| Author | Message | ||
     Xlcr |
Yes, Ducati is a model of success, that's why TPG is now in the process of selling them for a fraction of what they wanted two years ago. Just as I predicted. | ||
| Daves |
Hey!  | ||
| Djkaplan |
I don't know how well Buell the motorcycle company is doing, but Erik Buell the man is the happiest camper I've met in a long time. I guess it's hard not to smile when you have flocks of people wearing expensive leathers with your name emblazened on them clamoring to meet and talk with you. It must be good to be King. | ||
| Rocketman |
Seems I didn't make myself clear. Blake, put it this way. Everything you mention, and I mean everything from drawing board to product and all that lies in between, say $2500 per unit. Actual material cost per unit, that's everything from a light bulb to frame, say another $2500. Total per unit $5000 Bomber, I'm trying to say there are more individual components used to build the average Italian or Japanese bike that's in some way similar to a Buell product. Of those Italian or Japanese bikes their component make-up should consist of more higher quality parts than what we find on a Buell. That's because of two reasons. One is, there are more parts to start with, and two, the quality of component parts exceeds that of Buell in the first instance. Ask yourself this? Do Buell use any titanium products on their motorcycles? No. The Japanese and Italian's do. Do Buell use state of the art electronics on their motorcycles? No. The Japanese and Italian's do. Do Buell equip their bikes with top grade components from Showa, White Power, Nissin, Marzocchi, Brembo, Magneti Morrelli, etc etc etc? No. The Japanese and Italian's do. My point is, whilst Buell might well use a very high quality frame manufactured in Italy, or some similar quality wheels manufactured in China, or whatever else, Buell also adhere to a much more simple design criteria than the Japanese or Italian's. This works well in Buells favour, allowing a larger profit percentage on the whole product. How for example can a Buell XB12R sell for similar money as a Ducati 749R when the Ducati is selling at a profit? Consider the Buell is selling for a LOT more profit. Now I couldn't give two shites how much profit anyone makes, but when the profits made exceed the quality of what my money should deservedly buy me as a consumer, based on comparing production cost and quality and number of components making up a single unit, if another company can turn out a motorcycle that does that for similar money, what am I to think? Am I being ripped off? Am I stupid? Or, did my buying this bike have nothing to do with purchase cost reality? Please, and this has nothing to do with me liking Ducati, no one tell me a Buell is better value than a Ducati. A Ducati is leagues ahead in component quality. Number of components used in construction exceeds Buell component count. Overall quality of finished product is superior to Buell. That's my point. As for Ducati's recent financial affairs. Let's get real. Ducati are NOT in a (temporary) pickle because they make crap motorcycles. They are in the hands, majority speaking, of a conglomerate that exists to make money not motorcycles. TPG's intentions were to bolster up a thriving company, make more dollars, buy low sell high, in a few short years. TPG's involvement can't survive a temporary downturn in the market and it would seem TPG have hung on too long in an effort to bring in more cash, but it seems the time was wrong as Ducati hit a transitional phase that's seen a fall in profits. As for racing, whether it sells motorcycles or not my point was simply this. Cheering on your favourite motorcycle manufacturer is no different from supporting your favourite football team. In this respect, a company that goes racing is giving its fans (customers) something back - and it's free. This post is in no way a criticism of Buell. Hell I bought one new didn't I. It's simply a way of showing how smart one can be at making a bloody profit. I'd also add that in 1998 I didn't care a hoot. Back then an S1W was really something special and a 916 was over priced too! Rocket | ||
| Midknyte |
Ask yourself this? Do Buell use any titanium products on their motorcycles? No. The Japanese and Italian's do. Do Buell use state of the art electronics on their motorcycles? No. The Japanese and Italian's do. Do Buell equip their bikes with top grade components from Showa, White Power, Nissin, Marzocchi, Brembo, Magneti Morrelli, etc etc etc? No. The Japanese and Italian's do. Do the Japanese and Italian's make a bike I want to buy? No. Buell does! It took more than 15 years for someone to make a [another] bike that made me pull out the wallet. Guess who did it? | ||
| Brucelee |
"no one tell me a Buell is better value than a Ducati. " Actually, anyone can tell you this R man, as value is totally subjective, whereas cost is objective. One is not really connected to another. To expand, it depends on what one defines as "value". Some folks define value as "not breaking" and they buy Honda cars. Others define it as "speed" and they buy an Enzo. Others, well you get the picture. Personally, I like the Ducs alot and think the current S2R is a pretty good value at 9K. I think it is a pickum against say, a XB9. That is MY value system and cost has nothing to do with it. The great thing is that we live in a world where there are tons of GREAT motorcycles. God must love his children. "let the good times roll" | ||
