Warren Buffet invests $300m in Harley-Davidson
Harley-Davidson has announced that Warren Buffet's Berkshire Hathaway group will invest $300 million in the motorcycle maker by through a purchasee of senior unsecured notes that will mature in 2014. These funds match a similar investment by Davis Selected Advisers, L.P., which is already the largest holder of company stock. Harley-Davidson will use the money to bolster its lending services, hopefully making it easier for the trouble motorcycle maker to lend cash to consumers. Berkshire Hathaway will reportedly receive a hefty 15% annual interest rate on the investment.The markets have responded to the news rather favorably, with H-D shares hitting $13.56 in trading yesterday afternoon – a 14% increase from where they started the day. Just about a week ago, H-D announced a plan to shed 10% of its workforce. This move marks the first time that Buffet has ever invested in the company.
[Source: Bloomberg]
Reader Comments (Page 1 of 2)
Polly Prissy Pants 9:16AM (2/04/2009)
Hmmm, not seeing this one. H-D is a dead company walking but I guess if Berkshire Hathaway thinks they can clear 15% then it's worth the $300 million gamble.
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The Nethead here 3:28PM (3/02/2009)
Au contraire, PPP! Harley owns Italy's MV Agusta motorcycles, which produces some of the most technically advanced large (the MV Agusta line) and small (the Cagiva line) motorcyles on planet Earth. The Italian technology plus the Harley mystique and fanatical customer base could possibly mean that Harleys may eventually be the only street vehicles produced in the USA by an American company. The fate of the (not so) Big Three will validate or invalidate that claim.
Waaaayyy back in the early 'Seventies, wags were claiming Harley was finished at that time, too. Harley went on the gain 52 percent of the US street bike market despite the high-quality competition from Japan and Europe. The Nethead here has never owned a Harley (I've had a Honda CB750 Four since October of 1971), but I wish those mavericks (Oops, old man/Ms. Airhead terminology--pardonez moi!) all the luck in the world!
Epyx 2:13PM (2/04/2009)
Harley said Jan. 23 fourth-quarter profit fell 58 percent due to weaker demand for its motorcycles. The net income of $77.8 million, or 34 cents a share, was the lowest quarterly profit in nine years.
Yes they lost compared to historical numbers but they are still a profitable company.
halowars312 11:07PM (2/04/2009)
This is very unlike Warren Buffet
cooljobsalways
http://tinyurl.com/7uj5ay
LloydChiro 9:36AM (2/04/2009)
HD isn't dead. They have massive amounts of brand equity. They're not dead especially when you consider how low tech their products have been, and how much they keep on selling.
They could do a reverse evolution of their lineup and gradually end up with a bicycle frame and a panhead motor and still sell to the die hards.
Harley rules. All you have to do is take a drive around rural California to see how many people there are solely dedicated to this brand.
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Andrew 9:52AM (2/04/2009)
Wow 15% is really high. They must have needed the cash really bad
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Cameron 9:56AM (2/04/2009)
Hate to say it, but even as an owner & a fan I would have to agree with Polly Prissy Pants on this one. The "Harley" wave ended/peaked 5 years ago. Look at the custom or large chopper business as a whole, not very promising.
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Epyx 1:04PM (2/04/2009)
No offense Cameron but I am pretty sure the richest man in the world has a better understanding of the fate of HD than you do. Of course HD sales are down. It is a luxury product that no one needs. The want has not changed. There are still millions of consumers that "want" the product but simply cant manage it right now or that will make do with their current model. Even those that can afford it are holding off just to see how the economy improves. Buffet knows this. The stock is depressed, exactly why Buffet, the financial genius, decided to invest.
EU_reader 9:59AM (2/04/2009)
Normally i would agree with you, LloydChiro
And yes, the value of the name and brand 'harley davidson' is enormous, as is the lifestyle merchandising! But i'm in the market for a cruiser bike this year, and although i've always been a longtime HD fan (never owned one, i'm only 25) it's very unlikely that my cruiser will be a HD.
It's very weird, i used to absolutely love their 'design' (*cough*), the pedigree, the lineage and history. I've got the books, someone in my family owns a '42 liberator... No other company has that same 'lifestyle', 'brand recognition' image and has appealed to me more than HD.
But now, considering their line-up, there are only three harley's i would consider buying, namely a v-rod, fat bob (dyna) and maybe a rocker (C). That's it. :s All the rest is too heavy, too old, and much too expensive considering the competition out there.
Since i've come across victory and some recent japanese bikes that just hit the mark without being hugely overpriced, my appreciation for harley has hit rock bottom.
Maybe growing up made me realise that 'heritage' is no guarantee for the present. Their bikes look absolutely dated compared to victory's bike. Victory really has a modern cruiser style for the 21 century. HD is still a beefed up panhead from the '60. Performance, reliability, clean and modern design, it's all there with victory.
