Harley-Davidson And The Credit Crunch

During the good times, up to the end of 2005, Harley-Davidson used its in-house finance unit to chase after subprime borrowers, making it too easy for some bikers to buy $20,000 motorcycles with no money down. The risky lending practice has obliged the Milwaukee Company to take a $6.3 million write-down amid rising delinquency rates and decreasing interest among buyers for its securitized loans. Harley-Davidson Financial Services (HDFS) has about 1/3 of its bike loans with subprime borrowers. Now there’s concern that the problems at HDFS could jeopardize Harley-Davidson’s perfect credit rating. As long as HDFS could package loans and sell them as securities to investors, the strategy worked. In the first quarter of 2008, though, HDFS was forced to retain $54 million in loans no investor would touch. Even fewer buyers stepped forward in the second quarter as loan delinquencies kept rising. Harley-Davidson just announced that their 3rd quarter revenues dropped 37%.  The shares have lost half their value over the past two years.

13 Responses to “Harley-Davidson And The Credit Crunch”

  1. 1 gVTX Oct 20th, 2008 at 4:00 pm

    My Honda VTX is paid for, kicks ass, and looks killer.

  2. 2 harry Oct 20th, 2008 at 4:10 pm

    Yep, that is a shame but you reap what you sow, now H-D needs to suck it up and press on. If you get an H-D, then it should be like buying a house, better have 10%-20% ready to put down before you fill out the credit application (I did). I was able to get a decent interest rate cause of it and I had the bike paid off in a few years. Now when the time allows, a few years down the road, guess what, chances are when I get me another Harley, I will do the same thing: have 10%-20% (or more) ready to put on a Dyna or a Softail when that time comes. Just don’t tell my wife/lol. Harry out…

  3. 3 Brian Oct 20th, 2008 at 11:31 pm

    1/3 of their loans to subprime? Not smart at all, but they obviously aren’t the only ones that ate up the subprime market in the last few years. 1/3 is very surprising, though.

  4. 4 Storm Oct 21st, 2008 at 8:47 am

    gVTX …your money went back across the water to Japan and your bike is worthless.

  5. 5 Gar Oct 21st, 2008 at 10:18 am

    You live by the sword —- you die by the sword!

    Gar Out

  6. 6 J Oct 21st, 2008 at 10:47 pm

    Endemic to the times…….. Don’t underestimate the gravity of these numbers-

    Jimmy Z is not unlike many contemporary CEO’s- he and his crew recognized an opportunity to utilize the credit markets in such a manner as to tremendously leverage and ultimately loot the coffers of a once-great company….. Jimmy and crew just didn’t get their golden parachutes deployed in time.

    The Harley infrastructure over the past 10 years has been built on smoke and mirrors, and the unconsionable risks that the current management have taken in order to set themselves up at Harley Davidson will ultimately destroy this American icon, sooner than you can believe;

    Don’t believe me?

    Ask Merrill Lynch and Bear Stearns about their heritage…….. Same leverage, different widgets…..

  7. 7 Rodent Oct 22nd, 2008 at 7:15 pm

    Stock was around $75 and now it’s in the $20’s….Pump and Dump? Naw Not HD!

  8. 8 Lugnut Oct 22nd, 2008 at 7:39 pm

    Nothings guaranteed. But for all the naysayers out there, Harley just delivered over 74,000 motorcycles in the 3rd quarter of 2008. Sure this was down form the 3rd quarter of 2007, but shouldn’t that be expected? I ran across an article the othe day that said something about the US economy encoutering a few headwinds. Bad time come and go as do good times. It was I think just back in 1994 that Harley made a little over 88,000 bikes for the whole year (By the way – where are all those Evo’s – they used to be everywhere. Except for the one in my garage – I don’t see any around). The Harley name enjoys a well earned great reputaion around the globe. Don’t forget this gas thing. The recent lowering of prices is just a temporary thing. $5.00 a gallon will be the norm by 2013 or so. That is not bad news for a company that makes transportation that gets over 50mpg.

  9. 9 Hot Rod Oct 27th, 2008 at 4:08 pm

    FTF. Amen.

  10. 10 NotAHarleyGuy Nov 13th, 2008 at 12:33 am

    This summer I tried to apply for a Harley loan, but they said my credit score wasn’t good enough for them.

    I work full time and make enough money to pay for the bike, but they’d rather find some idiot who has good credit on paper but who is on shakey ground income wise.

    I said the hell with it, I decided to rebuild my 84 Honda Shadow instead. It’s cost me a bit of money, but at least when it’s done it’ll be MINE and not some finance company’s property, and I won’t be getting it up the butt with obscene interest rates.

    So Harley can keep their $15,000 bikes, they don’t run right until you drop another $10,000 into them anyways from what I’ve heard.

  11. 11 NotAHarleyGuy Nov 13th, 2008 at 12:38 am

    “your money went back across the water to Japan and your bike is worthless.”

    The Honda probably has more American parts than a Harley these days. Hell, instead of sending your money to Japan when you buy a Harley, you’re sending it to China.

    And BTW, a bike that doesn’t run is worthless. From what I hear, that’s frequently the case with Harleys.

  12. 12 Mike Greenwald Nov 13th, 2008 at 3:23 am

    Your one of those “nicest people on a Honda” that there ads used to talk about. Hope your bike doesn’t whine as loud as you are.
    Ride it like you can fix it.

  13. 13 burnout Nov 15th, 2008 at 10:32 am

    hey mike, please allow me to use ” ride it like you can fix it” ! thanks! peace

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Cyril Huze