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Riding High

Wait Two Years for a New Harley-Davidson? That's How Long It Can Take to Get Delivery on America's Motorcycle Wait Two Years for a New Harley-Davidson? That's How Long It Can Take to Get Delivery on America's Motorcycle
Mark Vaughan
From the Print Edition:
Ron Perelman, Spring 95

(continued from page 2)

Outside, the autumn dawn has broken clear and cool. You stand for a moment in the garage, contemplating the Heritage Softail Classic as though it were a postmodernist sculpture. Its gleaming chrome "big twin" 1340 cc engine and pipes, polished red-on-black fenders and gas tank, studded leather seat and saddlebags, extended bars and seven-inch headlight are the apex of form and function. It is as near perfect as any machine can be, and American-made.

Mounting the bike, you hit the starter button, and that distinctive Harley thunder fills the neighborhood. Without hesitation, you kick it into gear and you're off, heading for the open road, leaving the suburbs and city streets behind. Out on the highway, the pavement rushing past at a solid 65 mph, you feel the tensions of the week slip away. The backslapping and glad-handing, telephone screaming, busted deals, office politics, near misses, petty triumphs, life-and-death decisions, court theatrics, buys and sells...all gone, blown away by the power of the moment. You're in hog heaven, easy riding, and it's all yours: the machine, the highway, the distant hills.

* * *

If there is a company that symbolizes the rise, fall and resurrection of American industrial might, it is Harley-Davidson, Inc. From its humble turn-of-the-century beginnings in a Milwaukee garage, through a post-Second World War high, a 1970s low and a 1980s death bout with Japanese knockoff artists, Harley has roared on, becoming in the 1990s what may be the best-run manufacturing company in the United States.

The proof is in the product. The 20 models in Harley's 1995 motorcycle catalogue range from the basic XLH Sportster 883 ($4,995) to the posh FLHTC I Ultra Classic Electra Glide Thirtieth Anniversary Edition ($17,500). All Harley bikes have the look and feel of premium, heavyweight motorcycles, and with their abundance of chrome, state-of-the-art paint jobs and sleekly engineered features, they are--quite literally--beautiful machines. First-time visitors to a Harley-Davidson showroom often realize one of the great truths of the motor-vehicle age: to see a Harley is to want to drive one, to drive a Harley is to want to own one. As actor Mickey Rourke, a longtime Harley fan, has said about his Harley passion, "it's a personal thing that can't be described. It's part of you."

Much of the Harley's lasting appeal comes from an if-it-ain't-broke-don't-fix-it philosophy in style and design. Though mechanically the motorcycles have undergone a major reengineering in recent years, all models still incorporate styling elements that date back to the 1930s. The current guardian of the Harley look is William G. Davidson, vice president of styling, the last descendant of the company's founders to hold a senior management position. Willie G., as he is known throughout the motorcycle industry, studied design and worked at Ford Motor Company before coming to Harley in 1969 at the invitation of his father, William H. Davidson. He was given the task of setting up and managing the company's first styling department. From the beginning he showed a genius for understanding what the Harley customer wants.

One of Willie G.'s first projects was to alter Harley's superheavyweight Electra Glide model (much as California motorcycle customizers were doing at that time) to create the Super Glide. The transformation included removing the Electra Glide's windshield and saddlebags and replacing the massive front forks with lighter, longer ones. When it was introduced in 1971, the Super Glide proved that new models could be created without massive retooling and that production and profits could be boosted by moving customizing in-house. The Low Rider, Wide Glide, Fat Bob and Softail quickly followed, all created by simple design alterations and all of which still enjoy strong sales.

Harley's 1995 catalogue is a study in variations on a few basic themes: there are four Sportster models, four Dynas, six Softails (including the Bad Boy and the Fat Boy) and six Electra Glides (including the Road King). As Willie G. notes, despite a flamboyant image, most Harley customers are conservative when it comes to motorcycle design. "They rank the Harley look right up there with motherhood and God, and they don't want us to screw around with it," says Willie G. "They know what they want on their bikes, the kind of instrumentation, the style of the bars, the cosmetics of the engine, the look of the exhaust pipes and so on. Every little piece on a motorcycle is exposed, and it has to look just right. It's almost like being in the fashion industry."

* * *

York, Pennsylvania. Inside the 1 million-square-foot Harley-Davidson assembly plant on a cold November morning, workers are busy turning out the first of that day's 395 finished bikes. To a visitor on a private tour, it all seems deceptively smooth. The raw materials come in at one end of the plant, the completed motorcycles go out at the other. Between its Milwaukee engine and transmission plants and its York facilities, Harley produces more than 50 percent of the parts needed to make its products. The majority of the rest are also made in the United States.

