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Jochen Zeitz with an electric Harley-Davidson LiveWire motorcycle – Photo Credit: Joshua Kurpings

He saved Puma. Now he’s going to fix the Harley-Davidson global business!

I’m talking about Jochen Zeitz, the interim Harley-Davidson CEO.

The motor company today announced that Zeitz has been appointed President and CEO, effective immediately. You might recall that Zeitz assumed the role back in February when Harley-Davidson ditched CEO Matt Levatich for years of disappointing sales.

Before we ratchet up turnaround enthusiasm of new leadership, it might be good to peel back a layer on the mysterious Mr. Zeitz.  I’ve written a detailed background post HERE.

It’s been my experience that business leadership works much differently during a turnaround transformation.  Managers are less able to rely on practices that previously insulated them from criticism. In addition, a traditional consumer goods company is research driven, and don’t typically decide on action until research tells them to change – but the reality is that research doesn’t always tell you what the consumer wants.

Let’s check out some of the Zeitz FACTS:

  • Zeitz is on a combat mission to make the Harley-Davidson business sustainable in a way that improves both society and the natural environment, and that creates economic growth.
  • Zeitz was the driving force behind Harley’s sustainability efforts and approved former CEO Matt Levatich’s desire to “bet the farm” on electric motorcycles.
  • It took 8-years and the work of a thousand engineers to fully realize the LiveWire, the company’s first electric model, that finally went on sale at $30K.
  • Among the entire Harley-Davidson board of directors, there’s a total of ZERO years of motorcycle industry experience.  Coincidentally, ZERO is the top manufacturer of electric motorcycles for the street and dirt.
  • No public (via Google search) photo exist of Zeitz riding a motorcycle, attending a motorcycle rally or HOG event.
  • At Kering, Zeitz was known as the “sustainability Taliban” — Kering employees characterized him as impatient and demanding unrealistic standards.
  • Lack of gender equality on the Harley-Davidson board, yet Zeitz has been a board director and influential member since 2007.
  • Zeitz history of working with unions is murky.  In China workers don’t have the right to Freedom of Association and Asia remains Harley’s strongest sourcing region
  • Zeitz gets the gist of enlightenment after a dialogue with Benedictine monk Anselm Grün – yeah, yeah, you let go of attachments, dissolve your ego, and then you get enlightened and write a book.

Let’s gain some additional insight of the Zeitz thinking from his previous statements; “My belief is that every company has an opportunity to innovate by creating business solutions for services or products that significantly reduce your impact and create more demand for your product.”  “Well, unless you are an extracting business. In that case, you’re a dinosaur and you’re dying.”  The solution is to marry sustainability with growth. “It’s a question of what we grow and how we grow, and how we can reduce our impact significantly and still grow,” he went on to say, “We have to grow within planetary boundaries.

Planetary boundaries?  Huh?

I’m as green as the next fuel/air motorcycle enthusiast, but I had to do a deep dive on this one…  It seems the 11,700-year-long Holocene epoch (“Age of Man”) is the only state of the Earth System (ES) that we know for certain can support contemporary human societies. The planetary boundary (PB) concept, introduced in 2009, aimed to define the environmental limits within which humanity can safely operate.  The planetary boundary (PB) framework contributes to such a paradigm by providing a science-based analysis of the risk that human perturbations will destabilize the Earth system (ES) at the planetary scale.

Whoa, this is heavy!

I would assume that in Harley-Davidson parlance and every day practice, this means that instead of making short-term profits that may incur costs later on (an obvious example being depleted resources leading to higher raw material prices, or social inequalities reducing at-work performances and purchasing power), businesses need to spread some of that growth to the wider world around them, for the sake of the planet – but also themselves.

Who would’ve thought… buy a Harley-Davidson motorcycle for the sake of the planet!

Zeitz might actually be on a path similar to Alfred Ford.  Currently known as Ambarish Das, he is a great-grandson of Henry Ford and heir to the Ford Motor Company who has converted his earthly consciousness to helping build the Temple of the Vedic Planetarium in Mayapur, which was largely funded by Ford’s $35M donation.

