Will Hogs be History?

[MX793]

I've ridden a couple of Harleys and was never really impressed.  Granted, I probably would have found any cruiser style bike, H-D or otherwise, underwhelming since that style bike generally doesn't appeal to me.  I prefer something a little more nimble and with a more standard style seating position (the basic Sportster offers this, I haven't ridden one of those).  I will admit that the big twin exhaust note did put a grin on my face (one of the examples I rode had a set of aftermarket pipes) even if the thrust provided wasn't exactly awe inspiring.  Certainly still fun to ride, but a different kind of riding fun than I'm into at the moment.  However, they are pretty pricy for what you get, IMO.

[Raza]

I don't think you've ever been to a Harley dealership.

I used to drive by the biggest one in PA all the time.

[MX793]

But I'll hand you your ass with my $10k Buell.

(at least until we get up to ~65  )

I'm pretty sure a Gixxer 600 is quicker than any of the air-cooled Buells.  I think my bike will run about dead even with a 1200 Buell.

[hotrodalex]

I'm pretty sure a Gixxer 600 is quicker than any of the air-cooled Buells.  I think my bike will run about dead even with a 1200 Buell.

Not in low-end acceleration. After about 60 or 70, yes they are faster.

[Rupert]

V Rods and the customs are the most expensive bikes they make.

Most sell for well upwards of $15k, though, and they don't have half the features of a $24k Honda Goldwing.

But then, why would you want a Goldwing? 

[the Teuton]

But then, why would you want a Goldwing? 

Why would you want a Harley?

[AutobahnSHO]

HD is probably getting hammered by the cheapER (than before) "Custom" bikes which picked up a few years back, along with the economy..

[Rupert]

Why would you want a Harley?

Good point.

[ChrisV]

Good point.

For the same reason you might want a restored MGB instead of the cheaper and dynamically superior Miata.

[Morris Minor]

Harleys are not my cup of tea, but their popularity illustrates that uniquely American trait of an affection for machinery that is large, simple, reliable and brash. Harleys are along the same continuum as leather-lined pickup trucks, Hummers etc. They are (perhaps now were ) an indication of a wealthy society.

[Byteme]

WTF?  Do you know what a HOG is?  Harley Owners Group.  The bikes aren't HOGS, the owners are.  Byteme misnamed this thread.

Technically perhaps, but to the average guy the term Harley and Hog is interchangable.

Plus the question "Will Hogs be history" kind of flows.

[Byteme]

Here is the article from:  http://seekingalpha.com/article/116346-company-death-watch-harley-davidson



Harley-Davidson (HOG) reported earnings on January 23rd, and the numbers were worse than the headlines indicated. Much worse. The cash flow statement and the balance sheet show a very different picture of the company than the income statement. The core operating activities burned $684,649,000 of cash in 2008. Investing activities burned another $393,247,000, and the company only reduced capital expenditures 4.1% as the economy headed into the worst recession since the great depression. On top of this Harley bought back $250,400,000 worth of stock and paid out $302,000,000 in dividends. Total cash burned in 2008 was $1,630,296,000. The company had to finance this cash burn with borrowings.

Harley was able to increase sales and profits during the credit boom of the last decade by increasing the percentage of loans its financial services unit originated. Harley-Davidson Financial Services (HDFS) originated 22% of the loans for its bikes in 1999. HDFS originated 55% of all new Harley Davidson?s sold in the United States during 2007. During the securitization boom of the past decade Harley was able to sell the vast majority of the loans it originated for a profit. Now that the market for securitized loans has all but evaporated Harley is forced to hold all these loans on its books. Finance receivables increased $1,437,921,000 for the year end in December 2008, from $3,201,607,000 to $4,639,528,000. Finance receivables now account for 77.69% of 2008 revenue up from 52.11% of revenues in 2007. Total liabilities increased $2,432,000,000 in 2008. Current liabilities and borrowings increased $537 million in the fourth quarter alone. This occurred in a year where worldwide motorcycle sales declined 7.1%.

HDFS is financed by operating cash flow, asset-backed securitizations, the issuance of commercial paper, revolving credit facilities, medium-term notes, and the availability of advances and loans from the Company. In asset-backed securitizations, HDFS sells retail motorcycle loans and records a gain or loss on the sale of those loans. HDFS also retains an interest in the excess cash flows from the receivable and recognizes income on this retained interest. After the sale, HDFS performs billing, customer service and portfolio management services for these loans and receives a servicing fee for providing these services.

Harley-Davidson is now as much a lending institution as it is a manufacturing company. It is a financial in drag. This begs the questions, what is the company recording for its bad debts expense, and how much more can the company borrow to fund its motorcycle sales? Unfortunately for Harley?s shareholders the answer to both these questions is not much. HDFS uses discounted cash flow methodologies to estimate the fair value of finance receivables held for sale that incorporate appropriate assumptions for funding costs and credit enhancement, as well as estimates concerning credit losses and prepayments, that in management?s judgment, reflect assumptions marketplace participants would use. This means the company does not use mark to market accounting that financial institutions are forced to use. Harley only wrote down the value of its financial receivables 63.2 million dollars in the fourth quarter, 1.36%, as the world fell apart around them. ABS of all types sunk like a stone in the fourth quarter. One can extrapolate that the losses that Harley is realizing mean that cash flow those borrowers are at least 90 days or more past due. These losses will increase dramatically in the future. If Harley was forced to sell these loans at fair market prices due to a cash crunch, the company would have to record large losses.

