Harley sales go hog wild

Demand: While many businesses struggle, Harley-Davidson can't produce motorcycles fast enough for its customers.

November 25, 2001|By Ted Shelsby | Ted Shelsby,SUN STAFF

YORK, Pa. - At the Harley-Davidson Inc. motorcycle plant here, a shiny new bike rolls off the assembly line every minute - two shifts a day.

But that's not nearly fast enough to satisfy the customers.

Demand is so strong that riders are being forced to wait six months, a year, a year and a half, depending upon the model, to take delivery of their hogs, as they affectionately refer to their Harleys.

Some enthusiastic riders are paying up to 25 percent over the manufacturer's suggested retail price to speed delivery of a vehicle that analysts say has become an American symbol.

With hopes of bringing supply and demand closer together, Harley-Davidson has begun a $145 million, 350,000-square-foot expansion of its plant here that will add 275 jobs.

At the same time, the company is coming out with a new performance bike designed to appeal to a whole new group of riders.

When the expansion is completed in fall next year, the York plant will be bigger than Owings Mills Mall and will employ nearly 3,300 workers.

Employees here built more than 157,000 bikes last year - about 75 percent of the company's total production last year.

The new addition is the latest in a series of expansions that have added more than 1,000 jobs since 1990 to a facility that once served as the motorcycle company's lone assembly plant, said William B. Dannehl, a Harley vice president and general manager of the York factory.

"We are struggling to keep up with customer orders," said Dannehl, who is on a waiting list for a $16,000, 1,450 cc Harley Softail. "It's due next spring," he said.

Despite annual production increases of 10 percent to 14 percent over the past 10 years, James L. Ziemer, vice president and chief financial officer of the Milwaukee-based company, said demand has grown more rapidly.

Worldwide, Ziemer said, the motorcycle market is growing at a 9 percent annual rate. But in the United States, where sales last year totaled 1.4 million, according to the Motorcycle Industry Council, the annual increase is 15 percent to 20 percent, he said.

Ziemer said the company is not waiting for the York addition to come on line to meet demand. Production will be up about 14 percent this year to 232,500 bikes at its plants here and in Kansas City, Mo.

The company has scheduled a 10 percent jump in production next year to 256,000 units.

Those plans partly reflect the company's anticipated sales of its new V-Rod, scheduled to roll into showrooms next month.

It's the company's first completely new model in half a century and is designed to boost sales in Europe as well as the United States. Harley has been losing some younger riders to racy models from BMW, Yamaha, Honda and Ducati.

The V-Rod, designed with the aid of sports car maker Porsche and being manufactured in Kansas City, will feature the company's first water-cooled, overhead valve engine. With 115 horsepower - a big increase over anything Harley makes now - the V-Rod will rank in the upper echelon of performance bikes.

"It will bring in a whole new group of customers - those interested in performance," Ziemer said.

Ziemer said the $17,000 V-Rod, which boasts a top speed of 140 mph, should do particularly well in Europe. Performance bikes account for about 70 percent of the market in Europe, compared with 30 percent in the United States.

The company expects to produce between 10,000 and 12,000 V-Rods before the model year ends in June.

It's too early to say for certain, but the V-Rod could be a big winner for Harley, said Terrence MacKay, an analyst with Morningstar Inc., in Chicago.

"The people that I have spoken with say there is already a very high demand for the V-Rod. It's going to be tough to get your hands on one.

"The early indications are that it is going to a definite success, " he said.

Steve Ramsey, the owner of a Harley-Davidson store on U.S. 1 in Darlington, anticipates high demand for the new model.

"It's an exciting bike," Ramsey said. "I like it. I can see scalpers selling it for $5,000, $6,000 or $7,000 over the suggested retail price."

Even without the V-Rod, Harley-Davidson controls half the U.S. market for heavy-weight motorcycles - a substantial turnaround from the early 1980s, when it nearly went out of business under an onslaught of imports.

In 1981, 13 Harley executives acquired the company from AMF Inc., which had purchased the motorcycle company in 1969. One of the first things they did was petition the federal government for a five-year tariff on imported bikes. It was a move designed to give them time to get their feet on the ground and redesign the company's line of bikes. It was granted in 1983.

Five years was more than they needed. At Harley's request, the government dropped the tariff in 1987.

Harley was on its way.

"Harley is truly one of America's great business success stories," said George E. Hoffer, a professor of automotive economics at Virginia Commonwealth University.

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