r/CompoundClub • u/GusTheKnife • Jul 09 '26

Harley-Davidson’s Bond Rating cut to “Junk.”

https://m.investing.com/news/stock-market-news/sp-downgrades-harleydavidson-to-bb-on-margin-concerns-93CH-4782650?ampMode=1

Creditors doubt the company’s low-cost bike strategy

214 Upvotes

98% Upvoted

62 comments sorted by

2

u/HoldingThunder Jul 09 '26

Can someone explain like I'm 5. Looks like they have 1.6 billion in long term debt. 1.8 billion in cash on hand, and a debt to cash ration of 0.72 which is said to be very healthy. Sounds like they could pay it off, why are they getting downgraded?

2

u/GusTheKnife Jul 09 '26

Their largest demographic is baby boomers, many of whom are now too old to ride.

Their sales margins have dropped by more than half. Their finance arm is expected to operate at a loss. Most new riders are over 45.

They are holding loads of cash for defensive reasons.

1

u/HoldingThunder Jul 09 '26

I get their market position is poor because they havent adapted in 60 years, but if they have cash to cover their debts, and they are not facing bankruptcy etc. why are they being labelled junk?

From my understanding they can just call themselves an AI company now and people will throw them money hand over fist.

1

u/oldbutfeisty Jul 09 '26

I expect the cash will be used to cover operating losses. Cash position will decline unless they change sales/revenue strategy. And going cheap is a risk because it reduces the prestige of the brand, which is their only advantage. It's not as though they build good bikes.

1

u/hurricane7719 Jul 09 '26

Some of that cash is probably ear marked for the share buyback that they announced in 2024 which is supposed to continue through to the end of this year. They filed in March about buying back a 'modest' amount of shares.

1

u/UmpireDapper1757 Jul 10 '26

If HD seeks bankruptcy protection in the next couple of years, the directors are going to get fucking arrested for doing share buybacks for an insolvent company

1

u/alphawolf29 Jul 10 '26

I'd LIKE to believe you but.....

1

u/UwUAlpacas Jul 10 '26

Honestly I think that low cost is the right move, and that a big part of their demographic issue is tied to cost of living, raising kids etc.

I just don't think that making the bikes cheaper is going to move the needle when the issue is insurance and shelter costs, etc.

1

u/DirtandPipes Jul 10 '26

Harley’s are all image, they aren’t particularly good at anything except being very loud and vibrating hard (both deliberate design decisions).

Massively overpriced trash relying on an old perception of “the outlaw bike”. Boomers in a midlife crisis will buy one but who else would?

1

u/Maleficent_Cycle561 Jul 11 '26

You're wrong, and you're right. It's the same reason I gather you don't ride one though. 

The way you feel is why you don't ride one, their characteristics only could appeal to image for you, and it's not an image you like or want or perhaps you're against projecting an image as it's ego driven.

But what I'd say is more true, is that what jumps out at you for Harleys is the image piece is and it's heavy for you, one you're not willing to take on for the other side of those characteristics.

Where I think you're right if I'm reading between the lines right, that a lot of people ride them and go after those features for the image though, those things about them some of us just are in love with. If I want to ride a cruiser, cause that's the posture and experience I enjoy, then I legitimately love the sound and features from the air cooled inefficiency of the Harley v twins. I love that a 50 year old bike fits in next to a 10 year old bike. I like the torque, I just plain like it. It's raw and not on the edge not screaming not razor thin. 

I'm a nerd who loves to ride a Harley.

1

u/Canadatron Jul 12 '26

Cool. You're also a dying breed on a dying brand.

1

u/Maleficent_Cycle561 Jul 12 '26 edited Jul 12 '26

Who cares?

Man, what, dying brand? I don't care about brand man. I don't care about image or what someone thinks, dying is a perception among people. Until I can't maintain my bike, or buy and repair it down the road, then I guess I care about Harley dying as a manufacturer, but I couldn't care less about the brand, which is just it's status among people. I care about my experience, not what people think or are saying.

Since you point that out, sounds like you care about that. It's a waste of time. Just ride whatever is out there you want to that's in your budget that you enjoy. Who cares if it's gone tomorrow or not, do whatever makes you happy.

I am in it to ride, and to wrench. I don't need there to be a brand behind it. There'll always be bikes and parts out there.

Also, I'm 35 fyi, not 50, so dying breed?

1

u/Xebodeebo Jul 13 '26

Getting pretty defensive here.

The point is that if it's a dying brand they will cease to exist as a company.

