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Black Hills State University

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Presentation on theme: "Black Hills State University"— Presentation transcript:

1 Black Hills State University
IACS International Conference LEHMAN TRIKES: A STORY WITHIN A STORY Don Looney Annette Ryerson Black Hills State University

2 A New Strategic Alliance

3 Harley-Davidson - Lehman Trikes

4 Lehman Trike History

5 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

6 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)

7 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

8 Lehman Trike Product Line

9 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

10 Harley-Davidson

11 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

12 Harley-Davidson Performance
Revenue: $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)

13 Harley-Davidson Performance
Share price declined from $78 per share in Dec to $7.99 in March a 102% decline CEO, COO, & CFO replaced April 2009 1500 jobs reduced (15%) April 2009

14 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”

15 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

16 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

17 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?

18 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?

19 Epilogue for Harley-Davidson
Q 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

20 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

21 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”?

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