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Tuesday 1 December 2020

Comment by Editor-in-Chief, Robin Bradley

Do We Have Herd Immunity Yet?

As the international motorcycle industry continues to surf the waves of the pandemic, the fear of wipe-out is never far away. Regardless of how many waves we are destined to endure, sooner or later one of them will have rocks in it.
At present, based on reports from readers and customers and the latest available data on either side of the Atlantic, as I write this in early November, the signs are that motorcycle industry new unit sales remain surprisingly robust - unless your name is Harley-Davidson, but then we knew what was coming down the pike at it.
Is it sustainable? To be brutally honest, I don't think any of us really know if anything is sustainable anymore, and I still reckon that those who think they have the answers are following doctrinaire positions that screen out understanding of the questions.
In motorcycle manufacturer terms, whether or not it is the absence of H-D inventory in the market place or first hints of a genuine uptick in demand and profile, Indian Motorcycle unit sales are doing well (in the context of present output capacity planning), especially in Europe.
Ducati and BMW both recently published robust monthly or quarterly numbers, KTM and Husqvarna continue to do well, Triumph appears to be pushing ahead despite its waves of lay-offs this year, Piaggio's brands (principally Moto Guzzi, Aprilia and Vespa) are all seeing growth, and many other smaller, mostly Chinese made and/or owned brands are also doing well - again, especially in Europe, and especially those owned or distributed by Austria based KSR Group.
The Japanese 'Big Four' continue to have mixed fortunes. I think that it will turn out to have been Yamaha's year in terms of real progress, with Honda steady, Kawasaki growing and announcing that it is to spin off its motorcycle unit into a separate business, really only leaving Suzuki to contemplate its navel.
New CEO Jochen Zeitz unveiled more (mostly telegraphed) detail about the strategic background to what we are likely to see in the new 'HardWired' Harley strategic plan that is due to be unveiled in January - along with the 2020 full year fiscals and, presumably, the delayed MY 2021 offer.

Truth Decay

We already know that is going to include the expected 1,250 cc Pan America Adventure Tourer debut, which Harley has already been pimping on its international sites for some time, and that the change in new model year is both a pandemic spring shut-down response and a strategically rebuilt sales cycle leap into left field that makes Harley an outlier in such matters - whether or not it is a decision that proves to be prescient or problematic remains to be seen.
The Q3 numbers that were released ten days before I wrote this really didn't tell us anything much, excepting that the new Harley management team appears to be singing from the same page, and that page can be found under the general heading of 'The Blindingly Obvious' - and that is not meant as a criticism, quite the opposite.
The bravely touted "best Q3 income since 2015" headline did its job with most of the hard-of-thinking media industry for whom 'Truth Decay' set in a decade ago and allowed Harley to project that its present malaise sees it in a good place.
Most media channels, and even analysts and Wall Street commentators, allowed themselves to be blind-sided by the sharpening of focus and reignition of culture and sent Harley's share price to the kind of (still modest) level of over $35.00, not seen since February of this year.
Indeed, in congratulating her on her appointment, one of the analysts on the results conference call (October 27) warned newly minted CFO Gina Goetter not to get too used to seeing the stock market respond that well to her announcements - "it isn't always like this, as you'll no doubt find out," he said - if memory serves, I think he was from Morgan Stanley.
In fact, the truth that the decay in scrutiny has failed to report is that the results were beyond dreadful. The only reason the income was better than it had been recently (don't be fooled, it wasn't actually what you'd call 'good') was because Harley has been slashing costs and realigning everything, right down to the water coolers, as they try to draw a line under the wasted post Wandell years.
Do not get me wrong, this too is not a criticism. There is nothing wrong with overdue house cleaning and Harley has needed to try something dramatic since 2014. 'More Roads' was never the right road. When you are already having trouble trying to do too many things, trying to also do a bunch more in a market that was clearly in decline and morphing before our eyes was demonstrably naïve - the phrase commercial suicide comes to mind.
As Einstein famously said - to keep doing the same thing and expecting a different outcome is the very definition of madness. Under the prior CEO, Harley had been getting away with being allowed to keep swimming around an ever-smaller goldfish bowl for far too long.
Now, if the game-plan is to try to bottom out and give a robust foundation on which to "build back better," then rather like Keith Wandell's often criticised 2010 'slash and burn' road to survival, if this is the only legacy that Zeitz leaves behind him, then it is one of the most important ones anybody could engineer.
The phrase 'Keep It Simple Stupid' is often ascribed to Ronald Reagan and his Reaganomics school of economic thought. In fact, it first entered the lexicon in the late 1950s and early 1960s as an engineering term - one source I saw credited Kelly Johnson with coining the term - he of Lockheed Skunk Works fame.
Zeitz appears to have very quickly established that Harley had become way too complicated and was pursuing way too many customer groups while not in fact building on its core customers sufficiently well. 'Keeping it Simple' appears to be at the heart of what he is going to be doing as Harley CEO, and while there are plenty, especially among the dealer network, who will regard him as ill-equipped to "speak Harley" with the purists, he doesn't have to. That's not his job.
His job is to create the right environment that allows those who can address Harley's base to be able to do so without the message being drowned out by white noise. To give the bandwidth needed to be able to broadcast the purest of pure brand messages.
Doing so will buy Zeitz and buy Harley the time and strength needed to be able to start to amplify brand extension and nuance without drowning out core values.