What’s the first thing you would buy if you won $102 million in the lottery?
Reports have Streamwood resident Frank Capaci, who has been in that position since playing Powerball last month, looking for a new Harley-Davidson motorcycle.
“Everyone wants a Harley now,” says Marti Stempinski, sales manager for Chicago Harley-Davidson, a dealership on the North Side since 1978. “And what other product would you pay $22,000 for and then be put on a waiting list of six months to a year?”
“We’ve had 12 successive years of increasing revenue and profits,” says Jeffrey Bleustein, president and chief executive of Harley-Davidson Inc. “We can’t predict what will happen in 1998, but we expect it to be another record year that will continue to bring to us double-digit revenue and earnings growth.”
In 1997, Harley-Davidson had a record sales of $1.76 billion, with a good deal of that coming from Harley-Davidson gear and accoutrements as well as motorcycles.
It produced a record 132,000 motorcycles in 1997 and expects to top that by 16,000 in 1998. Nearly 30 percent of its 1997 production went overseas, where market share and the number of dealers is increasing.
In the last three years, Harley-Davidson has invested nearly $500 million in expansion projects–including the construction of a new final assembly plant in Kansas City and a new powertrain facility in Milwaukee–that officials hope will begin to close the gap between the increasing demand and supply.
And for icing on the cake, the company this weekend celebrated its 95th birthday with a blowout in its hometown of Milwaukee.
“Harley-Davidson is not just on a rebound–which lasts a year or two–they’re on a resurgence, which has lasted a more than decade,” says Jay Van Cleave, an investment analyst with Robert W. Baird & Co.
“They have solid products that are well received. They had a dedicated long-term following, and they have clever management people,” says Buzz Kanter, editor in chief of the Stamford, Conn.-based American Iron Magazine, which focuses on Harleys.
Just one more chapter in the history of Harley-Davidson.
The company dates to 1903 and a 10-by-15-foot shed in the back yard of Milwaukee brothers William, Walter and Arthur Davidson and friend William Harley.
It was there the group built the first three Harley-Davidsons. Six years later, the four men unveiled a more potent motorcycle powered by Harley’s famous V-twin engine, capable of reaching then-record speeds of 60 m.p.h.
As did more than a 100 motorcycle companies, Harley-Davidson prospered over the first quarter of the century, fueled somewhat by the military’s call for motorcycles in World War I.
The Depression, however, wiped out all of those companies except Harley-Davidson and Indian. By 1953, back on its feet thanks to increased production during World War II, Harley was the sole American motorcycle-maker. Indian folded that year.
Despite being the only U.S. manufacturer, in the late 1950s Harley-Davidson retooled its line and introduced heavy-weight sportster motorcycles.
Around the same time, motorcycle culture was changing, incorporating a philosophy of freedom and a fashion of black leather. That made motorcycles even more popular and redefined Harley as the premier bike.
On the business end, the company went public in 1965, and in 1969 merged with the American Machine & Foundry Co. Harley began producing 27,000 motorcycles per year.
At the same time, however, Japanese manufacturers began exporting a large number of low-priced and less powerful motorcycles to the U.S., cutting into Harley’s market share. That, coupled with recessionary times in the 1970s that hurt the industry in general, caused officials at the company to again retool.
This time, Harley officials not only came up with a new product line but also a new direction.
On the technical side, the retooling started in 1981, when 13 members of the Harley-Davidson management team purchased the company from AMF.
“We lost money in 1981 and 1982, and we were struggling for survival because the marketplace had dropped to about a third of what it had been in 1979 and 1980,” says Bleustein. “That forced us to rethink our whole business, and we went back to the basics. We focused on the quality of our products and we started to redesigned our products because they needed upgrading.”
The result was streamlined operations and new models such as the Electra Glide Ultra Classic, an updated version of Harley’s longest-running model introduced in the ’60s, and the Softail.
At the same time, says Bleustein, the company started “getting close to our customer” marketing, he says. “We rode motorcycles like they did and enjoyed partying like they did and we were open to talk to them and hear what they had to say.”
Then, in 1982, came the first Harley Owners Group, or HOG. The first chapters were formed in Milwaukee and Denver. Today, membership numbers 400,000 in thousands of chapters worldwide.
“What made a big change in Harley-Davidson was when the company started HOG and started sponsoring motorcycle events throughout the country,” says Naperville resident Mike Ramos, 59, director of the Oak Park HOG Chapter.
“That made people aware that you weren’t a bad guy driving a Harley,” adds Ramos, a Harley owner for 25 years. “That most people who ride Harleys were ordinary people–doctors and lawyers and business people.”
In 1983, the company broke even. In 1986, the year Harley-Davidson returned to public ownership, it retook the No. 1 position in the U.S. 651-cc super heavyweight market from Honda.
That success has been fueled by a number of factors, say those who know the company.
First, Harley realized its customer base was not only getting older but also richer.
According to Harley, the typical customer in 1985 was a male with a median age of 34 and a median household income of $35,000. In 1991, it was a 38-year-old with a $50,000 household income. By 1996, it was close to 44 with a household income of nearly $70,000.
“Our customer base has become a lot of Baby Boomers who are recapturing and revisiting their youth and are trying to fulfill the dream that was perhaps started when they were teenagers,” says Bleustein. “And now they have the money to do that.
“And a motorcycle fits in very nicely with their lifestyle because their leisure time is very short,” he adds. “With a Harley-Davidson motorcycle, you can go out there and in just a few hours have a lot of fun and clear the cobwebs from your head.”
“Our customer is a male in his mid-40s to mid-50s, has been at his job for a long time, has superior credit, probably has kids in college and has the house paid for,” says Stempinski. “And now they’re looking for a toy.
“I think they’re drawn to a Harley because it’s a different way of life,” he adds. “During the week our customer is a three-piece suit type of person but on the weekend they put on leather and bandanas and maybe stick-on tattoos, and they can be somebody else.”
“Twenty-five years ago if you had a Harley you were a bad guy,” says Ramos, a grandfather of three. “Now, if you have a Harley, you have a good job because the cost of one is around what most good cars cost.” Base prices on Harley’s 20 models range from $5,245 to $15,960. Its top seller is the XL883 Sportster.
Second, Harley has “capitalized on the Harley-Davidson brand,” says Kanter.
“The product is not so much better than the competition’s technically but a Harley-Davidson has a lot more heart and soul and essence,” he says. “It’s the real McCoy.”
And brand loyalty is extremely high, says Van Cleave.
“Harley-Davidson means freedom to get on a bike and cruise,” says Ramos. “It’s a thrilling lifestyle. It’s amazing how people without a motorcycle are attracted to you.”
“The company has invested quite significantly into the future and have set themselves up quite well,” says Kanter.
“This is not a fad,” says Van Cleave.
But there is that age thing with the older demographic of Harley buyers. “I hope this surge lasts forever but there may be a lot of used motorcycles out there in 10 to 15 years,” says Stempinski.
Others, however, are not fazed by the graying of Harley.
“Twenty years from now, the typical Harley customer won’t be too old to ride,” says Kanter.
“We certainly enjoy the Baby Boomers but also we’re reaching out to younger customers and in some cases with new products and new programs,” says Bleustein, who adds that the company hopes to be selling 200,000 Harleys a year in time for the company’s 100th birthday. “Also, from a worldwide basis, we’re in a market that’s growing in a healthy way as more people are coming into the larger motorcycle riding experience.
“So we feel there’s a good future for motorcycling and particularly for Harley-Davidson.”
