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Posts Tagged ‘Keith E. Wandell’

Matthew S. Levatich — Ex Harley-Davidson President and CEO

Harley-Davidson, Inc. announced yesterday that Matthew Levatich has stepped down as President and CEO and as a member of the Board of Directors. The Board of Directors appointed current Board member Jochen Zeitz as interim President and CEO following the abrupt resignation of Levatich.  A search committee is being formed, and the Company will utilize an external search firm to undertake the process to find a new CEO. The press release also stated that Levatich would assist with the transition through the end of March.

Levatich had a 26-year career at Harley-Davidson with the last five years as President and CEO. The abrupt departure marks 5-years of sliding sales and the value of the Milwaukee motor company has been cut in half.  It was not a cheerful week at Harley-Davidson!

The board and the CEO share responsibility for corporate performance, so it stands to reason that when a CEO fails, the board has failed as well.  I would speculate the company board is reacting to pressure from shareholders and seeks to appease investors in the short term by handing them the CEO’s head on a platter.  The investment community will want a replacement CEO who’s both promising and reassuring—and they’ll want him fast.

Jochen Zeitz — Harley-Davidson interim President and CEO

If we were to step into a time-machine and journey back to the future… from the V-Rod to the Buell Blast. Who can forget the MV Agusta dumpster fire and in the parlance of our time, there is now a green machine— LiveWire—a motorcycle short on juice, and one that few people want or can afford to buy.  Harley’s attempts to branch out has with out a doubt shown mixed results, at best.  In fact, some observers wonder if the company is “asleep at the switch.”

It would seem that “seeing the problem is easier than fixing it!”  Levatich’s mantra that Harley-Davidson doesn’t build motorcycles, it builds riders, always seemed a bit odd.  That’s like saying, “It’s not about horsepower, but more ideas per horsepower.”  Or “we don’t build motorcycles, we’re a lifestyle merchant company.” It’s that line of reasoning which is nice for marketing collateral, but when you actually dissect its meaning, it’s a  “wait, huh?” moment.

Harley-Davidson Five-Year Sales Slump

Levatich was promoted when Harley announced in February 2015 that he would succeed Keith E. Wandell as President and CEO of Harley-Davidson, Inc. upon Wandell’s retirement on May 1st.

You might even recall that back in August 2008, Matt Levatich, who at that time was vice president and general manager of parts and accessories and custom vehicle operations (CVO), was named managing director of its newly acquired premium Italian motorcycle company MV Agusta Group.  I blogged about this $108 million acquisition being a train wreck (Go Italian) back in 2008.  That deal was heavily promoted as a major part of Harley’s bid to increase its presence in Europe, where it had seen sales grow in the double digits the previous three years, offsetting weaker performance in the US.  The $108 million included $69 million paid to erase MV’s debts and included the Cagiva brand.

Just 14 months later, the Milwaukee “jetsetters” revealed during the Q3’09 financial results, the motor company would divest from the Italian national symbol of motorcycling and the real gut punch was—they would discontinue the Buell® product line.  I don’t recall seeing a lot of MV Agusta T-shirts, coffee and dog collars so, I guess it wasn’t a good fit.  Unfortunately, Levatich will go down in the motorcycle history books as the man that shut down Buell.  Granted the previous CEO, Keith E. Wandell, started unwinding the process caught up in the axel, but Levatich concluded the 16-years of collaboration.  It never added up as a smart business decision and every time I go back and research the articles and press releases it sounds more like someone had a vendetta they wanted to settle.

It’s my view that the blame for Harley-Davidson’s poor results lies squarely with the board of directors!

Poor performing companies don’t get that way because of any single decision or for that matter any single leader. Patterns of historical decisions, strategic neglect, and misallocation of resources all contribute to the deterioration in performance; some contributing factors may even lie outside the company’s control—looking at you tariffs!

