Can Jochen Zeitz Engineer a Turnaround at Harley-Davidson?
| Case Code: BSTR635 Case Length: 19 Pages Period: 2020-21 Pub Date: 2022 Teaching Note: Available |
Price: Rs.300 Organization : Harley-Davidson Industry : Automotive Countries : United States Themes: Business Level Strategies, Leadership and Change Management |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Growth over the Years…
Harley had played an important role in American history. It supported the US military during World Wars I and II by producing motorcycles for use in the wars. It was one of the two American motorcycle companies (the other being Hendee Manufacturing) to survive the Great Depression . After World War II (1939-1945), Harley became highly popular with the baby boomer generation, who rode the brand to greatness in the second half of the 20th century. However,..
The More Roads to Harley-Davidson Plan
Levatich, who joined Harley in 1994 and served in various positions across the US and Europe, became its CEO in 2015. He bet on new launches, including battery-powered bikes, to revive the fortunes of the company. Levatich unveiled the “More Roads to Harley-Davidson” (More Roads) plan in July 2018, designed to accelerate growth between 2018 and 2022. The More Roads plan of the company focused on four components – new products, broader access, stronger dealers, and an amplified brand..
Change in Leadership
The company’s shareholders were concerned about the brand’s falling sales. With no sales revival in sight, Wall Street speculated whether the company would seek refuge in a buyout or turn private to rework its product lines and branding..
“More Roads to Harley-Davidson” Rewired
As an interim CEO, Zeitz focused on steering Harley through the crisis. “We have determined that we need to make significant changes to the company; to our priorities, to our operating model and to our strategy to drive more consistent performance as we emerge from this crisis.” said Zeitz. He abandoned Levatich’s strategy, saying, “We’ve continued to move forward with the highest potential elements of More Roads, but our strategy must be reassessed.”..
Implementation and the Aftermath
Zeitz was appointed President and CEO of the company on May 7, 2020, soon after The Rewire was launched. “His two decades of experience as Chairman & CEO of a leading global company and brand, and his enthusiasm and determination to challenge everything about the company based on his turnaround experience is exactly what we need right now to lead Harley-Davidson to long term success,” said Thomas Linebarger, an independent member of Harley-Davidson’s Board of Directors. Zeitz would also continue as Chairman of the Board, the company said..
Going Back to Basics
After the company’s losses in the second quarter, Zeitz doubled down on his The Rewire turnaround plan. “A total rewire is necessary to make Harley-Davidson a high-performance company,” Zeitz said. He committed to shifting the company’s focus back to big and expensive bikes, traditional markets, and older and wealthier customers in a bid to grow profits. He refocused on Harley’s core customer base and what they loved about owning a Harley..
The Hardwire Plan
In January 2021, Harley announced that the critical overhaul of its business was complete through the Rewire and that it had set a strong foundation for the next plan ‘The Hardwire’. In February 2021, Zeitz unveiled a five-year overhaul plan, The Hardwire. Zeits said. “We managed COVID-19 impacts, kept our community well-being at the forefront, protected liquidity and delivered $250 million in cash savings. We also successfully overhauled the entire company through The Rewire [its previous turnaround plan], building a strong foundation to successfully implement our new 5-year strategic plan, The Hardwire.”..
The Strategic Priorities of The Hardwire Were
The Hardwire plan targeted increasing the company’s long-term profitability and low double-digit growth in earnings per share (EPS) through 2025 (See Exhibit VII). Over the five years (2021-2025), the company planned to invest between US$190 million and US$250 million a year to grow revenue in its most profitable bike segments – Touring, large Cruiser, and Trike – to achieve mid single-digit growth in bike revenue..
The Impact
Zeitz’s Hardwire strategy to reduce global operations and focus on the strength of the brand seemed to benefit the company, analysts said. Harley reported a positive start in 2021. Despite global motorcycle sales being affected by the pandemic, Harley posted a 9% year-over-year growth in its global motorcycle sales to 44,200 units in the first quarter of 2021 . .
The Ride Ahead
Harley showed some unsurprising gains in the first six months of 2021 compared to 2020’s numbers. (See Exhibit IX). However, analysts were critical about the company’s performance in 2021. They said for a true measure of sales in 2021, they had to be compared to the 2019 pre-pandemic period instead of 2020 as the pandemic had hit Harley’s business. Compared to 2019, Harley reported modest gains in its US sales for the first six months of 2021 while global sales were down 10% during the period..
Exhibits
Exhibit I: 2020 Harley-Davidson Motorcycle Lineup
Exhibit II: Harley-Davidson’s Vision, Mission and Culture
Exhibit III: Key Elements of More Roads to Harley-Davidson Plan
Exhibit IV: Market Share of Major Motorcycle Brands in the US in 2020
Exhibit V: Motorcycle Sales of Harley-Davidson (First Quarter of 2020 vs. 2019)
Exhibit VI: Retail Motorcycle Sales of Harley-Davidson
Exhibit VII: The Hardwire Financial Targets (2021-2025)
Exhibit VIII: Harley-Davidson’s Stock Chart (January 2007- June 2021)
Exhibit IX: Harley-Davidson’s Condensed Consolidated Statement of Operations
Exhibit X: Harley-Davidson Sales (2021 vs. 2019)
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