Tag Archives: HONDA

Harley-Davidson’s aging biker problem

Harley’s core customer is a middle-aged white American male, a group that will contract in the coming decade. As one blogger wrote, “The 60-70-year old riders have trouble lifting a leg over the seat because of arthritis. And finger joints hurt with the cold air and engine vibration.” Women represent just 11% of Harley buyers, and penetration in the African-American and Hispanic markets is similarly limited.

Harley’s need to readjust its aspirations was driven home this week by the news that the company had forced its Wisconsin labor unions to accept wage and benefit concessions by threatening to move its factories out of the state. New contracts will allow the company to cut 325 employees and convert 150 to 250 other workers to temporary or “casual” status, meaning they have fewer benefits and will work on an “as-needed basis.

The cutbacks come as Harley (HOGFortune 500) scales back in the face of a sharply shrinking market. As recently as 2008, Harley built 303,000 motorcycles, nearly double the 159,000 it assembled in 2000. This year it expects to make between 201,000 and 210,000 bikes. Since new CEO Keith Wandell arrived on the scene in May, 2009, Harley has consolidated operations, terminated its Buell line of sport bikes, and sold its MV Agusta Italian motorcycles back to its founder.

Bumpy roads are nothing new for Harley. The first Harley-Davidson was built in Milwaukee — still the company’s headquarters — in 1903 by William S. Harley and the three Davidson brothers. Their popularity took off during World War One, when 20,000 Harleys were used by the U.S. infantry. With the shutdown of Indian in 1953, Harley became the only American motorcycle manufacturer. Marlon Brando’s 1954 movie The Wild Onehelped solidify Harley’s image of hairy-chested rebellion, an identification it alternately embraces and spurns.

By 1969, Harley enjoyed an 80% share of the market for big bikes. But ten years later, incursions by Japanese manufacturers, led by Honda, squeezed its share to 20%. Fighting back at what it perceived as unfair competition, the company won an anti-dumping ruling from the International Trade Commission in 1982, and President Reagan imposed a 45% additional tariff on super heavyweight Japanese bikes.

Given an opening, Harley used the opportunity provided by the tariffs to regroup. It paid more attention to the appearance of its bikes, started to focus on quality, and beefed up its marketing. From 1988 to 1995, annual shipments doubled. In fact, demand grew faster than manufacturing capacity could keep up. Harleys became a cult item; Harley dealers packed extra charges onto list prices and compiled waiting lists for prospective customers. By the late 1990s, certain models were back-ordered for two years.

After resisting the temptation to expand, Harley belatedly added production capacity and grandiosely predicted sales would reach 400,000 by 2007. But lacking scarcity, Harleys also began to lose their cachet. Sales peaked in 2006 at 349,000. Nobody bought Harleys for transportation, and at up to $20,000 for a fully-rigged cruiser, they had become a highly-deferrable luxury purchase, especially in a recession.

Nor did Harley’s famous brand strength buffer it when its bikes were no longer in short supply and demand hit a wall. The combination of a faltering economy and an aging customer base at the end of the decade had significantly dented sales — perhaps permanently.

There is a lesson here for companies that become the flavor of the moment — and then use that as a base from which to make forecasts for the future. Harley’s famous brand couldn’t buffer it from the downturn once owning a Harley stopped being cool. Tattoos didn’t move motorcycles.

As analyst Craig Kennison of Robert W. Baird points out, Harley survived earlier economic downturns when other discretionary consumer durables slumped because Harleys were in short supply. As it built capacity to meet demand, Harley became just another manufacturer, vulnerable to a cyclical economy. In the fourth quarter of 2009, it suffered its first quarterly loss in 16 years.

The days when Harleys were a fashion accessory are likely over. Except perhaps for Indiana governor and presidential aspirant Mitch Daniels, it is no longer big news when a celebrity is seen riding a Fat Boy or Ultra Limited. The challenge for Harley-Davidson in 2010 is to adjust to the new normal. To top of page

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Price War: Honda and Toyota Get Down and Dirty, helping to boost March auto sales

Price wars and discounting used to be the province of beleaguered companies from Detroit. Now Honda (HMC) and Toyota (TM) are down in the bargain mud, too — and helping to boost March auto sales.

Forecasts for annual U.S. auto sales for the month are around 12.5 million range for theSeasonally Adjusted Annual Rate. That’s a sharp improvement from a 10.8 million SAAR in January 2010 and 10.4 million in February.

“The shape of the U.S. SAAR over the rest of the year will largely depend on how long the industry’s pricing battle goes on,” saidBrian Johnson, auto industry analyst for Barclays Capital.

Toyota kicked off the discounting this month with offers of zero-percent loans, to boost demand in light of the unintended acceleration disaster. Honda responded with cheap, no-money-down lease deals.

Such steep discounts are unusual for the Japanese carmakers, because their cars have typically been in higher demand than U.S. brands. Last month, before the current round of price-cutting kicked in, Edmunds.com said Honda’s incentives averaged about $1,400, less than half the level of Chrysler, Ford and GM. Toyota incentives averaged about $1,800, according to the shopping and research web site.

Meanwhile, ChryslerFord (F) and General Motors are bending over backwards to cut production and try and reduce the need for deep discounts, especially since Chrysler and GM went bankrupt last year. The results have been mixed.

Edmunds.com CEO Jeremy Anwyl said in a written statement the Toyota deals are unlikely to last, because Toyota’s inventories of unsold cars aren’t that high. The Toyota deals are set to expire April 5.

“Although this SAAR sounds promising,”Anwyl concluded, “it’s too early to wave the flag and say that the economy has turned the corner.”

Ford and Honda sales vault on clunker deals; GM down 20%, Chrysler down 15.4%

AUGUST U.S. SALES
Ford and Honda sales vault on clunker deals; GM down 20%, Chrysler down 15.4%
Largest boost in Ford sales since July 2005
Chrissie Thompson
Ford Motor Co. and American Honda posted August U.S. sales increases, while Chrysler Group’s and General Motors’ declines were worse than the previous month, as the government’s cash-for-clunkers program lifted industry demand to its highest levels this year.
Honda’s light-vehicle sales increased 9.9 percent, their biggest year-over-year monthly lift since Mary 2008. Ford’s light-vehicle sales rose 17.2 percent, for their largest boost since July 2005. The gain follows Ford’s 2.4 percent increase in July, which was its first year-over-year growth in 19 months.
GM saw a 20.1 percent slide, compared with the 19.4 percent its sales dropped in July. Chrysler’s sales fell 15.4 percent, worse than the 9.4 percent they slipped the previous month.
The results were worse than analysts’ forecasts, but enough to sustain industry predictions that sales would pass the 1-million-unit mark for the first time since August 2008.
“August was a shot in the arm for the industry,” said John Krafcik, CEO of Hyundai Motor America, in a statement. His brand’s August sales shot up 47.0 percent.
Elsewhere in the industry, Subaru’s sales spiked by 51.5 percent. That put its eight-month sales 11.2 percent higher than last year, making it the only automaker reporting a year-to-date U.S. sales increase.