Can Harley-Davidson survive the downturn? - Top Stocks Blog - MSN Money
 
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Can Harley-Davidson survive the downturn?

Posted Nov 19 2008, 04:37 PM by Kim Peterson
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America has a strong -- and growing -- used motorcycle market. Add a plunging economy to that, and the road is getting a little rough for Harley-Davidson these days.

Harley shares have taken a beating lately, falling 41% in less than three weeks. Shares are down 70% year to date. Sure, the stock looks cheap, but analysts warn that the earnings potential for the company is unclear.

One reason is that core Harley buyers are simply getting older. Only 12% of buyers are under 35, and long-term demand will slow as baby boomers "exit their peak riding years," wrote a JPMorgan analyst in a recent client note. The analyst expects motorcycle registrations to drop 14.7% next year in the U.S. and 4.2% internationally.

Harley also made bad business decisions. It sold bikes to buyers who clearly couldn't afford it, handing out $20,000 motorcycles with no money down, according to BusinessWeek. And now, a lot of subprime borrowers simply can't, or won't, repay those risky bike loans.

That's led to concerns about the credit rating for Harley's financial services unit. Standard & Poor's has placed Harley on "CreditWatch Negative" status and will meet with management with concerns.

Harley is responding by cutting back shipments to retailers, in hopes that it will reduce its inventory levels. The company has said that earnings will drop about 18% in 2008 -- the second straight year of decline after 20 years of growth, according to Standard & Poor's.

Harley shares are in the $13 range now, and option traders expect the stock to drop below $10 by Dec. 19. 

Photo credit: M62, Creative Commons license

Related reading:

Harley-Davidson slips on subprime consumers

Slaughtered HOG a bargain

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How Harley stock could roar back

Comments

 

Lets see jmiller says lets do away with unions. So you say the workers should then have faith in the CEO's they would be fair minded and give fair wages and benifits, hmmmmmmmmmm ya sure they would. give me a break i have no faith in the rich repuboigs doing anything for the average worker.

For too many years Harley and their dealers have been living the high life with no visible means of support. Even their entry level bikes were being marked up ridiculous amounts by the greedy dealers. While it's true that harley has many models that sell for under 20K it's just as true that virtually no dealer sold ANY Harl;ey model for anything close to suggested retail price. Even the entyr level 883 Sportster was hard to find for under 10K and this was a bike with a sub-7K suggested retail.

You can argue that price and demand sought their own level but over the long haul what Harley dealers did was to create an atmosphere in which too many serious buyers decided to scratch Harley permanently off their lists because of the dealers pricing strategy, their gouging of customers in their service departments, and the all to prevalent snobbery and poseur attitude of far too many Harley owners. The sales rags (Cycle Trader, etc.) are full of Harley's with virtually no miles ridden by people who bought them as jewelry not as motorcycles.

I went for a ride one weekend with a friend of mine (not Harley mounted). His son and friends wanted us to go with them and I was interested in a ride to a not too distant bike meet. We never got there. After stopping for 1/2 hour at each riders house to collect the group they then proceeded to get a 1 & 1/2 hour "breakfast" followed by stops at EVERY watering hole they passed so they could ogle each others bikes and show their colors. After 5 hours covering less then 30 miles I made my excuses and left for a real ride. They never did make it to that rally by the way.

Although I expect that the Japanese imports will also suffer and many of their dealers are also in for some hard times I suspect that they will be able to survive handily because they cater to real riders of all types with little or no attitude.

Harley has an MSRP, which is reasonable, then the dealers have "out the door price" which jacks the price way over MSRP. A lot of us bought them and paid the premium because we are loyal to the brand. This is the time to buy used Harleys. Get them half price.

That doesn't cure the ills of HD, or its stock holders or the Dealers who milked that cow dry. I would love to buy another one and have a spare, but like everyone else I am not spending money right now. I am waiting until the economy turns around.

Harley not only needs to get their Q & A under control, but they also need to take the dealers to task for their practices. I can not in this small space tell all the horror stories I myself have had with trying to get service and at 3 different dealerships. The stories are all the same, poor workmanship, refusal to be more customer friendly, over priced products, crazy service rates. My last experience was the last draw, purchasing new tires, long story short rear tire on backwards, then come to find out was not even the right tire was a front tire for another bike. I refuse to be a walking cah register for these clowns, If they go down no one to blame but them selves. Now I take my bike to a guy who works on it for a case of beer and have never had a problem yet.

They deserve it.  They overpriced everything in the store.  Now things get tough and they will pay the price. All those years of selling bikes over list.  I hoped they saved some money back because they are going under now

  FLHTC and FXWG,

What is a fact is that corporations have found a loophole that allows them renig on their negotiated contracts with Unions & allows them to short-change the people who built the company in the first place. They file bankruptcy & then the courts allow them to forget all their responsibilities to their workforce. With that type of mentality, how long until our working families are little more than the Chinese poor? GO ask the failed CEO why he deserves a 22 million dollar payout when he gets fired.

 So the motorcycle manufacturer that has done the least to improve it's form, function and performance is failing. It can join bias ply tires and kick starters in the scrap heap. Bicicle chains and big rubber bands should not be in a drive train. Life on the road will be quieter, and there will be less maintenance trailers following the pack to pick up the pieces.

                                    .....Rocky in Maine

No Union, NO WORKERS RIGHTS

I love the quote: "Union labor isn't cheap but it is the best craftsmanship money can buy."  Yeah if you consider craftmanship as one man working and three watching, then rotating roles every 15 minutes, as the "best craftmanship".   LOL, you union guys still don't get it, think you can work for 30 years, retire at age 50, and have the company pay for your lavish lifestyle, while all you did was turn a wrench for 30 years.  You people are a joke, and the end is near for most of you.  Good riddance to the worthless unions.

I think everyone has missed the point. The financially related criticism is related to the fact that Harley, like many home mortgage brokers, in their haste to make a sale,  loaned money to people who were obvious credit risks,  and now we are ALL paying the price of home and vehicle foreclosures. The really unfortunate fact is that our grandchildren will also be paying for this in the form of higher taxes and less benefits for those taxes.

Mark

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