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Wednesday, 6 February 2019

News Briefs

We here at AMDesign were saddened to hear of the passing of legendary performance engineer Jerry Branch. An AMA Hall of Famer, Branch is perhaps best remembered as one of the most innovative designers and builders of motorcycle racing engines in the second half of the 20th century. John O'Keefe, Branch's business partner for 43 years at Branch & O'Keefe Co., said Branch was still coming to the shop to work regularly until his passing. Involved in the formulation of the original AMA Superbike rules, Branch authored several books about his work with cylinder head air flow - his innovations in engine design and performance were far reaching. He founded the company Branch Flowmetrics, which he sold to Mikuni in the late 1990s.

The world's largest Harley-Davidson dealership group, The Motorcycle Company (the Veracka family), has announced further expansion, acquiring Desert Wind Harley-Davidson in Mesa, Arizona - the fifth dealership acquisition in the past 12 months and 12th Harley store under its ownership currently. TMC is targeting 10,000 Harley retail sales in 2019.

UBS estimate that domestic U.S. H-D retail sales in October and November 2018 were looking like they were “down double-digit percent” - which is worse than expectations and especially concerning as numbers lap the hurricane disruption months in Florida and Texas last year - FL and TX are the 2nd and 3rd largest states for motorcycle retail, accounting for some 11-12% of total U.S. sales. October and November are said to typically be around 72-73% of Harley’s Q4 U.S. retail sales and 11-12% of full year retail. 2018 has been Harley’s fourth consecutive year of U.S. retail sales decline.

Q4 2018 saw Wells Fargo increase its stake in Harley by 5.5%, buying an additional 20,809 shares, taking its holding to 400,010 shares for a 0.24% ownership stake worth $18.1m. The company dropped its price objective on H-D stock from $49 to $46. A number of other hedge funds and other institutional investors also modified its HOG holdings in the final months of 2018 (sell-offs and acquisitions), including Riverhead Capital Management, Aperio Group, Flinton Capital Management, Advisors Asset Management and Neuburgh Advisers. Over 88% of H-D stock is owned by hedge funds and other institutional investors, and as at mid-December the consensus rating on Harley was “Hold” with a target price of $44.38.

Harley is not the only one to see its share price tumble. Polaris Industries (owner of Indian Motorcycle) saw a January 2018 high of $134.87 fall back by -40% to around $80.00 by mid-December. However, at $4.74bn (as at 1-7-19), its Market Cap is now less than $1bn lower than Harley’s, making the H-D CEO’s dismissive boast of some four years ago that Harley is twice the size of Polaris sound a tad hollow now.

San Francisco Bay Area E-bike maker Alta Motors has ceased operations pending endeavors to find fresh investment capital. It would appear the positive press that its silent but serious off-roaders have garnered over the past couple of years has not proven sufficient for them to be able to absorb Harley’s decision to withdraw from the investment deal inked with the company just a few months ago. Harley announced that it is opening its own E-bike R&D center in ‘Silicon Valley’ - it is not known whether that decision was based on problems at Alta or if the problems were triggered by Harley’s decision. Either way, Alta is the second northern Californian E-bike maker to suffer a “Harley E-curse” - the original Livewire prototype was built for Harley by Mission Motor Company in SF, which also subsequently foundered.

Owners Don Andress and Tim Cashman have sold Las Vegas H-D and its affiliated dealerships (Red Rock and Henderson H-D) to John Morotti. The sale also includes Zion H-D, a satellite retail location in Washington, UT., and five alternate retail locations in the Las Vegas area including hotels, casinos and the McCarran International Airport. Morotti is owner of Mother Road H-D and Route 66 Motorsports (Kingman, AZ.), Superstition H-D (Apache Junction, AZ.) and Tobacco Road H-D (Raleigh, NC.)