Matt Levatich and Harley’s Ten‐Year Strategy

Source: Harley Davidson annual reports and Harley‐Davidson archives.

Downturn and Readjustment, 2008–14

The financial crisis of 2008 put an abrupt end to growth. After decades of customer waiting lists and a shortage of production capacity, Harley faced plummeting sales, excess inventory, and bad debts as customers defaulted on their loan repayments. In the shrinking motorcycle markets of North America and Europe, Harley—with the highest average retail price of any major manufacturer—suffered disproportionately. The credit crunch prevented Harley‐Davidson Financial Services (HDFS) from securitizing its customer loans—it was obliged to retain them on its own books.

When Keith Wandell took over as Harley’s CEO in May 2009, his priorities were to restore funding for Harley’s consumer lending, align production and employment with lower demand, and refocus on the core Harley‐Davidson brand—which involved closing Buell Motorcycles and selling Italian subsidiary MV Agusta.2 With its financial position stabilized, Wandell then sought to return Harley to its previous growth path. This involved:

  • Restructuring manufacturing operations including reducing capacity and increasing flexibility to allow a wider range of models to be produced and to match production to seasonal fluctuations in demand.
  • Expanding international sales—especially in the emerging markets of Asia and Latin America. In 2011, Harley opened an Asia‐Pacific regional headquarters in Singapore, and an assembly plant in India.3
  • Expanding the customer base. To reestablish growth in North America, Harley needed to broaden its customer base from its core demographic of white males of 45 years or more. Targeted groups included: women riders, “Harlistas” (Latino riders), “Iron Elite” (African‐American riders), “Harley’s Heroes” (military and veteran riders), and, most of all, younger riders through new models. During 2013, Harley launched its “Project Rushmore” motorcycles: a restyled range of touring motorcycles. They were followed by its “Street” models—lighter, sports motorcycles featuring new, liquid‐cooled 500cc and 750cc engines.

Matt Levatich and Harley’s Ten‐Year Strategy

In May 2015, when Matt Levatich succeeded Keith Wandell as CEO, Harley was facing declining revenues as it faced a shrinking US motorcycle market, intensifying international competition, and a rising US dollar. Of particular concern was a decline in motorcycle ownership among younger Americans. To address these challenges, in February 2017, Levatich and his team announced a 10‐year development strategy for the company. The key theme of the strategy was “Building the Next Generation of Harley‐Davidson Riders Globally.” Table 1 summarizes the key components of the strategy.

 

 

TABLE 1

Harley‐Davidson’s 10‐year strategy, 2017–27

Source: Harley‐Davidson, Inc. Investor Meeting, February 28, 2017.

10‐Year objectives

Actions

Build 2 million new HDa riders in the United States To convert “customer opportunities” into HD customers, HD would use its dealer network to provide more instruction in m‐cb riding, expand m‐c rental, assure quality of local events, and expand HD presence in used m‐c market.
Grow international business to 50% of annual volume Add 150–200 dealer points between 2016 and 2020. Increase brand awareness and loyalty through test rides and dealer events, including “Battle of the Kings” dealer customization competition.
Launch 100 new high‐impact H‐D motorcycles Annual expenditure on product development to be doubled. New models intended to expand HD’s customer base while building on HD’s “Key Differentiators”: Look, Sound, Feel, Personalization, and Connected Riding Experience.
Deliver superior return on invested capital for HDMCc (S&P 500 top 25%) HD’s initiatives to grow demand and increase the appeal of HD m‐cs would help revenue growth while improvements in operational efficiency would support margins. HD Financial Services would become increasingly important source of competitive advantage.
Grow our business without growing our environmental impact Sustainability initiatives related mainly to waste reduction and improvements in fuel economy. The launch of an all‐electric m‐c announced January 2018.

Notes:

aHD = Harley‐Davidson;

bm‐c = motorcycle;

cHDMC = Harley‐Davidson Motor Company, the main subsidiary of Harley‐Davidson, Inc.

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