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Glitch
| | Posted on Wednesday, June 13, 2007 - 06:22 pm: | 
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But you have to understand that HD wouldn't do anything with Ducati if there wasn't something in it for them.
True.
Think of this ( I could be wrong, but this is how I see it )....
Once merged H-D wouldn't be seen as an import ( In the classic sense) bike overseas, thus dodging many many taxes.
Now do the same with Ducati, once merged Ducati would be less of an import, and dodging many US import taxes.
Both would be able to sell the bike for less, because as we all know, corporations don't pay taxes, they merely pass the extra cost on to the consumer.
Viola! A bigger market share for each manufacturer!
Win for H-D.
Win for Ducati.
Most importantly a win for the consumer! |
Tommy_black_shark
| | Posted on Wednesday, June 13, 2007 - 07:55 pm: |
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Ok. Tell me where I am "wrong." I didn't specifically state that they don't survey buyers of other brands. I know they do. But how they do it is the real question. I know Willie G attends drag and flat track races,
Sorry if the tone of my message was harsh. Everything you are describing from surveying customers to deciding which bikes to build and how to position them price wise are marketing decisions. My point was that based on the success of Harley's marketing decisions over the last 20 years, it is hard to find fault with the decisions that they have made. If a part of the process is not visible to us it doesn't mean that it isn't happening. Whatever they are doing is working for their stockholders.
After reading the article in the Financial Times I am convinced that this story doesn't have much merit. The FT didn't even bother getting a HD spokesman to give a "no comment" answer. It would be very rare in my experience for a $300 million dollar company losing money to merge as equals with a $6 billion dollar company that is making money hand over fist. Potentially I could see HD buying Ducati, but I don't see what Ducati has that HD would want. Ducati has won a lot of races over the last 20 years. Unfortunately that doesn't translate into a big share of the market anywhere. On their home field in Europe they have 5% market share. In the US they are not even a blip on the radar screen. In the US Harley has about 50% of the market, the big 4 have about 43% and Ducati along with everyone else share the remaining 7%. I don't see Ducati having any distribution channels in Europe that Harley needs or would use. As far as the US HD dealer network is concerned, well we've seen how good they are at integrating the Buell brand. I think that integrating Ducati with its completely different mechanicals and customer culture would be even more difficult.
Harley has made the investment and done the work to develop one of the number one brands (of any type) in the world. Harley would never do anything to potentially damage the brand. Thats one of the reasons (IMHO) that they keep Willie G. as almost the high priest of everything Harley. If he says it looks like a Harley then it does. From a branding perspective I can't see any synergy between HD and Ducati. |
Slaughter
| | Posted on Wednesday, June 13, 2007 - 08:03 pm: |
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I'm with Tommy... what's in it for Harley?
Having the CFO of Ducati saying he'd consider an alliance with Harley "anytime" is like me saying I'd consider sex with Cameron Diaz "anytime." Not a bad thing for me, just not really likely to happen |
Buellshyter
| | Posted on Wednesday, June 13, 2007 - 10:04 pm: |
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Merging means not that H-D would own Ducati. More of a partnership.
If I own 51% of any company I'm calling the shots. What you get for your 49% is a fat paycheck and a corner office with a view. |
46champ
| | Posted on Wednesday, June 13, 2007 - 11:40 pm: |
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Yes and the 49% is what Harley got when they bought Aermacchi. They'll not make that mistake again. |
X1glider
| | Posted on Wednesday, June 13, 2007 - 11:59 pm: |
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I'm with Tommy... what's in it for Harley?
Actually, I am too. There isn't anything in it for HD. Just was playing a what if game. |
Ryker77
| | Posted on Thursday, June 14, 2007 - 08:26 am: |
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Duc - $$$$ customer base
HD - $$$$ customer base
Even the buell is a costly bike compared to others.
For larger dealerships I see no reason not to offer sportbikes of high quality to the customer. But I do see a Duc as competion with the Buell. With Buell having the cost advantage.
