Friday, October 16, 2009

Buell to be shut down, MV Agusta to be sold: Harley-Davidson unveils new business strategy

In a shocking statement released to the press yesterday, Harley-Davidson have announced that they will shut down Buell completely and stop production of all Buell motorcycles. The company will also sell MV Agusta, which it only acquired in 2008.

These decisions come in the wake of declining sales and revenues for Harley. Sales were down 21% during the third quarter this year, net income was down 84% and earnings per share were down 84.5% for Harley-Davidson. ‘Moving forward, our strategy is designed to strengthen Harley-Davidson for long-term growth and deliver results through increased focus,’ said Keith Wandell, CEO, Harley-Davidson Inc.

‘As our announcement regarding Buell and MV Agusta indicates, we are moving with the speed and decisiveness required to bring our business strategy to life. The fact is we must focus both our effort and our investment on the Harley-Davidson brand, as we believe this provides an optimal path to sustained, meaningful, long-term growth. We believe we can create a bright long-term future for our stakeholders through a single-minded focus on the Harley-Davidson brand,’ said Wandell.

Harley-Davidson expect to incur about $125 million in one-time costs related to the discontinuation of the Buell product line. The company expects to incur about $115 million of that amount this year. Remaining inventories of Buell motorcycles, accessories and apparel, while they last, will continue to be sold through authorized dealerships. Warranty coverage will continue as normal for Buell motorcycles and Harley will provide replacement parts and service through its dealerships.

Harley will, with immediate effect, also begin efforts to find a suitable buyer for MV Agusta, which is based in Varese, Italy. 'Our objective in acquiring MV Agusta last year was primarily to expand our presence in Europe, and was a recognition of MV Agusta's proud legacy. While growth in Europe and other global markets remains highly important to us, we believe that focusing our efforts on the Harley-Davidson brand is the optimal path to sustainable growth," said Matt Levatich, President and COO, Harley-Davidson. 'This decision was not made lightly, [however] with a streamlined business and an exciting product pipeline. we sincerely believe that MV Agusta is well positioned for the future,' he added.

We really don’t know how to react to this piece of news. Harley deciding to sell MV isn’t that big a deal – in fact we wonder why they bought Harley at all since there seem to be no business synergies whatsoever between the two brands. If anything, MV will probably be better off being sold to a more appropriate (preferably European) buyer who can focus completely on the MV brand.

However, Buell being shut down is a major shock. The company has, over the last few years, built some truly exciting, innovative motorcycles and the brand to suddenly disappear is certainly a terrible thing to happen. (Some might remember, UK's BIKE magazine once rated the Buell XB12R Firebolt as the world's best handling motorcycle, ahead of various GSX-Rs, Ducatis, KTMs, Hondas and Yamahas!) Our understanding of the business of motorcycles may be limited, but we do wonder why Harley wouldn’t sell – rather than shut down – Buell to an outside investor who’s prepared to invest in the brand and continue growing it?

Definitely a dark, sad day for the motorcycle industry and for motorcyclists everywhere, regardless of whether or not you actually own or ride a Buell motorcycle. Our sympathies are with Buell employees, most of whom will lose their current jobs by mid-December this year.

Erik Buell speaks about Harley's decision to discontinue the Buell brand. Erik may continue to work with Harley-Davidson in an advisory capacity

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