Will Harley-Davidson Hit the Wall?

Wearing black leather and riding huge Harleys, a motorcycle gang through northern Georgia thunders as if en route to a roar. But the only rough for this gang - Atlanta Harley Owners Group (HOG) - is one in the stomach. It's another Sunday drive in the country for the group, and as usual, it ends with a celebration. "We live to ride, ride and we eat," says the deputy director of the club BK Ellis, a systems analyst.

Ellis is one of 55 members of HOG on the output, mostly white-collar types secret life of bikers - and total dedication to their Harleys. "It's imaging, the mystique," said Ellis. The group is preparing for a large national gathering of Hog chapters in July: 20,000 owners were expected to roll into Atlanta for a three-day party to mark the beginning of Harley-Davidson's 100th anniversary celebration. Some would be hard core guys with big tattoos and bad tempers, the guy who once characterized the Harley customer. But most of them play hooky from $ 78,000-a-year jobs (the average wage today Harley client), riding motorcycles $ 16,000 (the typical cost of Harley's largest bicycle, a patrol car ), And pledging fealty to open a road to double worship as a $ 4 billion per year. It is the world motorcycle Harley-Davidson has reinvented, one that seems - and is - a century removed from the hangar in which Milwaukee William Harley Davidson and Andrew first collaborated in 1903. Harley today has more to do with the brotherhood than machines. You buy a Harley, you are joining a ready-made motorcycle gang: 600 U.S. HOG chapters, which operate dealers' aegis. The style is as important as speed. The dealers floors, draped leather outnumber mannequins can bicycles. Harley has artfully parlayed romanticism of the road and the independence of biker to the capture of baby boomers. Its main clients have returned to the 1960 revolt with a product that reflects their success of 1990's. By selling a lifestyle, while its competitors sold simple motorcycles, Harley left others in the dust for leadership in the most profitable segment of the market, the large cruiser bike. It has 45% of the USA, 23% against Honda. Harley did not build bikes better than its four main Japanese competitors - he was once the persistent quality problems - but it has built a much better mark. It licenses its logo to more than 100 manufacturers, which gives the company ubiquitous exposure. It promotes HOG clubs, who are running convoys of free publicity. Thus, even if it sells a niche product, Harley ranks among the ten best-known brands of America, accompanied by Coca-Cola and Disney. Harley also among America's top stocks of growth since its 1986 IPO. 37% of its average annual gain runs just behind the 42% of another debutante rythme'86: Microsoft. Although the benefit of so many others have been undertaken in the reservoir, there is still a lot of gas a Harley. During the first half of 2002 net income increased 27% to $ 264 million, a gain of 18% of turnover, to 1.9 billion dollars. Yet, even though Harley is the posting of these robust results and the beginning of its centennial bash, some of its main engines of growth are spraying. Its clientele is grey, as the average age of a Harley rider rose from 38 to 46 in the last decade. In addition, customers' ardor May be cooling the economy. "This is a high-middle-class toy," says Chad Hudson prudent fund Bear, one of a number of short-sellers believe that Harley will skid. "As people run out of disposable income, which will hurt." Many people who ride motorcycles and enjoy the comeuppance Harley, despite everything she has done for the industry. When Harley accelerated near-bankruptcy in the mid 1980, he revived the industry-wide motorcycle. After 15 long years of decline, it now has 11 consecutive years of sales growth. Yet old-school still can not forgive Harley for his introduction of yuppie and poseurs high-style duds. For them, this is a fancy-pants bean counters and marketing, with the only remnant of the old Harley-be vice president of style William G. Davidson, a small-son of co-founder, biker at the base, and known to all as Willie G. Willie G. rejects the accusation without quite denying it. "There are many beaners, but they are on motorcycles, which is a beautiful thing," he said, noting he recently co-directed a National Gathering groups of Canadian Hog Harley function with high, CEO Jeff Bleustein. It is not exactly the point of bikers, who is a former engineering professor at Yale. But Bleustein made his mark as Harley chief engineer, leading to an overhaul of the engine which brought an end to problems chronic leakage of oil. Harley the call is even more in the image in performance, however, fashion and businesses are vulnerable to changes in fashion and production. The future of Harley business is to Gen Xers and YERS, not really the strong of a company listening to baby boomers "rhythms and values. Naturally, the boom of the children want something in the race, but the old man of the model. They are from machines that are anti-Harley. American sales of light sport bikes, to 25 - to 34 years, men, increased 90% from 1998 to 2001. Suzuki , Honda, Yamaha, Kawasaki and have a combined 92% of this market. 