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 But for a look at the company's future, head for its vehicle and
power-train plant in Kansas City. Opened in 1998, the
435,000-square-foot factory produces several of Harley's most
popular bikes, including the Sportster and V-Rod.
Earlier this year a motorcycle unlike any Harley has made in decades
began coming off the line. Known as the Street, it is the company's
first entirely new bike in more than a decade and the first
U.S.-built small bike bearing the Harley name in nearly 50 years.
With an expected retail price of $6,500 to $7,500, the Street is the
most affordable bike Harley has brought to market under its name in
decades and an unapologetic effort to bring young riders around the
world into the company's two-wheeled fraternity.
"This basically targets a whole new market of people who want to try
a Harley-Davidson but don't have the money to try one of the bigger
bikes with all the bells and whistles," said Jaime Katz, an analyst
at Morningstar.
The Street, which will arrive in dealerships this spring, is a
stripped-down bike built for urban environments a major departure
Harley, known for heavy touring bikes built for the open highway. It
is also proof, according to Chief Executive Officer Keith Wandell,
that a company whose products have been dismissed as "geezer glides"
has no plans to shamble off into the sunset along with the baby
boomers who built the brand.
"Street is really symbolic," Wandell said. "It's the first new
product we've brought to market under the Harley-Davidson badge that
is intended to bring new riders and even younger riders into
the Harley-Davidson family."
It also illustrates Wandell's commitment to transform the company
into a leaner, more nimble manufacturer. The last time Harley
introduced a new bike, in 2002, it spent big bucks it refuses to
say how much building a new line in Kansas City dedicated to the
motorcycle. This time, Harley did it on the cheap, incorporating its
new bike into an existing line.
The Street's introduction is not without risks. It puts Harley in
direct competition with Japanese bike makers, which have strong
brands of their own. The yen's current weakness against the dollar
will also help the Japanese defend their small-displacement,
sport-bike turf.
Meanwhile, Harley faces a unique problem: convincing its core
customers that the new bike does not undermine the brawny, muscular
quality of the Harley brand. Company executives insist they aren't
worried.
"It's a Harley that just happens to be a little smaller," says
Mark-Hans Richer, Harley's top marketing executive. The Street's
exhaust, he noted, was specifically tweaked to make generate the
distinctive Harley "potato-potato-potato" rumble.
"We worked really hard on that," he said.
The debut will also make it harder for investors to understand where
profit margins on motorcycles will settle after years of
restructuring under Wandell. Harley has acknowledged that the Street
may pull buyers away from higher-margin entry-level heavyweight
motorcycles in its line, like the Sportster.
"As that mix shifts, it could hurt gross margins at least
temporarily," said Morningstar's Katz.
Harley saves considerable cost by building the Street on the same
line, and often at the same time, as its larger V-Rod.
Changeover from V-Rod to Street production can take place on the
fly, several times in a 24-hour period. The process could easily
devolve into chaos, said Steve Wiggins, manager of the Kansas City
plant, but factory workers quietly choreograph the changeover,
swapping components and tools in and out and just in time.
Workers on the line, who are briefed during a pre-shift huddle on
the day's production schedule, "don't see anything happen (during
the changeover) except they look up, see we've switched to Streets,
and the parts and tools they need are there." Wiggins said.
"So we do not lose any build time.
There's not a single skipped
carrier or anything."
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SMALL FLOPS
The last U.S.-made, Harley-badged small bike, the 1966 BTH Bobcat,
was an underpowered flop, discontinued after a year. More recent
efforts to break into the market with the Buell and MV Agusta brands
also ended badly.
The Street's stripped-down design and low price it costs just a
bit more than some Vespa scooters reflect the need to find a new
generation of buyers. The Street is the simplest motorcycle Harley
has offered since it discontinued the Buell Blast, a bike ridiculed
by Harley stalwarts as the "Be-Last."
Neil Howe, a demographer who helps companies market to younger
consumers, said Harley needs to show twenty- and thirtysomethings
that the Street meets their transportation needs. That age group has
a "brutal pragmatism," he said.
"It's one of their most impressive characteristics, the urge to
simplify," he said.
Harley expects to ship just 7,000 to 10,000 Streets in 2014 and has
confined the rollout to half a dozen countries, including the United
States, Italy, Spain and Portugal. Still, executives see the debut
as a pivotal event. "We don't come out with a new platform every
day," Richer said.
Doing nothing is not an option. Harley faces a growing number of
challenges, including shrinking demand in the United States, its No.
1 market, for the big, expensive bikes it has made for years.
And even as that market shrinks, new competitors, including the
relaunched Indian brand from Polaris Industries Inc <PII.N>, are
moving into the space.
Harley has problems overseas as well. Europe hasn't provided the
boost the company needs to offset the slowdown at home. And sales in
China have been disappointing since they began in 2006.
"They've found it hard to break into China with a $20,000 bike,"
said Morningstar's Katz.
If the Street water-cooled like the V-Rod, with either a 500cc
and 750cc engine takes off, it could reestablish Harley-Davidson
as a growth stock by increasing sales to members of the "millennial"
generation worldwide.
The Street will be Harley's first global bike, with models built in
Kansas City for North America and at a plant in Bawal, India, for
the rest of the world.
It's also not clear that Europeans, who have until now been supplied
by U.S. factories, will accept an Indian-made Harley, though company
executives downplay those concerns.
"The made in America' cachet is certainly more real in the United
States maybe than anywhere else in the world," Wandell said.
It may be some time before investors will know whether the Street is
a hit. Most of the bikes produced in 2014 won't be sold to consumers
straightaway but will instead be used as training bikes in
dealer-run motorcycle riding classes.
Even if the Street's launch is a success, Katz said she doesn't see
Harley's global shipments returning to their 2006 highs until 2019,
in part because so many boomers are aging out of their motorcycle
riding years.
"You're going to have that massive user base that takes off their
helmets and stops riding," she said.
"So they are hoping that this smaller, lighter, less expensive bike
caters to a much wider audience and moves volume through the
channel. And then they're just crossing their fingers that Street
buyers trade up as they get older and convert to heavy bike riders."
(Editing by David Greising and Douglas Royalty)
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