| Bomber |
Rocket -- absolutely correct -- parts count on a big 4 scoot or a Duke or darned near anything else is very likely (darned near sure) higher than on a Buell -- fewer parts is one of the ways that they have designed for ease and accuracy of assembly -- a laudable engineering goal, to be sure, with real world payoffs if you do your own wrenching, sez me ;-} if you DO decide to buy a product that generates more profit for the seller than another, you, by defination, are not being ripped off, as you made that decidsion yourself (Buell v Duke, in your example, if your guesstimates are correct) if you decide to buy a scoot that is more complex, uses more expensive materials, more hand labor, and uses somewhat outdated tech to achieve a performance level that is similar to a scoot that costs less (Duke vs Big 4, for instance), you are no tan idiot, as it's your choice, which could be influanced by a number of issues, many not measurable by numbers, as you pointed out as for overall quality, I would equate quality (I assume you're talking fit and finish here, as well as design) with beauty -- in the eye of the beholder, I'm thinkin lastly, you're right about Ducati's fiscal difficulties not being caused by poor quality products -- not even a little -- one could argue that they make products that they do not sell at high enough of a price, or produce them too expensively for the market to to support at a price that might generate sufficient margin, but, at the end of the day, they make great motorcycles -- it's the business that they don't seem to be able to sustain independantly (Message edited by bomber on December 06, 2005) | ||
| Court |
>>>One is not really connected to another. That's an accurate statement. Value, as stated, is a purely subjective metric and will vary with preferences, experience and taste. To me, as in my personal opinionation, "value" is the measure of "absence of cognitive dissonance". How well does a purchase meet my needs, real or perceived, as opposed to how much does it main me to have spent the money. The last Buell I bought was, to me, an excellent value. I've done nothing but enjoy the snot out of it, ride it, put it away, ride it, put it away and repeat. I never once looked in the financial rear view mirror to see if rider Q bought his $200 less than me. I just keep smilin', hummin' Axis Bold as Love and riding. . . . Darn few reasons why a person couldn't do the same thing on a Ducati. The last time I "traveled" on one, I did not own it. I picked it up in Anaheim and rode it to Willow Springs for testing. My comments about it were in Battle 2Win. In terms of "taste", and with the caveat that I'm not looking past the Ulysses in terms of a place to spend my own money, it's darn tough to argue that few bikes (and I do include many Buells) are as close to ART as the Ducati. The Monster, in my own mind....ride it or not, is one of the most visually stirring bikes ever. Court | ||
| Blake |
Sean, Not sure what you are saying. Are you still asserting that it only costs Buell around $5K on average to produce a motorcycle? What about "17.7% net profit margin" do you not understand? Good grief man. You can't argue with the numbers. Or are you saying that after years of struggling to make a profit, that now suddenly Buell has lept far ahead and is now bringing in over three times the net profit margin compared to HDMC? "Buell also adhere to a much more simple design criteria than the Japanese or Italian's. This works well in Buells favour, allowing a larger profit percentage on the whole product." Any engineer worth his pay will tell you that it is MUCH more difficult to find a simple solution than a complex one. How much engineering RD&T do you suppose Buell invested in their belt final drive system? How about the ZTL wheel/brake system? How about the XB frame/fuel-tank? The swingarm/oil-tank, the molded-in colored body panels? When was the last time Ducati or any other mfgr designed/engineered/tested/produced an entirely new type of frame, or front wheel, or front brake system, or final drive system, or an entirely new molded-in-colered body panels? It's pretty darn easy to keep the same configuration of frame, slap another same old conventional steel fuel tank on it, use the same old conventional style swingarm, conventional off-the-shelf brakes, with a conventional front wheel and go. Sorry buddy. You are WAY off base on this one. Heck, you are not even in the same ball-park.  Again, the number don't lie. I'd sure like to know how you imagine Buell is making a 60% net profit margin ($3K on $5K cost, $8K price, your numbers exactly) when HDI as a whole is only making 17.7%. | ||
| Blake |
And like those astute fellas say above. The profit is entirely irrelevant to the consumer. People will pay what they think a product is worth. I heard that Starbucks is pulling in a 50% or 60% margin. Ditto for Apple on their IPods. Explain that. Simple. Folks think the price they are paying is fair. | ||
