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Tuesday 22 September 2020

Comment by Editor-in-Chief, Robin Bradley

Harley Should Have Gone Private reports that H-D is very likely to go ahead with the closure of its Bawal, India factory and can its Street 500/750 line, with Asia Pacific operations being focused at its Thailand plant.
Meanwhile, talks are reportedly underway with KTM and Triumph collaborator Bajaj, Classic Legends owner (the Jawa and BSA owner) and Peugeot Motorcycles' parent company Mahindra & Mahindra and former Buell Racing owner Hero Motocorp for an alternate manufacturing of CKD (Complete Knock Down) kit assembly solution for the Indian market.
Of the major players in India, it would appear that only TVS, who has a deal with BMW Motorrad and recently acquired Norton Motorcycles, and Eicher Motors, the Royal Enfield owner, are the only Indian motorcycle industry players not currently on Harley's list of potential collaborators for the largest English speaking consumer market in the world.
Following the Motorsport Action Group's (MAG) great 'Unwind', Harley's 'Rewire' is the latest instalment in that favorite corporate parlour game beloved by children and everyone with an MBA - "Ooops, that didn't work, screw the cost, let's try again!"
However, where for children it is an experiential exercise, a learning experience, for a theoretically respected and capable corporate such as Harley-Davidson, it is more of an existential exercise. If Harley gets this wrong, it really will have run out of 'Roads'. I still maintain that the best thing it could do, should have done, is to have gone private again.
Maybe newly minted CEO Jochen Zeitz has that in his playbook, though, in fact, it would be much less expensive to do it while the company is drowning, then cure its problems without stockholders demanding their several pounds of flesh every quarter.
Waiting to cure the problems once back in private hands would have been a way more economical and efficient way to implement a new playbook, and in the medium to long-term a hugely more profitable way for a new owner or owners to be able to get to go back to the bank with a smile on their faces.


"other people's balance sheets"

There were, and still are, plenty of options to navigate back into private hands, and my favorite would be the consortium of dealer owners that could be put together quite quickly. There has been talk of something like that happening, and in the posh seats too - not just the bleachers.
This year's COVID-19 context would have made such a play an even more attractive, practical and effective strategy as it happens, but nobody was to know that.
What I think most people do realize, including the increasing number of ex-Harley executives now populating the aftermarket, is that it was even widely viewed internally as a preferable strategy just as soon as the wait lists evaporated.
Much is made of the 'lost decade' in terms of consumer demographics and the reshaping of the motorcycle industry customer landscape. But for Harley too it has been a lost decade and an entirely inexcusable string of missed opportunities.
There was never anything wrong in principle about the strategy that Harley embarked on in the late 1990s and early noughts to try and add brands to the portfolio.
The fact that the attempts to develop Buell and MV Agusta didn't work out is less a comment on whether or not they were smart ideas, but instead on the timing (which was late and sucked) and on their insistence to meddle in businesses that should have been allowed to evolve their own visions.
When Keith Wandell was hired to replace Jim Zeimer and perform the role of financial crisis company surgeon, it was a necessary evil. But, subsequently under Matt Levatich's watch, when Harley (and the motorcycle industry itself) had failed to mend by 2014/2015, a golden opportunity to get back on the acquisition trail was missed.
In private hands at that stage (surely by far the most sensible response to the share crash price that saw H-D drop from $73 in late 2006 to around $11 in just 27 months), the company could have bought out its remaining shareholders for buttons, relatively speaking.
Then, once the price had recovered back to the $70 mark in 2014, it failed again to spot an opportunity to leverage the growth for funds to make purchases.
When Harley came within 48 hours of acquiring (or merging with) KTM (depending on whom you believe) in late 1998, and subsequently had options to move on a then very reasonably priced Ducati (there were even Triumph, Norton and Moto Guzzi rumors at that stage too), I used to play a game of "Fantasy Forecourt".
The game involved seeing the Bar 'n Shield, Buell, KTM, Triumph, Ducati and other flags fluttering proudly in the wind outside the world's leading network of state-of-the-art motorcycle lifestyle destination dealerships all across the globe.
Instead, highly desirable and hugely exploitable brands such as those, and all the ones currently in Chinese and Indian hands, are (mostly) now lubricating other people's balance sheets.
Having achieved that while in private hands could then have been finished off with the mother of all leisure industry IPOs last year - one that would have seen Harley still playing with the big boys in the upper quartile of the S&P 500, rather than being unceremoniously dumped out of it three months ago.
Yes, yes, hindsight, flights of fantasy and all that. If Bradley is so smart, how come he's still publishing a motorcycle magazine? Though come to think of it, as one of the few remaining people who is still doing so, I am either a survivor or a dumbass (or maybe both). You can all form your opinions on that one!
Whichever way things had played out for Harley doesn't change the fact that the 'Magnificent Dozen', the twelve believers who took the company out of AMF's hands and survived their own existential crisis in 1986, deserve way better than to have had the success they set in motion through to 2006 wasted in the way that it has been.
Maybe Jochen Zeitz is the right man for the job and the times. Maybe his rapidly proliferating army of Chief Officers of this, that and the other will turn out to be a new golden circle of true believers who 'get it', but maybe they won't. As Philip Seymour Hoffman's Zen Master said in 'Charlie Wilson's War'…"we'll see"!