Harley-Davidson Is Getting Pounded And It's Going To Get Worse
Harley-Davidson was nearly destroyed under the mismanagement of conglomerate AMF during its ownership stint in the 1970s. (I guess there wasn't a lot in common with making motorcycles and bowling balls.) Harley-Davidson has become legendary again with its transformation over the last twenty years after a management buyout. They dominate the large bike segment in the United States and their motorcycles remain in very high demand around the globe. Harley has shown signs of deterioration for some time. The first signs of trouble were in its financing unit. Now it reports unit sales in the U.S. are down 16%. The stock is now down approximately 75% and has a negative return over the past ten years. In other words, anyone buying the stock since 1998 has lost money.
From Harley's recent SEC filings - The 30-day delinquency rate for managed retail motorcycle loans at September 28, 2008 increased to 5.59% from 4.91% at September 30, 2007. Managed retail loans include loans held by HDFS as well as those sold through securitization transactions. The increase in losses was primarily due to a higher incidence of loss resulting from an increase in delinquent accounts. The Company expects that HDFS (Harley-Davidson Financial Services) will continue to experience higher delinquencies and credit losses as a percentage of managed retail motorcycle loans in 2008 as compared to 2007.
Harley's financial group recently reported its chargeoffs increased over 300% in the past quarter. Could Harley's financial group become a drain on the parent company? Well, it's funny you would ask.
In 2009, HDFS expects to utilize a combination of funding sources........ ..........HDFS has developed contingency plans which would only be implemented in the event that conditions in the capital markets limit HDFS’ funding sources. These contingencies include but are not limited to utilizing cash from the Motorcycles Segment
There are many who would tell anyone who would listen that this company and many others are a great buy. This is a little like the bottom calls in banks that were blown out time and time again. Calls not based on balance sheet or detailed company analysis but instead based on the tenuous position that something has dropped by a large amount so it must be a buy. Some day this will be the case. But, it will not be based on the significantly worthless position that a company has dropped a lot so it is a buy but because the economy has started to reach a steady-state. Tomorrow, I'll give you another perfect example of how buying the dips rewarded gamblers with a once hot company that has dropped from $75 to $1.
From Harley's recent SEC filings - The 30-day delinquency rate for managed retail motorcycle loans at September 28, 2008 increased to 5.59% from 4.91% at September 30, 2007. Managed retail loans include loans held by HDFS as well as those sold through securitization transactions. The increase in losses was primarily due to a higher incidence of loss resulting from an increase in delinquent accounts. The Company expects that HDFS (Harley-Davidson Financial Services) will continue to experience higher delinquencies and credit losses as a percentage of managed retail motorcycle loans in 2008 as compared to 2007.
Harley's financial group recently reported its chargeoffs increased over 300% in the past quarter. Could Harley's financial group become a drain on the parent company? Well, it's funny you would ask.
In 2009, HDFS expects to utilize a combination of funding sources........ ..........HDFS has developed contingency plans which would only be implemented in the event that conditions in the capital markets limit HDFS’ funding sources. These contingencies include but are not limited to utilizing cash from the Motorcycles Segment
There are many who would tell anyone who would listen that this company and many others are a great buy. This is a little like the bottom calls in banks that were blown out time and time again. Calls not based on balance sheet or detailed company analysis but instead based on the tenuous position that something has dropped by a large amount so it must be a buy. Some day this will be the case. But, it will not be based on the significantly worthless position that a company has dropped a lot so it is a buy but because the economy has started to reach a steady-state. Tomorrow, I'll give you another perfect example of how buying the dips rewarded gamblers with a once hot company that has dropped from $75 to $1.
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