So long as the dealerships don't try and sell the 9k Duc next to the 9k Buell next to the 9k Sportster. Try keeping the more $$ line of Ducs to showcase the value of the Buell |
Mndwgz
| | Posted on Thursday, June 14, 2007 - 09:28 am: |
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So long as the dealerships don't try and sell the 9k Duc next to the 9k Buell next to the 9k Sportster. Try keeping the more $$ line of Ducs to showcase the value of the Buell
Marketing at the showroom floor level is a funny thing. When I went shopping last week the local HD dealer had dropped Buells. HD only and have we got a nice V-Rod for you, a real sportbike!
Went up to the next closest HD store, they did have Buells on the web site inventory, Hi, how can we help you babe as soon as you walk through the door greeter calls over the Buell expert. A quick glance around and you obviously have the popular HDs right in front of you, Buells 6 steps to the right with sportsters right across the isle that heads to the motor cloths. Further back Big Dogs next to HD engined Thundercycle choppers next to Fat Boys. I think 10-15 non HD choppers in there selling next to Harlys.
Now 'IF' there were Ducs in there parked across from the Buells instead of the sportsters, it would have taken me more than 5 minutes to buy the XB12R, but I'm sure the XB would have won anyways.
(Message edited by mndwgz on June 14, 2007) |
Ryker77
| | Posted on Thursday, June 14, 2007 - 10:19 am: |
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In Charleston WV HD/Buell shop is done up real nice.
Good selection of 2-5 Buells with other HD. But walk through the clothes, foodcourt, and into a Kawasaki showroom floor!!!
Why not? People buy a new bike based on looks and feel good factor. If the dealership doesn't have the bike that looks good or is what the buyer wants they loose a sale.
And often a potential buyer might walk in to look at a Duc.. and is not aware of Buell. Now the potential buyer has a few bike to pick from and will probably make a purchase from the dealer. |
Barker
| | Posted on Thursday, June 14, 2007 - 03:06 pm: |
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more fuel for the fire, just found this article.
very similar quotes.
This is starting to pop-up all over the web.
http://www.visordown.com/motorcyclenews/view/ducat i_considers_harley_davidson_merge/896.html |
Jackbequick
| | Posted on Thursday, June 14, 2007 - 04:03 pm: |
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"..For larger dealerships I see no reason not to offer sportbikes..."
The views on that must vary as you look at it from the mothership, the dealership, and the consumer level.
I think it has been decided that H-D dealers can elect to carry Buells or not. And many elected not to carry Buells, some did and then dropped them, and I suppose some may have added them later.
But there is a "bad" mind set that can exist at H-D dealers that could or would poison H-D being the U.S. distributor for Ducatis if that is what happened. And the "bad" mind set can be in the minds of the owners of the dealerships and/or their employees.
Maybe Willie G will have to administer spankings to Dudley Perkins and other dudes like that? Get some attitude readjustment going?
Jack |
Rocketman
| | Posted on Thursday, June 14, 2007 - 06:41 pm: |
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What rubbish.
I just realised that the new CEO at Ducati is Gabriele Del Torchio.
Enrico D’Onofrio is the CFO. It's just an opinion. His.
Rocket |
Danny_h__jesternut
| | Posted on Thursday, June 14, 2007 - 07:06 pm: |
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Sinkin ships. Anyone ever pay any atencion to the history of motor companies from Italy? Shakey, Risky. Up, down, sold, repeat. |
Tommy_black_shark
| | Posted on Thursday, June 14, 2007 - 09:20 pm: |
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I hope HD is not thinking of buying Ducati. However, there are some very strange things going on with Ducati stock. On very low volume it has virtually doubled in price since March. This for a company that homes to stop losing money next year. In May Ducati announced that they intended to be de-listed from the NYSE. They made the request formal on June 4. It was expected to be implemented by early September. Today (6/14) at the close of business Ducati changed its stock ticker to DMHYY. This would seem to signify a new bank partner in their selling of ADRs. The net effect of that would be to make it easier for them to sell their stock to American investors. We'll have to watch and see if anything happens tomorrow. They seem to have a market cap of less than $700 mill. Hopefully HD has that much in petty cash. |
Jlnance
| | Posted on Thursday, June 14, 2007 - 10:52 pm: |
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there are some very strange things going on with Ducati stock. On very low volume it has virtually doubled in price since March.
