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Wednesday, 18 March 2015

Comment by Editor-in-Chief, Robin Bradley

So long Mr Wandell, and thanks for all the "tough-love"!

The news that 'Motor Company' President and COO Matt Levatich is to step-up to take Harley-Davidson's corporate hot-seat came as no surprise.
The much expected news came just a few days after the company announced its 2014 full-year fiscals. While Keith Wandell (the first 'outsider' to lead Harley-Davidson) will be no doubt be remembered for the impacts of the tough decisions he took soon after arriving at Milwaukee in 2009, he should also be remembered for the nightmare scenario that he helped avoid - a bankrupt Harley-Davidson engaged in a scramble for survival.
At the time he announced the closure of Buell Motorcycles and the re-sale of MV Agusta to its former owners, it has to be remembered that it looked like the world as we knew it was about to be consigned to the dustbin of history.
Regardless of the fact that the giant Indian conglomerate Hero MotorCorp has been able to pick-up a 49 percent stake in Erik Buell's phoenix EBR operation for a mere $25m investment, at the time it was a necessary "tough-love" decision.
Regardless of the fact that Harley bought MV Agusta for around $110m, spent another $100m or so on owning it for less than two years, and unloaded it (reputedly) for $1.00 - at the time it was another necessary "tough-love" decision.
Regardless of the fact that in the years following his declared aim of returning Harley-Davidson's focus to pampering its traditional core customer, the company has instead diversified as never before in demographic and platform terms, the decisions it made at the time were the right ones.
Nobody should be under any illusions - as far as any of us can tell, the choices that Keith Wandell made were selected from a pretty thin menu, and regardless of their specific merits or otherwise they certainly achieved the desired results.
So where does that leave Harley-Davidson today as it eyes the dawn of a new era? One in which "one of its own" (well, mostly "one of its own") is back on the bridge wielding big-ass binoculars?
It is axiomatic in corporate culture that thesis is followed by antithesis - that the new guy can only make his own mark by erasing all trace of the marks left by the last guy - regardless of how righteous they may be.
Will Mr Levitich fall prey to such odious convention? Those who know him say not. Those I know who say they know him tell me that he is ambitious, but rational; he is as much an admirer of the next big thing, the sexy new project as the next guy, but not to the detriment of a plan.

'his legacy is less clear cut than one might imagine'
His madness is method, and one can deduce much about his character by the way he whispered into a recent local Milwaukee area business gathering (something environmental if I recall correctly) on one of the Factory's prototype 'Silent E-Fellows". Somehow one can't quite imagine any of Messrs Teerlink, Bleustein or Wandell pulling such a stunt - well, actually, thinking about it, it is indeed exactly the kind of thing Richard "Change Meister" Teerlink might well have done!
Regardless of the platform, demographic and engineering decisions that now get taken on his watch, Levatich's new front-line will be drawn in a very different landscape to the one he has been accustomed to.
His combatants will now be his investors rather than his competitors, his product will be share-price instead of paint job. In this regard Wandell's legacy is actually less clear cut than it might first appear. They say that timing is everything in such rarefied air and it may well be that Wandell departed the battlefield toting his personal "mission accomplished" banner at just the right time.
Despite the excellent financial results posted by Harley-Davidson at the end of January, the underlying worries about motorcycle volumes, especially domestically, have left the company with a problem.
Its annual results and its annual new model introduction announcements are the two most potent weapons it has beyond share price and dividend with which to enthuse its investor community.
Last year's MY15 announcements in August barely registered on the share price, and the 2014 results have actually resulted in a net decline. Even the subsequent announcement of another big dividend increase to the second highest level the company has ever paid hasn't left as much as a footprint in the sand.
Against this background surely Levatich's worst nightmare must be that after shaking off the shackles of third party ownership in 1981, regardless of whatever the company has in its locker in new model terms, his legacy could well turn out to be loss of that independence.
There is no question that its moribund fiscal position continues to leave it vulnerable to various kinds of hostile take-over attempts.
While there may be white knights in the wings prepared to fight off such attempts (Warren Buffett just bought into the motorcycle industry in Germany with the acquisition of retailer Detlev Louis), the chances are that raiders will be looking for a short-term flip rather than long-term contribution to an American institution.
Whatever it takes, Levatich has got to get Harley's share price moving decisively in the right direction again, and soon. Maybe buying before being bought will be Levatich's answer - after all, thwarted in their attempts to buy Ducati, it was Levatich who was dispatched to Europe to try and make sense of the MV Agusta purchase in the first place, so "he has game".