Source: Business Week; October 27, 2008
Author: Matthew BoyleConcept: Financing, Market Share
Brief Synopsis: This article discusses how Harley Davidson, in an attempt to gain market share against other lenders, used in-house financing to chase after subprime borrowers. The Harley-Davidson Financial Services (HDFS) now makes over half of all retail loans for Harley. With loan deliquency rates on the rise as early as last year, Harley is beginning to see trouble. Even though they cut production in response to slowing sales, they still continued to go after subprime borrowers. Now, Harley retains $54 million in loans and as a result, sales are still down and jobs are being cut.
My Thoughts: I believe Harley deserves what it gets. Obviously, continuously lending money to people who couldn't afford these $20,000 motorcycles was a big mistake on Harley's part. Not only that, but they actually promoted in-house lending by giving incentives to any dealer who directed buyers to Harley's financing services. If they were smart they would have let the banks do the lending--but then they wouldn't have been able to make as many sales. Stock shares have lost over half the value in the last two years because of these bad business decisions, and people are losing faith in the Harley Davidson company. Of course, Harley has always been known for shotty craftsmanship, and has had to spend much of the previous years building a better reputation for quality bikes--but that could be another article in itself. Might as well go buy a Honda!
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