Milwaukee--in 1903, young men (the hyperkinetic president was just 45) were on the move. The Wright brothers--Wilbur, 36, and Orville, 32--left their bicycle shop in Dayton to take their 12-second, 120-foot flight at Kitty Hawk. And William Harley, 21, and Arthur Davidson, 20, working in a 10-by-15-foot shed here, built a motorcycle. On the eve of its centennial, the company born in that shed is spectacularly successful, and one of America's best-known brands. No American company has such devoted customers.
The Information Superhighway is littered with the wreckage of New Economy companies. But America's real highways are humming with the distinctive sound of an iconic Old Economy product--Harley-Davidsons. Their sound (think potato-potato-potato) is so beloved by enthusiasts that the company tried to have it declared a trademark.
Last weekend the company began a 14-month-long 100th-birthday bash. It has much to celebrate, including increases in production of more than 10 percent annually for 16 years. And 16 consecutive years of record earnings. And average annual earnings growth of 37 percent. And a share price up 15,000 percent since 1986, about nine times as much as General Electric's, which is no slouch.
In the First World War, Harley-Davidson helped mechanize the Army--the first American to enter Germany after the armistice rode in on a Harley--and AMF bought the company in 1969. But by 1981 Harley-Davidson was reeling, partly because of Japanese imports. So 13 of the company's executives--including today's CEO, Jeffrey Bleustein, 62, a former Yale engineering professor--bought it for a highly leveraged $82 million.
In 1983 they got a five-year tariff protection, but recovery was so rapid they asked the government to end the protection a year early. The tariff--Bleustein doubts that anyone paid it--was a warning shot against "dumping" (selling at a price below the cost of manufacture) by the Japanese, who at the time had a two-year inventory in warehouses and were still producing full tilt. But the tariff exempted European manufacturers, who were not dumping, and the biggest Japanese maker, Honda, because its bikes were assembled in Ohio.
Today the tariff seems as quaint as other relics of the 1980s, such as the U.S. feeling of inferiority regarding Japanese economic prowess, and the country-music lament "everything I buy these days has a foreign name." Twenty years after the $82 million buyout, Harley's sales were $3.3 billion and earnings $435 million, thanks to passionate motorcyclists of the sort who every August descend, 300,000 strong, on Sturgis, S.D.
Hollywood--and a few motorcyclists--have made motorcyclists seem like bad boys, like Marlon Brando in "The Wild One" (1954) and Jack Nicholson and Peter Fonda in "Easy Rider" (1969). But most motorcyclists are middle-aged and middle class. The average Harley customer is 46 and has a household income of $78,000. There are many riders in their 70s and 80s. Says Bleustein, himself a rider, "Even after they stop playing golf, they can still ride."
The average Harley customer pays $15,000 for his machine, but some Harleys, such as those with music provided by a six-CD changer, can list for $22,000. Although output has been increased at the three factories--here and in York, Pa., and Kansas City, Mo. --demand so much exceeds supply (261,000 bikes this year) for some models that "scalpers" sell them for up to $4,000 over list. Some people sell their places on waiting lists. Others wait on the list, then sell their bikes at a markup before they even leave the dealer's parking lot.
Honda sells more bikes in America than Harley does, but Harley dominates the high-profit market for heavy bikes (a.k.a. hogs), even in Japan, and has 21 percent of the Asia-Pacific market for all motorcycles. In America, 650,000 people pay $40 annual dues to be members of the Harley-owners group. They doubtless agree with the company that it is selling a "lifestyle." This year bikers will spend more than $1 billion on Harley gear, from black motorcycle jackets for toddlers to Harley-Davidson fountain pens for bikers with literary aspirations.
Bleustein's office, in the 1920 brick building where all the bikes once were made, features a glass tabletop supported by two Harley engines. He wears a gray suit, crisp white shirt, french cuffs--and a colorful Harley-Davidson necktie that is the sartorial equivalent of chrome. Many of the office workers dress as though they just got off their Harleys, which they did. Worldwide, says Bleustein, motorcycling means "freedom, adventure, individual expression." As does America.
Harley-Davidson's 10-city centennial tour begins this week in Atlanta and will rumble to Mexico City, Sydney, Tokyo, Barcelona and on to Munich next July. It will culminate next August when a quarter of a million satisfied customers are expected to descend on Milwaukee to compare chrome and enjoy the music of their machines. Think: potato-potato-potato times 250,000.