| Glitch |
It's simple Blake, Buell uses cheap labor, cheap parts and Erik does all the engineering for peanuts. The real expense goes into the Kool-Aide. | ||
| Skully |
The real expense goes into the Kool-Aide. Ha! Ha! Ha! Amen, brother. Keith | ||
| Daves |
Yes but what great Kool-Aid it is! | ||
| Blake |
Buell-Aid!  | ||
| Redrocker |
Again, the number don't lie. I'd sure like to know how you imagine Buell is making a 60% net profit margin ($3K on $5K cost, $8K price, your numbers exactly) when HDI as a whole is only making 17.7%.} Actually $3K profit on a $8K sale is 62.5% MARKUP which represents a 37.5% PROFIT MARGIN, a common mistake. Further, the Net Income number you are referring to is not the number you should be using to calculate the wholesale price of the product, you would need to use Cost of Goods Sold. Using this number from the 2004 HD Annual Report would be $3115,655 divided by $5,015,190 which shows a MARKUP of 62.1% or 37.9% GROSS PROFIT MARGIN. Which would make, on average, a $8K product at wholesale carry a manufacturing cost of approx. $4968. | ||
| Rpmchris |
Having not seen the HD Annual Report, I'm just guessing, but those numbers likely include all income/revenue, including from parts, accessories, etc. which are usually sold at a HUGE markup. | ||
| Blake |
"Actually $3K profit on a $8K sale is 62.5% MARKUP which represents a 37.5% PROFIT MARGIN, a common mistake." Thanks for the correction. You are right. Silly me. How many times have I divided cost by 0.65 to come up with a price to provide 35% gross margin? Too many times. "Further, the Net Income number you are referring to is not the number you should be using to calculate the wholesale price of the product, you would need to use Cost of Goods Sold." You lost me there. Admittedly, I'm no accountant for sure. I simply used Buell's total revenue of $79M divided by their 9,900 motorcycles sold to find the ~$8K average unit wholesale price. Not sure you want to apply the overall HDI numbers to the Buell average wholesale price, which appears to be what you did. If you are interested in HDI overall, probably best to look at just HDMC which dominates by far the lion's share of the HDI books. In round numbers, HDMC sold some 317K motorcycles for a total revenue of around $5B. That puts their average wholesale price at around $15.8K per bike. If they made a net income on that of some $811M, that amounts to an average net profit after taxes of $2,558/bike per bike. And so a net profit margin of 19.3%. Similarly, after taxes HDI's net income amounted to 17.7% of its gross revenue. Not margin, but whatever you want to call that number, that is what I was referring to. Just how much $ was kept versus how much $ came in. Simple for me.  For most non-accounting types, the net income after taxes is synonymous with net profit, what is left over to put in your pocket. I know in accountingese it ain't that simple, but I think we are talking in straightforward simple terms here. You get into EBITDA analysis and all that and I'll have to bow out. | ||
| Blake |
HD Annual Report Financials | ||
| Rocketman |
Simple task. How much does it cost to design build and manufacture a Buell motorcycle. I'm not talking about the cost of advertising them or producing press pack CD's. Yes I include the phone calls to Italy, China or wherever. The cost of running the production plant etc etc, include that too. The printing of the owners manual also, but not a workshop manual that one buys separately. Basically anything that is involved in the build cost of a Buell. I say $5000 sounds about good to me just based on an educated guess. If my top of the head math is correct I'm saying Buell made about 29 million dollars in profit. I take it the 79 million includes clothing, accessories and trinkets? What's the profit margin there I haven't a clue. If it's 4 million that means the bikes have earned Buell a 25 million profit. I'd say that's about right. Around one third of total income is profit. It would surprise me if, as Blake is explaining, Buell were making shy of 14 million profit, again if we take 4 million off for the trinket sales, I wouldn't if I were HD back a small company like Buell to raise a 10 million dollar profit out of a 79 million dollar turn over. That's to close to the wind for my liking. That equates to about $1000 profit per unit. That's a paltry figure if the market fluctuates in the wrong direction. There's not enough margin to guarantee a strong profit if those units don't sell in big enough numbers. "no one tell me a Buell is better value than a Ducati. " Actually, anyone can tell you this R man, as value is totally subjective, whereas cost is objective. One is not really connected to another. To be clear I was talking from a manufacturing standpoint, in keeping with the profit discussion. Nothing to do with personal choice / preference/ taste / parting of the shekel's from ones wallet. When one buys a Ducati they are by nature of the beast getting a product of better value. It's like one buying a $1500 Tag Chronograph and a $3000 Rolex . They both tell the time equally as well but the Rolex is the higher quality item, and its price