Harley-Davidson CEO Keith Wandell. First Interview.

A couple of days after he had announced his company first quarter 2010 financial results, the did Harley-Davidson CEO Keith Wandell first interview. I have to disclose that Journalist Rick Barrett ed me on Monday April 26, 2010 to comment about Keith Wandell business management and be part of this interview. Not available right away over the phone, I had to decline. I summarize below Keith Wandell answers during this interview.

1- During my 1st year my objective was not to let Harley-Davidson become General Motors. Harley was already so far down that same path 2- They were issues that were going to ruin the company.

3- We had too many dealerships, there was too much inventory and we had driven down the residual value of our products. 4- Work has been outsourced so that Harley can focus on its core competencies, such as making motorcycle frames and engines, and painting and assembling bikes. We are never going to be as efficient or as competitive as our outside suppliers” 5- Buell Motorcycle Co. was not profitable for Harley. We were selling seven, eight, maybe ten Buell bikes a day worldwide 6- MV Agusta did not live up to expectations (serial for sale.) 7- We must get better and faster at developing new products while not offending loyal customers who have treated the brand with reverence 8- The company can’t afford to start 10 product design projects and hope that three of them reach the marketplace. There’s going to be a “rifle shot” approach to new ideas rather than a wasteful “shotgun” approach. (picture Keith Wandell on Harley prototype model copyright Tom Lynn)

16 Responses to “Harley-Davidson CEO Keith Wandell. First Interview.”

  1. 1 whiplash Apr 28th, 2010 at 4:22 pm

    ha ha. what is so “prototype” about the bike ol’ kieth is sitting on?
    maybe is is that oh so subtle change to the tired, old sport bob rear fender.

  2. 2 J Apr 28th, 2010 at 4:28 pm

    LOL- the prefunctory “I’m just one of the guys” Harley CEO pose….

    “We are never going to be as efficient as our outside suppliers…” Way to believe in the American worker, Keith; Unfortunately, cheapest isn’t always best, and if what you’re saying is true, then it won’t be long before you’re manufacturing the entire bike 100% offshore…..

    What does this mean- “Not let HD become General Motors”? You mean mired down with too much overpaid, upper-level management? Screwing around in quasi-finance, rather than focusing on building quality, market-leading products? Or are you just saying you’re not gonna deal with labor union issues anymore?

    Interesting to hear that Wandell believes that the number of dealers should shrink- deflation sucks, but this is what deleveraging is all about;

    Hope he comes up with a couple of constructive ideas along the way- much more promising presentation than the “market conditions going foward remain difficult” routine…….

  3. 3 Apr 28th, 2010 at 4:35 pm

    I truly hope that the company can remain viable in this tough economic climate. Seeing it chopped up and sold off would not be good for any of us in the motorcycle industry. While I personally may not agree with the choices that the major management team has made, I can see from a business strategy point of view why those decisions were made. Just like any major manufacturer who has sufferred setbacks over the past two decades, H-D has had to rethink their strategy and direction. Only the future can tell if this has been the right path or not. It’s up to each of us to support the brand in our own way, if for no other reason than to preserve an american icon. A Harley-Davidson made in China just won’t be the same as one made in America.

  4. 4 Apr 28th, 2010 at 8:54 pm

    “We are never going to be as efficient or as competitive as our outside suppliers”.
    Since when did efficient become a synonym for cheap offshore labor, and competitive mean “won’t pay a living wage?”? Strange how they still expect there to be good-paying jobs for folks who want to BUY their bikes.

  5. 5 Apr 29th, 2010 at 7:59 am

    Guys, it would pay a couple of you to have read the full article in the Milwaukee Journal Sentinel. It makes things quite a bit clearer. Search ‘Wandell Harley Davidson’ and the full piece will come up.

  6. 6 deadwood Apr 29th, 2010 at 9:30 am

    So, the six million dollar man thinks the people who make this industry work are inefficient and overpaid. This guy is a walking oxymoron. I noticed a post from an MMI Instructor above. An entry level tech will spend one year and about $20k of his own money for training. About $20k more for living expenses during that year, and another $5k or so in tools his first year on the bench. All while earning $9-$10 bucks an hour for that year. (Figures quoted from Dave Koshollecks current Dealer News Article). These execs claim you have to pay them big bucks for top quality talent which is just what they get, big bucks. Very little talent though. How the hell are Dealers supposed to get top quality techs, a highly skilled trade for peanuts. Qualified tech’s are leaving this industry in droves, I guess because they are overpaid. I just don’t get it. When I do a job I get paid only after I have accomplished said job successfully. Guys like Keith get paid up front. What the makes a guy who had NO motorcycle industry background whatsoever worth six mill and the workers are overpaid. I’m going to have to call bullsh!+ on this one. I understand the overstaffed part, but if the workers are overpaid his compensation is nothing short of obscene. Speaking of a shotgun approach, that’s what I’d call hiring an outsider who knew nothing about the motorcycle industry to run America’s largest surviving motorcycle manufacturer. Duck everyone, the scattergun has been fired and the pattern will be wide.