Typically a CEO is dismissed not because the board has thoughtfully and deliberately concluded that it’s time for a change at the top, but because investors, concerned about poor performance, demand a change.

Let’s hope Mr. Zeitz and the board of directors have a blueprint for success.

UPDATED: March 1, 2020 — added sales chart and text on length of Levatich career.

UPDATED: March 4, 2020 — According to the company’s 8-K regulatory filing on Monday, March 2nd, Levatich will receive a severance in line with the company executive severance plan.  The company’s 2019 proxy statement states; top company officers will receive a cash severance of 24 months of base salary and 18 months continuation of certain employee benefits, such as life insurance, medical, dental, vision, as well as outplacement and financial planning benefits, if employment is terminated for reasons other than for cause.  The Milwaukee motor company had 12 previous quarters of sales decline, and Levatich’s severance payment will be $2,152,500.  Assuming a 2018 base salary of $1,076,250.

Photos courtesy of Harley-Davidson.  Sales chart courtesy of Bloomberg news.

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FLS SoftailQuality control issues in 2014 seem to bedevil Harley-Davidson.

The latest examples are the recalls of 4,688 model year 2014-2015 FLS Softail motorcycles manufactured March 25, 2013, to October 2, 2014 for a lamp-outage detection issues and 1,560 of its 2015 Tri-Glide Ultra Classic FLHTCUTG motorcycles due to rear-brake master cylinder issues.

The Softail motorcycles may have been manufactured without lamp-outage detection for the front turn signals and a rider may not be aware that a front turn signal is not working. And without working front turn signals, there is an increased risk of a crash.  Harley-Davidson is notifying owners, and dealers will correct the body control module software, free of charge. The recall began in December 2014.  The Harley-Davidson’s number for this recall is 0618 or NHTSA campaign number: 14V725000.

Tri-GlideOn the 3-wheel, certain Tri-Glide Ultra Classic motorcycles manufactured from July 14, 2014, through Oct. 15, 2015, could have rear master cylinder assembled with an incorrect piston.  Harley says this piston may not provide the proper support and may allow a tear in the primary cup. If the primary cup develops a tear it will decrease the brake performance and might increase the risk of a vehicle crash.  Harley-Davidson will notify owners, and dealers will replace the rear master cylinder, free of charge. The recall began December 16, 2014. The Harley-Davidson’s number for this recall is 0162.  Owners may contact Harley-Davidson customer service at 1-800-258-2464 or National Highway Traffic Safety Administration Vehicle Safety Hotline at 1-888-327-4236, or go to www.safercar.gov.

While Harley-Davidsons recalls this year pale in comparison to the massive 300,000 bike recall issued back in 2011, but that was simply a rear brake light problem.

Most of the 2014 Harley-Davidson recalls seem to be centered around rushed product development and/or shoddy workmanship.  That same workmanship issue which has dogged the automakers.  And speaking of, these are the same automakers which just 4-years ago Mr. Keith E. Wandell (Harley-Davidson CEO and President) stated; “Look in a mirror – Harley was already so far down that same (GM) path it wasn’t even funny.”   Basically warning Harley-Davidson employees that it was turning into a GM… and the credibility issue that becomes being associated!

Prior to the above recalls we’ve seen the motor company recall more than 105,000 model 2014 Touring and CVO Touring motorcycles because of a problem with the anti-lock braking system that caused the front wheels to lock up without warning. In August, it recalled over 4,500 bikes for a faulty ignition switch.  It’s also recalling about 1,400 of its 500 and 750 Street bikes from the 2015 model year for a possible fuel tank leak.  I’ve captured the 2014 recalls HERE.

Is Harley-Davidson re-testing the customers reputation of shoddy workmanship (and raising the ghost of Harley’s past)?  It would do well to get a tighter grip on these issues and instill the pride of craftsmanship that should be the motorcycle maker’s hallmark.

Photos courtesy of Harley-Davidson.

