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Tuesday 2 February 2021

H-D Hardwire

H-D Hardwire 5-Year Strategic Plan - "Targets Profitable Growth and Brand Desirability"

Finally unveiled on February 2nd, 2021, along with the financial results for a dreadful 2020, 'The Hardwire' is designed to chart Harley's course through 2025, "targeting long-term profitable growth and shareholder value, and aiming to enhance its position as the most desirable motorcycle brand in the world."  
What follows are the principal commentaries from that February 2nd unveil, and are best considered in parallel with the combination 2020 Q4 and Full Year and Hardware Slide Show that can be linked online via the News and Presentations in Harley's Investor Relations website pages.
There will be a full feature with associated AMD Magazine commentary in the upcoming March edition of AMD Magazine - due to be published online on February 22nd (the same date Harley will be conducting its online 'Pan America' Adventure Tourer unveil) with print copies in the mail by February 26th, 2021 … 


Harley is to create an employee ownership scheme with equity shares being granted to some 4,500 employees, including hourly paid personnel.


Key Highlights:

  • Target increased profitability and low double-digit EPS growth through 2025
  • Broaden view of its customers, inclusive of non-riders, tailoring each step of the journey in new ways and through multiple channels, including enhanced digital touchpoints
  • Invest in core segments of Touring, large Cruiser and Trike to strengthen and grow its position
  • Expand into Adventure Touring and within the Cruiser segment to unlock untapped volume and margin
  • Launch Harley-Davidson Certified, a pre-owned motorcycle program supporting growth expected across all complementary businesses
  • Strengthen commitment to electric with the creation of a dedicated division focused exclusively on leading the future of electric motorcycles
  • Fuel power of Harley-Davidson as a global lifestyle brand through reinvigoration of parts, accessories and riding gear and global expansion of financial services
  • Extend employee ownership to all employees by offering an equity grant to approximately 4,500 employees, aligning with new approach to Inclusive Stakeholder Management

"We launch The Hardwire with capabilities, assets and a legacy unmatched by any competitor. Harley-Davidson is the most desirable motorcycle brand in the world, backed by leading positions in the most profitable segments and a reinvigorated culture of performance, efficiency, focus and speed. By unlocking our full potential, prioritizing profit through leadership and fueling our lifestyle brand with an enhanced product offering and leading digital capabilities, our strategic plan will drive the desirability of Harley-Davidson for all," said Jochen Zeitz, Chairman, President and CEO, Harley-Davidson. "I am proud to announce our first commitment as part of our Inclusive Stakeholder Management priority, an equity grant to thousands of our employees, including every hourly factory worker. It is only fitting that this inaugural action is for our own Harley-Davidson community who continue to deliver our iconic products and experiences with great pride and craftsmanship every day."

Much has been made of Harley's intention to reduce the number of markets it is principally active in, with the ten priorities now stated to be United States, Canada, China, Australia, New Zealand, Germany/Austria/Switzerland, United Kingdom, Italy and France.


"Rooted in desirability and guided by the company's vision and mission, The Hardwire aims to build the brand beyond riders, deepen loyalty, preserve value and drive engagement." The strategic priorities of The Hardwire are:

Profit Focus
Harley-Davidson will invest significant time and resources on strengthening and growing its leadership position in its strongest motorcycle segments - Touring, large Cruiser and Trike - with a curated portfolio of the highest priority products. These segments are the most profitable in the market globally and demonstrate steady aggregate demand of new and used sales. The company believes these segments offer untapped opportunity to inspire more engagement and repurchase and also compel new customers and riders to choose Harley-Davidson. Profitable growth is expected through inspirational new products that live up to the company's vision for market-leading innovation, evolution and emotion.

Selective Expansion and Redefinition
The company plans to selectively focus on opportunities in profitable segments, aligned with the company's product and brand capabilities that demonstrate a clear path to market leadership.
Pan America, Harley-Davidson's first Adventure Touring motorcycle, is an example of the company's selective expansion into a high-potential segment that is one of the largest in many European markets and has untapped potential in the U.S. The company also intends to reinvent and increase profitability within the Cruiser segment, with highly competitive and profitable middleweight offerings that expand its relevance to a greater customer set beyond its current stronghold segments.
Harley-Davidson has redefined its geographic footprint, with a focus on ten global markets that matter most to future success. The company will strategically drive these markets to their full potential by developing custom product and go-to-market approaches. The company will continue to test further avenues for desirable long-term growth through premium low displacement partnerships.


