Harley-Davidson Inc.: Bridging The Generational Divide

Motorcycle maker faces challenging times down the road with an aging customer base and tough overseas competition.

Harley-Davidson motorcycles have become such a cultural icon that a Long Island funeral home recently invested $100,000 in a three-wheeled carriage-style hearse for bikers who want to experience one last ride before they're buried. It's that same zeal that's helped Milwaukee-based Harley-Davidson Inc., an IndustryWeek 50 Best Manufacturer for 2007, maintain robust sales during challenging times.

Revenue and motorcycle shipments continue to grow even during an era in which many younger riders are opting for sportier Japanese models. Revenue in 2006 was $5.8 billion, up from $5.3 billion the previous year, while profit increased 8.7% to $1 billion. CEO Jim Ziemer credits strong sales to changes in the company's 2007 models. Among its new 2007 products was the Nightster, a sporty bike specifically designed to attract younger buyers with its low seat height and black and gray features.

The company also has been expanding its international reach by introducing products designed for overseas markets and streamlining its supply chain to get those products to the customer. According to its year-end financial report, the motorcycle manufacturer expanded its European dealer network and reworked its product distribution capabilities, and the results were obvious -- retail sales increased 14.6% in Europe during 2006.

But the company realizes that to stay relevant with younger riders it will need to appeal to new demographics.

"We believe there's a huge untapped pool of potential Harley-Davidson customers out there, including large underserved populations of younger enthusiasts, women, African Americans and Hispanics," said Ziemer in the 2006 annual report.

The company has its work cut out for it to reach these nontraditional markets. About 12% of Harley-Davidson motorcycle owners are women, but that's up from 2% about 15 years ago, Ziemer told the Associated Press on May 25. The company is trying to gain exposure with younger buyers by marketing at alternative rock concerts, skateboard tours and at women-only events, Ziemer says.

Harley-Davidson Inc.
At A Glance

Harley-Davidson Inc.
Milwaukee, Wis.
Primary Industry: Motor Vehicles
Number of Employees: 9,700
2006 In Review
Revenue: $6.2 billion
Profit Margin: 16.86%
Sales Turnover: 1.12
Inventory Turnover: 14.7
Revenue Growth: 9.02%
Return On Assets: 19.85%
Return On Equity: 33.83%

For 2007, the company has some additional hurdles to overcome. First-quarter revenue was down 8.3% from the year-earlier period because of a three-week strike at its York, Pa., plant. Profit was $192.3 million, an 18% decrease from the previous year. Even so, Ziemer says Harley-Davidson earnings per share will grow 4% to 6% in 2007 and 11% to 17% in 2008 and 2009.

Looking ahead to 2008, the company is on track with the construction of the Harley-Davidson Museum in Milwaukee. Construction workers erected the final steel beam on May 4, according to The Business Journal of Milwaukee. The 130,000-square-foot museum will feature exhibits of more than 400 Harley-Davidson vehicles, Elvis Presley's 1956 Model KH motorcycle, a 13-foot motorcycle with two engines known as "King Kong" and the 1903 Serial Number One motorcycle.

The museum also will feature a restaurant, cafe, retail shop, meeting space, special events facilities and the company archives. Harley-Davidson expects the museum will attract 350,000 visitors annually from around the world.


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