Dollars & Sense

Harley road hogs are going high-tech

Updated: 2013-08-31T02:56:17Z

Bloomberg News

Harley’s hogs are becoming high-tech road warriors.

Harley-Davidson’s newest touring models offer a voice-activated and touch-screen GPS system, the first on a production motorcycle. Just one of its tricks: When the bike is getting low on fuel, the system finds the nearest filling station and maps out directions on a 6.5-inch screen the rider can control by voice, touch or joystick.

What’s also new is how the company, which has an assembly plant near Kansas City International Airport, decided what to include: It asked its customers. For the first time, 110-year-old Harley is using customer focus groups and dealer clinics as it develops models and features. Last week, the first wave of new bikes from those changes began arriving in dealerships.

“Harley was an ‘if you build it, they will come’ kind of company,” said Sharon Zackfia, an analyst at William Blair & Co. in Chicago. “The recession was really what brought them into the 21st century. A lot of other companies had those moments long before.”

Chief executive officer Keith Wandell also speeded up the process by avoiding late changes that add cost and can reduce quality.

“Since day one, we’ve been trying to transform the company in a way that is going to make us stronger and more sustainable in the future,” Wandell said. “That’s what we said we wanted to do four years ago and, voila, here it is.”

The high-tech features are not included on the smaller cycles built at the Kansas City plant, which has about 800 employees. The plant here assembles the Sportster, Dyna and V-Rod models.

For most of its history, Harley sold as many motorcycles as it could make to customers it knew well: older, affluent, white American men. The global recession changed that. Revenue dropped by almost a quarter from 2006 to 2009, prompting Wandell, newly installed from auto parts maker Johnson Controls Inc., to cut costs, speed development and seek more advice on how to put new customers on bikes.

Matt Levatich, Harley’s president and chief operating officer, called it “a monumental mentality shift” after “107 years of inertia.”

In Minneapolis, three dozen people gathered in a hotel conference room for a few days. They got early peeks at prototypes and were asked to weigh in on the strengths and weaknesses of the competition’s bikes. Harley staged focus groups as far away as Europe and Tokyo.

The company also opened the doors of its product development center in suburban Milwaukee last year to dealers and sales managers. About 800 engineers and designers there are developing future Harleys. Only a third of Harley’s 5,800 employees have access to the building, and it wasn’t until last year that a group of its dealers was allowed in.

The new Touring line of motorcycles, some of Harley’s priciest and most profitable, start at $18,249 for the Road King and $25,899 for the Ultra Limited and can cost more than $40,000. The line appeals to Harley’s traditional customers as well as its new buyers: women, younger drivers, African-Americans and customers outside the U.S.

The Street Glide, starting at $20,399, is Harley’s top seller. It’s the kind of bike state troopers ride, with saddlebags, fenders and a fairing, which holds the infotainment screen.

Bill Davidson, great grandson of the co-founder, rode an amber whiskey Street Glide Special straight from the York, Pa., assembly line to Milwaukee for the company’s 110th anniversary celebration this Labor Day weekend.

The infotainment system linked to his iPhone with a USB cord tucked into a compartment to the right of the screen. He could control the song selection and navigation system by voice, buttons, touch screen or joystick.

Harley, which received about 25 percent of revenue outside the U.S. in 2006, is forecasting 40 percent of sales from international markets by next year.

In its home market, Harley faces established foreign rivals such as Kawasaki, Honda and BMW and a returning domestic challenger: Polaris Industries Inc. is bringing back Indian-brand motorcycles priced from $19,000 to $23,000.

Of the 282,000 new heavyweight motorcycles registered in the U.S. in 2012, 57 percent were Harleys, a gain of 2.3 percentage points since 2010, the company said in its annual report. Heavyweight motorcycles represented 62 percent of the new bike registrations in the U.S. last year, the company said.

Other innovations include electronically linked front and rear brakes that shorten stopping distance and a twin-cooled engine that lowers the temperature of the air in the exhaust pipe.

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