Queasy Rider: The Uncertain Future of Harley-Davidson

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S1: Paul Johnson is the curator of transportation at the Smithsonian’s American History Museum.

S2: I’m the same guy. I do maritime and motorcycles.

S1: One thing you do if you’re in charge of motorcycle exhibits at the Smithsonian is you ask people to donate motorcycle memorabilia. People like stunt writing legend Evel Knievel.

S2: I remember we asked him once. Can we have a helmet? Because he said he also gave us one of his jump costumes. So we don’t have one of your helmets. Can you send us one of you’re jumping and said, oh, sure, I got a lot of those. So about a month later, we got a helmet that had a big scrape on the outside and he stopped jumping in the 1970s. So I looked inside the helmet because it didn’t look quite right. I looked inside and it had a 1991 safety sticker. So I think he’d taken it out to his driveway and scraped it along the driveway and then sent it to as one of his junk helmets.

S1: But Knievel did give the museum some genuine artifacts from his career as a stunt performer, including the 1972 Harley-Davidson Express 750 on which he performed some of his most famous jumps. That Exaro, 750, is one of the crown jewels of the Smithsonian’s motorcycle collection. But it’s not the only Harley Davidson that Paul has acquired, which makes sense. Harley is a story brands like Levi’s or Coca-Cola, one that iconically represents America to itself and to the rest of the world.

S2: The first Harley was actually given to the museum by a staff person back in 1947. Paul Gerber was the first curator of what’s now the Air and Space Museum. He bought the bike after World War One in 1918. It was used it’s a 1913 model, Harley Davidson, about five horsepower, and he bought it for general transportation in 1918 and then started work at the Smithsonian 1920. He used it as his personal transportation and daily commuter for years.

S1: Paul Johnston is an avid motorcyclist himself. He has a deep appreciation for Harley’s, and he’s followed the various ups and downs of the company, mostly downs lately.

S2: As you probably know, Harley is struggling a little bit. They’ve just laid off several hundred staff to try to stay afloat.

S3: Harley Davidson is hitting a major speed bump. Its most reliable customers have gotten old and newer generations don’t seem as entranced by the Harley mystique. Meanwhile, a standoff with President Trump has left Harley off balance, scrambling to maintain its made in America image at home while fighting off tariffs from abroad. All this has left the company at a desperate crossroads, but it may have found a promising new direction earlier this year. Harley brought in a new CEO replacing a 25 year veteran of the company with a confident new leader from an unlikely industry.

S1: So their new CEO had been like a footwear CEO. He came from Puma as a motorcycle purist, you know. Do you have any concerns about what he might do to this classic company?

S2: He might save, who knows?

S3: Can Harley Revit engines soar over nine school buses, stick the landing and recapture its past glory? Or is the man now holding the handlebars about to steer into a ditch?

S4: I’m Seth Stevenson. Welcome to Thrilling Tales of Modern Capitalism. Today on the show, Queasy Rider, The Uncertain Future of Harley Davidson.

S2: Harley was incorporated on September 17th, 1983, by Mr. Harley and Mr. Davidson in Milwaukee, Wisconsin. I owned up for that answer.

S3: Bicycles were the craze of the 1896. William Harley was working at a bicycle factory in Milwaukee when he and his friend Arthur Davidson, both in their early 20s, had a thought that lots of other tinkerers were having right around the turn of the century. Wouldn’t it be fun to strap a gasoline engine onto a bicycle frame and see what happens? Harley Davidson’s earliest contraptions were designed for racing, but it turned out motorcycles weren’t only fun. They were also a very useful means of getting around, especially in an era before there were lots of paved roads. The military certainly thought so. At the height of World War One, Harley provided fully half its motorcycles to the war effort. The first American to enter Germany at the war’s end did it riding on a Harley.

S1: A host of other motorcycle brands launched alongside Harley in the early decades of the 20th century, but between the wars, many of them failed. Paul Johnston says they were victims of competition from an equally affordable but more practical means of propulsion.

S5: The Model T really wiped out early motorcycle manufacturing because those were available for only a few hundred dollars, whereas a bike was only a couple of hundred dollars, but a Model T followed by the model. Those were inclosed family vehicles. So I think people wanted something that they could get their families around in as opposed to maybe put a sidecar on a motorcycle. And then you can get your wife and a kid or a dog in there or whatever.

S1: By 1931, with the motorcycle industry battered even further by the Great Depression, Harley Davidson and its main rival, Indian, were the only two American motorcycle brands left standing. Harley sales were decimated. It took the onset of another war to revive the company.

