Harley-Davidson Inc, whose big motorcycles rumbled their way into American pop culture, is trying to ensure the future of the hog.
Harley begins production this month of the V-Rod, a motorcycle whose styling and performance are intended to attract fans of German and Italian motorcycles. The company's traditional bikes, or so-called hogs, draw buyers with an average age of 45.
The V-Rod is aimed at getting younger buyers hooked on Harleys.
"We have to get a lot of young riders in to keep the brand growing," said Jim McCaslin, president of Harley, which Tuesday said third-quarter profit rose 35 percent. "At the same time, we don't want those existing riders to leave -- we want them to ride until the end."
Loyal customers
Harley eluded bankruptcy in 1986 and in the 1990s won half the US market for heavy bikes, in large part because of those loyal customers. In the last five years, Harley doubled sales and profit by improving quality and efficiency and marketing machines as a lifestyle choice. The stock quadrupled in the same period, giving Harley a market value of US$13 billion.
Now Milwaukee-based Harley is sticking to plans to expand just as other vehicle makers are pulling back on concern that the slowing US economy and consumer confidence shaken by Sept. 11 terrorist attacks will hurt sales.
"Harley is an American icon and there's a cachet to it that is not normal," said David Zerfoss, who helps manage a US$3.5 billion equity portfolio for Pacific Century Trust Co. that includes 700,000 Harley-Davidson shares. "Given no further terrorist activity or something targeted specifically at them, I don't see anything changing in their outlook."
Record-setting earnings growth
Harley's third-quarter net income rose to US$111.7 million, or US$0.36 a share, from US$83 million, or US$0.27, in the year-earlier period, while sales rose 19 percent to US$850.8 million. It was company's 24th quarter of profit growth and beat the average forecast of 33 cents a share in a Thomson Financial/First Call analyst poll.
The biggest maker of motorcycles with engines 650cc or larger plans to build a record 232,500 Harleys this year, 14 percent more than in 2000, and 10,000 sport bikes sold under its subsidiary Buell nameplate. Harley-Davidson is enlarging its Kansas City, Missouri, plant to make V-Rods and Dyna-series bikes and spending US$145 million to add a second York, Pennsylvania, plant.
"These moves prepare us for the low double-digit annual production growth we've talked about," McCaslin said.
In contrast to automakers, whose sales dropped 6.8 percent in the first eight months of 2001 from a year earlier, US demand for big motorcycles grew 17 percent to 323,000, according to the Irvine, California-based Motorcycle Industry Council.
While Japan's Honda Motor Co, the largest motorcycle maker, leads in total US sales, Harley dominates in more profitable heavy bikes with a 50 percent share. Harley also has 21 percent of the Asia-Pacific market and its share rose 0.9 points to 7.4 percent last year in Europe, where it's trying to win sales from Bayerische Motoren Werke AG and Italy's Ducati SpA.
Sales last year rose to US$2.9 billion from US$1.5 billion in 1996, while profit rose to US$347.7 million from US$166 million.
Demand outstrips supply
Harley may not be hurt like other companies by declining consumer confidence, analysts said.
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