represents such. In the case of Buell v Ducati the same is not so. Non of us are that blind we can't see that a Ducati is of better value than a Buell when we consider the situation from an engineering / manufacturing / parts tally comparison. So I posed the question, are we being ripped off? That's the subjective part my friends. Would you pay $3000 for the Tag Chrono? Hey Blake, can I say single sided swing arm? How about that fancy wiring thingy I know not the name of on the 999 range? You know the one, where the electrical functions are all sent down one wire. Do we give slipper clutches to Ducati? Jeez I'm struggling to think of more Ducati innovation. Do they still use that old fashioned valve closing mechanism that's never proved successful? I heard a rumour recently that Ducati are developing a rear wheel steered bike. Does that count???? Hey guess what? After 6 weeks or so of not riding, my S1W refused to start today. Wet the plugs and the rear plug badly fouled. Had to put her on the Optimate after flattening the battery trying. Haven't run my 916 since August. Will anyone give me a wager that I try tomorrow to start her and she won't start? All in good fun............... So one last thing to sleep on. If the purchase of a Buell is indeed subjective as has been suggested, and therefore no one objects to the profit margin obtained in the sale of such a street hustler, then why not someone tell us the exact figure of production cost rather than us debate it? Or would the shock be too much even for the subjective amongst us? Over to you Court? Rocket | ||
| Glitch |
Will anyone give me a wager that I try tomorrow to start her and she won't start? I'd wager that you'd not tell us if she didn't. All in good fun...............  | ||
| Mikej |
"Would you pay $3000 for the Tag Chrono? " No. I wouldn't pay $1,500 for a Rolex either. Just throwing my 2cents (or 2 pence) into the discussion since that's about all I have these days. Carry on.... | ||
| Bomber |
Rocker -- rear wheel steering -- old news, brother -- Joan Claybrook (ex-head of the National Highway Safety Idiots, long gone, not at all lamented, Queen of the 85 MPH speedo) had a development program to create safer motorcyles -- included a roll cage, personnel restraints (seat and lap belts) and, er, rear wheel steering as anyone that's ever driven a forklift truck can tell ya, rear wheel-only steering is great for some things, not so great for most many of the things you call out as innovations on Duke's part (multiplexed signals down a single wire, single sided swingarm) are certain solutions to a problem, but far from the only ones -- the cost of [producing a Buell vs a Ducati is, while an interesting mental exercise, kinda beside the point -- Tag VS Rolex is too -- sure, they both tell time, as does a 9.95 Timex -- I'm guess that the engineering and materials cost between a Rolex and a Tag are not enough to explain the price difference -- market perception, however, is all in good fun, as you say -- my stance is that the cost of producing an item has little to do with what folks are willing to pay for it -- given Ducati's tradition difficulty running at a profit, one might conclude that they should either: 1 raise prices to the point that they can continue to operate as they are, to design and built bike like they do now, but realize a profit, or 2 revise their r&d and manufacturing (and marketing = racing) efforts to allow profit on presnet prices I'll guess that hte new owners combine both solutions, while trying mightily to preserve what is perceived as Ducati's traditional perceived value in the market place -- simply raising the prices would result in very expensive Ducati's indeed, and I'm sure that if hte facotry thought they could move an equal number of scoots at +20%, they woulda done so already | ||
| Mikej |
Safer motorcycles.... Looks to have a seatbelt too:  Crash testing:  | ||
| Brucelee |
"Non of us are that blind we can't see that a Ducati is of better value than a Buell when we consider the situation from an engineering / manufacturing / parts tally comparison." Actually anyone can tell you that. Value is as we said before, totally subjective. To wit, there are many who consider their Prius as a "good value." No matter that we can show them on a spreadsheet what a foolish financial move they made, they still "value" the whole environmental issue. No matter that there are Hondas that are at least as "clean" as the Prius, the Prius owner still thinks they got a great value! Now, when you start looking at how all potential customers tote up "value" ....... Near as I can tell, Buell is doing fine. I highly doubt the Board of HD cares a whit about things other than ROI, IN THE LONG RUN! | ||
| Blake |
