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Tuesday 31 March 2020

Comment by Editor-in-Chief, Robin Bradley

Harley - Compete, Why Don't You!

Following my "Mid-Cycle Cycles" piece last month, the rush to new models and updates continues - with more new paint from Harley, and a new 78 hp, 999 cc Scout Bobber Sixty (SBS) that Indian Motorcycle says "is a more attainable option for riders seeking Indian Motorcycle’s premium quality and craftsmanship combined with a stripped-down aesthetic."
With Harley having announced a base-level M-8 powered stripped-down monoshock Softail (I still think that's an oxymoron) for around $14k, both manufacturers are eyeing the competition for new metal that they face from the substantial inventory of used machines on the market, and from the appeal of bikes in the burgeoning $6k to $8k new model market (especially from the hugely capable and highly tuneable Royal Enfield 650 Twins).
The SBS falls nicely between the two - between the $6k sweet-spot and the $14k for an entry level M-8 Softail - and competes very effectively with Harley's Sportsters (and Street models in desire and tech terms) and capitalizes on the brand demand created for lighter weight, simple motorcycles by the much altered ownership and riding experience (to say nothing of budget/affordability criteria) of 'New Gen' consumers.
While in the short-term Indian, and others, continue to be able to exploit slow availability of Royal Enfield's 650s, for the money, the SBS is a lot of great looking and fun motorcycle - if Indian don't sell the crap out of it in the short, medium and long-term, then we are all in more trouble than any of us realize!
In which connection, I was going to use the SBS and Softail Standard as the jumping off point for a piece about the emerging brand wars between the two American V-twin manufacturers, the differing ways in which they are interpreting their futures and the very different balance sheets the two competitors have.
Indeed, there is an interesting compare and contrast to be made.
While a lot of Indian dealerships are finding the going tough, especially with the Big Twins (there have been store closures on both sides of the Atlantic) and with there already being speculation about for how much longer the Polaris board will subsidize their internal combustion engine motorcycle business, Indian is at least building a network and doing so at a time when, frankly, Harley is veering rudderless through a strategic plan that thought it would be a good idea to close out many of their loyal, traditional dealers and replace them with networks who couldn't care less if the profit came from the chocolate by the checkout so long as their brand investment cycle could be counted in months rather than years.

compare and contrast

While both firm's share prices have been taking a hit as Wall Street, London, Tokyo, Frankfurt and Hong Kong all let the bear in, in Harley's case the hit has been savage.
Having thought that a near halving of the share price in five years was a 'biggie' when I was prompted to write about it at the start of the year, as this edition of AMD Magazine went to press (March 13), it had pretty much halved in less than six months - from $40.48 at the end of October 2019 to $23.72 at close, having kissed the pavement at a new $19.23 ten year low just 24 hours previously as markets were hit with Coronavirus contagion.
If it sounds like I am obsessed by the share price, that's because I am. Not, unlike many, because I'm watching my own savings and pension pot tank before my eyes, but because Harley should be obsessed about it - interim CEO Jochen Zeitz and surviving (at this stage) CFO John Olin need to be obsessed about it because sure as heck, regardless of the recent effects of Coronavirus on all stocks, their owners and the analysts who advise them certainly are.
Olin was appointed CFO in 2009 by the CEO and imported 'Company Doctor' Keith Wandell, having initially joined Harley as Vice President and Controller in 2003. It is on his watch that Harley's financial fortunes have roller-coastered, and while no one person or company (or even industry) can own the can for the wild ride and changes that there have been in that timeframe, there comes a point in the rarefied air of board room altitude when the sticky stuff sticks and the casualties mount.
If Zeitz and his boardroom allies don't decide to go down the 'touchy-feely renaissance man' route for Matt Levatich's replacement and go instead (as I believe they should) for Wandell Mk II - if for no other reason than that the cupboard is bare now for internal promotions - then surely the hiring committee's second task before they can hit the beach this summer will be a replacement money man too.
There has been debate for some time now (in this column as well as elsewhere) about the advisability of Harley taking themselves private again. The recent increase in board-approved headroom for share acquisitions suggests that such a strategy may still be on the cards. Even if the strategy were to fall short in timescale or affordability terms, it does have the fall-back benefits of making it ever more difficult for a hostile bid to succeed, or at least to give the board greater control over being able to choose who their White Knight could be - one who would help them achieve that very worthy, highly advisable objective.
Regardless of the reasons why, if Harley's share price is destined to hover in the low $20s for any period of time, the risks of becoming Shark Bait multiply. If we are now headed into Bear Market territory, even if only for six months or less, then Harley's vulnerability just became an open wound telegraphing wounded availability to all predators.
The piece I was going to write would have talked about how smart Indian is being by taking the gloves off and 'Taking It To The Man' with its Challenger Challenge (regardless of what Harley is preaching about dreaming of buying a motorcycle off a snowmobile manufacturer) and getting as aggressive on price offer at the "entry level" as they possibly can.
That piece was also going to talk about just how embarrassingly, toe-curlingly amateur and gauche Harley's marketing has been ever since they actually came into the position of actually needing some as a result of the financial crash and evaporation of wait lists some 12-14 years ago.
Indian Motorcycle's focus on the metal rather than the brand (Wine Vs. Levatich, AIMExpo 2017) has exposed just how weak Harley's marketing has been. Trying to persuade 'New Gen' riders that their heart's desire of a lifetime of experiences and memories were a mere credit card swipe away was always naïve - always tainted by the hallmarks of those who learned their marketing in the classroom rather than in the showrooms and out on the road.