Harley-Davidson is in trouble.
After several years as a stock market darling, returning regular dividends and steadily climbing upwards, the company hit serious roadworks in 2017 with crashing sales and quality issues that culminated in one of the largest recalls in their history.
Business media went crazy as Wall Street analysts appeared on talk shows decrying Harley-Davidson’s inability to capture new and younger customers, while the motorcycle press ran the usual puff pieces about the new 2018 models. It’s been a confusing situation for the past six months.
Here are the facts: in 2017 Harley motorcycle sales were down 6.7% worldwide, and almost 9% in the US, while revenue was down 20.4%. The company announced the closure of it’s Kansas City assembly plant and laid off 800 workers. Those are not good numbers, especially when most of the brands that actually compete with Harley-Davidson products (think Triumph, BMW and Ducati retro roadsters) posted flat and even increased sales.
But lets put that into context. In the US the overall motorcycle market shrank about 6% and the reason is clear and has been discussed many times before. The average age of new motorcycle purchasers is well over 50, and newcomers to motorcycling are going to Honda, Kawasaki, Yamaha and KTM. Youth, women and previously reticent men who finally make the leap onto two wheels simply don’t find Harley-Davidson products as compelling as others, and price is a factor.
Harley-Davidson is a company I begrudgingly admire because they have a terrific management team that knows how to make money better than any other motorcycle brand.
What’s interesting is what Harley-Davidson is doing about it. They are moving swiftly into the electric motorcycle space.
Traditionalists may scoff, while others are getting to their keyboards to write angry, dismissive letters. But here are two other facts. The day after the Kansas City plant closure the company announced that the Livewire electric Harley was scheduled for a market launch in 2019. And one month after that Harley purchased a stake in Alta Motors, a San Fransisco area electric motorcycle company that has developed its own drive system with lots of patents.
Harley-Davidson is a company I begrudgingly admire because they have a terrific management team that knows how to make money better than any other motorcycle brand. I say begrudgingly because at the same time they have milked the whole “rebel-cruiser” cow dry at the expense of new product development and common sense. If current trends continue, the fat profits from high-margin bikes like the Electraglide will be gone by 2025, and Harley could shrink by half.
The writing has been on the wall for a decade, and the 2008 economic crisis, and Harley’s close call with bankruptcy, really should have been a wake up call. Although not widely reported the Harley finance arm HDFS was so over-leveraged that it threatened to collapse the whole company, and only an emergency loan guaranty from the American government saved the Motor Company. They shed Buell and MV Agusta and prepared to launch the Street 500 and 750 entry level line. It was good planning and brilliantly executed at the back office level, but the new bikes failed.
The Street family were not the sales bonanza Harley hoped for, and shareholders should be furious. How did the world’s most iconic, heritage-rich motorcycle brand fail to capitalize on the greatest boom in entry-level heritage motorcycles in history? BMW, Ducati, Triumph, and yes even the Japanese outsold Harley in the under $10,000 retro bike market.
Harley’s move towards an electric agenda is a serious course correction.
The Street suffered because Harley management didn’t let design do it’s job and insist that the bike be made it as cheaply as possible in the hopes that it would penetrate the India and China market, which it did not, because middle class Asians with disposable income don’t want condescending, low-end products with luxury brand names. The Street looks and rides like a knock-off 1985 Honda Rebel, except without the original’s ease of use and legendary reliability.
Harley’s move towards an electric agenda is, by contrast, a serious course correction and shows how aggressively they want to move the needle. It also indicates how well they read the market. If my straw poll at the motorcycle shows this winter is any indication, even the die-hard cruiser biker is showing electric vehicle acceptance.
Where only a few years ago crowds derided electric cars and motorcycles, the tattooed and H-D shirt wearing faithful spoke with me about the inevitability, even desirability of EVs. Amazing products like Tesla cars certainly helped make that attitude shift, but also an acknowledgment by many baby boomers that perhaps their perspectives were becoming obsolete.
Harley-Davidson knows that they are facing a double blow on the immediate horizon, the of loss of the market zeitgeist, and the 2020 deadline for stricter European and California emission standards. The pushrod, air-cooled V-twin era is over. And no one understands that better than the leaders in Milwaukee.
