Could Harley Davidson Go Private and Become More Successful?

By Sam Bendall - October 17, 2016

Rumors of a possible buyout by private equity continue to circle around Harley-Davidson (NYSE: HOG) like vultures over a carcass.

The troubled motorcycle maker can’t kick-start its sales, and it’s losing market share to rival Polaris Industries, and others. Much of this is due to the over-saturation of product on the used market, and the overall demand for leisure products is still low. Coupled with a number of lawsuits regarding EPA violations this past year, and the iconic motorcycle manufacturer is hurting – badly.

Sure enough the economy is still in recovery mode, but the entire motorcycle industry has been feeling the effects for awhile now. Would moving back to private ownership be best for the company?

Rich Duprey at, Investopedia, explains why this step could be a viable alternative:

Ever since the financial meltdown of 2007-2008, speculation that Harley-Davidson might be taken private has cropped up from time to time. Motorcycle shipments peaked at almost 350,000 units in 2006, but sharply decelerated as the recession hit the economy. Harley-Davidson hit a nadir of just 210,000 bikes in 2010. That’s when the rumor of a possible takeover by private equity firm KKR first surfaced. However, nothing ever materialized — it also seems as though the pattern keeps repeating.

In July, those rumors were resurrected again, causing Harley’s stock to spike 20%. Then, just the other day it was speculated once more KKR was ready to swoop in on the bike maker. That proved baseless too, but investors may be getting inured to the rumor-mongering as Harley’s shares only rose 7% this time.

As a publicly traded company, it needs to pay attention to its near-term share price as well as what’s best for the business, and sometimes, that conflict leads companies to take a short-sighted view.

For example, Harley has had a difficult time meeting its guidance for motorcycle shipments, and for the past two years has shipped an excess of bikes to its dealers just to hit the low-end of its forecasts.

During 2014, it predicted it would ship between 270,000 and 275,000 motorcycles to dealers, but despite sales falling, it actually increased the number of bikes shipped in the fourth quarter — which also happens to typically be one of its slowest sales periods, and just managed to make it over the lower threshold of range with 270,276 bikes shipped.

The same thing happened at the end of last year when it hiked fourth-quarter shipments despite falling sales all year long. It sent 266,000 bikes to dealers in 2015, safely in the range of 265,000 to 270,000 bikes it had guided toward. Yet Harley-Davidson’s sales fell 2% in the U.S., and were down 1.3% for the full year.

By going private, Harley could focus once again on building great bikes and fixing what’s wrong at the company, without having to worry about engaging in dubious practices that could ultimately damage its reputation.