Report: Harley could have, should have sold Buell

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Buell_1125_Engine.jpgWriting in American Motorcycle Dealer, respected journalist Alan Cathcart reports on growing stockholder unrest following Harley management’s decision to shutter rather than sell Buell. According to Cathcart, Bombardier made two separate offers to Harley after Buell’s closure was announced, but both were declined seemingly for reasons of vanity. Now, HD stockholders have savvied to the fact that declining the offers cost the hemorrhaging doo-rag manufacturer $125 million in shutdown costs and potentially many times more due to negative publicity. Remember, Harley shut Buell without first calculating the costs.
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Bombardier — a Canadian company to which motorcycles are little but a
side-line to massive aircraft and public transport operations — owns
both Can-Am and Rotax. Rotax makes the 72° v-twin that was used in both
the Buell 1125CR and 1125R, Can-Am makes the utterly pointless,
non-leaning Spyder trike that’s also powered by a Rotax V-twin (the 60°
one that was also used in the Aprilia RSV 1000 R). Seeking to protect a
major outlet for Rotax engines, Bombardier initially offered to purchase
the design and manufacturing rights and tooling to produce the two
water-cooled Buell motorcycles. When that offer was refused, Bombardier
then offered to acquire the entire Buell operation. While this would
still have meant the end for the Harley-powered models, Cathcart says it
could have seen Bombardier use Buell’s existing East Troy, WI facility
to produce not only the 1125s, but also that Can-Am Spyder; the bikes
could have been re-badged under the Can-Am brand. The terms of both
offers are unknown, but would have likely covered most, if not all of
that $125 million, especially appealing when you consider Harley
actually had to pay Bombardier a large sum of money to cancel its
10-year contract for the Rotax motors.

So why didn’t Harley take the easy and less costly way out and make the
sale to Bombardier? According to Cathcart, it was the risk of getting
“considerable egg on their corporate faces” if the 1125s had found more
market share simply by being marketed properly and placed in more
appropriate dealerships. That’s not going to sit well with stock holder
calling for blood after larger than expected fourth quarter 2009 losses.

Harley has declined to comment on the potential sale of Buell many, many
times, only saying, “We decided not to sell Buell because it is too
inextricably tied to Harley-Davidson operations. Bottom line, we
thoroughly explored it and decided it was not the option to pursue.” We
thank them for their good humor and patience in putting up with our
constant hassling.

via AMD (page 51)

  • pauljones

    I think we all kind of realized that; getting rid of Buell was foolish, but shuttering it rather than selling it to make money or at the very least not lose quite so much money was an even bigger mistake. It is a decision that I fear Harley-Davidson will come to seriously regret, and sooner rather than later.

    There’s nothing that can be done to change that at this point, though. Why stir this pot all over again just when people were starting to accept it and move on?

  • Nola

    I keep wanting to believe that it was anything but cheap hubris that urged HD’s actions regarding Buell. If this article is indeed factual, it’s tough to think otherwise.

    Many if not most motorcyclists dismiss Harley culture, but we’re talking about a corporation, here. Forget about the dentists in $400 chaps for a second – not selling Buell solely to save face is a terrible decision if in fact it is the case.

  • http://amarokconsultants.com Michael

    Please note that BRP Bombardier Recreational Products Inc. is a separate company from Bombardier International (stock name BBD), maker of transportation systems and aircraft. They split in 2003. It is a common mistake, just like many think that Yamaha Motor Co. and Yamaha Inc (Maker of electronics and instruments) are still together)

    Another side note, Can-Am is a once famous manufacturer of off-road and enduro motorcycles of their own, so assuming the Buell line would have made a lot of sense from a branding standpoint as well.

    Anyway, it is all academic now.

    M

  • Botswana Meat Commission FC

    Why doesn’t Bombardier just start their own motorcycle brand using Rotax engines, buy up Buell’s old factory (or the equipment) and hire Erik Buell to start building new Can-Am bikes for them? Why the need to get Harley’s approval? Are Buell’s chassis designs un-copyable? Even if the designs are patented, don’t they lose patent protection if the company stops operating?

