American Motorcycle Dealer AMD 215 June 2017 | Page 4
“Way to go Harley”!
ith the jury still definitely out as to whether or not this
season has seen any uptick in business (OE or
aftermarket) so far (most are saying not, especially
where OE sales are concerned), the market appears to
be at a loss to understand why.
Although some of the primary economic indicators for April have been positive
(among Europe’s 19 members of the Euro currency zone as well as in the United
States), there appears to be a continuing lack of confidence that any newly minted
largesse will be coming the way of the custom motorcycle industry and growing
concern that further market contraction is upon us.
Don’t get me wrong, it’s not that the wider economic picture is definitely, for sure
and 100 percent for certain “doing well” as such, it isn’t and it can’t while growth
and consumer spending continue to zip around all over the place.
However, with employment levels good or at worst
improving (Eurozone) and nudging labor shortage
territory on both sides of the Atlantic, especially
skilled labor, and with growth being revised
dramatically upwards for the first quarter in the
United States, stocks hesitating but still essentially
growing more valuable by the quarter (including
Harley’s and Polaris’), inflation climbing but under
control and likely to finally going to trigger rate
rises, the big question is where’s the “trickle
down”?
These are such febrile times that one is reminded of Ezra Soloman’s famous and
often misquoted quote that “the only function of economic forecasting is to make
astrology look respectable.” Soloman was a major player in Nixon’s economic
team in the 1970s, and is it just me, or do the times in which we now live feel like
a return to the unpredictability and uncertainty of what, in economic terms at least,
was a “Dark Decade”?
ersonally I loved the 1970s, I had a great time (if you know what I mean!), but
in financial (and political) terms it was as if the world was in meltdown, that
any orthodoxies or certainties were simply there as shooting practice, and that
many of the issues that were in play then are returning to haunt us now?
For example, “outsourcing” (or “off-shoring” as it is also euphemistically known)
was just as hot a topic and just as misunderstood is it is now. Back then the
motorcycle parts and accessories industry that we know today was just starting
to emerge, and with it a growing proportion of parts manufacturing was being
placed on Asian tooling as we consumers availed ourselves of the lower pricing it
brought us.
Interesting then that following its trumpeting of its status as an ‘American Icon’
Harley-Davidson should have let slip (via a “fake news” item in the New York
Times?) that it is planning to start making whole motorcycles in Thailand.
What has been even more interesting though has been the widespread reaction
to it – especially from the Unions.
Here is an instinctively counter-intuitive ‘factoid’ for you. Did you know that, in
W
general terms, the less that the west has consumed of western made goods, the
wealthier, in general terms, most (though not all) western economies have
become?
I’m not as familiar with the minutiae of the math in the United States and
elsewhere as I am for my own country, but here in the UK the decades of
unprecedented growth and recovery from the industrial blight of the 1960s and
1970s have happened hand-in-hand with the decline of domestic UK
manufacturing – and in broad terms it is as true in countries such as the United
States and most of the leading European economies as it is in the UK.
here was a time in the UK when the phrase “trade old boy” was a derogatory,
used to decry the rather sordid process of actually having to work for a living.
But without trade nobody gets to go to the bank. Without profit, nobody gets to
go to work at all.
Harley-Davidson are not transferring jobs to Asia,
they are creating new jobs there so they can
repatriate profit (not bikes) that western wage
rates, benefits and (above all) union practices
would simply make unavailable to them otherwise.
It isn’t the (massively) overstated effects of tariffs
that make Wisconsin, Pennsylvania or Missouri
based manufacturing unprofitable for them in Asia,
it is the relative costs that they would need to
export there that prevents them from otherwise
being able to exploit the undoubted opportunities that the love of an ‘American
Icon’ that there is throughout the rest of the world provides them with.
The purpose behind making things is not to leave us all with a warm and fuzzy
feeling (well, not only), but to make us profit. Besides, if you can make profit
without actually making something yourself (Apple anyone?), then how much
smarter is that?
ithout being able to enter some of the world’s fastest growing markets
profitably, Harley (and everyone else for that matter) would be challenged
in terms of delivering value to stake holders, and it is that value that is the oil in
the west’s engine. Without being able to generate the capital needed for
investment, for growth, for rising stock pric