Modern Vespa

After 107 years, Harley to hit the road?

The motorcycle-maker may move its Milwaukee plant, home to its iconic bikes for more than a century. Would this help share prices?

Posted by InvestorPlace on Wednesday, August 4, 2010 9:26 AM
By Jeff Reeves, editor of InvestorPlace.com


It's been quite a ride for Harley-Davidson (HOG). The iconic motorcycle company has been cranking out bikes since 1903, and it's one of only two major motorcycle manufacturers to have survived the Great Depression.


The first Harley rolled off the line just one year after the first telegraph cable was laid across the Pacific Ocean, and nowadays you can log on to Harley's website to customize your "Hog" or find a dealer on your smart phone.

But now there's a rough road ahead for the company. The plant that cranks out Harley's choppers in Milwaukee may finally be at its breaking point after more than a century, with labor costs threatening to shutter the facility and end 107 years of tradition.


According to reports, Harley-Davidson warned employees in April that it would move its Wisconsin manufacturing operations if it could not cut millions of dollars from its production costs. That would mean the bikes known as "Milwaukee Iron" may have to get another nickname very soon.


Harley's CEO told The Associated Press the company will reach a decision on relocation within a month or two. Harley execs aren't necessarily going to leave the United States and are reportedly scouting out American locales outside of Wisconsin. There's also a push to establish incentives to keep the 1,630 manufacturing jobs where they are in Milwaukee, but that's up in the air.


Harley-Davidson stock has been hit hard by the financial crisis as its motorcycles -- which can often cost as much as or more than small cars -- became less popular and consumer spending dried up. HOG stock is down about 60% from early 2007, and the company has missed profit estimates for three of the past four quarters.


It's worth noting that things are starting to improve. After a steep loss in the fourth quarter of 2009, the company has been growing its earnings steadily again and is turning a decent profit.


But company executives -- not to mention shareholders -- are hardly satisfied, considering Harley-Davidson's previous successes. In 2009, HOG saw a nearly 27% decline in shipments to dealers and a 23% decline in worldwide sales of motorcycles, so any gains this year are simply making up for lost ground.

Same with stock prices. Despite Harley's stock gains that have beaten the market since January, many long-term investors are still deeply in the red.


As for whether Harley will pull the plug on Milwaukee, that remains to be seen. But the bigger question that HOG stockholders should ask themselves is whether a small dip in labor costs will really make that big of a difference in share prices.

Moving a manufacturing facility might not make up for the fact that Harley motorcycles are an expense that cash-strapped Americans aren't prepared to shoulder in this era of high unemployment and economic uncertainty.

http://articles.moneycentral.msn.com/Investing/top-stocks/blog.aspx?post=1789378&_blg=1,1789378

Not surprising. I bet they move to a southern state with a non union work force like Boeing did. http://www.washingtonpost.com/wp-dyn/content/article/2009/10/29/AR2009102904835.html

I think the engines are assembled elsewhere already, and when you figure in the chinese parts.. does it really matter

I was reading where HD was really going to do a big push in India. Really.

You wouldn't know Harley was having a problem with all the Milwaukee twins on the road.

I suspect that is actually another part of the problem. Harley has sold a lot of bikes in the last ten years. Riders that want a Harley get to decide between $20-30K for a new one or 1/2 to 1/3 of that price for a late model used one. Most of my neighbors with Harleys only roll them out of the garage on a few nice weekends a year.

I do have to say that of all the bikes out, the HD's were out in full force yesterday. A few with out-of-state license plates that were all packed up and looked like they'd been on the road for a while.

I sure hope HD stays in this country!!

TURKMAN i second that. I won't get started on my rant of why are we letting companies that were founded here move to CHINA etc As much as people bitch about HD and their riders i've always found them to be cool with me on my scooter. Some of the nicest people also, It would be a shame if they moved.

I can see more Chinese crap on the horizon.
Not that I like Harleys anyway.

