Prior to this recent economic set back, Harley had been doing quite well.
While many boomers were basking in what they thought was their financial success, they felt it was time to reward themselves for their hard work and try to relive some of their youth by buying a motorcycle. As we all know, the motorcycle that seemed to attract the born again or wannabe bikers was Harley Davidson. Accordingly, sales were quite robust for Harley during that period.
As with many vehicle manufacturers, Harley Davidson had created it's own financial department that would "assist" would be Harley customers with finance to buy their motorcycle of choice. Not a bad idea if the customer holds up their end of the deal.
The main difference between financing a motorcycle and a car is that with automobile financing, the customer will not default as readily for something that's necessary to them such as their car or pickup. The chink in Harley's plan is that motorcycles aren't essential. They're a luxury. When push comes to shove and something has to go, it will be the luxuries first.
When the big economic crisis hit in late 2007, things began to unravel. By 2008, the full impact of the economic problems began to effect people on a personal level. Much of the perceived wealth that many thought they had, fizzled away overnight. Many of Harley Davidson's financial departments loans went sour as customers defaulted on their commitments. Many of these loans were for the full price of the bike. No money down. Just sign here. Anything to get another bike out the door. Risky business indeed.
It would appear that HD may not have performed a worst case scenario risk assessment when they set up their financial department. If they had, it should have been abundantly clear that a serious financial crisis would have very harsh effects on HD's financial well being. Combine that with loose lending practices, the consequences would be substantial in a worst case situation.
As if that wasn't bad enough, as more and more loans defaulted and more and more Harleys were repossessed, the market became flooded with thousands upon thousands of very lightly used almost new Harleys. With a surplus of very good deals to be had on so many late model used bikes, production would now be compromised due to the fallout from the financial department's failures. When there are literally thousands of almost new late model bikes being sold for upwards of ten thousand dollars less than a new bike, sales will and did suffer. According, loss of sales directly impacts production. As we can see from this latest news release, the problem would appear to still exist.
I see some real tough times ahead for Harley Davidson. Not just the immediate crisis but in five to ten years from now. Their customer base is drying up. It's primarily boomers and bad boy wannabe bikers that are Harley's bread and butter. When the boomers are done, there won't be enough "bad boys" to keep them afloat.
Many of the next generation of motorcyclist are unlikely to have any nostalgia nor desire for that type of bike. Harley's reluctance to change with the times will, sooner or later, be their undoing. If Harley had been more innovative over the years as was BMW, they'd have a greater opportunity to draw in a wider market.
As it is, the future would not appear too bright for the company. Who knows? Maybe this will act as a wake up call for HD? Seeing how Buell was flushed down the toilet in order to perpetuate the status quo, I doubt that it will be.