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Skills Deficit: We’ve forgotten how to ride!
To add to the already glutinous amount of opinion with regards to the coming perfect storm of motorcycling’s demise, I would like to mention one more possible problem. It is the simple fact that today’s new riders cannot ride!
What I mean to say is they do not have any transferable “skills.” Manufacturers like Honda and Yamaha have recognized this “skills deficit” and are subsequently developing a self-balancing motorcycle, and a crazy three-wheeler, the Niken. When I first saw the Niken, I thought, “Who the hell is that for?”
To quote Sherlock Holmes: A Game of Shadows, the motorcycle industry understands that motorcycles are “dangerous at both ends and crafty in the middle.” Compared to horses, they require a minimum of physical skills; in particular, one needs coordination and a good degree of balance and confidence.
How can the industry make motorcycling more manageable? The industry is trying to solve the problem of coming generations raised on computer games and smart phones instead of riding bicycles.
How could a generation raised playing video games lack the ability to keep all balls juggling at once? They must have the hand/eye and foot coordination to administrate throttle, clutch, brake and shifter, so what is the problem? Like a thunderbolt, I realized it was the act of riding a motorcycle itself.
“Can’t you ride?!” Millennials have no experience!
Those helicopter parents placed their kids in plastic bubbles, never letting them get out there to be a kid. These sheltered children never developed any riding skills whatsoever. This is the generation expected to save the motorcycle industry? We are in real trouble.
Motorcycles are “dangerous at both ends and crafty in the middle.”
Previous generations of kids in America and the world consistently followed the same path: we get a tricycle, then a pedal bike (with training wheels) and we never looked back.
As we got older, next came dirt bikes, then street bikes. A progression of skills learned as children makes us capable of handling most street situations on a motorcycle. This agogi of childhood bicycling taught us balance, lean, acceleration and deceleration. It was a right of childhood. Even the ability to change a flat tire and wrench on our pedal bikes cannot be underestimated, as it led to the shed tinkerers.
Millennials, and now Gen Z, were shortchanged without these essential childhood experiences.
I grew up under a canopy of green with a sea of rich brown earth
Growing up in my neighborhood, kids were everywhere. During our two months off for summer, there was stuff to do (outside) every minute of the day. The boys all had BMX bikes and we rode everywhere. Any summer day we would go to someone’s house and build BMX trails all morning, and ride them after lunch. I grew up under a canopy of green with a sea of rich brown earth to build, reshape, tear down and build again. Designing the layout of our trails, engineering and planning the height of the jumps (how much cubic earth it would take); can anyone say S.T.E.M.? We lived it everyday building BMX trails!
My generation was also fit; this constant travel by bike around town to parks, streams, hills, and abandoned buildings was all adventure, all the time. We rode all times of the year, night and day. We practiced jumps, skids, endos, and wheelies. We rode in sand, dirt, mud, gravel and on wet grass. Years of riding bikes in the streets with our future nemesis (the automobile), we became experienced. Crossing busy roads and predicting at an early age what car drivers would do became second nature.
I rode a 1987 GT Pro Series (TEAM MODEL) everyday of my life until I got my first girlfriend.
“Millennials, and now Gen Z, have been shortchanged without these essential childhood experiences.”
The group of 10 contemporaries I rode with were all skilled riders. Collectively we crashed thousands of times. In the 1980s, kids never wore helmets. Helmets were for American football. I cannot recall any of us ever hitting our heads, not even once! Lucky, or skilled? We were great; we knew how to crash a BMX bike. This instinctive “crash reflex” became natural. You learned it, or you got hurt.
I also know that the skills I learned as a child saved me last summer, as I exited Interstate 95.
Slowing down on the exit ramp, I saw the glint of diesel on the motorcycle line. The turn tightening as I rode the corner, I knew I would cross it as some point! I got off the brakes knowing that one or both wheels would slide as I hit the diesel. I felt the front hit and ever so slightly tuck; then the back hit (now both wheels sliding). I held on without panicking. The wheels immediately regained traction at the same time. I never target fixated or locked up the brakes. The stripe of diesel mercifully ended, and it was over.