In July 2008, the Company and HDFS entered into a $950.0 million 364-day facility and a $950.0 million three-year facility HDFS can issue unsecured commercial paper of up to $1.90 billion as of September 28, 2008. Maturities may range up to 365 days from the issuance date. Outstanding unsecured commercial paper may not exceed the unused portion of the Global Credit Facilities. Harley had $1,169,200,000 outstanding as of September 28th, 2008. Short term debt increased $599,667,000 in the fourth quarter. One can only assume that a substantial portion of this debt came from its commercial paper facility. This means that Harley only has a few hundred million dollars left of borrowing ability for its HDFS unit. The company also has $200,000,000 of debt coming due in 2010. There is a very real possibility that Harley will not be able to access the credit markets in 2009 to increase the lending capacity of HDFC. This puts over half the company?s revenues at risk. Credit is hard to come by so many potential buyers will have difficulty obtaining financing from other lenders. There is also the distinct possibility that the line of credit is pulled at year end. The dividend at Harley will have to be cut if it is not able to access credit or Harley will have to liquidate a portion of its loan portfolio at a large loss. The coming cash crisis at Harley Davidson makes it a legitimate contender to be the first major American vehicle manufacture to declare bankruptcy. This is a value trap that should be avoided or shorted.

[GoCougs]

Interesting - take away the profit from merchandising and now lending, and it doesn't look to be much of enterprise in the bikes themselves.

From the sounds of the situation it was a doomed for some time - The only company more tenuous than one founded on a product with little intrinsic value is the same in which its customers rely on loose consumer credit to purchase that product.

[Byteme]

I think one of their major problems is they sell a product one can easily do without when money's tight and times are hard.

One of my co-workers shopped For a HD over Christmas.  The model he wanted cost about $16,000 and the dealers were not dealing.  He found a NIB 2006 (New in Box) Honda for less than half that.

[GoCougs]

I would have always thought that being such a luxury item that the majority of them would not be financed, but that doesn't seem to be the case.

H-Ds are uniquely American, but yes, when it comes to performance and value they are usually bested by Japanese bikes costing 1/2 as much.

[Cobra93]

Here is the article from:  http://seekingalpha.com/article/116346-company-death-watch-harley-davidson



Harley's going broke, etc................

I know what would help. They could start having all of their gin-u-wine American Harley Davidson Apparel, boots and doo-dads manufactured overseas to save money.



































Oh wait... they already do that.

[Cobra93]

I would have always thought that being such a luxury item that the majority of them would not be financed, but that doesn't seem to be the case.

Yep, And the trailer payment comes first.

[Byteme]

The Harley dealer kept telling (selling) my friend on the fact it was A Harley.  The salesman evaded all the performance figures and reverted to what was essentially 'you are buying an image and a lifestyle'.

I'm not surprised most are financed.  I have no data but I suspect many if not most buyers are middle aged middle class to upper middle class males ticking off an entry on their bucket list.

[SVT666]

I think one of their major problems is they sell a product one can easily do without when money's tight and times are hard.

One of my co-workers shopped For a HD over Christmas.  The model he wanted cost about $16,000 and the dealers were not dealing.  He found a NIB 2006 (New in Box) Honda for less than half that.

A Honda will never sound like a Harley though.

[Byteme]

A Honda will never sound like a Harley though.

A harley sounds like a 1600CC, flat four, air cooled, VW Beetle engine running unmuffled on three cyls.   

[ChrisV]

Not everyone needs ultimate performance in a street vehicle. I've had sportbikes and love them, but you really can't use all their potential on the street (or if you do, your'e lumped with the stunters that we have around here that do absolutely stupid stuff in traffic). If I do get another bike it won't be a sport bike.

I used to want a street rod style softail, but I rode a V-Rod, and I love it.

As for value, one of the things that Harleys had going for them that the Japanese bikes didn't was resale and longetivity.

[Cobra93]

A Honda will never sound like a Harley though.

But if you pull a few plug wires it'll run like one.

[Cobra93]

Not everyone needs ultimate performance in a street vehicle. I've had sportbikes and love them, but you really can't use all their potential on the street (or if you do, your'e lumped with the stunters that we have around here that do absolutely stupid stuff in traffic). If I do get another bike it won't be a sport bike.

I used to want a street rod style softail, but I rode a V-Rod, and I love it.

As for value, one of the things that Harleys had going for them that the Japanese bikes didn't was resale and longetivity.

I too, like the V-Rod. However, most traditional Harley guys don't, so it hasn't been very successful for them. As for that superior resale, those days are gone, perhaps because H-D made it too easy to buy a new one..

[GoCougs]

A Honda will never sound like a Harley though.

Thankfully - A piping CBR sounds 567 times better than any H-D ever built.

To me the only thing that sounds worse than a H-D is a coffee-can'd non-performance gunned-out ricer 4 cyl.

[ChrisV]

Sorry, but drop some slip-ins in the exhaust of this bike, and I'd ride it all over the place.



Just like a new GT-R will outrrun and outhandle a hot rod '32 Ford, but I'd rather have the '32, I'd rather have this than a new sport bike.

[Morris Minor]

My guess is the Wisconsin congressional delegation will be seeking taxpayer-funded assistance to stop Harley going under.

[Tave]

Harleys are not my cup of tea, but their popularity illustrates that uniquely American trait of an affection for machinery that is large, simple, reliable and brash. Harleys are along the same continuum as leather-lined pickup trucks, Hummers etc. They are (perhaps now were ) an indication of a wealthy society.

Harleys are notorious for breaking down. They make them that way on purpose so you have a chance to bond with other riders.

[giant_mtb]

That's the only Harley I want.

Now that is freakin' awesome.

[SVT666]

Harleys are notorious for breaking down. They make them that way on purpose so you have a chance to bond with other riders.

OLD Harleys are notorious for breaking down.  They are quite reliable now.

[Tave]

True, they've improved in that regard, but their popularity wasn't built on reliability, is my only point.

And they've still got a ways to go.