Harley-Davidson’s CEO Just Quit: Here’s The Problem

Matt Levatich has been CEO of Harley-Davidson for just under five years. In that time sales have dropped every year. Here’s the problem; Harley’s customers are aging out. They’ve either got the Harley or Harleys they want and they’re through. That or they’re dying or dead. Sorry to be so blunt but that’s a lot of what’s facing Harley in the days and years ahead. Millennials don’t want them; they’re not that interested in cars let alone big cruiser bikes.

The yada-yada from the Harley-Davidson Board

Former Harley-Davidson CEO Matt Levatich | Getty

Harley-Davidson Board member Jochen Zeitz said, “The Board and Matt mutually agreed that now is the time for new leadership at Harley-Davidson. Matt was instrumental in defining the More Roads to Harley-Davidson accelerated plan for growth, and we will look to new leadership to recharge our business. On behalf of the Board, I would like to thank Matt for his 26 years of service to Harley-Davidson. He has worked tirelessly to navigate the Company through a period of significant industry change while ensuring the preservation of one of the most iconic brands in the world.” 

Now, here are some of the problems Harley is facing

20 February 2020, Hamburg: A model poses on a Harley-Davidson electric motorcycle during a press conference for the Hamburg Motorcycle Days (February 21 to February 23, 2020). Photo: Daniel Reinhardt/dpa (Photo by Daniel Reinhardt/picture alliance via Getty Images)

Yeah. It raises questions but who are we to punch holes in this move? A lot of this may have to do with the launch of the Livewire and subsequent slow sales. The company was banking on it doing well with Millennials. 

Then there are the mounting losses. In the Milwaukee Journal Sentinel from a few weeks ago came this comment by analyst Brian Yarbrough of Edward Jones Co., “These are declines on top of declines on top of declines. It’s years of declines. If we hit a recession in the next two years then all of their sales targets are off of the table. There is no way they are going to hit those targets then.” 

Shareholders have asked that the company be sold to recoup some of their losses

Harley-Davidson concentration, More than 1,500 Harley-Davidson flood Madrid, in Madrid on May 12, 2019. spain (Photo by Oscar Gonzalez/NurPhoto via Getty Images)

During its last shareholders’ conference call Levatich was asked to sell the company so that shareholders could recoup some of their investments and the company could get new ownership to possibly turn the losses around. Yikes! While he dismissed the question he said at the time that 2020 would be pivotal for Harley.  

More recently Harley has indicated it would be relying on international sales to help shore up falling domestic sales. Unfortunately, international sales also fell for 2019. So sales are falling globally and its latest best guess at a hot bike is barely selling. It’s a recipe for disaster.

It’s still a moneymaker, but nothing like it once was

Sales fell in 2019 8.5% to $874.1 million. Earnings were $423.6 million so it’s still a moneymaker. But 2019 sales were the lowest in 16 years. Global shipments were down the lowest in 10 years. 

2020 Harley-Davidson CVO Road Glide engine
2020 Harley-Davidson CVO Road Glide engine | Harley-Davidson

Then there’s the stock performance. Shall we say it’s down? How about 44% in just the last five years. And that’s during a period when the S&P 500 Index gained just a hair under 65%. Harley’s 2019 earnings were more than $100 million less than in 2018.

For now, Zeitz will be interim CEO

For now, Zeitz says, “The Harley-Davidson board and leadership team will continue to work closely together as we search for a new CEO.” He will take over on an interim basis until a successor can be found. 

Harley has a huge hill to climb. How much time the next CEO will be given is anybody’s guess. Investors might hold out possibly until the end of 2021 but expect that if there is not a stop to the bleeding that the brand may put out the “For Sale” sign. Then, all bets for the future are off of the table.