Sean, To clarify, I'm saying that Buell is making a net profit, or "net income" (meaning after subtracting GS&A and taxes) of no more than 20% of their gross revenue. Before GS&A and taxes, which is what you seem to be talking about, yes the gross profit is going to be significantly higher. I would never agree that a Ducati is by default intrinsically a better value than the current lineup of Buell motorcycles. You'd first need to define what you mean by "better value." I'll give you the single sided swingarm for the Duc. That is an innovation on par with a dual-duty swingarm/oil tank or frame/fuel-tank. I doubt that Ducati engineers invented the data communication method/protocol you mention; they simply employed it, probably in a very off-the-shelf way using existing protocol and commercially available componentry, and that while requiring some effort, is more on par with how Buell employed the smallest possible dual headlights for the Firebolt models. Torque limiting clutches? Those things have been around for a very very long time. Giving Ducati much credit for that would be like giving them credit for using gears in their transmission. That said, if they were the first to apply that technology to a motorcycle, then they deserve some credit for sure. Those Ducati innovations happened over quite a long timespan. When did they first introduce the SSSArm? The torque limiting clutch? Buell, in one giant fell-swoop brought ALL the innovations I mentioned to market in one new model motorcycle. BIG difference, no? 1. Preloaded constant path length zero backlash belt final drive system. 2. Floating perimeter ZTL disk brake/wheel. 3. Dual duty frame/fuel-tank. 4. Dual duty swingarm/oil-tank. 5. Molded-in colored body panels. (clarification, the X1 and Blast first brought this to market) 6. Radical 250GP racer chassis geometry. 7. Adjustment free rear axle. 8. Spacer free wheel assemblies. 9. The lightest ever production aluminum front wheel for a middleweight plus sporting motorcycle. All that in one model release. People who have not worked in engineering and manufacturing just cannot appreciate the amazing amount of effort that was required to bring all that innovation to market. That such a small motorcycle company like Buell was able to do so is unprecedented, truly amazing! Have some friggin' respect amigo. | ||
| Whodom |
I'll give you the single sided swingarm for the Duc. That is an innovation on par with a dual-duty swingarm/oil tank or frame/fuel-tank. Blake, A bit of an aside, here, but somewhat relevant to the discussion. Did you know that Triumph dropped the single-sided swingarm fitted to some of their models a few years back? Turns out the engineers found out a standard 2-sided swingarm was inherently lighter for a given stiffness (or stiffer for a given weight) than the single-sided unit, which only makes sense. However, customers really liked the look of the single side unit and complained, so the single-sided swingarm was re-introduced after a year or so. I suppose for racing, the single-sided swingarm might offer a real advantage in being able to quickly change rear tires, but for the street or at least as far as handling, it seems a double-sided swingarm is inherently better. Perhaps the Duc swingarm isn't really a technological innovation, but a good marketing innovation. | ||
| Blake |
Yes, I actually did know that. Ducati also dropped the SSSArm from their repli-racer models, the 749 and 999. Besides Duc, their are plenty of other manufacturers who have employed SSSArms on motorcycles, BMW, Honda, Triumph (like you said), MV Augusta and others I'm sure. You can even buy one for your Buell tube framer if you want. They do look too cool. But they are not any kind of advantage, just cool looking and are in fact heavier. I do like 'em. | ||
| Xlcr |
The single sided swing arm first appeared on the BMW GS in 1981. The mutiplex bussing was on the first Dodge Intrepid I test drove in the early '90s. Try again. And while you are, may I give you the world's first hydraulic valve actuators, on the '47 Panhead, Roller cams, ditto, the world's first hydraulic brake, '57 Duo Glide, and the world's first all disc bike, the '72 SuperGlide. There is more, but the point is, Harley has more innovations than Ducati does, not even counting Buell. Oh, they have better fit and finish too. QUALITY, you know. | ||
| Arbalest |
Nobody seems to be talking about about REAL profit. Remember, corporate tax must be paid on all profit. The only reason for the existence of tax accountants, is to reduce tax liability. The profit figures publicly stated by any corporation are a fairy tail for the tax collector. As an example, the company I work for, tells us (the employees) that the target is 3% profit. Granted, I was not an economics Major, I just minored in economics...BUT, the only reason for a profit making enterprise is the pursuit of ECONOMIC PROFIT. Economic profit is, by definition, profit over and above that profit that can be realized by careful investment. Since most savvy investors realize profit from the market in excess of 5%, the owners of my company should close the doors and just invest their money. They choose not to. This company is being run but the son and daughter of the founder of the company. Neither has any great interest in manufacturing. Why are we still in business? Because the owners get to use the company revenue stream to their personal advantage. In the real world, they are getting more than the sub 3% profit margins would indicate. There is no reason to think that other for profit enterprises operate any differently. | ||
| Daves |
So, the single sided swingarm was engineering for engineering sake? |