S6: How is the pace of modern war speeds up, the motorcyclist becomes more and more vital importance not only for the carrying of messages, but the liaison and reconnaissance work.

S1: Harley made about 60000 motorcycles for the military during World War Two. Many American GIs first discovered the exhilaration of riding a motorcycle while serving overseas when they came back. They found a market flooded with cheap military surplus Harley’s and they snapped them up as toys. Some started riding together in groups as an escape from civilian life and a sort of post-war therapy, mixing the freedom of the road with the camaraderie of fellow veterans. Today, we might call these motorcycle gangs, but that description has negative connotations. Those first gangs were just blowing off steam and having some fun. They weren’t associated with criminality until one magazine chose to run a sensationalistic photo essay.

S2: And there was a very famous issue of Life magazine that talked about a motorcycle gang and riot in Hollister, California. It was a Fourth of July meeting. And yeah, if you guys got drunk and might it on a weekly or two and there might have been a fistfight or two, there’s there’s one or two gang members that still live that remember that incident. And that’s the actual origin of the bad boy motorcycle image. Even though the picture of the bad boys sprawled out on a motorcycle with beer bottles all around him was staged in a phony shot and really captured the imagination.

S7: This is where it begins for me back on this road.

S3: That 1947 Life magazine photo spread inspired a short story called The Cyclist’s Raid, which was turned into a 1951 movie called The Wild One. It stars Marlon Brando as the leader of an out-of-control motorcycle gang that terrorizes a small town. Brando sports a leather jacket, dark sunglasses and enough nihilistic attitude to launch an enduring stereotype.

S6: Hey, Johnny, what are you rebelling against? What do you got?

S1: The Wild One firmly established the idea of bikers as members of an outlaw subculture. It kicked off two decades of movies about glamorous motorcycle riding outlaws named.

S4: This year, the judges of the Cannes Film Festival presented the award best film by a new director to Easy Rider. It’s the story of a man who went looking for America and couldn’t find it anywhere.

S1: By 1969, the counterculture had longer hair and a more psychedelic aesthetic, but it still rode Harley Davidsons.

S8: All we represent to them and an assembly needs a haircut. Oh, what you represent to them is freedom. What the hell’s wrong with freedom? And that’s what it’s all about.

S1: Easy Rider, which featured, lovingly filmed, tricked out Harley choppers, was a blockbuster. It cemented the notion that motorcycles weren’t mere transport or recreation.

S3: They were a lifestyle and a slap in the face to authority. The baby boomers who made Easy Rider a hip embarked on a generational love affair with motorcycles. At the end of World War Two, there were about 200000 registered motorcycles in the U.S. 25 years later, there were almost three million. But increasingly, those motorcycles were made in Japan. The 60s saw brands like Honda and Yamaha undercutting Harley with bikes that were affordable and reliable. Harley needed capital to compete. So we went public in 1965, but within a few years it became a ripe target for hostile corporate takeover. The family members and allied executives who still controlled Harley stock scramble to steer the company to a buyer they trust. It turned out their trust was misguided.

S9: Harley Davidson has been quality and proponents for more than 70 years. That’s why AMF puts his name on the line. To add, that name adds even more value to sports products like Harley Davidson motorcycles. AMF brings out the best.

S3: Harley was bought by American Machine and Foundry, or AMF, in 1969. Right around the time Peter Fonda and Dennis Hopper took to the highways in Easy Rider. AMF made all kinds of sporting goods but was maybe best known for its bowling equipment.

S1: Balls and pin setting machines in such its entry into motorcycles did not go well as just one cog in a big conglomerate. Harley didn’t get the attention from AMF that it had grown accustomed to getting from people whose last names were Harley or Davidson. Meanwhile, AMF insisted on speeding up Harley’s production but didn’t bother to upgrade its factories.

S7: Only a few months ago, this plant was making pin setters and bomb cases, but our motorcycle planning group completely changed.

S1: The upshot was that Harley’s quality suffered and customers noticed that the newer bikes just weren’t as good. By 1981, Harley was wobbling badly. A group of loyal Harley executives, frustrated by how the brand had been tarnished under a decade of umph ownership, arranged to buy the company back for 81 million dollars with a plan to restore Harley to its former glory. Their plan got kick started with a little help from Ronald Reagan.

S10: Thank you very much.

S1: In 1982, Reagan boosted tariffs by 45 percent on imported Japanese bikes.

