October 16, 2009

The essential American story

This is the story of a genuinely American company. Conceived in a 10’ by 12” wooden shed, sired by a 21-year-old kid with a penchant for speed and a talent for mechanics.

It was in 1901 when William S. (Bill) Harley penciled out a drawing for a small engine intended to be mounted onto a bicycle frame. He showed his drawing to school chums Arthur and Walter Davidson. Together these men built the first American motorcycle. Two years later they sold their first to another school chum. The Harley-Davidson Motor Company was open for business, and Bill shepherded the company from upstart, through war, into legend.

In 1943, at the age of 66, the kid with the dream died. Bill Harley's concept had become a great success, built a great company, and made the American motorcycle king. It would reign for several more years, but the beginning of the end came in 1965. With all of the original founders now dead, the Harley-Davidson Motor Company, privately held for over 60 years, became a publicly traded company.

Many would consider this to be the pinnacle of success, but historically similar stories have not always had dream-like ends, and Harley-Davidson would be no exception. In 1969, only a few years after going public, Harley-Davidson announced a “merger” with the American Machine and Foundry Company (AMF). The die was cast.

The next ten or so years would prove nearly fatal for Harley-Davidson. Under AMF management, the original American motorcycle company sacrificed quality for expediency, innovation for mass marketing, and reputation for short term profit. Investors made big bucks for a time, but as both sales and reputation plummeted, the profit takers cut and ran. Shares were sold in volume and the company’s value sank nearly as low as employee morale. The company product, once the envy of every hairy-legged country boy, became all but reviled in the American marketplace. As Harley slid to near oblivion, innovative new Japanese bikes took over the bulk of the market share. The imports bikes would never look back.

As anyone even the least bit interested knows, the Harley story did not end there. They were down, but old-time Harley management knew they were not out. In 1981, a group of 13 employees purchased the company from AMF in a leveraged buy-out, and began an undertaking that has surprised even die hard skeptics like me.

The next five or so years of Harley history saw renewed focus on quality and technology. Outsourced, low bid parts purchasing and mass marketing policies were replaced by improved, in-house manufacturing techniques, strict quality control, and targeted marketing. Many of Harley’s new processes were learned from the Japanese, their greatest competitors. As product quality improved, sales and employee morale followed. Today the Harley-Davidson is again the Great American Motorcycle.

The dichotomy that is Harley-Davidson is well illustrated by comparing the 75th Anniversary bikes, produced in 1978, against the fine fine craftsmanship and high quality of 2003’s 100th anniversary bikes. It has taken a long time for Harley to rise from the ashes, but the company has restored not only their reputation, but some small faith in American innovation. We must hope that Harley-Davidson sets an example, and that this is not too little, too late.

Though a tale of great rebound, this story begs a question. Where has American innovation gone? Harley-Davidson did not hold an exclusive to the profits over quality story. Looking around it seems that as America becomes more a culture of consumption and less a culture of innovation, all the great success stories are crumbling. Look at big names like General Motors and General Electric, or products such as Master padlocks, Black & Decker power tools and Hoover vacuums.

American companies are being sold off to foreign interests or taken over by managers with a decidedly low-tech mass-market mentality. The philosophy seems to be "Make them faster and cheaper, then advertise the hell out of them so everyone will want one." This is a dead end philosophy that will eventually bankrupt any business... if it doesn't bankrupt this country first. Harley-Davidson's rebound may represent the rare exception to the rule, but only because a handful of employees were more interested in quality than short-term profit.

More products manufactured overseas are imported and sold in stores such as Wal-Mart and Home Depot, and more American factories are shuttered. Americans demand low prices, and quality goods no longer sell well because they are more expensive. American companies responded by cutting quality and out-sourcing production. This shored it up for a time, but not long. There are very few Made in America products left. The American automobile manufacturers seemed solid enough at first, but even those are threatened by this most recent recession. Cash for Clunkers sold more imports than Chevrolets, Chryslers and Fords.

Look to the boardrooms to understand this phenomenon. The heads of most major American manufacturing and technology companies are salesmen and bean counters, with no knowledge of, or interest in the quality or technological innovation required to make a product of quality. Instead they rely on the often-told-lie and slick, weasel-worded advertising to maximize profits, moving cheaper products in shorter time.

Discussing Microsoft and the technology sector in general, Badtux offers an interesting corollary to this over on his blog.