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Gold top 10 winnerIt’s that time of year when folks are getting ready to ring in the New Year and its customary to provide a Top 10 list.

I decided to pull together a nostalgic list of some of the more ridiculous Harley-Davidson executive quotes.  There are some doozies and it makes a person wonder if they were cocktail chatter or actually written down and prepped by the PR team.  Honestly, it was difficult to narrow it down to just ten, but here they are: 

  1. “I would be really upset if you felt our strategy was about “meeting the nicest people on a Harley” because I can tell you that ain’t the strategy…” Harley CMO Mark-Hans Richer (Source: HERE)
  2. “These new bikes are leaner, yet still have a mean streak – they’re the real deal, made of real steel.” Harley CMO Mark-Hans Richer (Source: HERE)
  3. Little did we know we were doing a cross-promotion with God.” Harley CMO Mark-Hans Richer (Source: HERE)
  4. “‘Come Together’ is not merely a song in our [advert] spot – it’s an anthem for our relationship with our fans.” Harley CMO Mark-Hans Richer (Source: HERE)
  5. “We don’t do trend bikes, or fashion-statement motorcycles. We try to make something that will last forever.” **Brian Nelson, lead stylist on Project RUSHMORE  (Source: HERE)
  6. “I couldn’t care less if I ever wore a tie again.” Harley Chairman of the Board, president and CEO Keith Wandell  (Source: HERE)
  7. “None of us get up every morning and want to make people’s lives miserable and see people lose their jobs. If you think that’s the case, I apologize.”  Harley Chairman of the Board, president and CEO Keith Wandell  (Source: HERE)
  8. “We can’t survive on our core customers alone.” Harley Chairman of the Board, president and CEO Keith Wandell (Source: HERE)
  9. “The safety of our customers is our highest priority,” Harley General Manager of Motorcycle New Product Delivery Tony Wilcox (Source: HERE)
  10. “We think it’s a dichotomy” Harley Chairman of the Board, president and CEO Keith Wandell (Source: HERE)

There it is.  Do you have any memorable quotes to add to the list?

**Note: Mr. Nelson (#5) is not a company executive.

Photo courtesy of Sam Churchill.

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HOG-StockNeil Young wrote the song Keep On Rockin’ In The Free World in 1989.

Neil and a member of his band, Pancho Sampedro, were glancing at newspaper photographs on the funeral of Ayatollah Khomeini in Iran as the angry mob set America flags on fire and chanted death to America.  Sampedro commented, “Whatever we do, we shouldn’t go near the Mideast.  It’s probably better that we just keep on rockin’ the free world.”

And speaking of rockin’… listening in on the HOG Q2’13 financial call today felt upbeat with a positive vibe.  Sure there was plenty of financial mumbo jumbo, but every profession has its buzzwords to create the illusion that things are more complex than they really are.

Here are the Q2’13 financial highlights:

  1. Consolidated revenue of $1.79 Billion
  2. Net income was $271.7 Million
  3. Diluted earnings per share were $1.21
  4. Added 104 dealerships outside the U.S. since late 2009; the latest was Salvador, Brazil.
  5. With nearly 1500 dealers worldwide H-D sold 90,193 motorcycles
  6. U.S., dealers sold 58,241 motorcycles
  7. In international markets, dealers sold 31,952 motorcycles
  8. Through 6-months, net income was $495.9 Million on consolidated revenue of $3.37 Billion
  9. U.S. (Heavyweight) market share increased to 53.0%
  10. Completed its first year of seasonal surge production at its plant in Springettsbury Township
  11. For the 1H, H-D mostly attributes cool, damp weather — not the economy — to a 2.7 percent drop in U.S. bike sales.
  12. Supply and demand are back in balance… read that as an opportunity to raise model prices again!
  13. First corporate confirmation there will be no Road Glide models in the new 2014 model year as they retool and refresh the model
  14. 60 bands over 3-days at the 110th Anniversary celebration in Milwaukee

The most interesting question?

