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IACS International Conference LEHMAN TRIKES: A STORY WITHIN A STORY. Don Looney Annette Ryerson Black Hills State University. A New Strategic Alliance. Harley-Davidson - Lehman Trikes . Lehman Trike History. Lehman Trikes. Founded in 1984 Headquarters: Spearfish, South Dakota

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slide1
IACS International Conference
  • LEHMAN TRIKES:
  • A STORY WITHIN A STORY

Don Looney

Annette Ryerson

Black Hills State University

lehman trikes
Lehman Trikes
  • Founded in 1984
  • Headquarters: Spearfish, South Dakota
  • Publicly traded: TSX Canadian Exchange
  • CEO: Ken Hines, formerly VP Lockheed Martin
  • Employees: 140
  • Operations: 5 days / week/ 2 shifts / day – capacity 5000 units per year
  • Marketing: 122 dealers worldwide, 112 in the U.S.
  • Customer Loyalty: Pride Matters Magazine
lehman trikes6
Lehman Trikes
  • Revenue: 2008 - $22.6 million
  • Revenue: 2009 (Q1-Q2) - $17 million ($35million annualized, a 51% increase)
  • Net Income: 2008 – ($570K) loss
  • Net Income: 2009 (Q1-Q2) - $597K ($1.2 million annualized, a 299% increase)
lehman trike s business model
Lehman Trike’s Business Model
  • Sales of conversion kits to dealers - $13,000
  • Factory assembly from new O.E.M. motorcycles – price range $18,000 - $33,995
  • Factory conversions for dealer supplied-customer owned motorcycles - $13,000 +
  • Conversion & assembly of the Tri Glide for Harley-Davidson – Retail price $29,999 - $32,339
u s motorcycle market
U.S. Motorcycle Market
  • Value of $10.2 Billion
  • Volume of 1.05 million units
  • Second Quarter 2009 – GDP declined 2.5%
  • Second Quarter 2009 – motorcycle sales down 40%
  • U.S. market 15.9% of global total
harley davidson11
Harley-Davidson
  • Founded in 1903
  • Publicly traded (NYSE: HOG)
  • Market Cap $6.69 Billion
  • Headquarters in Milwaukee, Wisconsin
  • Employees: 10,100
  • Operations: eight unionized manufacturing facilities
  • 2007 machinists union strike - $27.89 maximum wage
  • Marketing: 684 dealers in the U.S., 74 in Canada
harley davidson performance
Harley-Davidson Performance
  • Revenue: 2008 - $5.594 billion
  • Revenue: 2009 (Q2) - $808.7 million ($3.234 billion annualized, a 31.7% decrease to prior year Q2)
  • Net Income: 2008 – $222.8 million
  • Net Income: 2009 (Q2) - $19.8 million ($79 million annualized, a 91.7% decrease to prior year Q2)
harley davidson performance13
Harley-Davidson Performance
  • Share price declined from $78 per share in Dec. 2006 to $7.99 in March 2009 a 102% decline
  • CEO, COO, & CFO replaced April 2009
  • 1500 jobs reduced (15%) April 2009
harley davidson lehman trikes14
Harley-Davidson - Lehman Trikes
  • 2008 – Three year exclusive supply agreement for the Tri Glide, prices renegotiated annually
  • Lehman must maintain capacity to supply Harley orders
  • Harley currently selling “all the Tri Glides they can get”
harley davidson s expectations
Harley-Davidson’s Expectations
  • Low cost, low risk entry into a new market segment
  • Non-union production shop
  • Satisfied enough to launch Street Glide Trike for 2010
  • Allows a ‘wait & see’ strategy for next move
lehman trike s expectations
Lehman Trike’s Expectations
  • The Harley agreement will legitimize the trike segment
  • The agreement is providing the cash flow & critical mass for Lehman to grow even during the recession
  • Lehman continues to talk to other major motorcycle manufacturers but now with the Harley seal of approval
  • Lehman continues product development with the 2009 launch of the Victory Cross Bow
the future for lehman
The Future For Lehman
  • Lehman’s product sales mix now favors the ‘Harley side’
  • Will that reverse or become more balanced as the recession ends?
  • Will the Harley agreement really legitimize and grow the three-wheel market?
  • Can Lehman capitalize on the Harley agreement to sign supply agreements with other manufacturers?
  • Has Lehman already become overly dependant on the Harley agreement?
the future for harley
The Future For Harley
  • With Harley’s ongoing financial difficulties are they at all focused on the developments in the trike market?
  • Should Harley acquire Lehman to establish a non-union bridgehead?
  • Will Harley use the Lehman agreement with their unions to negotiate more favorable terms?
  • Will the new management’s new strategies include the trikes?
epilogue for harley davidson
Epilogue for Harley-Davidson
  • Q3 2009 sales down 21% net income down 84%
  • Announced “go forward” strategy
  • Discontinue Buell line, divest MV Augusta business
  • Announced “two path” study of York, PA factory
  • Major union concessions or relocate plant to Kentucky
epilogue for harley davidson20
Epilogue for Harley-Davidson
  • Dec. 3, 2009 announced a new union agreement
  • Job cuts of 50% from 1950 hourly to 750 & 250 “casual” workers
  • Savings of $150 million per year
  • Allows York to resize & become more flexible
  • Job classifications cut from 60 down to 5 allowing workers to do more & significantly different tasks
epilogue for lehman trikes
Epilogue for Lehman Trikes
  • Jan. 16, 2010 H-D announced Lehman will no longer assemble their trikes after 2010.
  • H-D announced moving trike assembly to York, PA plant.
  • Can Lehman effectively restructure to reflect loss of over half their volume?
  • Will economic recovery occur in time to revitalize sales on the “Lehman Side”?