Companies make statements like the one that started this thread in order to raise the stock price. |
Tommy_black_shark
| | Posted on Friday, June 15, 2007 - 08:29 am: |
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Companies make statements like the one that started this thread in order to raise the stock price.
A couple of points, the movement on the stock started long before the FT article. Senior managers in companies face stiff penalties for pumping their stock. In the US the authorities take a dim view of fraud and manipulation and hand out big jail time for violators. The EU is not far behind. Considering the fact that one of the players is a US company and subject to Sarbanes-Oxley I don't think that we are looking at anything like that.
To really understand the situation we would need to know how many stockholders control what portion of Ducati and what they think of their current management team. We know that TPG sold their share to Investindustrial Holdings last year. These folks buy and sell positions and don't care whether its motorcycles or spaghetti that is being made. However we don't know who owns the other 2/3. We'll just have to wait and see.
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Thelumox
| | Posted on Friday, June 15, 2007 - 09:32 am: |
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the new Ducati dealership in Daytona also sells arlen ness choppers. (or, maybe i should say the arlen ness chopper dealership sells Ducati). very strange showroom.
(Message edited by thelumox on June 15, 2007) |
Anonymous
| | Posted on Friday, June 15, 2007 - 09:09 pm: |
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Classic stock price raising ploy used overseas where there is less protection for investors. The head of KTM did this a number of years ago, based on a short visit with H-D. "H-D about to buy KTM" squalled the press, S. Pirer, CEO of KTM confirmed it. The stock went up, the deal never went through, then Polaris got excited that they might get one up on H-D, dumped some mooney in, then woke up and quickly bailed out of anything further before they got really screwed. |
Rocketman
| | Posted on Saturday, June 16, 2007 - 06:34 am: |
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Did it ever occur to you that KTM stock went up because they're bringing great bikes to market that are selling like hot cakes?
Can you prove that your comments made KTM stock rise? Of course you can't. That's just conjecture on your part.
Rocket |
Jimidan
| | Posted on Saturday, June 16, 2007 - 07:43 am: |
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The KTM/Polaris venture was a much better fit than a KTM/Harley merger. After watching how HD has treated Buell ever since they bought the company, I can't see ANY merger with another bike company being a good one for the other brand. Buell is HD's red-headed step child, and I don't see it changing for the better. It just keeps getting worse with more dealerships dropping the brand...creating some very ill feelings with recent Buell customers, BTW. They feel very abandoned...which is never a good thing for repeat business.
I have said it once and I will say it again, Buells should be marketed in sportbike stores with other brands...Harley stores have always been the worst place to try to sell Buells because of a myriad of reasons.
It is interesting to read about this reported Ducati merge on the Ducati sites...they are nearly totally against it as they think it would ruin their brand...and especially the racing aspect. I am inclined to agree with them as I have oft complained about how HD has screwed with Buell racing. |
M2nc
| | Posted on Saturday, June 16, 2007 - 08:59 am: |
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After watching how HD has treated Buell ever since they bought the company
Do you think the way we perceive how HD treats Buell is due to the way we as customers are treated in HD dealerships? If you look at what HD has done with Buell over the last eight years turning a specialty bike company that struggled with quality and profit, into a profitable manufacturer that is putting out a competitively priced product with competitive quality. They have invested in the manufacturing process and from the press you read HD is trying to use Buell to expand into parts of the world and market that traditional cruisers do not fit. Now Buell is going into the dirt bike market and HD had to sign off on it. So I am not sure that HD corporate is treating Buell badly. The mistreatment in my opinion comes from the dealerships. So I agree with your comment that Buells would sell better if you move them to dealerships that sell other brands. |
Jon
| | Posted on Saturday, June 16, 2007 - 05:30 pm: |
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Harley does not need Ducati. They have a world class unit that does "that". |
Jimidan
| | Posted on Tuesday, June 19, 2007 - 12:13 am: |
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Harley Davidson and its dealerships are one in the same. Of course, you have to include them when you speak of corporate HD. I think that Buell came into the "black" financially last year in spite of HD's marketing strategy rather than because of it. What kind of marketing strategy allows a huge percentage of its franchise dealerships to opt out of selling one of its main products?
