Harley-Davidson's aging biker problem

[xsrider]

Found this on CNN.com here > http://money.cnn.com/2010/09/17/autos/harley_davidson_fall.fortune/index.htm?eref=mrss_igoogle_business

Nothing new, we've heard it before.  Harley buyers are getting old and younger riders aren't buying Harleys.  

FORTUNE -- Harley-Davidson was the feel-good turnaround story of the 1990s and then the poster-boy for brand values in the 2000s. How often did you read that Harley was the only consumer brand whose customers were so loyal they wore the company's logo tattooed on their chest?

But after expanding exuberantly in the last decade, Harley has fallen on hard times. Now it is struggling against a foe that not even cost-cutting nor brand loyalty can overcome: demographics. Its current owners are getting old, and not enough younger ones are coming up behind them.

Harley's core customer is a middle-aged white American male, a group that will contract in the coming decade. As one blogger wrote, "The 60-70-year old riders have trouble lifting a leg over the seat because of arthritis. And finger joints hurt with the cold air and engine vibration." Women represent just 11% of Harley buyers, and penetration in the African-American and Hispanic markets is similarly limited.

Harley's need to readjust its aspirations was driven home this week by the news that the company had forced its Wisconsin labor unions to accept wage and benefit concessions by threatening to move its factories out of the state. New contracts will allow the company to cut 325 employees and convert 150 to 250 other workers to temporary or "casual" status, meaning they have fewer benefits and will work on an "as-needed basis.

The cutbacks come as Harley (HOG, Fortune 500) scales back in the face of a sharply shrinking market. As recently as 2008, Harley built 303,000 motorcycles, nearly double the 159,000 it assembled in 2000. This year it expects to make between 201,000 and 210,000 bikes. Since new CEO Keith Wandell arrived on the scene in May, 2009, Harley has consolidated operations, terminated its Buell line of sport bikes, and sold its MV Agusta Italian motorcycles back to its founder.

Bumpy roads are nothing new for Harley. The first Harley-Davidson was built in Milwaukee -- still the company's headquarters -- in 1903 by William S. Harley and the three Davidson brothers. Their popularity took off during World War One, when 20,000 Harleys were used by the U.S. infantry. With the shutdown of Indian in 1953, Harley became the only American motorcycle manufacturer. Marlon Brando's 1954 movie The Wild One helped solidify Harley's image of hairy-chested rebellion, an identification it alternately embraces and spurns.

By 1969, Harley enjoyed an 80% share of the market for big bikes. But ten years later, incursions by Japanese manufacturers, led by Honda, squeezed its share to 20%. Fighting back at what it perceived as unfair competition, the company won an anti-dumping ruling from the International Trade Commission in 1982, and President Reagan imposed a 45% additional tariff on super heavyweight Japanese bikes.

Given an opening, Harley used the opportunity provided by the tariffs to regroup. It paid more attention to the appearance of its bikes, started to focus on quality, and beefed up its marketing. From 1988 to 1995, annual shipments doubled. In fact, demand grew faster than manufacturing capacity could keep up. Harleys became a cult item; Harley dealers packed extra charges onto list prices and compiled waiting lists for prospective customers. By the late 1990s, certain models were back-ordered for two years.

After resisting the temptation to expand, Harley belatedly added production capacity and grandiosely predicted sales would reach 400,000 by 2007. But lacking scarcity, Harleys also began to lose their cachet. Sales peaked in 2006 at 349,000. Nobody bought Harleys for transportation, and at up to $20,000 for a fully-rigged cruiser, they had become a highly-deferrable luxury purchase, especially in a recession.

Nor did Harley's famous brand strength buffer it when its bikes were no longer in short supply and demand hit a wall. The combination of a faltering economy and an aging customer base at the end of the decade had significantly dented sales -- perhaps permanently.

There is a lesson here for companies that become the flavor of the moment -- and then use that as a base from which to make forecasts for the future. Harley's famous brand couldn't buffer it from the downturn once owning a Harley stopped being cool. Tattoos didn't move motorcycles.

As analyst Craig Kennison of Robert W. Baird points out, Harley survived earlier economic downturns when other discretionary consumer durables slumped because Harleys were in short supply. As it built capacity to meet demand, Harley became just another manufacturer, vulnerable to a cyclical economy. In the fourth quarter of 2009, it suffered its first quarterly loss in 16 years.

The days when Harleys were a fashion accessory are likely over. Except perhaps for Indiana governor and presidential aspirant Mitch Daniels, it is no longer big news when a celebrity is seen riding a Fat Boy or Ultra Limited. The challenge for Harley-Davidson in 2010 is to adjust to the new normal.

[Galo]

But....but.....but!

the same thing -the same demographic changes- are impacting every other manufacturer...cars included. What have others done? Expanded their offerings to cover the changing demographics and fads. Dual Sports? Check  Triumph, Suzuki, Ducati, etc. Motards? Yamaha, KTM, etc. More capable sport-cruisers? Yamaha, Triumph, Honda, etc etc.