“…this is true of most big companies today in the United States. They're run by salesmen, cronies of the oligarchs who control half the wealth of the US, and salesmen are not by nature reflective souls and are chosen for loyalty, not for intelligence. They arrogantly believe it is not necessary to understand technical details of what they're selling in order to make proper judgments about its content and scope, all they have to do is sell, sell, sell and it all works out in the end. The problem is that since they don't understand the technology and worse yet have no desire to understand the technology, they're ill equipped to make critical decisions about product direction and feasibility. They fall prey to yes men, fads, and scams, and pour company resources into directions that are not productive.”

The roots of the tree of greed are beginning to grow large under the foundation of our country, and the cracks are showing. If it all falls down around our ears, I wonder where the bankers will run. You can't eat money.

[I have a friend with one of those AMF Harley's, which sits in my shop waiting for parts more frequently than it spends time between his legs. That was the reason for this piece, which has been sitting unfinished and idle in my drafts folder for a couple of months. The penguin's piece prodded my writer-blocked muse off the couch... Thanks Tux.]



jbrock said...

And now they've thrown Buell under the bus.

Mule Breath said...

Yes, which has caught me by surprise, but the explanation seems somewhat valid. Buell was an attempt reach a market that has been dominated by rice burners since the 70's. HD's core market has always been heavy iron. As unfortunate as it may seem, Buell seems to have not caught on.

Mule Breath said...
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Mule Breath said...
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jbrock said...

Yeah, I'm afraid you're right ...

So it's back to rice grinders and Eurosleds for me.

Mule Breath said...

You may have noticed from previous blogs, but I don't ride Harley's either. I admire the comeback, but I ride a rice burner.

Anonymous said...

As a rider who has no personal Hog experience, I'd like to read a knowledgeable review of Harley engine design progress up to the present day ignoring the AMF era. It has always seemed to me that most innovations by Harley were dead end sorts of things - like the short life of the dohc Daytona race engines that never hit the street (that I know of). Visually, the bikes just seem to get heavier, more bulky, and expensive over time. Their quality (aside from the AMF era) probably has improved but it's still a lump and too damn expensive. I guess I'm just disappointed that "lean and mean" was never a Harley design goal. . .

Mule Breath said...

Jeg, you might try a couple of available web pages for some bits of information, HERE and HERE, but I've not seen any trustworthy reviews covering engineering or design progression.

No, 'lean and mean' was never a goal for HD, which was the reason I never was lured to that side of the tracks. My first bike was a Honda, I've owned a couple Suzukis and one old Triumpth 650, but otherwise I've been a Kawasaki fan. My current V-twin Kaw is more reliable, rides smoother, has greater acceleration and cost a fraction of the HD competition.

Anonymous said...

Thanks for the two links. Good data but not much on design progression. The fact that Japan's manufacturers have spit out new engine designs so often makes me wonder how HD stays in business. I know there is a hard-core HD fan base, but most of them don't ride stock bikes. When the current group of "wanna-be-bikers" get a few more years on them, I look for Harley sales to plummet - unless a big helping of "lean and mean" is found somewhere in HD's design/engineering spaces.

Rogue Medic said...

How many of those American car companies are American?

how many of the foreign car and motorcycle companies make their cars in America?

Are we more concerned with how much of the cars and bikes actually use American labor, American parts, or American executives?

I have never owned a Harley. I understand that they are easy to work on and that parts are more interchangeable than on any other brand, but when you use a motorcycle for daily transportation - rain, snow, sleet, et cetera - how do you justify spending that much on a Harley, when an import will be more reliable and much cheaper and will handle better? A longer wheelbase is nice in the snow, but that is not the only time I would ride.

I bought a mini-pickup back in the late 80s. There were no American made models. Every American company had their mini-pichups made under contract by a foreign company and then imported them to the US.

I got rid of the mini-pickup for the same reason I stopped riding. As a single parent, it was not appropriate transportation. I bought American. I became very well acquainted with mechanics. Foolishly, after a few years of that, I replaced the clunker with another American car. After a while and much more mechanic contact than I needed, I bought a foreign car that is made in the US. Now I only deal with maintennance.

It is not really different from intubation. Some places produce quality and some do not. The responsibility is with management.

A great book that addresses the problems of corporate innovation is Re-imagine! Business Excellence in a Disruptive Age (2003).

His blog is also full of great information. Tom Peters.