Interesting article


http://www.todaysfinancialnews.com/u...nset-7182.html
The financial situation is bleak. But at least some consumers can justify buying new cars. Imagine the situation at Harley Davidson (NYSE:HOG), the manufacturer of the ultimate discretionary item. By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): If I were a General Motors (NYSE:GM) dealer, I would be holding onto every penny I have and praying it gets better. If I were a Toyota (NYSE:TM) dealer I would be saying, “So this is what it feels like to be from Detroit.”
But if I were a Harley Davidson (NYSE:HOG) dealer, oh boy, I would checking the value of my property and working my way into a new franchise. Even during a severe repression, consumers and businesses need new cars and trucks. But almost nobody can justify a must-have motorcycle.
Before I go any further, I have to tell you I hail from the town that hosts Harley’s largest manufacturing plant. And I have spent many nights studying the world of business and manufacturing operations with its engineers and managers. So I have the right to say what I am about to say.
Harley Davidson is in big trouble.
The Big Three may be getting the majority of the media’s attention, but the Milwaukee-based bike maker has many of the same problems. In fact, many of its problems, like demand for its motorcycles, are even worse.
First, Harley’s assembly line is filled with UAW workers. That means the same expensive labor costs and burdensome contracts that are destroying Detroit are pulling down Harley’s bottom line.
Sadly, if the company could afford to de-value its brand by moving operations offshore and cutting labor costs, I am positive it would have done it ages ago.
Borrowing a hog
We have all heard of the problems facing GM’s lending arm, GMAC. It is much the same at Harley, but bikes are even harder to finance and securitize. Lending is tight and the riders that do qualify for loans are paying higher interest rates.
Proving the difficulties of the current market, the company’s head of its financial services unit, Sy Naqvi, jumped ship last week and is headed for less stressful territory.
This news comes just less than a month after the company’s CEO, Jim Ziemer, announced he is leaving Harley. This turnover creates yet another major obstacle as the company moves forward.
All of this should be a sign that the world of chrome exhausts, leather jackets and oil puddles is not exactly revving up. As the Baby Boomer generation trades its bikes for wheelchairs, demand will slow even further.
The company has relied on its powerful brand for nearly a generation. As that brand power diminishes, shareholders will see the value of their company drop just as quickly.
Over the past 12 months, shares of the company have dropped from over $40 to under $14 today. The decline is not over. Just like a Honda at a Hog rally, this will not be pretty.

 

Guess it depends on how long this "repression" lasts.

 

been watching this, they will have to get creative
Dealers in FLA, maybe near you, are offering "buy a sportster, and trade it in for full value after a year on a bigger V Twin

I guess I am going backwards. Living in FLA we can ride year round.
I am looking at selling my 05 SUV and just ride the bike for now.
If the rain stroms are too much I will pick a used beater car just for those days

 

Thanks for the post......I know you ain't playing doomsayer or dissing HD, but it's something we all need to face, and we really need to face it squarely....ESPECIALLY those considering trading up or buying a new HD right now.

A year ago I saw all this comming and moved all my investments into treasurys....I missed a few upspurts in the stock market, but I avoided many unpredictable and deep losses there.

Folks, you guys with hogs that are paid for might wanna consider keeping them....You without, might wanna wait and watch the used market bottom out.....as it is now, those trying to unload used bikes are struggling to get payoff....those that are repoed are too.....but the bikes repoed will be real deals soon when debt holders decide to liquidate for whatever they can get.

IF things don't turn around soon, we here with HOGS with be like those in Cuba who have managed to keep their American cars on the road with no parts support for 50 years!

 

As an investor, I would say that is a bunch of HOGwash. Baby boomers trading in bikes for wheelchairs? Even if that is true, didn't those baby-boomers have children? The next generation of riders is even bigger, so on that front, demand would increase.
I also don't buy the fact that a bike is a luxury item. Much of the country can ride year round. Given the uncertainty of gas prices, a bike would make a great alternative to a car.
As for the financial arm, HDFS is much different than other lending institutions. Banks foreclosed on houses mainly because the value of homes plummeted. The value of Harley Davidson motorcycles have not. If they are repo'd, they are still of value.
And finally, once you are a HD customer, you're a customer for life. Brand loyalty for this company is like no other in the world.
Sure, the financial markets are taking a hit, and so is HOG, but the long term future is bright. I'm a HOG buyer at these levels.

 

Speculators have been predicting the demise of Harley since they started, go figure

 

Yes, I also think that the MOCO is in trouble. A few years ago, when the financial arm of H-D started their "Screw it....Let's ride" thought process of putting folks into loans that many probably should never have received.....I told some friends that in my mind, that may be the beginning of the end. Of course, nobody thought that was possible, but then not many thought that they would ever see their stock drop as it has either (I sold mine in 2006). Look at what happened in the mortgage mess and you can see where I found my precedent for thinking this way. You couple that with quality issues and the cavalier way that customers have been treated for years and when added up, there is a lot of anti Harley sentiment. Now throw in the tailspin the economy is in and I think anything that may fall in the category of "I WANT it, but don't NEED it" could most definitely be is serious jeopardy.....including H-D. I've owned Harleys for over 35 years and hope to for as long as I can throw a leg over them, but as I've read many times in comments here and elsewhere.....it's the bike, not the company that keeps me coming back. It's an American icon and a tradition like very few others, but I think the message in this article is very accurate. I sincerely hope I'm wrong, but I won't be surprised if it happens.

 

Well, I'm not worrying about it, in fact I believe I will ride my Harley into the sunset today. peace!

 

Fearnofish,

As a fellow investor, let me share a little lesson with you that has proven to pay off.

"You make your money when you buy something, not sell it."

What that means is NEVER pay present value for anything except perishable consumables-ALWAYS search for a STEAL....Look always for a house/car/bike/lawnmower that is destressed-the more destressed the better.

The repo lots will soon be full of boats, jetskis, scooters, RV's and such.....Stash your cash and be ready.

 

Well, they are not helping themselves by not offering deals to the few prospective buyers out there. There was a long thread about this a few days ago. When sales drop drastically you can count on price cuts from almost everyone but HD. Better to take less and make a sale than to not make a sale. I am in that position right now. It is a buyers market if there ever was one. Heck, I dont have to buy a new bike, so make it worth it to me and I will. And I am not talking about warranties or gift cards but a price drop. Just my 2 cents.