S11: The agreement called the Get Agreement. That’s the General Agreement on Tariffs and Trade.

S1: This move was at odds with Reagan’s free trade philosophy, and it was clearly intended as a targeted lifeline for Harly, the new tariffs applied to larger heavyweight motorcycles, which were the only kind Harly was making at that point, and by then completely ceded the smaller, sportier categories to the Japanese.

S11: You asked us to give you breathing room so you could finish getting into shape to meet unexpectedly strong foreign competition. It was like giving a boxer a few extra weeks of training before a fight. We looked at it carefully. We asked, is Harley-Davidson really serious about getting into shape? And the answer came back a resounding yes. So when I was told that you wanted a little more time to train, I said, yes, kick on the engine, Harley, and turn on your thunder.

S4: Aided by these tariffs and by better management, Harly slowly began to write itself. The company went public again in 1986, expanded along with the economy in the 1990s, and established a thriving side hustle with licensed merchandise like Harlene T-shirts. In 1996, it attempted in vain to trademark its beloved engine noise, the so-called potato potato created by the syncopated firing of two cylinders.

S3: Baby boomers who’d been turned on by Easy Rider were now entering middle age and combining lots of disposable income with a deep psychological need to prove to themselves that they were still rebels at heart. Harley was ready to meet that need with big, fancy, expensive bikes that looked badass but were tailor made for cushy, comfortable weekend rides.

S1: It was all smoothly paved road right up until the 2008 recession, when baby boomers wallets got walloped. So did Harley sales. Boomers were using their motorcycles for fun not to commute, and no one wanted to blow lots of money on a toy anymore. Harley struggled to recover ever since. This year, a new CEO hopped into the saddle and has been greeted as a potential savior. But the challenges in his path remain daunting for me, like one of the biggest questions I had.

S12: OK, you’re a marketing genius. How are you going to make millennials want to buy motorcycles? More on that when we come back.

S1: In the last few years, Harley’s traditional strengths have become its biggest liabilities. For instance, Harley’s quintessential American ness, Gabrielle Coppola covers Harley for Bloomberg News, and she says the brand draws deeply on its American provenance even if people don’t have a motorcycle.

S13: It’s just like, oh, American like that American brand appeals. It translates. I know also a lot of Europeans, when they come to the U.S., part of Harley’s businesses, people want to rent a Harley Davidson. It’s part of like, oh, I’m in America, let me rent a Harley Davidson and go right on the open road made in America.

S1: With the arrival of a new president with a fixation on American manufacturing seemed like good news for Harley. Company executives were invited to the White House less than a month after President Trump’s inauguration. It looked like the beginning of a beautiful friendship. Little bit like it’s safe, right, for you. All right. But being a symbol of America turned out to be a problem for Harley. When Trump began trade wars with other parts of the world in twenty eighteen, when Trump imposed 25 percent tariffs on European steel and Europe was looking for a way to strike back, it wanted to hurt something that represented America.

S12: And in retaliation, Harley became a hostage or a pawn in this game. And Europe said, OK, if you’re going to do that to us, we’re going to place a tariff on imported Harley motorcycles.

S1: That tariff would have added thousands of dollars to the cost of buying a Harley in Europe, but only if that Harley was made in America. So Harley started making more bikes in Thailand to sidestep the tariff, which meant Trump’s effort to protect American manufacturing. Allow Ronald Reagan in 1980 to have the opposite effect.

S12: And that is what created the rage on. The president made a lot of people angry.

S1: Harley Davidson, please build those beautiful motorcycles in the USA, please. OK, don’t get cute with us. Don’t get cute.

S12: So they kind of went from being this kind of darling of Trump because they represent American manufacturing in history and heritage, too, in his eyes, not supporting the narrative and his trade policy. So that caused some brand trauma. I would say there are a lot of Harley writers that are Trump supporters because I think that is one of the main values of the brand of why people want to ride them, as they say, well, I want to buy American. So anything that kind of insults or dents that image is bad for them.

S4: Build them in the USA. Your customers won’t be happy if you don’t, I’ll tell you.

S3: So Harley found itself paying a price for being a treasured piece of Americana, and at the same moment it also found itself paying the price for its longtime romance with the baby boom generation. The boomers who longed to take to the highway with Peter Fonda haven’t abandoned Harley, but they’re causing the company problems in a few ways because boomers are its core customer. Harley caters to them almost exclusively, and at this point that means making huge comfy touring bikes. Those bikes are more expensive to buy, which is good for Harley’s profit margins. But they’re not a winning play in the long term.