And that's bad? Who wants to wrestle an 800LB bike for a quick grocery run or for weekday errands around town? The roads are extremely busy with HD riders every weekend here. Most I know are high mileage riders. 5-10 times the mileage of this Vesparado! I've said it before, I find many scooter riders attitudes towards HD almost comical. I'd hate to see them move out of the midwest and I believe it will hurt them with the older crowd. But then again the Walmart parking lot always has a dozen or so HD's in the lot. My brother and many of the riders I know don't run HD twins anymore. His 3000 mile Evo is a coffee table base. Revtech and S&S have a huge segment here. Rev tech 125" is a monster and a real thrill ride! HD CVT and I'm in for a highway cruiser! I find most maxi scoots to be coyote ugly.

all this downward trend for HD started when they hired the new CEO. wonder if that has anything to do with the downfall. The guy was not even from a M/C back ground, he came from Johnson controls and has never been involved with M/C's before. IMO just a pencil pusher and no real passion for the industry. He cut Buell and is selling MV. while MV was not making big proffits they were above red line and Buell was showing almost as much good margin as HD and this was in a very competetive sport bike market. Heck the only thing keeping HD afloat is the clothing and Acc division They constanly show good margin.

Even Volvo was not safe from the Economy. They were sold to China's Geely firm yesterday. It will be interesting to see really happens to the brand in the future.

J

Bad economy or not, I believe people still want to buy things. The only difference in what people purchase is the cost.

I personally struggle with the cost of a new Harley cruiser, especially when I see a $32k motorcycle, and knowing I can get a Ford Taurus SHO for almost the same price.

Harley's solution is simple, drop the cost of their bikes and people will begin purchasing once again. Make a $4-5,000 bike and people will buy it.

I as said above, it's not people aren't buying, they just aren't purchasing over priced 'expensive' items.

The engines are assembled in Kansas City, MO, and Menomenee Falls, WI.

Harley is already assembling bikes in Brazil.

I guess it would all depend on how much $$ someone makes to care my HD was 24.5 k new and I plan a new one in 2012 when I give my old bike to my son.

Funny they are thinking this after rolling out the museum. Be ironic if the museum is the only remaining remnant of HD in Wisconsin.

We're already $trillions in debt. Might as well bail them out too.

Doesn't any company plan for rainy weather ahead?

I did not read about any HD bail out.

I was being sarcastic.

Ultra's are manufactured in PA. Perhaps there is a strong business case for consolidating mfg operations at other US Harley plants.

I know this flies in the face of us "capitalists" but:

High quality manufacturing jobs and the need to meet quaterly earnings for Wall Street are pretty much mutually exclusive. You simply can't be focused on short term earnings AND make stuff in the USA. If you want the stock to go up - everything else be damned, you HAVE TO lower costs. Union or not, making stuff in the USA costs a lot. Sucks.

The bikes assembled in Brazil are only sold in the Brazilian market. A requirement of the Brazilian government. The bikes are largely assembled in the U.S., then shipped to Brazil where they complete the assembly. Meets the requirements of the Brazilian government.

I think Harley is well aware that a large percentage of their current market would walk away from the brand if they moved manufacturing off-shore. They've had a pretty hard time already (PR problems) defending the current level of Chinese parts found on the bikes.

-Craig

Subsequent news stories out of Milwaukee confirm the move may be to another STATE!

http://www.google.com/hostednews/ap/article/ALeqM5jhl9h4Uqh0Ud33VphDRevvA6BllwD9HCR60O0

"Harley chief executive Keith Wandell said the company will make its decision on whether to move in the next two months. Harley executives are already scouting out other states, though Wandell will not say which ones." BINGO

It is all really sad. I'm a life member of HOG, and have owned 1 or more H-Ds over the years. My garage welcomes all makes.

The problem is cost. When money was flowing, they were selling bikes and flooding the market. Now the money dried up, I know people who can't even afford to ride their bike. I've been reading these articles in HOGTales where they are trying to promote rides. They did one for bike week for $100. Of course they didn't count the airfare or the fact that the author borrowed a bike into this $100.

I really hope they get their act together. They really have come a long way since the days of AMF.