  • generic1776

    Don’t forget the Rotax engines used in the BMW 650 series and the Rotax engines used in the Aprilia RSV series (I can’t remember if they still use a Rotax motor or not)

    • Mitch

      The article mentions the Rotax twin in the RSV-R (Mille 1000). The new RSV4 is an Aprilia/Piaggio developed and made engine. In fact, I think Aprilia’s standing lineup has moved away from any Rotax engines.

  • jake

    think of the jobs i could have saved

  • CafeRacer1200

    As a Buell owner, I was shocked that nobody wanted to step up and buy Buell. Now it seems that BRP did. My second closest Buell dealer is fantastic but 60 miles away. My closest one is 15 miles away, but treats Buell like some sort of weird genital wart. The hypocrisy of Harley wanting to survive by divorcing themselves from AMF but not wanting Buell to survive via Can-Am is not lost on me.

    • Noone1569

      You must live by me then . . lol . .same situation

      It is obvious that this decision has hurt Harley in the real motorcycle world, not the poser harley riders. Press has slammed them, even major press. Sigh. What’s happend has happened, now we can do nothing but support EBR by buying his excellent products.

      • Noone1569

        I too recommend HD/Buell of Bloomington if you are in Indiana. Hey man, shoot me an e-mail sometime noone1569 at gmail.com, lets go buell up!

  • CafeRacer1200

    P.S.
    I forgot to mention, and if this post seems fishy I assure you that it is not. I won’t be offended if it’s deleted.
    If you are a Buell owner and feel like your local dealer sucks, I’ll recommend Harley Davidson/Buell of Bloomington (IN) They will treat you like part of the family.

  • sburns2421

    This is just conjecture, but the IP for the 1125R and 1125CR are most likely owned by Harley and not Erik Buell himself. Therefore BRP/Rotax was a contract manufacturer for H-D and owns nothing in the way of patents or tooling. It is all Harley and they decided to throw Buell away rather than sell it. If another company wanted to use the designs to make new bikes they would need Harley’s blessing, which is unlikely. If Harley were going to sell these designs, it would have already happenned.

    Erik Buell Racing is more or less a tuning company modifying existing Buells made before the closure. You would assume this is with Harley’s tacit approval as it has been reported he currently is under a non-compete for the next year or so.

    After that who knows what happens, maybe EBR continues, maybe Erik Buell goes to work for BRP, maybe he starts a new company himself.

    IMO we will see Can-Am streetbikes within the next few years. It would be perhaps sweet revenge if Buell were involved in that effort and the bikes were a sales success.

  • Speedealer

    What is the status of MV Agusta as far as the “motor co” is concerned?

  • Gary

    If there are any brains left in Harley management, they will find a way to get Erik Buell making bikes again . . . SOON.

    If they have to give the rights away and let him out of his non-compete, that’s what they should do. They could probably get some cash, but if not, it’s still in their best interest to have him making bikes and end the unrest.

    Harley is a brand that sells largely on image and the image of a greedy robber-baron is not in their best interest . . . but that’s how people in the motorcycle community will view them until Erik is back up and running. The sooner that happens, the sooner Harley can get the conversation back on what they are selling rather than what they aren’t.

