Wednesday, August 11, 2010


The contemporary tale of Harley Davidson/MV Agusta proves the lessons of the past have yet to be learned, the entire scenario being a poor repeat of H-D's previous of Aermacchi in 1961.  At that time, H-D sought an entry into small-capacity motorcycling, as they hadn't developed any lightweight bikes since introducing the Hummer (below), whose design was based wholly on the DKW RT125, blueprints and tooling of which were acquired as war trophies/reparations immediately following WW2.  Thus, H-D had a lot of catching up to do, having done no development in the fastest-growing segment of motorcycling in the late 1940s through early 70s.  Having done the calculations, I'm certain management concluded it would be more cost-effective to purchase a small company with a successful product line of lightweights, than begin a years-long process of developing a new H-D line of small machines.

Harley was successful initially with their new models, which proved popular, for racing, street, and off-road uses.  The move required a huge effort to arm-wrestle dealers into selling bikes they didn't know at all, make space on shop floors, and retrain thousands of service departments to work on unfamiliar models, which were introduced at a rapid pace.  Every H-D mechanic also had to buy a complete new set of metric tools!  Echoes of their grumbling can still be heard today, and it's a rare true-blue Harley enthusiast/dealer/mechanic who retains fondness for the Aermacchi episode, or frankly, even acknowledge the Italian machines as H-Ds at all.

The flabbergasting conclusion to this whole tale isn't the fact that H-D sold MV Agusta for a reported 3Euros - that's typical when a corporate buyer must assume the debts of the seller's company.  No, it's that BOTH deals involved the Castiglioni brothers, who purchased Aermacchi from Harley in the 1978.  The Castiglionis have repeated the exercise, decades later, of  buying an Italian motorcycle company for a song when H-D was in financial trouble.  A remarkable case of déja vu - haven't we been here before?
The Castiglioni's won't have it easy to revive MV Agusta from its current moribund state, but they managed in the 70s to prosper after buying Aermacchi back from H-D, and seem to have come out just fine in the end.  Their tale, and that of their father Giovanni, deserves to be told on these pages, as Giovanni founded Cagiva in 1950 and sons Claudio and Gianfranco inherited the company - changing the focus in 1978 from metals production to motorcycles.

George Santayana famously wrote (in 'The Life of Reason', 1905), "Those who cannot remember the past are condemned to repeat it".  It would seem H-Ds venture with MV Agusta was doomed from the start.

From The Wall Street Journal:

"Motorcycle maker Harley-Davidson completed the sale of MV Agusta, its sport-bike business based in Varese, Italy. The company’s announcement didn’t include the sale price but its 8-K filing with the Securities and Exchange Commission revealed the company essentially paid MV Agusta’s former owners to take it back.

In the filing Harley said it “contributed 20 million Euros to MV as operating capital” that was put in escrow and is available to the buyer over a 12-month period. The buyer is Claudio Castiglioni, who, with his brother Gianfranco, ran MV Agusta for years before selling it to Harley two years ago for about $109 million.

At the time Harley was concerned that its core baby-boomer customers were getting older and losing their will and ability to ride motorcycles. So it bought MV Agusta, a maker of expensive, exotic, high-performance sport bikes as a quick way to attract younger buyers. But the strategy never worked out. While MVs are wonderful bikes for purists who treat each motorcycle ride almost like a gym workout, riding them in traffic or as casual transportation can be a chore. They are also prohibitively expensive for many motorcycle enthusiasts.

In the filing Harley also said it received “nominal consideration” from the buyer. In a subsequent interview the company said the specific amount it received was $3 Euros. A company spokesman said the terms of the transaction “reflect the realities of the current economic environment and the difficult conditions” in the sport-bike market. Motorcycle sales in the U.S. have been sagged in the past few years after more than a decade of steady growth. Unlike cars, which began a recovery this year, motorcycles are typically discretionary purchases — the type consumers give up during difficult economic times.

Harley has previously write-downs totaling $162.6 million for the fair value of MV Agusta and began treating the unit as a discontinued operation after announcing its intention to sell it a year ago. The company said it anticipate additional related losses from discontinued operations in the third quarter of 2010.

A footnote: There is a certain element of should-have-known-better in this story. This isn’t the first time Harley-Davidson has had a hard time with an Italian acquisition. In the 1960s it bought a stake in Aermacchi, a maker of small off-road bikes as a way to expand into new markets. Eventually it bought the whole company, but that move also eventually failed and Harley sold Aermacchi in the late 1970s. The sellers and buyers: the Castiglioni brothers."


camerabanger said...

It would be easy to excuse this episode of fiscal ineptitude if it were some new-comer to the motorcycle market taking a swing at the consumer but Harley represents The American Motorcycle Industry. (excuse me if I discount the Polaris for a moment here) They should have their finger firmly on the pulse of the domestic consumer-should they not? Even with the super fragmented market and considering that the motorcycle is basically a grown up toy for most it should not be too difficult for Harley to get out in front of consumer and stay there. Unfortunately it is just another big company trying to make a product that will appeal while turning out the profit that their shareholders demand.

