TACH - AUTOMOTIVE STOCK INDEX
January 03, 1997
By Gerald Levinson CMA
Harley-Davidson, Inc.
Harley-Davidson doesn't just make motorcycles -- it creates lifestyles. Offering loads of chrome, a seat modeled after a horse's saddle, and a rowdy V-Twin engine (available in 3 sizes: 883cc, 1200cc, and 1340cc), a Harley is a singularly American experience. The Milwaukee-based company controls more than half of the heavyweight motorbike market in the US; its model names are among the best-known in the industry, including Sportster, SuperGlide, Low Rider, Dyna Glide, Softail, and Road King. Its bikes, some known as Hogs, are sold through a worldwide network of more than 1,000 dealers. Harley-Davidson has been the only US motorcycle manufacturer since Indian gave up the ghost in the 1950s.
The company has transformed its operations to focus on its booming motorcycle sales. It sold its Holiday Rambler Recreational Vehicle Division (and most of its dealerships) to Monaco Coach Corporation and plans to double its motorcycle production to more than 200,000 by 2003. The expansion strategy calls for increasing capacity at existing plants while building an entirely new factory in Kansas City, Missouri (to begin operation in 1998).
Nothing has changed more noticeably in the long history of Harley-Davidson than its customers. Gone are the days of bad attitudes and worse tattoos. Most Harley owners these days are weekend riders -- college-educated with an income of about $66,000. The company has introduced more apparel lines and accessories to appeal to the new market. Soft apparel sales, however, have caused one of few blemishes on Harley-Davidson's highly tuned performance.
HISTORY
In 1903 William Harley and the Davidson brothers (Walter, William, and Arthur) of Milwaukee sold their first motorcycles, which were essentially motor-assisted bicycles that required pedaling uphill. Demand was high, and most sold before leaving the factory. Six years later the company introduced its trademark 2-cylinder, V-twin engine, which produced a low rumbling sound; its bikes reached speeds of 60 mph. By 1913 the company had 150 competitors.
WWI created a demand for US motorcycles overseas that made foreign sales important. During the 1920s Harley-Davidson was a leader in innovative engineering, introducing models with a front brake and the "teardrop" gas tank that became part of the Harley look.
The Great Depression decimated the motorcycle industry. As one of only 2 remaining companies, Harley-Davidson survived by its exports and by sales to the police and military. To improve sales, the company added styling features like art deco decals and 3-tone paint. The 1936 EL model, with its "knucklehead" engine (named for its odd appearance), was a forerunner of today's models.
During WWII Harley-Davidson prospered from military orders, elevating production to record levels (90,000 cycles were built for the military). It introduced new models after the war that catered to a growing recreational market made up of consumers with money to spend: the K-model (1952), Sportster ("superbike," 1957), and Duo-Glide (1958). By 1953 Harley-Davidson was the last remaining major motorcycle manufacturer in the US.
The company began making golf carts (since discontinued) in the early 1960s. It went public in 1965 and merged with American Machine and Foundry (AMF) in 1969. But by the late 1970s sales and quality were slipping; certain that Harley-Davidson would lose to Japanese bikes flooding the market, AMF put the company up for sale. There was no buyer until 1981, when Vaughn Beals and other AMF executives purchased it. Minutes away from bankruptcy in 1985, then-CFO Richard Teerlink convinced lenders to accept a restructuring plan.
Despite low demand and Japanese competition, Harley-Davidson made one of the greatest comebacks in US automotive history. Using Japanese management principles, it updated manufacturing methods, improved quality, and expanded the model line. Harley-Davidson again went public in 1986, and by 1987 it had acquired 25% of the US heavyweight motorcycle market, up from 16% in 1985.
Harley-Davidson opened its first retail mall outlet to sell MotorClothes in 1990. Three years later it acquired a 49% stake in Eagle Credit (financing, insurance, and credit cards for dealers and customers; it bought the rest in 1995) and a 49% share of Wisconsin-based Buell Motorcycle (gaining a niche in the performance motorcycle market).
The company sued Lorillard Tobacco in 1995 to break its 9-year-old licensing agreement that puts its name on cigarettes. In early 1996, Harley-Davidson sold its recreational vehicle business, Holiday Rambler, to Monaco Coach Corp. for $50 million.