Interesting updates and additional information related to earlier stories:
When writing about the Harley Davidson strike, I said the interruption of motorcycle shipments caused by the strike might be a convenient way of reducing the backlog of unsold inventory, something the union might not have considered. Although a comment took me to task for this idea, it seems at least some financial analysts agree with me.
The Can-Am Spyder might be an even better move by Bombardier when you consider Arctic Cat is announcing layoffs. Arctic Cat makes snowmobiles and ATVs just like Bombardier, however, they don’t have anything like the Spyder in their lineup, … so far. I bet Ludovic Lazareth is also watching developments with the Spyder, as he works on his Triazuma.
Be sure to check the story about Buell’s future dirtbikes. Yesterday I added an update that identifies the future bikes as motocross motorcycles powered by a 450cc Rotax engine.
Since writing about the Motorcycle Sculptures of Michael Ulman, he dropped me a note to say he’s added quite a few photos to his web site of a hot rod he just finished, built from a mailbox. Very cool.
The Shelby Motorcycle built by Rucker Performance drew a very mixed response here, some of you liked it, many didn’t. Rucker has since pointed out the bike as shown is still a concept. Rucker also tells me all production versions of this motorcycle will be supercharged. More information as it becomes available.
Richard says
“I [Kneeslider] said the interruption of motorcycle shipments caused by the strike might be a convenient way of reducing the backlog of unsold inventory, something the union might not have considered. Although a comment took me to task for this idea, it seems at least some financial analysts agree with me.”
Kneeslider, you appeared to say that reducing the backlog inventory was good for the *dealers*, which is probably not correct. (“A strike helps clear the backlog. If dealers can spend less on advertising because the bikes become just a bit more scarce and they can hold the line on prices instead of offering discounts, dealers make more money.”) What those financial analysts said was that it could be good for *HD* to clear out their inventory. (“the work stoppage would allow the Milwaukee-based firm to reduce the number of motorcycle shipments it previously promised [to the dealers, I presume!] without significantly affecting its stock or investor perception, analysts said.”) Unless the HD company and its dealers are one and the same, then that does not agree with what you said.
Furthermore, I still don’t see how this applies to the situation with the union, though you made a point to say that you didn’t think the union had considered the backlog issue.
kneeslider says
Richard, reducing backlog could be good for HD and for dealers, too. I think my explanation of why a dealer could benefit remains true, plus, I didn’t mention reducing backlog means the dealer pays less to the finance company for the unsold bikes in stock. Long term a strike is bad for everyone, but short term HD can see some benefit and the dealers can see it as well. Short term the union members feel the downside of not working and they feel it almost immediately. That is how it applies to the union.
You seem to think I’m taking sides. I’m simply pointing out a factor that favors the company and not the union in this particular situation. This is not a forum for union versus management debates and I am not going to enter into one.
Richard says
I’m not debating mgmt. vs. union, but I do not understand how reduced inventory at the factory is going to reduce the dealer’s finance costs for the bikes that are already sitting on his showroom floor. Does HD force its dealers to take all the bikes they produce, so the strike saves the dealers from having to receive additional bikes in the future that they won’t be able to sell? If not, the only way I can see the dealer benefitting is if demand remains constant (or increases), but supply is limited, so prices go up. But you already said, “the over retail pricing is a thing of the past and there are more than a few bikes sitting around unsold,” so that can’t be what you mean. Maybe you mean that HD will use the strike as an excuse to raise retail prices?
I agree that the company (HD) may benefit in the short term, but I don’t see any short term benefit for dealers. In fact, companies regularly schedule those actions that might provoke a negative response from their employees (like reducing pay/benefits) to those times that they think will be most beneficial to the company. In this case, I think they made a serious error by attempting to reduce pay/benefits immediately on the heels of astoundingly huge company profits.
kneeslider says
Richard, from the link in my post above:
“Dealers view the strike as a potential positive. While we have not yet completed a comprehensive dealer survey, dealers seem to think that the strike lasting a few weeks would be good for their business. We view this as a reflection of full dealer inventory levels, a more challenging pricing environment and the timing of the strike (i.e., during the seasonally slow time of year).”
– Edward Aaron, director of equity research, RBC Capital Markets, in a Feb. 6 research note
“Dealer inventory levels are too high – Based on our surveys, Harley dealers are more concerned about dealer inventories than at any point in the past – Harley therefore cannot keep loading up the channel to achieve earnings indefinitely.”
– Gregory Badishkanian, analyst,Citigroup Institutional Investor Group, in a Jan. 18 research note
If you do not understand this, talk to a dealer.
Richard says
Thank you for pointing that out. I was guilty of not reading the entire article you linked to. So, what you’re saying is that the strike prevents the dealers from having to receive (and finance) more bikes that they can’t sell, so their losses are reduced. Not really “good” for them, but better than the alternative of taking on more inventory that they can’t sell.
kneeslider says
Bingo!
Many people do not understand the company/dealer relationship, they think the dealer is in total control. Companies do a lot of things to get the dealer to take bikes they may not want. Often they require the dealer to take some of the slow moving models when they just want to order some of the hot ones. Order one of these and you have to take two of those. The dealer sells the hot one and the others sit unsold. If you know a dealer, sit down and talk to him sometime. It can be interesting. If you wonder why some dealers have a lot of bikes no one wants and none of the ones everyone wants, there’s your answer.
Also, companies report sales when the bikes are gone from their inventory so they have more incentive to push the bikes out to dealers who end up holding the bag and then the whole thing starts over the next year.
If productions slows or stops for any reason, strikes included, the dealers can breathe a sigh of relief while they have the opportunity to sell off the backlog of slow movers since the hot ones are all gone and customers still want a new bike of some sort and may buy their second choice, instead.
If production is turned off too long then trouble begins and profits go down for everyone but as long as dealers are sitting on unsold bikes, there’s no rush to fill the pipe again.