I don’t want to appear like I’m self-serving, but as you get gray hair in the beard you tend to focus the “More Roads” plan on which rides you are really trying to accomplish in life.  Maybe it’s time to published a memoir, meet-up in Alachua County, Florida and reflect in one of those “healing” pools.

I hope this transcendental awakening works out for Harley-Davidson.

Photo courtesy of Harley-Davidson.

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Flexible-WorkersWe read everyday how the economy is ever so slowly improving and there was some good news this week for the long-term unemployed.

According to news reports the motor company is hiring 400 temporary workers as part of a seasonal surge in production at the assembly plant in York, Pa.

York is where Harley-Davidson assembles heavy weight motorcycles.   You might recall the widely publicized dispute with the union a few years ago that allowed them to use “casual” workers to do some of the production work at all their existing plants.  A “casual” worker is a temp worker, not employed year ’round, to manage temporary high volume.

According to Harley spokeswoman Bernadette Lauer the jobs start at the end of January and run through the end of May with salaries ranging from $16.75 to $23.30 per hour.  To apply or request to be contacted visit H-Dflexibleworkforce.com.

Harley’s revenues are still well below their pre-crisis highs, but they get credit for revenues and unit sales which have enjoyed a nice bounce over the last year and there is new swagger in the brand.

Photo courtesy of H-D.

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Way back in 2009 I posted a blog about H-D’s restructuring and management looking at moving from the York, Penn. plant due to inefficiencies, cost structure and a major problem with absenteeism.

At the time H-D was looking at four other possible sites including moving operations to the Kansas City facility.  I even wrote a tongue-n-cheek letter to CEO, Keith Wandell stating Oregon was open for business if they wanted to consider the west coast for relocation.  Concessions were made to keep the plant in York, changes in work culture and a new attendance policy were negotiated as part of a multi-year restructuring deal and the York plant continues on.

Then earlier this year I posted about H-D management giving it’s Milwaukee workers an ultimatum… approve a new labor agreement or risk losing/moving jobs out of Milwaukee (PTO and Tomahawk) to the Kansas City plant or to another state.  Ratification of a new labor agreement occurred on September 14, 2010 which meant fewer employees and a whole host of other changes to generate about $50M in annual operating savings.

And speaking of Kansas City, Harley-Davidson management has told its KC plant employees this week that they must accept wage and other concessions or the plant could be closed or move.  The company stated the plant would be merged with one in York, Penn.  The company said: “that recent internal studies show significant cost, efficiency and production flexibility gaps in the Kansas City operations,” which must be addressed.

Talk about déjà vu… all over again!

Is it about the “Art of Negotiation” or is management truly committed to closing the Kansas City plant?  Probably a little of both, as we’ve seen in the past the recession favors management and puts more pressure on workers to agree to the demands.  In fact, in each of the previous cases the company has obtained nearly all the concessions ask.

Adding to the KC efficiency insult was the company statement of how it would make a final decision in Q1, 2011.  Gives the workers something to think about over the holidays.  Just stay classy H-D!

Photo courtesy of web.

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A few weeks ago H-D management were passing out accolades to the Wisconsin legislators who were considering a designation of the H-D motorcycle as the “official motorcycle” of the state.  But, that has since turned into a game of “double-dog-dare-ya” or something along the lines of ‘playing chicken’ as the latest management salvo didn’t sound conciliatory, rather they dropped the bomb about abandoning the state and moving the company.

Huh?  Is the “Ride Home” dead?  Is Wisconsin truly at risk of losing the motorcycle icon or is this more of a psychological ploy than practical?  When ‘playing chicken’ someone is bound to get hurt!

Consider the Boeing Co., a huge part of Washington’s history and the threat of a move out of Seattle back in 2001.  Few believed, especially the Mayor or state representatives in Olympia.  The end result?  Can you spell Chicago?!  Several hundred employees were left behind when the headquarters moved.  It didn’t stop there.  With it’s continuing need to drive down labor costs,  last October Boeing announced it would open a second 787 production line in Charleston, S.C., not Everett which turns out to be more about negotiations with labor not further tax breaks.  Sound familiar to Harley-Davidson?