That just plain sucks. It should be an all or nothing proposition. |
Crusty
| | Posted on Tuesday, June 19, 2007 - 06:52 am: |
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What kind of marketing strategy allows a huge percentage of its franchise dealerships to opt out of selling one of its main products?
T-shirts? |
Tommy_black_shark
| | Posted on Tuesday, June 19, 2007 - 07:42 am: |
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Harley Davidson and its dealerships are one in the same. Of course, you have to include them when you speak of corporate HD. I think that Buell came into the "black" financially last year in spite of HD's marketing strategy rather than because of it. What kind of marketing strategy allows a huge percentage of its franchise dealerships to opt out of selling one of its main products?
That just plain sucks. It should be an all or nothing proposition.
I am not aware of any corporate owned HD stores. The dealers are all independent businesses. The control HOG has over these dealers is specifically detailed in their various contracts, and subject to individual state franchise laws. If the dealer upholds his end of the contract there is little that can be done to force him to sell Buell. Correct that, there is nothing that can be done to force him to sell Buell, there is little that can be done to force him to stock Buell.
I disagree that our beloved Buells are a main product of HD. Our local Buell group refers to itself as the 3% ers. Referencing that 12,000 Buells is approximately 3% of 400,000 Harleys. Fair enough, but I'm pretty sure that with Buell being on the short end of the stick in accessory and clothing sales the overall impact is probably more like half that. Would Harley force a dealer in the tropics to stock cold weather gear?
Despite the cold shoulders many have reported receiving at HD dealerships, there is really only one reason a dealer would drop the Buell line. It was not making as much money as an alternative. The fault for why Buells didn't sell or weren't making much money has many owners. Clearly Harley's marketing and positioning of the brand is part of the problem. Unfortunately, I think that it is behind build quality, reliability and negative media perception as factors.
I would love to see Buell positioned as THE hot rod Harley. The bike for riders that want American speed. That would be a very uphill climb. Harley and the dealers have far too big a stake in the Screaming Eagle engine upgrades and other goodies to let anything else be center stage as a Harley hot rod. What I'd really like to see would be a Buell XLCH. |
Buellshyter
| | Posted on Tuesday, June 19, 2007 - 12:14 pm: |
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If the dealer upholds his end of the contract there is little that can be done to force him to sell Buell. Correct that, there is nothing that can be done to force him to sell Buell, there is little that can be done to force him to stock Buell.
And just how can you make such a claim? Have you read a dealer contract? Contracts from franchise to franchise vary wildly in business - they are not uniform in their requirements. A well written contract places the power and authority with the corporation not the franchisees. |
Tommy_black_shark
| | Posted on Tuesday, June 19, 2007 - 02:09 pm: |
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And just how can you make such a claim? Have you read a dealer contract?
Well as a matter of fact I have. As a motorcycle dealer I had dealer contracts with several manufacturers.
If you re-read my post, you will see I explicitly left an option for the manufacturer to force the dealer to STOCK a product. Since selling one would involve a third party (customer), there is no practical contractual way to force a dealer to SELL anything. I have seen many contracts that require minimum stocking levels.
A well written contract places the power and authority with the corporation not the franchisees
How many motorcycle dealer agreements have you negotiated? Between my own business, and acting as a consultant I have participated in more than a dozen. While there is normally a stronger party in a negotiation, it is not always the manufacturer, and is often the dealer. Add to this franchise case law (which does vary by state) which is almost 100% weighted in favor of the dealer and you have the basis for a reasonable contract. |
Midnightrider
| | Posted on Tuesday, June 19, 2007 - 02:33 pm: |
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The dealer I bought my Uly at sells HD, Buell, BMW, Ducati, and Yamaha. With probably less than 1/3 the floor space of a typical HD Dealer. I went in there specifically to buy a Uly but if I was still in the shopping/research mode - it would have been an interesting day |
Jimidan
| | Posted on Wednesday, June 20, 2007 - 01:30 pm: |
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Regardless of whether there are any franchises that are corporate owned (I never said there was), the decision to keep Buell at arms length as a wholly owned subsidiary was made at the top levels when they bought-out Erik. This was done for a REASON.
