Harley-Davidson: History and Ownership

Harley-Davidson Motor Company is the largest manufacturer of heavyweight motorcycles in the world, and one of the most recognizable brands in the United States. Harley is renowned for making one specific product, and the Harley-Davidson brand is easily the most recognized in the heavyweight motorcycle industry. Harley targets high-class customers, and represents success and high social status. Harley has competitors that make products of the same quality; however Harley is able to charge a premium due to its strong brand name. Harley emphasizes the riding lifestyle as opposed to just selling motorcycles. Harley customers are extremely loyal to the brand, and they believe that Harley makes the best heavyweight motorcycles in the world.

William S. Harley and William A. Davidson founded Harley-Davidson in Milwaukee, Wisconsin in 1903. The first documented appearance of a Harley was in a Milwaukee motorcycle race held at State Fair Park in 1904. In 1905, Carl H. Land of Chicago, the first Harley dealer, sold three bikes out of a dozen that were built. Production increased to 150 motorcycles in 1907. The company was officially incorporated in September of 1907. Harley began selling motorcycles to police departments around that period of time. Production increased to 450 motorcycles in 1908, and then jumped to 1,150 machines in 1909. Harley began dominating motorcycle racing after 1914, separating itself from its nearest competitor, Indian.

Harley provided about 15,000 motorcycles to the United States military during World War I, marking the first time that the motorcycle had been adopted for combat service. By 1920, Harley was the largest motorcycle manufacturer in the world. Over 28,000 motorcycles were sold in 67 countries that year. Harley-Davidson was one of only two major American motorcycle manufacturers to survive the Great Depression. From 1929 to 1933, sales of Harleys fell from 21,000 to 3,703. However, the company rebounded and over 90,000 motorcycles were produced for the United States military and Allied Nations during World War II. The brand’s reputation was tarnished in 1952 when Harley was charged with restrictive practices after requesting that the United States Tariff Commission place a 40% tax on imported motorcycles. From the 1950’s to the 1970’s Harleys were featured in Hollywood films as motorcycles ridden by outlaw biker gangs. Harley became synonymous with the Hells Angels biker gang and other renegade organizations.

American Machinery and Foundry purchased Harley-Davidson in 1969, and their efforts to streamline production resulted in labor strikes and lower quality motorcycles. Harleys were more expensive and inferior in quality and performance relative to Japanese competitors. Sales dropped so significantly around this time that the company almost went bankrupt. In 1981, American Machinery and Foundry sold Harley-Davidson to a group of thirteen investors for $80 million. In 1983, President Reagan imposed a 45% tariff on imported motorcycles with over 700 cubic centimeter engine capacity, which slowed the penetration of Japanese competitors until they started manufacturing motorcycles in the United States. Also in 1983, Harley established the Harley Owners Group (HOG). The nickname “Hog” had been given to Harleys beginning in 1920, when a team of farm boys used an actual pig as their mascot during motorcycle races. The Harley Owners Group was built on the strong loyalty of Harley enthusiasts as a means to promote the Harley lifestyle and riding experience. The company went public in 1986, and enjoyed rapid growth over the next 16 years. Harley ranked among America's top growth stocks since its 1986 IPO. Its 37% average annual gain runs just behind the 42% pace of Microsoft, which also debuted in 1986.

By 1990, Harley-Davidson was once again the worldwide sales leader in the heavyweight motorcycle market. In 2000, Ford began making a Harley-Davidson edition of its popular F-150 pickup truck. In 2008, the 130,000 square foot Harley-Davidson Museum opened in the Menomonee River Valley. It contains a vast collection of Harley motorcycles that pay tribute to the history of the company.

According to Interbrand, the value of the Harley-Davidson brand dropped by 43% to $4.34 billion in 2009. This drop has been attributed to a significant drop in the company’s profits over the previous two quarters. Due to the current recession, sales in the United States and Canada have dropped significantly (-26% and -37% respectively), and international sales are down slightly as well. International sales have not been affected as drastically as in North America due to Harley’s premium brand recognition and the depreciation of the American Dollar.

Harley sells motorcycles directly, sells motorcycle parts and accessories, operates retail motorcycle dealerships, sells motorcycle gear and general merchandise, and offers loans to buyers. The collapse in the housing market in the United States crippled Harley’s financing arm, which relied on using customers’ homes as collateral for financing loans. Harley’s financing arm traditionally accounted for 15% of Harley’s income, but experienced significant losses in 2009. Harley shipped 25% fewer motorcycles in 2009 than in the previous year. As a result, Harley was forced to fire 2,500 employees (about 25% of its total workforce), and shut down or consolidate numerous manufacturing facilities to accommodate its drastically reduced sales.

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