There is lots of talk lately about the dire circumstances of some of our beloved Harley dealers. Some are in trouble while some are fairing better. The deciding factor usually is how well the dealer has operated his business over the last few years. If the dealer is one of those who has gotten a little greedy over the last few years when demand was high and did not put much back into the business, then his bank account has probably taken a pretty big hit the last 3 months. If, on the other hand, the dealer has kept his nose to the grindstone and tended business, while not getting overly greedy, his bank account is probably in better shape. There are good operators and bad operators in every industry. Both survive in the good times, only one survives in tough times. The M/C business is no different. There will be a thinning of the retail herd this go-around, in every industry. No exceptions. There are simply too many retail stores of every variety.
For the manufacturers, it is a little bit different. True, they will have a tough time in this economic environment. But. there a a lot fewer manufacturers around to distribute a product when the demand eventually does return. If your local dealer goes south due to unforeseen circumstances, you can always travel to the next town and buy the same product from a dealer who has survived.
Now, what does this have to do with OPEC? No much except the parallel adoption of the same business plan. It is much easier and more profitable to control the supply of a product than it is to try and regulate the end price of the same. In other words if you cut back on production and demand stays about the same, the price of the commodity should rise or even out. It has worked like a charm for OPEC for the last 40 years. We will now see if it works for Harley Davidson. Just like OPEC, there will always be a few dealers who will deviate from the adopted policy, but as long as most hold together we will probably not see a decline in the MSRP. The hat trick will be to see if many of the dealers subscribe to that notion as the economy slides further and sales drop off more. One year from now we will know more. Anybody got a crystal ball?

 

Sorry Dude but that's way to much to read at one sitting!!

 

I think you are right in that the Moco is trying to control the demand side. This should keep prices close to the same, as long as demand keeps up with the supply. But if they drop production by 20% and demand drops by 40%, there will still be excess inventory.
Another option is to try to put incentives in place to get people to buy now; 0% financing, buybacks, extended warranties, etc. The problem with these types of programs is that you start borrowing on next quarters sales with the incentives, and set up a self perpetuating cycle. As soon as you end them, sales drop like a rock.

 

Actually, the company has been working this problem for a lot longer than most would think. Most certainly longer than the popular definition of the start of the economic down turn, (recession).
For example, in September 2007 the Harley factory in York, Pa had some 2000 completed bikes stored in warehouses. They were waiting to be shipped out but there was no real demand for them. Keep in mind, York only assembles the softtail line. The Sporties and rubbermounts have been moved, from there, for several years now. To make adjustments in the inventory, (reduce the numbers coming off the lines and deplete the stored bikes), the company made arrangements and informed the workers that the plant would close for the first 2 weeks of December. Conveniently, that happens to coincide with antlered deer season in Pa.
The company will do whatever it takes to stay viable. Remember they have more experience at this than most others. They had their own private recession back in the seventies. In fact, they even got their own private governmant bailout, sorta. Huge tariffs on big bikes did Harley some huge favors as they struggled to rebuild.

 

So Opec tries to control prices by limiting supplies.....I could be wrong...but it does not seem to be working. Yet. HD might be cutting production but I don't believe it is to maintain their over inflated prices. I am paying $1.49 for a gallon of gas. I am loving it. But I imagine the guys and gals who have lost their jobs are scratching their asses and trying to decide....gas or groceries. Plenty of used scoots for sale. All over the place. Is HD gonna go Tango Utah? Doubt it. But....the winds of change are a blowin' and they are going to continue for a good long time. Am I going to the local dealer and pay sticker for a new scoot??? NFW. And I can afford to. But I am not going to. Why?? I don't know if I will be employed next month. Very few things in life that trump riding...but dinner is one of them. But... I can live without the bike. Priorities in America are going to be changing dramatically in the next 5 to 10 years. When I bought my only new bike (96 FLSTF), I made a deposit and got in line. Took 22 months for delivery. HD probably won't ever see days like that again. At least not in my lifetime. Walk into any shop today.....no shortage of bikes on the floor. Yet....no smoking deals from the dealer. At least not here. Let 'em eat 'em. My current ride, 07 FLHP, bought from the local dealer. Never again. At least not this dealer. Price was fair. Their service sucks red, wrinkled, rhino rods. That is why the next one (if there is a next one) will be out of the paper or off the web. In todays economy....HD is going to find themselves priced out of the market. If Toyota is shutting down for 11 or 12 days........

 

Sounds like economics 101, "guns and butter"!!!

 

Lots of good insight in the above posts......but, you are all still too optomistic in my opinion.

Sorry but, you can't compare Harleys or any other luxury item to OPEC.

Trust me, the newspaper would already be full of spotless 1-2 year old Harleys(and SUVs) IF the cash strapped owners could even get pay off for them....But like home values, Harleys and other luxury items true market values have tanked....And those items are hocked beyond present value....So tere are no buyers..............YET

Let the crash run full cycle......Don't rush in and buy a distressed bike, house, or SUV just yet....Let them all go to foreclosure until the creditors have them running out their ears, then pounce(If you yourself sill can)

Folks, things are going to get really bad starting soon.....the pols can't keep it hidden much longer....You will be lucky to have a job, much less a need for transportation to get there.

Am I pessimistic?...YEP, and that's why I have lots of money and ain't scared.

 

Too many words...MORE pictures!

 

Interesting thoughts.
But there is more to the HD equation. As they cut back on production to hold price, they must also cut bac k on costs to maintain enough profit to keep the lights on. Generally that means layoffs, since labor is a big hunk of the cost in manufacturing. But to build motorcycles, there is a critical mass of employees with the necessary skill sets and labor hoursneeded to hold quality and get the units out the door. The real challenge for Harley will be if they can walk the fine line and preserve their production capability with enough profit, or if sales will fall so low that they cannot maintain that critical mass of talent and go the way of the
dinosaurs.

 

Let this sink in......."Over 700 thousand laid off LAST MONTH"....Well over 2 million laid off the whole year of '08......Now that the final tally is in for all last year, we expect that 1 out of 4 retailers will close in the next two quarters.

Those are sobering numbers, huh?....But the problem is, the predictions based on those numbers are still too optimistic......The same optimism that got us into this mess prevails yet!

I expect that fully HALF of all retailers and manufactures(USA) will shut their doors in the next 18-24 months.

Why do you think there has been such a rush of THEFT and gutting of hedge funds, retirement funds and other bulk investment assets....Those in the know who hold your funds saw it coming and are escaping with your financial future as you sleep.