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

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Presentation on theme: "IACS International Conference LEHMAN TRIKES: A STORY WITHIN A STORY Don Looney Annette Ryerson Black Hills State University."— Presentation transcript:

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

2 20-2 A New Strategic Alliance

3 20-3 Harley-Davidson - Lehman Trikes

4 20-4 Lehman Trike History

5 20-5 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 20-6 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 20-7 Lehman Trike’s Business Model 1.Sales of conversion kits to dealers - $13,000 2.Factory assembly from new O.E.M. motorcycles – price range $18,000 - $33,995 3.Factory conversions for dealer supplied- customer owned motorcycles - $13,000 + 4.Conversion & assembly of the Tri Glide for Harley-Davidson – Retail price $29,999 - $32,339

8 20-8 Lehman Trike Product Line

9 20-9 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 20-10 Harley-Davidson

11 20-11 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 20-12 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)

13 20-13 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

14 20-14 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 20-15 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 20-16 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 20-17 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 20-18 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 20-19 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

20 20-20 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 20-21 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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