It came from Craig Kennison (Baird & Co.) – “Did you ask the Pope to pray for better weather?”  I liked the snarky question which was in reference to the fact that H-D attributes cool, damp weather — not the economy — to a 2.7 percent drop in U.S. bike sales and being somewhat of a drag on H-D parts and accessories.  If you don’t ride you don’t need to do much motorcycle service or buy parts.

In conclusion and more important to all the riders, the company remains on track to announce its 2014 model year bikes in the 3rd week of August.

Photo courtesy of H-D/Google.

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NOAA-MapYou’re the CEO and going down your quarterly earnings check list:

  1. Still in business after 110 years – Check
  2. Secured music talent for 110th Anniversary Party – Check
  3. Number one seller of motorcycles to young adults (18-34) – Check
  4. Increase 2013 first quarter revenue to $1.57B (up 10%) vs. $1.43B a year earlier — Check
  5. Increase 2013 first quarter income to $224.1M vs. $172M a year earlier – Check
  6. HOG shares up 2.1% to closed at $54.31 – Check
  7. U.S. dealers sold 34,706 new motorcycles, down 12.7% from a year earlier – Ooops!

Colder temperatures and the wet climate set the stage for the quarterly sales miss.  At least according to Harley-Davidson CEO, Keith Wandell who stated in last week’s earnings call… “By far, the vast majority of the (sales decline) was weather related”.

Temp2-MapInteresting.  The earnings call didn’t signal any major marketing changes for the brand, instead pinning some of the losses on external factors such as rainfall in many parts of the country, the weak economy and the unseasonably cold weather.

Are the only unemployed consumers who keep getting rained on Harley-Davidson consumers?!

Generally speaking home sales and auto sales are up.  It would seem that management neglected to remind us about Superstorm Sandy, how federal tax returns have been delayed and how fuel prices are unsettling to consumers.  To be fair some retail outlets selling spring apparel, home and garden were depressed due to wintry conditions, but looking at the weather for an impact on Harley-Davidson consumer spending seems a bit trivial.

I spent the last week in Arizona and if you plotted temperatures from dawn until noon, you’d observe an alarming warming trend.  If you extended that trend line for the next 4-months, you’ll clearly notice that ice caps will melt and the poor polar bears will be swimming more.

We’ll soon know if the good weather in the upcoming quarter provides a recovery to more normalized sales volume.

Photo courtesy of NOAA

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Another year of cupcakes and candles is an acute reminder that I’m just an aging blogger.

And, there are some readers out there who actually believe I fly on the Harley-Davidson corporate jet, that Mark-Hans Richer (CMO) writes me a personal check every month for the magical posts I throw down about the motor company and that the kind words about Keith Wandell (CEO) were because he sent me a case of chrome Road Glide parts to fence on the black market.

I am in the middle of a blacked-out billet phase on the Road Glide with no chrome parts for sale, but the point is about aging and obsolescence.

For example, I was watching the Jeff Lynne (Electric Light Orchestra (ELO)) documentary on Palladia a couple weeks back.  I’d like to recommend that you watch it, but it’s just not that good so don’t waste your time.  But if you were under the age of twenty and watched this documentary you’d think Jeff Lynne was the most skilled rock star of the seventies.  It’s just not true. But there was a moment early on, when they played Jeff’s first single with the Idle Race… when they dropped the needle on the 45 and…

You’ve got to know, turntables did not become the rage until the very late sixties, in some cases the seventies. Audiophiles might have had an AR or a Thorens, or if you really had some money you’d purchase a Duals, but before that… there were only record players.  The tone-arms were about as sleek as a Ford F-350 truck. Heavy, and they were rarely automatic.  In fact, you’d often need to tape a dime on top to ensure they did not skip.

