The motorcycle king’s failures may have more to do with who’s

at the top than what’s being brought to market.

As Harley-Davidson‘s (NYSE:HOG) sales enter their fourth year of decline, investors should ask whether

the motorcycle maker needs a shakeup. The problem may not just be the soft industry in which it operates,

but rather also the front office in Milwaukee. Maybe instead of 100 new models in 10 years, Harley-Davidson

needs a new CEO and board of directors.


A long way down

Investing legend Warren Buffett once noted, “You only find out who is swimming naked when the tide goes out,”

which is another way of saying that everyone looks like a genius in a bull market.

When times were good in the motorcycle business, it was easy for CEO Matt Levatich and the board to appear to be

geniuses, but now that the tide is running out on the motorcycle bull market, the CEO and his board are increasingly

looking like they’re swimming naked.


During Levatich’s tenure as CEO, which began in May 2015, total motorcycle sales fell 5%, U.S. sales are down more

than 6%, foreign sales are off over 1%, and Harley-Davidson’s stock has tumbled 11%. Over that same time frame, the

S&P 500 has gained more than 25%, and rival Polaris Industries (NYSE:PII) has seen sales of its Indian Motorcycle

brand soar (its stock is down over 9%, but it has been dealing with a massive recall situation in other divisions of its



Investment1-Year Total Return3-Year Total Return5-Year Total Return
S&P 50042.4%28.7%86.6%
Polaris Industries20.6%-12.8%63.6%



For investors, Harley-Davidson’s stock trades at the same price it did 17 years ago. It’s had ups and downs over that time,

rising and falling beyond that threshold, but the fact remains there has been no value creation over nearly two decades.


While Polaris CEO Scott Wine agrees with Levatich that there are significant challenges facing the motorcycle industry

today, he’s still managed to keep Indian sales growing at a double-digit rate. To get Harley-Davidson to start growing again,

too, maybe it’s time the company had new leadership at the top.


Where are the motorcycle people?

Levatich came to Harley in 1994, serving in a variety of capacities, until being elevated to the position of president and

COO in 2009 before being appointed to his current position of president and CEO.

Of the nine directors who serve with Levatich on the board, four have come in the last two years, and none has any relevant

experience in the motorcycle or related industries. The chairman of the board, who was appointed to the position last year,

is a former senior VP at Boeing, while the longest-serving board member (since 1996) is the founder of a digital

entertainment company.


Others include a division of General Electric that deals with LED lighting and solar power; a co-founder of a not-for-profit

sustainable business practices consultancy; a former Starbucks executive; a former executive of Levi Strauss; an executive

with the Bill & Melinda Gates Foundation; one from engine maker Cummins; and the CEO of YUM! Brands Taco Bell



Although it’s important for a business to bring in outsiders to a board who can provide a fresh perspective, it’s equally

important to have people serving who understand the industry, too, otherwise they’ll be more likely to defer to the CEO.

In Harley’s case, Levatich is seen as “the motorcycle guy,” and his prescriptions for rectifying the situation will be viewed

in a more positive light than perhaps they ought to be.



Read More: