Harley-Davidson Turns Out the Lights on Buell and its Future?

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Yesterday, Harley-Davidson announced that it would discontinue production of Buell motorcycles permanently by Oct. 30. Harley-Davidson is also divesting itself of MV Agusta, the Italian sport bike company it purchased last year.

What a sudden and dramatic difference a year makes.

According to Harley-Davidson spokesman Paul James, the ending of the 26-year-old Buell brand, a wholly owned subsidiary of the Milwaukee-based manufacturer since 1998, “is part of Harley-Davidson’s go-forward business strategy. The new long-term strategy aims to drive company growth through a focus of efforts and resources on the Harley-Davidson brand.”

James is further quoted that, “The fact is, a dollar invested into Harley-Davidson, there’s more impact than the same dollar invested elsewhere when it comes to reaching new riders and enriching the experience of our core customers.”

With Harley-Davidson exiting the sportbike, exotic and adventure markets (see the Buell Ulysses), one might suggest the company look up from the spreadsheets, look up the meaning of “myopic” in the dictionary and do a bit of market research.

Harley’s termination of Buell brand comes on the same day it announced third-quarter earnings. Worldwide, retail sales of Harley-Davidson motorcycles declined 21.3% in the third quarter of 2009 versus 2008, with that comes an investor rattling report of an 84 percent slide in third-quarter profit.

Will the future look brighter for a Harley-Davidson monomanically focused on its own single brand? Likely not.

As of 2007 total Motorcycle Sales failed to increase after 14 consecutive years of gains, and if losses were a race then Harley’s been in the lead since then. So what could turn this around?

Not playing to the declining cruiser market for one, in 2005 cruiser sales in the US peaked at 340,000 units on the heels of 2004’s 10% growth and have been trending downwards since. Part of that is the aging “cruiser” demographic , as slowly the boomer dollars begin to fade away. What Harley has done is thrown away two “lifelines” and the money invested in them, counter a current industry trend of product line diversification.
BMW has aggressively and successfully expanded its line, Ducati is in the process of doing so, thus ensuring that a slump in one market does not tragically impact the brand as a whole. Of course, there Japanese “Big Four”— Honda, Yamaha, Kawasaki and Suzuki — are ultimately designed to endure any one two-wheel segment downturn, slump or even extinction. That’s largely because three of those four also serve the smaller displacement motorcycle and scooter markets, where for low cost transportation continues to grow.

By turning inwards, relying on a single-brand tradition and nationalism, and divesting itself of innovative brands and the possibility of expansion into other segments, Harley-Davidson may well have dimmed the lights on a brighter and longer future.

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