The real pleasure of this job is the amount of time it gives me on the road with my Harley. When I happen to be passing a Harley dealership, I always go in and have a look around, checking up on my few shares of H-D stock. With the 2008 year in full flourish, I’ve noticed there are still a few 2007 models on the floor. Maybe even an ’06 Sportster. Is that good? Bad? Indifferent?
I am pretty much indifferent to this. Ten years ago you had to wait in a very long line to buy a new Harley, and now you don’t. Dealers loved life 10 years ago, customers love it today. Harley-Davidson, Inc., or HOG as it is listed on the New York stock exchange, is a very well-run company, and one presumes that the executives are not about to cut and run with bulging suitcases full of money. Watching the news a few weeks ago I saw that bit at the close of trading in New York when some invitee bangs the gavel, and there was Harley’s CEO Jim Ziemer and a bunch of Harley folk. Good for them.
The 2007 second financial quarter (2Q, as the money folk call it) was really good for Harley, generating some $290 million in profit, whereas the previous year’s 2Q was a mere $244 million. A pretty good increase. However, the Milwaukee company’s fortunes are a bit unfortunate as I write this in October of 2007, with the 4Q moving briskly along. Ziemer recently announced that production of the 2008 models will be cut from 350,000 to 330,000 units, and five of Harley’s manufacturing plants will shut down for a week following Thanksgiving—Kansas City, York, and three in Wisconsin (the engine and plastics plants). Ziemer also said, not surprisingly, that annual profits will be down this year.
I’ve never been very good at finances, especially higher finances; I generally know how much cash I have in my wallet, but beyond that I am pretty helpless. My mother had a relation who worked and prospered as a stockbroker and thought I should follow in his path, but my brain just could not wrap itself around those numbers. I always figured that buying gold coins and burying them in the back yard was the best way to a comfortable retirement, but I never had any money to buy gold coins.
Then I got married at age 49, for the first (and presumably last) time, and my wife has a better head for these things. So we have a very thin portfolio, as those Wall Street guys call it, and a Harley-riding advisor who looks after it, reminding us we are in for the long haul, not doing day trades. We tend to buy stock in things we use, like Home Depot, as Sue spends a good deal of money at that place. After Buzzelli inadvertently got overly generous some years back—he swore never to be so foolish again—we had an extra couple of grand that we invested in HDI. The stock split after we bought it, which is a good deal; no great increase in wealth, just twice the number of shares, each at half the price of the one that split. Today our little investment has nearly doubled, so we’re happy.
In the stock market things are not always rosy, as we have been hearing of late. A year ago HOG was up to $75 a share, now it is down to about $50. Are we slumping into a recession? Hope not. Another 1929? Doubtful, as the Securities and Exchange Commission set up in 1934 is committed to making sure such extreme financial wipe-outs cannot occur.
The Harley company is worth about $12 billion, counting up the quarter-million HOG shares, which ain’t peanuts, and it is run by some very smart executives. It is no giant Ponzi scheme like the ill-fated Enron, and it suffers along with the rest of the stock market. Considering that the median income for a full-time worker in this great nation of ours is about $40,000, $12 billion amounts to the total annual income of 300,000 workers. Or the cost of the war in Iraq for a little over a month, to give the value a different perspective. About half the annual income of the company is in the production of motorcycles, the other half, chrome and doo-dads.
I have no problem with that. If I can’t afford a $20,000 Electra Glide, I can indulge myself in a $20 T-shirt. As my local Harley dealer pointed out, you and the wife go to a moderately fancy restaurant, drop $100 on food and drink, and tomorrow you are hungry again. Buy a bit of bling for your wife’s Softail, and you can admire that for a long time.
This “branding”—the value that is placed on that bar-and-shield logo-—is important to the health and continuing welfare of the company. Back in the old AMF days, in the ’70s, nobody in the company seemed to be looking after the logo, and lots of enterprising folk were using it without permission, on everything from bandannas to belt buckles. After H-D went independent in 1981 the new hierarchy, experienced business and Harley types, understood the value of the symbol and the need to get it under control. Today an entrepreneur can still make a bar-and-shield bandanna, but he is going to have to give H-D a percentage; after all, it is the motorcycle and its heritage that gives the bandanna its value, not the other way around.
The motorcycles are desirable items. Nobody needs a Harley the way you need a place to live or a refrigerator to keep the milk and beer cold, but it really does provide relatively inexpensive gratification. If my financial situation is shaky I do not want to sign up for a $200,000 mortgage with adjustable (read: always higher) interest rates a year or two off. I’d rather pay rent and spring $6,700 for a new Sportster; that is a doable indulgence.
Two thousand and seven has been a rough year for the company, with a sales slump and a short strike. Some uncharitable analysts feel that H-D actually wanted the strike to happen in hopes of reducing production, but to me that is no never-mind. Much talk has been wasted on the so-called “saturation factor,” that amorphous moment when everybody who wants a Harley will have a Harley...except that will never happen. Old Harleys wear out and need to be replaced, and it seems that new customers are always looking, though maybe they don’t have the money right now.
Our national economy is in a bit of a slump at the moment, much of it due to those infamous sub-prime loans in the real-estate market. Harley has its own financing company and I can only presume that it is wise enough not to offer a sub-prime loan on a new Rocker to the box boy at the supermarket who works 20 hours a week. Another concern is the price of oil. A year ago when Harley stock was selling for over $70, a barrel of oil was less than $60; now a barrel is over 80 bucks. This has nothing to do with the small amount of gas and oil we use in our Harleys, but in the cost of doing business everywhere; ships and trucks make our economic wheels turn, and they all consume oil.
The economy rolls along, like waves in the ocean, sometimes like a roller-coaster, with highs and lows. We are in a trough now, but I believe things will get better; since I’m looking way down the line, I’m keeping my HOG stock.
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