American Motorcycle Dealer AMD 229 August 2018 - Page 4

Congratulations Harley-David As revealed when Harley-Davidson released its Q2 2018 fiscals (July 24), the Motor Company subsequently was due to unveil what it trailed as its “accelerated strategy for growth” a week later - and subsequently did so on July 30 - it was smart to put some distance between the two announcements. The Q2 fiscals were not, actually, quite as bad as many analysts had been expecting and produced a $4 to $5 bounce in the share price straight away (to the $45 mark). What was unveiled a week later was one of the most profoundly important strategic planning announcements in the 30 plus years since the company went public in the mid-1980s. Of itself it didn’t (yet) produce quite such a marked stock market response, but there is now reason to believe that, at worst, Harley has bought itself the time needed to be in with a fighting chance of staving the sharks - bait no more - not for now anyway. Given that much of the funding for new plans is going to come from “good housekeeping” rather than splashing the cash or, worse, needing to use someone else’s, would appear that Harley’s (entirely appropriate) caution is being matched favorably by that of investors, because the strategic thinking they unveiled and the likely ROI it is slated to yield within five years certainly hasn’t spooked the markets. The ‘More Roads’ strategy has added much needed flesh to the bones of CEO Matt Levatich’s January 2017 announced plans. Those plans were to launch 100 new models and train 2 million new riders in the U.S.A. in 10 years, massively grow its international dealer network and see some 50 percent of unit sales coming from ‘international’ markets. Remember, that latter announcement pre-dates this strategic leap forward and the whole Kansas, tariffs and Thailand matrix of issues. All these worthy objectives were to be achieved in environmentally appropriate ways while sustaining balance sheet integrity and shareholder value. Ambitious! So, has Harley managed to put flesh on the skeleton in a convincing and forwardthinking way? One that can see the reach, the consumers and opportunities they will represent in the next 20-30 years? Does ‘More Roads’ provide a platform from which the company can get creative and responsive? Well, yes, I think it does. At the worst, Harley has given itself a convincing startpoint down a path that will provide a foundation from which to emerge from under the shadow of engineering conservatism and 20th century legacy. Whether the path broadens out into ‘Roads’ remains to be seen, but provided the twists and turns of the market and wider economic and geo-political issues aren’t harboring shocks of seismic proportions then, again, yes, there could well be those broad, sunlit uplands ahead. Even if many of the riding options on sale 20 years from now bear only a passing resemblance to those envisaged at this stage, Harley (and the wider market for us pilot fish) does now have a foundation. The company has given itself the allimportant pathway for future first time Harley buyers to grow with the brand. Provided Matt Levatich can carry sufficient of the forward thinkers in Milwaukee with him, sufficient of the dealer network and sufficient Wall Street credibility for ‘Middleweights? Hurrah! the plans, then there’s no question that we are now firmly into ‘game on’ territory at long last. Of course, any slew of initiatives with this breadth (if not yet depth – focus on the strategic thinking, not the styling or tech at this stage) is going to have required senior management to have been coming off a “long run”, but the radio silence in the meantime has been deafening to outsiders and, no doubt, deeply frustrating to insiders. Maintaining competitive advantage by keeping the powder dry has, of course, been justifiable in terms of minutiae, but the vacuum that has opened up since Levatich unveiled his worthy, but so far seemingly hollow responsive manufacturing thesis has handed much of that competitive advantage to competitors. truth is that Harley still has a long way to go before it really is seen to be a The more responsive and agile business, and as he observed at the time, it certainly does need to get into a much smarter place when it comes to exploiting market opportunities. It needs to be able to change or add engineering practices at an even greater speed than it has previously managed to change or add paint jobs…it needs to be able to pirouette on a dime! In the 30 years I’ve been commenting on the Motor Company, the long since discarded Buell and MV Agusta initiatives aside, it has instead been more like watching an aircraft carrier attempt a three-point turn in a swimming pool. But I don’t want to be churlish. That gripe aside (personal opinion? The value of unions, politicians and regulations to society are vastly overstated and have little or no place in a business environment that sets a premium on flexibility and response to customer opportunities.), the plans unveiled are a foundation, and after all these years, the mis-steps and the wasted chances, watching Harley wake from its long slumber and inhale deeply of the sweet scent of opportunity is going to be a wondrous thing to behold. The core of the strategy is to bring their E-bike plans to market, as already announced, with ‘LiveWire’ as the first of an evolving program of ‘new gen’ urban riding solutions in 2019. But here is that flesh - it will do so before entering the Adventure Touring segment in 2020 (late, but hurrah!), doing so with a new 500 to 1250 cc displacement