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

 

JTM,

Actually the unions are greatly responsible for the demise of GM, Ford and Chrysler.  The largest industry in the US has been run into the ground by union wages, health care, and their pensions.  Your idea of bringing all other wages up to the unions levels is inflationary and would support a non-market level for wages and would be very unhealthy economically.  The artificial wage levels established by the unions does not support a free market in contrast to your communist statement.  Non-pants wearing wife is right on in her views, especially on fiscal responsibility.  If HD was non-unionized, how much lower would their labor costs be?

The Motor Company wrote off their traditional customer base - those of us who have been riding their bikes for decades - to get the RUBs on their bikes.  Now the RUBs are going away and it will be interesting to see if the Motor Company decides that those of us who have demonstrated our loyalty back to the AMF days are worthy of their attention once again.

HD should have held back on production many years ago but like all publicly traded companies they needed to satisfy stockholders. They have overproduced and taken the resale value way down. Remember when a used HD would sell for nearly what you paid new? I love my Electra Glide and hope they survive!

"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

Nomad"

& how do you think those products will compare to the craftsmanship you receive from quality American-made products? Would you trust as Chinese-made Harley? Would you trust a Chinese-made anything? How about a Pakistan-made Harley, Chevy, Ford?

By the way.... FACT: Harley labor accounts for approx. 10% of the total cost of a Harley. Yes.... I said 10%.

Look at me! Look at me!  I'm super cool!  I bought a Harley but I can't afford my mortgage!  Look at me!

It's no wonder Harley-Davidson is having a tough time...

Articles like this spread the myth that Harleys cost 20K.  There are only a couple of models that cost that much, and those are the fully loaded touring ones.  That's like saying that all GM cars cost $80,000 because the is a Cadillac that cost that much.  I paid $10,000 for mine new in 2005 and couldn't be happier. I get 45mpg vs. 22mpg for my truck.  It sure was nice riding it to work every day this summer when gas was 4 bucks a gallon.

I didn't read all the comments, so this may have already been addressed, but, this isn't the first time Harley had problems.  Remember when they sold to AMF??  Just like Nathan's post, Harley will be just fine.

Ride safe y'all.

  FLHTC and FXWG, justa  recap of another post a few minutes ago..... labor only accounts for 10% of a Harley. Yes, that is a fact & it is accurate.

harley davidson is the reason all motorcycles in this country are so expensive,remember when they got bailed out by raising tariffs to super high rates in the early 80's.If they can't survive on thier own after the great years that just past,it is time to let this weak and poorly run company R.I.P......P.S. just traded in a 2005 goldwing paid 17k brand new,rode it 3yrs and got 10.5k.Not bad

Hardly Doinitson has been screwing their customers for years. All the Jap bikes are cheaper, better and more powerful and they don't break. They are worse than the American Car companies for putting out a poor product. The only thing they had going for them was awesome marketing. They have been able to dupe the buyers for years. Thay deserve to fold.

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