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Turfscape (40.38)

Cleaning up the HOG pen

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5

December 02, 2009 – Comments (4) | RELATED TICKERS: HOG , GE , JCI

So, Harley-Davidson CEO got what he was looking for out of York and the Union voted today to accept the new labor agreement

Story here

Since his arrival in May, Wandell has been making fairly dramatic moves to reorganize the cost structures of Harley-Davidson; from dismantling Buell, to divesting MV Agusta, shutting down manufacturing for an entire month or quarter (depending on the facility), to laying off salaried employees. One of his key concerns was the structure of the manufactuing operation in York. He has repeatedly stated that the facility was simply not sustainable and that if York didn't find a way to become sustainable, production would move. Period.

It would seem that these moves are truly realigning the H-D cost structures for the longer term, which bodes well for future profits. Already dealers have commented on the effectiveness of the production cutbacks on inventories. HDFS has been able to secure funds for financing. The parts all look like they are falling into place.

Wandell was clearly what H-D needed (someone from the outside with a focus on the business instead of being "in the club"...so to speak). I give HOG two years to be back to peak form...and Wandell five years to take his turnaround talents to another company with a bigger challenge (GE anyone?).

4 Comments – Post Your Own

#1) On December 02, 2009 at 12:47 PM, Turfscape (40.38) wrote:

Disclosure: Long HOG

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#2) On December 02, 2009 at 2:33 PM, lemoneater (87.47) wrote:

Catchy title. Also remember that a HOG drinks less gas than a car. If oil goes up again, this might be a defensive play.

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#3) On December 02, 2009 at 2:50 PM, Turfscape (40.38) wrote:

lemoneater wrote:
"Also remember that a HOG drinks less gas than a car. If oil goes up again, this might be a defensive play."

Higher gas prices may spark some interest in small pockets of the population in purchasing a motorcycle, but the bigger benefit would be those who already own riding more...choosing to use their motorcycle for commuting instead of only on the weekends, for example. That sort of increased ridership leads to increased visits to dealers for service, parts and gear (sudden realization that they could use a new helmet or gloves). And, of course, the more they go to the dealership the more they're exposed to the new bikes. And, the more people see the new bikes and sit on them, the more likely they are to trade in and trade up.

My hope, though, is that Harley continues to reach out to new riders through marketing events like THIS for women, or through their partnerships with groups like UFC for youth crowds.

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#4) On December 03, 2009 at 9:55 AM, Turfscape (40.38) wrote:

H-D released the full details of their York restructuring this morning (release here). It looks like in 2012 they'll be seeing the full benefit (financially) of all company wide restructuring, with savings of $240 - $260 million in annual operating costs. For a company with a $5 billion market cap, I'd say that's fairly significant.

But, more important than just the pure dollars is the flexibility in production that they'll be implementing. From the looks of it, it should be easier for H-D to respond to market conditions and scale production numbers up or down accordingly.

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