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Harley-Davidson

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Things have been quiet on the Italian front after Harley-Davidson acquired premium sportbike manufacturer MV Agusta last year, with the American company apparently leaving the brand alone for a while after its purchase. The company we love to hate from Milwaukee has finally started to make some changes in the old Italian brand, drawing a clear line between what product lines will focus on a premium road bike experience for the rider, and what products will be developed for track day weaponry for the weekend warrior.

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As we noted late last week, Jim Ziemer, President and CEO of Harley-Davidson, will be leaving the Milwaukee company soon. Replacing him will be Keith E. Wandell, former COO of Johnson Controls. Along with Mr. Wandell, there is further shuffling and addition in the Harley ranks. Matt Levatich has returned from running MV Agusta, to become Chief Operations Officer. In turn, replacing Levatich at MV Agusta is the Italian Enrico D’Onofrio, former CFO at Ducati. D’Onofrio will take the position of Managing Director of MV Agusta. How about that for three letter bingo?

While we expect that these names have been gracing the lips of Board Members for some time, the announcement of their appointment happily coincides with harsh criticism made in the media of Harley-Davidson’s current financial problems, and general mismanagement. We can only hope that the timely appointments will also mean timely changes for Harley-Davidson.

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You may remember the NY Times article that we mentioned a few days ago that was critical of the company’s current status and direction. In response to the NY Times article, Harley-Davidson is running the above ad in an attempt to provide a counter-argument to the criticism that the company is on shaky ground.

It should come with little surprise that Harley-Davidson is again playing on Patriotic themes and rhetoric that shifts the focus from the fact the company has serious issues ahead of it, and to date not clear plan on how they are going to overcome them. In addition to this ad, a message was sent out to all Harley-Davidson employees, read it after the jump.

Could Ducati be building a street cruiser to compete against the likes of Harley-Davidson? That’s the rumor behind the so-called Ducati Vyper, which was started by a statement made by Ducati boss Claudio Domenicali, who revealed that Ducati is looking to branch out into a wider market. The 1400cc 170hp prototype is said to be already in running form, and has started preliminary tests at the Bologna factory.

The Vyper will feature a stroked version of the company’s Testastretta engine, and house it in Ducati’s signature steel-trellis frame. A 240 rear tire mounted onto a beefy hollow-section swing-arm is also believed to be on the new machine. Luca from Bar-Design has made some exclusive renders of the Ducati Vyper for Asphalt & Rubber, and if the original looks anything like this, we might just be believers in the Italian chopper concept.

The New York Times ran a great article this week about the challenges facing Harley-Davidson, both from the current economic depression, and more generally as the quintessential Harley rider gets older in age.

In summation, Harley-Davidson dealers around the US and overseas are seeing sales drop dramatically as people scale back their expensive purchases, and as the access to credit becomes increasingly difficult.

There’s no real surprise there, and any hardcore fan will be quick to tell you that Harley will be back on top once this financial turmoil is over. However, looking farther down the road at Harley-Davidson’s long-term business position, there is additional trouble brewing as well.

Baby boomers account for the majority of Harley sales, and they are getting older. The NY times ends there with its commentary, but we think there’s more to the story on Harley-Davidson and the American bike market in general. 

Harley-Davidson has announced that Warren Buffett’s Berkshire Hathaway group will invest $300 million in the motorcycle maker through a purchasee of senior unsecured notes that will mature in 2014. These funds match a similar investment by Davis Selected Advisers, L.P., which is already the largest shareholder of the company’s stock. Harley-Davidson will use the money to bolster its lending services, hopefully making it easier for the troubled motorcycle maker to lend cash to consumers. In exchange, Berkshire Hathaway will reportedly receive a lucrative 15% annual interest rate on the cash infusion.

The markets have responded to the news rather favorably, with Harley shares hitting $13.56 in trading yesterday afternoon – a 14% increase from where they started yesterday. Just about a week ago, Harley-Davidson announced a plan to shed 10% of its workforce. This move marks the first time that Buffett has ever invested in the company.

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Harley-Davidson () shares dropped 12% Monday as financial analysts grew bearish over motorcycle purchases in 2009. Sparking the plummet, Goldman Sachs downgraded Harley’s shares to sell, lowered its target price to $11, and cut its 2009 profit outlook by 50%. Goldman analyst Patrick Archambault said he expects Harley’s retail bike sales to fall by 30% this year, making it the worst year for new registrations since 1982.

Part of the reason for the downgrade is becauset Harley-Davidson CEO, James Ziemer, said last month that he plans to retire from his 40 years of service with Harley in 2009, and on Thursday last week, Sy Naqvi stepped down as interim president Harley’s finance unit.

Another concern has been Harley-Davidson’s financial services division. The division is expected to make less revenue in 2009 off of sales, lose more money on delinquent loans, and be stuck with loan obligations because of a frozen LBO and secondary loan markets.

Source: Visordown

Spanish magazine Solo Moto has gotten word that Harley-Davidson has put together a plan to revive the Cagiva brand. Cagiva, like many Italian marks, has struggled the past years because of poor financing and business management. In its deal to acquire MV Agusta, Harley-Davidson also acquired Cagiva with that hopes that the American company could provide a remedy to these problems, and has recently laid out its plan on how it is going to achieve those goals. Read more about their road map for Cagiva after the jump.

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Harley-Davidson is getting creative with selling motorcycles, and we here at Asphalt & Rubber like it. HD must really want to capitalize on those sales, as it’s just announced a unique incentive to purchase a new Sportster, or alternatively to trade in your recently purchased model. 

All new 2008 and 2008 Sportsters, bought between December 26, 2008 and March 31, 2009, will be sold with a guarantee that Harley-Davidson will offer the full MSRP of the bike when traded in for a larger bike, within on year of the original purchase. The offer does not apply to the new XR1200, and the bike bought after the trade-in must be a Dyna, Softail, VRSC, or Touring model. 

Economically, this is an interesting deal. Harley-Davidsons, unlike most other marquees, generally appreciate in value over-time. This is mostly a function of long-waiting lists, and difficulty of purchasing abroad. Regardless, its a bonus point for buying the Milwaukee brand. The Sportster line, being at the bottom of the Harley totem pole, is the most susceptible to having this trend end with the economic crisis. This promotion, effectively squashes that possibility for the time being. Anyways, for the average consumer, revile in the fact that an otherwise depreciating object will hold its value for the next year minus the rate of inflation, and in the event of deflation in the value of the dollar, will actually be a decent investment. Booyaca!

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