Harley downshift jolts fans
Harley-Davidson Inc. is engineering its own makeover, and some shocked fans and workers aren’t pleased.
In reporting an 84% drop in quarterly earnings, the Milwaukee manufacturer said Thursday that it is shutting down its longtime Buell product line and selling its MV Agusta business, an exclusive, high-end Italian brand it bought only last year.
The company said it wants to focus on its core Harley brand.
The decision to get out of sport bikes left a small but devoted ridership “kind of depressed,” said Joe Frus, owner of the American Thunderbike Club, an online forum for Buell fans with 2,000 members.
Frus has owned three Buells “just because it’s different.”
“It’s the whole cookie-cutter thing,” he said. “When you go someplace, you’ll see 25,000 Hondas or 25,000 Suzukis, but only four or five Buells.”
Ernie Snair said he was “devastated” by Harley’s decision. He’s a Buell racer and specialist at Harley-Davidson of Glendale, where he works in sales. He said he worked from time to time with Erik Buell, the founder of the innovative sport-bike company that Harley-Davidson bought in 1998.
“Motorcycling is a passion, and his bikes are a passion,” Snair said. “The bean counters . . . are making a huge mistake because you can’t figure that stuff out on a computer and doing marketing.”
While the rarity of Buell bikes has been a draw for the brand’s small fan base, it’s part of the reason Harley-Davidson decided to pull the plug. Just 135,000 Buell motorcycles have been produced in the brand’s 26 years, and MV Agusta sells only about 300 a year in the United States. By comparison, Harley-Davidson will produce as many as 227,000 motorcycles this year alone.
No buyer has yet been named for MV Agusta, based in Varese, Italy. MV could be sold because it is a stand-alone business unit, whereas Buell could not because it is too integrated into Harley’s other operations, said company spokesman Paul James.
Harley-Davidson will stop production of Buell motorcycles Oct. 30, though dealers will sell remaining Buell inventories of motorcycles, accessories and apparel and will continue to provide warranty service and repair work. Harley expects to provide replacement and service parts for as long as required.
Wall Street seemed to welcome the news. Harley-Davidson shares rose $1.43, or 5.5%, to $27.69.
The company’s decision to rid itself of the Buell and MV brands came with the dour news of third-quarter earnings of $26.5 million, or 11 cents a share, a huge drop from last year’s third-quarter profit of $166.5 million, or 71 cents a share. Quarterly sales fell 21% to $1.1 billion from $1.4 billion.
The company attributed the poor performance to the effects of the recession on both sales and loans through Harley’s financial services division.
“While the environment remains challenging for us, we are mildly encouraged by the moderation in the decline of dealer retail Harley-Davidson motorcycle sales,” Chief Executive Keith Wandell said.
The discontinuation of the Buell brand, which has been a wholly owned subsidiary of Harley-Davidson since 1998, is part of a “go-forward business strategy” aimed at driving growth “through a focus of efforts and resources on the Harley-Davidson brand,” James said.
As part of its new strategy, the company will focus on sales in emerging markets such as India, where Harley recently announced plans to begin selling its motorcycles in 2010, and on a small but growing North American market for women and minority riders.
Though Harley-Davidson has been hard hit by the recession, it is faring better than other manufacturers of heavyweight motorcycles, which have seen sales decline 36% in the third quarter from the year-earlier period.
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