Harley-Davidson, Inc. (“Harley-Davidson”) (NYSE:HOG) today announced actions it has taken to rewire the company, setting the foundation for a 5-year plan as the most desirable motorcycle brand in the world. The company also reported second quarter 2020 financial results, and its ongoing actions to manage the impacts of COVID-19 on its business.
“I’m very pleased with our accomplishments in these times of extraordinary challenges and uncertainty. Through all of this, we have made significant progress toward the goals of The Rewire; the positive feedback from key stakeholders and the early impacts we are seeing in the marketplace are very encouraging,” said Jochen Zeitz, chairman, president and CEO, Harley-Davidson. “A total rewire is necessary to make Harley-Davidson a high-performance company. Building on our strong brand legacy, we are reinvigorating our core profit driving business – powered by our strongest dealers, most exciting products and careful inventory management, while focusing on the most important opportunities for future expansion. We’re overhauling our operating model and our product plan and are rewiring our market structure and organization to focus on the strengths of our brand and company. We are now working on our new 5-year strategic plan, The Hardwire, which will be grounded in enhancing the desirability of our brand and protecting the value of our iconic products.”
New Operating Model: Reduced Complexity and Increased Speed
Vast changes to the company’s operating model under The Rewire include all areas of the business globally, from commercial operations to center-led support functions. Significant work has been undertaken to eliminate duplication, inefficiencies and complexity throughout the organization. As previously announced, the streamlined structure requires 700 fewer positions across its global operations.
Refined Motorcycle Line-Up and High-Impact Product Launches
The company plans to rewire its product offering to more precisely match customer desires and to strengthen the value of its products. The company will also improve product timing and go-to-market plans to achieve the greatest market impact.
Highlights of the new approach include:
- Streamlining planned motorcycle models by approximately 30 percent; balancing investments between current stronghold categories and new, high-potential segments
- Expanding product offerings of its best-selling, iconic motorcycles
- Delivering its first Adventure Touring motorcycle – Pan America 1250 – in 2021
- Shifting annual product launch timing from August to early in the first quarter
- Reinvigorating launch efforts including collaborations with key influencers to bring the brand and new products to life drive brand desirability
- Among other plans, the company is set to launch a new marketing campaign including a collaboration with Jason Momoa to celebrate the shared journey and unrelenting spirit of Harley-Davidson.
Growth through Parts & Accessories and General Merchandise
The company is intensifying focus on its Parts & Accessories and General Merchandise businesses, encouraging customers to customize their entire riding experience to match their own style. Now part of the new Commercial function, new leadership has designed strategies for each business aligned to the company’s motorcycle and market priorities with the goal of delivering a holistic experience in the marketplace.
Reset Global Business and Focus on High-Potential Markets
Harley-Davidson plans to concentrate on approximately 50 markets primarily in North America, Europe and parts of Asia Pacific that represent the vast majority of the company’s volume and growth potential. The company is evaluating plans to exit international markets where volumes and profitability do not support continued investment in line with the future strategy.
The company also plans to shift resources and marketing investments into the regions for maximum impact. As part of this effort, the company has streamlined regional offices and created new groups of high potential countries that will have the autonomy, within a clearly defined framework, to drive the business. Additionally, the company plans to optimize its dealer network to provide an improved and integrated customer experience.
Protecting Value
Harley-Davidson has revamped its approach to supply and inventory management focusing on products and initiatives that add value, while significantly reducing discounting and price promotions. This is expected to drive retail pricing to help preserve the value and desirability of Harley-Davidson motorcycles for its customers and brand.
The Rewire
All of the above efforts of The Rewire aim to provide a better starting point for the future and to build desirability for the Harley-Davidson brand and products.
The Rewire outcomes and other highlights at the end of Q2:
- $250 million in cash savings (excluding restructuring charges) including SG&A and capital reductions expected in 2020
- Restructuring charges of $42 million expected to result in approximately $100 million in ongoing annual savings based upon actions taken
- Global dealer inventory down 32 percent
- On average, U.S. new Model Year 2020 motorcycles selling at MSRP
- Used Harley-Davidson pricing up significantly at retail and auction
- The Rewire is expected to continue through the end of the year, leading to a first look at the company’s 2021-2025 strategic plan, The Hardwire, expected in the fourth quarter. Building on the foundation and principles of The Rewire, the driver of the new plan will be Harley-Davidson as the most desirable motorcycle brand in the world for its customers, employees, community and investors.
COVID-19 Response and Recovery
The company continues to proactively manage its business through the pandemic and has implemented robust protocols to keep workers safe in its factories. Most non-production workers will continue to work from home until the end of the year. Its response and recovery plans include supporting global dealers and customers. At the end of the quarter, about 93 percent of its global dealers were open for retail motorcycle sales following pandemic interruptions.
The complete press relese can be read here.
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