Brucelee
07-14-2008, 16:37
In Deal for Italian Bike Company,
Harley Seeks to Broaden Its Base
By JONATHAN WELSH
July 11, 2008
In a move to gain access to a broader, growing customer base in Europe and the U.S., motorcycle maker Harley-Davidson Inc. agreed to purchase MV Agusta Group, an Italian motorcycle company, for about $109 million.
Harley, based in Milwaukee, Wisc., builds large, often ornate motorcycles called heavyweight cruisers. The bikes are typically driven slowly on short jaunts around the suburbs, although some models are designed for long-distance touring. MV Agusta's models are light, fast and resemble grand prix racers that have been modified for use on the street. Such a stark contrast between the companies' products makes the planned combination seem unlikely.
But the deal is attractive because it would give Harley-Davidson a line of desirable motorcycles that appeal to serious sport-riders, Europeans in particular, who are unlikely to have ever considered buying a Harley. Attracting this new, younger customer is becoming increasingly critical for Harley as its traditional baby boomer buyers in the U.S. grow older and buy fewer motorcycles.
Harley-Davidson's chief executive Jim Ziemer says the deal is largely aimed at building the company's business in Europe, a market it has pursued with increasing vigor in recent years. He said three of four riders in Europe ride performance bikes like those MV builds, not Harley's traditional cruisers.
Mr. Ziemer says the company's broader intent is to increase international sales, which accounted for about 25% of Harley's sales last year. He said that ideally the ratio would be 60% of sales in the U.S and 40% internationally. Retail sales of Harley-Davidson motorcycles have grown at a double-digit rate in Europe in each of the last three years, as the company has focused on the global market.
WhileHarley-Davidson has largely been on a tear for the last 20 years with its sales, audience and, some would say, its legend growing steadily. But recently Harley's results have suffered as the economy slowed and the motorcycle market sagged after decades of growth. The company reported motorcycle shipments of 330,619 units in 2007, a 5.3% decrease compared with a year earlier. Diluted earnings per share were $3.74, a 4.8% decline compared with 2006.
Over the past several years the company has designed a number of bikes under its Harley-Davidson and sportier Buell brands aimed at attracting younger, hipper buyers in the U.S and performance-minded riders in Europe. Models like the racy Buell 1125R, the retro-styled Harley Nightster, and the V-Rod, which has a special engine designed by Porsche, have broadened the company's appeal -- but not as fast as some executives would like. Buying MV Agusta indicates the traditionally conservative, non-acquisitive Milwaukee bike maker is willing to make more radical moves in order to restore sales growth.
Harley-Davidson says it plans to continue operating MV Agusta from its Varese, Italy, headquarters following completion of the transaction, which the company says it expects in several weeks. MV Agusta Group chairman Claudio Castiglioni will continue in that position and will guide future product development. Design chief Massimo Tamburini, who is well known in motorcycle circles for landmark designs like MV's F4 and earlier bikes he designed for Italian rival Ducati including the 851 and 916 models.
Mr. Ziemer says his priority is to accelerate production of MV Agusta motorcycles, which has slowed of late because the Italian company has been "financially stressed," he says. MV Agusta sold 306 bikes in the U.S last year compared with 251,772 for Harley-Davidson.
Harley Seeks to Broaden Its Base
By JONATHAN WELSH
July 11, 2008
In a move to gain access to a broader, growing customer base in Europe and the U.S., motorcycle maker Harley-Davidson Inc. agreed to purchase MV Agusta Group, an Italian motorcycle company, for about $109 million.
Harley, based in Milwaukee, Wisc., builds large, often ornate motorcycles called heavyweight cruisers. The bikes are typically driven slowly on short jaunts around the suburbs, although some models are designed for long-distance touring. MV Agusta's models are light, fast and resemble grand prix racers that have been modified for use on the street. Such a stark contrast between the companies' products makes the planned combination seem unlikely.
But the deal is attractive because it would give Harley-Davidson a line of desirable motorcycles that appeal to serious sport-riders, Europeans in particular, who are unlikely to have ever considered buying a Harley. Attracting this new, younger customer is becoming increasingly critical for Harley as its traditional baby boomer buyers in the U.S. grow older and buy fewer motorcycles.
Harley-Davidson's chief executive Jim Ziemer says the deal is largely aimed at building the company's business in Europe, a market it has pursued with increasing vigor in recent years. He said three of four riders in Europe ride performance bikes like those MV builds, not Harley's traditional cruisers.
Mr. Ziemer says the company's broader intent is to increase international sales, which accounted for about 25% of Harley's sales last year. He said that ideally the ratio would be 60% of sales in the U.S and 40% internationally. Retail sales of Harley-Davidson motorcycles have grown at a double-digit rate in Europe in each of the last three years, as the company has focused on the global market.
WhileHarley-Davidson has largely been on a tear for the last 20 years with its sales, audience and, some would say, its legend growing steadily. But recently Harley's results have suffered as the economy slowed and the motorcycle market sagged after decades of growth. The company reported motorcycle shipments of 330,619 units in 2007, a 5.3% decrease compared with a year earlier. Diluted earnings per share were $3.74, a 4.8% decline compared with 2006.
Over the past several years the company has designed a number of bikes under its Harley-Davidson and sportier Buell brands aimed at attracting younger, hipper buyers in the U.S and performance-minded riders in Europe. Models like the racy Buell 1125R, the retro-styled Harley Nightster, and the V-Rod, which has a special engine designed by Porsche, have broadened the company's appeal -- but not as fast as some executives would like. Buying MV Agusta indicates the traditionally conservative, non-acquisitive Milwaukee bike maker is willing to make more radical moves in order to restore sales growth.
Harley-Davidson says it plans to continue operating MV Agusta from its Varese, Italy, headquarters following completion of the transaction, which the company says it expects in several weeks. MV Agusta Group chairman Claudio Castiglioni will continue in that position and will guide future product development. Design chief Massimo Tamburini, who is well known in motorcycle circles for landmark designs like MV's F4 and earlier bikes he designed for Italian rival Ducati including the 851 and 916 models.
Mr. Ziemer says his priority is to accelerate production of MV Agusta motorcycles, which has slowed of late because the Italian company has been "financially stressed," he says. MV Agusta sold 306 bikes in the U.S last year compared with 251,772 for Harley-Davidson.