  • Skipper

    Harley Davidson first and foremost sells it image and lifestyle. Sell someone a Harley and then you have them for life to sell them all the clothes and chrome accessories. I was in a Harley dealership Iowa yesterday. About 25% of the floor space is for motorcycles and the rest is clothes and accessories. It is like selling motorcycles is an afterthought. Buell did not fit this culture. A salesman wants to sell you a Harley and then 3 or 4 thousand dollars worth of performance parts to make the aging Harley motor work a at least a little like the modern bikes. Plus they can then sell you hundreds and hundreds of dollars worth of clothes and chrome parts. Selling a Buell was just that, selling a Buell and the salesmen were not interested in selling Buells. I only stopped at the Harley dealer out of curiosity. I asked the salesman (complete with tattoos and pony tail) how much the XB1200 was that was sitting on the floor. He did not know and he said “we don’t sell many of those.” They also had only 1 V-Rod on the floor and the salesman did not know how much it was either. They had about 5 new ultra’s on the floor. I looked at one of those and the salesmen were falling over themselves trying to sell me one. Buell should have been in separate dealerships and not with the moron Harley dealers. Also, trying to sell a performance “Sport” bike with a lead weight Harley motor in it was not to smart either. Just when Eric gets rid of the antique Harley motor in favor of the Rotax motor Harley dumps the line. Harley Davidson will never change from its outlaw image.

  • Travis

    Its Harley… Since when have they ever made sense? Not the company… but purchasing a Harley over any other bike.

    Like most of their riders who are all clad in Harley gear. Leather chaps and fingerless gloves and no helmet. I’m not even sure its possible to ride a Harley without wearing at least a Harley T-Shirt and matching du rag.

    Buell was about the only thing they had going for them that appealed to the people with common sense. I’m not surprised they turned down offers. Harley is great at marketing (they must be to sell an inferior product and ridiculous prices) but they screwed this up royally.

  • geonerd

    i’m not a proponent of letting market forces rule the system (see subprime mortgage crisis). but it’s only a matter of time before the “invisible hand” ho-slaps companies like Harley for making short-sighted, stay-the-course, screw the american people decisions.

    • BL

      the CRA started the subprime crisis…not the market.

      it would be a silly board meeting indeed at any corporation to sit down and say ‘how can we best screw the american people’

      somehow, i don’t believe this was their exact thought process.

      the average life of a multinational corporation is 40-50 years, Harley’s decisions thus far have doubled the average.

      that being said, from this perspective, it seems the buell thing was a big mistake.

      • geonerd

        that simply isn’t true. the notion that cra caused the meltdown is exactly what wall street wants you to think. nobel economists have shot that theory down time and again.

        lack of regulation of OTC derivatives is widely recognized as one of the prime factors in the shady lending that brought our economy to it’s knees. and we’re all paying for that now.

        harley is like the george w bush of the motorcycle industry. trust fund babies pretending to be cowboys. and the naive masses lapping it up.

        • BL

          if that’s the way you think, there’s no convincing you in the HFL comment section, but i think you’re wrong.

          classic to slip in a bush bash for a punchline, man that never gets old…and to tie in harley, beautiful.

          your mention of the Nobel prize is humorous, leads me to another simile.

          E-bikes are like the Obama of the motorcycle industry with eco-dorks, funded by unemployment benefits, lapping it up like wheat grass juice

          • Tom

            BL, you are free to THINK that geonerd is wrong, but geonerd has the facts to back him up. Use Google, its a most wonderful tool. Just be sure to prune out all the Republican Pravda sites to find some real Truth.

  • Dave

    This just boils my blood! I wondered why the hell H-D didn’t try to sell Buell, and to learn this makes me angry. Watching the video of Erik Buell announce the closure of Buell and basically the end of his dream was absolutely gut wrenching. You could clearly see the pain on his face as he fought back tears. Knowing now that he was probably hopeful of a sale, only to watch H-D turn it down must have been soul destroying. I sincerely wish Erik well and hope he gets back in the bike business, on his terms. The H-D execs who did this should be set on fire.

  • Tom

    I cannot help but read this article, if it is indeed 100% accurate in its reporting, with a great sense of irony. I, and other, have been criticized in a recent thread for our vocal oppostion to Harley, everything it stands for, and for pointing out that its a self-destructive myopic company. There is no t-shirt big enough to hide the fat belly of Harley’s hubris nor doo rag thick enough to cover this, and let’s be charitable, boneheaded economic decision.