"Ours is an American product, period," explains Harley-Davidson's CEO Richard Teerlink. "We go offshore for a part for only one of two reasons: either that part is simply not available domestically or what is available does not meet our quality standards. Price is not an issue. We will pay a premium for a U.S.-made part."

At the York plant, stamping machines take sheets of metal and turn them into fenders and other parts. Precision-welding robots close seamless joints. Despite the automation, much of the work is still done by hand; tinkers tap out metal parts to form precise curves, grinders smooth the curves into almost perfectly flat surfaces. Raw components disappear into the adjacent state-of-the-art paint shop and return via a conveyor belt, shining in one or more of Harley's distinctive colors. At another station, workers assemble hubs and spokes into finished wheels. The pace is steady but deliberately unhurried. This is especially true on the main assembly lines, where workers take their time adding components, testing torques, gauging tolerances.

"For us, quality is key," says Lynn Sweet, communications manager at the York plant and tour guide for the day. "Anyone on the line can stop production at any time. If there's a problem with a part, or if there's a parts shortage, it doesn't get passed on to be dealt with later. Production comes to a halt, and the problem is fixed."

One of the most striking things about the Harley assembly plant is the sense of order that prevails there. Some 2,100 people work three shifts producing parts and finished bikes. Yet everything seems to be stacked neatly in its place. There are no stray components, no debris, no trash. On this day only one assembly line, the 1340 "big twin" line, is operating, turning out the heavy machines that comprise four-fifths of Harley's models. As the shiny, new motorcycles roll off the end of the line, they are given a vigorous testing: starter, engine performance, emissions, brakes, lights, turn signals, horn, steering...you name it, it's tested.

In a small building behind the main plant, the final steps in quality control take place. Here, the half-dozen members of the company's Quality Audit Team carefully inspect a randomly selected portion of the finished bikes, measuring assembly, function and performance against a set of standards. "If we detect a problem that relates to parts quality or assembly, we get back to the line and either see that it is resolved immediately or shut down operations until it can be solved," says supervisor Ron Alexander. "In the old days, you'd have caught hell for doing something like that; now we'd catch hell for not doing it."

* * *

At Harley-Davidson, the "old days" go all the way back to 1901, when William S. Harley and Arthur and Walter Davidson set out to design and make a motorized bicycle. By 1903, the young men from Milwaukee, all barely in their 20s, had formed the Harley-Davidson Motor Company and turned out their first motorcycle, a 25-cubic-inch motor on top of a bicycle-like frame that had a top speed of 25 mph. In 1908, a new model powered by a 35-cubic-inch engine with a top speed of 40 mph was created. Harley-Davidson's total production for that year was just two bikes. But by 1908, the company was pumping out 450 motorcycles a year. The workforce had expanded from four partners and one employee in 1905 to 35 employees by 1909, according to Harley-Davidson archivist Marty Rosenbloom.

In 1909, Bill Harley designed the first of the company's distinctive V-twin engines. The V-twin, with a displacement of 49.5 cubic inches, a seven-horsepower kick and a top speed of nearly 60 mph, became the prototype of all Harley-Davidson engines to follow. By 1920, just 11 years after the V-twin made its debut, Harley-Davidson had become the largest motorcycle manufacturer in the world, producing more than 25,000 motorcycles and 16,000 sidecars a year, with 2,000 dealerships in 67 countries.

Despite the nearly fatal blow of the Great Depression (between 1929 and 1933 sales dropped by more than 80 percent), the company managed to sputter along until the Second World War, when military contracts helped boost sales back to early-1920s levels. The postwar slump hit rival Indian Motorcycle Company harder than it did the Milwaukee company, and in 1953 Indian closed its plant doors for the last time, leaving Harley-Davidson as the only major U.S. motorcycle manufacturer. By the early 1960s, Harley virtually owned the U.S. heavyweight motorcycle market, with sales soaring from about 10,000 units in 1961 to more than 30,000 in 1966.

Like many companies in the 1960s, Harley-Davidson made a disastrous mistake: it failed to take the Japanese threat seriously. While Harley rested on its laurels, the big four Japanese motorcycle companies (Honda, Yamaha, Kawasaki and Suzuki) were having a major impact on the U.S. lightweight bike market, and by the late 1960s, all were jealously eyeing the heavyweight segment. By then, consumers were beginning to view Harley's machines as outdated, oil-leaking heaps that stood in poor contrast to the sleeker, high-tech, oil-tight Japanese bikes.

In 1969, faced with an urgent need to upgrade production, capitalize expansion plans and prevent a hostile takeover bid, William H. Davidson urged company stockholders to accept an offer from American Machine & Foundry to buy Harley-Davidson outright for $22 million. The deal ended more than 60 years of family control of the company.