The contracts with the franchises are written by corporate attorneys who could require that Buells be stocked AND so many of them sold, as a condition of keeping the franchise in good stead. I am sure that an underachieving HD dealership could be in jeopardy if they fail to sell a certain number of hogs. Yet, they choose not to require the sale of Buells...for a REASON.
If Buells are "not a main product of HD" (I do not agree), then there is a REASON that HD has not granted them this status. I would contend that many of the dealerships and some in corporate have a vested interest in seeing Buell fail, thus my comment on how Buell is in the black in spite of HD's marketing strategy, rather than because if it.
To bring this back to the thread though, this type of arrangement would be the death knell for Ducati. Ducati does not need to be put under "red-headed step-child" status.
jimidan |
Jimidan
| | Posted on Wednesday, June 20, 2007 - 01:34 pm: |
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Slaughter sez:
Having the CFO of Ducati saying he'd consider an alliance with Harley "anytime" is like me saying I'd consider sex with Cameron Diaz "anytime." Not a bad thing for me, just not really likely to happen
Pretty funny, but I think that it would be more like you saying that you would have sex with Cameron Diaz "anytime", and you know she is HIV positive. |
Tommy_black_shark
| | Posted on Wednesday, June 20, 2007 - 04:58 pm: |
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If Buells are "not a main product of HD" (I do not agree), then there is a REASON that HD has not granted them this status. I would contend that many of the dealerships and some in corporate have a vested interest in seeing Buell fail, thus my comment on how Buell is in the black in spite of HD's marketing strategy, rather than because if it.
Wow! What an accusation. As a HOG stockholder I am outraged that someone or some group within HD corporate has the influence and desire to have Buell fail. Can you offer any evidence of this, or is this merely a conspiracy theory? How about Erik? As a senior officer of the corporation he should have this same information. Does his silence mean he is part of the conspiracy?
the decision to keep Buell at arms length as a wholly owned subsidiary was made at the top levels when they bought-out Erik.
What evidence is there to suggest to you that Buell is at arms length to HD? Buell is wrapped into the HOG annual report, only one tax line is reported. I haven't seen any indication that HD transfers components, technology and services to Buell at levels that are the same as if they were independent of each other and not part of the same corporate structure.
The contracts with the franchises are written by corporate attorneys who could require that Buells be stocked AND so many of them sold, as a condition of keeping the franchise in good stead. I am sure that an underachieving HD dealership could be in jeopardy if they fail to sell a certain number of hogs. Yet, they choose not to require the sale of Buells...for a REASON.
In my experience the manufacturer will present a pro-forma dealer agreement. However, this is a starting point for negotiations not a take it or leave it proposition. The bigger the potential dealership, the more leverage they will have. If the dealer agreement presents a "collar" that puts their investment at risk they are likely to take their several million dollars and invest in a McDonalds or something else.
If Buells are "not a main product of HD" (I do not agree),
I think Buell represents "strategic" products for Harley Davidson in the sense that their continued development will offer the opportunity to increase Harley share in overseas markets, and in the sense that Buell is able to do some amazing things emissions wise with an air-cooled, push rod engine which may help the main line at some point. However, if Buell generates less revenue than motorclothes and knick-knacks and is a "main product" of the company, what is not a main product?
I see many examples of dealers who have neglected or abandoned the brand. I haven't seen the same from the corporation. The XB series is a newer overhaul of a product line than the Harley Twin Cam bikes. Last years Uly, this years TT is right in line percentage wise with the new model churn of the Harley branded line. At the dealer level there has been a double whammy holding Buell sales back: It is undeniable that past reliability and quality problems created problems for the dealer (and their staff) that will not soon be forgotten. Also, for most of the period of time that Buell has been affiliated with Harley, selling Harleys has been a piece of cake. The main problem has been getting enough Harleys to sell. It is human nature to take the path of least resistance. Do you work hard to sell a bike that is tough to sell, or do you put the emphasis on the bike that can be sold at more than MSRP?