    Not everyone who points out the obvious failure of HD do so with glee. Lots of people are now unemployed and many more will be if HD keeps making decisions like this. Its one thing to criticize a company that exalts the worst of America while it is another thing entirely to cheer the unemployment of hard working people.

  • Papasan in AZ

    Good piece of info, but all that said I must give my many thanks to HD for selling me a Buell 1125cr for $7500, and if that says I capitalized an HD stupidity and ignorance, then so be it…

    Papasan in AZ

    P.S. Future of Buell MC’s? Keep your eyes on the horizon, it won’t be long before they are being manufactured again.

  • Corporate Hubris

    It was pointed out in an earlier post that Buell is under a non compete contract with HD for 18 months. And that Bombardier has a readymade dealer network (Seadoo/Skidoo/Can-Am) should he decide to decide to join them to develop a new line of sport bikes.

    Several others speculated that the MoCo killed the line rather than sell it, thinking that Buell might somehow take business from their Sportster line. As hard as that is to believe, that kind of thinking is common in companies with large customer bases.

    I agree that Can-Am will use that Helicon motor in a new line of bikes. I’d like to see them put it in a standard. The torque is supposed to be impressive.

  • travis

    just like the gvmt harley should start over. the managment is obese

  • Nutcase

    Harley is smoking something if they think the Buell line would be taking sales from there Sportster line. The Sportster is a sport bike in name only. It is a outdated poor handling and underpowered bike and anyone who buys one thinking it is a sport bike must be smoking something also. Hell, even the moron pirate dressing Harley crowd thinks the Sportster is a girls bike. An example of Harley stupidity is the “NEW” 48. It is a typical new model Harley. Last years Sportster with a tiny gas tank and big ass tires. The #48 must stand for the horsepower.

  • TL

    I’ll bet the Buell DSB championship pissed off more than a few at HD who, with 10x the budget, screwed the royal pooch with the VR1000 disaster.

    HD = Yesterday’s technology at tomorrow’s prices. No thanks.

  • Tom

    Piss off Harley. How that company’s leadership can sleep at night is well beyond me.

  • PJ

    let me guess…all the teeth gnashers….you supported Buell all along and have had one in your garage for years.

    rolleyes

    • pauljones

      No, I’ve never owned a Buell. I never really even wanted one, honestly. But I liked where Buell was going. Companies like Kawasaki, Suzuki, Yamaha, etc. all spent so much money on advancing the technology of their bikes, and then, out of seemingly nowhere, came Buell with more innovations packed into their bikes than the rest of the industry. And it was done with significantly less R&D money. Erik Buell is a sharp guy, and a great engineer. He simply deserved better.

      And then there is the market perspective to consider, too. Having a foot hold in another market outside of the traditional cruiser market could have been huge for Harley-Davidson, had they put so much as half the level of marketing effort into Buell as they did the H-D brand. Buell had the engineering ingenuity cred, the performance cred, the race cred, and even the good old “Made in the USA” cred. Focusing more R&D and marketing efforts at Buell would have helped Harley-Davidson diversify its market hold, and may possibly have been a great help in weathering the economic storm.

      But, instead, they were happy just to keep in on the back burner. Understand, I’m not hating on Harley-Davidsons bikes, nor their owners. I’m not claiming that I was “maybe thinking about considering buying a Buell one day”. I simply think that shutting down Buell as they did was a result of a poor management decision in my opinion. Sure, there may be more to it that we don’t know. Or maybe not. But based on what we do know, I think it was the wrong decision.

    • geonerd

      no, you’re right. i didn’t support buell all along. i didn’t support any of the XB bikes. and if that’s all he ever built, i’d say good riddance. your eye-rolling would be justified.

      but he finally broke the shackles. but he got my attention with the 1125 – a bike which i have ridden and think is a tremendous achievement, particularly considering the situation.

      i didn’t know he had it in him, and i certainly didn’t expect the 1190rr. now that i know what could have been, i’m pissed.