S13: You know those big bikes you might see on the highway, it looks like you’ve got enough to put your luggage in it and like big radio stuff in the front.

S12: Those are not popular with millennials and younger people. And so that’s been this existential dilemma that Harley has been grappling with for at least a decade.

S3: Baby boomer motorcyclists keep getting older. Some have quit riding. Some have already gone to that motorcycle rally in the sky. Either way, Harley can’t count on their business forever. But because riders over 50 are still so crucial to Harley sales and because the margins on those pricey boomer bikes are as padded as the seats, Harley has been desperate to hang on to older customers. That has a downside. The Easy Rider thing is getting stale. Younger riders prefer cheaper, sportier bikes, and Harley hasn’t focused enough on that segment of the business to make it work. The result has been an accelerating death spiral. The beginning of 2020 saw the worst sales numbers in 16 years, and that was before the pandemic, when dealerships were shuttered. Those dismal results led Harley CEO to step down and a longtime board member to step up. His name is Johan ZATZ, and he’s cut from different cloth than previous Harley CEOs. He collects art plays, classical guitar. He’s an environmentalist. Maybe most surprising, he’s German. The first non American to lead Harley ZATZ comes from the footwear industry, and he’s famous for lifting Puma from bargain bin sneaker to stylish fashion brand. His first call with Harley investors this spring felt like a breath of fresh air.

S14: From my observations over the last two months, it is clear we are at a critical time in our history that requires significant changes to the company by key insight as follows.

S13: But he just has a lot of conviction behind what he says he’s got a plan, is clear on it, is confident, and the markets just are like, oh, like there’s like the sigh of like they got finally, like somebody who knows what they’re doing. Like, I think that was kind of the reaction that investors had.

S3: Harley boosters are hoping that Jochen Zeitz is marketing alone, can do the same thing it did for Puma, give a moribund brand some new cachet.

S13: He’s a retail guy. A lot of the other CEOs at Harley were manufacturing guys or industrial. They know how to fix production and know how to make the manufacturing run more efficiently.

S12: But when it came to understand the dynamics of retail, I think he is really good at that. And that’s maybe a strength where it might have been a bit of a weak spot in.

S1: The former CEO is short term play has been to cut costs and slow down production. He’s eliminating more than 500 jobs. He needs to get Hurleys bleeding under control. But in the longer term, he has a bigger problem.

S3: How can he reshape Harley’s brand so it can appeal to people under 50? And who will those new younger customers be?

S13: So they are trying to reach younger people, but not like a twenty year old who can’t afford the bike. I’ve seen on some of their social media channels, they had one guy who was like looked like he was South Asian and he was a doctor. And I feel like that is like their dream Harley rider of the future, you know, not just like the white guy with tattoos, but they want to get people of color with professional incomes who can afford their bikes in the future and making it cool with that set.

S3: Part of this will be about marketing and image shaping, but part of it’s about making new products that these new customers really want. Parley’s first stab is the live wire. It’s an amazing machine in many respects, an electric powered motorcycle that goes from zero to 60 faster than any bike Harley has made before. But starting at 30000 dollars, it’s at least three times more expensive than most sporty entry level bikes. And it’s a radical departure from the gasoline soaked vibe that Harley spent more than a century cultivating.

S1: Reconciling the electric bike with the Harley brand is a little tough, it doesn’t quite seem on Brand for Harley, you know, with its like roaring growling combustion engine. Just how do they make that fit their image?

S12: I think it’s a real marketing challenge. I mean, Yelchin, he thinks it’s great because, you know, he says, who would ever think that a Harley rider would want electric bike? But when you ride it and you feel it, it’s totally Harley. I don’t know if everybody agrees with that. It’s quiet. And I think the people that want the growl are always going to want the growl.

S3: This episode was produced by Jess Miller with help from Solutia Technical Direction from Merick Jacob. Special thanks to the Harley Davidson Museum for lending us some engine noises. Gabriel Roth is Slate’s editorial director for audio. Alicia Montgomery is the executive producer of podcasts at Slate. Jim Thomas is senior managing producer of the Slate Podcast Network. Next week on the show, what happens when a giant of the sharing economy faces an economic crisis and won’t share with the people who earn them their profit? My phone just wouldn’t stop ringing. Just cancellation, cancellation, cancellation. I just sat on the floor in my kitchen and just cried. That’s next week on Thrilling Tales of Modern Capitalism.

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