We agree on one thing, if Harley was foolish enough to buy Ducati it would be the end of Ducati. At least until its next reincarnation. |
Swordsman
| | Posted on Thursday, June 21, 2007 - 08:56 am: |
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I'm admittedly ignorant on such things, but I'd almost like to see the merger happen out of sheer curiosity. I wonder if Buell and Ducati would end up working together to create a super bad-ass bike? And maybe Buell and Ducati could go in together with their own showrooms... that'd be cool.
~SM |
Jimidan
| | Posted on Thursday, June 21, 2007 - 10:41 am: |
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Ducati already HAS bad-assed bikes...for that matter, so does Buell. Although the thought of Ducatis and Buells sharing a dealership does have some merit. It would be much better than trying to sell Buells in a HD dealership (which doesn't want to Buells on the floor anyway).
jimidan |
Jimidan
| | Posted on Thursday, June 21, 2007 - 11:33 am: |
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Wow! What an accusation. As a HOG stockholder I am outraged that someone or some group within HD corporate has the influence and desire to have Buell fail. Can you offer any evidence of this, or is this merely a conspiracy theory? How about Erik? As a senior officer of the corporation he should have this same information. Does his silence mean he is part of the conspiracy?
Actually, we agree on a lot of things, but we are coming to different conclusions about what those things mean. As a stockholder, you should be incensed. I don't know a Buell owner who has walked into a HD dealership who has not been made to feel like a second class citizen in about 5 minutes flat. Erik himself has acknowledged this "problem" to me personally (and said they were "working" on it). Of course, I can't "prove" that there are those on the inside who wish to see Buell fail, but I am just drawing logical conclusions based on the end results...kinda like this one...I forgot who said it though :
"I would love to see Buell positioned as THE hot rod Harley. The bike for riders that want American speed. That would be a very uphill climb. Harley and the dealers have far too big a stake in the Screaming Eagle engine upgrades and other goodies to let anything else be center stage as a Harley hot rod. What I'd really like to see would be a Buell XLCH."
What evidence is there to suggest to you that Buell is at arms length to HD?
Because they are at arms length now...just a subsidiary. If HD really had wanted to integrate Buell into the company, they wouldn't have designated it into the red-headed step-child status (being sold at just a dwindling handful of its stores is a pretty good indication). HD would have made a total commitment and brought it into their product line, to be sold at all stores just like a Sportster, and certainly not in direct competition with "the Screaming Eagle engine upgrades and other goodies".
In my experience the manufacturer will present a pro-forma dealer agreement. However, this is a starting point for negotiations not a take it or leave it proposition. The bigger the potential dealership, the more leverage they will have. If the dealer agreement presents a "collar" that puts their investment at risk they are likely to take their several million dollars and invest in a McDonalds or something else.
You are making my point for me...thanks. If marketing Buells out of a HD store is perceived as a "collar", as you say, and the investor sees that it would put that investment "at risk", then they should take their money and invest in a McDonalds then...where they will HAVE to sell Big Macs regardless of the fat content.
HD franchises are a gold mine...there is probably a waiting list to get one. Where there is already a store in a town, you can't put another one in there for any amount of money. HD could write into the contract that the franchise would offer and sell ALL of its motorcycles if it wanted to...but it doesn't. You can try and paint this anyway you like, but it is like putting lipstick on a corpse...
