Leader of the Pack – William Harley and Arthur Davidson

Hogs. Fat boys. Soft tails. Leather jackets and suicide clutches. Few business marketers have tied their products with a lifestyle image better than William S. Harley and Arthur Davidson from the time they built their first motorcycle in 1903 – the same year Henry Ford formed his motor company. By 1920 the Harley-Davidson Company had sold 28,000 motorcycles. Yet the popular (and now affordable) automobile took the first bite out of Harley Davidson’s market, and by 1913 only two of the several dozen American motorcycle manufacturers remained.

In an effort to raise funds during the Depression, Harley-Davidson sold the rights to manufacture its bikes in Japan to a pharmaceutical firm. Though this deal saved the company, it unwittingly laid the groundwork for competition that would nearly kill America’s sole surviving motorcycle manufacturer forty years later.

Fortunately, Harley-Davidson had become an American institution. With appearances in cult movies such as The Wild One and Easy Rider, Harleys were cultural icons. The ungainly “Hogs” had a distinctive macho roar, and the bikes attracted leather-clad rebels who loved its bad-boy mystique. In 1969 American Machine & Foundry Co. (AMF) acquired Harley-Davidson.

As of 1974 Japan had not threatened the heavyweight (750 cc) or super heavyweight (850 cc) class that Harley-Davidson dominated (though Honda, Kawasaki and Yamaha had successfully exported their lightweight motorcycles to “nice people” in America for years.) Harley-Davidson grew complacent as quality control got lost in the AMF maze. By 1980 more than 50% of the “Hogs” rolling off the assembly line failed inspection (while only 5% of Japanese bikes missed their mark). One biker magazine noted that “some of the hardware found on Harley-Davidsons looked as if it were hammered out of iron ore by rock-wielding natives along the shores of the Milwaukee River.” Yet shoddy quality didn’t impact sales until 1981 when Japan finally took aim at the heavyweight market.

As AMF sought a buyer for the floundering Harley-Davidson division, senior manager Vaughn Beals enlisted twelve fellow executives to rescue Harley-Davidson in a leveraged buyout. They quickly persuaded Washington to impose a temporary tariff increase on Japanese motorcycles, thus buying the team enough time to completely remake their company.

They studied their Japanese competitors and concluded that Harley-Davidson had to play the game the way the Japanese did. By granting middle managers and line workers greater decision making power, then adapting the American inventions of Just in Time Inventory, Employee Involvement, and Statistical Quality Control, the company soon turned the corner. However, the Hogs still had a credibility problem. Known for leaking oil, inadequate electrical and braking systems and generally poor craftsmanship, managers decided that they needed new designs and some intense marketing. The founder’s bearded grandson and long time design chief Willie G. Davidson led the charge as they marketed this new and improved product to their extraordinarily loyal, die-hard customers. The new owners began to remark, “It’s amazing the difference. They don’t beat you to death anymore, and your kidneys are still intact.”

Though Harley-Davidson is no longer a family-owned business, Willie G. is the cultural torchbearer for the company. He never lost sight of what made them great: people weren’t just buying a motorcycle; they were buying the Harley experience.

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