Harley-Davidson Tries to Rejuvenate Its Business

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Photograph courtesy of Harley-Davidson Photography & Imaging / (c) Harley-Davidson

The Harley-Davidson Sportster Iron 883

In a Facebook video, the screen is filled with a sea of 20-something men and women cruising on sleek black motorbikes, all of them Harley-Davidson's Sportster Iron 883s. It's part of a marketing campaign to generate buzz around the newest Sportster. "That's hot!" one woman declares on Harley-Davidson's Facebook page, where other minidocumentaries promoting the bike are posted.

Back at Harley's Milwaukee headquarters, one can only hope for heat. Priced at roughly $8,000, the Sportster is positioned to help one of the world's most iconic brands survive the gravest economic crisis in decades. But it must also help Harley-Davidson move beyond its aging baby-boomer base. (See pictures of Harley-Davidson's evolution.)

It's been a grueling few weeks for American companies, but particularly so for Harley-Davidson, purveyor of bikes that easily top $30,000. Last month, the company reported that its fourth-quarter global sales fell 13.1%. Last year, its profits sank nearly 30%. And it's been a wipeout for investors: Harley-Davidson's stock price has plunged nearly 70%, to $11.96 a share in mid-February, from $37.34 a share one year ago. Americans haven't lost reverence for Harley-Davidson, but a key problem is that people are simply less willing to spend money on luxury items. Overall motorbike sales fell 7.2% last year, according to the Motorcycle Industry Council, an Irvine, Calif., trade group. (See pictures of the world's most expensive motorcycles.)

America's leading motorcycle manufacturer is enduring its bleakest period since the 1980s, when it nearly went bankrupt. "Clearly it's a challenging environment, and we're doing all the right things in this environment to position our premium brand in this marketplace to make sure we're even stronger when we're out of this cycle," says Tom Bergmann, Harley-Davidson's chief financial officer.

Harley-Davidson has been through a few cycles. It was founded in Milwaukee in 1903, and within a decade built itself into a global business. It survived the Great Depression by selling to police departments. In 1957, it introduced the Sportster, a sleeker, less expensive alternative to the company's popular touring bikes and a response to a wave of British imports. The Sportster's relatively small size made it appealing to women. But by the 1970s, motorcycling had become a marginalized sport. Its renaissance came in the late 1980s, driven largely by baby boomers' new affluence. From 1992 to 2007, new-bike sales soared from 278,000 to 1.1 million annually. Harley-Davidson rode much of that wave, chiefly with touring bikes like the brawny Ultra Classic Electra Glide (starting price: $35,499, with a 110-cu.-in. Screamin' Eagle engine and a six-speed transmission). Its patrons grew older and wealthier, but its efforts to cultivate a large base of female and younger riders have been marginally successful. (See the top 10 female sports heroes.)

Acknowledging the challenge of selling premium motorcycles in this economic environment, Harley-Davidson recently introduced a print ad aiming to play on the Sportster Iron 883's relatively low price. The message: "About six bucks a day. Cheaper than your smokes, a six-pack, a lap dance, a bar tab, another tattoo, a parking ticket ..." The Sportster line is expected to account for a larger share of Harley-Davidson's sales this year — though still less than 25% of the total. (The company notes that there is still a waiting list for the new $29,000 Tri-Glide Ultra Classic despite the grim economy.)

Guiding Harley-Davidson's marketing strategy is Mark-Hans Richer, 44, who was hired as chief marketing officer in July 2007 after leading marketing efforts at General Motors' Pontiac unit. One of Richer's first moves was to hire a director of product development for "outreach customers" — young people, women and those in non-U.S. markets. Richer's team quickly discovered that young people aren't into the heavy chrome found on many Harley-Davidsons — hence the emphasis on the primarily black Sportster Iron 883, which was already in development.

See pictures of expensive things that money can buy.

See 25 people to blame for the financial crisis.

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