My brother in law owns a business in WI and I have several other friends who do business there and they all say that WI is the worst state to do business in. My CEO recently discussed expansion for our company and said he'd set up anywhere but WI because it's so business un-friendly.
Supporting business is real, my friends. You can't keep treating them like the bad guy and expect them to stay.

I know of four parts in EVERY V-Twin and another in the Six-Speed that are machined in Brookfield, WI.

I do. Damn near every day, too. 'Cept mine's only 663lb. Sorry to say, but I've put WAY more miles on my HD than I did on both of my Vespas. In 2½ years, I only racked up 4400 miles on my GTS. In 1½ years, I'm over 11,000 miles on my Super Glide. Yeah, me, too. Many HD riders love Vespas. Had a blast at the 100th and 105th Anniversaries on our Vespas. Agreed.

It tickles me when Vespa riders say that HDs are overpriced. Pot-Kettle comparison kinda thing. You can get an HD for much less - about $8,000, in fact.

+1 I had to chuckle at the comment about H-D being overpriced too. I could have bought a brand new scooter from China for a lot less then a Vespa. But what's the fun of owning something like that?

You are also correct about the prices. $30K+ harleys are not the norm. The majority are in the $8K-$20K range. In fact 23 of 26 high volume production models that Harley sells this year are under $20K MSRP. They do make a few hundred "CVO" bikes every year that break the bank, but they are a drop in the bucket (less then 1%) when compared against the total number of bikes H-D builds every year.

-Craig

Harley-Davidson recently announced its four-bike CVO lineup for the 2011 model year. Returning to the Custom Vehicle Operations stable is the range-topping Ultra Classic Electra Glide ($36,499), the popular Street Glide ($32,499), and the versatile Softail Convertible ($29,599) - all with new additions and options to set them apart from the 2010 iterations. We'll bring you riding impressions of that trio later, but we'll first start with the newest CVO, the Road Glide Ultra, a stylish and exclusive luxo-touring rig.


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It's a tough economy out there for a lot of us, causing a precipitous drop in motorcycle sales over the past two years. However, those with deep pockets and shrewd investments always seem to have disposable income for a new toy in their garage.

Well-heeled riders such as these don't choke when they are told the $35,999 MSRP of the 2011 CVO Road Glide Ultra. If you're trying to eke out another 500 miles from your old KLR650's tires, perhaps you're not the customer the CVO group is targeting.





http://www.motorcycle.com/manufacturer/harley-davidson/2011-harleydavidson-road-glide-ultra-review-89829.html


This fits the topic

I wonder if they're going to keep the HD museum in Milwaukee open.

HD = A company where 90% of their technology is ancient and outdated

No more ancient and outdated than Vespas.

It's not just the manufacturing facilities that are moving to different states and even off shore...Headquartered Operations are also considering moving due to the tax implications that are coming down.

I believe Steve Wynne has shifted his operations to Macau, China vs. Las Vegas as the profits are better.

Regarding manufacturing facilities...we should not be just be bashing China...India, Viet Nam, Cambodia and a lot more are also areas where manufacturing is being outsourced.

Hence, it's not just manufacturing it's business ops that may end up relocating. We're not just talking nationally but internationally...who can blame 'em it's not just lost of revenue but the drain on what's left via the taxes that are being levied and then distributed to those who are not putting anything back in...if we don't start turning it around...see above.

By the way...don't come to Hawaii...nice place to visit...but you wouldn't want to start a business here. Unless you're into creating jobs and generating revenue to pay taxes and support those with the entitlement wagon and having minimal profit to payoff your investors or yourself...then Aloha and come on over to paradise!

Amazing how this story and others on forums get totally convoluted and filled with conjecture...

BTW Wynn says a lot of things...his mouth cost him The Mirage by some accounts. "In April 2010, Wynn caused a stir when he chided the government on CNBC and said he was considering moving the company's global headquarters from Las Vegas to Macau. A few weeks later, amidst criticism from his rivals, he clarified that he meant a greater allocation of time spent in Macau because of the substantially higher profits made there"