Harley-Davidson Puts a German Environmentalist in Charge

Mention the name Harley-Davidson, and visions of high-handled bikes growling down endless, sun-streaked highways instantly come to mind. Whether it was the 1951-52 Panhead Chopper that Peter Fonda rode across the country in Easy Rider or the 1991 Fat Boy in Arnold Schwarzenegger’s nail-biting chase scene in Terminator 2: Judgment Day, the bikes have always been able to evoke a powerful feeling of American nostalgia and freedom.

So what is Jochen Zeitz, a European environmental activist and celebrated African art collector, doing behind the handlebars of the U.S.’s most iconic motorcycle manufacturer? He’s trying to save it from becoming an anachronism.

Zeitz, who took over as chief executive officer of Harley-Davidson Inc. in February, is under pressure to turn around the storied company, whose heavyweight $22,000 bikes are prized by aging boomers but not so much by millennials.

He’s an unlikely savior. Unlike the Midwestern accountants and engineers who’ve led Harley over its 117-year history from its Milwaukee headquarters, 57-year-old Zeitz grew up in Germany and graduated with a degree in international marketing. He’s authored two books, a how-to on sustainable capitalism and a spiritual tome on management values he co-wrote with a Benedictine monk. In 2017 he turned his vast collection of African art into a nine-story museum on the waterfront in Cape Town. Zeitz speaks seven languages, plays classical guitar, and set up a foundation to support ethical eco-tourism like that practiced by his luxury resort in Kenya.

He can also see the spiritual side of motorcycling, as in 2013 when he attended a mass where hundreds of Harley enthusiasts took their bikes to the Vatican to be blessed by Pope Francis. “You’ve had the status quo replaced by a vision of this cultured, worldly, global person,” says Tony Gonzalez, a Denver-based industry consultant who works with Harley dealers. “If you look at most businesses right now, there’s a lot that are focused globally and trying to connect with a new customer.”

Zeitz earned his fortune and managerial stripes when at age 30 he became CEO of an almost bankrupt Puma SE and repositioned the sneaker company as a hip fashion brand. That launched the former Colgate-Palmolive Co. executive into CEO stardom, landing him on the board of Harley in 2007. He pushed the board to embrace business-friendly environmentalism by championing the company’s first all-electric motorcycle, LiveWire, and programs such as measuring supply chain impact.

A LiveWire sits parked in the Bloomberg Television studios in New York on June 23, 2014.

He took the top job after the sudden resignation of his predecessor, Matt Levatich, and immediately had to confront the coronavirus pandemic, which shut Harley’s factories and depressed sales already suffering from a five-year slump in the U.S.

Zeitz quickly pulled pages from the cost-conscious playbook he used at Puma, where one of his first moves was to walk into a sneaker factory in the company’s hometown in southern Germany and tell workers he was sending their jobs to cheaper plants in Asia. He’s dismissed roughly 14% of Harley’s workforce, including the chief operating officer, finance chief, and a swath of midlevel managers. While details of Zeitz’s turnaround plan beyond cost cuts have yet to be unveiled, he’s hinted at focusing on a more premium, high-margin product line—akin to what occurred with the Puma makeover.

So far, Wall Street is encouraged. Harley’s stock has jumped 50% since Zeitz first addressed investors on an earnings call in April, and a slew of analysts have either upgraded or started covering the shares, citing his record and the potential for a turnaround. Even activist investor Impala Asset Management, which tried to oust the previous CEO, appears willing to let Zeitz try his hand, after it negotiated the right to nominate a new board member.

The German marketing whiz still has his work cut out for him. Harley’s core baby boomer riders are aging out of the market. Millennials and Generation Z would rather buy an ATV or an off-road bike than a heavyweight Hells Angels cruiser. At the same time, Indian, another historic U.S. motorcycle brand, now owned by Polaris Inc., has been eating into Harley’s dominance of the heavyweight market, while Japanese and European manufacturers beat it to the punch on lightweight bikes.

Investors and dealers are hopeful that Zeitz’s marketing cred will enable him to succeed where his predecessors have fallen short. Keith Wandell, who took over at Harley in 2009, was an auto executive who upgraded manufacturing technology and forced unions to agree to job cuts. Levatich, an engineer, tried everything from expanding into emerging markets to offering less expensive lightweight motorcycles and e-bikes for children. Neither was able to combat the generational shift away from heavyweight motorcycles—about 78% of Harley’s shipments worldwide—that poses an existential threat to the company’s core U.S. market.

Zeitz in 2008 during his tenure at Puma.

One skill that may set Zeitz apart is that he knows how to make things seem cool. At Puma, he took a brand focused purely on athletic performance and repositioned it within the “sport lifestyle” niche, recruiting Madonna to wear the sneakers during her 2002 concert tour and featuring skateboarders in its ads. By the time he stepped down almost two decades later, Puma’s stock had risen 27-fold.

But Harley has been trying to reach younger riders for years. It started a riding academy two decades ago to help bring women, twentysomethings, Blacks, and Latinos to the brand. And today its female brand ambassadors fill up Instagram with adventure-porn posts of camping and riding on the open road. Still, UBS estimated in 2017 that the median age of Harley riders in the U.S. was 52.

Rather than ginning up fresh interest among twentysomethings, Harley is now hinting it’s narrowing its aim toward affluent professionals who can afford its pricey bikes. “We are sharpening our focus on products and customers who are riding Harley-Davidson motorcycles or who already have interest,” the company said in a statement.

Zeitz sees electrification as one solution to the brand’s demographic challenge. At a 2014 summit in the Swiss Alps on sustainable business, he crowed about a LiveWire prototype he was promoting. “The traditional hog owner is not necessarily the electric enthusiast,” he said. “But if you hear this bike and look at the bike, it’s totally Harley.”

LiveWire received raves from critics and enthusiasts, but its $29,799 price—roughly double a similar gas-powered Harley—has made it a tough sell. “Our youngest buyer was 72,” says Kevin Kodz, owner of Classic Harley-Davidson in Leesport, Pa. “They weren’t hitting the market they wanted, but those are the guys who can afford it.”

Defenders of LiveWire say it’s a so-called halo product, an object of desire and aspiration meant to redefine the brand. The company has said it plans to electrify other parts of its lineup.

Meantime, Wall Street is counting on Zeitz being a steely-eyed hatchet man rather than the eco-conscious idealist who earned the nickname “the sustainability Taliban” at Puma. By starving dealers of new inventory during Covid-19 shutdowns, Zeitz cleared a glut of used bikes that had been weighing on new-bike prices—a headache that dogged previous management. He’s also said he’ll invest more in Harley’s most profitable heavyweights.

“Cutting costs and improving the lineup and making sure the investments are into profitable products, they can do better,” says Bob Bishop, Impala’s chief investment officer.

While that may help profitability in the short term, Zeitz still has to grapple with Harley’s demand problem, says Robin Farley, an analyst with UBS AG in New York. “Harley has a top-line issue,” she says. “I don’t know if marketing solves it.” —With Richard Weiss

You can find the original article here.

Unikorn Staff
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