  7. 7 Apr 29th, 2010 at 10:50 am

    I read the article in the paper the other day, and it’s the same as the online version
    I have to stay with my current opinion. Harley’s gotten rid of the major selling point they had over the last few decades; the ability of their customer’s to turn up their noses at at riders of “Jap crap, China junk”, etc and brag about their American bike. Frankly, people laugh in their faces now and point to all the offshore stuff on their ‘merican bike and tell ’em to F-off.
    That is their major downfall IMHO. They killed off what they were to us old folks, and will not be able to impress the young. On top of that, they charge extra. At least Walmart brought low prices in exchange for the mfg. jobs shipped overseas.

  8. 8 Mediaguy Apr 29th, 2010 at 12:35 pm

    Remember when Walmart marketing was “Made in America”????? Now look at them. Is H-D going down the same path?

  9. 9 J Apr 29th, 2010 at 12:36 pm

    Good point on the Walmart pricing, Woody- so how does this offloading of in-house work DIRECTLY lead to benefitting the consumer. Vis a vis Walmart, Keith?


    Exactly…. All it does is lead to balance sheet propogation, which in turn is what drives the pricing of Keiths’ options.

    I WORK in investment banking- I should be a fan of anything that is designed to increase shareholder value, but I also see this for what it is- a short-term scheme to prop up the balance sheet, so Keith can score on his options and leave the resulting mess in the hands of the next CEO;

    There is absolutely no incentive for Keith to do anything here but this, and the Harley board is incompetent if they cannot see this for what it is.

    Quit trying to tweak the balance sheet, and work on the MACRO problems that Harley faces- and if you’re gonna go down the Walmart path, then do it RIGHT and drop your prices to consumers.

    Here’s an idea- how about a clawback, based on performance over the next five years, for example- if Keith doesn’t perform, he returns the options he’s been so bizarrely granted for performing absolutely nothing thus far;

    BTW, as long as we’re moving things offshore, what’s the going market price of a foreign CEO these days? As long as they’re going down this road, Harley can find a much cheaper deal on someone to run this company;

    What’s that? Oh, I see- so the American worker can price himself out of the market, but the American executive cannot, huh?


  10. 10 mark Apr 29th, 2010 at 3:14 pm

    Guys, you keep hitting on the outsourcing. Is it known that he is outsourcing abroad? Could they be outsourcing in the US, having other specialties companies due machining? Any comments would be cool.


  11. 11 Apr 29th, 2010 at 4:02 pm

    How much this guy makes or doesn’t make will not effect HD as a company near as much as his inability to find a way to attract the younger riders. If HD does not find a way to get younger riders on an HD they won’t need an executive that gets one dollar per year let alone six million per year. I like how he claims that HD is cutting back on their dealer network too help retain value in the bikes rather than admitting that the dealers were just tired of dumping good money after bad trying to stay afloat. Maybe HD should try helping their dealer get new customers instead of trying to put them out of business too retain value. Just a thought.

  12. 12 Apr 29th, 2010 at 4:13 pm

    “Harley-Davidson CEO Keith Wandell ”
    Imo, it was an honest and sharing interview. The guy told us what problems HD had. Who does that anymore? Not GM or Goldman-Sachs. Those lying sacks of crooks.
    The HD® CEO didn’t try to hide anything. He basically said, “We want to concentrate on the motor, frames and paint. We can still control the core components of a Harley®, but the days of making our ancillary (small) parts are America is over.”
    Anyone who has handles current Harley-Davidson® trim parts, knows that they are made to USA Harley specs. in Taiwan. Taiwan can make anything you want as long as you want to pay for it.
    Any Harley® parts I have from Taiwan are exactly as OEM. Even the HD® 1951-1954 script and underbar are perfect duplicates. Import tank emblem screw-holes match-up exactly with the OEM emblerm tank strips.
    No longer stainless, they’re chrome. And THAT is the sign of the times. Some items like s/s and cadmium plating are history. Harley is still the leader and better for the shake-up, imo.
    The “workingman’s” most popular repop HD parts company (the third chapter), explained it to me last week in this way:

    “Every nation has their era. In the 19th century it was England. In the 20th century is was America. In the 21st century it’s China.”

  13. 13 Apr 29th, 2010 at 4:43 pm

    And it continues here in Wisconsin, today’s Milw. paper:

    I’m sure any employees left will be able to afford a good used bike, perhaps a VTX or Vulcan…….

    Some of the outsourced jobs may be here in the US but I doubt it will be meaningful. Look at all the Kury part # already on the bikes & as accessories, Chinese SE parts etc. If they are going to cut their own people loose and since they already hang tons of overseas parts on the bikes, I doubt if there would be any reason in their minds not to shave a few more dollars off the cost of the bike. That’s how they keep their prices so low 😉

  14. 14 TPEvans Apr 29th, 2010 at 8:26 pm

    J, I think you are the first ever to use “vis a vis” and “propagate the balance sheet” on these pages. In terms of pricing one’s self out of the market, investment banking seem to be on a short path to the border, given the industries commplicity in driving share prices down if companies do not seek maximum “efficiency” – otherwise known as offshoring. Between the EPA, OSHA, the SEC, SARBOX and most definitely the investment bankers, we will all be selling insurance to each other, working in restaurants, or cutting hair soon.

    As far as Wal-Mart is concerned, it looks like a few guys from Arkansas have really managed to piss off alot of people. Keep in mind most of the folks aggravated with Wal-Mart are ticked because they can’t get a parking place close to the front door. Unless you can convince a whole bunch of folks that a tube of toothpaste is a deal at $10.00 a tube, somebody will be seeling it for a lot less. It may as well be Wal-Mart.

    And hey, it’s been one heckuva long time ago since a Harley was made all in the USA. You want a lower priced, 100% American made Harley? The government will provide “free” healthcare without raising taxes first.

  15. 15 J Apr 30th, 2010 at 11:22 am

    LOL- maybe I was trying to impress Cyril with what little French I know- oh wait- is “arbitrage” French too?

    Well ya, I think there has to be a reset of capital here somewhere; Harley can dick around all they want to with individual components within the structure. but cutting expenses only goes so far- at some point, they have to create actual GDP and grow the top-line.

    I don’t know how many Buells Harley was selling- neither does Keith, apparently- but one thing I do understand is that once Harley decided to get rid of the line and chopped prices, people were stampeding into dealerships, looking for a good deal. Sure they made minimal money on those sales- perhaps even took losses- but it got new people into the showrooms, and moved product.

    It’s always tough to appease the short-term demands of shareholders- the board wants to see a trick balance sheet, because up in the Ivory Tower, all they know is what they see on CNBC- oh look, our share price is up, we must be doing a good job;

    But the current share price isn’t accurately reflecting the long-term problems of this company. Sales down 20% is unacceptable, because rarely does a big-time manufacturer come back from such a hit.

    When times are lean, everyone has to lean out, including shareholders; Unlock the excess capital currently tied up in shareholder value and spread it out over the company- yes, the stock will take a hit for awhile, and Keiths’ options won’t vest, but if Harley truly has a long-term view, they shouldn’t care about short-term problems.

    All of this, of course, is predicated on the idea that Harley still wants to be Walmart, and have a dealer on every corner; Me personally, I liked the old model of low-production exclusivity, but I can’t see Harley going back to that unless they take themselves private;

    Once you’re publically owned, you’re pretty much obligated to pin the throttle all the way back, unless you’re a strong enough salesperson to convince shareholders that the “old” Harley business model is best for the long-term health of the company;

    I don’t see Harley spending much time or effort in negotiating with those plants in Wisconsin once the India/China/Botswana/Katmandu plants are completed- seems to me that Harley is ready to gamble on taking off the “Made in America” shield and try its luck in the Global flee-to-cheapest- producer game;

    Anything to keep that share price up.

    Good luck.

  16. 16 Phil Jun 14th, 2010 at 3:45 pm

    Well, HD has always outsourced major components. Suspension pieces, forks and shocks, have come from Showa since the 1970’s. Brake rotors are Japanese Sunstar components. Carberetors came from Keihin since the ’70’s too, and the first fuel injection was an Italian source Marelli system. Cast wheels have toggled from Japanese to Australian. Starters have been from Hitachi, but I believe a US factory made them. Guages used to be from Nipponseiki. Not sure where they are from now. Transmission gears and shafts are now sourced from Getrag of Germany, a real improvement if you ask me. Pistons are German too, from Mahle, as they have been for decades. Mahle is OEM for Porsche and BMW. Are we complaining about that too? The V-Rod originally came with a LOT of German content, gradually replaced with items manufactured in Kansas City. The current fuel injection is US made Delphi components.
    Harley’s big problem is their too strong brand image. They make, and have in the past made, bikes that should have appealed strongly to riders of other makes of bike, but these riders are so off put by the bandana wearing, bearded, beer swilling, tattooed and pierced image the Motor Company generates, these potential customers simply won’t enter a Harley dealer for any reason, no matter how good the product. This is what killed Buell. Had HD allowed Buells to be sold outside HD’s formal dealer network, they would have prospered. The new XR-1200 is a fabulous bike by any standard, but the riders who would most appreciate it’s great handling and braking don’t even know it exists, or scoff at it as just another slow, rotten handling Hog. Look what happened to the wonderful Street Rod. Outstanding bike, refined and powerful, but the HD faithful I encounter on mine scoff at it as “just a crotch rocket” and the rest of the motorcycle world laughs at it as “just a cruiser”, until they encounter one on a twisty road.
    HD needs to take a page from BMW, who’s sales haven’t suffered like other makes of bike, or Porsche, and broaden rather than narrow their product line, and ignore the crying of the faithful. Continue to make bikes to cater to the bandana heads but also go out and pursue riders of different types of bikes, not by trying to stuff them into the cruiser mold, that will never work, but by building bikes these riders will love, and give them a dealer environment that does not intimidate them.

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