Harley-Davidson is shutting down its Buell Motorcycles division. Not selling it, not letting it spin off as its own entity. They are killing it.
Rather than re-inventing the wheel, or re-stating the facts and arguments, I defer to Hell for Leather:
Cutting through the [excrement of the male bovine], it seems you can boil Harley's plan down to this: cut costs by streamlining production and lowering output, thereby alleviating dealers of stock they can't sell, then hope that the loans carry the company through to a projected return of middle-class solvency and credit availability.
All this sounds startlingly similar to the business practices that got Harley into so much trouble in the first place. It'll continue to rely on the same demographic buying the same motorcycles and, since a large proportion of those customers don't have enough money to buy either the bikes or the accessories, it'll continue to give loans to people that can't afford to repay them. It'll make those loans using money that it has, in turn, borrowed, often at a higher interest rate than what's being charged to customers. The company has presented no short-term plans to pursue the design of motorcycles with appeal outside its existing customer base and is therefore hoping the customers of other brands change their preference rather than finding new ways to appeal to new customers. As Boomers age beyond their riding years and see their purchasing power massively reduced by the end of cheap credit, Harley is failing to understand either the need or the means to reach a younger or wider audience. Relying on the market for motorcycles to return to its pre-recession levels without taking active steps to see it do so seems a remarkably naive way to do business. Harley is now effectively a passive passenger riding the economy's roller coaster. If the economy goes up, a lot, it might be OK. If the economy goes down or remains stagnant, it may find itself unable to repay that $1.9 billion and be forced to seek protection from its creditors.
Harley has a product line that may be charitably described as “stagnant;” the same may be said of their approach to customers.
Yes, last year’s renovation of the touring line was excellent. Yes, the V-Rod is wrapped around a fantastic motor. And, yes, the XR1200R simply rocks. (Well, not any more this year, since they’ve suspended Sportster production for the rest of the year.)
By and large, though, Harley cranks out the same motorcycles every year. For year after year, the grand change is…New Paint!
For many, this is awesome. Owning a Harley feels like owning a piece of history.
For new customers, though, it’s a bore.
Everybody wants to blame the current economic climate for their company failures, but Harley suffers more from a failure of imagination. Buell was a taste of something different than business as usual at Harley, and Harley executives killed it without even a clear idea how much, if any, money this will save them.
Honest, I hope they have a plan, something they don’t want to discuss. I’m afraid they’ll be like Cylons, though, and have a plan…until suddenly they don’t.