In short, i'm no longer buying that 'lifestyle' crap, the marketing is all about hot air, no substance. I kinda feel like a fool for buying into it.
They seriously need to consider a new engine design with more power, maybe even watercooled. Appeal to a younger audience, because all your babyboomers already have one. Come on harley, leed the pack, like they've done with the V-Rod. That bike is spot on for all the right reasons!!
My top 3 is:
-victory vegas/kingpin
-yamaha Raider S (13500 dollar for god sake... o_0 )
-fat bob/v-rod
In that order. They need to do something about dealer attitude (arrogance), quality and appeal of their bikes, and clean up some of that untidy and dated design of theirs. Bolting a crude v-twin in an iron welded tube frame no lunger does it for me...
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Epyx 1:52PM (2/04/2009)
Total Cost of Ownership is generally less with a HD than other manufactures. Unless you plan on never selling your bike the extremely high resale value of HD is important. Only the V-rod sees any significant depreciation, despite being the tech marvel of the lineup.
john riley 10:48AM (2/04/2009)
The thing that gave them so many sales in recent years was that they became a life stage vehicle for boomers. Once they move on, the numbers will never come back, even if the hard cores remain faithful. Maybe the boomers will still buy them when the economy comes back and Buffet can get his money out, but it is not a bet I would take.
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Epyx 1:07PM (2/04/2009)
So you are basically saying that you are smarter than Warren Buffet when it comes to investing?
jim 10:50AM (2/04/2009)
HD is significant short term trouble. The cruiser market in general has peaked and EU_reader is not alone in cruiser buyers seeking out other brands. Used HD are also a big problem for the company, too many bikes for sale, with too few miles. Why would a buyer interested in HD buy a new bike, even if discounted, when they can buy a 2-3 yo one with less than 5K on the odo for 50-60% less that is virtually indistinguishable from a new one?
The whole MC industry shares this low mileage used bike problem, but for HD it is particularly a problem. The other day, a MC dealer sales manager of a different brand told me that 2 of the local HD franchises are not taking trades or are only doing it selectively.
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Epyx 1:19PM (2/04/2009)
"Why would a buyer interested in HD buy a new bike, even if discounted, when they can buy a 2-3 yo one with less than 5K on the odo for 50-60% less that is virtually indistinguishable from a new one?"
1. Because you cant get a used HD with for 50-60% of the MSRP. The cost difference is not that significant. These are not Hondas.
2. Because HD buyers generally want to make their bike uniquely theirs by customizing it.
3. Because HD does a very good job of making each model year significant with new colors and subtle changes, that anyone in the market for a HD actually cares about.
4. Because it is difficult to get financing for a private party deal, especially now. Much easier to finance form a dealer.
5. They want a warranty.
6. The same reason people buy new cars when the off lease car is 20% less expensive. People like new stuff.
Epyx 1:22PM (2/04/2009)
"The other day, a MC dealer sales manager of a different brand told me that 2 of the local HD franchises are not taking trades or are only doing it selectively."
Could this not also mean that the new bikes are selling faster then the used inventory?
Also, dont you think that is a self-serving statement from a MC sales-person? Maybe no trades of MC and by selective they mean only HD?
Epyx 1:46PM (2/04/2009)
Can you please show me a link to all these 50-60% off 2 year old HDs? I cant find any. 2003 HD Fatboys are still $13-$16K. What other cruiser holds value like that?
MajorGeek 11:19AM (2/04/2009)
Doubt it, and wonder how many of you ride American bikes or even care? I own, I ride. Harley will be fine, heres why. The custom bike thing was, and always is, a joke. Most of the custom bikes are unrideable. Things are done to make the bike LOOK good first, rideability sometimes is not even second. For the "thrill" of owning one of these useless thngs you can pay 60k or more. Harely starts to look good, if your after American iron, at under 20k and maybe 5-10k in accessories. Their target audience has almost always been the 40+ crowd, like myself, people who tend to have money.
In otherwords, as the custom motorcycle industry finally is dying a well deserved death, Harely will be there to catch people looking for an American V-Twin. The same people are riding Harleys that were 20 years ago and will be 20 more years from now. If they get new customers with their new custom looking bikes, improved sportster and Buell, they should ride out of this nicely.
Now, we wait.
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EU_reader 1:19PM (2/04/2009)
"Doubt it, and wonder how many of you ride American bikes or even care?"
And how is that important? You can have opinions about cruiser bikes without resorting to pathetic patriotic reasoning. That's what HD does best, appealing to (and abusing) that deep rooted patriotic feeling, which is not the least bit relevant when motoring is concerned. It's even an insult to true patriotism, since biking is only riding around on a piece of metal.
The "you don't ride one so your meaning is insignificant" is the worst type of argument there is. If so, you can just close down autoblog.com, since not a lot of people own porsches, ferrari's, etc...