How many millennials would have come through this seat-clenching event? A childhood of BMX riding had just saved my butt.
My Generation, X (1965-1985) will be the last traditional motorcyclists with the necessary toolbox of skills that ride honest motorcycles. We should have raised free range children in a manner to mirror our own experiences.
Motorcycling should not need technological trickery to address monumental problems. Mark my words: two-wheel motorcycles will eventually be legislated out of existence as “unsafe.” Congratulations Yamaha and Honda, you are the motorcycle company equivalent of the helicopter parents and contributing to traditional motorcycles’ demise, in an effort to make sure no one gets a boo boo or needs a plaster (band aid).
In trying to keep this next generation safe, you have doomed it for the rest of us. Maybe Honda & Yamaha can give you a participation trophy every time you ride their three-wheeler or self-balancing motorcycle.
Is it 1891? No this is 2018, and if this technological nonsense is the future of motorcycling… I weep for you all.
We are doomed!
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When Projects Creep Out of Control
Is ‘more’ always better?
Back in 2008, after more than a decade working in the motorcycle industry, I finally bought my first brand new bike. Like the kid in the proverbial candy store, I wandering through my local motorcycle dealer with my stomach in knots knowing that one of these shiny, magnificent machines would be mine. And like so many people tilted by emotion, despite years of experience and insider knowledge, or perhaps because of it, I let excitement take over the decision making process. I bought a motorcycle far beyond my needs.
It was not long after taking possession of my Yamaha FZ-1 that I realized my mistake. The bike was technically faultless, the problem lay in that it was not at all what I needed. With a tiny fuel capacity and very firm ride it was a lousy touring rig (especially in Quebec where road surface quality is akin to a bombed out airstrip), but conversely it was too bulky and heavy to flick into corners on curvy A roads. It was bigger, faster, incorporated superior suspension and materials technology than it’s predecessor, the Fazer 1000 I helped develop years earlier, an yet somehow the new package was less motorcycle.
When you ask motorcyclists what they want in a new bike, the answer is always “more”. More power, more space, more features. The only thing they don’t want more of is cost. It makes sense, after all we all want more of a good thing. With motorcycles problems often arise when designers and engineers are tasked with piling on those ever increasing specifications to an existing model. This mission creep can, if not managed carefully by a strong project leader, end with a product so packed with features and high specification that it can do everything, but none of it particularly well.
The 1998 – 2004 Yamaha FZS600 Fazer was a wildly successful motorcycle design. At a time when entry level, middle displacement (500cc to 650cc) street bikes were either extremely basic or used obsolete technology, the Fazer delivered modern handling and performance in a user-friendly package. Featuring the engine and brakes from Yamaha’s YZF600R Thundercat, and a compliant chassis made of steel pipe to keep costs down, the little Fazer sold like mad satisfying a wide array of beginners and experienced riders alike.
With motorcycles the temptation is always to add more performance.
Yamaha introduced a mildly revised version two years later, along with the aforementioned larger, 1000cc version. Honda blatantly copied the Fazer formula of packaging supersport technology into an inexpensive package with the CB600F Hornet. Yamaha saw sales plummet, so along with a dozen other designers and engineers I was brought into a group to create the next, all-beating Fazer.
And that’s when the wheels came off the cart.
A whirlwind tour of European cities took place in which we interviewed hundreds of entry-level 600cc customers. The specification list grew longer and longer each day, as the demands of existing users piled on. More fuel tank range! More wind protection! More cargo carrying capacity! And of course… more power! Always more power.
Back at headquarters, the project leader handed over the design brief. As a very young designer I was confused. The new Fazer would now have an R6 motor. It would feature an all aluminum, Deltabox frame, lightweight R6 rims and a 180 section rear tire. Projector headlights. LEDs. Twin, under seat stainless steel exhausts. The brief read like the spec sheet from a top-of-the-line flagship project, not the replacement for Yamaha Motor Europe’s best selling motorcycle.
This is project creep, and it happens when an organization is beset by fear and acts out of ignorance of the big picture. The reasoning behind this phenomenon seems sound: if your opponent has three guys with knives, you better make sure you have six. It makes sense until you discover that you only have enough food for four, and so field six starved, exhausted guys against three strong and healthy ones. In manufacturing history there are hundreds of examples of this, the most famous of which may be the case of the Ford Edsel. It had more of everything than any of its competitors, and yet was so much less car.