modular engine platform that can also allow the company to launch some very different factory customs (excellent!) and embrace some ‘streetfighter’ styling interpretations (also a tad late, but welcome nonetheless). That modularity of platform and, no doubt, the manufacturing flexibility and responsiveness that consolidation at an expanded and re-tooled York, Pennsylvania, facility (with matching engineering processes overseas) should permit the company to … drumroll … get a share of the already burgeoning ‘middleweight’ market (more hurrah!). Some have questioned Harley’s interpretation of the displacement and price sweet spot of that growing market, but better to come to the party than pass it by altogether! Going further, the real value in the investments internationally will be to allow Harley to get a share of the lightweight displacement market, especially in Asia Congratulations Harley-David s revealed when Harley-Davidson released its Q2 2018 fiscals (July 24), the Motor Company subsequently was due to unveil what it trailed as its “accelerated strategy for growth” a week later - and subsequently did so on July 30 - it was smart to put some distance between the two announcements. The Q2 fiscals were not, actually, quite as bad as many analysts had been expecting and produced a $4 to $5 bounce in the share price straight away (to the $45 mark). What was unveiled a week later was one of the most profoundly important strategic planning announcements in the 30 plus years since the company went public in the mid-1980s. Of itself it didn’t (yet) produce quite such a marked stock market response, but there is now reason to believe that, at worst, Harley has bought itself the time needed to be in with a fighting chance of staving the sharks - bait no more - not for now anyway. Given that much of the funding for new plans is going to come from “good housekeeping” rather than splashing the cash or, worse, needing to use someone else’s, would appear that Harley’s (entirely appropriate) caution is being matched favorably by that of investors, because the strategic thinking they unveiled and the likely ROI it is slated to yield within five years certainly hasn’t spooked the markets. The ‘More Roads’ strategy has added much needed flesh to the bones of CEO Matt Levatich’s January 2017 announced plans. Those plans were to launch 100 new models and train 2 million new riders in the U.S.A. in 10 years, massively grow its international dealer network and see some 50 percent of unit sales coming from ‘international’ markets. Remember, that latter announcement pre-dates this strategic leap forward and the whole Kansas, tariffs and Thailand matrix of issues. All these worthy objectives were to be achieved in environmentally appropriate ways while sustaining balance sheet integrity and shareholder value. Ambitious! o, has Harley managed to put flesh on the skeleton in a convincing and forward- thinking way? One that can see the reach, the consumers and opportunities they will represent in the next 20-30 years? Does ‘More Roads’ provide a platform from which the company can get creative and responsive? Well, yes, I think it does. At the worst, Harley has given itself a convincing start- point down a path that will provide a foundation from which to emerge from under the shadow of engineering conservatism and 20th century legacy. Whether the path broadens out into ‘Roads’ remains to be seen, but provided the twists and turns of the market and wider economic and geo-political issues aren’t harboring shocks of seismic proportions then, again, yes, there could well be those broad, sunlit uplands ahead. Even if many of the riding options on sale 20 years from now bear only a passing resemblance to those envisaged at this stage, Harley (and the wider market for us pilot fish) does now have a foundation. The company has given itself the all- important pathway for future first time Harley buyers to grow with the brand. Provided Matt Levatich can carry sufficient of the forward thinkers in Milwaukee with him, sufficient of the dealer network and sufficient Wall Street credibility for A the plans, then there’s no question that we are now firmly into ‘game on’ territory at long last. Of course, any slew of initiatives with this breadth (if not yet depth – focus on the strategic thinking, not the styling or tech at this stage) is going to have required senior management to have been coming off a “long run”, but the radio silence in the meantime has been deafening to outsiders and, no doubt, deeply frustrating to insiders. Maintaining competitive advantage by keeping the powder dry has, of course, been justifiable in terms of minutiae, but the vacuum that has opened up since Levatich unveiled his worthy, but so far seemingly hollow responsive manufacturing thesis has handed much of that competitive advantage to competitors. he truth is that Harley still has a long way to go before it really is seen to be a more responsive and agile business, and as he observed at the time, it certainly does need to get into a much smarter place when it comes to exploiting market opportunities. It needs to be able to change or add engineering practices at an even greater speed than it has previously managed to change or add paint jobs…it needs to be able to pirouette on a dime! In the 30 years I’ve been commenting on the Motor Company, the long since discarded Buell and MV Agusta initiatives aside, it has instead been more like watching an aircraft carrier attempt a three-point turn in a swimming pool. 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