Harley CEO asks investors for patience as sales slide

MILWAUKEE: To Harley-Davidson Inc’s investors, its chief executive has a simple message — be patient with his strategy to turn around the slump in demand for its iconic motorcycles. In an interview, Matt Levatich said the company is not exploring a merger with a rival or a private equity buyout, as some investors have speculated.
Instead, Harley is spending millions of dollars on product development and marketing efforts, including promoting its learn-to-ride academies at showrooms, where Harley-Davidson certified coaches provide riding and safety lessons.
Levatich said the ridership programme would transform the motorcycle-maker into a “customer-creator.” But he does not have an answer when it will return Harley to sales growth in the United States, its biggest market.
“Mindset shifts are not something that happen overnight,” he said in the interview in his office at the company’s headquarter in Milwaukee, Wisconsin. “But that’s very much core to the 10-year strategy for the company.”
However, nearly three years into Levatich’s tenure as Harley CEO, investors are getting restless. Harley’s stock has fallen over 23 per cent since mid-March last year.
Since Levatich came to the helm, the shares are down 14 per cent, and Harley is losing share in a declining market for motorcycles in the United States.
Harley investors and executives have worried for years about what would happen in the future when the company’s devoted Baby Boomer got too old to ride.
Now, Harley has reached that demographic cliff. The company last month projected shipments to dealers could plunge to their lowest level in eight years in 2018 after sales fell in every region last year.
Falling sales have made Wall Street speculate whether the company, which symbolized the counterculture movement of the 1960s, would seek refuge in a buyout or turn private to rework its product lines and branding without the pressure from shareholders to shield its profit margins.
Levatich, however, sees no alternative to the current ownership structure.
“The moment, however, we feel that the ownership structure of the company… is starting to dictate our strategy, that’s the moment to consider whether that ownership model is the right model,” he said. “So, it is not the case. We are very clear in our strategy.”
In 2017, the ridership programme added 32,000 new riders in the United States. Levatich sees it as a “positive” trend and wants to build on it.
More riders, however, do not necessarily mean higher sales.
Bill Koester, a general manager at a Harley dealership in Illinois, says only 35 per cent to 40 per cent of the riders trained at his dealership last year bought a new or pre-owned bike.
To woo the next generation of riders, last month Levatich unveiled his big bet on the small but growing market for electric bikes.
Yet, the new technology is still very expensive and not as profitable as automakers may have to sacrifice margins to succeed in selling battery vehicles.
“There are some practical problems with EV that still most auto companies are also struggling with,” said Levatich. “It is very expensive,” he added.— Reuters