114000 bicycles sold in the category still pale beside 262000 Harley in the cruiser segment. But the youth of America took the floor. They prefer brighter, more sporty machines that Harley pork, and Harley brass had better listen. The company must make breakthroughs in the current context of twentysomething bikers because of the shortage of thirtysomething. The first age of motorcycle customers is 35 to 44, according to Donald Brown, a consultant to the industry. Brown said this age group the number began to decline in 1999 and will continue to do so through 2016. Since Harley can not replace all its customers boomers a small group of busters, it must reach more deeply than ever into the youth market. The result, Brown said: "It will have to compete more-head with Japanese." Harley Give credit for not bury our heads in the sand, while the Japanese did when they were at the market peak in early 1980. They wrote on a Harley near bankruptcy, has not responded to its resurgence, and then transferred to boomers and cruisers. That will not happen to Harley, Bleustein vows. His message to a national meeting of 650 dealers in July: "The only thing that can stop us if we get complacent. Even if we succeeded, we can not yet. " To this end, Harley has poured money into developing new, youth-oriented models. The $ 17000 Harley V-Rod - a little slung, powerful number officially known as a sports car performance and familiarly as a crotch rocket - is designed for hard-charging young. Harley has also tried to go young with the Buell Firebolt ($ 10000), its response to Japanese sport bike, and the Buell Blast ($ 4400), a starter motorcycle. But Buell, a subsidiary of Harley bought in 1998, has captured only 2% of the sport-bike market, and Harley are only 10000 V-Rods this year. Bleustein insists that these figures are not the point: "This is not a deal-shot. These are new platforms from which many models proliferate." Making changes is difficult for a company with the Harley worship: They may alienate existing customers. The V-Rod of water-cooled engine is a big departure from the traditional Harley-cooled air, and uncomfortable to some riders have an unwelcome further changes to come. "If they ever do anything with that [roar] sound, they have lost their customer base," says BK Ellis. Harley has designed its one-year, ten-city 100th anniversary bash to appeal to both old riders, he met a long time and new riders they need. The first day of the Atlanta party, the HOG clubs to mingle and get their first look at the anniversary models. The weekend Harley invites the public to its Open Road Tour, featuring country singer Tim McGraw and calls on others to nonbikers. The company for every day hoping weekend crowds of 40000 to 50000. But he never organized anything of this kind and a very large number of people with a whole lot of curiosity about Harley - plus a lot of money to pay the $ 55 ticket. People who catch the fever Harley will be directed to a dealer hometown. Many offer Rider's Edge course for novices. Bleustein the program began two years ago because he felt that many people were interested in motorcycles, but intimidated by the bikes. Approximately half of Rider's Edge graduates are women. Harley the proportion of women customers has doubled over the past ten years, 9%, partly because the company required dealers to transform their bikes filthy retail emporiums. Dealers who derive benefits, such as guidelines that seem convinced that the company can keep reinventing itself. "They did a lot to be avant-garde," says Chris Houghton Harley-Davidson in Atlanta. Yet, privately, some dealers worry. The customer waiting list for new motorcycles has declined by as much as two years to a matter of months. Retailer premiums ranged from $ 2000 and $ 4000 had disappeared for most models. Retailers are grateful for the company plays the centenary of the handle. But the question, "said one dealer, is" What will happen in 2004? " The answer: Harley must go ahead of the demographic curve with new customers while retaining a certain fanatical faith with its alumni. If it does not, the born-to-be-wild company will start its second century of earnings growth that is doomed to be mild.