Harley bets big on a small bike
The Street, starting at about $7,000, is a stripped-down urban bike meant to lure new riders into the Harley family.
KANSAS CITY, Missouri (Reuters) - To catch a glimpse of Harley-Davidson Inc history, visit its Milwaukee headquarters, housed in the 111-year-old company's first real factory. Or tour its York, Pennsylvania, plant, which has cranked out motorcycles since the early 1970s and builds some of its biggest cruising bikes, including the Road King and Electra Glide.
But for a look at the company's future, head for its vehicle and power-train plant in Kansas City. Opened in 1998, the 435,000-square-foot factory produces several of Harley's most popular bikes, including the Sportster and V-Rod.
Earlier this year a motorcycle unlike any Harley has made in decades began coming off the line. Known as the Street, it is the company's first entirely new bike in more than a decade and the first U.S.-built small bike bearing the Harley name in nearly 50 years. With an expected retail price of $6,500 to $7,500, the Street is the most affordable bike Harley has brought to market under its name in decades and an unapologetic effort to bring young riders around the world into the company's two-wheeled fraternity.
"This basically targets a whole new market of people who want to try a Harley-Davidson but don't have the money to try one of the bigger bikes with all the bells and whistles," said Jaime Katz, an analyst at Morningstar.
The Street, which will arrive in dealerships this spring, is a stripped-down bike built for urban environments -- a major departure Harley, known for heavy touring bikes built for the open highway. It is also proof, according to Chief Executive Officer Keith Wandell, that a company whose products have been dismissed as "geezer glides" has no plans to shamble off into the sunset along with the baby boomers who built the brand.
"Street is really symbolic," Wandell said. "It's the first new product we've brought to market under the Harley-Davidson badge that is intended to bring new riders -- and even younger riders -- into the Harley-Davidson family."
It also illustrates Wandell's commitment to transform the company into a leaner, more nimble manufacturer. The last time Harley introduced a new bike, in 2002, it spent big bucks -- it refuses to say how much -- building a new line in Kansas City dedicated to the motorcycle. This time, Harley did it on the cheap, incorporating its new bike into an existing line.
The Street's introduction is not without risks. It puts Harley in direct competition with Japanese bike makers, which have strong brands of their own. The yen's current weakness against the dollar will also help the Japanese defend their small-displacement, sport-bike turf.
Meanwhile, Harley faces a unique problem: convincing its core customers that the new bike does not undermine the brawny, muscular quality of the Harley brand. Company executives insist they aren't worried.
"It's a Harley that just happens to be a little smaller," says Mark-Hans Richer, Harley's top marketing executive. The Street's exhaust, he noted, was specifically tweaked to make generate the distinctive Harley "potato-potato-potato" rumble.
"We worked really hard on that," he said.
The debut will also make it harder for investors to understand where profit margins on motorcycles will settle after years of restructuring under Wandell. Harley has acknowledged that the Street may pull buyers away from higher-margin entry-level heavyweight motorcycles in its line, like the Sportster.
"As that mix shifts, it could hurt gross margins -- at least temporarily," said Morningstar's Katz.
Harley saves considerable cost by building the Street on the same line, and often at the same time, as its larger V-Rod.
Changeover from V-Rod to Street production can take place on the fly, several times in a 24-hour period. The process could easily devolve into chaos, said Steve Wiggins, manager of the Kansas City plant, but factory workers quietly choreograph the changeover, swapping components and tools in and out and just in time.
Workers on the line, who are briefed during a pre-shift huddle on the day's production schedule, "don't see anything happen (during the changeover) except they look up, see we've switched to Streets, and the parts and tools they need are there." Wiggins said.
"So we do not lose any build time. â¦ There's not a single skipped carrier or anything."
The last U.S.-made, Harley-badged small bike, the 1966 BTH Bobcat, was an underpowered flop, discontinued after a year. More recent efforts to break into the market with the Buell and MV Agusta brands also ended badly.
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