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http://jacksonville.com/autos/2011-12-09/story/harley-davidson-inventories-10-year-low
Harley-Davidson inventories at 10-year low
In Jacksonville, Adamec's strong sales result in a good selection for customers. Posted: December 9, 2011 - 10:59am | Updated: December 9, 2011 - 2:24pm
Adamec Harley-Davidson Vice President of Operations Joe Key shows off his personal CVO Road Glide Custom in Maple Metallic and Vivid Black with a Real Smoke Graphics paint scheme. Back Photo: 2 of 2 Next MCTJeff Sainlar McClatchy News Service Brian Kite applies pinstriping to a Harley-Davidson motorcycle at House of Harley in Milwaukee, Wis.
December 9, 2011 - 10:59am Harley-Davidson inventories at 10-year low By Rick Barrett
Milwaukee Journal Sentinel
The inventory of new Harley-Davidson Inc. motorcycles is at its lowest point in 10 years, according to a new dealership survey by the investment firm Robert W. Baird & Co.
That’s somewhat good news for Harley as it works to protect the “scarcity value” of its brand. Scarcity value means the company doesn’t want to flood the market with motorcycles that dealers can’t sell, and it does want shoppers to feel just a little anxious about finding a new bike.
It’s not all good for Harley, though, when some of its most expensive motorcycles aren’t available.
In the recent quarter, the company’s sales were up 13 percent to $1.23 billion, including a 5.4 percent gain in the United States.
Do these statistics hold true in the Jacksonville market?
“That’s a two-part answer,” said Joe Key, vice president of operations for Adamec Harley-Davidson, which has three dealerships in the area. “Up until the last two months, our inventory was extremely limited, but our sales staff still managed to generate sales that were 30 to 35 percent above last year’s for the same period, during which the district had only a 5-percent increase. Because new inventory is allocated according to sales, our October, November and December inventory was higher than it has been at any other time this year.”
With less than one month to go in 2011, Key hopes that December sales will follow November’s, which were up 54 percent, and that the year will end on a high note for sales.
“December and January are normally our slowest sales months, but we’re optimistic that we’ll finish the year off very well,” he said.
Adamec’s sales gains notwithstanding, Harley-Davidson’s success was partially offset by production issues at the company’s largest manufacturing plant in York, Pa., which has struggled to produce enough of Harley’s most profitable motorcycles.
The York plant is deep into a restructuring that, when complete, will make it a much more efficient operation, according to the company.
The work involves taking four assembly lines in more than 20 buildings and consolidating them into one line on a much smaller campus that will build all of the Softail, Touring, CVO and Trike motorcycles for the U.S. and international markets.
As a result, Harley wasn’t able to produce as many of the larger touring and custom bikes that dealers needed in the third quarter, shifting customers to smaller, less profitable models and reducing the average profit on each bike sold.
There’s still significant change coming, as Harley moves to a manufacturing system where it can ramp up production in April, ahead of the riding season, and dial it back down at the end of summer, said analyst Robin Farley with UBS Investment Research.
In 2012, Harley-Davidson will implement changes at its plants in Menomonee Falls, Wis., and Tomahawk, Wis.
By adjusting productions schedules and using seasonal employees, the company says it can respond better to changes in the marketplace.
Key agreed.
“There is also a new union agreement at the York plant that will allow more flexibility in the type of bikes produced,” he said. “So, where the need is greatest — where we’re having our highest sales demand — we’ll get higher production, which will then mean more inventory in that product. In other words, if we’re selling out of all our Softails, we’ll be able to get more of those bikes and keep up with the demand, which is good news for everyone, customers and dealership alike.”
Baird analyst Craig Kennison said surveyed dealers reported very low inventories, with 86 percent of them saying the supply of new bikes was “too low” or “about right.”
U.S. dealers ended the recent fiscal quarter with about 36 bikes each, down from 39 last year and 67 in 2009, according to Kennison.
If a dealership doesn’t have a particular bike, in the right color with the features a customer wants, it risks losing a sale.
“You can trade bikes with other dealers, but it doesn’t help much if they’re low on inventory, too,” said Todd Berlin, sales manager at Suburban Harley-Davidson in Thiensville, Wis.
Specialty Publications writer Barbara Gavan contributed to this report.
For more information, go online to adamecharley.com or harley-davidson.com.