But what brought me back in time was that little arm, the little piece of plastic on the side… It was the lever you used to flip the needle from 33 to 45. And when you thought the music was getting a bit distorted, a bit scratchy, you’d go to your local electronics shop, which was just like an auto parts store, but with more dust, and you’d hold the needle in front of the guy behind the counter and he’d go back and retrieve a new one.  It came encased in a tiny plastic jewel box, sitting on a piece of foam rubber.  You’d go back home, pop it in, and listen once again through that all-in-one unit with the single speaker.

This was the way it was done. It was a routine and as familiar as dialing a rotary phone. But, it’s been lost to the sands of time.  It’s one thing to look at pictures on the internet of stuff that happened long before you were born. It’s quite another to be jolted into a past that you were extremely familiar with which has completely disappeared.

Things change and technology accelerates the pace.

We heard for a decade that digital photography was going to kill film and that Kodak wasn’t prepared.  Yet it seemed to never happen, then almost overnight everyone had a digital camera and Kodak filed for bankruptcy. Just because the future isn’t here yet it doesn’t mean it’s not coming.

Is Harley-Davidson the Kodak of the future?  They believe they’re in the memories and shared experience business when they really produce motorcycles!

Tell me which H-D touring model has a highly advanced semi-active suspension system which is capable of automatically adapting calibration to the type of path, asphalt and riding style the rider adopted?  Do any H-D cruisers have a multi-map ride-by-wire accelerator, traction control adjustable to multiple levels with multi-channel ABS (which can both be disengaged)?  What key features were developed from all the years of racing experience and applied to the product?  Are touring V-twin engines a jewel of technology and capable of producing power and torque above the closest competition?

It’s like they’re standing on ceremony, waiting for the past to return when nothing of the sort is ever going to happen.

It’s my viewpoint that the motor company needs to better COMMUNICATE the changes being considered for future products.  A product roadmap if you will.  We hear a lot about manufacturing optimization process changes, but when you put the bottom line first, you head straight towards obsolescence.

Harley-Davidson needs to get in the river and swim alongside its audience.  For example; I know a half dozen riders who have purchased 2-3 H-D motorcycles each over the past 10 years.  Not once has the motor company contacted these riders requesting feedback or soliciting ideas for product improvements.  Why?  If you want to be relevant in the future, you’ve got to innovate and lead.  When you get the motorcycle public embracing your plans, people will do your marketing if they believe in your product.

Here are a few ideas that H-D should consider:

  1. Provide more access to H-D experts/employees along with technical information via social media.
  2. Provide more do-it-yourself customization and/or how-to maintenance info; webcasts H-D TV or on a H-D Education Channel.
  3. Sponsor an educational program such as a “Tech Tuesday” video chat with experts to help consumers get more familiar with the technology and motorcycle culture.
  4. Invite independent bloggers to cover pre-launch and launch activity.  Provide bloggers similar access granted to the trade magazines to the factory. We understand press embargoes and know the drill.
  5. Provide bloggers limited access to your corporate sponsored dealer events.

You stay relevant by continuing to play. By taking chances. Innovating. Once you rely on your greatest hits, you’re toast.

Photo courtesy of H-D and Adalgisa Lira Santos

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Enterprise Resource Planning (ERP) was the watch word at Harley-Davidson’s Q3’12 earnings call earlier in the week.  So eloquent were the deflections it almost makes a person think they’re a SAP – for investing in SAP AG!

Harley-Davidson’s third-quarter earnings were income from continuing operations at $134.0 million on consolidated revenue of $1.25 billion, compared to income from continuing operations of $183.6 million, or $0.78 per share, on consolidated revenue of $1.40 billion in the year-ago quarter.

Through nine months, Harley-Davidson income from continuing operations increased 12.1 percent year-over-year to $553.3 million, or $2.40 per share, on consolidated revenue of $4.41 billion, compared to income from continuing operations of $493.4 million, or $2.09 per share, on consolidated revenue of $4.13 billion in the year-ago period.

