Photo: 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.
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
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
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.