  • http://cohobot.blogspot.com/ coho

    Sound off, how many of you have ever actually ridden a Sportster or Big Twin? Or do you think they suck and their company(which is older than most motor vehicle companies and many countries)is stupid because your friends and the interwebs told you they do?

    I do not, nor have I ever, owned a Harley-Davidson or a Buell. But I have ridden both and they are what they are and they are good at being that. If you don’t like them – cool, don’t.
    But please just STFU about how this multinational, multibillion dollar company is run by idiots and retards because they don’t make a Harleybusa and six different models of lights & signals track bikes.
    HD financial services was a bad financial decision (no other vehicle company actually loans you the money to purchase their product – their FS arm is a separate company),however, this does not mean that the HD engineering department is also full of drooling greedheads.

    /rant

  • Stump

    coho where in the hell have you been living for the last 50 years? HD does not have an “engineering department.” If they do then they must be “engineering” the latest line of crotchless pants, do-rags, nose picker gloves and clocks because they sure have not done any “engineering” on HD’s ancient line of motorcycles. The last thing they “engineered” was the V-Rod and all that was is a water cooled version of the old v twin. The V-Rod does not sound like a harley so the harley morons will not buy it. HD will never recover there “engineering” cost on the V-Rod. It has been stated before that if you walk into a Harley dealership over 75% of the floor space is for aftermarket products like HD t shirts, hats, nose picker gloves etc. I now believe what everybody has been telling me – that HD is a boutique company that sells an aging line of motorcycles to go with there clothing line.

  • Salad Shooter

    Stump and Co., just stop talking now, please. Clearly you have no idea how much innovation and engineering muscle it takes to make HD’s “ancient, outdated” air-cooled V-twins comply with modern noise and emissions standards. The Motor Company’s Product Development Center (PDC) is one of the most capable and sophisticated engineering facilities in this country. Crack open a Twin Cam B motor some day and inspect the enormously complex counterbalancing system, and appreciate the genius of an engineering solution that completely changes the character of the motor without changing the the engine’s traditional look AT ALL. Consider that the latest primary case design got something stupid like 180 material changes to reduce noise and improve NVH values, again, without changing the traditional look of the motor AT ALL. There is just as much engineering invested into a modern Twin Cam motor as any modern GSX-R. There’s probably more challenges with the Harley, since you can hide a lot of ugly innovation behind plastic fairings, while HD engineers operate under the additional constraint of having to maintain a traditional look as well. To claim that there is no “engineering” present is ignorant.

    +1, BTW, on everyone talking chit about Harleys without ever having ridden one. Same for all the Buell champs who have never ridden one of those, either–not nearly as good as many of you “remember.”

  • Stump

    Harley engineers are spending time and money complying with noise and emissions standards is a lot of BS. I see very few Harley with a muffler on them and every Harley dealer jumps over fences to sell a straight pipe or a loud muffler. 90% of the Harleys on the road have no catalytic converter or muffler. Harley Davidson spent over 4 million dollars on a “sound lab room”. They invite the public into the room to listen to Harley exhaust sounds and then the public votes on which sound they like. That is an example of Harley engineering. Sound is what sells a Harley – not advances in engineering because there are none. The Harley v-twin is an old design and nothing can be done to improve it. Besides the morons that buy a Harley are only buying the sound it makes. They could care less about technology because they only ride them in town to show off there loud exhaust.

  • http://www.thisblueheaven.com Mark D.

    This really makes my blood boil. I’m not an anti-Harley guy, but this sure pushes me in that direction. Buell was the ONLY American sport bike manufacturer. HD shuttered a viable plant, and laid off how-many workers…for vanity’s sake? A motorcycle for me is not a necessity. As such, as a consumer, a bike being “American Made” actually resonates with me, especially when it is manufactured in the US, and designed by an American (Buell). Unlike GMs and Fords (which are perfectly fine cars), which are international corporations, manufacturing in Canada and Mexico, with parts made in China.

