Harley-Davidson Announces “Rewire” Progress

Walter White / July 11,2020
Harley-Davidson Announces “Rewire” Progress

It is a tough year for motorcycle manufacturers.  April and May’s sales of bikes were dismal but the end of the doldrums appears to be approaching.  Some manufacturers have issued press releases indicating that sales are looking good for the rest of 2020.

Somewhat differently, a Harley-Davidson (Harley) press release touts not its present sales, but its plans to rejuvenate itself through a plan called “The Rewire”.  The plan is the beginning of Harley’s first steps to return the company to its former glory.

The Rewire and significant changes

The MoCo is making very significant changes.  Much happened the in early part of this year.   CEO Matt Levatich left the company Jochen Zeitz has taken the reins.  Now, John Olin, Harley’s CFO is out and is being replaced by current VP and Treasurer, Darrel Thomas until a successor is appointed.

Harley-Davidson Announces “Rewire” Progress

Jochen Zeitz is the man behind The Rewire plan.  Photo credit: Harley-Davidson

While the management shakeup is significant, bigger changes are being made.  Clearly, some big changes are necessary and the Rewire is implementing them.

Recently, Harley announced more than 700 job cuts.  That’s a very significant number of employees considering Harley’s dwindling employee base.  In 2008, Harley had approximately 9,300 employees.  But at the end of 2019, its employee count was down to approximately 5,000.  With the recent news the additional layoffs, Harley will employ somewhere around 4,300 or about 46% of its 2008 heyday workforce.

“The Rewire”

All up, the Rewire is focused on the following elements:

  • Enhance core strengths and better balance expansion into new spaces
  • Prioritize the markets that matter
  • Reset product launches and product line up for simplicity and maximum impact
  • Build the Parts & Accessories and General Merchandise businesses to full potential
  • Adjust and align the organizational structure, cost structure, and operating model to reduce complexity and drive efficiency to set Harley-Davidson up for stability and success

In addition, the Rewire’s changes include all areas of its business globally, from commercial operations to corporate functions.

Harley-Davidson Announces “Rewire” Progress

The Pan America will be Harley’s first entry into the “adventure” bike market.  Photo credit: EICMA

However, it seems that the last bullet of their plan is their first priority at the moment.  With the announcement, Jochen Zeitz is quoted as saying:

“The Rewire is progressing very well and substantial work is being done to eliminate complexity and get Harley-Davidson on a path to winning. Our new operating model is simpler, more focused and enables faster decisions across the entire company.

“We’ve taken a hard look at our entire set up, our spending, and how work is getting done, to align our operating model, structure and processes. We are building a strong foundation to drive a high-performance organization in the future.”

Zeitz is clearly making cost-cutting moves and for a company that is hurting for revenue, that can be a good thing.  Reducing complexity to make a company more agile and responsive can also be of significant benefit.

Rewire Deeper dive

But let’s take a look at Harley’s other plans.  Some of the other bullets are subtly coded messages about how the business will operate in the future.  Let’s take a quick look at those.

  • Enhance core strengths and better balance expansion into new spaces

The message here is to go back to basics and concentrate on those bikes whose sales help support the company.  But the second message, “better balance expansion into new spaces” seems to point to a pullback on new models like the Livewire and other electric mobility.

Priorities

  • Prioritize the markets that matter

“Let’s concentrate on the places where we’re selling bikes at a good clip” seems to be the message here.  Harley’s previous international expansion will likely be slower.

Delay

  • Reset product launches and product line up for simplicity and maximum impact

“Less is more.”  That seems to be the message here.  Harley will decrease production quantities and the number of models in the hope that fewer machines will support and drive pricing higher.  With higher prices, comes increased profitability.   Zeitz has been quite clear that going forward, he wants Harley to be an “exclusive” brand.

Harley-Davidson Announces “Rewire” Progress

Harley’s Bronx streetfighter will be its first attempt at a “smaller” streetfighter model.  Photo credit: Harley-Davidson

He is also delaying the rollout of some of Harley’s significantly anticipated models.  The Pan America adventure bike and the smaller Bronx urban streetfighter will not make an appearance before 2021.

Build PG&A

  • Build the Parts & Accessories and General Merchandise (PG&A) businesses to full potential

This is an interesting bullet.  Harley’s PG&A has been one of its most profitable areas.  Its PG&A profit margin is far and above higher than the profit percentage from its bikes.  Whether this means PG&A will become more expensive or the PG&A line will be expanded is not stated.  Most likely, it will be a little of both.  So if you think you’ve seen a lot of Harley branded gear and accessories, you likely haven’t seen anything yet.

Harley-Davidson Announces “Rewire” Progress

Expect to see more jackets, t-shirts, boots, and accessories as a result of the Rewire.  Photo credit: Ebay

Comprehensive summary coming

Harley says that it will release a “comprehensive summary” of its Rewire actions and financial impacts with it releases its Q2 results later this month.  That information will hopefully provide a more comprehensive roadmap showing where Harley is now and where it plans to go.

Zeitz is not a man to sit on his hands and he’s proving that he is willing to make significant changes.   It will be interesting to see what else Zeitz has up his sleeve for the MoCo going forward.

What do you think of Zeitz’s plan so far?  Let us know in the comments below.

Author: 
Category: