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

Harley to women: Hear us roar

How Harley stock could roar back

Comments

 

I personally think way too many people put too much trust in what analysts and rating agencies say.  S & P blew it when rating mortgage securities; and analysts as well as economists are not as accurate in their predictions as they want you to believe.  The people of this great country are resilent and productive; our current finanical meltdown was not created by the hard working everyday citizen, but rather by those on Wall Street who thought they were smarter than decades of proven underwriting and sound logic.  We can turn the economic corner by positive actions and ignoring the negativity put out by the news media, economists and other negative minded people who now get their 15 minutes of fame!

Union losers...why can't you grasp the fact that because of union labor costs is the reason why so many companies out source thier stuff....Plainly speaking, lose the union and it will bring back industry back to america where it belongs

Haven't planned for the future?!?!?! That doesn't make sense.  They have been cutting production for a year now to start bringing there levels back to what the market will bear. Personally I think they should go below demand. They realized they had loaded there dealers up back in 06' and started the process back then but you didn't hear about it. Harley Davidson is far from greedy. Do your research. This stuff is only coming up because the "Big 3" weren't smart enough to do the same and now have put themselves in a world of hurt. Nevermind putting someone with bad credit on a new motorcycle, they were putting them in homes, and new cars and trucks. I know the article is on HD but it's a much bigger picture. They are a small part of it and I don't believe you will see them asking the gov't to bail them out. They've been around for 105 years. Indian hasn't. Both times combined. That's why the other guy can't trade it. No one wants it. There not going to take it on trade just because. They need a market for it to move. Sell it on you own. Let us know how you do.

On another note if you think their accessories and cloting are to exspensive go somewhere else. It's still America. You still have a choice. For now. Just remember, you get what you pay for. That alway's lies true.

For the guy with the Huyabusa, explain what makes an HD crap? With facts please. I'm curious.

Everything comes to and end. If HD goes its just a company name. There will always be motorcycles around and being built

I bought my first HD at age 50 - a dream for decades made impossible with kids and other responsibilities.  It was a personal achievement goal.  I love my Softail Cassic - no other feel or sound (VHLongshots) on the road like her.  But many of the writers here are correct - HD has caused alot of their own problems - again.  Micromanaging dealers, overpricing accessories and clothing, getting greedy  and especially  creating false inflationary value by limiting product at a time of high demand.  Yup, they did it to themselves again.  With the economic downturn, have to make room for everyday things vs. dreams.  I already did the seroius house downsizing, cheaper car, no eating out, no movies, no vacations, clothing from WalMart and Target.  For the high price items in the checkbook - pay the mortgage, insurances and health care or pay for my HD?  Sorry, reality came kicking the door down and the HD is on the market - anyone interested?  Selling an 06 for $13K.   Fabulous condition.

Harley Davidson will survive during this current economic downslide.  People don't know or realize the other compnaies which harley owns.  Ask people who make the bombs we drop on terrorists- harley makes the shell casings.  How about the sophisticated electronics of guided waeponry-harley.  Sure they sold motorcycles to losers who intentionally scammed them, so did realtors- its about generating revenue and forcing plowback.  No company wants to pay taxes on stock that's not moving or dealers not accepting their orders.  Harley will be just fine, maybe dump the financial services division.  Later.

Instead of all the concern about brands, pricing, quality, etc. What all us riders need to be focused on is our rights. Without the few that are still left, all this other talk is irrelivant.

Get in touch with your state COC and support our rights. Independents and patchholders.

SCR FastEddie

Wouldn't it be a shame if we didn't have more loud abnoxious motorcycles on the road.  

This is an exsample of americans not supporting and american bussiness. we end up buying the imports like honda yamaha etc. sure they are built in the USA but the parts are shipped from Japan.

TO NON PANTS WEARING WIFE,

You should re-think your stance on the unionized labor, maybe your gripe should be directed at the CEO's who work for a company for 3 weeks and get a 2 million sign on bonus and a 15 MILLION "retirement bonus" for working for 3 WEEKS ??? 17 MILLION for 21 days of work... Im union and make about 55K a year in the telecom industry, this CEO made in 3 weeks what it will take me 309 YEARS to earn.  This wage would also take care of the wages for 125 of my co-workers for nearly 3 YEARS.  I have a feeling that 125 of us "union" people could get a little more accomplished in 3 years than this BANK CEO got accomplished in 21 days...  Union's keep American moving!!! Dont forget it !!!!

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