With motorcycles the temptation is always to add more performance. After all, motorcyclists are fundamentally sold on the thrill of speed and aggressive handling. The problem is that too much performance makes most motorcycles into unmanageable, sphincter-clenching torture devices. Among our tribe few are skilled enough to exploit even half of the potential of modern bikes, which makes adding high performance to models destined for the rest of us an academic exercise. Of course our egos won’t allow us to admit it, but inside we are terrified of opening the throttle fully mid-corner. So we don’t, and wobble around on large, expensive bikes that not only don’t satisfy, but fill us with regret because we cannot master the objects of our desire.
At the cruiser end of the spectrum, the height of the chopper era saw mature, fully grown manufacturers launch models that were laden with Edsel-like heapings of features. The Honda Rune was presented as the end-all, be-all of the cruiser genre. According to Honda America’s Ray Blank, they “…wanted to set the bar higher than ever, erecting standards that no one else had yet imagined.”.
The result was a seven foot long, 400 kg, six cylinder monster that boasted 50% more torque than Honda’s then flagship superbike.
It was literally the most cruiser you could buy from any mainstream manufacturer, and yet its’ excess was its failure. At $30,000 (US) it wasn’t more expensive than a range topping Harley-Davidson, but the market balked at its bulk and cornucopia of pointless styling. Honda had failed completely to stop the design at some stage and roll it back, asking the team to refocus on what make people yearn to cruise on a motorcycle: the simple joy of sitting astride a large mechanical powertrain suspended between two chunky tires. The Chopper is, by definition, a bike “chopped” down to its basic, core elements. A little baroque styling and flair is cool, but it is not the main attraction.
As an industry, the motorcycle business is not very good at learning the lesson of project creep. The endless fight to produce the sexiest products in the marketplace inevitably drive an arms race that produces some great innovation but also squeezes out lots of poorly conceived motorcycles. If a bike comes out with a strong styling direction that hits the market like a storm, then simply copying it only with a more extreme execution is not going to work. When a competitor eats your lunch, as the Honda Hornet did when it replicated the original Yamaha Fazer concept in 2003, then just doubling down on everything is not going to win the market back.
How did we end up in a place where an entry-level street bike comes with racing style, upside-down forks and a mouse pad for a seat?
The second generation FZS600 (called the FZ6 in North America) that debuted in 2005 with all those crazy upmarket features did well in Europe for a few years, but alienated a lot of customers who loved the original Fazer’s rugged, approachable simplicity. They flocked to the second generation Suzuki SV650S, which was a better Fazer than the new FZ6 (ironically, the Suzuki’s styling was almost a copy of the updated original Fazer). By 2008, Yamaha introduced the FZ6R, a confusingly named but genuine successor to the formula that was simple, cheap, versatile and easy to use. It quietly dropped the over-spec’ed FZ6 Fazer without a replacement a year later.
In the market battlespace, project creep is easily seen in the most hotly contested areas. The 250cc class ballooned to 300cc because Kawasaki needed to edge out the class leading Honda CBR250. Then KTM launched the RC390, resplendent in its superior specification. The new Honda CBR250RR presented this winter is a very far cry from the CBR250 I tested in 2011. In five short years, the baby Honda sport bike went from being what I called “the missing link”, a motorcycle for everyone that the industry so badly needed, to being a mini CBR1000RR World Superbike contender.
I love the look of the CBR250RR, and if I am completely honest I want one rather badly. But how did we end up in a place where an entry-level street bike comes with racing style, upside-down forks and a mouse pad for a seat? I suspect it has a lot to do with looking ahead instead of behind. I’ve seen this show and I know the ending. In five years time the 250cc class will be dead again, because it will have priced itself out of the marketplace.
Getting excited and dreaming of the ultimate motorcycle is the job, but it is also the duty of manufacturers to deliver products people can actually afford and use. The ultimate anything is, as the word suggests, the last of the line. And winning the battle for the ultimate product is meaningless if you destroy the consumer base as a consequence.