America seems to be playing a game of catch-up ball with most of our manufacturing efforts. Chrysler. GM. Cars, cameras, computers, the list is endless... We have a genius for establishing the exciting trends and models for the worlds culture, then we give it away and the truly ambitious capitalists in other countries make the profit.
I am sure this is something of a generalization but there seems to be a kernel of truth to it.

Baslot said...

The Harley Davidson was very similar to the B.S.A. Bantam, which was also based on the pre-war D.K.W.


vintagent said...

@Camera; well said
@Baslo; as I mentioned in the article.

Dave said...

Aermacchi was not owned by the Castiglioni's but was a freestanding airpalne company that had gotten into the MC business as a sideline. H-D bought the factory and the MC business form them and later sold it to the Castiglioni's.

I want to study business under these guys; they are making a ton of money.

Anonymous said...

These trans-Atlantic shenanigans--thanks for your invaluable reporting, as always--recall past episodes that came to no good, e.g., the Berliner Bros. transactions with AMC (AJS/Matchless/Norton) in the 1960s and then with Ducati (an extensive online literature can be consulted) or the sorry story of Floyd Clymer's involvement with Velocette and Enfield. The WSJ clip is instructive in reminding us of the distance (sic) between the H-D faithful mainstream of American motorcyclists and the minority who have some awareness of two-wheeled contraptions from the other side of the pond. In these down economic times, save for the privileged elite of Pebble Beach exhibitionists--we await your report--the acquisition, care, and use of a "classic" British/European motorcycle is indeed a matter of love and not of portfolio advancement.
Thanks for keeping us on our toes.

James J. Ward
Professor of History
Director, Honors Program
Cedar Crest College
100 College Drive
Allentown, PA 18104-6196 USA

7point62 said...

"While MVs are wonderful bikes for purists who treat each motorcycle ride almost like a gym workout, riding them in traffic or as casual transportation can be a chore. They are also prohibitively expensive for many motorcycle enthusiasts."

As a Brit biker who has been riding all kinds of sleds for over a quarter of a century I have to say that the exact same could be said for HD's!
C'mon Harley, shoehorn those Sportster engines into a lightweight chassis with quality European cycle parts and ape the XR thing, only with flickability in mind, rather than just style. Bend to fashion a little and make a street scrambler too. Heck, lay up some carbon fibre and do a modern day take on Lucifer's Hammer. Harley used to be all about competition. Change is needed now, or HD will go the way of the brontosaurus, together with it's present customers.

Grandpa Jimbo said...

Paul: Two comments:

A) I liked the Aermacchi and they sounded good.

2) Floyd Clymer's involvement with Velocette amounted to him coming across a little over 100 Venom engines in India (which I believe were to be used in the "Indian Velocette") which he then proceeded to stick in a few very nice chassis with Italian components to sell in America (which led to Whitworth, Metric, and SAE fasteners all on the same machine). i rmn & etc...Jim A.

YJH said...

Thanks Paul for another true journalistic post. Was anybody speaking fluent Italian at HD since the 60' ? : not knowing fluent reciprocol languages always leads to failure and not only in business.

pipsqeek said...

Moral of the story for me is if H-D buy a motorcycle manufacturer. Just sit back and wait for them to make it go broke.

Shame really, that little H-D in the second photo looks brilliant.

Conchscooter said...

My first motorcycle was a lightly used MV 350 Sport in 1974 and I didn't know they weren't sensible bikes because I rode it everywhere as my sole transportation. The modern MVs are beautiful in an unusable way. I was surprised HD let Buell die; I wasn't surprised they couldn't make MV work. I wonder who can in a world sinking into Depression. Perhaps we will all end up on the equivalent of Aermacchi 250 singles to get to work while our masters ride Brutales to the Hamptons for the weekend from their Manhattan bank towers...

Anonymous said...

I would never have considered buying anything from HD until Buell came along, like there motors but the bikes never suited me and that's a common sentiment I have found with other Buell owners. I still cant believe that after bringing the whole concept up to date and building such great bikes to ride they pulled the pin on it. I can understand HD having problems marketing European Makes but Buell sloted into the range perfectly. There is now no mass produced American sport bike on offer. HD has I think lost alot of repeat customers at the end of the day, me included. How can that be good for them?

Redhawk34 said...

I don't know how I managed to miss this article, (excellent, as usual), particularly as I had just bought a distressed 350 SS as it was written. Now restored, it's a superb little bike. Story here;
From the reactions I get at every stop, I cannot believe that there is no market for a modern equivalent, but why can we not design and build it here? This motor was designed by one man, a few draughtsmen and some pattern makers. It didn't take 10 years and 100 million dollars.
I do not believe that every buyer wants a jockstrap stuffer. A 350-500 OHC single, making 35-40 HP on a bike under 350 lb, and priced around $6000 US would make the entry bike that Harley has never had.