guys, here come the harley codgers and their delusional comments)

  • General Apathy

    Umm guys.. Harley sells a consumer product that would be first on the list of things NOT to buy in a bad economy, BUT they still made a profit. They did not lose money. Hey, I hate the bikes too, but the company itself is quite healthy.. for now.

  • geonerd

    Credit Suisse gave Harley a neutral rating on its stock, but that was before these figures came out. It’s negative, but maybe not as bad as I first thought.

  • generic1776

    “See, everything is working as intended.”

  • peej

    Americans, Americans who are supposed motorcycle enthusiasts, mocking an American motorcycle company’s finacial trials in the middle of this financial implosion. Utterly shameful. Tell me why I should care when you lose your jobs and futures.

    • mototom

      You should care cause I’m a nice guy and my dog likes me and if I lose my job my mum will be very sad…oh, almost forgot, you should also care because I’ll default on my mortgage which is collateraled by a house worth 1/2 of the loan value and I’ll be on the street with nothing but my guns and my very large, very hungry dog.

    • Jordan

      It’s just in the international motorcycle market, I wish America had a different company to represent itself when it comes to the best and the brightest… which I feel isn’t H-D.

      I mean, you look at other niche companies like Ducati and they carry a truly impressive product portfolio along with a huge pride in their nationality.

      Meanwhile, Americans are stuck with a backwards motorcycle company to carry on their country’s colors and its (ex)employees are the ones left to suffer for bad corporate decision making in an ultra competitive market. That’s what makes this fact such a shame.

      H-D, you have potential; don’t squander yourself.

  • webbiker

    I gotta agree with peej on this. I don’t get you guys.

    • http://hellforleathermagazine.com Wes Siler

      So sitting by and saying nothing while an American company drives itself into the ground is somehow patriotic?

      • Stu

        Is capitalism not patriotic? How can I save Harley without buying any of their products?

        • geonerd

          I like to buy things that improve the quality of my life. Porky, overpriced, underengineered cruisers don’t tick that box for me.

          So until HD, GM and Chrysler start making things that meet that requirement they’ll continue to lose my business to foreign companies.

  • aeolus

    H-D rode the wave and made a bundle. Now the ride’s over and it will have to go back to being what it was before, a small manufacturer with a limited customer base. Perhaps they could continue the Easy Rider/Wild One mystique with the younger generation but I doubt it. In any event the economy will need to recover to the level of the last decade, which isn’t in the cards. I visited a H-D dealership in search of a Buell and was met with total indifference. I guess the mark-up isn’t what they were used to. They looked to be selling a lifestyle from the clothes which dominated the establishment. Not a long lasting business plan I expect.

  • http://hellforleathermagazine.com Wes Siler

    Easy, by encouraging them to make the kind of products that you would buy.

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