Wisconsin Tax Burden

Does Wisconsin’s tax structure drive Harley-Davidson business away?  By clicking HERE you can check how each state collects taxes and measures up nationally on tax burden, government spending and user fees.

Fact: Wisconsin ranks 14th in total tax burden.  Fact: Wisconsin ranks 26th in total spending by all levels of state and local government based on the latest figures (as compared with 20th in population, 24th in Gross Domestic Product and 24th in personal income for the same year).  Fact: A Tax Foundation study identified Milwaukee County as 22nd highest on property taxes as a percentage of a median home’s value, out of 775 counties nationwide.  If you’d like more detail, then reporter Dave Umhoefer of the Journal Sentinel researched and wrote a comprehensive article on Wisconsin’s tax burden HERE.

Will Harley-Davidson leave the state?  It’s a complex answer and in the end, H-D selects a location to move or expand into based on a wide range of issues.  One important issue is the balance between public services offered and the taxes levied to pay for those services.  Harley-Davidson management will likely ask two basic questions: 1) are the mix of public goods and services in a given locale right for my business; and 2) am I getting what I pay for with my tax dollar?  If the answer is no, then the state legislators further cutting business taxes will not have the desired result to keep them in the state.

If this is truly about labor costs and it’s tactics to renegotiate or obtain additional concessions from the union then it’s unclear how this riff will shake out.  Further fragmenting their supply chain doesn’t seem like a credible business case, but moving to a state like South Carolina would mean lower taxes, easing regulatory burdens in the state’s tort and workers compensation system and it’s a right-to-work state.  This might be the tipping point to make a change.

Photo courtesy of Double Dog Dare Band; WI tax chart courtesy of the Journal Sentinel.

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The WAIT is over.

Sometimes, fame comes to York.  The famous author, John Grisham wrote about York, PA in “The Associate” as it was the main characters hometown.  In fact, many of its residents have gone on to fame.

But, in the case of Harley-Davidson the bleak economy means financial fame in York.

It’s been a rough year for the factory tour capital of the world.  After a reduction of over 600 employees earlier this year the company announced today it will keep its operations in York, after ratifying a new labor agreement with IAMAW which involves nearly a 50% cut in jobs.  Under the new agreement structure, the plant will have about 1,000 hourly workers reduced from the current level of 1,950. Of the 1,000 workers, 700-800 will be full-time unionized workers and about 200-300 will be unionized “casual” staff, who work according to seasonal demand and as managers deem.

H-D expects to have about 150 salaried employees, or a little more than half of the current number.  The company will invest about $90 million in the restructuring of the plant and expects about $200 million in restructuring charges tied to the plant into 2012.  The restructuring is expected to generate about $100 million in annual operating savings compared with the current structure.

Many claimed that H-D employees were out-of-touch with the ‘real’ work world.  But, being faced with the prospect of operations moving to Kentucky they voted to cut their workforce, change their work rules to allow managers to shift workers around to various tasks in the plant and agreed that new hires will earn significantly less.

Sure it’s a positive note in a sea of bad news, but isn’t that just the point, the plethora of bad news?  The companies statement can be read in full HERE.

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International Association of Machinists and Aerospace Workers

The York Daily Record reported that union workers at the Harley-Davidson Springettsbury Township operations got their first look at a proposed contract that if approved will stop the motor company from relocating the York Vehicle Operations to an alternative site in Kentucky.

You can read the detailed contract highlights HERE.  Briefly, it’s a 58 page document that covers the next 7 years.  H-D will commit to investing up to $90 million to restructure the operations and stop efforts to relocate to Kentucky.  For those workers who lose their job as part of the restructuring there are a number of alternatives from lump-sum payout to volunteering for the reduction and receiving benefits if they lose their job.  Workers received copies of the contract today at the Toyota Arena where members met. They will vote to ratify or turn down the deal on December 2nd.  The company has until December 12th to approve.

Reading the “tea leaves,” I anticipate the International Association of Machinists and Aerospace Workers (District 98) will ratify the new contract.  Do they have any other choice?  The company has worked all angles during this down economy to their advantage and will obtain significant concessions from the workers who need a job.

UPDATE: December 3, 2009 — H-D announced the union ratified the 7 year labor agreement.

Photo courtesy of IAMAW

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