Furthermore, victory is just as 'american' as Harley Davidson, probably even more so. HD is producing lots of parts in Asia, whereas Victory doesn't. No, you confuse heritage with nationalism. If a bike is designed, produced and put together by Americans, then i would call that an American bike, even if their 'history' only spans 10 years.
I understand the american cruiser concept and spirit, even though I'm European.
But i guess that also makes me ignorant about American bikes in your eyes. Nevertheless, i respect and understand the HD brand marketing. I know all their bikes, all the engines, worked on a '42 liberator, i know my HD history.
Which makes me not buying a modern HD all the more significant.
You talk about customs. That's totally not the point here. Customs have always been a niche market for people with money to spare. I like watching American Customs on television, because the Teutuls look like a nice and warm family. But i thouroughly dislike almost every bike they make. Even if they gave me one, i wouldn't accept riding it. I'm all for rational choices and superior ride quality, not 400mm wide rear tires and bikes more than 2.5m long. They look absolutely ridiculous.
"In otherwords, as the custom motorcycle industry finally is dying a well deserved death, Harely will be there to catch people looking for an American V-Twin."
You make it sound like everyone wants a custom bike, can't afford one and that only HD will be there to jump in when the custom scene dies. Wrong. Lots of brands are there fighting for your attention and approval, for people who can put aside the HD brainwashing.
Customs will always be made, since you will always see people who do not know where to spend their money first. But that marketshare is so small, it's got nothing to do with HD, Victory, yamaha ... or whatever.
"The same people are riding Harleys that were 20 years ago and will be 20 more years from now. "
True, but that hardcore crew will perhaps only buy one more Harley Davidson in 20 years. Heck, maybe they'll even drive the one they have for 20 more years.
Besides, if i'm gonna spend 15-20k dollars, i would want the best there is on the market, and not have my judgement clouded by emotional reasoning. Choosing is all the fun in buying!
I refer to the vegas (not the jackpot!) and the Raider S. I would not consider those to be custom bikes. The ride is brilliant and not compromised by big tires, long rakes and heavy 'barn-engineering'. Alu frames, good shocks, good brakes, light bikes combined with a modern and sleek take on contemporary cruising (not 'custom'!!) is really the future for classic V-twin cruising.
If you want a new inflow of young buyers, you need other kind of bikes, it's that simple. Come on, HD has 2 valves per cylinder, what year is this? 1980?
Having a bike watercooled is also a nice treat on a warm summer day while standing still at the traffic lights.
Don't get me wrong, i'll always admire HD's, but now they're just lagging far behind.
About prices: You could argue that a porsche is also expensive, but a porsche delivers on that price and offers premium quality! HD makes you pay a premium price for 1990's technology. No thanks. I wouldn't care about the price, if they could deliver more added value than just some badge value and history. And i'm sure a lot of people feel the same way.
I'm a rational person, i'd like to shell out my euros for tangible quality and technology. Get value for my cash. As soon as Harley davidson is ready to move on, and show me what their vision on the future is, i'd be right back in the HD camp. With their current line-up, they just don't cut it. But i guess that's totally different in the USA, where they like chrome, bling and a lot of noise.
IOMTT 10:44PM (2/04/2009)
I have owned and ridden a Harley, OK but nothing that great. I do hope they do well, because I would hate to see Buell go down...I have owned and ridden Buells and I actually would consider buying another one...especially the 1125. Too bad the HD dealers I have been to lately pretty much ignore you when you hover around the Buells ( with out one other customer in the dealership in one instance )...bunch of tools!
Epyx 1:35PM (2/04/2009)
"But i guess that's totally different in the USA, where they like chrome, bling and a lot of noise."
Exactly - you dont really get the appeal of HD. The V-Rod is there for those like you. Nothing wrong with that but that is not really the HD formula. HD riders dont really care about performance against other brands- just performance against other HDs. Harley is a society all in itself. It is a sub-culture that the bike is only one part of. The bikes are not the most tech advanced, but it does not matter, that is not the point. With a HD you are buying into something you CAN not get with any other bike manufacturer except maybe Indian or Triumph. HD is way more than just bikes. The bike is probably only 50% of the equation.
If none of that is important to you that is fine. It is probably not the same in Europe anyway. But HD is a status symbol, a piece of freedom, a historical icon. The intangibles are what make a HD not the performance specs. HD makes very high quality bikes with tremendous fit and finish that is what is important to the buyers.
When have over 1 million people assembled for a Honda gathering? Harley owners do it a few times a year. Yes, you can go to Daytona on a MC but its not the same.
To each their own, but HD does not need to change to suit you. There have always been those out there like you that just dont get "it" about HD. It not the root of the current slowdown, the economy is the problem, not marketing, products, or anything else.
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