On the cage side, Ford has done a masterful job of covering the demographics on all sides, from the gentlemanly Taurii on one end down to the super-kewl, world-class Fiesta and upcoming Focii. Hell, even GM ditched Olds and Pontiac as they realized the demographics played against these brands.  Harley on the other hand, continues to plod along with their blinders on, refusing to see the light of day.
 

Bottom line: the problem is not the demographics, it's their miopic, one-track vision of what a bike should be and such a complete lack of innovation that they call a 1200 Sportster with Showa forks and a new paint scheme a 'new' bike.
 

[atadaskew]

If everyone bought Guzzis we wouldn't be having this discussion.

[motormike]

Harley needs to diversify into elderly mobility scooter thingies like the Lark or whatever they're called.

* spelling edit *

[Jmac_bandit]

yet another harley specific thread allowed to languish in general moto discussion  

[atadaskew]

yet another harley specific thread allowed to languish in general moto discussion  

Ok, I'll help out....

Just got the latest issue of SportRider.  They test the Honda VFR1200 with DCT box.
What was interesting is it's perf numbers.
1/4 mile in 11.7 secs.

The Harley XR1200, is 12.7.  A slug? Maybe.  Butt it's 'only' 1 second slower in the 1/4 mile.  Think about watching that from the sidelines.  Honda crosses first, then the Harley.  yes, the difference is as long as it took you to read the sentence.
The Honda costs $5K more.

An unusual comparison to be sure.  But it's interesting that the only bike the VFR12 DCT is quicker than in the ST market is the Honda St1300...

A couple o grand in the XR12 will make it quicker than the VFR12 in the 1/4, and still be about $3K less.

As for the topic of this thread, I have a feeling it's been discussed before.

[falconati]

Many of my peers want Harleys, they just can't afford them.

I would say that the Harley brand is actually very appealing to youth; however they haven't been able to create bikes that young riders want to buy (they can't afford a Fat Boy, but they don't want to buy the Sportster because it's "a girl bike")

[stevent]

Way back in the ancient 80's when I was in my 20's I was riding Harleys as were most of my friends, that's because used ones were cheap and few people wanted them. Everyone wanted Japanese bikes and you could buy a brand new one for around $3000. It's only after the big Harley fad hit that prices went through the roof, that's what screwed them. All of a sudden only people in their high wage earning years could afford them. Now that demographic is getting up there in years and the prices are still too high for a lot of young people to afford them, that's changing daily though as prices are dropping out the bottom of the used bike market as people realize they're not going to get $15,000 for a 10 year old bike.

[weidauer]

I haven't posted on this board in months, but it's good to know that nothing's changed here at good old  H-B.N (Harley-Bashers.Net): those who don't ride Harleys spend an inordinate amount of time and bandwidth talking about them.

If I hated a marque as much as these folks claim to hate Harley, I wouldn't spend all my time reading and posting articles, and discussing same, ad nauseum.

If you don't like H-D, and don't ride one, WTF do you care what they do?

[BrookR1]

Why do they need to target young people again? Until the recession hit, they were doing just fine. What's wrong with just continually targeting the over 40 crowd? Young people aren't going to solve HD financial problems because they're just as broke as the rest of us.

[azharrison]

Why do they need to target young people again? Until the recession hit, they were doing just fine. What's wrong with just continually targeting the over 40 crowd? Young people aren't going to solve HD financial problems because they're just as broke as the rest of us.

Harley is now facing the same dilemma that Cadillac faced in the 80's.  Their target market were getting older and on their way out, but the next generation buyers were just not into their "Dad's car"anymore. So many looked to other luxury brands like Acrua, Lexus, BMW, Mercedes etc.  Caddy reinvented itself with much cooler cars and reclaimed some of their marketshare.  I don't think H-D will be able to change its stripes so easily.  They need to make a couple of affordable bikes with at least a little performance.  They have made only one engine in 60 years!  I can't include the V-rod  powerplant because they outsourced it. 

I think the question is, Can H-D develop an entirely new engine (smaller, better, cheaper), that can power a new generation of machines?

[JGreb]

I haven't posted on this board in months, but it's good to know that nothing's changed here at good old  H-B.N (Harley-Bashers.Net): those who don't ride Harleys spend an inordinate amount of time and bandwidth talking about them.

If I hated a marque as much as these folks claim to hate Harley, I wouldn't spend all my time reading and posting articles, and discussing same, ad nauseum.

If you don't like H-D, and don't ride one, WTF do you care what they do?

I think what you need to realize weidauer is deep down everyone on here wants an American motorcycle company that can build the kind of motorcycle we like. Something fast and light and dependable. Something that can compete with the Japanese big 4. I don't want them to ditch what they do best. They build an awesome cruising machine and I like them.

The act of dumping Buell  can be viewed as a big step backward if they want to sell bikes to the younger generations that are now riding 150 HP sportbikes. 20 years from now do you think they'll be satisfied with an air cooled twin cam 125 or whatever they come up with? They need to diversify their motorcycles and customer base to survive and they sank the one man that could do that, Erik Buell.

The other thing that keeps people talking is how they openly embrace the loud pipes save lives weekend warrior pirate poser image to sell their bikes.


Remember this guy? the VR 1000. Harley was on the track trying to improve their product through racing development and compete. I don't think people wanted to see them give up so easily.

[David Morrow]

I haven't posted on this board in months, but it's good to know that nothing's changed here at good old  H-B.N (Harley-Bashers.Net): those who don't ride Harleys spend an inordinate amount of time and bandwidth talking about them.

If I hated a marque as much as these folks claim to hate Harley, I wouldn't spend all my time reading and posting articles, and discussing same, ad nauseum.

If you don't like H-D, and don't ride one, WTF do you care what they do?

I've met very few people who hate Harley's including people around here. What most people do hate though is the smug HD owners with attitudes of superiority. The "why don't you buy a real bike" kind of attitude. If their bikes really were better, faster, or less expensive, they may have something to brag about but they have none of that. HD made decent bikes and were masterful at marketing. And just as the demographics are changing, what do they do ? They shut down Buell - their best entry into the younger rider market. With that, I think they turned down a one way road that is going to be hard to find an exit from.

[Orson]

I'm of a mind that it's a motorcycling problem and not a Harley problem.

When I wuz a kid in the 70s, we we're in the midst of a motocross boom. Bikes were cool and it seemed everyone wanted one.

Now I wonder if motorcycling may lack the grasp on today's youth like it had on my era.

look at ST.N...save but a few, we're mostly old farts  

[atadaskew]

I'm of a mind that it's a motorcycling problem and not a Harley problem.

When I wuz a kid in the 70s, we we're in the midst of a motocross boom. Bikes were cool and it seemed everyone wanted one.

Now I wonder if motorcycling may lack the grasp on today's youth like it had on my era.

look at ST.N...save but a few, we're mostly old farts  

It's the same problem for scooter sales. Bikes like the Zuma 125 are aimed at kids, but being bought by older people.
The reality is nowadays kids have far more stuff to be distracted with, that takes away any $ they may have used towards a bike.
They all have to have an I Phone.  The monthly cost for one of those is a bike payment...

[greidel]

When I got into bikes, I had a 50cc scooter and wanted something more powerful. I didn't know what kind of bike I wanted. I thought I wanted a cruiser, beacause there are so many on the road (most of them Harleys) they must be the ultimate bike, right? Well, a look at Harley prices quickly eliminated them as an option. I got a Suzuki S40 for $3000 as a starter bike. What did that teach me? The feet-forward cruiser style not give me the feeling I had riding a ten-speed as a kid. A small gas tank isn't for distance. And the Japanese make a hell of bike, for a fraction of the price of a Harley. 5 months later, my next bike would be a Kawasaki Versys, which I still own and love.

Why complain about Harley? Because I'd like to buy an American product. I'm patriotic. But I don't want what Harley is selling right now. I might even forgive that, compromise a little and buy one, but their American labor-union prices are a league above the rest of the market. And what's even more American than a Harley is not spending your hard-earned money on one thing when somebody else sells something just as good at half the price.

My income is going up, and Harley is slowly changing their lineup. We may meet in the middle in a few years, and Harley may make a a bike I want that I can afford. If they put a 5 gallon tank on a XR1200, it might be sooner. But in the meanwhile, I have to hear the "loud pipes" bullshit, "screw it, let's ride" and "when are you going to get a real bike?". Their arrogant attitude is really hard to ignore and get over. Especially since I know that it's fake: if I bought a Harley tomorrow, I'd be welcomed into the fold like brother. Fake.

And they remind me of the Goth kids in high school... let's show how independant and individual we are by all dressing exactly alike and collectively acting and thinking the same. Yawn.

[county]

Well, when a motorcycle is heavy, slow and won't handle worth a shit and costs a lot of money it is incumbent on me as a motorcyclist to say that it sucks, even if it is real shiny.

[weidauer]

Well, when a motorcycle is heavy, slow and won't handle worth a shit and costs a lot of money it is incumbent on me as a motorcyclist to say that it sucks, even if it is real shiny.

And I think Beemers are quirky, elitist and over-engineered. Not to mention they sound like sewing machines.We all have our opinions. And BMW riders can be every bit as annoyingly smug as HD riders.  

The difference is that I don't spend my day surfing the net looking for articles about BMW to prove my point. Just sayin'.  

[county]

And I think Beemers are quirky, elitist and over-engineered. Not to mention they sound like sewing machines.We all have our opinions. And BMW riders can be every bit as annoyingly smug as HD riders.  

The difference is that I don't spend my day surfing the net looking for articles about BMW to prove my point. Just sayin'.  

Well, actually, what you posted about BMW's is mostly opinion while what I posted about Harley's is fact.

[sagerat]

If I read one more article in the BMW ON (owners' news) magazine about how BMW needs to attract younger riders, I'll puke.  BMW, H-D, Moto Guzzi, hell, even Ural has the same handwringing about where have all the new younger customers gone?