    Well, the upshot is, Bombadier’s offer proves that there is a market for North American, “different” sport bikes. Its only a matter of time before its filled, and this time it won’t be dragged down by HD.

  • Tom

    I’ll admit that I never owned a Buell but this is not because I do not want to. I have wanted a Buell Blast for a long time, but I live in an apartment complex in South Florida with no covered, much less secure, parking. I’m not owning a bike left out to the elements of South Florida’s climate and an inability to keep is locked up.

    Had I a garage, then yes – most definitely I would have owned a Buell.

  • http://plugbike.com/ skadamo

    Eric Buell said…

    “They’re [Harley management] talking to the dealers and the dealers are saying, “Nah, racing’s not important.” Maybe if we’d been in dealers with a Honda or Suzuki dealership on the side, they might’ve heard, “Hell yes, you need to be racing!” But there were only a few Harley/Buell dealers who understood the importance of that.”

    http://www.cycleworld.com/article.asp?section_id=3&article_id=2123&page_number=2

    …so yeah, Buell probably could have done better in a multi-brand powersports dealership. This could have happened with Bombardier ownership I assume.

  • http://www.rantlust.com/author/suman Sumanster

    The closure of Buell (and retention of patents) vs. selling the brand (and losing said intellectual property) could have been a stroke of genius on H-D’s part, by quickly raising awareness of the brand and encouraging potential Buell buyers to step up and actually buy one. I’ve liked the Firebolt ever since it was introduced in ’02 and test-rode one a few years ago, but didn’t actually buy one until I got a great deal after the closure announcement (I should add that I’m very happy with my new XB12R). Unfortunately, H-D’s decision to eliminate the factory and employees means that they’ll never capitalize on that bump in interest.

    Between this article and the “Harley shut Buell without first calculating the costs” article linked to in the first paragraph above, I am curious to see how H-D’s business will fare in the future. I wish Erik Buell and EBR the best and am even more curious to see how his and Bombardier’s businesses will fare once Erik’s non-compete clause with H-D expires…

  • TSport

    Interesting thread… I have not read it all but wanted to comment on the non-compete issue. BRP is Canadian… if in fact they hired or used Mr. Buell as a consultant… by Canadian law the non-compete goes against our laws. If he is a builder of motorbikes then he is a builder and no one person, let alone a corporation, can take his livelihood away from him… designing & building motorbikes… hence he would be able to do what he does…. design and build motorbikes, either on his own or with the assistance of a corporation… What he can not do is use what he has learned/developed with H-D… from what I know most of what he has done was done prior to H-D and only became “theirs” when they “forced” him to be bought out… (Big guy against the little guy,,, very very un-American wouldn’t you say…) Thus he could continue developing his brand, especially with BRP, who has the money and development shops, as long as he was in Canada… interesting, eh?

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  • smokey

    The snarky Harley hating and demeaning of people that ride them is interesting. I do like Harleys, there is a history and uniqueness to them that is uncommon in the MC world. I want to state for the record that I don’t have a doo rag, an eye patch or a parrot, the only leather gear I have is a pair of cold weather gloves. I also have a Buell Ulysses XT and a Yamaha dirt bike, they all have their purpose. I do love the Buell even though by some accounts it has an inferior power plant. If I had to give up all but one of my bikes the one I keep would be the Buell hands down.

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  • Donny

    I thought here it is the new harley davidson sportster (BUELL),the lightning long XB12 SS,the fire bolt,and the rest of the line of new sportster buell’s,but then harley davidson killed it,and now they have nothing but bikes you need a tool truck to follow you down the road with.(PS ) I ride, i need a bike i can ride every day not once a year,i need a bike like the lightning long xb12 ss blacked out,and i can have a passenger.( forgive my spelling i em so mad.