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Wednesday 19 September 2018

Comment by Editor-in-Chief, Robin Bradley

No More Shark Bait or Foolishness

It’s funny how, just sometimes, one can be bang-on, indeed prescient, without necessarily realizing just how close to an outcome you actually are.  This column was written, indeed this edition was being sent to press, just as Harley’s dealers were gathering in San Diego, California, to bask (at last) in the reflected glory of an OE that, for once, has given them a meaningful long-term plan.
Like many people (not least Harley’s dealers), I am still mulling the contents and implications, strategic and otherwise, of Harley’s ‘More Roads’ announcements rather than being over-focused on the cosmetic details of whatever changes the company is unveiling for 2019 - although I guess one of them might finally be a production prototype LiveWire?
In the context of recent columns such as ‘Meeting its Fiduciary Obligations’ (July), ‘Bring On The Middleweights’ (June), ‘Management of Decline’ (May), ‘Shark Baits I and II’ and ‘Whose the Fool/More Foolishness’ of earlier this spring and last winter, the ‘More Roads’ package appears to have simultaneously kicked several cans into the long grass - at least through to 2022, I’d have thought.
If CEO Matt Levatich is to leave in that time, it will now be on his terms with a comprehensive, appropriate and viable model range, outreach and dealer plan in place.
If the company is to fall foul of corporate raiders of malign intent, the weapons it now has in its locker should enable it to see off unwelcome advances. Indeed, although Harley quite rightly and sensibly is aiming to be self-funding, should it decide to raise capital, it would now be able to do so on its own terms.
 

‘what, not where it makes’


Harley’s intention to be sustainable in terms of its S&P Dividend performance and other hallmarks of investor return means it should now have secured loyalty and enthusiasm for the future, and make the share buy-backs look a tad saner than they did. It may even have laid the foundation for a stock split at some stage in the next five to ten years. Though the (admittedly remote) chance of the company taking itself back into private ownership again any time soon will now recede - unless Harley seeks out a White Knight to stave off the equally receding risk of a hostile bidder(s).
Above all, the company has built a firewall between it and any continuing long-term decline in its traditional core cruiser market, the inevitable decline in its traditional Boomer customer base, and the brand atrophy that any continued failure to speak to “New Gen” would accelerate.
In giving itself a way ahead it has, quite literally, given future generations of riders a pathway along which to age with the brand (in the way the Boomers and prior generations were able to do), just in time to be a player in the fun to come.
The lightweight and (above all) middleweight battlegrounds will not only see Harley going up against existing competitors who are positioning and, in some cases, already positioned for the war to come (Yamaha, BMW, KTM, Royal Enfield etc), but also against those who are poised to add to what will become a crowded space - Triumph, Norton, BSA, JAWA and, no doubt, other as yet undeclared projects. Who knows, maybe even Ducati might decide to play in the smaller unit space – it has acknowledged a scooter project already.
Harley has also hedged its bets, not only in terms of the future of the wider domestic motorcycle market and the possibility that the E-bike forecasts may at least somewhat play out, but in terms of finally, genuinely, becoming a player on the global stage in a way that it hasn’t been before.
To date, international demand for Harley-Davidsons has been predicated on international enthusiasms for all things American - from memorabilia to culture, from hamburgers to Route 66. In these febrile times, there is no telling what vestiges of that heritage will still be standing when the dust settles, if ever it does, but regardless international consumption of idiosyncratically domestic national iconography a global player does not make.
London’s red buses, black taxi cabs, policemen and guardsman helmets and bear skins are popular the world over, but those do not make the fading star of GB Inc. a global player. They are no more the ingredients that constitute a country or corporation that has solutions for domestic audiences and needs elsewhere any more than slow, heavy, expensive cruisers born of a post war interstate road system that is almost unique in the world.
However, quite apart from producing elsewhere, it is the alternate displacements and platforms that stand to finally see Harley-Davidson emerge, after a mere 115 years, as a genuinely global corporation with bespoke product solutions refined for the specific needs of varying global customer groups. Yet more hurrah!
Where Harley produces its motorcycles is an  entirely economic and price-point issue. Where it makes, is in fact a moot point compared to the tardiness with which it has finally started to address the way more significant and strategic issue of what it makes.
In that context, where it makes its motorcycles takes on an altogether different significance - is open to an altogether different interpretation. If it is okay for BMW, Honda, Yamaha, Toyota and other global corporations to make domestic U.S. product in the country the products are designed and destined for, which of course it is, then it is entirely sensible for Harley to make motorcycles destined for the traffic of Asian cities.
Quite apart from the crippling effect that domestic U.S. labor rates and corporate overheads would have on price-points in India, Thailand, Malaysia, Indonesia and elsewhere (both of which are issues that are way more damaging to international competitiveness than tariffs), competing on the global stage and repatriating profits is at the heart of American capitalism as we have known it, and at the heart of the dividends and yields that drive American pensions, economic and tax-take growth, bond yields and capital generation.
Harley has shown prudence, wisdom, determination, confidence and market smarts, but above all bravery to announce where its “Roads” are going to lead.