Last week we had a story about rumors of Ducati getting all chummy with Harley Davidson, then the financial folks started whispering about Honda looking to buy the motor company. Now it appears those rumors have subsided and everyone is back to where they started. Harley stock rose then fell back. This is beginning to sound like the racing off season when everyone speculates about which rider will jump to which team.
Motorcycle sales have not been booming and Harley Davidson had the strike earlier this year, then their financial unit has been hit with higher defaults than usual and instead of waiting lists, some of the big Milwaukee V-twins are actually selling below retail. Maybe the financial gurus smelled blood and started guessing about the future or maybe the companies really were considering a marriage of some sort. Whether Ducati or Honda made logical partners for a merger is questionable and as noted in one article, the Honda hook up would leave the combined company with 65% of the U.S. motorcycle market, a red flag for regulators.
Maybe this will all settle down and everyone can concentrate on motorcycles again but just when you believe that, someone else whispers of another potential takeover. If you’re thinking of investing in motorcycles, it might be safer to buy the bike and leave the stocks for the time being.
Link: Forbes and earlier Forbes
Related: Ducati Considering Harley Davidson Merger?
Modena says
H-D buying of Ducati is just a ploy to create a sense of urgency and establish a market value. But a well intended decoy possibly we will soon discover? Ducati was approached by two other manufacturers awhile back in regard to acquisition. [@18 months ago?] Nothing happened due to a few problems ala US stock listing [now delisted], debt restructuring [improved now] and personalities involved [fixed]. Big question is will the German motorcycle manufacturer come in and complete the deal now?
Clive M Sanders says
I think im tired of freakin hearing about it! Im a member of a ducati site and if those guys say one more damn thing about it my head is going to explode.
BikerDan says
It could have been an instance of one of the oldest tricks in the book for stock traders. “Leak” news to the press about a buy out to drive the price up, then sell your stock at a premium.
For professional traders, it’s all about buying something for a dollar, and then selling it for 2. 🙂
However, there have been so many mergers, buyouts, etc. That such a thing really is in the realm of possibility. These days, ANY company that is having trouble is a take-over target… Especially one with the kind of brand power of HD.
Murdoch is trying to buy the Wall Street Journal for the exact same reason, and at a premium price (way more than it’s “actually” worth), because brand like that is worth a butt-load — for the name it carries alone.
Richard says
Didn’t Kneeslider tell us that that strike earlier this year was going to *benefit* HD? Oh well, at least he’s not trying to give us stock advice. 🙂
I think the “writing is on the wall” for HD. Their target audience is dying off through old age and due to the recent surge in single vehicle crashes as they scoot along from bar to bar, and it’s likely to be at least 20 years before another nostalgia frenzy creates a new generation of “ride free or die” wannabees. It’s only a matter of time before they are forced to go through some kind of major restructuring of their business.
Always “follow the money” when looking for the truth behind the rumors. In this case, I suspect that HD’s abysmal performance was making the stock slump and they wanted to boost it for a while, so out came the merger rumors. You might want to look into whose stock option package benefited from the recent stock price surge. Did any insiders just happen to sell off some stock?
Prester John says
I’ve repetedly been assured that every possible person that would want a Harley had already bought one and everyone should dump their HD stock PDQ since, oh, 1990 or so!
Anyway, I was serious about what I said the other day about HD buying Royal Enfield*. Asia (where 4,000,000,000 folks live) is going middle class, and RE is poised to become the HD of Asia. The product line-ups and customer profiles are highly complimentary.
BTW, for those of you who haven’t been following RE, they are currently running the factory three shifts and there are waiting lists for the bikes.
Tom
*I think this acquisition would actually be prevented by Indian law, but it’s still an interesting idea.
hoyt says
Does Indian law forbid investment up to a maximum? Maybe HD wouldn’t own them outright, but have a huge invested interest.
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Richard – I might not go that far (yet), but the HD Product line-up 20+ years from now will be very interesting.
Think about 20 yrs of R&D thrown at the Tesla electric supercar & battery technology. Consider how that tech could be applied to motorcycles. As much as I enjoy the HD Deluxe & Road King, an electric-powered Road King just doesn’t have that appeal, does it?
Ok, so the great i-c engine can still be built in the coming decades, but what will the price of gas be & its impact on consumer choices? Enough to diminish sales? probably….and how far will those sales dip without some other models to fill the gap?
So, what is on the HD Product Planners 20+ yr. forecast? Similarly, what is on NASCAR’s outlook? An electric, high performance F1 car maintains more appeal than an electric stock car.
Harley Davidson – the 1st One Hundred Years.
Harley Davidson – the next One hundred Years ?
The above notion can be applied to all of our beloved marques….Moto Guzzi, HD, Ducati, Buell, Triumph, BMW, etc. These are going to be interesting times.
jim says
Two intertwined issues building motorcycles and financial. From the building MC point of view HD is doing well and will continue to do so, but on the financial side the company has to be worrying about where the growth will come from in order to keep the stock price up.
Those you with long memories will recall that HD owned and RV manufacturer that it sold off in the mid 90’s. The concept was to build a motor recreation business in a couple of segments that would have some synergy. The RV acquisistion was HD’s attempt to bolster the company against an eventural down turn in the MC market, but the synergies never developed and HD sold off the RV biz.
The talk of Ducati and earlier KTM acquisitions is likely HD’s management attempting to make a bet on where growth will in the industry they know, motorcycles. For Honda owning HD would be a way to tap into a profitable, if not fast growing, revenue stream in a mature market that it also knows. Honda also has the resources in place to quickly deploy the HD brand in Asia, something the HD is only begining to do.
HD is a mature business in a mature market, but since it is publically traded is subject to the grow or die ethos of Wall Street. Also consider as a corporation HD is much smaller than the other major brands when you consider they are in multiple lines of business. Get used to this talk shield and bar fans it won’t go away soon.
jim says
An addendum to my previous post.
For HD, being acquired by Honda or another larger company provides the benefit of a big payday for the stockholders and particularly the managers who have clauses in their compensation packages that will award them royally if the company is sold