Posts Tagged ‘Wamu’

If you have a finance fever then the only prescription is more cowbell – Guess what?!  Harley-Davidson Financial Services (HDFS) has got COWBELL, and when they’re done we’ll all be wearing gold-plated diapers.  NOT!

With credit markets in the deep freeze, financial details are starting to leak out on how HDFS aggressively went after a “lower-quality borrower” to gain market segment share against other lenders.  Sound familiar?  Ever hear of WAMU?  According to new reports between 2003 and 2006, the percentage of HDFS borrowers paying 15% or more in interest — an indicator of credit risk — increased from 8% to 19%.  In addition HDFS’ share of Harley’s operating income grew to more than $200 million or about 15% of the company total, up from 7% in 2000.

Then loan delinquency rates started to rise where they are now more than 4%. The simultaneous reduction of motorcycle production and continuation of chasing marginal borrowers are problematic for Harley.  Remember the “Stick it to the Man” campaign in 2007? An offering of zero money down and teaser interest rates as low as 2.99%.  Everything’s “golden” as long as HDFS could package loans and sell them as securities to investors.  But, in the first quarter of 2008, HDFS was forced to keep $54 million in loans as very few investors would touch them. Then in Q2’08 even fewer buyers stepped-up as loan delinquencies kept rising.  As a result, Harley’s finance arm has increased loan collection staff and is making more calls on weekends and evenings to chase down deadbeats. With credit being nearly “inaccessible” to marginal borrowers, HDFS has eliminated its no-money-down financing offers, reserving them for the most creditworthy customers.

So how will Harley raise capital to fund this business going forward?  They either lack the ability or were unwilling to recognize that the entire economic infrastructure of the U.S. was being undermined by the housing crisis.  As a result producing more and more motorcycles that are being financed by a self-serving organization in a false, paper economy bites you in the butt.

Full disclosure: I own zero HOG stock.

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Money Vault

Money Vault

I’m not an advocate for bailouts.  I think it means responsible people (like me!) will L-O-S-E and end up giving my hard earned money to gamblers, cheats and liars.  It doesn’t matter if you’ve been paying your mortgage….it’s now YOUR job to pay for others lack of responsibility. 

It’s reckless and we need to shout out the windows that we’re “mad as hell, and not going to take this anymore“. 

I’m not a cynically deranged “motorcycle enthusiast” ranting revelations or some guy discussing male menopause on The View with Barbara Walters…but folks the BS resonates louder and sounds truer today than ever.  It’s really become crazy!

Can I now expect the federal government to bail me out of my poor stock investments, my poor choices in 401K mutual funds…it’s only fair

Harley-Davidson Ad

Harley-Davidson Ad

And I’d like a little more “chrome” money for the Harley so, how about bailing me out of my “cage” loan?  While you’re throwing around a few billion here and there, my school district wants to put a bond on my home (via property taxes) to help balance the bloated operating budget…could you bail them out too?  Better yet, can you bail me out of my job so that I can shine the chrome and just blog?

Somewhere today a child was born who will spend an academic career figuring out what the effects of the this bail-out week are and what in hind sight should have been done.

And speaking of stock.  A $100 investment in Harley-Davidson at the end of 1986 was worth $15,687 at the end of 2007.  For you mathematicians that means a $10k investment would have grown to be worth $1.569 million in twenty-one years!  Who would have predicted that in 1981 when execs at Harley HYPEN Davidson purchased the company from AMF it would be around for the 105th anniversary?

And did you see Harley-Davidson ask the government for a bailout?  No!  It’s true that in 1983 they requested and received additional tariffs on all Japanese motorcycles when it was determined they were “dumping” to buy market segment share.  President Reagan imposed the tariffs on motorcycles 700 cc or larger.  But, Harley petitioned the ITC for early termination of the five year tariff in 1987.  They succeeded as a private company with improved manufacturing and quality as a new image was formed.  Independent of any government bailout.

Instead of all this talk of tighter regulations by the sleazy politicians, which is clearly pissing in the wind, I say piss on the financial institution graves when they go under for their self-imposed mess.   While we’re at it let’s have a public hanging for the obscene payment of CEO’s who wrecked the companies they worked:

Washington Mutual – CEO Killinger exits package worth $23.5 million

Fannie Mae/Freddie Mac – CEO’s Mudd and Syron combined exit packages worth $24 million

Merril Lynch – CEO O’Neal exit package worth $160 million

Countrywide Financial Corp – CEO Mozilo took home $120 million

Citigroup – CEO Prince got $39.5 million in stock, options, bonus and perks.

And if that doesn’t make you angry note that at:

Fannie Mae – CEO Mudd’s predecessor, Franklin Raines, received an annual pension of $1.37 million when he retired from Fannie in late 2004. Raines was also in line to receive $5.8 million in stock options and $8.7 million in deferred compensation to be paid through 2020, according to a U.S. regulatory filing.

Freddie Mac – Former CEO Chief Executive Leland Brendsel received a pay package of more than $50 million.

And both of these CEOs left their companies during a massive accounting scandal.  Yeah, we should all be happy about bail-outs.

It seems to me that most of these greedy, corrupt people don’t know the difference of oversees from oversights!

I need to ride…

Photos taken at and courtesy of HD Museum.

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