It looks like The Livewire will live again, or at least further iterations will do so, with Harley planning to create a standalone division specifically to build its Electric offer and market position, with more details due to be unveiled later in 2021.

Lead in Electric
Electric motorcycles are important to Harley-Davidson's future and the company is committed to remaining at the forefront of electric motorcycle technology following its groundbreaking success with the LiveWire motorcycle, widely regarded as the leading electric motorcycle in the world. The company is investing in its long-term success by creating a separate division dedicated exclusively to electric motorcycles. The focus will be on technology development, with an approach to product and go-to-market actions that reflect the expectations of the targeted customer to deliver the most desirable electric motorcycles in the world.

Growth Beyond Bikes
Harley-Davidson's complementary businesses – Parts & Accessories, General Merchandise, and Harley-Davidson Financial Services – are important pillars of the company's future success as a global lifestyle brand and provide untapped potential to grow its customer base and add to customer lifetime value. The Hardwire targets growth and profitability of these businesses through refreshed product offerings, stronger execution, and additional digital and in-dealership purchase opportunities. Expanding global Harley-Davidson Financial Services offerings will provide greater flexibility for customers, including a pre-owned Harley-Davidson motorcycle program, Harley-Davidson Certified, aimed at enhancing the overall customer experience and supporting growth in all complementary businesses.

Customer Experience
The Hardwire puts customers at the forefront of Harley-Davidson's products, experiences and investments and defines customers as people who may dream of motorcycling or just learned to ride, all the way to riders who are deeply passionate about and invested in the Harley-Davidson lifestyle. The company recognizes the different needs and expectations of customers across the purchase journey and the importance of a customer experience that ensures each touchpoint is tailored to individual needs. Powered by integrated data, the company's goal is to seamlessly engage with customers, creating a meaningful, unique and personalized experience with Harley-Davidson each and every time.

Inclusive Stakeholder Management
In its approach to optimize long-term value for all stakeholders, Harley-Davidson views inclusive stakeholder management in the context of people, planet and profit, as all three are deeply embedded in the past and future success of the Harley-Davidson brand and company.
People: Harley-Davidson aims to foster a community reflected in its H-D #1 culture, including a highly desirable, safe and inspiring workplace that attracts and retains top talent by evolving its spaces and how its employees work. The company will strive to create an inclusive community with a strong dealer network and a supply base focused on ethical, sustainable and equity-based purchasing and sourcing practices.
Planet: The company is developing a path to net zero environmental impact while delivering on its mission, investing in its practices and teams to do so.
Profit: Through Harley-Davidson's focus on desirability, the company plans to drive profitability and shareholder returns. In order to closely align the rewards of its employees with those of its shareholders, approximately 4,500 employees will be offered an equity grant at the start of The Hardwire. With this expanded approach, all employees from factory workers to executives and all shareholders will benefit when the company succeeds.


Financial Targets
The company is targeting profitable growth on the top and bottom line through 2025. Financial results are expected to demonstrate progress in several critical areas, including revenue and operating margin, driven by investments, increased efficiencies across operations and leverage within SG&A as the company maintains a lean cost structure.

The Hardwire financial targets 2021-2025:

  • Mid-single-digit revenue growth in Motorcycles segment, with solid growth expectations across all businesses
  • Steady improvement in Motorcycles segment operating margin from 2019 (most recent comparable year)
  • Double-digit growth in Financial Services segment operating income behind growth in the Motorcycles segment and optimization of the company's digital platform
  • Low double-digit EPS growth
  • Capital investments between $190m to $250m annually
  • Cash allocation priorities are first to fund growth through The Hardwire initiatives, then to reward shareholders through dividends. Harley-Davidson, Inc.'s Board of Directors approved a first quarter 2021 dividend of $0.15 per share, payable March 19, 2021 to shareholders of record of the company's common stock as of March 2, 2021.