Harley-Davidson cuts high-performance bikes

Harley-Davidson will shut down its Buell high performance division and seek a buyer for Italy’s MV Agusta as part of a drive to bolster its core motorcycle brand.

The Milwaukee-based bike maker, which has been hit by a steep decline in sales during the recession, also said on Thursday that it would put a growing emphasis on markets outside the US. It aims to boost foreign sales from 31 per cent of the total this year to at least 40 per cent by 2014, appointing 100-150 new dealers outside the US.

Keith Wandell, who took over as chief executive in May, said that “growth is the single most critical need for Harley-Davidson right now”. The company announced an 84 per cent plunge in third-quarter earnings and a 21 per cent drop in revenues.

While the Harley brand is recognised worldwide, Mr Wandell said that “we have great conviction that there is much more we can do to tap into the power of that brand and extend it further”.

Noting that the Harley name is familiar to many non-bikers, he added: “Look for us to push the boundaries when it comes to how we engage with everyone who admires the brand”.

The new strategy will include stepping up promotion of peripheral products, such as branded clothing, parts and accessories, which already make up almost a quarter of revenues so far this year.

The company will also consider tailoring its products to individual markets through local design and manufacturing.

Harley is the latest in a series of companies that have consolidated brands to conserve resources during the recession.

In the automotive industry, General Motors has trimmed four of its eight brands. Ford Motor has sold Aston-Martin, Land-Rover and Jaguar and put Volvo on the block. Daimler has given up the Sterling truck brand in the US to concentrate on Freightliner.

Harley bought Agusta in early 2008 as part of a drive to expand its presence in Europe and in high-performance sports bikes, especially popular among younger riders. But the Italian group lost $55m in the first nine months of this year.

Harley also said on Thursday that it was considering “a broad spectrum of options” for its beleagured financial services unit. The financing business reported a nine-month operating loss of $111m and said it expected losses to continue for the next few quarters due to mounting loan losses and higher funding costs.

Harley said the US retail market remained tough. It expects 15-30 domestic dealers to close over the next six months.

Third-quarter earnings were well below analysts’ estimates, sagging to $26.5m, or 11 cents a share, from $166.5m, or 71 cents, a year earlier. Revenues dipped to $1.12bn from $1.42bn. Bike shipments fell by 27.4 per cent.

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