“The third quarter marked a pivotal milestone in Harley-Davidson’s transformation. With the launch of the ERP production system at York, a major piece of our restructuring work is behind us. We are now focused on optimizing the system and look forward to the start of seasonal surge production early next year,” said Keith Wandell, Chairman, President and Chief Executive Officer.

Like partners in a three-legged foot race, both the management and employees were hobbled by their connection to this so-called new ERP production system at the Company’s largest assembly plant.  How ironic.  A new production system being implemented to improve manufacturing performance becomes part of the problem that resulted in comments during the call like:

  1. “Harley-Davidson’s annual new model launch was pushed to late August from late July.”
  2. “New motorcycle sales were adversely affected by a limited availability of new motorcycles in July, August and early September.” 
  3. And leaving no deflection rock unturned… “The economy remains fragile and there’s a lot of uncertainty for high-end products like a brand (Harley-Davidson) like ours.”
  4. No mention in the call about the Milwaukee HQ IT jobs outsourced in July to India (Infosys) and if that had an impact on Q3?!
  5. Nothing mention in the call whether what I feel has to be the lamest slogan (“Great Motorcycles”) on the 110th Anniversary models is creating sales issues.  It would be the first thing I’d take off the bike!

110th Anniversary Model with “Great Motorcycles” Slogan – Primary Cover

On a worldwide basis, dealers sold 61,053 new Harley-Davidson motorcycles in the third quarter of 2012 compared to 61,838 motorcycles sold in the year-ago period.  Dealers sold 40,402 new Harley-Davidson motorcycles in the U.S. compared to sales of 42,640 units in last year’s third quarter. In international markets, dealers sold 20,651 new Harley-Davidson motorcycles during the third quarter compared to sales of 19,198 units in the year-ago period.  During the quarter, retail unit sales increased 32.3 percent in the Latin America region, 9.8 percent in the Asia Pacific region and 1.8 percent in the EMEA region and decreased 4.7 percent in North America (U.S. and Canada) compared to last year’s third quarter.

Harley-Davidson Motorcycles and Related Products Segment Results Third-Quarter Results: Third-quarter operating income from motorcycles and related products was $144.8 million, a 19.9 percent decrease compared to operating income of $180.7 million in the year-ago period.

110th Anniversary Model with “Great Motorcycles” Slogan – Air Cleaner Cover

Revenue from motorcycles during the third quarter of 2012 of $774.0 million was down 16.1 percent compared to the year-ago period. The Company shipped 52,793 motorcycles to dealers and distributors worldwide during the quarter, down 14.5 percent and in line with prior guidance, compared to shipments of 61,745 motorcycles in the third quarter of 2011.

Revenue from motorcycle parts and accessories totaled $233.7 million during the quarter, down 0.8 percent, and revenue from general merchandise, which includes MotorClothes® apparel and accessories, was $75.6 million, up 9.1 percent compared to the year-ago period.

Gross margin was 34.7 percent in the third quarter of 2012, compared to 33.7 percent in the third quarter of 2011. Third-quarter operating margin from motorcycles and related products was 13.3 percent, compared to operating margin of 14.7 percent in last year’s third quarter.

For the full year 2012, Harley-Davidson continues to forecast a five-to seven-percent increase in motorcycle shipments compared to 2011.

My view is that they are not done transforming the company and it’s going to take more time to right the ship while getting the ERP humming to turn the management business vision into a reality.

Photo courtesy of SAP and H-D.

Note: In 2006 H-D selected SAP to help them manage and optimize their growth.  In June 2011, there was an article in Forbes referring to H-D involvement in SAP’s Community Network.  It’s unclear if the “new” ERP implementation is an updated rollout of a newer version of SAP or a major transition to new ERP vendor. 

Full Disclosure:  I have no investment in or hold any SAP AG or Harley-Davidson stock.

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