Though Harley had an enthusiastic friend in AMF's CEO Rodney Gott, the marriage got off to a bad start and never really improved. Gott's strategy for Harley was to expand production rapidly, something the motorcycle maker was ill equipped to do. Between 1969 and 1972, total output zoomed from about 27,000 to 60,000 units a year. At the same time, quality control went out the window. Bikes were rolling off the line with wrong parts, rusty parts and sometimes not enough parts.

To be fair, under Gott's direction, AMF pumped millions of dollars into research and development at Harley, including a $10 million new engine-development project (which was eventually shelved). But in the meantime, the manufacturing side of the business was a shambles. The Harley hog continued to leak oil, and the company to lose customers to the Japanese. By 1980, Harley's once whopping 78 percent share of the U.S. motorcycle market had dwindled to 30 percent, only slightly ahead of Honda.

"In the late '70s, Harley quality was horrible," says Mike Lombardi, third-generation owner of the F. Lombardi & Sons Harley-Davidson dealership in Staten Island, New York. "We didn't know if a bike was going to make it out of the showroom and down the street without us having to go after it with a pickup truck to collect the pieces." Harley CEO Teerlink agrees that "there was a perceived quality problem in the marketplace. The fact is, the Japanese were doing it better for less."

In February 1981, a group of 13 Harley-Davidson executives signed a letter of intent to purchase the company from American Machine & Foundry. By then, Rodney Gott, who had become a self-proclaimed "Harley freak," had retired, and AMF had lost its enthusiasm for the motorcycle trade. The deal was engineered by Vaughn Beals, an AMF executive sent to Milwaukee to reorganize Harley in the mid-1970s and the current chairman of the company's board of directors.

Beals structured a leveraged buyout requiring only $1 million in cash and about $80 million in loans (Harley was valued at about $300 million at the time). Financing was easily arranged through a consortium of eager banks led by Citicorp. As one Citicorp executive later observed, "what hit me was that this was the only product I'd ever seen that people had tattooed on their bodies."

* * *

Jeff Bleustein's favorite story about Harley's drive to regain its reputation as a manufacturer of high-quality motorcycles has to do with his wife, Brenda. Bleustein, now president and chief operating officer of Harley-Davidson's motorcycle division, was vice president of engineering during the AMF years. When he first moved to Milwaukee and bought a house, Bleustein came home one afternoon with a new bike and parked it in the garage. The next morning, there was a big puddle of oil under the bike. Bleustein says his wife told him, "I know you want to ride a motorcycle, but you'd better fix those oil leaks because there will be no motorcycles in our garage until you do."

One measure of the success enjoyed by Harley since the Beals-led leveraged buyout is that its engines no longer leak oil. In fact, the V-2 Evolution motor, designed by Bleustein's engineering team and introduced in 1983, is so precisely engineered that he can park a bike in his living room without fear of ruining the carpets.

"From the beginning, we decided that our emphasis was going to shift from volume to quality," says Teerlink, who joined the company as chief financial officer in 1981. "We took a hard look at the Japanese motorcycle industry, and we realized that their success had nothing to do with culture. They were just better managers than we were."

In an attempt to beat them at their own game, Harley's new owners introduced three standard Japanese manufacturing techniques: full employee involvement in problem solving and quality control; just-in-time inventory to lower the cost of holding large inventories of parts and have greater control of parts quality; and operator control, which calls for giving all workers the statistical training necessary to be able to measure the quality of their own output.

"None of these concepts are revolutionary," admits Teerlink. "The problem has always been one of implementation. We were in a fight for our lives, and once people began to realize that and to understand that we didn't want them to come to work and check their brains at the door anymore, things began to click."

In 1982, arguing that Honda and Yamaha had amassed huge inventories that they intended to dump on the U.S. market, Harley-Davidson petitioned the International Trade Commission for tariff protection. A similar request had been turned down by the Carter administration in 1978. This time, the ITC responded positively, and in April 1983, the Reagan administration imposed stiff tariffs on imported motorcycles with engines of 700 cc's or greater for a limited five-year period.

"It was really a symbolic gesture, since Honda's and Kawasaki's U.S.-assembled bikes were exempt from the tariff, and Yamaha and Suzuki shortly came out with motorcycles that were slightly less than 700 cc," says Teerlink. "But it did send a message that the United States was not going to let its motorcycle industry die by the side of the road."

By 1987, in an unprecedented move, Harley's new masters were confident enough to petition the ITC again--this time to ask that the 1983 tariffs be lifted a year ahead of schedule. "It might seem like a strange thing to do," admits Teerlink. "But it really gets down to values. We'd upgraded and refined our designs, revamped the entire production process, and sales and customer satisfaction were high. We just didn't believe it was right to continue operating in a protected market because we'd accomplished what we'd set out to do."


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