American Motorcycle Dealer AMD 222 January 2018 | Page 4

Who’s the fool?
he recent piece written by Rich Duprey, published in December
by investor analysis website the ‘Motley Fool’, exposes a
commonplace Achilles heel of Wall Street, namely the disconnect
between investor perspective and the real world of real people
consuming real products in real markets. That disconnect is between
“Wall Street and Main Street” as one industry insider put it to me
recently.
The purpose of investment used to be to generate investment capital and profits to
fund more profits and investment capital in a virtuous upward cycle of increased,
profitable, business activity -the making, selling and buying of product in a cycle that
drives profitable productivity and growth.
It would appear now that the short-term focus on dividend (“share holder value”)
requires analysts to cut themselves off from the realities of the business that the
businesses they invest in actually trade in, the realities of the markets those businesses
trade in, and the realities of the tastes, demands and
expectations that consumers have of the businesses they
buy from.
Investing money in money is not the same as investing
money in metal or any other material that consumer goods
are made from.
The piece in question, one that was rather unfortunately
given inappropriate extra currency by certain motorcycle
blogs, was one that called into question the suitability of Harley-Davidson’s current
senior management - “Does Harley-Davidson Need a New CEO and Board?”
Now, personally, I have been eying the evolution of the composition of Harley’s board
in recent years with some scepticism. Outside experience and skill sets are indeed vital,
but it does seem to me that Harley may have failed to balance that against the need
for the board of directors of a manufacturing company to be able to make business
judgements in a manufacturing and engineering context; specifically, in a motorcycle
industry context.
Business acumen and experience from other sectors must be balanced with
manufacturing and engineering knowledge and experience.
he present composition of Harley’s board may well have imbalance in that
important respect. But to suggest, as the ‘Motley Fool’ piece does, that the route
to dealing with this imbalance might be to replace what, as far as I am aware, is the
one and only remaining board member with motorcycle industry experience in general,
and experience of dealing with the specific issues that have faced the Motor Company
in the past decade, strikes me as entirely inappropriate and contradictory.
The only way Harley has of rebuilding its market position is to design, engineer and
productionize its way out of a hole that isn’t entirely of its own making.
What Matt Levatich likely needs is more motorcycle industry experience to draw on,
not less; more engineering and production gravitas to lean on, not less; access to more
investment, not less. Harley-Davidson needs a new CEO as much as it needs a hole
in the ground.
It is always high-risk to go out on a limb about Harley’s business prospects some four
weeks or so before the company is due to release its annual results, but as I said last
T
month, and have alluded to several times the past few months, now is not the time
to blink.
I do believe that Harley is headed for stability at worst, even if the number of sales
available to it aren’t poised for actual unit growth for some time yet - maybe another
24 months.
If, as I hope, “Stable is the new Growth” in 2018 then expect to see Harley’s share of
the available market continue to grow, even if only slightly, as the 2018 Softails start
to reignite sales is a balance sheet area that had trailed behind the M-8 (and even
Rockwell) Touring models, and behind the more assured evolution of the Sportster
offer than the results of the past five years might suggest.
Price-point will remain Harley’s own Achilles heel of course, as it does for almost every
American manufacturer, but in terms of a design and handling offer that can effectively
speak to the riding and ownership expectations of new consumer generations and
demographics there is no question that Harley is in a much better place than it was
even just five years ago.
To replace the CEO that has brought the horse so close
to the water before the company really gets a chance to
drink would be foolhardy indeed.
s Matt Levatich said nearly a year ago, following the
successful launch of the M-8 Touring models, “we
haven’t seen anything yet”. While, at that stage, such
optimism felt more like wishful thinking than reality,
having overseen such a successful reimagining of its cruisers I for one think it would
simply be nuts to rock that particular boat at this stage.
I regularly hear informal, thinly veiled hints from vendors who are already prototyping
for additional new models and, hopefully, platforms. Such individuals are generally
speaking not easily impressed and not given to looking at OE product direction through
rose tinted glasses. The kind of individuals I am talking about are hard-nosed, hardcore
Tier Ones who supply a wide range of OEs - so they are in a position to judge, and to
be impressed, or n