A ‘shame’: Powersports leaders weigh in on potential HDFS sale

The news that Harley-Davidson could be exploring a sale of its financing arm Harley-Davidson Financial Services is sparking concerns that the move could put the motorcycle maker at a disadvantage. On April 10, news broke that Harley-Davidson was considering the sale of HDFS , estimated at least $1 billion, according to Bloomberg reports citing people familiar with the matter. The sale could appeal to buyers such as private equity firms and regional banks, but no decision has been made by the company, according to the report. A Harley Davidson representative declined to comment. The potential sale comes amid year-over-year retail sales and origination declines. Harley-Davidson (HOG) is currently searching for its next chief executive as CEO Jochen Zeitz plans to step down after five years at the helm, according to an April 8 company release. Zeitz will remain CEO until a successor is identified. Harley-Davidson market shares fell 10.7% following the CEO announcement April 8. By market close April 9, HOG shares climbed 13.6%, but the stock fell 9.4% by market close after Bloomberg’s report came out April 10. HOG shares fell 3.1% over the past five days, landing at $22.58 at market close today, up 0.18% from market open. [caption id="attachment_58337504" align="alignnone" width="1920"]<img class="size-full wp-image-58337504" src="https://www.autofinancenews.net/wp-content/uploads/2024/02/407337737-scaled-e1707429938380.jpg" alt="Customers walk past motorcycles at the Bluegrass Harley-Davidson dealership in Louisville, Kentucky, U.S., on Wednesday, Feb. 9, 2022. Harley-Davidson Inc. gained after reporting a surprise profit in the fourth quarter as strong demand in its home market and higher motorcycle prices padded earnings and shipping delays eased." width="1920" height="1281" /> (Courtesy/Bloomberg)[/caption] Industry reaction Since the announcement of a potential HDFS sale, industry players have taken to LinkedIn to share largely negative sentiments about how it would impact HOG’s legacy and operations. Meanwhile, ThunderRoad Financial CEO Donal Hummer Jr. told Auto Finance News it would be a “shame” and a “mistake” for HOG to sell HDFS. Hummer helped establish HDFS in 1992, where he oversaw credit operations and information systems while serving as general counsel for 14 years before launching ThunderRoad in 2014. “I have a strong belief in the motor company and the passion of its people. They’ve built a very good product. ... There are few captive companies out there [in powersports]. I think it would put [HOG] at a disadvantage to give up their captive company.” — Donal Hummer Jr., ThunderRoad Financial A sale would “further erode [HDFS’] market share,” Hummer said. “I have a strong belief in the motor company and the passion of its people. They’ve built a very good product. ... There are few captive companies out there [in powersports]. I think it would put [HOG] at a disadvantage to give up their captive company.” One historical advantage HDFS has is its ability to attract a wide range of customers, Mark Sheffield , strategic adviser to New Braunfels, Texas-based manufacturer Woods Indian Motorcycle and dealership Woods Cycle Country , told AFN . “When [another large captive] couldn’t get somebody bought, some of those customers ended up on a Harley, and it was because Harley bought deeper than anybody else,” he said. When HDFS first launched, it offered interest rates below some competitors because not many banks or national lenders would finance powersports products, Hummer said. That edge allowed HDFS to “grow leaps and bounds past its competitors,” he said, noting that over time the captive moved into more of a “marketing arm as a way to sell bikes versus a captive finance company.” Changes in management and focus could have contributed to HDFS’ challenges, Hummer said. “You need to let the finance company act like a finance company, even if it’s yours,” he said. “They're the ones that will make the right kind of loans for your customers.” Search underway for CEO HOG began the search for a new CEO in the fourth quarter after Zeitz expressed interest in retiring this year, according to a company release. Harley-Davidson evaluated three candidates in March but did not make any offers, according to an April 10 8-K filing with the Securities and Exchange Commission . Jared Dourdeville on April 5 resigned from the HOG Board of Directors, citing concerns about the state of the company and calling for the immediate resignations of Zeitz, Lead Independent Director Tom Linebarger and longtime board member Sara Levinson , according to his resignation letter, which was included in the filing. Zeitz was involved in creating Hardwire, the company’s five-year strategic plan set through 2025, according to Harley-Davidson. Sales, originations decline In 2024, the motorcycle manufacturer faced declining sales and decreased financing activity. Harley-Davidson's North American retail sales were dow n 13% year over year in Q4 to 15,100 units and 4% YoY for the full year 2024 to 102,000 units. HDFS’ originations declined 16% YoY in the fourth quarter, Chief Financial Officer Jonathan Root said during Harley-Davidson's earnings call in February. The company did not break out specific origination figures. Sales also decreased for Harley-Davidson's electric motorcycle subsidiary LiveWire , with 236 units sold in Q4, down 54% YoY and full-year sales down 7% YoY to 612 units, according to the company. Sheffield, a board adviser to the National Powersports Dealer Association , said some of Harley-Davidson’s biggest challenges include making LiveWire profitable and finding a new target audience. “The first thing any new CEO should do [is] shut down LiveWire. It’s a financial incinerator at this point in time, and I don’t think that there’s a long enough runway where LiveWire gets to a profit center.” — Mark Sheffield, NPDA HOG is also faced with attracting different customers, Sheffield said. “Harley has struggled to figure out who that next tier of customers is going to be,” he said. “That core customer is aging out at this point in time.” HDFS last year was reviewing ways to increase sales while maintaining its risk appetite, including programs tied to limited credit borrowers and first-time buyers, according to information shared during the 2024 Powersports Finance Summit. Auto Finance Summit East 2025 is set for May 12-14 at the JW Marriott Nashville, featuring fireside chats with Santander Consumer USA and Chase Auto. Visit autofinance.live for more information.

A ‘shame’: Powersports leaders weigh in on potential HDFS sale

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