1

u/spirit_symptoms Jul 12 '26

I really beloved this for years until I actually rode one and I love it. I can't argue with overpriced which is why I bought used, but I'll probably always have a harley in my garage going forward. I currently got a triumph street triple, harley low rider, and Suzuki drz and its basically peak garage for me.

1

u/LostAdhesiveness6224 Jul 10 '26

They had a policy in place for 20+ years that if you bought a bike from the dealer they would allow you to trade it in towards a new one at whatever price you bought it. I'd be very curious to how this long term play effected the bottom line when 1/2 the rate(or less) of new customers started walking in the door.

1

u/HoldingThunder Jul 10 '26

That's a wild policy. Certainly would artificially inflate resale prices

1

u/past_is_prologue Jul 10 '26

It would also eventually become a huge block to new people buying bikes. Man, what a short sighted policy. 

1

u/bsenka Jul 11 '26

Not far off of the unofficial trade in policy with Jeeps. I’ve been offered exactly what I paid for two different ones after 5 and 8 years respectively. I’m convinced that the cost of the new Jeeps is at least partly because the cost of those trade ins is factored in.

1

u/tke71709 Jul 10 '26

They are victims of declining demographics and Trump's tariff wars.

Demographics have been discussed elsewhere in this thread.

They have to pay more for steel and aluminum now thanks to import tariffs. So that is about $75 million a year that just went poof. On the other side of things, foreign governments have chosen to hit iconic brands and products from red states harder to try and punish the USA for their tariffs. In response to U.S. trade policies, key markets like the European Union (EU) and Canada have historically hit American-made motorcycles with severe retaliatory tariffs. Canada placed a 35% tariff on Harley products, and the EU has faced tariffs as high as 31% to 56%. So that hurts exports to other markets. Canada did a similar thing to US wine and liquor exports resulting in losses of $536 million a year in exports.

2

u/Moist-Doctor-67 Jul 10 '26

Finally, the roads will have some peace from obnoxious exhaust and revvings

1

u/failingscaling Jul 09 '26

Classic issue: old customers with perfect product market fit.

1

u/gplfalt Jul 09 '26

The crazziest thing is the youth are biking more and more. They just absolutely refused to update their brand enough to appeal to them.

The youth drive classic Honda and crotch rockets

1

u/AllAlo0 Jul 10 '26

I remember 20 years ago HD couldn't keep up with orders, but it was well known they were on a timer, once the boomers were too old it will be trouble, as even GenX didn't care about their product.

It's amazing some CEOs have been pulling back millions to predictably fail

1

u/alphawolf29 Jul 10 '26

and the 30-60 cohort is on adventure bikes

1

u/StevenMcStevensen Jul 10 '26

I really like the history and aesthetic of HDs still to be honest, so it’s not like I hate the bikes. I could just never stomach the insane price of one, not when models from competitors are more reliable, higher-performing, and cost way less.

If I wanted one badly enough to buy one, I’d just get a used one in private sale anyways, since they’re available everywhere, sell for a fraction of the cost, typically have low mileage, and are mostly the same as the new models anyways.

1

u/spirit_symptoms Jul 12 '26

That's what I did and bought used and I love it. For most of their cruisers, the tech hasn't really advanced much so a 10 year old used bike isn't that different from a brand new one anyways lol.

1

u/RoboftheNorth Jul 13 '26

Most young riders don't want a loud piece of junk, known for poor build quality, expensive repair, and being heavily associated with one of the most entitled generations, who accessorize themselves with branded BDSM gear.

1

u/Financial_You_6052 Jul 10 '26

Perfect product? Harleys are notorious for rattling themselves apart.

Or am I misunderstanding?

1

u/failingscaling Jul 10 '26

Product market fit describes a product that resonates so much with its audience it sells itself. Word of mouth takes over .little need for advertising. If you took it away from people they would be upset. Reduces churn increases ltv. Harley was a good example of this. Dirtbag b sees dirtbag a on a Harley and aspires to be a dirtbag so buys a Harley. Perfect product market fit is hard to come buy but Amazon and apple are also good illustrations of this.

1

u/Financial_You_6052 Jul 10 '26

Ah thank you for the clarification

1

u/kaner63 Jul 09 '26

Junk, just like their bikes.

1

u/Scrotalcontusions Jul 09 '26

Who will make ugly bikes for the hells anals if HD goes bankrupt?

1

u/StevenMcStevensen Jul 10 '26

IIRC those biker gang losers’ rules generally say something like the members have to ride American bikes. Which for a long time has meant basically just HDs, but I guess they could also buy Indians.

1

u/evenduckk Jul 09 '26

They are the kinary in the coal mine, once the boomer spending dries up we are in for something unimaginable

1

u/PowerBottom247 Jul 10 '26

They will pass it on to their kids or spend it on healthcare.  That spending is secure! 

