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:

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How Harley stock could roar back

Comments

 

why by a harley when you can buy jap bike and get twice the horsepower or half the price.  i love american cars and trucks because they are the best deal. and so are jap bikes.

That's why a Yamaha Star is Twice the bike for half the price

People...Wake Up!  This downturn is an opportunity.  An opportunity for the strong companies to survive and the ones that have been mismanaged by greedy executives to fail.  Take a look at the auto industry and you will see the way HD will also go.  HD has a bad reputation for overcharging the crap out of their product and piss poor customer service.  Remeber a few years ago when HD actually limited the number products they put on the floor.  When it started to be really cool to ride a HD, dealers charged, and received, thousands over MSRP.  Not good for future relations with the public.  Looking back at that, how bad does it really make you feel that HD is suffering at their own hands?

I own a couple of Harleys, I enjoy them, I ride the heck out of them.  But people, you need to learn when you buy one and put a bunch of money into it to get rid of the ugly stock parts, you will never see that money again.  Its still a used HD the day its bought. With the economic downturn and with good Japanese cruisers available now, along with Victory, Triumph, Big Dog, and others that have survived, there are many choices when purchasing a really nice bike.  HD are nice bikes, but so are the others.  There are so many choices along with a ton of used Harleys at great prices.  Why would anyone buy a new Harley now or in the future.  Say goodbye to the HD company that you knew a couple of years ago.

It may survive but it will be smaller and will have to be less greedy.

What's the difference between a broken down Harley Davidson and an old dog?  The old dog can get in the truck by itself!

In Response to non pants wearing wife:

I agreed with you until this stupid comment came rolling from your mouth:

"As for union workers - the reason that our auto-makers, and perhaps even Harly, are in the shape they're in is because of the HIGH cost of unionized labor.  Move all the manufacturing plants to the southern United States and you won't have an issues with unions.  They aren't tolerated in the south."

Why is it that everyone wants to dis the Union workforce? Why does everyone think the union workforce should be brought down to a lesser level? Wouldn't it be a better idea to bring the wages of everyone else up to the level of union workers? You know what you sound like? a communist.

People love their Harleys but it is a luxury item.  Just like a  home, if you sell them at $20,000 a pop with no money down people don't have any equity in them and it is easier to walk away from.  

No Jim they are repubpig cry babies.

hold on to your dreams, ride the wheels of the motorcycle, have a cold one when you get back home and don't believe half of what you hear and little  of what you read...and you just may get thru' all this crap. there are better times ahead, there always are..

  GLY, I have ridden to Sturgis many times as well as Bike-week. I have seen Harley's at the side of the road but more times than now, they are very old bikes. How many of the broken-down honda's at the Honda rallies are old Hondas? Oh yeah, they don't really have too many national Honda rallies do they?  ANYWAY..... I was referring to Chinese made bikes. I never said Harley's never have mechanicals. I'll bet you my last dollar that IF you had as many Chinese-made bikes as there are Harley's you'd see a ton of broken-down Chinese bikes compared to the number of Harley's.

Their market will not die off but they need to be more reasonable with their pricing and start funding some R&D. I am a young man of 28 and I have been riding for about 9 years, Take a guess what i ride...Thats right, I ride a "Crotch Rocket" It's not that I wouldn't like to have a Harley, the bottom line is I can't afford one. Why on earth would I pay anywhere from $16k-$30K for a bike that is no better then what I can get for $9k from a Japanese Bike. HD'S R&D needs to stop fooling itself into thinking it's keeping up. I spent $9K on my bike brand new. It is lighter, faster, More reliable, consumes less gas and is a fraction of the cost. I think almost everybody my age that rides will get a cruiser style bike eventually because let's face it the sport bikes are uncomfortable after a while but if Harley Doesn't become more reasonable and reliable I will certainly go for a Japanese bike when the switch happens.

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