Is Harley-Davidson on the way out?

Extinction is the death of every member of a species or group

Spuck Bennet’s dealership outside Ocean City, Maryland, is cluttered with 65 shiny Harley-Davidson motorcycles, including the chrome Sportster and the sleek V-Rod. Last year, Mr. Bennett, 79, sold 200 bikes, down from 280 the year before. This year, sales have slowed to a crawl.

“I haven’t seen anything like this in the 33 years I’ve owned a dealership,” says Bennet. “We’re just trying to survive.” He has cut expenses by trimming hours and overtime and has laid off 7 of his 49 employees.

I’m going to apply for a Payday Loan for a ticket to Ocean City to look at Spuck’s collection before he closes up shop.

Who exactly is Harley Davidson?

In 1901, William S. Harley, age 21, drew up plans for a small engine with a displacement of 7.07 cubic inches and four-inch flywheels. The engine was designed for use in a regular pedal-bicycle frame.

Over the next two years Harley and his childhood friend Arthur Davidson worked on improving their motor-bicycle using a machine shop at the home of a friend. It was finished in 1903. But the boys found their power-cycle unable to conquer Milwaukee’s modest hills without pedal assistance. They wrote off their first motor-bicycle as a valuable learning experiment.

They began work on a new and improved second-generation machine. This first “real” Harley-Davidson motorcycle had a bigger engine of 24.74 cubic inches with 9.75 inch flywheels. The bigger engine and loop-frame design took it out of the motorized-bicycle category and helped define what a modern motorcycle should contain. They were in business.

Harley’s customers have no money now

Harley’s core customers are graying baby boomers, whose savings, in many cases, have gone up in smoke in the market downturn. Few are in the mood to shell out up to $20,000 or more for something that is basically a big toy, and the company, in turn, has not captured much of the younger market.

Harley’s woes pale in comparison to what the automakers are facing, but it is a blow to a great product. Harley goosed sales by luring many buyers with ‘no-money-down’ loans. A subsidiary created about 15 years ago, Harley-Davidson Financial Services, made those loans and packaged them into securities to sell to investors. As the credit market skidded, so did this subsidiary.

Harley’s future

Tom Bergmann, Harley-Davidson’s chief financial officer says, “It’s not easy in this environment. We have to give loans to customers, but only to those worthy, and we’ve been disciplined and prudent in granting credit to our customers.”

In large part because of loan problems, profits at Harley fell 30 percent last year, to $654.7 million on revenue of $5.6 billion. Operating income of the financial subsidiary fell 61 percent.

Concerns about Harley’s future grew after the departures of its two top executives were announced. In December, Jim Ziemer, 59, said he planned to retire as C.E.O. this year. In early January, the company announced that Saiyid Naqvi, the head of the finance unit, was resigning after less than two years at Harley. Since September, Harley’s stock has plunged 70 percent, to under $13, compared with a 36 percent decline for the Standard & Poor’s 500.

Let’s hope that Harley can overcome this hazardous road.