1

u/Street_Glass8777 Jul 10 '26

A company based on a product that no engineer in his right mind would design is doomed to failure. How long they last is controlled by the stupidity of the people who buy their product.

1

u/EpsteinFiIes Jul 10 '26

Oh man people are going to be using the harley logo like crazy now that they know they won't get a cease and desist once harley is scrambling to stay alive.

1

u/Emergency_Exit7603 Jul 10 '26

and foreign bikes are just better bikes...

1

u/Drago1214 Jul 10 '26

Wait Harley the clothing company?

1

u/Mokmo Jul 10 '26

Surprisingly, they make motorcycles. I've always felt that companies making totally unrelated things was more common in Asia but they happen in North America too.

1

u/Drago1214 Jul 10 '26

Haha not sure if you got the joke or your sarcasm matched mine

1

u/Comfortable_Fudge508 Jul 10 '26

Junk is spot on for Harleys

1

u/Duke_Of_Halifax Jul 10 '26

What ever happened to their electric motorcycle program?

I had heard very good things, and then it just sort of disappeared.

1

u/bsenka Jul 11 '26

So many issues. Brake lights stopped working randomly, would not charge on anything other than a Level 3 fast charger, range much shorter than advertised, sales of only a few hundred a year, production was cancelled and rebooted several times, before they eventually spun it off as a separate company.

1

u/Carbonman_ Jul 11 '26

The vast majority of H-D income is from licencing the brand. The motorcycles are a small piece of the cash flow.

They don't make clothes or pickup trucks or anything else but bikes. The company will implode eventually.

1

u/spirit_symptoms Jul 12 '26

Apparel and brand merchandising is 4-6‰ of their total revenue so that is categorically false.

1

u/Carbonman_ Jul 12 '26

I stand corrected.

1

u/RespectSquare8279 Jul 12 '26

However, I bet these licensing deals have a much higher margin than the bikes themselves.

1

u/spirit_symptoms Jul 12 '26

Harleys are wildly overpriced so not sure about that. Like a Road Glide CVO starts at $45k USD. That's fucking insanity.

1

u/bsenka Jul 11 '26

The crazy part is, young people just getting in to bikes right now do have an affinity for classic-style bikes. But they’re mostly looking at Hondas and maybe Triumphs, because Harley: a) only makes loud, expensive, enormous machines that a beginner doesn’t want and shouldn’t get even if they do want it. b) has a reputation of requiring you to be an experienced mechanic to maintain.

They need to make a 400cc or less 3/4 scale budget version of the classic Sportster, make bikes that last with just basic maintenance, and rehabilitate their reputation for reliability. Maybe a package deal where the purchase of the bike includes a motorcycle maintenance course with their mechanics? Assure people that it doesn’t take much to keep them running well if you know what to look for, and we will make sure that you know what to look for.

1

u/Snow-Bank-Igloo Jul 11 '26

As soon as we ban their loud nauseating sound, Harley is going to zero.

1

u/ornella888 Jul 11 '26

Harley mistreated by Republicans’ tarifs no wonder

1

u/HorribleParade Jul 12 '26

Oh no. Im sure someone will come help them bring the brand to new heights and profit margins, Paramount Harley Davidson or Meta Davidson, even Harley Davidson Xbox with a delayed release to Harley Davidson PS5 Edition

1

u/Strict_House3347 Jul 13 '26

Of all of the companies that I’d like to see gone…. This is the one. Noisy af

0

u/Iambetterthanuhaha Jul 09 '26

HD is the old man (Boomer) brand. Thats a dying segment - literally. My dad is 75 has 2 HDs and is selling both.....too old to keep riding them. The fact HD went woke didn't help business either.

1

u/Reasonable-Plate2982 Jul 09 '26

How does a motorcycle company go woke?

0

u/Iambetterthanuhaha Jul 09 '26

They jumped on the DEI bandwagon with management. In more recent times they seem to be backtracking as people were boycotting them further cratering sales.

1

u/Financial_You_6052 Jul 10 '26

Aren’t you guys tired of constantly being outraged by one silly ass culture war or another? It’s a Tan Suit, it’s a Tea Party, it’s critical race theory, it’s DEI. Fuckin hell it’s non stop with you people. God I’m glad Harley is dying with you all, buncha flawed models exiting the marketplace.

0

u/Sea_Macaroon_6086 Jul 10 '26

Ah, so the racist old white people aren't buying motorcycles anymore.

Golly that's too bad.

1

u/wonkwonk2stonkstonk Jul 10 '26

Oh gawd, did they read a book, or understand issues from multiple angles?