My local HD store still has Buells, more because the owner has an S2 himself, than because they are making so much money on them. I was told by the dealer in Indy that they purchase a lot of our local dealers bikes. I can still remember the day I walked in my dealership and the sales associate told me, "I don't know nuthin' about no Buells, and I don't want to know nuthin' about 'em". Then I remember going into Daytona HD at Bikeweek and telling the Service Manager that I had a Buell...to which he snapped, "That's YOUR problem!", to the guffaws of all around. Apparently, that is a well rehearsed line around there. That pretty much is still the problem...but Erik said he is "working on it".
jimidan |
Wtcardr
| | Posted on Thursday, June 21, 2007 - 11:39 am: |
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By the way, HOG is Harley Owner's Group, Not Harley-Davidson |
Bigdaddy
| | Posted on Thursday, June 21, 2007 - 12:28 pm: |
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BTW,
HARLEY DAVIDSON (NYSE:HOG)
G2 |
Tommy_black_shark
| | Posted on Thursday, June 21, 2007 - 01:09 pm: |
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I don't know a Buell owner who has walked into a HD dealership who has not been made to feel like a second class citizen in about 5 minutes flat.
I have never been made to feel like a 2nd class citizen in any HD dealership because I have a Buell. Stone Mountain HD and Earl Smalls are the two I frequent. The only dealer I have ever heard bad things about Buells (personally) from is Killer Creek in Roswell, GA. But that was when I wasn't a Buell owner and they haven't got a very good reputation for Harley's either.
"I would love to see Buell positioned as THE hot rod Harley. The bike for riders that want American speed. That would be a very uphill climb. Harley and the dealers have far too big a stake in the Screaming Eagle engine upgrades and other goodies to let anything else be center stage as a Harley hot rod. What I'd really like to see would be a Buell XLCH."
Thats my quote, but it is a very, very long way from making a business decision not to take a chance of potentially undercutting a successful line of business (SE) to having a vested interest in the failure of another line of business (Buell).
In my experience the manufacturer will present a pro-forma dealer agreement. However, this is a starting point for negotiations not a take it or leave it proposition. The bigger the potential dealership, the more leverage they will have. If the dealer agreement presents a "collar" that puts their investment at risk they are likely to take their several million dollars and invest in a McDonalds or something else.
You are making my point for me...thanks. If marketing Buells out of a HD store is perceived as a "collar", as you say, and the investor sees that it would put that investment "at risk", then they should take their money and invest in a McDonalds then...where they will HAVE to sell Big Macs regardless of the fat content.
In contract terms a "collar" is usually a description of a "take or pay" arrangement. The big four learned much to their chagrin that that kind of dealer agreement was not only impractical but difficult to enforce. A dealer also can have a tough time with secondary financing and a line of credit if the bank thinks their dealer agreement is too one sided. I have seen (and signed) personal guarantees for obligations that should be corporate.
HD franchises are a gold mine...there is probably a waiting list to get one. Where there is already a store in a town, you can't put another one in there for any amount of money. HD could write into the contract that the franchise would offer and sell ALL of its motorcycles if it wanted to...but it doesn't. You can try and paint this anyway you like, but it is like putting lipstick on a corpse...
I can only restate that based on my experience in negotiating motorcycle dealer agreements that there is a considerable amount of negotiation that takes place. The company is in a particularly weak position with an existing store and if the dealer is located in a state with aggressive franchisee protection. You may recall a few years ago Harley unsuccessfully trying to prevent dealers from stocking other than Harley parts and chemicals.
What evidence is there to suggest to you that Buell is at arms length to HD?
Because they are at arms length now...just a subsidiary. If HD really had wanted to integrate Buell into the company, they wouldn't have designated it into the red-headed step-child status
Being at "arms length" has a specific and well defined meaning in a business situation. There is no reason for Buell and Harley to be at arms length. If you look at the HOG annual report, the motorcycle operations are consolidated, and the financial services are segregated. However, even at that motorcycle and financial are consolidated at the bottom line. Its possible (but impossible to tell from public info) that Harley "sells" Buell engines at arms length for internal scorecarding.
I think we agree that we'd like to see the brand strengthened. The way to accomplish that is not by bringing an Italian company into the mix. If they have difficulty coordinating activities between Milwaukee and East Troy, think of the problems between Milwaukee and Bologna.
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Tommy_black_shark
| | Posted on Thursday, June 21, 2007 - 01:12 pm: |
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By the way, HOG is Harley Owner's Group, Not Harley-Davidson
HOG is Harley's new ticker symbol as of last August. I like it a lot better than I liked HDI. |
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